7 CCR 1101-14-7-2 - Financial Responsibility Mechanisms
Mechanisms to satisfy FR as described in 7-1 are listed below:
(a) 40 CFR Part 280.101
designates state funds as an approved mechanism. The Colorado Petroleum Storage
Tank Fund, referred to in this section as the "Fund", is an EPA approved Fund
to provide FR to tank owners and operators in the State of Colorado. Moneys in
the Fund, created pursuant to C.R.S. Section
8-20.5-103, may be used by certain
owners and operators of petroleum storage tanks to demonstrate their compliance
with the FR requirements in federal regulations.
(b) Owners and operators not eligible for
access to the Fund shall be solely responsible for securing independent
financial assistance, but may use any federally approved financial assurance
mechanism identified in 40
C.F.R. 280.94 through
280.103 to help fund the cost of
complying with such requirements. These federally approved mechanisms are as
follows.
(1) Financial Test of Self-Insurance.
(i) An owner/operator may satisfy the
requirements of C.R.S. §
8-20.5-206 and §
8-20.5-303 by passing a financial
test as specified in this section. To pass the financial test of
self-insurance, the owner/operator's net worth must be based on year-end
financial statements for the latest fiscal year.
(ii) The fiscal year-end financial statements
of the owner/operator must be examined by an independent certified public
accountant and be submitted along with the accountant's report of the
examination.
(iii) The
owner/operator's year-end financial statements must not include an adverse
auditor's opinion, a disclaimer of opinion, or a "going concern"
qualification.
(iv) To demonstrate
that it meets the financial test under this subsection the chief financial
officer of the owner/operator must sign, within 120 calendar days of the close
of each financial reporting year, a letter stating that the owner/operator has
met the financial test for self-insurance covering USTs or ASTs at the
facilities listed. The letter must contain a list of the facilities covered,
and the following information must be provided for each facility: the name and
address of the facility, the number of tanks at the facility, the size of each
tank and the regulated substance contained in each tank.
(v) If an owner/operator using the test to
provide FR finds that he or she no longer meets the requirements of the
financial test based on the year-end financial statements, the owner/operator
must obtain alternate coverage as described in this article within 150 calendar
days of the end of the year for which financial statements have been prepared
or within 30 calendar days of the date of the financial statement, whichever is
earlier.
(vi) The Director may
require reports of financial condition from the owner/operator at any time. If
the Director finds, on the basis of such reports or other information, that the
owner/operator no longer meets the financial test requirements of this
subsection, the owner/operator must obtain alternate coverage within 30
calendar days after notification of such a finding.
(vii) If the owner/operator fails to obtain
alternate FR within 60 calendar days of finding that he or she no longer meets
the requirements of the financial test based on the year-end financial
statements, or within 30 calendar days of notification by the Director that he
or she no longer meets the requirements of the financial test, the
owner/operator must notify the Director of such failure within 10 calendar
days.
(2) Insurance
Coverage.
(i) An owner/operator may satisfy
the requirements of C.R.S. §
8-20.5-206 and §
8-20.5-303 by obtaining a liability
insurance policy that conforms to the requirements of this section from a
qualified insurer or risk retention group.
(ii) If the policy contains any type of
deductible, the policy must state that the insurer will be liable for such
deductible amount in the event of a default by the owner/operator.
(iii) Each insurance policy must be issued by
an insurer that is authorized to transact the business of insurance or
authorized to provide insurance as an excess or surplus lines insurer in
Colorado. The insurer must be in compliance with all applicable regulations,
policies and procedures of the Colorado Division of Insurance.
(iv) Each owner/operator must obtain a
certificate of insurance from the insurer showing the name and address of each
covered location, the policy number, period of coverage, name and address of
the insurer and the name and address of the insured for each facility covered
by insurance. In the policy, the insurer must certify the following with
respect to the insurance described herein.
(A)
Bankruptcy or insolvency of the insured shall not relieve the insurer of its
obligations under the policy to which this certificate applies.
(B) When requested by the Director, the
insurer agrees to furnish a signed duplicate original of the policy.
(C) Notice of cancellation of the insurance
by the insurer must be sent to the Director and to the insured at least 60
calendar days prior to the effective date of the cancellation of the insurance.
However, if the cancellation is based on one or more of the following reasons,
then such notice may be sent less than 60 calendar days prior to the effective
date of the cancellation of the insurance: fraud; material misrepresentation;
nonpayment of premium; or any other reason approved by the Commissioner of
Insurance.
(D) The insurance covers
claims for any occurrence that commenced during the term of the policy that is
discovered and reported to the insurer within six months of the effective date
of the cancellation or other termination of the policy.
(3) Letter of Credit.
(i) An owner/operator may satisfy the
requirements of C.R.S. §
8-20.5-206 and §
8-20.5-303 by obtaining an
irrevocable letter of credit that conforms to the requirements of this section.
The issuing institution must be an entity that has the authority to issue
letters of credit in Colorado and whose letter of credit operations are
regulated and examined by the Colorado Department of Regulatory Agencies.
(ii) The letter of credit must be
irrevocable for a term specified by the issuing institution. The letter of
credit must provide that credit be automatically renewed for the same term as
the original term, unless, at least 90 calendar days before the current
expiration date, the issuing institution notifies the Director by certified
mail of its decision not to renew the letter of credit. Under the terms of the
letter of credit, the 90 calendar days will begin on the date when the Director
receives the notice, as evidenced by the return receipt.
(iii) The letter of credit must be payable to
the Director and may be drawn on to cover corrective action and/or compensating
third parties for bodily injury and property damage caused by accidental
releases arising from operating the UST(s) identified in the letter of
credit.
(iv) The letter of credit
must list the name(s) and address(es) of the covered facility(ies) where the
tanks are located, the number of tanks at each facility and the regulated
substances contained by the tanks at each facility.
(4) Trust Fund.
(i) An owner/operator may satisfy the
requirements of C.R.S. §
8-20.5-206 and §
8-20.5-303 by establishing a trust
fund that conforms to the requirements of this section. The trustee must be an
entity that has the authority to act as a trustee and whose trust operations
are regulated and examined by the Colorado Department of Regulatory Agencies.
(ii) The trust fund, when
established, must be funded for the full required amount of coverage.
(iii) The trustee must be instructed to
disburse funds from the trust fund to pay the costs of corrective action and/or
third-party bodily injury and property damage only as directed or approved by
the Director.
(5)
Certificate of Deposit or Other Secured Financial Instrument.
A certificate of deposit or another financial instrument secured by an agency of Colorado or the US Government may be used to satisfy the requirements of C.R.S. § 8-20.5-206 and § 8-20.5-303 provided that such financial instrument is made payable to the Director. Any interest or dividends payable by such instrument may be made payable to the owner/operator using this method of assuring FR. This financial instrument will be returned to the owner/operator by the Director only after the instrument has been replaced by an alternate FR mechanism or the owner/operator is released from the FR requirement under 7-3(f) below.
Notes
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