Remediation Funding Source (RFS) and Financial Assurance (FA) Guidance

What constitutes a complete RFS package?

The initial submission of RFS should include:

  • Remediation Certification Form – if Industrial Site Recovery Act (ISRA) trigger is a sale or transfer of ownership or operations of the industrial establishment.
  • Remediation Cost Review and RFS/FA Form
  • Original RFS mechanism – Please note: The certification on the last page of the RFS mechanism is to be signed by the person responsible for conducting the remediation, not the issuing institution and not the LSRP.
  • 1% RFS surcharge check (not applicable if using self-guarantee)

For subsequent submissions, the person responsible for conducting the remediation is required to submit an annual cost review 365 days after the person was required to establish the initial RFS. This submission must include:

Annual 1% RFS Surcharge

N.J.S.A. 58:10B-11 and N.J.A.C. 7:26C-5.9 [pdf] requires a surcharge in the amount equal to one percent (1%) of the required RFS to be paid annually by every person who is required to establish and maintain a RFS in the form of a Letter of Credit, Line of Credit, Remediation Trust Fund and/or Environmental Insurance Policy, and/or Surety Bond. There are no surcharges for Self-Guarantees. The 1% surcharge checks should be made payable to: “Treasurer, State of New Jersey”. Please include the NJDEP Program Interest Number (PI #) or ISRA case number (e.g. E2013001) in the memo field of the check so the Department and the Department of Treasury can accurately record receipt of the check in its database and the person will be considered in compliance with the requirement. The initial surcharge check is due with the initial submission of the RFS mechanism and is due annually thereafter on the same date the initial submission was required. Thereafter, the person responsible for conducting the remediation will receive an invoice for the 1% surcharge from the Department of Treasury annually. Please follow the instructions on the invoice when making payment.

The DEP Online “Pay a Paper Invoice” Service can now be used to pay the annual 1% surcharge invoice issued by the Site Remediation Program (SRP). This Service can be found at NJDEP Online Business Portal under “Non-Registered Services.” Non-Registered Services are simplified services that DO NOT require logging into or having an account with myNewJersey to access or complete. The “Pay a Paper Invoice” Service allows anyone to pay a bill on line either using an eCheck or credit card. You will need your Invoice Number which can be found in the upper right corner of your invoice. This service cannot be used for initial 1% surcharge payments.

Please note:

  • The 1% surcharge is calculated on the amount that is in the RFS account for the cost of remediation. It is not calculated on any accrued interest.

What are acceptable RFS and Financial Assurance (FA) mechanisms?

All RFS and FA mechanisms must comport with the format and language of the model documents found at the links below.

Remediation Funding Source (RFS)
Direct Oversight (DO) for RFS

Please refer to N.J.S.A. 58:10C-27c.(4) and (5) for DO RFS requirements. Appropriate mechanisms include:

If you have earned adjustments to Direct Oversight, the standard Remediation Trust Fund Agreement [doc] or Line of Credit Agreement [doc] may additionally be used to satisfy DO RFS requirements.

Financial Assurance (FA) – (To be used for Remedial Action Permits only)

Annual RFS Renewal and Verification of the Amount in the RFS

The person responsible for conducting the remediation who has established RFS shall notify the Department annually of the value of the RFS and that the RFS will continue to exist for the next consecutive 12 months as follows:

  • Self-guarantee: 30 calendar days prior to the current approved expiration date, a new application is to be submitted based on the most current fiscal year end financials.
  • Remediation Trust Funds, Lines of Credit and Environmental Insurance Policies and Surety Bonds: 30 calendar days prior to the anniversary date of establishment of the RFS, a written statement must be submitted to the Department from the holder or issuer of the RFS confirming the value of the funding source and renewal of the funding source for the next 12-month period. Please see the RFS Annual Renewal Notification template [doc].
  • Letters of Credit: This mechanism stipulate ‘self-renewal’ clauses (i.e., the letter of credit will be automatically renewed) unless 120 days prior to the expiration date the lender notifies DEP of the nonrenewal. If the lender does not renew the letter of credit, the person responsible for conducting the remediation must obtain a replacement RFS mechanism prior to the expiration date of the existing letter of credit.

Changes to RFS Amount or Mechanism

There are four ways that the RFS can or must be changed:

  1. Disbursed to pay for actual remediation costs incurred or to be incurred:
    • If the RFS is in the form of a Remediation Trust Fund or a Line of Credit, the request for disbursement must be made by the LSRP to the holder of the RFS.
      • The Remediation Trust Fund or Line of Credit Agreement must contain language from the current model document allowing for the LSRP to authorize disbursement for remediation costs. The Department no longer processes disbursement requests for these RFS mechanisms unless the site is under Direct Oversight. Note: This provision was added to the model Remediation Trust Fund Agreement and the model Line of Credit documents in 2009. Please ensure that any of these two existing RFS mechanisms contain the LSRP disbursement provision.
      • The Department must be copied on the request for disbursement. The Department has a model disbursement authorization request letter that the LSRP may use to request the disbursement. (Model Form Letter for Disbursement [docx])
    • All requests for disbursement must contain the name of the site and PI# or ISRA case number, the amount of the disbursement request, and certification by the person responsible for conducting the remediation and the LSRP that the money requested is for actual remediation costs that were or will be incurred.
    • Requests for disbursements can only be made once every three months.
    • Within 30-days of receiving the disbursement, the person responsible for conducting the remediation must submit to the Department a completed Remediation Cost Review and RFS/FA form indicating the amount disbursed and the amount of the remaining RFS. A copy of the disbursement request should be attached. This will ensure that the Department’s database contains the accurate amount of funds in the RFS and that the 1% surcharge is calculated on the correct amount that is in the RFS. See N.J.A.C. 7:26C-5.12
  2. Decreased based on a decreased cost estimate for the completion of the remediation:
    • At any time during the course of the remediation, if the person responsible for conducting the remediation determines that the cost estimate to complete the remediation has decreased, the person may request that the Department authorize a reduction of the amount of RFS posted to the amount of the revised cost estimate.
    • The person must submit a completed Remediation Cost Review and RFS/FA form indicating the amount of the revised cost estimate and the amount of the remaining RFS. This will ensure that the Department’s database contains the accurate amount of funds in the RFS and that the 1% surcharge is calculated on the correct amount that is in the RFS.
  3. Must be increased based on increased cost estimate for the completion of the remediation:
    • At any time during the course of the remediation, if LSRP determines that the cost estimate to complete the remediation has increased, the LSRP must submit written notice of the increased cost estimate to the person responsible for conducting the remediation and copy the Department.
    • The person must request that the holder of the RFS increase the amount of RFS posted to the amount of the revised cost estimate within 30 days of receipt of the LSRP’s revised cost estimate.
    • The person must submit a completed Remediation Cost Review and RFS/FA form to the Department indicating the amount of the revised cost estimate and the amount of the increased RFS.
  4. Release of RFS:
    • The Department will authorize the release of the RFS when:
      • The LSRP has filed an RAO with the Department for all known areas of concern.
      • The person responsible for conducting the remediation substitutes another form of RFS.
      • Another person has established RFS for the person responsible for conducting the remediation (a party may not submit a self-guarantee application on behalf of another party in order to satisfy that other party’s RFS obligation.)
    • To request release of RFS, the person responsible for conducting the remediation shall submit a complete Remediation Cost Review and RFS/FA form indicating a request for RFS release.

Transitioning from RFS to FA

If the LSRP is issuing a Response Action Outcome (RAO) with the Department for all known areas of concern and the RAO requires an engineering control as part of the remedial action, the person responsible for conducting the remediation may use the existing RFS to meet FA requirements. RFS can be transitioned to FA as follows:

  • All three of the following criteria must apply at the site:
    • The LSRP will be issuing an entire site RAO following the issuance of the Remedial Action Permit for which the RFS will be used as FA. In other words, there are no remaining areas of concern which require remediation at the site. (Note: If there are remaining areas of concern requiring remediation (an entire site RAO can’t be issued), RFS is still required for that site, therefore the person cannot use the existing RFS mechanism, but must obtain a separate FA mechanism)
    • The amount of the funds in the RFS mechanism is equal to the amount of the funds required to be posted for FA at the time the Remedial Action Permit application is submitted. If the amount of the funds in the RFS is either greater than or less than the amount required for FA, the person must follow the requirements in the ARRCS rules at N.J.A.C. 7:26C-5.11 [pdf] to either increase or decrease the funds PRIOR TO the submission of the Remedial Action Permit application.
    • The RFS is NOT in the form of a self-guarantee. If the RFS is in the form of a self-guarantee, the person cannot use the existing RFS, but must obtain a separate FA mechanism.
  • The person responsible for conducting the remediation must indicate in section H of the Remedial Action Permit form(s) that s/he is choosing to utilize the existing RFS mechanism to satisfy the FA requirement.
  • Once the amount of the RFS is equal to the amount of FA required and the Department has been advised via the Remedial Action Permit application that the person responsible for conducting remediation wishes to use the existing RFS mechanism to meet their FA requirement, the Department will adjust its records to change the mechanism from RFS to FA and ensure that the 1% surcharge invoices are suspended.

Note: If the remedy includes ground water monitored natural attenuation (MNA) and no engineering control, the person is not required to post FA.

If the LSRP is issuing an area of concern Response Action Outcome (RAO) requiring an engineering control as part of the remedial action, the person responsible for conducting the remediation must apply for and receive from the Department a Remedial Action Permit and post FA PRIOR to the LSRP issuing the RAO. The funds in the RFS can be transitioned to FA only if the full scope of the required remediation for which the RFS was required is completed. If the area of concern RAO does not cover the full scope of the remediation:

  • The person responsible for conducting the remediation must establish a separate mechanism of FA as part of the Remedial Action Permit application.
  • The RFS must be maintained in the amount of the cost estimate to complete the remediation of the remaining area(s) of concern.
  • The person responsible for conducting the remediation may decrease the amount of the existing RFS to the amount estimated to complete the remediation of the remaining area(s) of concern. The person must check the “Change in Remediation Funding Source or Financial Assurance Amount pursuant to N.J.A.C. 7:26C-5.11” box on the Remediation Cost Review and RFS/FA form submitted along with the Remedial Action Permit application.
Sections
Important links:

Contacts RFS:
Jennifer MacLeod
Remediation Funding Source Coordinator
609-940-7283
Jennifer.MacLeod@njdepwptest.net

Contacts FA:
Vincent Fasanella
Financial Assurance Coordinator
609-940-7273
Vincent.Fasanella@njdepwptest.net