Environmental Quality - Environmental Response and Remediation - Administration of the Petroleum Storage Tank Loan Program

Published: 2021-09-13

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R311. Environmental Quality, Environmental Response and Remediation.
R311-212. Administration of the Petroleum Storage Tank Loan Program.
R311-212-1. Definitions.
Definitions are found in Rule R311-200.
R311-212-2. Declaration of Loan Application Periods, and Loan Application Submittal.
(1) Application for a loan must be made on forms incorporated in Section R311-212-10, in accordance with Subsection 19-6-409(9).
(a) loan applications will be accepted during application periods designated by the director.
(2) At least one application period shall be designated each calendar year if, on January 1:
(a) the current balance due for all outstanding loans is less than 25% of the cash balance of the Petroleum Storage Tank Trust Fund; and
(b) the cash balance of the Fund exceeds $10,000,000.
(3) If the requirements of Subsections R311-212-2(2)(a) and R311-212-2(2)(b) are not met on January 1, but are met at a later time in the calendar year, the director may designate an application period.
(4) An open application period will close if:
(a) the current balance due for all outstanding loans exceeds 25% of the cash balance of the Fund; or
(b) the cash balance of the Fund is less than $10,000,000.
(5) If an open application period closes as required by Subsection R311-212-2(4), loan applications currently under review when the application period closes may be renewed when a new application period opens, unless the applicant must re-apply as required by Subsection R311-212-5(1).
(6) Applications must be received by the director by 5:00 p.m. on the last day of the application period.
(7) Loan applications received outside the application period will be invalid.
R311-212-3. Eligibility Review.
(1) The director shall determine if the applicant meets the eligibility criteria stated in Subsections 19-6-409(5) through 19-6-409(8).
(2) To meet the eligibility requirements of Subsection 19-6-409(6) the applicant must, for all facilities for which the applicant requests a loan:
(a) demonstrate current compliance with all state and federal UST laws, rules and regulations, including compliance with all requirements for remediation of facilities with leaking USTs; or
(b) must be able to achieve compliance with the loan proceeds.
(3) To meet the eligibility requirements of Subsection 19-6-409(6) the applicant must meet the following for all facilities owned or operated by the applicant for which the applicant does not request a loan:
(a) the applicant has demonstrated current compliance with all state and federal UST laws, rules and regulations, including compliance with all requirements for remediation of facilities with leaking USTs;
(b) all regulated USTs owned by the applicant have met the requirements of Subsection 19-6-412(2) and have a current certificate of compliance;
(c) the applicant has paid all UST registration fees, interest and penalties which have been assessed; and
(d) the applicant has paid all applicable petroleum storage tank fees, interest and penalties which have been assessed.
(4) To meet the requirements of Subsection 19-6-409(5), the loan request must be for the purpose of:
(a) upgrading petroleum USTs;
(b) replacing petroleum USTs; or
(c) permanently closing USTs.
(5) if an applicant requests a loan for closing USTs which will be replaced by aboveground storage tanks, the loan, if approved, will be only for closing the USTs.
(a) the security pledged by the applicant for a loan to replace USTs with aboveground storage tanks will be subject to the limitations in R311-212-6.
R311-212-4. Prioritization of Loan Applications.
(1) When determined by the director to be necessary, all applications received during a designated application period shall be prioritized by total points assigned.
(a) ten points shall be given for each item that applies to the applicant or the facility for which the loan is requested:
(i) the applicant has less than $1,000,000 annual gross income and fewer than five full-time employee equivalents and is not owned or operated by any person not meeting the income and employee criteria.
(ii) the applicant's income is derived solely from operations at UST facilities.
(iii) the applicant owns or operates no more than two facilities.
(iv) the facility is located in a U.S. Census Bureau population unit containing fewer than 5,000 people.
(v) there are no more than three operating retail outlets selling motor fuel within 15 miles road distance in all directions.
(vi) loan proceeds will be used solely for replacing or upgrading petroleum USTs.
(vii) all USTs at the facility are greater than 15 years old.
(b) one point shall be given for each road mile of distance from the facility to the nearest operating retail outlet selling motor fuel, to a maximum of 30 points.
(2) Applications which receive the same number of points shall be sub-prioritized according to the date postmarked or the date delivered to the director by any other method.
(3) Applications shall remain in priority order regardless of availability of funds until a new application period is declared.
(a) when a new application period begins, priority order of applications which have not been reviewed terminates.
(4) An applicant whose application has not been reviewed or an applicant whose application has not been approved because the applicant has not satisfied the requirements of Subsections 19-6-409(5) through 19-6-409(8), loses eligibility to apply for a loan and must submit a new application in the subsequent period to be considered for a loan in that period.
R311-212-5. Loan Application Review.
(1) The applicant shall ensure that the loan application is complete.
(a) the completed application with supporting documents must contain all information required by the application.
(2) If the applicant does not submit a complete application within 60 days of eligibility approval, the applicant's eligibility approval shall be forfeited, and the applicant must re-apply.
(3) All costs incurred in processing the application shall be the responsibility of and paid for by the applicant including:
(a) appraisals;
(b) title reports; or
(c) UCC-1 releases.
(i) the director may require payment of costs in advance.
(ii) the director shall not reimburse costs which have been expended, even if the loan fails to close, regardless of the reason.
(4) The review and approval of the application shall be based on information provided by the applicant, and:
(a) review of any and all records and documents on file;
(b) verification of any and all information provided by the applicant;
(c) review of credit worthiness and security pledged; and
(d) review of a site construction work plan.
(5) The applicant must close the loan within 30 days after the director conveys the loan documents for the applicant's signature.
(a) if the applicant fails to close the loan within this time period, the approval is forfeited and the applicant must re-apply.
(b) an exception to the 30-day period may be granted by the director if the closing is delayed due to circumstances beyond the applicant's control.
R311-212-6. Security for Loans.
(1) When an applicant applies for a loan of greater than $30,000, the applicant must pledge for security personal or real property which meets or exceeds the following criteria:
(a) the loan amount may not be greater than 80% of the value of the applicant's equity in the security for cases where the Department obtains a first mortgage position; or
(b) the loan amount may not be greater than 60% of the value of the applicant's equity in the security for cases where the Department obtains a second mortgage position.
(2) The applicant shall provide acceptable documentation of the value of the property to be used as security using:
(a) a current written appraisal, performed by a State of Utah certified appraiser;
(b) a current county tax assessment notice; or
(c) other documentation acceptable to the director.
(3) A title report on all real property and a UCC-1 clearance on all personal property used as security shall be submitted to the director by a title company or appropriate professional person approved by the director.
(4) When the title report indicates an existing lien or encumbrance on real property to be used as security, the existing lien holders may subordinate their interest in favor of the Department.
(a) the director will accept no less than a second mortgage position on real property pledged for loan security.
(5) Whenever a corporation seeks a loan, its principals must guarantee the loan personally.
(6) The applicant must provide a complete financial statement with cash flow projections for debt service.
(7) Aboveground storage tanks and real property on which they are located will not be acceptable as security.
(8) USTs and the real property on which they are located will not be acceptable as security unless:
(a) the UST facility offered for security has not had a petroleum release which has not been properly remediated; and
(b) the applicant provides documentation to demonstrate the UST facility is currently in compliance with the loan eligibility requirements set forth in Section R311-212-3.
(9) If a loan is made without security, the maximum loan repayment period will be seven years.
R311-212-7. Procedure for Making Loans.
(1) Loan funds shall be obligated after all documents to secure a loan are complete, processed, and appropriately signed by the applicant and the director.
(2) The director may approve a borrower's request for one initial disbursement of loan proceeds to the borrower after the loan is closed, and before work begins.
(a) the initial disbursement shall be for the lesser of 40% of the approved loan amount or the amount required by the borrower's contractor as an initial payment before work is done.
(b) disbursement of the remaining loan proceeds, or disbursement of the entire loan proceeds if no initial disbursement is made, shall be made after work at the site is completed, and all paperwork and notifications have been received by the director.
(i) if an initial loan disbursement is made, the borrower shall begin work on the project no later than 60 days, or another time period approved by the Director, following the initial disbursement.
(ii) disbursement of the remaining loan proceeds shall be made no later than 180 days, or another time period approved by the director, following the initial disbursement.
(c) if work is not initiated or completed within the time periods established in Subsection R311-212-7(2)(a), the loan balance must be paid within 30 days of notice provided by the director.
(3) Loan proceeds may not be used to pay UST registration fees, penalties, or interest assessed under Section 19-6-408 or petroleum storage tank fees, penalties, or interest assessed under Section 19-6-411.
(4) Loans shall not be made for work which is performed before the applicant's loan application is approved and the loan is closed.
R311-212-8. Servicing the Loans.
(1) The director shall establish a repayment schedule for each loan based on the financial situation and income circumstances of the borrower and the term of loans allowed by Subsection 19-6-409(8)(b)(ii).
(2) Loans shall be amortized with equal payment amounts and payments shall be of such amount to pay all interest and principal in full.
(a) the initial installment payment shall be due on a date established by the director.
(b) subsequent installment payments shall be due on the first day of each month.
(i) a notice of payment and due date shall be sent for each subsequent payment.
(c) non-receipt of the statement of account or notice of payment shall not be a defense for non-payment or late payment.
(3) The director shall apply loan payments received first to penalty, next to interest and then to principal.
(4) Loan payments may be made in advance, and the remaining principal balance of the loan may be paid in full at any time without penalty.
(5) Notices of late payment penalty assessed with amounts of penalty and the total payment due shall be sent to the borrower.
(6) The penalty for late loan payments shall be 10% of the payment due.
(a) the penalty shall be assessed and payable on payments received by the director more than five days after the due date.
(b) a penalty shall be assessed only once on a given late payment.
(7) Payments are considered received the day of the U.S. Postal Service postmark date or receipt date for payments delivered to the director by methods other than the U.S. Postal Service.
(8) If a loan payment check is returned due to insufficient funds, a service charge in the amount allowed by law shall be added to the payment amount due.
(9) Notice of loans paid in full shall be sent after all penalties, interest and principal have been paid.
(10) Releases of the director's interest in security shall be prepared and sent to the borrower or filed for public notice as applicable.
R311-212-9. Recovering on Defaulted Loans.
(1) Loans may be considered in default when:
(a) two consecutive payments are past due by 30 days or more;
(b) when the applicant's ability to receive payments for claims against the Fund lapses; or
(c) if the certificate of compliance lapses or is revoked.
(2) Lapsing under Subsection R311-206-7(5) will not be considered as grounds for default for USTs which are permanently closed.
(3) The director may declare the full amount of the defaulted loan, penalty, and interest immediately due.
(4) The director need not give notice of default prior to declaring the full amount due and payable.
(5) The borrower is liable for attorney's fees and collection costs for defaulted loans whether incurred before or after court action.
R311-212-10. Forms.
(1) The forms dated and listed below, on file with the Department, are incorporated by reference as part of Rule R311-212, and shall be used by the director for making loans.
(a) Loan Application version 7/14/16
(b) Balance Sheet version 7/29/14
(c) Loan Agreement version 7/29/14
(d) Corporate Authorization version 7/29/14
(e) Promissory Note version 7/29/14
(f) Extension and Modification of Promissory Note Agreement version 7/29/14
(g) Security Agreement version 7/29/14
(h) Hypothecation Agreement version 7/29/14
(i) General Pledge Agreement version 7/29/14
(j) Assignment version 7/29/14
(k) Assignment of Account version 7/29/14
(l) Trust Deed version 7/29/14
(m) Trust Deed Note version 7/29/14
(n) Extension and Modification of Trust Deed Note Agreement version 7/29/14
(2) The director may require or allow the use of other forms that are consistent with these rules as necessary for the loan approval process.
(3) The director may change these forms for administrative purposes provided the revised forms remain consistent with the substantive provisions of the adopted forms.
R311-212-11. Rules in Effect.
(1) The rules in effect on the closing date of the loan and the forms signed by the parties shall govern the parties.
KEY: hazardous substances, petroleum, underground storage tanks
Date of Last Change: September 13, 2021
Notice of Continuation: March 27, 2017
Authorizing, and Implemented or Interpreted Law: 19-6-105; 19-6-403; 19-6-409