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ARTICLE 6 FINANCIAL RESPONSIBILITY

REQUIREMENTS FOR OWNERS/OPERATORS OF PETROLEUM UNDERGROUND STORAGE TANKS

Section 6

ARTICLE 7 EMISSION INSPECTION

7-1 Statement of Basis and Purpose

7-2 Fee Schedule

7-3 Statutory Authority

ARTICLE 6 FINANCIAL RESPONSIBILITY REQUIREMENTS FOR

OWNERS/OPERATORS OF PETROLEUM UNDERGROUND STORAGE TANKS

Section 6

8-20.5-206. Financial responsibility for petroleum underground storage tanks.

(1)(a) Moneys in the Petroleum Storage Tank Fund, created pursuant to section 8-20.5-103, And referred to in this section as the "Fund", may be used by certain owners and operators of petroleum storage tanks to demonstrate their compliance with the financial responsibility requirements in federal regulations. 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.

(b) After payment is made from the Fund for remediation expenses, the owner or operator on whose behalf the payment was made shall pay to the Fund the remediationamount o r ten thousand dollars, whichever is less.

(c) After payment is made from the Fund for personal injury or property damage settlement expenses, or a combination of both, the owner or operator on whose behalf the payment was made shall pay to the Fund the aggregate settlement payment amount or twenty-five thousand dollars, whichever is less.

(d) Moneys in the Fund shall not be used for any remediation activity at a location that is within a site identified by the national priorities list, or where a response action by this state has begun pursuant to the federal "Comprehensive Environmental Response, Compensation, and Liability Act of 1980".

(e) If an owner or operator cannot meet the financial requirements of paragraphs

(b) and (c) of this subsection (1), another approved financial assurance mechanism must be identified for such owner or operator to remain in compliance with this section and to be allowed to continue operation of an underground petroleum storage tank.

8-20.5-207. Financial responsibility for regulated substances other than petroleum. Owners and operators of underground storage tanks containing regulated substances other than petroleum may demonstrate financial responsibility for taking corrective action and for compensating third parties for bodily injury and property damages by using any one or more of the mechanisms allowable under 40 C.F.R. sections 280.95, 280.96, 280.97, 280.98, 280.99, 280.102, and 280.103. Owners and operators of underground storage tanks containing regulated substances other than petroleum shall not be eligible to participate in the Petroleum Storage Tank Fund, but shall be subject to federal financial responsibility regulations.

(a) The owner/operator subject to this article (a person not eligible for the Fund) shall establish financial responsibility according to the following rules:

(1) Applicability.

(A) This financial responsibility requirement applies to owners/operators of all petroleum UST systems except as otherwise provided in this section.

(B) State and federal government entities whose debts and liabilities are the debts and liabilities of a state or the United States are exempt from the requirements of Article 6.

(C) The requirements of this Article 6 do not apply to owners/operators of any UST system described in section 2-1-1(b) or (c).

(D) If the owner and operator of a petroleum UST are separate persons, only one person is required to demonstrate financial responsibility; however, both parties are liable jointly, if neither party complies with this Article 6.

(2) Definition of Terms. When used in this Article 6, the following terms shall have the meanings given below:

(A) "Accidental release" means any release of petroleum from an UST that results in a need for corrective action and/or compensation for bodily injury or property damage neither expected nor intended by the tank owner/operator .

(B) "Bodily injury" shall have the meaning given to this term by applicable Colorado state law; however, this term shall not include those liabilities which, consistent with standard insurance industry practices, are excluded from coverage in liability insurance policies for bodily injury.

(C) "Financial reporting year" means the latest consecutive twelve-month period for which any report used to support a financial test is prepared. "Financial reporting year" may thus comprise a fiscal or a calendar year period.

(D) "Net worth" means the assets that remain after deducting liabilities; such assets do not include intangibles such as goodwill and rights to patents or royalties. For purposes of this definition, "assets" means all existing economic benefits obtained or controlled by an owner/operator.

(E) "Owner/Operator ," when the owner and operator are separate parties, refers to the party that has obtained financial responsibility for the purpose of complying with this Article 6.

(F) "Property damage" shall have the meaning given this term by applicable Colorado laws. This term shall not include those liabilities which, consistent with standard insurance industry practices, are excluded from coverage in liability insurance policies for property damage. However, such exclusions for property damage shall not include corrective action associated with releases from tanks which are covered by the policy.

(G) "Provider of financial assurance" means an entity that provides financial assurance to an owner/operator of an UST through one of the mechanisms listed below, including but not limited to an insurer, issuer of a letter of credit, or the trustee of a trust fund.

(3) Allowable Mechanisms and Combinations of Mechanisms. An owner/operator may use any one of the mechanisms listed in the following subsections to demonstrate financial responsibility for the USTs owned or operated.

(4) Financial Test of Self-Insurance.

(A) An owner/operator may satisfy the requirements of 8-20.5-206 by passing a financial test as specified in this section. To pass the financial test of self-insurance, the owner/operator's worth must be based on year-end financial statements for the latest completed fiscal year.

(B) The fiscal year-end financial statements of the owner/operator must be examined by an independent certified public accountant and be accompanied by the accountant's report of the examination.

(C) The owner/operator's year-end financial statements cannot include an adverse auditor's opinion, a disclaimer of opinion, or a "going concern" qualification.

(D) To demonstrate that it meets the financial test under this subsection the chief financial officer of the owner/operator must sign, within 120 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 at the facilities listed. The letter must contain a list of the facilities covered, and for each facility:

the name and address of the facility, the number of tanks at the facility, the size of each tank and the regulate d substance contained in each tank.

(E) If an owner/operator using the test to provide financial responsibility 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 alternative coverage within 150 days of the end of the year for which financial statements have been prepared or within 30 days of the date of the financial statement, whichever is earlier.

(F) The State Inspector of Oils may require reports of financial condition at any time from the owner/operator. If the State Inspector of Oils 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 days after notification of such a finding.

(G) If the owner/operator fails to obtain alternate financial responsibility within 60 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 days of notification by the State Inspector of Oils that he or she no longer meets the requirements of the financial test, the owner/operator must notify the State Inspector of Oils of such failure within 10 days.

(5) Insurance Coverage.

(A) An owner/operator may satisfy the requirements of 8-20.5-206 by obtaining liability insurance, that conforms to the requirements of this section, from a qualified insurer.

(B) 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 .

(C) Each insurance policy must be issued by an insurer or risk retention group 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 regulations, procedures, and policies of the Colorado Division of Insurance.

(D) 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. The insurer must certify the following with respect to the insurance described herein:

(i) Bankruptcy or insolvency of the insured shall not relieve the insurer of its obligations under the policy to which this certificate applies.

(ii) When requested by the State Inspector of Oils, the insurer agrees to furnish a signed duplicate original of the policy.

(iii) Notice of cancellation of the insurance by the insurer must be sent to the State Inspector of Oils and to the insured at least 60 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 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 Com missioner of Insurance.

(iv) 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.

(6) Letter of Credit.

(A) An owner/operator may satisfy the requirements of 8-20.5-206 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 .

(B) The letter of credit must be irrevocable with 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 days before the current expiration date, the issuing institution notifies the State Inspector of Oils by certified mail of its decision not to renew the letter of credit. Under the terms of the letter of credit, the 90 days will begin on the date when the State Inspector of Oils receives the notice, as evidenced by the return receipt.

(C) The letter of credit must be payable to the State Inspector of Oils 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.

(D) 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.

(7) Trust Fund.

(A) An owner/operator may satisfy the requirements of 8-20.5-206 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.

(B) The trust fund, when established, must be funded for the full required amount of coverage .

(C) The trustee of the trust fund must be instructed to disburse funds from the trust fund to pay the costs of corrective action and third party bodily injury and property damage only as directed or approved by the State Inspector of Oils.

(8) Certificate of Deposit or Other Secured Financial Instrument. A certificate of deposit or another financial instrument secured by an agency of Colorado or the U.S. Government may be used to satisfy the requirements of 8-20.5-206 provided that such financial instrument is made payable to the State Inspector of Oils. Any interest or dividends payable by such instrument may be made payable to the owner/operator using this method of assuring financial responsibility. This financial instrument will be returned to the owner/operator by the State Inspector of Oils only after the instrument has been replaced by an alternate financial responsibility mechanism or the owner/operator is released from the financial responsibility requirement under subsection (14) below.

(9) Substitution of Financial Responsibility Mechanisms.

(A) An owner/operator may use any alternate financial responsibility mechanisms specified above provided that at all times he maintains an effective financial responsibility mechanism that satisfies the requirements of 8-20.5-206.

(B) After obtaining alternate financial responsibility as specified in this Article 6, an owner/operator may cancel a prior financial responsibility mechanism by providing notice to the provider of financial responsibility .

(10) Cancellation by a Provider of Financial Responsibility. If a provider of financial responsibility cancels or fails to renew for reasons other than incapacity of the provider as specified in subsection (11) below, the owner/operator must obtain alternate coverage within 60 days after receipt of the notice of termination. If the owner/operator fails to obtain alternate coverage within 60 days after receipt of the notice of termination, the owner/operator must notify the State Inspector of Oils of such failure and submit:

(A) The name and address of the provider of financial responsibility;

(B) The effective date of termination; and

(C) The evidence of the financial responsibility mechanism subject to termination, maintain ed in accordance with subsection (12).

(11) Reporting by Owner/Operator .

(A) An owner/operator must submit current evidence of financial responsibility to the State Inspector of Oils:

(i) Within 30 days after the owner/operator identifies a release from an UST required to be reported under Articles 4 or 5;

(ii) If the owner/operator fails to obtain alternate coverage as required by this Article 6, within 30 days after the owner/operator receives notice of:

(aa) Commencement of a voluntary or involuntary proceeding under Title 11 (Bankruptcy), U.S. Code, naming a provider of financial responsibility as a debtor,

(bb) Suspension or revocation of the authority of a provider of financial responsibility to issue a financial responsibility mechanism,

(cc) Other incapacity of a provider of financial responsibility; or

(iii) As required by subsections (4)(G) and (10).

(B) An owner/operator must certify compliance with the financial responsibility requirements of this Article 6 as specified in the new tank registration form when notifying the State Inspector of Oils of the installation of a new UST under section 2-2-10.

(C) The State Inspector of Oils may require an owner/operator to submit evidence of financial responsibility as described in subsection(12)(B) or other information relevant to compliance with this Article at any time.

(12) Record keeping.

(A) Owners/operators must maintain evidence of all financial responsibility mechanisms used to demonstrate financial responsibility for an UST until released under subsection (14). An owner/operator must maintain such evidence at the site or the owner's or operator's place of business. Records maintained off-site must be made available upon request by the State Inspector of Oils.

(B) An owner/operator must maintain the following types of evidence of financial responsibility:

(i) An owner/operator using a financial test of self-insurance must maintain a copy of the chief financial officer's letter based on year-end financial statements for the most recent financial reporting year. Such evidence must be on file no later than 120 days after the close of the financial reporting year or 30 days from the date of the financial statement, whichever is earlier.

(ii) An owner/operator using a letter of credit must maintain a copy of the signed agreement and copies of any amendments to the agreement.

(iii) An owner/operator using an insurance policy must maintain a copy of the signed insurance policy, the certificate of insurance specified in subsection (5)(D) and any amendments to the policy .

(13) Drawing on Financial Responsibility Mechanisms.

(A) The State Inspector of Oils shall require the insurer, trustee, or institution issuing a letter of credit or certificate of deposit to make available the amount of funds stipulated by the State Inspector of Oils, up to the limit of funds provided by the financial responsibility mechanism if:

(i) The owner/operator fails to establish alternate financial responsibility within 60 days after receiving notice of cancellation of insurance, letter of credit, or other financial responsibility mechanism; and

(ii) The State Inspector of Oils determines or suspects that a release from an UST covered by the mechanism has occurred and so notifies the owner/operator or the owner/operator has notified the State Inspector of Oils of a release from an UST covered by the mechanism.

(B) The State Inspector of Oils may draw on these available funds when:

(i) The State Inspector of Oils makes a final determination that a release has occurred and immediate or long-term corrective action for the release is needed, and the owner/operator , after appropriate notice and opportunity to comply, has not conducted corrective action as required; or

(ii) The State Inspector of Oils has received either:

(aa) Certification from the owner/operator and the third-party liability claimant(s) and from attorneys representing the owner/operator and the third-party liability claimant(s) that a third-party liability claim should be paid; or

(bb) A valid final court order establishing a judgment against the owner/operator for bodily injury or property damage caused by an accidental release from an UST covered by financial responsibility under this Article 6; and the State Inspector of Oils determines that the owner/operator has not satisfied the judgment.

(14) Release from the Requirements. An owner/operator is no longer required to maintain financial responsibility under this Article for an UST after any necessary corrective action has been completed and the tank has been properly closed as required by these regulations.

(15) Bankruptcy or Other Incapacity of Owner/Operator or Provider of Financial Responsibility.

(A) Within 10 days after commencement of a voluntary or involuntary proceeding under Title 11 (Bankruptcy), U.S. Code, naming an owner/operator as debtor, the owner/operator must notify the State Inspector of Oils by certified mail of such commencement and submit a list of all affected UST facilities.

(B) An owner/operator will be deemed to be without the required financial responsibility in the event of a bankruptcy or incapacity of its provider of financial responsibility, or a suspension or revocation of the authority of the provider of financial responsibility to issue an insurance policy, letter of credit, or other financial responsibility mechanism. The owner/operator must obtain alternate financial responsibility as specified in this Article within 30 days after receiving notice of such an event. If the owner/operator does not obtain alternate coverage within 30 days after such notification, he must notify the State Inspector of Oils immediately.

(b) Reestablishment of Financial Responsibility.

(1) Whenever the required amount of financial responsibility has been reduced by payment of claims due to a leak or spill at any facility; and the owner/operator is responsible for another facility or other facilities then the owner/operator must immediately reestablish the ability to pay the required amounts for any leak or spill occurrence at the additional facility or facilities.

(2) Whenever the required amount of financial responsibility for the owner/operator of a single facility has been reduced by payment of claims due to a leak or spill occurrence at a facility and the period of corrective action for that occurrence has been completed, the owner/operator must then immediately reestablish the required amount of financial responsibility.

(c) Petroleum UST owners/operators who do not qualify for participation in the Petroleum Storage Tank Fund must establish and maintain evidence of financial responsibility for taking corrective action and for compensating third parties for bodily injury and property damages according to one or more of the mechanisms allowable under 40 C.F.R. sections 280.95, 280.96, 280.97, 280.98, 280.99, 280.102, and 280.103 . The required dollar amounts and deadlines are the same as those in sections 280.90, 280.91, 280.92 and 280.93 of volume 40 of the Federal Register.

ARTICLE 7 EMISSION INSPECTION

7-1 Statement of Basis and Purpose.

This regulation is promulgated to establish a fee to offset the cost of the State Inspector of Oils to conduct emission inspection of USTs which are required to have installed pollution equipment.

7-2 Fee Schedule.

The State Inspector of Oils shall conduct an emission inspection of all USTs that are located in the geographical area designated by Regulation #7 of the Department of Health 5 C.C.R. 1001-9 and which contain petroleum distillate such as gasoline, to insure pollution control equipment is installed and is in operating condition. The fee for this inspection of such tanks shall be twelve dollars, payable by the tank owner/operator. The fee shall be payable to the Air Pollution Control Division, Colorado Department of Public Health and Environment.

7-3 Statutory Authority.

    This section has no further detail.