Tennessee Federal Regulatory Program, 9616-9637 [E7-3649]

Agencies

• DEPARTMENT OF THE INTERIOR
• Office of Surface Mining Reclamation and Enforcement
• Surface Mining Reclamation and Enforcement Office

[Federal Register Volume 72, Number 41 (Friday, March 2, 2007)]
[Rules and Regulations]
[Pages 9616-9637]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-3649]



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Part II





Department of the Interior





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Office of Surface Mining Reclamation and Enforcement



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30 CFR Part 942



 Tennessee Federal Regulatory Program; Final Rule

Federal Register / Vol. 72, No. 41 / Friday, March 2, 2007 / Rules 
and Regulations

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DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation and Enforcement

30 CFR Part 942

RIN 1029-AC50


Tennessee Federal Regulatory Program

AGENCY: Office of Surface Mining Reclamation and Enforcement, Interior.

ACTION: Final rule.

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SUMMARY: We, the Office of Surface Mining Reclamation and Enforcement 
(OSM), are finalizing changes to the Tennessee Federal regulatory 
program regarding performance bonds and revegetation success standards. 
These revisions provide a mechanism to use our statutory authority to 
accept financial assurances in the form of trust funds and annuities in 
Tennessee to fund the treatment of long-term postmining pollutional 
discharges from surface coal mining operations and thus satisfy 
performance bond obligations for treatment of those discharges. Our 
previous regulations also did not facilitate the growth of forests, and 
we are taking a number of steps to ensure the reestablishment of high 
quality hardwood forests where the postmining land uses are related to 
forestry. To minimize competition with woody plants and support 
healthier tree growth, we are removing the 80% ground cover 
revegetation success standard for mine sites with postmining land uses 
of wildlife habitat, undeveloped land, recreation, or forestry; 
limiting the herbaceous ground cover success standards to those 
necessary to control erosion and support the forestry-related 
postmining land use; requiring seed mixes and seeding rates of 
herbaceous vegetation for those land uses to be specified in the 
permit; and removing the limitations on the amount of bare areas that 
can remain after reclamation of mine sites with those land uses.

EFFECTIVE DATE: April 2, 2007.

FOR FURTHER INFORMATION CONTACT: Tim Dieringer, Field Office Director, 
U.S. Department of the Interior, Office of Surface Mining Reclamation 
and Enforcement, Knoxville Field Office, 710 Locust Street, 2nd Floor, 
Knoxville, Tennessee 37902; Telephone: 865-545-4103; E-mail: 
tdieringer@osmre.gov.

SUPPLEMENTARY INFORMATION:
I. Background on the Tennessee Federal Program
II. Background on This Rulemaking
III. How and why are we revising the Tennessee Federal program 
regulations?
IV. How did we respond to the comments that we received on the 
proposed rule?
V. Procedural Determinations

I. Background on the Tennessee Federal Program

    Section 503(a) of the Surface Mining Control and Reclamation Act of 
1977 (SMCRA or the Act), 30 U.S.C. 1253, permits a State to assume 
primacy for the regulation of surface coal mining and reclamation 
operations on non-Federal and non-Indian lands within its borders under 
certain conditions. The Secretary of the Interior conditionally 
approved the Tennessee program on August 10, 1982. However, because of 
actions that we took pursuant to 30 CFR Part 733 to correct 
shortcomings in the administration and implementation of the approved 
Tennessee program on May 16, 1984, the State repealed most of the 
Tennessee Coal Surface Mining Law of 1980, Tennessee Code Annotated 59-
8-301-59-8-339, and its implementing regulations, effective October 1, 
1984. As a result, on October 1, 1984, we withdrew approval of the 
Tennessee permanent regulatory program and promulgated a Federal 
program for Tennessee under the authority of section 504(a) of the Act, 
30 U.S.C. 1254(a). This program appears in 30 CFR Part 942, where it 
replaced the disapproved State program. With the promulgation of a 
Federal regulatory program, we became the regulatory authority under 
SMCRA in Tennessee. You can find background information on the 
Tennessee Federal program, including our findings and the disposition 
of comments, in the October 1, 1984, Federal Register. 49 FR 38874.

II. Background on This Rulemaking

    We published the proposed rule underlying this final rule on April 
6, 2006. 71 FR 17682. On May 3, 2006, we extended the public comment 
period until June 30, 2006, and provided notice of a requested public 
hearing that was held on June 1, 2006. 71 FR 25992.

III. How and why are we revising the Tennessee Federal program 
regulations?

A. Section 942.800: Bond and Insurance Requirements for Surface Coal 
Mining and Reclamation Operations

    On April 6, 2006, we published proposed revisions to the Tennessee 
Federal program that provided a mechanism to use our authority to 
implement trust funds and annuities for funding treatment of long-term 
postmining pollutional discharges. 71 FR 17682. Those revisions, which 
we are adopting in slightly revised form in this final rule, reflect 
our efforts to provide a system suitable for the long-term funding of 
the treatment of the postmining pollutional discharges that exist in 
Tennessee and any unanticipated discharges that may occur in the 
future.
    We are adopting new Sec.  942.800(c), which we proposed as Sec.  
942.800(b)(4), to provide us with a mechanism to use our statutory 
authority to accept trust funds and annuities as an alternative system 
as provided for in SMCRA at Section 509(c), 30 U.S.C. 1259(c), by which 
permittees may satisfy the requirement to provide a performance bond to 
cover the treatment of postmining pollutional discharges. Final Sec.  
942.800(c) reads as follows:

    (c) Special consideration for sites with long-term postmining 
pollutional discharges. With the approval of the Office, the 
permittee may establish a trust fund, annuity or both to guarantee 
treatment of long-term postmining pollutional discharges in lieu of 
posting one of the bond forms listed in Sec.  800.12 of this chapter 
for that purpose. The trust fund or annuity will be subject to the 
following conditions:
    (1) The Office will determine the amount of the trust fund or 
annuity, which must be adequate to meet all anticipated treatment 
needs, including both capital and operational expenses.
    (2) The trust fund or annuity must be in a form approved by the 
Office and contain all terms and conditions required by the Office.
    (3) The trust fund or annuity must provide that the United 
States or the State of Tennessee is irrevocably established as the 
beneficiary of the trust fund or of the proceeds from the annuity.
    (4) The Office will specify the investment objectives of the 
trust fund or annuity.
    (5) Termination of the trust fund or annuity may occur only as 
specified by the Office upon a determination that no further 
treatment or other reclamation measures are necessary, that a 
replacement bond or another financial instrument has been posted, or 
that the administration of the trust fund or annuity in accordance 
with its purpose requires termination.
    (6) Release of money from the trust fund or annuity may be made 
only upon written authorization of the Office or according to a 
schedule established in the agreement accompanying the trust fund or 
annuity.
    (7) A financial institution or company serving as a trustee or 
issuing an annuity must be one of the following:
    (i) A bank or trust company chartered by the Tennessee 
Department of Financial Institutions;
    (ii) A national bank chartered by the Office of the Comptroller 
of the Currency;
    (iii) An operating subsidiary of a national bank chartered by 
the Office of the Comptroller of the Currency;
    (iv) An insurance company licensed or authorized to do business 
in Tennessee by the Tennessee Department of Commerce and Insurance 
or designated by the Commissioner of that Department as an eligible 
surplus lines insurer; or

[[Page 9617]]

    (v) Any other financial institution or company with trust powers 
and with offices located in Tennessee, provided that the 
institution's or company's activities are examined or regulated by a 
State or Federal agency.
    (8) Trust funds and annuities, as described in this paragraph, 
must be established in a manner that guarantees that sufficient 
moneys will be available to pay for treatment of postmining 
pollutional discharges (including maintenance, renovation, and 
replacement of treatment and support facilities as needed), the 
reclamation of the sites upon which treatment facilities are located 
and areas used in support of those facilities.
    (9) When a trust fund or annuity is in place and fully funded, 
the Office may approve release under Sec.  800.40(c)(3) of this 
chapter of conventional bonds posted for a permit or permit 
increment, provided that, apart from the pollutional discharge and 
associated treatment facilities, the area fully meets all applicable 
reclamation requirements and the trust fund or annuity is sufficient 
for treatment of pollutional discharges and reclamation of all areas 
involved in such treatment. The portion of the permit required for 
postmining water treatment must remain bonded. However, the trust 
fund or annuity may serve as that bond.

    SMCRA, its implementing regulations, and our policy require that 
the performance bond be sufficient to cover treatment of those 
discharges in the event that the permittee fails to do so. Section 
509(a) of SMCRA, 30 U.S.C. 1259(a), requires that each permittee post a 
performance bond conditioned upon faithful performance of all the 
requirements of the Act and the permit. That section of the Act also 
specifies that ``[t]he amount of the bond shall be sufficient to assure 
the completion of the reclamation plan if the work had to be performed 
by the regulatory authority in the event of forfeiture * * *.'' 30 
U.S.C. 1259(a). Section 509(e) of the Act provides that ``[t]he amount 
of the bond or deposit required and the terms of each acceptance of the 
applicant's bond shall be adjusted by the regulatory authority from 
time to time as affected land acreages are increased or decreased or 
where the cost of future reclamation changes.'' 30 U.S.C. 1259(e). The 
statutory requirements for a ``reclamation plan'' include the measures 
to be taken to ensure water quality. 30 U.S.C. 1258(a)(13).
    Our regulations at 30 CFR Part 800 implement the requirements of 
section 509 of the Act, 30 U.S.C. 1259. Those regulations, first 
promulgated in 1979, were revised in 1983 in a manner that clearly 
implies that performance bonds must be adjusted when unanticipated 
events, such as postmining pollutional discharges, increase the cost of 
reclamation (in this case, treatment of the discharges).
    In our discussion of determining bond amounts in the March 13, 
1979, Federal Register (44 FR 15111), we noted:

    The Office recognizes that the regulatory authority cannot 
reasonably establish the initial bond amount based upon speculative 
events such as the need to abate ground water pollution, since the 
operation must be designed initially to prevent such consequences in 
order to qualify for a permit. However, such unplanned consequences 
occasionally occur due to improper mining or reclamation, or because 
an important variable was not evaluated properly. When such 
consequences are identified prior to the release of all liability 
and termination of the permit in accordance with Part 807, the 
permittee's legal obligation to abate them necessarily adds to the 
cost of reclamation.
    Under such circumstances, the regulatory authority would be 
authorized to impose additional bond liability under that permit, or 
to retain a larger portion of the total liability than otherwise 
required in response to an application for release of bond, in order 
to ensure adequate funding to complete the abatement work required 
(Sections 805.14(a) and 807.12(d)).

    According to this 1979 preamble discussion, regulatory authorities 
have discretionary authority to increase bonds to reflect the increased 
costs of reclamation that result from the occurrence of unanticipated 
events such as postmining pollutional discharges. However, in the 
preamble to our 1983 revisions to the bonding rules, we indicate that 
increases in bond amounts under those circumstances are mandatory, not 
discretionary:

    If at any time the cost of future reclamation under the bond 
changes, the regulatory authority is required to adjust the bond 
accordingly (Sec. 800.15(a)). Thus, the amount of the bond for any 
increment must at all times be sufficient to assure the completion 
of the reclamation plan if the work had to be performed by the 
regulatory authority.

48 FR 32937, July 19, 1983.

    Under 30 CFR 780.21(h) and 784.14(g), one component of the 
reclamation plan is a hydrologic reclamation plan. Among other things, 
this plan must include the provision of ``water-treatment facilities 
when needed.'' Consequently, the bond must be adequate to cover the 
cost of treating long-term pollutional discharges because treatment of 
those discharges is part of the reclamation plan.
    We further affirmed and clarified our position on financial 
guarantees for long-term postmining pollutional discharges in a March 
31, 1997, document entitled, ``Policy Goals and Objectives on 
Correcting, Preventing and Controlling Acid/Toxic Mine Drainage.'' 
Objective 2 under the policy goal concerning environmental protection 
requires that financial responsibility associated with acid mine 
drainage (AMD) be fully addressed. Specifically, the policy includes 
the following strategies:

    Strategy 2.2--If, subsequent to permit issuance, monitoring 
identifies acid- or toxic-forming conditions which were not 
anticipated in the mining and operation plan, the regulatory 
authority should require the operator to adjust the financial 
assurance.
    Strategy 2.3--Where inspections conducted in response to bond 
release requests identify surface or subsurface water pollution, 
bond in an amount adequate to abate the pollution should be held as 
long as water treatment is required, unless a financial guarantee or 
some other enforceable contract or mechanism to ensure continued 
treatment exists.

    When responding to commenters on the policy who objected to the 
requirement that permittees post financial guarantees for treatment of 
pollutional discharges during and after land reclamation (comment 
no.16), we stated:

    Section 509(a) of the Act requires that each permittee post a 
performance bond conditioned upon faithful performance of all the 
requirements of the Act and the permit. Paragraph (b) of this 
Section of the Act specifies that ``[t]he amount of the bond shall 
be sufficient to assure the completion of the reclamation plan if 
the work had to be performed by the regulatory authority in the 
event of forfeiture.'' The hydrologic reclamation plan is part of 
the reclamation plan to which this section refers. Section 519(c) of 
SMCRA authorizes release of this bond only when the regulatory 
authority is satisfied that the reclamation required by the bond has 
been accomplished, and paragraph (c)(3) specifies that ``no bond 
shall be fully released until all reclamation requirements of this 
Act are fully met.'' Furthermore, section 519(b) of the Act provides 
that whenever a bond release is requested, the regulatory authority 
must conduct an inspection to evaluate the reclamation work 
performed, including ``whether pollution of surface or subsurface 
water is occurring, the probability of continuance of future 
occurrence of such pollution, and the estimated cost of abating such 
pollution.'' Therefore, there is no doubt that, under SMCRA, the 
permittee must provide a financial guarantee to cover treatment of 
postmining discharges when such discharges develop and require 
treatment.

    On May 30, 2000, our Knoxville, Tennessee Field Office (KFO) issued 
Field Office Policy Memorandum No. 37 entitled ``Policy for Requiring 
Bond Adjustments on Permitted Sites Requiring Long-Term Treatment of 
Pollutional Discharges.'' This policy described the general procedure 
that the KFO would utilize to require adjustments to performance bonds 
on sites in Tennessee where unanticipated pollutional discharges are 
occurring and

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long-term treatment is required. The policy requires that treatment 
costs be estimated based on an assumption that treatment will be needed 
for at least 75 years, absent convincing evidence to the contrary. 
Between June and September of the year in which the policy was issued, 
the KFO ordered some permittees in Tennessee to submit permit revisions 
to provide for the installation, operation and maintenance of long-term 
treatment systems and to adjust performance bonds accordingly.
    Those permittees then sought administrative review of the KFO's 
orders. However, on October 2, 2000, the National Mining Association 
(NMA) filed suit in the United States District Court for the Northern 
Division of the Eastern District of Tennessee seeking to overturn the 
policy. NMA v. Babbitt, No. 3:00-CV-549 (E.D. Tenn. filed Oct 2, 2000). 
The plaintiffs alleged that the KFO's Policy Memorandum No. 37 was 
unlawfully adopted in violation of the rulemaking requirements of the 
Administrative Procedure Act, is inconsistent with the permitting and 
bonding provisions of SMCRA by requiring retroactive revision of 
permits that have already expired and the posting of performance bond 
for expired permits, and violates the Due Process Clause of the U.S. 
Constitution.
    The Department of the Interior's Office of Hearings and Appeals 
then placed the administrative appeals of the KFO's orders to 
individual permittees in abeyance pending resolution of the Federal 
district court case. On July 24, 2001, the Federal district court 
litigation also was placed in abeyance in response to NMA's request 
that the parties pursue settlement of the case. Settlement negotiations 
are ongoing.
    The Tennessee Federal program regulations at 30 CFR 942.800 
incorporate the Federal bonding regulations in 30 CFR Part 800 by 
reference. In addition, that section of the Tennessee Federal program 
contains a few Tennessee-specific bonding provisions. As adopted on 
October 1, 1984, the Tennessee Federal program relies upon a 
conventional bonding system in which site-specific performance bonds 
must be filed with the KFO. The KFO determines the amount of the 
performance bond based upon the approved reclamation plan and adjusts 
that amount periodically when the cost of future reclamation changes. 
The bond amount must be sufficient to assure completion of the 
reclamation plan if we have to perform the work in the event of bond 
forfeiture.
    A system that provides an income stream may be better suited to 
ensuring the treatment of long-term pollutional discharges, such as 
AMD, than conventional bonds. Surety bonds, the most common form of 
conventional bond, are especially ill-suited for this purpose because 
surety companies normally do not underwrite a bond when there is no 
expectation of release of liability. Further, a mandate that would 
require the permittee to immediately post other forms of conventional 
bonds, such as cash or negotiable bonds, may force insolvency on a 
permittee that is currently treating pollutional discharges but is 
unable to provide the large sums required to guarantee treatment 
through conventional bonding instruments. Insolvency will most likely 
lead to forfeiture of existing bonds and the proceeds of that 
forfeiture may not be sufficient to ensure long-term treatment of 
discharges.
    On May 17, 2002, we published an advance notice of proposed 
rulemaking (ANPR) entitled ``Bonding and Other Financial Assurance 
Mechanisms for Treatment of Long-Term Pollutional Discharges and Acid/
Toxic Mine Drainage (AMD) Related Issues.'' 67 FR 35070. In that ANPR, 
we sought comments on, among other things, the form and amount of 
financial assurance that should be required to guarantee treatment of 
postmining pollutional discharges. Commenters on the ANPR disagreed as 
to whether financial assurance should be required, but they largely 
agreed that, if it was, surety bonds are not the best means--or even an 
appropriate means--of accomplishing that purpose. For instance, the 
Surety Association of America stated that surface coal mining 
operations ``would not be prudently bondable if the scope of the 
obligation included perpetual treatment of discharge[s].'' According to 
the Association, ``the problem of acid mine drainage requires a funding 
vehicle, and a surety bond is not a funding vehicle.''
    Through responses to the ANPR and the experience of Pennsylvania 
(discussed below), we have determined that the best approach to provide 
an alternative for financial assurances for long-term treatment of 
pollutional discharges is to allow the permittee to establish a 
dedicated income-producing account, such as a trust fund or annuity or 
both, that is held by a third party as trustee for the regulatory 
authority. The income stream from a fully funded trust fund or annuity 
will be used to fund treatment of postmining pollutional discharges 
(including maintenance, renovation, and replacement of treatment and 
support facilities as needed), the reclamation of the sites upon which 
treatment facilities are located and areas used in support of those 
facilities. However, until this rulemaking, our regulations did not 
provide for a mechanism to accept such accounts in satisfaction of the 
Tennessee Federal program's bonding requirements. The addition of 
paragraph (c) to 30 CFR 942.800 now implements our statutory authority 
and establishes the parameters under which trust funds and annuities 
must operate.
    By adding paragraph (c), we are building on the experience of 
Pennsylvania, which has successfully implemented similar provisions. 
Pennsylvania amended its Surface Mining Conservation and Reclamation 
Act to include the authority to accept trust funds and annuities to 
fund treatment of postmining discharges. Pennsylvania's statutes allow 
the complete release of any conventional bonds remaining after land 
reclamation has been fully completed and the revegetation 
responsibility period has expired for a site with a pollutional 
discharge if provisions have been made for sound future treatment of 
that discharge. 52 Pa. Cons. Stat. Ann. 1396.4(g)(3). Pennsylvania's 
provisions state that sound future treatment must consist of another 
approved financial instrument, such as a trust fund, that will fully 
secure the long-term treatment obligation and is applicable to the area 
associated with that treatment. 52 Pa. Cons. Stat. Ann. 1396.4(d.2). 
This rule is not intended to mirror the provisions of the Pennsylvania 
program, but rather to adapt the concepts behind Pennsylvania's program 
for use in the Tennessee Federal program.
    When Pennsylvania submitted the amendment to its program 
authorizing the use of trust funds and annuities, it characterized 
those financial instruments as collateral bonds, and we approved them 
as such. 70 FR 25472, amended at 70 FR 52916. However, the Federal 
regulations at 30 CFR 800.11(e) provide another option for approving 
trust funds and annuities. Those regulations implement the provision in 
section 509(c) of SMCRA, 30 U.S.C. 1259(c), authorizing OSM and the 
States to establish an ``alternative system that will achieve the 
objectives and purposes of the bonding program pursuant to this 
section.'' The regulations at 30 CFR 800.11(e) require that those 
alternative systems (1) ``assure that the regulatory authority will 
have available sufficient money to complete the reclamation plan for 
any areas which may be in default at any time;'' and (2) ``provide a 
substantial economic incentive for the permittee to comply with all 
reclamation provisions.'' As we noted in the proposed rule, 
establishment of a

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trust fund or annuity would satisfy the first criterion, while the 
permittee's provision of the moneys needed to establish a trust fund or 
annuity and the express terms of the trust would satisfy the second 
criterion. 71 FR 17684.
    In this rulemaking, we are providing for the use of trust funds and 
annuities in Tennessee as an alternative bonding system (ABS), as 
provided for in section 509(c) of the Act. As an ABS, trust funds and 
annuities are not subject to the provisions of 30 CFR 800.12, 800.20, 
800.21, and 800.23 because those provisions pertain only to various 
types of conventional bonds. Except as otherwise provided in this rule, 
trust funds and annuities will generally be subject to the other 
provisions of 30 CFR Part 800. Specific information on the portions of 
30 CFR Part 800 that apply to individual trust funds and annuities will 
be set forth in a formal written trust fund or annuity agreement made 
between the KFO and the permittee responsible for treating the 
discharge.
    We will allow permittees a reasonable time to fully fund trust 
funds and annuities rather than requiring a lump-sum deposit as would 
be required for collateral bonds. We will use the provisions of 30 CFR 
800.15(a) on a site-specific basis to establish a schedule for periodic 
review to ensure that trusts and annuities contain sufficient funds for 
treatment of the discharge, and maintenance and reclamation of 
associated facilities.
    A permittee with postmining pollutional discharges that establishes 
a trust fund or annuity to guarantee funding for treatment will be able 
to secure release of conventional bonds on the portion of their permit 
that does not support the treatment of the discharge. However, the 
trust fund or annuity must be fully funded before the permittee 
qualifies for release of the conventional bond. A fully funded trust 
fund or annuity would be available to fund treatment and reclamation 
activities in the event of a permittee's bankruptcy or dissolution.
    In implementing this rule, we will first determine whether a 
postmining pollutional discharge requiring long-term treatment exists. 
If so, and if the permittee elects to use a trust fund or annuity to 
satisfy the financial assurance (performance bond) obligation for 
discharge treatment, we, in consultation with the permittee, will 
develop a formal written agreement that sets forth the details of the 
trust fund or annuity. While we will consult in good faith with the 
permittee on the terms of the trust fund or annuity, including the 
selection of the trustee, the investment mix making up the trust fund 
or annuity, and the amount and duration of the trust agreement or 
annuity, we retain the final authority and responsibility to establish 
bond amounts, terms, and conditions, as provided by 30 CFR 800.16 and 
this rule. In determining the amount needed to fully fund the trust 
fund or annuity, we will consider the quality and quantity of the 
discharge, anticipated future changes in discharge quantity and 
quality, treatment options, support facilities needed, treatment 
facility maintenance, renovation, and replacement intervals, current 
and projected investment performance, and any other factors necessary 
to ensure ongoing treatment and reclamation of the discharge. We will 
use this rule, existing OSM policies, and computer software designed to 
estimate treatment and associated costs to calculate the amount of 
funding required to fulfill treatment obligations.
    We anticipate that a fully funded trust or annuity may include 
provisions for payments to the permittee as a mechanism to cover the 
cost of water treatment, especially for those permittees no longer 
generating income from the mining of coal. Payments from the income 
stream of a fully funded trust fund or annuity will not be considered a 
bond release or a bond forfeiture. This rule establishes an ABS 
authorizing the establishment of a trust or annuity that produces an 
income stream that can be transferred to a permittee or other entity to 
pay for the treatment costs provided for in Sec.  942.800(c)(8). The 
trust fund or annuity will also include other provisions that provide 
for the continuation of treatment in the event that the permittee fails 
to meet its treatment obligations.
    This rule does not alter our existing responsibilities or those of 
permittees or any other Federal or State agency relating to postmining 
pollutional discharges. Existing treatment requirements and 
obligations, as well as permitting and enforcement responsibilities, 
are not affected by this rule.
    Because of the adoption of this rule, we will not be pursuing a 
national rulemaking regarding the use of trust funds and annuities in 
response to the ANPR that we published in 2002. The successful 
implementation of trusts and annuities in the Pennsylvania program and 
our explicit addition of trust funds and annuities as an ABS in 
Tennessee with this rulemaking demonstrate that adequate authority for 
the use of trust funds and annuities is already available under SMCRA 
and its implementing regulations. Therefore, a national rule is not 
needed.

B. Sections 942.816(f)(3) and (4) and 942.817(e)(3) and (4): 
Revegetation Success Requirements for Forestry-Related Postmining Land 
Uses

    On April 6, 2006, we proposed revisions to the Tennessee Federal 
program regulations regarding ground-cover revegetation success 
standards for reclaimed lands with postmining land uses of wildlife 
habitat, undeveloped land, recreation, or forestry. In this final rule, 
we are adopting the revisions as proposed, with one technical 
correction and minor editorial modifications to reflect plain language 
principles. The technical correction replaces the term ``mining and 
reclamation plan'' in the proposed rule with ``reclamation plan'' to be 
consistent with terminology used elsewhere throughout the Federal 
regulations.
    The revisions modify 30 CFR 942.816(f)(3) and 942.817(e)(3) by 
eliminating the 80% vegetative ground cover revegetation success 
standard for reclaimed lands with postmining land uses of wildlife 
habitat, undeveloped land, recreation, or forestry. The regulations 
will be changed to state that herbaceous ground cover should be limited 
to that necessary to control erosion and support the postmining land 
use and that the permit will specify the ground cover seed mixes and 
seeding rates to be used. Final Sec. Sec.  942.816(f)(3) and 
942.817(e)(3) read as follows:

    (3) For areas developed for wildlife habitat, undeveloped land, 
recreation, or forestry, the stocking of woody plants must be at 
least equal to the rates specified in the approved reclamation plan. 
To minimize competition with woody plants, herbaceous ground cover 
should be limited to that necessary to control erosion and support 
the postmining land use. Seed mixes and seeding rates will be 
specified in the permit.

    Section 515(b)(19) of SMCRA, 30 U.S.C. 1265(b)(19), requires 
establishment of a diverse, effective, and permanent vegetative cover, 
at least equal to the premining cover, that is capable of self-
regeneration and plant succession. The Federal regulations at 30 CFR 
816.116 (for surface mining activities) and 817.117 (for underground 
mining activities) provide national requirements and parameters for 
revegetation success standards. Sections 816.116(b)(3) and 
817.116(b)(3) establish requirements pertinent to revegetation success 
standards for areas to be developed for postmining land uses of fish 
and wildlife habitat, recreation, undeveloped land, or forest products. 
Those regulations provide that

[[Page 9620]]

``success of vegetation shall be determined on the basis of tree and 
shrub stocking and vegetative ground cover.''
    At the time that we promulgated the Federal program for Tennessee, 
the national rules at Sec. Sec.  816.116(a)(1) and 817.116(a)(1) 
required the regulatory authority to select the standards for 
revegetation success and include them in the regulatory program. 49 FR 
38874. Therefore, we included specific standards in the Tennessee 
Federal program at Sec. Sec.  942.816(f)(3) and 942.817(e)(3) for areas 
with postmining land uses of wildlife habitat, recreation, or forest 
products. Those regulations required a minimum 80% ground cover on 
mined lands reclaimed for those postmining land uses. In the preamble 
discussion of those rules, we noted that a minimum level of 80% 
vegetative coverage was necessary to control erosion on the steep 
terrain that is common to eastern Tennessee. 49 FR 38888.
    In addition, we adopted Sec. Sec.  942.816(f)(4) and 942.817(e)(4) 
which prohibit bare areas larger than one-sixteenth of an acre in size 
and that total more than 10% of the area seeded. We adopted these 
provisions because we believed that they were necessary to prevent the 
release of bonds on lands that meet the overall requirements of 80% or 
90% ground cover, but still have localized areas that are not yet 
stabilized with respect to soil erosion. 49 FR 38888.
    We have learned much more about reestablishing vegetation, 
particularly trees, on mined land in the years since we adopted those 
standards. Permittees generally prefer pasture or grazing land as 
postmining land uses because they do not require the extra work and 
expense of planting trees and ensuring successful tree establishment. 
Thus, the reclamation of mine sites has typically resulted in dense 
grasslands with few trees. Many trees that were planted had low 
survival rates and required replanting, while those that survived often 
did not reach their optimal growth potential, which further discouraged 
operators from considering a land use that required planting trees.
    We recognize the importance and benefits of promoting the 
reestablishment of forests, especially native hardwood forests, on 
mined land. Consequently, we have determined that changes to our 
regulations are necessary to promote and enable the establishment of 
diverse, vigorous forests on reclaimed mine sites. The conventional 
method of mine reclamation typically includes using bulldozers to grade 
and track-in spoil, creating smooth slopes. This method results in a 
compacted soil surface that not only inhibits root growth of seedlings 
and planted stock, but also restricts infiltration of precipitation and 
increases runoff. To prevent erosion from runoff, operators seed the 
regraded areas with aggressive, quick-growing herbaceous ground covers. 
This method of reclamation is very effective in producing dense hayland 
and pastureland. However, it is very detrimental to establishing 
forested land on mine sites for three reasons. First, the dense 
herbaceous ground covers used to control erosion compete with newly 
planted trees and tree seedlings for soil nutrients, water, and 
sunlight. Second, soil compaction inhibits root growth as well as water 
infiltration. Third, the dense ground cover provides habitat for 
rodents and other animals that damage tree seedlings and young trees.
    In summarizing research into ground cover and its effects on 
establishment of trees on mined lands, Jim King and Jeff Skousen of 
West Virginia University noted in 2003:

    The negative effects of overly abundant and aggressive ground 
cover on the survival and growth of trees planted on reclaimed mine 
lands has long been known. Trees planted into introduced, aggressive 
forages [especially tall fescue and sericea lespedeza] often are 
overtopped by the grass or legume and are unable to break free 
(Burger and Torbert, 1992; Torbert et al., 1995). The seedlings are 
pinned to the ground and have little chance for survival. If it is 
known that trees are to be planted, a tree-compatible ground cover 
should be seeded that will be less competitive with trees. Tree-
compatible ground cover should be slow growing, sprawling or low 
growing, not allopathic, and non-competitive with trees (Burger and 
Torbert, 1992). Plass (1968) reported that after four growing 
seasons the height growth of sweetgum and sycamore planted into an 
established stand of tall fescue on spoil banks was significantly 
retarded. Andersen et al. (1989) found that survival and height 
growth for red oak and black walnut was significantly greater on 
sites where ground cover was chemically controlled.\1\
---------------------------------------------------------------------------

    \1\ Tree Survival on a Mountaintop Surface Mine in West Virginia 
King, J., J. Skousen, West Virginia University Morgantown, American 
Society of Mining and Reclamation, 2003.

    Researchers affiliated with the Virginia Polytechnic Institute and 
---------------------------------------------------------------------------
State University also found that:

    The use of tree-compatible ground covers during reclamation can 
allow seedlings to survive at rates exceeding the 70% that is 
necessary to achieve regulatory compliance without the expense of 
follow-up herbicide treatment. Furthermore, our experience indicates 
that sowing tree-compatible ground covers at reduced rates often 
allows invasion by woody vegetation from adjacent forests. The 
results of this study suggest that sowing ground cover at reduced 
rates achieving 50 to 70% cover, instead of 90% currently required 
by Virginia's regulations, would also greatly improve the likelihood 
of hardwood reforestation success.\2\
---------------------------------------------------------------------------

    \2\ Herbaceous Ground Cover Effects on Native Hardwoods Planted 
on Mined Land Burger, J.A., D.O. Mitchem, C.E. Zipper, R. Williams, 
Virginia Polytechnic Institute and State University, American 
Society of Mining and Reclamation, 2005.

    Researchers from the University of Maine determined that even a 
---------------------------------------------------------------------------
small amount of herbaceous ground cover can inhibit tree growth:

    Additional research has found that herbaceous vegetation 
(grasses and broadleaves) in small amounts (<20% cover) around 
seedlings immediately after planting will substantially reduce early 
stand growth.\3\
---------------------------------------------------------------------------

    \3\ Top 10 Principles for Managing Competing Vegetation to 
Maximize Regeneration Success and Long-Term Yields R.G. Wagner, 
University of Maine.

    These researchers are united in their findings that even ground 
cover significantly less than the 80% ground cover standard in 
Tennessee's rules would still be detrimental to tree survival and 
growth.
    We have also determined that dense herbaceous ground cover impedes 
the natural succession of native forest plants, thereby frustrating 
attainment of the requirement in section 515(b)(19) of SMCRA, 30 U.S.C. 
1265(b)(19), for establishment of a diverse, effective, permanent 
vegetative cover of the same seasonal variety native to the area and 
capable of self-regeneration and plant succession. As Burger and Zipper 
noted:

    Another purpose of low ground cover seeding rates is to allow 
the invasion of native plant species such as yellow poplar, red 
maple, birches and other light-seeded trees. Dense ground covers 
prevent the natural seeding-in of native plants.\4\
---------------------------------------------------------------------------

    \4\ How to Restore Forests on Surface-Mined Land Burger, J.A., 
C.E. Zipper, Virginia Polytechnic Institute and State University, 
Powell River Project, Virginia Cooperative Extension Publication 
460-123, Revised 2002.

    While excessive herbaceous ground cover is detrimental to tree 
growth and survival and natural succession, we are cognizant that some 
vegetative cover is often needed to meet the cover requirements of 30 
CFR 816.111(a)(3) and (4) and 817.111(a)(3) and (4). Additional cover 
may be needed to control erosion on newly reclaimed mine sites, as 
required by 30 CFR 816.95(a) and 817.95(a), and to prevent the 
contribution of additional suspended solids to streamflow outside the 
permit area, as required by 30 CFR 816.45(a) and 817.45(a) and section 
515(b)(10)(B)(i) of SMCRA, 30 U.S.C. 1265(b)(10)(B)(i). However, the 
amount of vegetative ground cover necessary to control erosion on any 
particular site is

[[Page 9621]]

a function of the site topography, composition of the surface material, 
precipitation amounts, and the degree of soil compaction. Loosely 
graded or uncompacted material, particularly if placed on a relatively 
gentle slope, may have virtually no runoff or erosion and would require 
little or no herbaceous vegetative ground cover to control erosion. 
Conversely, highly compacted material placed on a steep slope severely 
limits infiltration and increases runoff so that a dense vegetative 
cover may be needed to control erosion.
    Researchers have stated:

    Non-compacted mine soils have higher infiltration rates and 
erode less than graded soils. When using the Forestland Reclamation 
Approach, less ground cover is needed to prevent erosion and protect 
water quality, and in the process, diverse mixes of trees are able 
to survive and grow at rates that will create an economically viable 
forest.\5\
---------------------------------------------------------------------------

    \5\ Herbaceous Ground Cover Effects on Native Hardwoods Planted 
on Mined Land Burger, J.A., D.O. Mitchem, C.E. Zipper, R. Williams, 
Virginia Polytechnic Institute and State University, American 
Society of Mining and Reclamation, 2005.
---------------------------------------------------------------------------

    Third-year results show that intensive grading did not result in 
better ground cover establishment or erosion control. In fact, 
erosion was highest on the intensively graded plots.\6\
---------------------------------------------------------------------------

    \6\ Influence of Grading Intensity on Ground Cover 
Establishment, Erosion, and Tree Establishment on Steep Slopes 
Torbert, J.L., Burger, J.A., Virginia Polytechnic Institute and 
State University, International Land Reclamation and Mine Drainage 
Conference and the Third International Conference on the Abatement 
of Acidic Drainage, 1994.

    Loosely grading the topsoil or topsoil substitutes on reclaimed 
mine sites will result in less compacted growing media, which will 
increase water infiltration and limit the amount of runoff. This in 
turn will limit erosion and sedimentation as well as make more water 
available for tree growth. Limited compaction is also more favorable to 
tree root growth, which will increase survival and growth rates.
    Forestry researchers agree that productive forest land can best be 
created on reclaimed mine land by using techniques that we will refer 
to as the Forestry Reclamation Approach (FRA). The FRA is a series of 
five techniques designed to reestablish healthy productive forests on 
reclaimed mine lands. These techniques include (1) Creating a suitable 
rooting medium for tree growth that is no less than four feet deep and 
that is comprised of topsoil, weathered sandstone and/or the best 
available material; (2) loosely grading the topsoil or topsoil 
substitute to create a non compacted growth medium; (3) using 
herbaceous ground covers that are compatible with growing trees; (4) 
planting two types of trees--early succession species (for wildlife and 
soil stability) and commercially valuable crop trees; and (5) using 
proper tree-planting techniques.
    We examined the factors in Federal and State regulations that may 
act as impediments to implementing the FRA. We determined that there 
were no regulations regarding backfilling and grading that would act as 
impediments to implementation of the provisions of the FRA that require 
a minimum of four feet of topsoil or topsoil substitutes to be loosely 
graded. Thus, we did not propose any changes in our backfilling and 
grading regulations as part of this rulemaking.
    However, we did identify the ground cover standards and bare area 
restrictions adopted as part of the Tennessee Federal program on 
October 1, 1984, as impediments to the FRA and disincentives to forest 
restoration. Elimination of the 80% vegetative ground cover standard 
and bare area restrictions will provide us with the flexibility to 
adjust the amount of vegetative ground cover required on mine sites 
with postmining land uses related to forestry to levels that are 
sufficient to control erosion without impairing tree growth and 
survival. To minimize competition with woody plants while meeting other 
regulatory requirements, we are revising our rules to specify that 
herbaceous ground cover should be limited to that amount necessary to 
control erosion and support the approved postmining land use. We will 
take into account all site characteristics when determining the level 
of vegetative ground cover suitable for a mine site and require 
permittees to specify the ground cover seeding mixes and seeding rates 
in the permit.
    As proposed, we are also expanding the postmining land uses to 
which the regulations at Sec. Sec.  942.816(f)(3) and 942.817(e)(3) 
apply by including undeveloped land and by modifying the postmining 
land use of forest products to forestry. We made these changes to 
accurately reflect the postmining land uses that require the 
establishment of trees and shrubs. The revised version of the national 
regulations at Sec. Sec.  816.116(b)(3) and 817.116(b)(3) that we 
adopted in a separate rulemaking on August 30, 2006, likewise includes 
undeveloped land as a postmining land use to which its requirements 
apply. See 71 FR 51695-51697.
    SMCRA and its implementing regulations clearly require control of 
erosion and prevention of additional sedimentation. They also require 
establishment of a vegetative cover that is capable of stabilizing the 
soil surface from erosion. See 30 CFR 816.111(a)(4) and 817.111(a)(4). 
At the same time, research has demonstrated that many types of 
herbaceous ground cover are detrimental to tree growth and natural 
succession and thus would impede attainment of the postmining land uses 
of wildlife habitat, recreation, or forestry. The regulatory 
modifications that we are adopting in this rule will ensure that the 
FRA can be effectively implemented in Tennessee.

C. Removal of Restrictions on the Amount of Bare Areas for Postmining 
Land Uses of Wildlife Habitat, Undeveloped Land, Recreation, or 
Forestry

    As proposed, we are revising the Tennessee Federal program 
regulations to exempt sites with postmining land uses of wildlife 
habitat, undeveloped land, recreation, or forestry from the 
restrictions of Sec. Sec.  942.816(f)(4) and 942.817(e)(4) concerning 
bare areas. This change facilitates implementation of the FRA, which 
requires the use of less competitive herbaceous vegetative ground 
covers at lower seeding rates, or in some cases no herbaceous ground 
cover at all. Consequently, some areas may be essentially bare except 
for tree seedlings and volunteer herbaceous vegetation. As we noted 
earlier, reduced levels of herbaceous vegetative ground cover are 
necessary for natural succession of native forest plants and to reduce 
competition between grasses and legumes and planted tree seedlings for 
water, nutrients and sunlight. To achieve this goal, some areas must be 
devoid of herbaceous ground cover because many native woody plants and 
forbs require bare soil conditions for seed germination. In addition, 
most traditionally planted herbaceous ground cover species are not 
expected to be part of the mature forest plant community.
    Final Sec. Sec.  942.816(f)(4) and 942.817(e)(4) reads as follows:

    (4) Bare areas shall not exceed one-sixteenth (\1/16\) acre in 
size and total not more than ten percent (10%) of the area seeded, 
except for areas developed for wildlife habitat, undeveloped land, 
recreation, or forestry.

    Nothing in this rule change should be construed as negating the 
requirement in 30 CFR 816.111(a)(3) and 817.111(a)(3) that 
reestablished vegetation on mined lands be at least equal in extent of 
cover to the natural vegetation of the area. Nor does this change alter 
the applicability of the erosion control requirement in 30 CFR 
816.95(a) and 817.95(a).

[[Page 9622]]

IV. How did we respond to the comments that we received on the proposed 
rule?

A. Section 942.800(c), (proposed as Sec.  942.800(b)(4)): Bond and 
Insurance Requirements for Surface Coal Mining and Reclamation 
Operations

    Of the 13 commenters on the proposed revisions to 30 CFR 
942.800(b), which we are adopting as 30 CFR 942.800(c) in this final 
rule, four were coal companies, two were associations representing the 
coal industry, two were government agencies, two were environmental 
groups, one was an association representing mining states, one was an 
organization that administers trusts in other states, and one was a 
private citizen.
    Seven commenters generally supported the concept of using trust 
funds and annuities to satisfy financial assurance requirements for 
treatment of long-term postmining pollutional discharges, but requested 
that we put more details concerning the creation and administration of 
those mechanisms in the rule.
    We appreciate the support from these commenters. However, we do not 
find it necessary or appropriate to adopt the suggestions for more 
specific regulations regarding the creation and administration of trust 
funds and annuities. The purpose of this rule is to provide us with 
mechanism to use our statutory authority to accept trust funds and 
annuities in lieu of conventional performance bond instruments to fund 
treatment of postmining pollutional discharges. The final rule 
establishes a framework (with safeguards) within which we will accept 
trust funds and annuities. It is not, nor was it intended to be, a 
handbook that specifies all the details of how trust funds or annuities 
would work. Those details are best worked out on an individual basis, 
taking into consideration the characteristics of the discharge, the 
mine site, the investment instrument, and economic projections at the 
time that the trust or annuity is finalized. The KFO will address the 
specifics of each trust fund or annuity in formal written agreements 
with permittees. This approach is consistent with the manner in which 
conventional bond amounts are calculated, which is left to the 
discretion of the regulatory authority. In situations where we are the 
regulatory authority, Directive TSR-1, ``Handbook for Calculation of 
Reclamation Bond Amounts,'' governs those calculations.
    Two commenters requested that we either increase bond amounts or 
require both bonds and trusts on the same mine site. We find that there 
is no legal basis or practical reason to do so. Under section 509(a) of 
SMCRA, ``[t]he amount of the bond shall be sufficient to assure the 
completion of the reclamation plan if the work had to be performed by 
the regulatory authority in the event of forfeiture and in no case 
shall the bond for the entire area under one permit be less than 
$10,000.'' 30 U.S.C. 1259(a). In addition, section 509(c) specifies 
that an ABS, such as the trust funds and annuities approved under this 
rule, must ``achieve the objectives and purposes of the bonding program 
pursuant to this section.'' 30 U.S.C. 1259(c). Because Sec.  
942.800(c)(1) requires the trust fund or annuity to ``be adequate to 
meet all anticipated treatment needs, including both capital and 
operating expenses,'' the amount of the trust fund or annuity should be 
sufficient to meet the requirements of section 509(c) of SMCRA. On a 
case-by-case basis, depending upon the stage of mining during which a 
trust fund or annuity is established, a mine may have both conventional 
bonds and a trust fund or annuity. Requiring multiple bonds in all 
cases goes beyond the requirements of section 509(c) and would place an 
unnecessary burden on permittees.
    In the remainder of this section of the preamble, we will discuss 
comments directed at specific sections of our revision to Sec.  
942.800, followed by comments of a more general nature that were 
directed to the use of trust funds and annuities. We will not discuss 
comments that are beyond the scope of this rulemaking, such as comments 
that do not pertain to the rule provisions that we proposed to revise 
on April 6, 2006.
Section 942.800(c)(1), (Proposed as Sec.  942.800(b)(4)(i))
    Subsection 942.800(c)(1) provides that we will determine the amount 
of the trust fund or annuity, which must be adequate to meet all 
anticipated treatment needs, including both capital and operating 
expenses.
    Five commenters suggested that the method for determining the 
amount of the trust fund or annuity must be objective and clearly 
stated in the rule. Two commenters recommend that we use the AMDTreat 
software (a computer program used to estimate costs associated with 
treating discharges) or the Pennsylvania law, as a model, to determine 
the amount needed. One commenter provided two mathematical formulas to 
calculate the present value of the amount needed to fund the trust, 
while another commenter noted that historic operating and capital costs 
for chemical treatment and construction of the treatment systems are 
important indicators of future costs. Also, a commenter indicated that 
data from the permittee should be used to determine the amount of the 
trust fund or annuity because of personal experience with OSM requiring 
excessive bond amounts based on outdated and erroneous information.
    As previously noted, our rule establishes a framework (with 
safeguards) within which we will accept trust funds and annuities. It 
is not, nor was it intended to be, a handbook that specifies all the 
details of how trust funds or annuities would work. Those details are 
best worked out on an individual basis, taking into consideration the 
characteristics of the discharge, the mine site, the method of 
treatment, the investment instruments, and economic projections at the 
time that the trust or annuity is finalized. Consequently, we are not 
making the changes sought by the commenters. We do not believe that it 
is advisable to limit our flexibility by including all the variables 
that may factor in to the determination of the amount of the trust fund 
or annuity in the rule. Doing so could restrict our ability to consider 
the most current information and technology available when determining 
the amount of money needed to fully fund a trust fund or annuity.
    When calculating the amount of a trust fund or annuity, we plan to 
look at, but are not limited to, the following sources: Historic 
treatment cost data (if any) supplied by the permittee; existing 
publicly available software, such as AMDTreat; and publicly available 
policies and guidelines, such as OSM Directive TSR-1, ``Handbook for 
Calculation of Reclamation Bond Amounts.'' For instance, the AMDTreat 
software developed cooperatively by the Pennsylvania Department of 
Environmental Protection, the West Virginia Department of Environmental 
Protection, and OSM is one tool available to the KFO to use to estimate 
the costs of treatment and the costs of constructing and maintaining 
all associated treatment facilities.
Section 942.800(c)(2), (Proposed as Sec.  942.800(b)(4)(ii))
    In subsection 942.800(c)(2), we require that the trust fund or 
annuity be in a form that we approve and contain all the terms and 
conditions that we require. We received no comments on this provision.
Section 942.800(c)(3), (Proposed as Sec.  942.800(b)(4)(iii))
    In subsection 942.800(c)(3), we require that a trust fund or 
annuity

[[Page 9623]]

irrevocably establish the United States or Tennessee as the beneficiary 
of the trust fund or of the proceeds from the annuity. This provision 
is intended to ensure that moneys in the trust fund or annuity will be 
available to the regulatory authority for treatment regardless of an 
operator's financial circumstances or business status.
    The one commenter on this subsection recommended that the rule be 
revised to allow trust accounts established for purposes of termination 
of jurisdiction to name alternative trust beneficiaries, such as the 
State of Tennessee. We disagree with the commenter's assumption that 
trust funds or annuities will be established for purposes of 
termination of jurisdiction. This rulemaking provides for the 
establishment of a trust fund or annuity as an ABS, which means that we 
are retaining jurisdiction over the mine site with respect to treatment 
of the postmining pollutional discharge. However, we are accepting the 
commenter's suggestion to name the State of Tennessee as an alternative 
beneficiary. When OSM became the regulatory authority for the State of 
Tennessee, we stated that the bonds posted for the Federal program for 
Tennessee would be payable to ```The United States or the State of 
Tennessee' * * * so as to ease the transition in the event that 
[Tennessee] reassumes primary regulatory authority.'' 49 FR 38877-
38878. Because conventional bonds in Tennessee are payable to the 
United States and the State of Tennessee, we decided to require trust 
funds and annuities to be treated in a similar fashion to remain 
consistent with existing provisions. We have revised Sec.  
942.800(c)(3) to include this provision to be consistent with Sec.  
942.800(b)(2).
Section 942.800(c)(4), (Proposed as Sec.  942.800(b)(4)(iv))
    Subsection 942.800(c)(4) requires that we specify the investment 
objectives of the trust fund or annuity. Four commenters stated that 
the investment objectives of the trust fund should be both defined in 
the rule and spelled out in the trust agreement. The commenters 
asserted that the permittee should choose the investment objectives 
subject to approval by the regulatory authority. The commenters opined 
that if the regulatory authority alone selects the investment 
objectives, it may use an overly conservative mix of assets that may 
adversely impact the investment performance of the trust. Additionally, 
one commenter stated that trusts created under these rules should allow 
Tennessee law to regulate the duties and obligations of the trustees, 
which would include making proper investment decisions. Another 
commenter recommended deleting this subparagraph entirely because OSM 
is not equipped to control the investment objectives of the trust fund 
or annuity. The commenter argued that the investment objectives of the 
trust should be established by the trust agreements themselves and by 
professionals with experience in managing trust accounts.
    We are adopting the rule as proposed because (1) We see no benefit 
to restricting our flexibility by specifying investment objectives in 
the rule, and (2) we must retain final control of the investment 
objectives to protect the assets of the trust or annuity and ensure 
that sufficient funds will be available for treatment. However, nothing 
in this rule will prevent us from implementing this provision in a 
manner consistent with the other comments that we received on this 
subparagraph, should we determine that it would be appropriate and 
beneficial to do so. Also, while we retain ultimate control of the 
investment objectives, which will be defined in the trust or annuity 
agreement, the trustee will make decisions regarding the investment of 
the assets of the trust fund or annuity. Trustees have an inherent 
obligation to comply with Tennessee law, so there is no need for us to 
add that requirement to this rule.
Section 942.800(c)(5), (Proposed as Sec.  942.800(b)(4)(v))
    Subsection 942.800(c)(5) provides that termination of the trust 
fund or annuity may occur only as specified by OSM upon a determination 
that no further treatment or other reclamation measures are necessary, 
that a replacement bond or another financial instrument has been 
posted, or that the trust fund or annuity can no longer be administered 
to carry out the purpose for which it was established. As an example of 
a trust fund or annuity that is terminated because it can no longer 
carry out the purpose for which it was established, the trust documents 
may specify that a trust will be terminated if the regulatory authority 
determines that it is too small to be administered effectively. This 
provision allows us to keep the trust fund or annuity in place as long 
as necessary and practical to maintain and reclaim treatment 
facilities.
    Five commenters asserted that the rule should address the duration 
of the trust and the criteria for termination of the trust fund or 
annuity. The commenters requested the establishment of objective 
criteria, based on time or other factors, to establish the point at 
which the trust fund or annuity must be terminated and the remaining 
assets of the trust or annuity must be returned to the permittee. One 
commenter suggests that we modify the rule to require the regulatory 
authority to make a determination, based on site-specific information, 
of how long treatment is anticipated. The commenter further suggests 
that we modify the rule to provide for monitoring of the untreated 
discharge for a period not to exceed two years after treatment is 
completed. After two years, the trust should be terminated and the 
proceeds returned to the operator.
    We do not agree that the suggested provisions should be part of the 
rule. In order to meet the purposes of Sec.  509 of the Act, the 
alternative system should meet the objectives and purposes of the 
bonding program established by SMCRA, including the requirement that 
liability ``be for the duration of the surface coal mining and 
reclamation operation,'' 30 U.S.C. 1259(b). Consequently, each 
agreement for a trust fund or annuity will specify the anticipated 
length of treatment, based on site-specific information. Defining 
treatment goals is an integral part of determining the funds necessary 
for sustaining the trust fund or annuity. Furthermore, if appropriate, 
the formal trust fund or annuity agreement may define a post-treatment 
monitoring program and the program's anticipated duration. We intend 
for trust funds and annuities to be an additional option for permittees 
to fulfill their bonding obligations, while providing greater 
flexibility than conventional bonds.
    It is important to distinguish the duration of the trust or annuity 
from the duration of the obligation to the permittee to perform 
treatment of a pollutional discharge. We are providing that a trust 
fund or annuity may be terminated if replaced by another bond or 
financial instrument in Sec.  942.800(c)(5), consistent with Sec.  
800.30 and other provisions of part 800. Thus, we anticipate that a 
trust or annuity of limited duration may need to be replaced by another 
bond or financial instrument if the permittee's obligation to treat a 
pollutional discharge extends beyond the term of the trust or annuity. 
Rather than establishing an arbitrary duration in this rule, we have 
chosen to set the duration of the trust fund or annuity on a case-by-
case basis, which will allow us to consider the anticipated need for 
treatment for each site, the permittee's proposals for meeting the 
treatment obligations, and other considerations, such as the 
requirements of Tennessee law.
    One commenter noted that the specification of objective performance

[[Page 9624]]

standard criteria, such as reestablishment of biologic integrity, would 
eliminate any potential dispute between the permittee and OSM as to 
when it is appropriate to terminate the trust fund or annuity. 
According to the commenter, these types of objective performance 
standards exist in provisions of the Act detailing when a bond may be 
released.
    In response, we note that the trust or annuity agreement will 
specify treatment goals and requirements. We see no need or purpose to 
limit our flexibility by incorporating specific criteria in the rule 
itself. Indeed, doing so may be impossible or impractical, given the 
variation in discharges and the treatment standards applicable to those 
discharges. The KFO will evaluate whether the permittee has met the 
treatment goals in the agreements before terminating the trust or 
annuity. In order to provide a structure for how and when a trust fund 
or annuity will be released, we intend to incorporate the procedures 
for bond release under 30 CFR 800.40 into the formal agreement creating 
the trust fund or annuit