Solid Waste Financial Responsibility

Owners and operators of all permitted solid waste facilities as defined by APC&EC Regulation 22 are required to show that they have the financial resources for the required closure and post-closure care activities and any for corrective action that might become necessary due to releases of contaminants into the environment. These financial assurance demonstrations ensure proper long-term financial planning by owner/operators so that sites will be closed properly and maintained and monitored in a manner that protects human health and the environment.

Overview of Financial Assurance Requirements

The first step in demonstrating financial assurance is preparing a written, site-specific cost estimate. Closure and post-closure care cost estimates are prepared prior to commencement of facility operations. The closure and post-closure cost estimates must be adjusted annually during the active life of the facility to account for inflation as required in the Annual Engineering Inspection Report. Corrective action cost estimates are prepared when a release is detected, and also must be adjusted annually during the period of the corrective action. All cost estimates are calculated based upon hiring a third party to perform the required action.

A professional engineer registered in Arkansas is required to inspect the landfill site at least once a year and prepare an annual report addressing operational compliance with permit conditions, permit plans, specifications, narrative, and all applicable regulations. The annual engineering inspection report (AEIR) addresses the 12-month period from January through December and is due to ADEQ by March 31 of the following year.

The annual engineering inspection report contains documentation, including:

  • Remaining capacity of the landfill
  • Remaining capacity in constructed cells
  • Projected date for opening new cells or area
  • Estimated site life (in years - based on the utilization rate during the previous one year period)
  • Compliance with operating requirements of regulation 22, permit conditions, and the approved operating plan and narrative
  • An updated contour map
  • Quantity, locations and characteristics of leachate collected, recirculated, and disposed
  • Maintenance of stormwater controls and other best management practices for erosion control
  • Status of capping and closure of completed areas; status of remedial or corrective actions taken
  • Updated financial assurance
  • Revised or updated facility closure plan and any other items that affect compliance at the landfill

Facilities Requiring Financial Assurance

Financial assurance regulations apply to owners and operators of most solid waste disposal or processing facilities.

Allowable Mechanisms

Owners and operators of permitted solid waste landfills have several allowable mechanisms for meeting the financial assurance requirements.

All allowable mechanisms used to satisfy financial assurance requirements must be submitted to the director for approval in their original form, with original signatures and notarized seals (if required). ADEQ cannot accept email versions, faxed versions, or instruments duplicated by a copy machine.

Forms and Documents

Select the appropriate subject below to find financial assurance application forms and documents. Submit required forms.

A trust fund allows an owner or operator to set aside money in increments according to a pay-in period. At the end of the pay-in period, the facility will have enough funds earmarked for closure, post-closure care, and corrective action requirements.

A surety bond guarantees to ADEQ that it will meet the permitted facility's closure, and/or post-closure obligations if the owner or operator is unable to do so. Types of surety bonds include:

  • Performance Bond
    The surety guarantees that it will either perform the closure/post-closure activity in accordance with the approved closure plan on behalf of the permitted facility or pay out the face value of the bond into a standby trust fund.
  • Payment Bonds
    The surety guarantees that it will pay out the face value of the bond into a standby trust fund in the event that the owner/operator fails to perform as required by the approved closure plan.
  • Standby Trust Agreement
    An owner of operator using a surety bond also must establish a standby trust fund when the mechanism is acquired. A standby trust fund is simply a trust fund that is not yet funded but is otherwise ready to accept monies in the event they are received from a particular source.

A letter of credit is a document issued by a financial institution that guarantees the payment of the permitted facility's obligations up to a stated amount for a specified period of time.

Through the policy, the insurer agrees to reimburse the permitted facility (or third party) upon direction from the regulator, for costs incurred to closure and post-closure care.

Corporate Financial Test

The corporate financial test is a form of self-insurance where the owner or operator is not required to arrange with a third party or set aside cash funds for closure, post-closure, or corrective action costs, provided that the owner or operator can pass one of two financial tests. When these costs need to be paid, the owner or operator is solely responsible for paying them.

Corporate Guarantee

A corporate guarantee is a form of the financial test in which a third party (either the direct or higher-tier parent corporation of the owner/operator, a firm whose parent corporation is also the parent corporation of the owner/operator, or a firm with a “substantial business relationship” with the owner/operator) “stands in the shoes” of the owner/operator in providing a guarantee that costs of closure, post-closure care, or corrective action will be paid in the event that the owner/operator is unable to do so. The third party (the guarantor) must be able to pass the corporate financial test.

Local Government Financial Test

A local government can also self-insure by demonstrating its financial strength, provided the local government can pass one of two financial tests. This demonstration can be achieved by showing that it has issued general obligation bonds for which it received investment grade ratings. Alternatively, the local government can pass ratios that address its cash holdings and debt obligations relative to the size of its budget.

Local Government Guarantee

A local government may guarantee the costs of closure, post-closure, and corrective action by another local government or by a private business. The local government or private business guarantor would promise to take responsibility for the obligations of the local government owner or operator if the owner or operator fails to do so and provide proof that it passes the financial test requirements.

An owner or operator may guarantee the costs of closure, post-closure, and corrective action by obtaining any other mechanism that meets the criteria specified in Reg.22.1405 (l) and is approved by the director.

Annual Inflation Factor Calculation Guidance

During the active life of the facility, the owner or operator must annually adjust the closure, post-closure care, and corrective action cost estimates for inflation, either by completing a new cost estimate or by multiplying the previous year's cost estimate by the inflation factor.

When there have been no significant facility changes in design, closure, post-closure, or corrective action plan, owner/operators may use an inflation factor to recalculate the costs.

When significant changes to facility design and/or closure, post-closure, or corrective action plans are required, the cost estimates must be recalculated rather than simply applying the inflation factor.

The inflation factor adjustment should be determined using the most the recent implicit price deflator (IPD) for gross national product (GNP) as published by the U.S. Department of Commerce in its Survey for Current Business. Annual factors are used instead of quarterly factors to reflect an accurate inflation rate for the previous year. Please note the IPD is updated annually on March 31.

After the factors are published, ADEQ provides this information to each permitted facility required to establish financial assurance for closure, post-closure, or corrective action. Once the inflation factor is determined, the cost estimate dollar value must be multiplied by the inflation factor for the most recent year.

The inflation factor is the result of dividing the latest published annual deflator by the deflator for the previous year. The previous year's cost estimate is then multiplied by the inflation factor to derive the adjusted cost estimate to be assured for the next year.

Calculating Cost Estimate Adjustment

The Implicit Price Deflator (IPD) is used to update closure, post-closure, and corrective action financial assurance estimates.

Example Calculation
Annual sum of closure, post-closure and corrective action: $1,500,000.00
Multiply by the inflation factor for current year: 1.018
Update cost estimate for current year: $1,527,000.00

Implicit Price Deflator

The IPD for the U.S. gross national product is updated March 31 of each year. For reference, the annual inflation factor for recent years is shown as follows:

Year Implicit Price Deflators (IPD) - Updated March 31 of each year Inflation Factor
1998 1997 IPD = 101.93 1996 IPD = 100.00 1.930
1999 1998 IPD = 103.19 1997 IPD = 101.93 1.240
2000 1999 IPD = 104.77 1998 IPD = 103.19 1.530
2001 2000 IPD = 106.89 1999 IPD = 104.77 2.020
2002 2001 IPD = 109.21 2000 IPD = 106.89 2.170
2003 2002 IPD = 110.63 2001 IPD = 109.21 1.300
2004 2003 IPD = 105.671 2002 IPD = 103.932 1.670
2005 2004 IPD = 109.099 2003 IPD = 106.516 2.420
2006 2005 IPD = 112.726 2004 IPD = 109.416 3.030
2007 2006 IPD = 116.034 2005 IPD = 112.726 2.930
2008 2007 IPD = 120.613 2006 IPD = 116.034 3.950
2009 2008 IPD = 123.244 2007 IPD = 120.613 2.180
2010 2009 IPD = 134.305 2008 IPD = 133.627 0.510
2011 2010 IPD = 111.140 2009 IPD = 109.664 1.350
2012 2011 IPD = 114.061 2010 IPD = 111.140 2.630
2013 2012 IPD = 116.089 2011 IPD = 114.061 1.770
2014 2013 IPD = 106.588 2012 IPD = 105.002 1.015
2015 2014 IPD = 108.289 2013 IPD = 106.733 1.458
2016 2015 IPD = 109.775 2014 IPD = 108.686 1.002
2017 2016 IPD = 111.416 2015 IPD = 110.012 1.013
2018 2017 IPD = 113.421 2016 IPD = 111.416 1.018

Information in this table is obtained from the Federal Reserve Bank of St. Louis