The statement of scope for this rule, SS 058-24 was approved by the Governor on May 23, 2024, published in Register No. 821B on May 28, 2024, and approved by the Natural Resources Board on August 14, 2024. This rule was approved by the Governor on November 7, 2024. ORDER OF THE STATE OF WISCONSIN NATURAL RESOURCES BOARD
AMENDING AND CREATING RULES
The Wisconsin Natural Resources Board adopts an order to amend NR 520.08 (1) (b), (2) (b), and (3) (b); and to create NR 520.06 (6m) and 520.10 (3m) relating to an alternative method for a municipality to establish proof of financial responsibility required for a solid waste disposal facility. |
WA-07-24(E)
Analysis Prepared by the Department of Natural Resources
3. Explanation of Agency Authority:
Section 289.05 (1) and (3), Stats., requires the department to promulgate rules establishing minimum standards for construction, operation, and closure of solid waste facilities. Sections 227.11 (2) (a) and 289.06 (1), Stats., also confer rule making authority to the department to promulgate rules implementing ch. 289, Stats. Section 289.41 (3m), Stats., requires the department to adopt by a rule the minimum financial requirements for a municipality to establish proof of financial responsibility. The statute also requires the department to establish the processes necessary to review and determine municipal owner financial responsibility through this alternative method. 2023 Wisconsin Act 107 (Act 107), effective March 14, 2024, established requirements relating to an alternative method of establishing owner financial responsibility (OFR) at municipally owned solid waste disposal facilities and directed the Department of Natural Resources (department) to promulgate rules. Act 107 states that the department “shall use the procedure under s. 227.24 to promulgate rules under s. 289.41 (3m) no later than the first day of the 7th month beginning after the effective date of this subsection. Notwithstanding s. 227.24 (1) (c) and (2), emergency rules promulgated under this subsection remain in effect until the first day of the 36th month beginning after the effective date of the emergency rules or the date on which permanent rules take effect, whichever is earlier. … Notwithstanding s. 227.24 (1) (a) and (3), the department of natural resources is not required to provide evidence that promulgating a rule under this subsection as an emergency rule is necessary for the preservation of public peace, health, safety, or welfare and is not required to provide a finding of emergency for a rule promulgated under this subsection.” 4. Related Statutes or Rules:
Requirements and obligations for OFR at solid waste disposal facilities are also outlined in ss. NR 500.06 (3), 514.06 (14) and (15), and chs. NR 503 and 520, Wis. Adm. Code. 5. Plain Language Analysis:
Owner financial responsibility, or financial assurance, ensures the owners and operators of a solid waste facility have sufficient funds to close the facility and to conduct any required post-closure long-term care (LTC), such as maintenance or groundwater monitoring. OFR requirements also ensure funding from owners and operators of solid waste facilities is available for the department’s Waste and Materials Management Program to perform necessary site closure activities and LTC at solid waste facilities in the rare instances where the owners do not fulfill the requirements themselves. Requiring OFR enables the department to minimize the potential risk to the environment and ensure the costs of necessary site closure activities remain the responsibility of the owner and are not a burden on the taxpayer.
The facility’s owner/operator must establish an OFR “proof mechanism” before an operating license is issued. The OFR proof mechanism shall equal or exceed the cost estimate of closure, which is approved in the facility’s plan of operation. After the original establishment of an OFR proof mechanism, the mechanism needs adjustments to ensure it continues to equal or exceed the cost estimate. Annual adjustments are required to account for inflation. Approved cost estimates also need to be revised at least every ten years to reflect current market values or when changes in the plan of operation impact the cost estimate.
Wisconsin administrative code and statute have long established the methods for entities to obtain proof of OFR for closure, long-term care, and remediation activities. The owners or operators of both privately and municipally owned solid waste facilities have been able to obtain proof of OFR through one or more “Standard methods of establishing proof of financial responsibility” [s. 289.41 (3), Stats. (Standard Methods)]. An additional option has been available for private companies only, known as the “Net worth method of establishing proof of financial responsibility” [s. 239.41 (4), Stats. (Net Worth Method)]. This rule will make the Net Worth Method available to municipal solid waste disposal facilities as well. Under Act 107 and this rule, municipalities may meet their financial responsibility requirements for a solid waste disposal facility by applying to the department and satisfying the minimum financial requirements established by statute and rule. If a solid waste facility is maintained by two or more municipal governments, any owning or operating municipality may establish proof of financial responsibility on behalf of itself and the other municipalities that are owners or operators. Act 107 and this rule outline both of the following as necessary for establishing alternative municipal financial responsibility:
— If the municipality has any outstanding, rated, general obligation bonds, none have been rated lower than “Baa” as issued by Moody’s Investors Service or “BBB” as issued by Standard & Poor’s Corporation.
— The municipality’s most recent audited annual financial statement shows a ratio of cash plus marketable securities to total expenditures of not less than 0.05, and a ratio of annual debt service to total expenditures of not greater than 0.20.
Act 107 and this rule also include that if the department determines that a municipality does not meet the financial responsibility requirements established by statute and this rule, the municipality shall apply to establish proof of financial responsibility through one of the Standard Methods outlined in ch. NR 520, Wis. Adm. Code. The municipality shall establish proof of financial responsibility within 45 days of the department’s determination. Existing Requirements
Statute specifies that Standard Methods may be met by obtaining any of the following made payable to or established for the benefit of the department: a bond, a deposit, established escrow account, irrevocable letter of credit, irrevocable trust, or satisfactory financial commitment (these are referred to as OFR mechanisms). All are viable in proving to the department a facility's ability to comply with closure or long-term care requirements [s. 289.41 (3) (a) 1. to 5., Stats.]. This proof must be reviewed and approved by the department. Administrative code further defines how a facility may use the Standard Methods, with specific requirements outlined for each assurance type [s. NR 520.06 (1) to (5), Wis. Adm. Code]. Beyond establishing Standard Methods, administrative code also defines additional processes the department and regulated facilities must utilize to: — Change OFR mechanisms,
— Adjust the amounts of OFR Mechanisms, or
— Calculate the amount of proof for OFR [ss. NR 520.07 to 520.15, Wis. Adm. Code]. Ultimately, it is through the administrative code that facilities can find the most practical instruction on how to prepare for establishing OFR.
As previously mentioned, prior to Act 107, only privately owned facilities had the option to choose the Net Worth Method to establish OFR. Under the opinion of an independent certified accountant, facilities may apply for the Net Worth Method as a component of an initial site inspection. Upon the review of all relevant material, including a copy of the most recent annual audited financial statements which were distributed to any persons with a financial interest in the facility, the department may issue a determination on the facility’s OFR status [s. 289.41 (4) and (5), Stats.]. Additional provisions in statute, including s. 289.41 (6), (7), and (9), Stats., outline the criteria for the facility to maintain compliance with the minimum financial standards for using the Net Worth Method for OFR. As with the Standard Methods, code further defines how to use the Net Worth Method [s. NR 520.06 (6), Wis. Adm. Code]. Proposed Requirements
To complement the Standard Methods and the Net Worth Method currently available in Wisconsin administrative code and statute, Act 107 establishes in statute a new “Alternative method of establishing financial responsibility for solid waste disposal facilities; minimum financial standards for municipalities” (Alternative Method) [s. 289.41 (3m), Stats.]. This Alternative Method is the municipal equivalent to the Net Worth Method used by private facilities. As previously outlined, a municipality may use obligation bonds with ratings above certain defined standards paired with the proof of maintaining established financial ratios to demonstrate they can meet closure and long-term care requirements. Municipalities may also use this method to establish OFR for a facility co-owned or co-operated by municipalities other than the applicant. In statute, the Alternative Method requires many of the specific application processes to be further defined in a rule promulgated by the department. Therefore, this rule uses statutes, administrative code, and federal code to define the parameters for an acceptable Alternative Method for financial responsibility, including:
— A municipality must reapply annually and adjust the OFR cost estimates, taking into account the effects of inflation on the total necessary OFR amount.
— A municipality must use the total cost of compliance for all solid waste facilities it owns and operates when determining the necessary amount of OFR.
— Establishing OFR using the Alternative Method will be done as a part of the initial license application or annual reapplication and include a copy of the most recent annual audited financial statements and the opinion of an independent certified public accountant.
— The maximum amount of closure, long-term care, and remedial action costs for which a municipality may establish proof of financial responsibility using the Alternative Method cannot be more than 43 percent of the municipality’s total annual revenue. A Standard Method proof of financial responsibility must cover all costs that exceed 43 percent of the municipality’s total annual revenue.
