Section 46.04.040. Proof of financial responsibility.

   (a) A person may not cause or permit the operation of an oil terminal facility in the state unless the person has furnished to the department, and the department has approved, proof of financial ability to respond in damages. Proof of financial responsibility required for a crude oil terminal is $50,000,000 per incident. Proof of financial responsibility required for a noncrude oil terminal is $25, per incident, for each barrel of total noncrude oil storage capacity at the terminal or $1,000,000, whichever is greater, subject to a maximum of $50,000,000. For purposes of this subsection, an oil terminal facility that stores both crude oil and noncrude oil is subject to the financial responsibility requirements applicable to the type of facility that corresponds to the type of oil storage that predominates at the facility. However, if the facility stores more noncrude oil than crude oil, the $25 per incident, per barrel requirement of this subsection applies to each barrel of oil storage capacity at the facility.
   (b) A person may not cause or permit the operation of a pipeline or an exploration or production facility in the state unless the person has furnished to the department, and the department has approved, proof of financial ability to respond in damages. Proof of financial responsibility required for
        (1) a pipeline or an offshore exploration or production facility is $50,000,000 per incident;
        (2) an onshore production facility is
             (A) $20,000,000 per incident if the facility produces over 10,000 barrels per day of oil;
             (B) $10,000,000 per incident if the facility produces over 5,000 barrels per day but not more than 10,000 barrels per day of oil;
             (C) $5,000,000 per incident if the facility produces over 2,500 barrels per day but not more than 5,000 barrels per day of oil;
             (D) $1,000,000 per incident if the facility produces 2,500 barrels per day or less of oil;
        (3) an onshore exploration facility is $1,000,000 per incident.
   (c) Except as provided in (m) of this section, a person may not operate a tank vessel or an oil barge within the waters of the state, or cause or permit the transfer of oil to or from a tank vessel or an oil barge, unless the person operating the tank vessel or oil barge has furnished to the department, and the department has approved, proof of financial ability to respond in damages. Proof of financial responsibility required under this subsection is
        (1) $300, per incident, for each barrel of storage capacity or $100,000,000, whichever is greater, for a tank vessel or barge carrying crude oil;
        (2) $100, per incident, for each barrel of storage capacity or $1,000,000, whichever is greater, subject to a maximum of $35,000,000, for a tank vessel or barge carrying noncrude oil.
   (d) Except as provided in (k) of this section, it is not a defense to an action brought for violation of (a) - (c) of this section that the person charged believed in good faith that proof of financial ability to respond in damages had been furnished to, and approved by, the department.
   (e) Financial responsibility may be demonstrated by (1) self-insurance, (2) insurance, (3) surety, (4) guarantee, (5) letter of credit approved by the department, or (6) other proof of financial responsibility approved by the department, including proof of financial responsibility provided by a group of insureds who have agreed to cover pollution risks of members of the group under terms the department may prescribe. An action brought under AS 46.03.758, 46.03.759, 46.03.760(a) or (d), 46.03.822, or AS 46.04.030(g) may be brought in a state court directly against the insurer, the group, or another person providing evidence of financial responsibility; however, the liability under this section of a third-party insurer is limited to the type of risk assumed and the amount of coverage specified in the proof of financial responsibility furnished to and approved by the department. The applicant, and an insurer, surety, guarantor, person furnishing an approved letter of credit, or other group or person providing proof of financial responsibility approved by the department shall appoint an agent for service of process in the state. For purposes of this subsection, an insurer, other than a group of insureds whose agreement has been approved by the department, must either be authorized by the Department of Commerce, Community, and Economic Development to sell insurance in the state or be an unauthorized insurer listed by the Department of Commerce, Community, and Economic Development as not disapproved for use in the state. In this subsection, "third-party insurer" means a third-party insurer, surety, guarantor, person furnishing a letter of credit, or other group or person providing proof of financial responsibility on behalf of an applicant under this section; "third-party insurer" does not include the applicant.
   (f) Acceptance of proof of financial responsibility expires
        (1) one year from its issuance for self-insurance;
        (2) on the effective date of a change in the surety bond, guarantee, insurance agreement, letter of credit, or other proof of financial responsibility; or
        (3) on the expiration or cancellation of the surety bond, guarantee, insurance agreement, letter of credit, or other proof of financial responsibility.
   (g) The person whose proof of financial responsibility is accepted by the department under this section shall notify the department at least 30 days before the effective date of a change, expiration or cancellation in the surety bond, guarantee, insurance agreement, letter of credit, or other proof of financial responsibility. Application for renewal of acceptance of proof of financial responsibility under this section must be filed at least 30 days before the date of expiration.
   (h) The department, after notice and hearing, may revoke acceptance of proof of financial responsibility if it determines that
        (1) acceptance was procured by fraud or misrepresentation; or
        (2) a change of circumstance has occurred other than a change specified in (f)(1) - (3) of this section, which would have warranted denial of the application.
   (i) Financial responsibility under this section extends to a loss compensable under AS 46.03.760(d) or 46.03.822 and an assessment under AS 46.03.758, 46.03.759, 46.03.760(a), or AS 46.04.030(g).
   (j) Upon acceptance and approval of proof of financial responsibility under this section, the department shall issue to the applicant a certificate stating that the state's financial responsibility requirements have been satisfied. The certificate must include the name of the facility, pipeline, tank vessel, or oil barge for which it is issued and the expiration date of the certificate.
   (k) It is a defense to an action brought for violation of (a) - (c) of this section that the person charged relied on a certificate of approval issued under (j) of this section unless the person knew or had reason to know at the time of the alleged violation that the approval had been revoked or was expired.
   (l) Notwithstanding the requirements of (e) of this section, the applicant may provide evidence of financial responsibility provided by an insurer or other person who does not agree to be subject to direct action in state courts or to appoint an agent for service of process if
        (1) the department is satisfied that the insurance or other form of financial responsibility covers judgments under the statutes listed in (e) of this section;
        (2) the applicant provides proof of $50,000,000, or the amount required by (a) - (c) of this section, whichever is less, in insurance or other form of financial responsibility that meets the requirements of (e) of this section; and
        (3) the applicant provides a sworn statement or affidavit that insurance or other form of financial responsibility that meets the requirements of (e) of this section is not available in greater amounts.
   (m) A tank vessel or oil barge that is conducting, or is available only for conducting, oil discharge response operations is exempt from the requirements of (c) of this section if the tank vessel or oil barge has received prior approval of the department. The department may approve an exemption under this subsection upon application and presentation of information required by the department.

Authorities

46.04.045;46.04.047;46.04.055;46.08.040

Notes

Recent Bills that will modify this

HB 362 TRANSFER DUTIES: COMMERCE TO REVENUE

Implemented As

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18 AAC 75.215
18 AAC 75.220
18 AAC 75.225
18 AAC 75.235
18 AAC 75.236
18 AAC 75.237
18 AAC 75.240
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18 AAC 75.250
18 AAC 75.255
18 AAC 75.260
18 AAC 75.265
18 AAC 75.270
18 AAC 75.271
18 AAC 75.272
18 AAC 75.275
18 AAC 75.280
18 AAC 75.285
18 AAC 75.290

References

18 AAC 75.205
18 AAC 75.235
18 AAC 75.240
18 AAC 75.245
18 AAC 75.250
18 AAC 75.255
18 AAC 75.260
18 AAC 75.265
18 AAC 75.270
18 AAC 75.271
18 AAC 75.272
18 AAC 75.275
18 AAC 75.290
AS 46.04.045 Adjustment of dollar amounts.
AS 46.04.047 Noncrude oil operations.
AS 46.04.055 Nontank vessels and railroad tank cars.
AS 46.08.040 Uses of the fund.

History

(Sec. 2 ch 116 SLA 1980; am Sec. 117, 118 ch 59 SLA 1982; am Sec. 7, 8 ch 41 SLA 1989; am Sec. 11 - 18 ch 191 SLA 1990; am Sec. 60 ch 21 SLA 1991; am Sec. 1 ch 102 SLA 1992; am Sec. 1 ch 12 SLA 1994; am Sec. 9 ch 140 SLA 1996; am Sec. 8 ch 49 SLA 2002; am Sec. 53 ch 49 SLA 2004; am Sec. 3 ch 79 SLA 2005)