An applicant may use any of the following mechanisms to cover the financial assurance obligation for an aquifer protection permit (APP). Use of the Templates provided below will expedite our review of your demonstration, but it is not required.

Please note: If a mechanism has a "draft" watermark, please remove the watermark before using the document.

Financial Test of Self-Assurance

This mechanism keeps the risk of covering closure/post-closure costs "in-house" with the applicant, leaving them responsible for covering the cost estimates. To qualify, the applicant must pass a test of self-assurance which will require it to demonstrate that it meets certain liquidity, debt, and/or net income ratios, among other considerations.

Performance Surety Bond

A performance surety bond is a guarantee by a surety company that it will meet the obligations of the applicant. Under the terms of a performance bond, the surety(ies) shall become liable on the bond obligation if the applicant has failed to fulfill the conditions of the permit.

Surety bonds are issued by a licensed surety rather than a bank and generally issued to cover a lack of performance rather than default on a financial obligation.

Surety bonds typically cost about two percent of the surety amount.

Certificate of Deposit

A certificate of deposit (CD) is a written acknowledgment of the receipt of a sum of money on deposit for a pre-specified period of time, which the depositary institution promises to pay to the depositor, to the order of the depositor or to some other person (i.e., a beneficiary such as ADEQ). An applicant should deposit funds to cover the full required amount of the financial responsibility unless the CD is being used in combination with other mechanisms. CDs are subject to FDIC insurance limits. If the cost estimates exceed the FDIC limits at any one bank (at the time of this writing is $250,000 per depositor), then it would be necessary to combine this mechanism with another mechanism or CD issued by a different bank.

• Assignment of CD Agreement | Download Template >

Trust Fund

Under a fully-funded trust fund, money for closure/post-closure costs are held and administered by an impartial third party. The fund can be used to fulfill the entire amount of financial assurance responsibility, or it may be combined with other mechanisms to fulfill the total cost estimates. Applicants using fully-funded trust funds must provide the full amount of the assured costs. For example, an applicant must provide the entire amount required as per the cost estimates if the fund is the sole means of demonstrating financial responsibility. Banks acting as trustees of funds typically impose annual administrative maintenance charges between 0.1 and 1 percent.

• Trust Agreement template | Download Template >

Letter of Credit

A letter of credit is a contract between three parties: (1) the issuer, (2) the principal, and (3) a third party. By issuing a letter of credit, the issuer (normally a bank) promises to pay a certain amount to the third party (ADEQ) in the event that the principal (the applicant) fails to meet an obligation. In this case the obligation would be to cover the closure and post-closure care in the event the applicant is unable to perform. The cost of a letter of credit can vary in range from 1 to 15 percent, with a typical charge of about three percent.

• Letter of Credit template | Download Template > 

Insurance Policy

Through the insurance policy mechanism, the insurer agrees to reimburse the permitted facility (or a third party) for costs incurred to cover closure and post-closure care.
An insurance policy for an APP does not work in the same way as a typical general liability policy which would cover property damage claims, for instance. For a permit, the insurance policy acts to guarantee that funds will be available to pay closure/post-closure costs without a deductible. It guarantees that once closure or post-closure care begins, the insurer will be responsible for paying out funds to ADEQ up to an amount equal to the face amount of the policy.

If the Permittee choses a General Liability Policy of Insurance, the Permittee must also demonstrate an additional financial assurance mechanism to equal the current cost estimate submitted to the director to meet the requirements of AAC R18-9-A201(B)(5) through one of the other approved listed mechanisms.

Cash Deposit

The applicant provides a cashier’s check to ADEQ. ADEQ deposits the check at the State Treasurer of Arizona for safekeeping. Only the ADEQ Director has access to the funds to cover closure/post-closure costs in the event that the applicant does not meet its obligations. Please complete the Acceptance of Cash Deposit for Financial Assurance form below.

• Acceptance of Cash Deposit for Financial Assurance | Download Form > 

Guarantee

A guarantee is a promise by a third party to pay for closure/post-closure care or any other costs as required by the permit if ordered to by ADEQ. The guarantor is required to make payments only after the applicant has failed to meet performance requirements. Guarantors must qualify for self-assurance using the Financial Test of Self-Assurance method.

• Affidavit of Foreign Entity | Download Affidavit >
• Affidavit of Permit Applicant | Download Affidavit >
• Affidavit of U.S. Guarantor | Download Affidavit >
• Guarantee Template | Download Template >

Applicants are not required to use ADEQ templates, but using them may fast-track approval of your financial assurance mechanism.