This comment is in reference to the financial assurance requirement for permit issuance (https://law.lis.virginia.gov/admincodefull/title9/agency20/chapter70/). Updates to these regulations are needed to improve the regulations’ ability to protect public health, safety, and welfare. Specifically, updates are needed to reduce risk of permitting a landfill that is prone to insolvency and the subsequent environmental and financial harm to localities and the Commonwealth. Landfill bankruptcy can lead to landfills being turned over to state, becoming public responsibility. The recent case of the Bristol landfill illustrates the public impact of unfunded landfill remediation and associated settlements[1].  Despite being permitted under current regulations, the Bristol landfill's closure fund is unfunded. Taxes and fees will have to be increased or state funds will need to be deployed to address this problem. Other recent cases of privately owned landfills declaring bankruptcy have also resulted in extensive public liability[2].

Over the past 20 years, landfill size has increased dramatically, greatly increasing the potential public environmental and financial impact of a bankruptcy. At the same time, financial crises in our nation (Enron, banking and mortgage crisis of 2008, current inflation crisis) have brought into relief how simple assurances may be inadequate. Without requiring multiple methods of financial assurance and relying only on those highly susceptible to credit risk, and remaining blind to red flags of corporate dishonesty, the current regulations do not sufficiently ensure financial stability in applicants.

We propose the following amendments to 9VAC20-70-81. General purpose and scope.

1. “A…the owner or operator of such facility shall obtain one, or a combination of the financial responsibility mechanisms described in this part.” At least two methods should be required. Any one approach may be flawed, as we have seen through ratings agencies’ failures to recognize the Enron risk or the mortgage backed securities risks in 2008.

We propose the following amendments to 9VAC20-70-140.

1. Regarding “9VAC20-70-140. Allowable financial mechanisms. Owners and operators shall choose from the options specified in this article.”
   1. Applicant discretion in selecting financial assurance mechanism is inappropriate. The financial assurance mechanism should be selected by the regulatory agency (DEQ).
   2. The options are not equal in reliability or susceptibility to credit risk. Virginia should prefer the most stringent, non-credit based methods: Trust Fund; Surety bond and trust fund; certificate of deposit, corporate financials test.
2. Regarding 9VAC20-70-200. Corporate financial test. 1.a. (1) (2) and (3). Corporate financials test should be performed by DEQ for all applicants. Meeting the test should be a minimum requirement.  All 3 elements of the corporate financial test should be required (as opposed to any one of the three). (2) and (3) are simple calculations that can be done by agency employees in a few minutes. (1) Bond ratings are easily obtained in less than a minute.
3. Due diligence research, when needed, must be supported by regulation. Currently there is no way to act on concerns of dishonesty/financial red flags that emerge outside of the list of assurance mechanisms (such as previous fraud, analyst concerns of corporate financials being misrepresented or criminal ties). DEQ should have discretion to 1) research such information on their own or request thorough review by the attorney general's office, as they can do with other agencies during the solid waste permitting process; 2) reject permit applications based on these red flags even if other financial assurances can be met.

As a final note, the following section is good as it stands (9VAC20-70-81 section D.):

The director may reject the proposed evidence of financial responsibility if the mechanism or mechanisms submitted do not adequately assure that funds will be available for closure, post-closure care, or corrective action. The owner or operator shall be notified in writing within 60 days of receipt of a complete financial assurance submission of the tentative decision to accept or reject the proposed evidence.