TITLE 9. ENVIRONMENT
Title of Regulation: 9VAC25-650. Closure Plans and
Demonstration of Financial Capability (amending 9VAC25-650-70, 9VAC25-650-90).
Statutory Authority: §§ 62.1-44.15 and 62.1-44.18:3
and of the Code of Virginia.
Public Hearing Information: No public hearings are
scheduled.
Public Comment Deadline: December 11, 2019.
Effective Date: December 26, 2019.
Agency Contact: Melissa Porterfield, Department of
Environmental Quality, 1111 East Main Street, Suite 1400, P.O. Box 1105,
Richmond, VA 23218, telephone (804) 698-4238, FAX (804) 698-4019, or email
melissa.porterfield@deq.virginia.gov.
Basis: The State Water Control Board is directed by § 62.1-44.18:3
of the Code of Virginia to adopt regulations that require privately owned
sewerage systems and sewerage treatment works that discharge more than 1,000
gallons per day and less than 40,000 gallons per day to develop closure plans
and provide financial assurance for closure of the sewerage systems or sewage
treatment works.
Purpose: This regulation is being amended to revise
financial assurance requirements related to the transfer of the permit to a new
owner or operator. Currently the previous owner or operator is required to
provide financial assurance until the new owner or operator provides financial
assurance. The regulation is being amended to require the new owner or operator
to provide financial assurance prior to the transfer of the permit. This change
is consistent with the requirement for a new facility to provide financial
assurance prior to the facility beginning to operate. This change will reduce
the regulatory burden on former permit holders by requiring the new owner or
operator to provide financial assurance before the permit transfer occurs.
The regulation is also being revised to include a missing word
in 9VAC25-650-90.
Rationale for Using Fast-Track Rulemaking Process: The
agency conducted a periodic review for this regulation and recommended this
regulation be amended to address financial assurance requirements related to
the transfer of the permit to a new owner or operator. Currently the previous
owner or operator is required to provide financial assurance until the new
owner or operator provides financial assurance. The regulation is being amended
to require the new owner or operator to provide financial assurance prior to
the transfer of the permit. This change is consistent with the requirement for
a new facility to provide financial assurance prior to the facility beginning
to operate.
This amendment is expected to be noncontroversial since it
reduces the regulatory burden on former owners and operators to continue to
provide financial assurance after the permit has been transferred to a new
owner or operator. The new owner or operator was previously required to
provide financial assurance within six months of the permit transfer. This
regulatory change makes the new owner or operator provide financial assurance
prior to the permit transfer occurring. This maintains consistency with the
requirement for an owner or operator of a new permit to provide financial
assurance prior to starting operation of the privately owned sewerage systems
and sewerage treatment works.
Substance: The regulation is being amended to require
the new owner or operator to provide financial assurance prior to the transfer
of the permit. 9VAC25-650-90 is also being amended to include a missing word.
Issues: The primary advantage to the public is
protection from closure costs associated with the abandonment of a privately
owned sewerage systems and sewerage treatment works that discharge more than
1,000 gallons per day and less than 40,000 gallons per day. The financial assurance
provision of this regulation provides funding for the costs to close the
facility in the event the facility is abandoned. Former owners and operators
would also benefit from this change since they would be no longer be required
to maintain financial assurance after they have transferred the permit to
another entity.
Requiring financial assurance to be demonstrated by the new
owner or operator is consistent with the requirements placed on owners or
operators seeking a permit to operate sewerage systems and sewerage treatment
works that discharge more than 1,000 gallons per day and less than 40,000
gallons per day.
There are no disadvantages to the public, agency, or
Commonwealth.
Small Business Impact Review Report of Findings: This
fast-track regulatory action serves as the report of the findings of the
regulatory review pursuant to § 2.2-4007.1 of the Code of Virginia.
Department of Planning and Budget's Economic Impact
Analysis:
Summary of the Proposed Amendments to Regulation. The State
Water Control Board (Board) proposes to revise financial assurance requirements
related to the transfer of a Virginia Pollutant Discharge Elimination System
(VPDES) permit to a new owner or operator.
Result of Analysis. The benefits likely exceed the costs for
all proposed changes.
Estimated Economic Impact. Section 9VAC25-650-20 of the
regulation states that:
The purpose of this regulation is to require owners or
operators of certain privately owned sewerage systems2 that treat
sewage from private residences to file with the board a plan to abate, control,
remove, or contain any substantial or imminent threat to public health or the
environment that is reasonably likely to occur if the facility ceases
operations. For the purposes of this regulation, such a plan shall be termed a
closure plan. Such plan shall also include the demonstration of financial
assurance …
The financial assurance is to ensure that the costs associated
with protecting public health and the environment are recovered from the owner
or operator in the event that the facility ceases operation. Financial
assurance can be demonstrated by one or a combination of the following
mechanisms: trust agreement, surety bond, letter of credit, certificate of
deposit, corporate financial test, and corporate guarantee.
The current regulation requires that when a transfer of
ownership or operational control occurs,
the old owner or operator shall comply with the requirements of
this chapter until the new owner or operator has demonstrated that he is
complying with the requirements of this chapter. The new owner or operator
shall demonstrate compliance with this chapter within six months of the date of
the change of ownership or operational control of the facility.
The Board proposes to instead require that the "new owner
or operator shall demonstrate compliance with this chapter and the board shall
approve the financial mechanism prior to the transfer of the permit."
Former owners and operators would benefit from this change since they would no
longer be required to maintain financial assurance after they have transferred
the permit to another entity. The public would benefit in that there would be
assurance prior to the transfer that new owners are financially capable of
covering the costs associated with protecting public health and the environment
in the event that the facility ceases operation. New owners would have to incur
the expense of acquiring a trust agreement, surety bond, letter of credit,
certificate of deposit, corporate financial test, or corporate guarantee sooner
under the proposed language. However, that could be taken into account in the
agreed on price in the sale of the facility.
Businesses and Entities Affected. The proposed amendments
potentially affect current owners of the 32 privately owned sewerage systems
and sewerage treatment works that discharge more than 1,000 gallons per day and
less than 40,000 gallons per day, as well as potential future owners.
Localities Particularly Affected. The proposed amendments do
not disproportionately affect particular localities.
Projected Impact on Employment. The proposed amendments are
unlikely to significantly affect employment.
Effects on the Use and Value of Private Property. The proposed
amendments would not likely significantly affect the use and value of private
property.
Real Estate Development Costs. The proposed amendments are
unlikely to affect real estate development costs.
Small Businesses:
Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia,
small business is defined as "a business entity, including its affiliates,
that (i) is independently owned and operated and (ii) employs fewer than 500
full-time employees or has gross annual sales of less than $6 million."
Costs and Other Effects. The proposed amendments are unlikely
to significantly affect costs for small businesses.
Alternative Method that Minimizes Adverse Impact. The proposed
amendments do not adversely affect small businesses.
Adverse Impacts:
Businesses. The proposed amendments do not adversely affect
businesses.
Localities. The proposed amendments do not adversely affect
localities.
Other Entities. The proposed amendments do not adversely affect
other entities.
___________________________
2Privately owned sewerage systems subject to the
Virginia Pollutant Discharge Elimination System Permit Regulation (9VAC25-31)
that treat sewage generated by private residences and discharge more than 1,000
gallons per day and less than 40,000 gallons per day to state waters.
Agency's Response to Economic Impact Analysis: The
department has reviewed the economic impact analysis prepared by the Department
of Planning and Budget and has no comment.
Summary:
The amendments require a new owner or operator of a
privately owned sewerage system or sewerage treatment works that discharges more
than 1,000 gallons per day and less than 40,000 gallons per day to provide
financial assurance prior to the transfer of the permit issued by the State
Water Control Board to the new owner or operator.
9VAC25-650-70. Transfer of ownership or permit.
A. If a privately owned sewerage system subject to this
regulation is to be sold or if ownership is to be transferred in the normal
course of business, the owner or operator shall notify the board, in written
form through certified mail, of such intended sale or transfer at least 30 days
prior to such sale or transfer. The notification shall provide the full name,
address, and telephone number of the person to whom the facility is to be sold
or transferred. The notice shall include a written agreement between the
existing and the new permittee containing a specific date for transfer of
permit responsibilities, coverage, and liabilities between them.
B. Changes in the ownership or operational control of a
facility may be made as a minor modification with prior written approval of the
board in accordance with 9VAC25-31-380, except as otherwise provided in this
section. When a transfer of ownership or operational control occurs, the old
owner or operator shall comply with the requirements of this chapter until the
new owner or operator has demonstrated that he is complying with the
requirements of this chapter. The new owner or operator shall demonstrate
compliance with this chapter within six months of the date of the change of
ownership or operational control of the facility. new owner or operator
shall demonstrate compliance with this chapter and the board shall approve the
financial mechanism prior to the transfer of the permit. Upon
demonstration to the board by the new owner or operator of compliance with this
chapter, the board shall notify the old owner or operator that he or she
the old owner or operator no longer needs to comply with this chapter as
of the date of demonstration.
9VAC25-650-90. Trust Agreement.
A. An owner or operator of a privately owned sewerage system
may satisfy the requirements of this chapter by establishing an irrevocable
trust fund that conforms to the requirements of this section and by submitting
an originally signed duplicate of the trust agreement to the board. The trustee
shall be an entity that has the authority to act as a trustee and whose trust
operations are regulated and examined by a federal agency or the State
Corporation Commission (Commonwealth of Virginia).
B. The trust agreement shall be irrevocable and shall continue
until terminated at the written direction of the grantor, the trustee, and the
board, or by the trustee and the board if the grantor ceases to exist. Upon
termination of the trust, all remaining trust property, less final
administration expenses, shall be delivered to the grantor. The wording of the
trust agreement shall be identical to the wording as follows, except that
instructions in parentheses are to be replaced with the relevant information
and the parentheses deleted. The trust agreement shall be accompanied by a
formal letter of certification of acknowledgement as specified in this chapter.
TRUST AGREEMENT
Trust agreement, the "Agreement," entered into as
of (date) by and between (name of the owner or operator), a (name of state)
(insert "corporation," "partnership,"
"association," "proprietorship," or appropriate
identification of type of entity), the "Grantor," and (name of
corporate trustee), (insert "Incorporated in the state of ________"
or "a national bank"), the "Trustee."
Whereas, the State Water Control Board of the Commonwealth of
Virginia has established certain regulations applicable to the Grantor,
requiring that an owner or operator of a private sewage treatment facility
shall provide assurance that funds will be available when needed for
implementation of a closure plan. The attached Schedule A contains the name and
address of the facility covered by this trust agreement;
Whereas, the Grantor, acting through its duly authorized
officers, has selected the Trustee to be the trustee under this agreement, and
the Trustee is willing to act as trustee;
Now, therefore, the Grantor and the Trustee agree as follows:
Section 1. Definitions. As used in this Agreement:
(a) The term "Grantor" means the owner or operator
who enters into this Agreement and any successors or assigns of the Grantor.
(b) The term "Trustee" means the Trustee who enters
into this Agreement and any successor Trustee.
Section 2. Establishment of Fund.
The Grantor and the Trustee hereby establish a trust fund,
the "Fund," for the benefit of the Department of Environmental
Quality of the Commonwealth of Virginia. The Grantor and the Trustee intend
that no third party have access to the Fund. Payments made by the provider of
financial assurance pursuant to the Director of the Department of Environmental
Quality's instruction are transferred to the Trustee and are referred to as the
Fund, together with all earnings and profits thereon, less any payments or
distributions made by the Trustee pursuant to this Agreement. The Fund shall be
held by the Trustee, IN TRUST, as hereinafter provided. The Trustee shall not
be responsible nor shall it undertake any responsibility for the amount or
adequacy of, nor any duty to collect from the Grantor as provider of financial
assurance, any payments necessary to discharge any liability of the Grantor
established by the State Water Control Board.
Section 3. Payment for Implementation of the Closure Plan.
The Trustee shall make payments from the Fund as the
Director, Department of Environmental Quality shall direct, in writing, to
provide for the payment of the costs of implementation of the closure plan for
the facility covered by the financial assurance mechanism identified in this
Agreement.
The Trustee shall reimburse the Grantor, or other persons as
specified by the State Water Control Board, from the Fund for implementation of
the closure plan in such amounts as the Director of the Department of
Environmental Quality shall direct in writing. In addition, the Trustee shall
refund to the Grantor such amounts as the Director of the Department of
Environmental Quality specifies in writing. Upon refund, such funds shall no
longer constitute part of the Fund as defined herein.
Section 4. Payments Comprising
the Fund.
Payments made to the Trustee for the Fund shall consist of
cash and securities acceptable to the Trustee.
Section 5. Trustee Management.
The Trustee shall invest and reinvest the principal and
income of the Fund and keep the Fund invested as a single fund, without
distinction between principal and income, in accordance with general investment
policies and guidelines which the Grantor may communicate in writing to the
Trustee from time to time, subject, however, to the provisions of this Section.
In investing, reinvesting, exchanging, selling, and managing the Fund, the
Trustee shall discharge his duties with respect to the trust fund solely in the
interest of the beneficiaries and with the care, skill, prudence, and diligence
under the circumstances then prevailing which persons of prudence, acting in a
like capacity and familiar with such matters, would use in the conduct of an
enterprise of a like character and with like aims; except that:
(i) Securities or other obligations of the Grantor, or any
other operator of the facility, or any of their affiliates as defined in the
Investment Company Act of 1940, as amended, 15 USC § 80a-2(a), shall not be
acquired or held, unless they are securities or other obligations of the
federal or a state government;
(ii) The Trustee is authorized to invest the Fund in time or
demand deposits of the Trustee, to the extent insured by an agency of the
federal or state government; and
(iii) Trustee is authorized to hold cash awaiting investment
or distribution uninvested for a reasonable time and without liability for the
payment of interest thereon.
Section 6. Commingling and Investment.
The Trustee is expressly authorized in its discretion:
(a) To transfer from time to time any or all of the assets of
the Fund to any common, commingled, or collective trust fund created by the
Trustee in which the Fund is eligible to participate, subject to all of the
provisions thereof, to be commingled with the assets of other trusts participating
therein; and
(b) To purchase shares in any investment company registered
under the Investment Company Act of 1940, 15 USC § 80a-1 et seq., including one
which may be created, managed, underwritten, or to which investment advice is
rendered or the shares of which are sold by the Trustee. The Trustee may vote
such shares in its discretion.
Section 7. Express Powers of Trustee.
Without in any way limiting the powers and discretions
conferred upon the Trustee by the other provisions of this Agreement or by law,
the Trustee is expressly authorized and empowered:
(a) To sell, exchange, convey, transfer, or otherwise dispose
of any property held by it, by public or private sale. No person dealing with
the Trustee shall be bound to see to the application of the purchase money or
to inquire into the validity or expediency of any such sale or other
disposition;
(b) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments that may
be necessary or appropriate to carry out the powers herein granted;
(c) To register any securities held in the Fund in its own
name or in the name of a nominee and to hold any security in bearer form or in
book entry, or to combine certificates representing such securities with
certificates of the same issue held by the Trustee in other fiduciary
capacities, or to deposit or arrange for the deposit of such securities in a
qualified central depository even though, when so deposited, such securities
may be merged and held in bulk in the name of the nominee of such depository
with other securities deposited therein by another person, or to deposit or
arrange for the deposit of any securities issued by the United States
Government, or any agency or instrumentality thereof, with a Federal Reserve
bank, but the books and records of the Trustee shall at all times show that all
such securities are part of the Fund;
(d) To deposit any cash in the Fund in interest-bearing
accounts maintained or savings certificates issued by the Trustee, in its
separate corporate capacity, or in any other banking institution affiliated
with the Trustee, to the extent insured by an agency of the federal or state
government; and
(e) To compromise or otherwise adjust all claims in favor of
or against the Fund.
Section 8. Taxes and Expenses.
All taxes of any kind that may be assessed or levied against
or in respect of the Fund and all brokerage commissions incurred by the Fund
shall be paid from the Fund. All other expenses incurred by the Trustee in
connection with the administration of this Trust, including fees for legal
services rendered to the Trustee, the compensation of the Trustee to the extent
not paid directly by the Grantor, and all other proper charges and
disbursements of the Trustee shall be paid from the Fund.
Section 9. Advice of Counsel.
The Trustee may from time to time consult with counsel, who
may be counsel to the Grantor, with respect to any questions arising as to the
construction of this Agreement or any action to be taken hereunder. The Trustee
shall be fully protected, to the extent permitted by law, in acting upon the
advice of counsel.
Section 10. Trustee
Compensation.
The Trustee shall be entitled to reasonable compensation for
its services as agreed upon in writing from time to time with the Grantor.
Section 11. Successor Trustee.
The Trustee may resign or the Grantor may replace the
Trustee, but such resignation or replacement shall not be effective until the
Grantor has appointed a successor trustee and this successor accepts the
appointment. The successor trustee shall have the same powers and duties as
those conferred upon the Trustee hereunder. Upon the successor trustee's
acceptance of the appointment, the Trustee shall assign, transfer, and pay over
to the successor trustee the funds and properties then constituting the Fund.
If for any reason the Grantor cannot or does not act in the event of the
resignation of the Trustee, the Trustee may apply to a court of competent
jurisdiction for the appointment of a successor trustee or for instructions.
The successor trustee shall specify the date on which it assumes administration
of the trust in writing sent to the Grantor and the present Trustee by
certified mail 10 days before such change becomes effective. Any expenses
incurred by the Trustee as a result of any of the acts contemplated by this
Section shall be paid as provided in Section 9.
Section 12. Instructions to the Trustee.
All orders, requests, and instructions by the Grantor to the
Trustee shall be in writing, signed by such persons as are designated in the
attached Schedule B or such other designees as the Grantor may designate by
amendment to Schedule B. The trustee shall be fully protected in acting without
inquiry in accordance with the Grantor's orders, requests, and instructions.
All orders, requests and instructions by the State Water Control Board to the
Trustee shall be in writing, signed by the Director of the Department of
Environmental Quality, and the Trustee shall act and shall be fully protected
in acting in accordance with such orders, requests, and instructions. The
Trustee shall have the right to assume, in the absence of written notice to the
contrary, that no event constituting a change or a termination of the authority
of any person to act on behalf of the Grantor or the State Water Control Board
hereunder has occurred. The Trustee shall have no duty to act in the absence of
such orders, requests, and instructions from the Grantor and/or the State Water
Control Board, except as provided for herein.
Section 13. Irrevocability and Termination.
Subject to the right of the parties to amend this Agreement
as provided in Section 17, this Trust shall be irrevocable and shall continue
until terminated at the written direction of the Grantor and the Trustee, or by
the Trustee and the Director of the Department of Environmental Quality, if the
Grantor ceases to exist. Upon termination of the Trust, all remaining trust
property, less final trust administration expenses, shall be delivered to the
Grantor.
Section 14. Immunity and Indemnification.
The Trustee shall not incur personal liability of any nature
in connection with any act or omission, made in good faith, in the
administration of this Trust, or in carrying out any directions by the Grantor
or the State Water Control Board issued in accordance with this Agreement. The
Trustee shall be indemnified and saved harmless by the Grantor, from and
against any personal liability to which the Trustee may be subjected by reason
of any act or conduct in its official capacity, including all expenses
reasonably incurred in its defense in the event the Grantor fails to provide
such defense.
Section 15. Choice of Law.
This Agreement shall be administered, construed, and enforced
according to the laws of the Commonwealth of Virginia.
Section 16. Amendment of Agreement.
This Agreement may be amended by an instrument executed in
writing executed by the Grantor, the Trustee, and the Director of the
Department of Environmental Quality, Commonwealth of Virginia, or by the
Trustee and the Director of the Department of Environmental Quality,
Commonwealth of Virginia, if the Grantor ceases to exist.
Section 17. Annual Valuation.
The Trustee will annually, at the end of the month coincident
with or preceding the anniversary date of establishment of the Fund, furnish
the Grantor and to the Director of the Department of Environmental Quality,
Commonwealth of Virginia, a statement confirming the value of the Trust. Any
securities in the Fund will be valued at market value as of no more than 30
days prior to the date of the statement. The failure of the Grantor to object
in writing to the Trustee within 90 days after the statement has been furnished
to the Grantor and the Director of the Department of Environmental Quality,
Commonwealth of Virginia will constitute a conclusively binding assent by the
Grantor, barring the Grantor from asserting any claim or liability against the
Trustee with respect to matters disclosed in the statement.
Section 18. Interpretation.
As used in this Agreement, words in the singular include the
plural and words in the plural include the singular. The descriptive headings
for each section of this Agreement shall not affect the interpretation or the
legal efficacy of this Agreement.
In Witness whereof the parties have caused this Agreement to
be executed by their respective officers duly authorized and their corporate
seals (if applicable) to be hereunto affixed and attested as of the date first
above written. The parties below certify that the wording of this Agreement is
identical to the wording specified in 9VAC25-650-90 B as such regulations were
constituted on the date written above.
(Signature of Grantor)
(Name of the Grantor)
(Title)
Attest:
(Signature of Trustee)
(Name of the Trustee)
(Title)
(Seal)
(Signature of Witness)
(Name of Witness)
(Title)
(Seal)
CERTIFICATE OF ACKNOWLEDGMENT
State of ______________________________
County of ______________________________
On this (date), before me personally came (owner's or
operator's representative) to me known, who, being by me duly sworn, did depose
and say that she/he resides at (address), that she/he is (title) of
(corporation), the corporation described in and which executed the above
instrument; that she/he knows the seal of said corporation; that the seal
affixed to such instrument is such corporate seal; that is was so affixed by
order of the Board of Directors of said corporation; and that she/he signed
her/his name thereto by like order.
(Signature of Notary Public)
(Name of Notary Public)
My Commission expires:___________________
SCHEDULE A
Name of Facility
Address of facility
Closure Cost Estimate
VPDES Permit Number
C. The irrevocable trust fund, when established, shall be
funded for the full required amount of coverage, or funded for part of the
required amount of coverage and used in combination with other mechanism(s)
mechanisms that provide the remaining required coverage. Schedule A of
the trust agreement shall be updated within 60 days after a change in the
amount of the approved cost estimate covered by the agreement.
D. If the value of the trust fund is greater than the
required amount of coverage, the owner or operator may submit a written request
to the board for release of the excess.
E. If other financial assurance as specified in this chapter is
substituted for all or part of the trust fund, the owner or operator may submit
a written request to the Director director for release of the
excess.
F. Within 60 days after receiving a request from the owner or
operator for release of funds as specified in subsection D or E of this
section, the board will instruct the trustee to release to the owner or
operator such funds, if any, that the board determines to be eligible for
release and specifies in writing.
G. Whenever the cost estimate changes, the owner or operator
shall compare the new estimate with the trustee's most recent annual valuation
of the trust fund. If the value of the fund is less than the amount of the new
cost estimate, the owner or operator shall, within 10 days of the change in the
approved cost estimate, deposit a sufficient amount into the trust so that its
value after payment at least equals the amount of the new estimate, or obtain
other financial assurance as specified in this article to cover the difference.
If the value of the trust fund is greater than the total amount of the cost
estimate, the owner or operator may submit a written request to the board for
release of the amount that is in excess of the cost estimate.
H. After beginning implementation of the closure plan, an owner
or operator or any other person authorized to implement the closure plan,
may request reimbursement for implementation expenditures by submitting
itemized bills to the board. Within 60 days after receiving bills for
plan implementation activities, the board shall instruct the trustee to make
reimbursements in those amounts as the board determines are in accordance with
the closure plan or are otherwise justified.
I. The board shall agree to terminate the trust when:
1. The owner or operator substitutes alternate financial
assurance as specified in this article; or
2. The board notifies the owner or operator that he is no
longer required to maintain financial assurance for the implementation of the
closure plan.
VA.R. Doc. No. R20-5633; Filed October 22, 2019, 10:26 a.m.