SF 129 (LSB 1479XS (4) 86)

SENATE FILE 129

BY  HOGG

A BILL FOR

An Act requiring proof of financial assurance relating to accidental hazardous pipeline discharge damage claims, and including effective and applicability date provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 479B.2, Code 2015, is amended by adding the following new subsection:
   NEW SUBSECTION.  1A.  “Financial assurance instrument” means an instrument submitted by an applicant to ensure the applicant’s financial capability to respond as provided in section 479B.13A, in the form of one or more of the following:
   a.  The establishment of a secured trust fund.
   b.  The use of a cash or surety bond.
   c.  The obtaining of insurance.
   d.  The satisfaction of a corporate financial test.
   e.  The satisfaction of a local government financial test.
   f.  The obtaining of a corporate guarantee.
   g.  The obtaining of a local government guarantee.
   h.  The use of a local government dedicated fund.
   i.  The obtaining of an irrevocable letter of credit.
    Sec. 2.  Section 479B.13, Code 2015, is amended to read as follows:
   479B.13  Financial condition of permittee —— construction, maintenance, or operation damages —— bond.

   Before a permit is granted under this chapter the applicant must satisfy the board that the applicant has property within this state other than pipelines or underground storage facilities, subject to execution of a value in excess of two hundred fifty thousand dollars, or the applicant must file and maintain with the board a surety bond in the penal sum of two hundred fifty thousand dollars with surety approved by the board, conditioned that the applicant will pay any and all damages legally recovered against it growing out of the construction, maintenance, or operation of its pipeline or underground storage facilities in this state. When the pipeline company deposits with the board security satisfactory to the board as a guaranty for the payment of the damages, or furnishes to the board satisfactory proofs of its solvency and financial ability to pay the damages, the pipeline company is relieved of the provisions requiring bond.
    Sec. 3.  NEW SECTION.  479B.13A  Financial condition of permittee —— damages for discharge.
   1.  Before a permit is granted under this chapter for a pipeline to be constructed on or after January 1, 2015, and in addition to the requirements of section 479B.13, an applicant must provide to the board a financial assurance instrument verifying that the applicant has the financial capability to provide reasonable and necessary remedial response and to respond in damages for claims arising from the accidental discharge of hazardous liquid. The financial assurance instrument shall meet all requirements adopted by rule by the board, and shall not be issued, canceled, revoked, disbursed, released, or allowed to terminate without board approval.
   2.  For the first calendar year during which hazardous liquid is shipped, the amount of financial assurance required pursuant to this section shall be two hundred fifty thousand dollars per mile of pipeline. For the second calendar year during which hazardous liquid is shipped, and every calendar year thereafter, the amount of financial assurance required shall be the greater of one dollar per barrel of hazardous liquid shipped per calendar year by the applicant based on the most recent calendar year for which such information is available to the applicant, or two hundred fifty thousand dollars per mile of pipeline. In no event shall the amount of financial assurance required pursuant to this section in any calendar year be less than two hundred fifty thousand dollars.
    Sec. 4.  Section 479B.14, unnumbered paragraph 6, Code 2015, is amended to read as follows:

   A pipeline company may petition the board for an extension of a permit granted under this section by filing a petition containing the information required by section 479B.5, subsections 1 through 5, and meeting the requirements of section sections 479B.13 and 479B.13A.
    Sec. 5.  EFFECTIVE UPON ENACTMENT.  This Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 6.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2015.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill requires the submission of proof of financial assurance prior to issuance of a permit to construct, maintain, and operate a hazardous liquid pipeline by the Iowa utilities board.
   Current provisions contained in Code section 479B.13 require an applicant to satisfy the board that the applicant has property within Iowa other than pipelines or underground storage facilities subject to execution of a value in excess of $250,000, or requires the applicant to file and maintain a surety bond in that amount. These provisions relate to damages attributable to the construction, maintenance, or operation of the pipeline or underground storage facility.
   The bill creates a new Code section 479B.13A which requires that before a permit is granted for a pipeline to be constructed on or after January 1, 2015, and in addition to the requirements of Code section 479B.13, an applicant must provide to the board a financial assurance instrument verifying that the applicant has the financial capability to provide reasonable and necessary remedial response and to respond in damages for claims arising from the accidental discharge of hazardous liquid. The bill states that the financial assurance instrument shall meet all requirements adopted by rule by the board, and shall not be issued, canceled, revoked, disbursed, released, or allowed to terminate without board approval. The bill defines a “financial assurance instrument” to mean one or a combination of establishing a secured trust fund, using a cash or surety bond, obtaining insurance, satisfying a corporate or local government financial test, obtaining a corporate or local government guarantee, using a local government dedicated fund, or obtaining an irrevocable letter of credit.
   The bill provides that the amount of financial assurance required for accidental hazardous liquid discharge liability for the first calendar year during which hazardous liquid is shipped, and shall be $250,000 per mile of pipeline. For the second calendar year during which hazardous liquid is shipped, and every calendar year thereafter, the amount of financial assurance required shall be the greater of $1 per barrel of hazardous liquid shipped per calendar year by the applicant based on the most recent calendar year for which such information is available to the applicant, or $250,000 per mile of pipeline. The bill states that in no event shall the amount of financial assurance required in any calendar year be less than $250,000.
   The bill takes effect upon enactment and is retroactively applicable to January 1, 2015.