Can a hazardous waste facility use a corporate guarantee instead of a bond to meet Maryland's financial assurance rule?

Plain-English summary

Companies that run controlled hazardous substance facilities in Maryland have to prove they can pay for closing the site safely and caring for it afterward. The Department of the Environment wanted to let a permit holder meet that financial assurance requirement with a corporate guarantee, essentially a written promise from a parent corporation that passes a financial test, rather than a posted bond or trust fund. The Legislative Auditor had questioned whether a corporate guarantee counted as the "security" the statute, EN §7-242(a)(1), required. The Deputy Secretary asked the Attorney General to resolve it.

The Attorney General agreed with the Department. The opinion offered two independent reasons. First, the word "security" in the statute is not a fixed term; while it usually means a posted resource like a bond, it can carry a broader meaning depending on context, and the statute asked only for security "that the Department considers sufficient." The Department's own regulation incorporates the detailed federal EPA financial-assurance rules, which expressly allow a "financial test and corporate guarantee" option, so reading "security" to include that option was a permissible construction entitled to deference. Second, even if "security" were read narrowly to exclude corporate guarantees, the Department had separate statutory authority (EN §7-208(d)(4)) to exempt permit holders from a requirement when the exemption is consistent with federal law or regulation. Allowing a corporate guarantee that tracks a federal regulation fit squarely within that exemption power.

Currency note

This opinion was issued in 1990. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The Environment Article, the Department's COMAR regulations, and the federal EPA financial-assurance rules (including the specific 40 C.F.R. Part 264 provisions and the version incorporated by reference) have all been amended since 1990, so the section numbers and cross-references here may not be current. The federal deference framework the opinion relied on has also evolved in later Supreme Court decisions. Read the analysis and the citations here as the law as it stood in 1990, and check the current Environment Article and current federal regulations before relying on any specific rule.

Common questions

Could a hazardous waste facility use a corporate guarantee instead of a bond?
Yes, under this 1990 opinion. The Attorney General concluded the Department of the Environment could accept a corporate guarantee that met the federal EPA financial-assurance standards to satisfy the permit's financial assurance requirement.

What is a "corporate guarantee" in this setting?
It is a written guarantee, typically from the parent corporation of the facility's owner or operator, that the corporation itself passes a financial test (covering assets, net worth, bond rating, and similar measures) set by the federal regulation. It is an alternative to posting a bond or funding a trust.

Why did the Legislative Auditor question it?
Because "security" most commonly means a posted resource, like a bond or deposit, that a creditor can draw on if the obligation is not met, and a corporate guarantee is a promise rather than a posted resource. The opinion acknowledged that concern but concluded the statutory term was broad enough in context.

What were the two legal grounds for allowing it?
First, the Department could reasonably read "security" in EN §7-242(a)(1) to include a corporate guarantee it found sufficient, and that reading was entitled to deference. Second, even if not, the Department's authority under EN §7-208(d)(4) to exempt permit holders in ways consistent with federal regulation independently supported the practice.

Background and statutory framework

Maryland requires anyone owning, establishing, operating, or maintaining a controlled hazardous substance facility to hold a facility permit (EN §7-232(a)), and a permit applicant must show financial ability and file acceptable evidence of a bond or other security the Department requires under EN §7-242. That section directs each permit holder to maintain "a bond or other security that the Department considers sufficient" to guarantee fulfillment of the permit requirements, to monitor, maintain, and close the facility, and to secure it after closure (EN §7-242(a)(1)). The Department has power to adopt regulations to carry out the subtitle (EN §7-208(a)) and, under EN §7-208(d)(4), to adopt a regulation exempting persons from a requirement when the exemption is consistent with federal law or regulation.

Neither the statute nor the Department's regulations defined "security." Instead, the Department's financial-requirements regulation incorporated the federal EPA rules by reference (COMAR 26.13.05.08). Those federal rules set out detailed financial-assurance options at 40 C.F.R. §264.143, including a trust fund, a surety bond, and a "financial test and corporate guarantee for closure," under which a parent corporation that meets specified financial criteria can guarantee the obligation. The opinion reasoned that because "security" has no unvarying meaning and can, in some contexts, reach undertakings given to preserve the value of an asset, and because the statute asked only for security the Department considered sufficient, the Department could permissibly read the term to include a corporate guarantee that satisfied the federal criteria. That construction drew deference under Chevron and Maryland's own deference cases, and the opinion noted the Attorney General had said as far back as a 1983 federal certification that "other security" could include letters of credit or other forms of financial assurance the Department deemed sufficient. As a fallback, the opinion held that allowing a corporate guarantee could be viewed as an exemption from the bond-or-security requirement, permissible under EN §7-208(d)(4) precisely because it was consistent with, indeed incorporated, a federal regulation. The bottom line: the Department acted within its authority in accepting corporate guarantees meeting the federal financial-assurance rules.

Citations and references

Statutes and regulations:

• §7-242(a)(1) of the Environment Article, the financial assurance requirement, and EN §7-232(a), the facility permit requirement
• EN §7-208(a), the Department's general rulemaking power, and EN §7-208(d)(4), the authority to exempt persons consistently with federal law (enacted by Chapter 115, Laws of Maryland 1988)
• COMAR 26.13.05.08, incorporating the federal EPA financial-assurance rules, and those rules at 40 C.F.R. §264.143 (including the corporate-guarantee option at subsection (f)); the federal Resource Conservation and Recovery Act, 42 U.S.C. §6924(t)(1)

Cases:

• Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984); Batterton v. Francis, 432 U.S. 416, 424-25 (1977); and Holy Cross Hosp. v. Health Services Cost Review Comm'n, 283 Md. 677, 685, 393 A.2d 181 (1978), on deference to an agency's construction
• Greve v. Leger, Limited, 64 Cal. 2d 853, 52 Cal. Rptr. 9, 13 (1966), and Tahoe National Bank v. Phillips, 4 Cal. 3d 11, 92 Cal. Rptr. 704, 711 (1971), on the broad meaning "security" can carry, contrasted with State ex rel. Landis v. Rosenthal, 148 So. 769 (Fla. 1933)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1990/Volume75_1990.pdf (this opinion appears at printed pages 213-217 of the bound annual volume; Maryland's site does not publish a standalone PDF of this opinion)

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

ENVIRONMENT

Controlled Hazardous Substance Facility — Financial "Security" — Department of Environment May Accept Corporate Guarantees Meeting Federal Requirements

February 8, 1990

Mr. Robert Perciasepe
Deputy Secretary of the Environment

 You have requested our opinion on whether the Department of the Environment has the authority to allow a controlled hazardous substance facility permit holder to offer a corporate guarantee in satisfaction of the financial assurance requirement of the statute. The Legislative Auditor has expressed the view that a corporate guarantee would not satisfy that requirement, set out in §7-242(a)(1) of the Environment Article ("EN" Article).

Your counsel had previously advised that the Department had the authority to accept corporate guarantees or similar financial assurances from permit holders. For the reasons stated below, we agree with this advice.

I

Statutory Background

 Under EN §7-232(a), "a person shall hold a facility permit before the person may own, establish, operate, maintain a controlled hazardous substance facility in this State."1 An applicant for a permit is required:

         (1) To provide evidence of financial ability to properly establish, operate, and maintain a controlled hazardous substance facility; [and]

         (2) To file with the Department acceptable evidence of a bond or other security that the Department requires under [EN] §7-242 ....

 EN §7-242, in turn, sets standards that a permit holder must meet in order to keep a facility permit. One of these requirements covers financial assurances, requiring each permit holder to:

          Maintain a bond or other security that the Department considers sufficient to cover any cost for:

          (i) Guaranteeing fulfillment of all requirements related to the facility permit;

          (ii) Monitoring, maintaining, or closing the controlled hazardous substance facilities; and

         (iii) Assuring the security of the controlled hazardous substance facility after closing; ....

EN §7-242(a)(1).

 The Department has the power "to adopt rules and regulations to carry out the provisions of [the hazardous substance] subtitle." EN §7-208(a). Under EN §7-208(d)(4), "[i]f an exemption is consistent with federal law or federal regulation," a regulation may "exempt persons from any requirements of this subtitle."

II

Nature of "Security"

 Neither the statute nor the Department's regulations themselves define the term "security." Instead, the Department's regulation, entitled "Financial Requirements," incorporates by reference the pertinent regulations of the federal Environmental Protection Agency. See COMAR 26.13.05.08.2

 The federal regulations, in turn, set out extremely detailed requirements by which the "owner or operator of each facility must establish financial assurance for closure of the facility." 40 C.F.R. §264.143. See also 40 C.F.R. §§264.145 (post-closure care) and 264.151 (wording of instruments). Under the federal scheme, the operator may choose from one of a number of specified options, including the creation of a trust fund and the posting of a surety bond.

  Another of these options is the "financial test and corporate guarantee for closure." 40 C.F.R. §264.143(f). To pass the financial test, the owner or operator must meet various criteria relating to assets, liabilities, net working capital, tangible net worth, and bond rating. 40 C.F.R. §264.143(f)(1). The federal regulation also provides that an owner or operator complies with its financial assurance obligations "by obtaining a written guarantee ... [from] the parent corporation of the owner or operator," which itself must meet the financial criteria of the regulation. 40 C.F.R. §264.143(f)(10).3

In our view, the Department permissibly may construe the term "security" in EN §7-242(a)(1) to encompass this form of financial assurance. We understand the Legislative Auditor's concern, for most commonly the term "security" denotes some "obligation, pledge, mortgage, deposit, lien, etc. given by a debtor in order to assure the payment or performance of his debt, by furnishing the creditor with a resource to be used in case of failure in the principal obligation." Black's Law Dictionary 1216 (5th ed. 1979) (emphasis added). A corporate guarantee is not itself a "resource" like a bond.

 The term "security" does not have an unvarying meaning, however, but rather one that can vary from one context to another.4 As the California Supreme Court observed, in some settings the term can apply broadly: "Whenever the performance of some undertaking is necessary to 'secure' or preserve the value of some asset or some other agreement, we could possibly refer to the undertaking as one that has been given as 'security.'" Greve v. Leger, Limited, 64 Cal. 2d 853, 52 Cal. Rptr. 9, 13 (1966). See also Tahoe National Bank v. Phillips, 4 Cal. 3d 11, 92 Cal. Rptr. 704, 711 (1971). But see State ex rel. Landis v. Rosenthal, 148 So. 769 (Fla. 1933) (personal bond of grantee of franchise does not satisfy statutory requirement of "security").

 Moreover, the statute speaks not of a "security" in the abstract, but one "that the Department considers sufficient...." (Emphasis added.) The federal criteria are designed to achieve the same results as the financial assurance provision of the Maryland statute. Because the agency's construction is not precluded by the statutory language or its evident purpose, that construction is entitled to considerable deference. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984); Batterton v. Francis, 432 U.S. 416, 424-25 (1977); Holy Cross Hosp. v. Health Services Cost Review Comm'n, 283 Md. 677, 685, 393 A.2d 181 (1978).5

III

The Department's Exemption Authority

 Even if the term "security" in EN §7-242(a)(1) could only be construed narrowly, so that corporate guarantees would not satisfy that provision, nevertheless the regulation in question would still be permissible. The Department has express power to adopt a regulation that "exempt[s] persons from any requirements of this subtitle," so long as the exemption "is consistent with federal law or federal regulation ...." EN §7-208(d)(4).6

 The option to provide a corporate guarantee can be viewed as an exemption from the statutory requirement that a permit holder maintain a bond or other security. Hence, the exemption is permissible under EN §7-208(d)(4). The provision allowing corporate guarantees is manifestly "consistent with ... federal regulation," for it incorporates a federal regulation.

IV

Conclusion

 In summary, it is our opinion that the Department of Environment acted within its authority in allowing facility permit holders to maintain a corporate guarantee that satisfies the financial assurance requirements in the pertinent federal regulation.

                                             J. Joseph Curran, Jr.
                                             Attorney General

                                             Jack Schwartz
                                             Chief Counsel
                                               Opinions and Advice

1
The terms "controlled hazardous substance," "controlled hazardous substance facility," and "facility permit" are defined in EN §7-201(b), (c), and (j), respectively.

2
"[T]he Department adopts as its regulations the federal regulations at 40 C.F.R. 264.140-.148, and 264.151 as amended through the Federal Register of January 2, 1987 (Volume 52, No. 1)."

3
The provisions of the federal Resource Conservation and Recovery Act dealing with financial responsibility give broad discretion to the EPA Administrator in establishing evidence of financial responsibility. 42 U.S.C. §6924(t)(1). The statute does not use the term "security."

4
Indeed, this opinion should not be understood to be addressing the scope of the term "security" in any other context.

5
On October 12, 1983, the Attorney General certified that Maryland law regarding hazardous substance control met certain federal requirements. As part of the certification, the Attorney General observed that "'[o]ther security' in [EN] §7-242(a) also may include letters of credit or other forms of financial assurance as deemed sufficient by the Department."

6
This provision was enacted for the purpose of "authorizing the Secretary of the Environment to exempt certain persons from the requirements of the Controlled Hazardous Substances Law under certain circumstances." Chapter 115, Laws of Maryland 1988 (title).