Black Lung Benefits Act: Authorization of Self-Insurers, 3349-3366 [2023-00534]

Agencies

• DEPARTMENT OF LABOR
• Office of Workers' Compensation Programs

[Federal Register Volume 88, Number 12 (Thursday, January 19, 2023)]
[Proposed Rules]
[Pages 3349-3366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-00534]


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DEPARTMENT OF LABOR

Office of Workers' Compensation Programs

20 CFR Part 726

RIN 1240-AA16


Black Lung Benefits Act: Authorization of Self-Insurers

AGENCY: Office of Workers' Compensation Programs, Labor.

ACTION: Notice of proposed rulemaking; request for comments.

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SUMMARY: The Department is proposing revisions to regulations under the 
Black Lung Benefits Act (BLBA or the Act) governing authorization of 
self-insurers. These proposed rules will determine the process for coal 
mine operators to apply for authorization to self-insure, the 
requirements operators must meet to qualify to self-insure, the amount 
of security self-insured operators must provide, and the process for 
operators to appeal determinations made by the Office of Workers' 
Compensation Programs (OWCP).

DATES: The Department invites written comments on the proposed 
regulations from interested parties. Written comments must be received 
by March 20, 2023.

ADDRESSES: You may submit written comments by any of the following 
methods. To facilitate receipt and processing of comments, OWCP 
encourages interested parties to submit their comments electronically.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions on the website for submitting comments.
     Facsimile: (202) 693-1395 (this is not a toll-free 
number). Only comments of ten or fewer pages, including a fax cover 
sheet and attachments, if any, will be accepted by fax.
     Regular Mail/Hand Delivery/Courier: Submit comments on 
paper to the Division of Coal Mine Workers' Compensation Programs, 
Office of Workers' Compensation Programs, U.S. Department of Labor, 200 
Constitution Avenue NW, Suite S3229-DCWMC, Washington, DC 20210. The 
Department's receipt of U.S. mail may be significantly delayed due to 
security procedures. You must take this into consideration when 
preparing to meet the deadline for submitting comments.
    Instructions: Your submission must include the agency name and the 
Regulatory Information Number (RIN) for this rulemaking. Caution: All 
comments received will be posted without change to https://www.regulations.gov. Please do not include any personally identifiable 
or confidential business information you do not want publicly 
disclosed.
    Docket: For access to the rulemaking docket and to read background 
documents or comments received, go to https://www.regulations.gov. 
Although some information (e.g., copyrighted material) may not be 
available through the website, the entire rulemaking record, including 
any copyrighted material, will be available for inspection at OWCP. 
Please contact the individual named below if you would like to inspect 
the record.

FOR FURTHER INFORMATION CONTACT: Michael Chance, Director, Division of 
Coal Mine Workers' Compensation, Office of Workers' Compensation 
Programs, U.S. Department of Labor, 200 Constitution Avenue NW, Suite 
S3229-DCWMC, Washington, DC 20210. Telephone: 1-800-347-2502. This is a 
toll-free number. TTY/TDD callers may dial toll-free 1-877-889-5627 for 
further information.

SUPPLEMENTARY INFORMATION:

[[Page 3350]]

I. Background of This Rulemaking

    The BLBA, 30 U.S.C. 901-944, provides for the payment of benefits 
to coal miners and certain of their dependent survivors for total 
disability or death due to pneumoconiosis, commonly known as black lung 
disease. 30 U.S.C. 901(a); Usery v. Turner Elkhorn Mining Co., 428 U.S. 
1, 5 (1976). The Act places the primary responsibility for paying 
benefits on coal mine operators. 30 U.S.C. 932(b). When a coal miner is 
determined to be eligible for benefits, the operator responsible for 
paying benefits (the responsible operator) is generally the one that 
most recently employed the miner for a period of at least one year and 
is financially capable of paying benefits. 20 CFR 725.495(a)(1). If a 
responsible operator cannot be determined, is unable to pay, or 
defaults on its obligation to pay, the responsibility for paying 
benefits falls to the Black Lung Disability Trust Fund, which is 
financed by an excise tax on coal mined for domestic use and, as 
necessary, borrowing from the U.S. Treasury's general fund. 30 U.S.C. 
932(j), 934(b); 26 U.S.C. 4121, 9501.
    Because coal mine operators are principally responsible for paying 
benefits, the Act requires every operator to secure the payment of 
benefits for which it may be found liable. 30 U.S.C. 932(b). Each 
operator must secure the payment of benefits either by purchasing 
commercial insurance or by qualifying as a self-insurer ``in accordance 
with regulations prescribed by the Secretary.'' 30 U.S.C. 933(a); see 
also 20 CFR 726.1.
    The current regulations--Part 726 Subpart B--establish the 
standards for a coal mine operator to qualify as a self-insurer. They 
provide that, to qualify as a self-insurer, an operator must meet 
certain minimum requirements, including ``obtain[ing] security . . . in 
a form approved by [OWCP] and . . . in an amount to be determined by 
[OWCP].'' 20 CFR 726.101(b)(4). The regulations identify four forms of 
security that OWCP may allow an operator to provide: (1) Indemnity 
bonds; (2) deposits of negotiable securities; (3) letters of credit; or 
(4) trust funds under Section 501(c)(21) of the Internal Revenue Code. 
20 CFR 726.104(b). The regulations further provide that ``[OWCP] shall 
require the amount of security which it deems necessary and sufficient 
to secure the performance by the applicant of all obligations imposed 
upon him as an operator by the Act.'' 20 CFR 726.105. The regulations 
also set forth a non-exhaustive list of factors that OWCP will consider 
in setting the amount of security an operator must provide, including 
the operator's net worth, the existence of a guarantee by a parent 
corporation, and the operator's existing liability for benefits. Id.
    The Department historically has not required self-insured operators 
to post security with a face value that would cover all of the 
operator's expected black lung liability. See 62 FR 3338, 3370 (Jan. 
22, 1997). Instead, the Department has relied in part on a company's 
size as evidence of its ability to make future benefits payments. Id. 
Depending on the operator's assets, the Department usually required 
security sufficient to cover from three to fifteen years of the 
operator's payments on claims currently in award status, rather than 
the operator's total liability for current and future claims. Id. Under 
this model, most large operators therefore posted fewer years of 
payment relative to smaller operators.
    A number of bankruptcies in the mining industry revealed weaknesses 
in that process and demonstrated that a more substantial security 
amount would be required to adequately protect the Trust Fund. 
Specifically, beginning in 2014, three large self-insured operators 
filed for bankruptcy. Because these operators had insufficient 
securities to cover the full amount of expected benefits, an estimated 
$865 million in liabilities will ultimately transfer to the Trust Fund. 
See U.S. Government Accountability Office, Federal Black Lung Benefits 
Program: Improved Oversight of Coal Mine Operator Insurance is Needed, 
at 13 (Feb. 2020), available at https://www.gao.gov/products/gao-20-21.
    In response, OWCP developed revised guidelines and procedures for 
authorizing coal mine operators to self-insure, which it began to 
implement in 2019. These guidelines were intended to standardize the 
process by which applicants provide financial and actuarial information 
to OWCP. OWCP required each company to calculate and report its 
projected black lung liabilities through actuarial reports using a set 
of standardized assumptions, including discount rate, claim cost 
trends, and the probability of awards. OWCP also developed a set of 
financial metrics and a methodology to assess each operator's solvency, 
profitability, and risk of default. This assessment would determine the 
proportion of the operator's projected liabilities it would be required 
to post as security. Operators determined to be at less risk of not 
meeting their obligations would be required to provide smaller amounts 
of security, while operators at higher risk would be required to 
provide larger amounts of security. These guidelines were summarized in 
a December 2020 bulletin, see BLBA Bulletin No. 21-01 (Dec. 7, 
2020).\1\
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    \1\ OWCP published a notice in the Federal Register seeking 
comment on the Bulletin in January 2021, pursuant to then-operative 
Executive Order 13891 and the Department's implementing regulation. 
86 FR 1529 (Jan. 8, 2021). OWCP later withdrew the notice after the 
Executive Order and the Department's regulation were rescinded and 
the new Administration imposed a temporary regulatory freeze. 86 FR 
8806 (Feb. 9, 2021).
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    Although the revised guidelines allowed OWCP to better identify and 
account for self-insured operators that presented significant 
bankruptcy risk, they proved problematic in several respects. The 
financial metrics were not able to consistently predict which operators 
were at risk of experiencing financial difficulties. The process 
contemplated by the guidelines also imposed significant burdens on OWCP 
in continuously monitoring the financial health of individual operators 
on a quarterly basis. In addition, although the guidelines were shared 
with the public in various ways while they were being developed, 
stakeholders raised procedural concerns about how the guidelines were 
developed.
    Based on its experience administering the self-insurance program 
over the years and in response to stakeholder concerns, the Department 
now proposes to revise Subpart B and seeks comments on its proposal. 
The proposed rule would codify the practice of basing a self-insured 
operator's security requirement on an actuarial assessment of its total 
present and future black lung liability. The Department proposes to 
eliminate the financial scoring process. Instead, the Department 
proposes to require all self-insured operators to post security equal 
to 120 percent of their projected black lung liabilities, which ensures 
adequate coverage regardless of an operator's financial health.\2\ The 
Department has determined that 120 percent is an appropriate level of 
security because, among other things, it protects the Trust Fund in the 
event an operator's actual liabilities exceed its projected 
liabilities. The proposed rule would also remove the requirement that 
an operator's average current assets over the preceding three years 
must exceed its current liabilities, which would not be necessary to 
protect the Trust Fund under the proposed security scheme.

[[Page 3351]]

The proposed rule would also prospectively remove Section 501(c)(21) 
trust funds, which have proven to be less reliable, as an acceptable 
form of security. Furthermore, the proposed rule will clarify the 
process for operators to apply for authorization to self-insure, how 
long the authorization remains effective, the conditions under which 
OWCP will deny or revoke authorization to self-insure, and the process 
for operators to appeal OWCP's determinations.
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    \2\ This means the applicant would have to purchase an 
instrument that would pay out up to 120% of the projected liability, 
not that the applicant would have to actually spend that amount on 
collateral. OWCP estimates that premiums on surety bonds will cost 
anywhere from 2 percent to 12 percent of the security amount, and we 
welcome comments on this estimation.
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    The Department believes that the proposed rule will better protect 
the Trust Fund when a self-insured operator becomes insolvent. 
Moreover, by eliminating the need to continuously monitor each 
individual operator's financial situation, the proposed rule will 
lessen the administrative burden on OWCP to gather, review, and analyze 
operators' financial information, and lessen the burden on operators to 
collect and provide such information. The procedural changes will also 
provide greater clarity and certainty with respect to OWCP's and 
operators' respective obligations in the self-insurance authorization 
process. Based on all of these considerations, the Department has 
preliminarily determined the benefits of the proposed rule (e.g., the 
increased safeguards for the Trust Fund and taxpayers, the decreased 
administrative burden, etc.) would outweigh the purchase price of any 
additional surety bonds or other securities for operators who choose to 
self-insure.
    The Department invites comments on the proposed rule from all 
interested parties. The Department is particularly interested in 
comments addressing the impact of the proposed rulemaking on coal mine 
operators currently participating in the self-insurance program and any 
resulting impact on their ability to continue participating in the 
program.

II. Statutory Authority

    Section 426(a) of the BLBA, 30 U.S.C. 936(a), authorizes the 
Secretary of Labor to prescribe rules and regulations necessary for the 
administration and enforcement of the Act.

III. Summary of the Proposed Rule

A. General Provisions

    The Department is proposing several general revisions to advance 
the goals set forth in Executive Order 13563, 76 FR 3821 (Jan. 21, 
2011), on Improving Regulation and Regulatory Review. The Order states 
that regulations must be ``accessible, consistent, written in plain 
language, and easy to understand.'' Id.; see also E.O. 12866, 58 FR 
51735 (Sept. 30, 1993) (agencies must draft ``regulations to be simple 
and easy to understand, with the goal of minimizing the potential for 
uncertainty and litigation arising from such uncertainty.''). 
Accordingly, the Department proposes numerous technical and stylistic 
changes to Subpart B to improve clarity, consistency, and readability.
    The Department proposes to remove the imprecise term ``shall'' 
throughout the sections that it is amending, and to substitute 
``must,'' ``must not,'' ``will,'' or other situation-appropriate terms. 
No alteration in meaning either results from or is intended by these 
changes.
    Consistent with the goal of making this regulation easier to 
understand, the Department proposes several additional technical 
changes. For instance, the Department proposes to replace references to 
``the Office'' with ``OWCP'' because that acronym is more commonly used 
by stakeholders. As explained in current Sec.  725.101(a)(21), 
``Office'' and ``OWCP'' both mean ``the Office of Workers' Compensation 
Programs, United States Department of Labor.'' Thus, no alteration in 
meaning either results from or is intended by this change.
    The current regulations frequently refer to applications ``for 
authority to become a self-insurer'' or ``for authorization to self-
insure.'' Where appropriate, OWCP proposes to amend such references to 
include applications ``to renew authorization to self-insure'' or 
similar language. This change is intended to clarify, where necessary, 
whether and when the requirements of this Subpart B apply to renewal 
applications.
    The technical and stylistic changes designated here are not 
included in the section-by-section explanation. All proposed 
substantive revisions to existing rules and all proposed new rules are 
discussed below.

B. Section-by-Section Explanation

20 CFR 726.101 Who May Be Authorized To Self-Insure
    OWCP proposes substantially revising Sec.  726.101 to update the 
minimum requirements an operator must meet to qualify for authorization 
to self-insure and remove the provisions requiring OWCP to continuously 
monitor each applicant's financial situation.
    Paragraph (a) is retained in its entirety.
    Current paragraph (b) establishes the minimum requirements that an 
operator must meet to qualify for authorization to self-insure. At 
present, paragraphs (b)(1), (b)(3), and (b)(5) respectively provide 
that an operator must have been in the business of coal mining for at 
least three consecutive years prior to applying, the operator's average 
current assets over the prior three years must exceed its current 
liabilities by a specified amount, and the operator must have five or 
more employee-miners. Paragraphs (b)(2) and (b)(4) respectively provide 
that an operator must demonstrate the administrative capacity to fully 
service claims and that an operator must obtain security in a form 
approved by OWCP and in an amount determined by OWCP.
    OWCP proposes to remove paragraphs (b)(1), (b)(3), and (b)(5). 
Because OWCP elsewhere proposes to require all self-insurers to post 
security equal to 120 percent of their projected black lung 
liabilities, the requirements of paragraphs (b)(1), (b)(3), and (b)(5) 
would no longer be necessary. OWCP has preliminarily determined that a 
120 percent security level for all companies would better protect the 
Trust Fund in the event of an operator's default than percentages that 
vary based on a company's continuously-changing financial status. OWCP 
has likewise preliminarily determined that an actuarial assessment of 
liability for current and future claims is a better gauge of the dollar 
amounts the Trust Fund may be required to pay out, than consideration 
only of an operator's current claims. This change would also reduce the 
administrative burdens for both OWCP and self-insured operators.
    Given the foregoing changes, OWCP proposes to renumber current 
paragraph (b)(2) as paragraph (b)(1), and paragraph (b)(4) as paragraph 
(b)(2).
    Current paragraph (c) provides that no operator who is unable to 
meet the requirements of this section should apply for authorization to 
self-insure and that OWCP will not approve an application for self-
insurance ``until such time as the amount prescribed by [OWCP] has been 
secured in accordance with this subpart.'' OWCP proposes to revise 
paragraph (c) by removing the language prohibiting nonqualifying 
operators from applying. That requirement will serve no purpose and 
have no practical consequences in the revised regulation. OWCP also 
proposes to revise paragraph (c) by clarifying that no application will 
be approved until OWCP receives security in the amount and in the form 
determined by OWCP. Revised paragraph (c) will also specify that, if an 
applicant is seeking authorization to self-insure for the first time, 
the applicant is not authorized to self-insure while its application is 
under review. The purpose of this change is to

[[Page 3352]]

clarify the circumstances under which OWCP will approve a qualifying 
operator's application to self-insure.
    OWCP also proposes to add a new paragraph (d), which will provide 
that no operator whose application for authorization to self-insure or 
to renew authorization to self-insure is denied may reapply until 12 
months after a final decision denying such application. The purpose of 
this addition is to prevent non-qualifying operators from filing serial 
applications for authorization to self-insure. In turn, this addition 
would reduce the administrative burden on OWCP to review renewed 
applications. Moreover, if an operator disagrees with the amount of 
security OWCP has determined is appropriate, the operator can simply 
use the appeal process set forth in Sec.  726.116 rather than filing a 
new application. Barring operators from reapplying within 12 months 
after a denial prevents operators from pursuing new applications while 
an appeal on the denied application is pending.
20 CFR 726.102 Application for Authority To Become a Self-Insurer; How 
Filed; Information To Be Submitted
    OWCP proposes to amend paragraph (a) to require operators to file 
applications for authorization to self-insure (or to renew 
authorization to self-insure) electronically in a manner prescribed by 
OWCP, and to remove existing requirements that apply only to paper 
filings (e.g., affixing a corporate seal). This change is intended to 
streamline the application process and reduce the administrative burden 
of processing physical mail and documents.
    OWCP proposes to substantially revise paragraph (b) to change and 
update the information that must be submitted with an application for 
authorization to self-insure or to renew authorization to self-insure.
    Current paragraphs (b)(1), (b)(2), (b)(3), and (b)(5) require an 
operator to submit several pieces of information, including a statement 
of the employer's payroll, a statement of the average number of 
employees engaged in coal mine employment within the preceding three 
years, a list of mines covered by any particular self-insurance 
agreement and a statement demonstrating the applicant's administrative 
capacity to service claims. OWCP requires operators to provide much of 
this information in the requisite application forms, namely, forms CM-
2017 and CM-2017b, which are available on OWCP's website at https://www.dol.gov/agencies/owcp/dcmwc/regs/compliance/blforms. Accordingly, 
OWCP proposes to retain current paragraphs (b)(1), (b)(2), (b)(3), and 
(b)(5), but renumber them after adding two more paragraphs.
    OWCP proposes to add a new paragraph (b)(1) that will require an 
application to include any application forms required by OWCP. As noted 
above, those forms currently include CM-2017 and CM-2017b.
    OWCP also proposes to add a new paragraph (b)(2) to require an 
applicant to include with its application an actuarial report using 
OWCP-mandated actuarial assumptions. Proposed paragraph (b)(2) would 
also provide that an operator must submit a new actuarial report every 
three years and allow an operator to submit an additional actuarial 
report using alternative assumptions.
    With the additions of proposed paragraphs (b)(1) and (b)(2), 
current paragraphs (b)(1), (b)(2), (b)(3), and (b)(5) are respectively 
renumbered as (b)(3), (b)(4), (b)(5), and (b)(6).
    Current paragraph (b)(4) requires an applicant to submit its gross 
and net assets and liabilities for the preceding three years. Because 
OWCP elsewhere proposes to eliminate the minimum requirement pertaining 
to an operator's assets and liabilities, it likewise proposes to remove 
current paragraph (b)(4).
    Current paragraph (b)(6), which allows OWCP to request additional 
information or evidence from an applicant at OWCP's discretion, is 
retained and renumbered as paragraph (b)(7). OWCP proposes to make 
stylistic changes to new paragraph (b)(7) by removing unnecessary 
language. No alteration in meaning either results from or is intended 
by this change.
    Paragraph (c), which specifies which entities may apply for 
authorization to self-insure, is retained in its entirety, but revised 
to clarify that the paragraph also applies to applications to renew 
authorization to self-insure.
20 CFR 726.103 Application for Authority To Self-Insure; Effect of 
Regulations Contained in This Part
    Current Sec.  726.103 is retained in its entirety.
20 CFR 726.104 Action by OWCP Upon Application of Operator
    OWCP proposes deleting and replacing paragraph (a) to clarify what 
action OWCP must take with respect to an application and the timeframe 
within which OWCP will take such action. New paragraph (a) provides 
that OWCP will issue a written determination, either denying the 
application or determining the amount of security, within 30 days after 
determining that an application is complete. New paragraph (a) also 
allows OWCP to extend the 30-day deadline if it determines that 
additional evidence is needed or that the applicant's evidence is not 
in compliance with OWCP's requirements.
    OWCP proposes removing current paragraph (b)(4), which allows a 
self-insurer to give security by funding a trust pursuant to section 
501(c)(21) of the Internal Revenue Code. Few self-insured operators use 
501(c)(21) trusts as security and most of those operators use them in 
combination with other forms of security. Also, OWCP has determined 
that section 501(c)(21) trusts are a less reliable form of security and 
more burdensome for OWCP to monitor because, unlike other forms of 
security which generally guarantee a fixed dollar amount, the amounts 
kept in the trusts can fluctuate and significantly decrease as self-
insurers use such trusts to pay claims and the costs of administration. 
The remaining provisions of paragraph (b) are retained.
    OWCP proposes to add a new paragraph (c). New paragraph (c) 
provides that if the applicant is receiving authorization to self-
insure for the first time, OWCP will notify the applicant that its 
authorization to self-insure is contingent upon submitting the required 
security and completed agreement and undertaking, and that the 
applicant's authorization will be effective for 12 months from the date 
such security and completed agreement and undertaking are received by 
OWCP. The purpose of this amendment is to clarify when a new 
applicant's authorization to self-insure becomes effective. 
Additionally, as explained in more detail below, under new Sec.  
726.111, OWCP will also notify the applicant of the date on which its 
authorization is effective, the date on which such authorization will 
expire, and the date by which the applicant must apply to renew that 
authorization if it intends to continue self-insuring its liabilities.
    OWCP proposes to add a new paragraph (d) for procedures when OWCP 
renews the applicant's authorization to self-insure. Under proposed 
paragraph (d)(1), if there are no changes in the required security 
amount, OWCP would notify the applicant that the applicant's 
authorization to self-insure is effective for 12 months from the date a 
completed agreement and undertaking is received. Under proposed 
paragraph (d)(2), if changes are required to the existing security 
amount, OWCP would notify the applicant that the applicant's 
authorization to self-insure is not effective until the applicant has

[[Page 3353]]

submitted the required security and a completed agreement and 
undertaking. In the latter event, the applicant's authorization to 
self-insure will be effective for 12 months from the date such updated 
security and completed agreement and undertaking are received by OWCP. 
The purpose of this amendment is to clarify when a renewal applicant's 
reauthorization to self-insure becomes effective.
    Current paragraph (c) is retained but renumbered as paragraph (e). 
OWCP proposes to amend this paragraph to provide that any applicant who 
cannot meet the security requirements imposed by OWCP should proceed to 
obtain a commercial policy or contract of insurance and submit proof of 
such coverage within 30 days after OWCP issues its decision. Current 
paragraph (c) also sets forth the process by which an applicant may 
appeal OWCP's determination on an application. Because OWCP elsewhere 
proposes to set forth new procedures for an applicant to appeal OWCP's 
determinations (see Sec.  726.116), that language is now redundant. 
Accordingly, OWCP proposes to revise paragraph (c) to clarify that an 
applicant may appeal such determinations in the manner set forth in new 
Sec.  726.116. For the same reasons, OWCP proposes to delete current 
paragraph (d), which describes what action OWCP will take with respect 
to such an appeal.
20 CFR 726.105 Fixing the Amount of Security
    Current Sec.  726.105 requires OWCP to set the amount of security 
each applicant is required to post by determining the amount 
``necessary and sufficient to secure the performance by the applicant 
of all obligations imposed upon him as an operator by the Act.'' The 
current regulation provides that OWCP will consider various factors 
including, but not limited to, the operator's net worth, the existence 
of a guarantee by a parent corporation, and the operator's existing 
liability for benefits.
    OWCP proposes to delete current Sec.  726.105 and replace it with a 
new Sec.  726.105. Proposed Sec.  726.105 would provide that any 
operator approved to self-insure must submit security equal to 120 
percent of its actuarial estimated liabilities (all present and future 
liabilities) as determined by OWCP based on the actuarial report or 
reports submitted by the applicant (or on file with OWCP), other 
information submitted with the operator's application, or any other 
materials or information that OWCP deems relevant. This means the 
applicant would have to purchase an instrument that would pay out up to 
120% of the projected liability, not that the applicant would have to 
actually spend that amount on collateral. OWCP estimates that premiums 
on surety bonds will cost anywhere from 2 percent to 12 percent of the 
security amount, and we welcome comments on this estimation.
    This change would better protect the Trust Fund in the event that a 
self-insured operator becomes insolvent or enters bankruptcy. This 
change will also better protect the Trust Fund in the event an 
insolvent operator's actual liabilities turn out to be greater than its 
projected liabilities. Generally, OWCP will continue to determine an 
operator's projected liabilities based on the operator's actuarial 
report and supporting information, including the information submitted 
with an operator's annual renewal application. Because those reports 
attempt to project future liabilities, however, they are inherently 
imperfect and open to potential error. This approach is also consistent 
with the practices of some state workers' compensation programs that 
set a security deposit amount based on accrued or projected 
liabilities. See, e.g., 8 Alaska Admin. Code section 46.040 (setting 
security deposit amount at $600,000 or 125% of the total accrued 
workers' compensation liability, whichever is greater); Ariz. Code 
section 23-961(a)(2) and Ariz. Admin. Code section 20-5-206(D) (setting 
guaranty bond amount at fixed dollar amount or 125% of the total 
outstanding accrued liability); La. Rev. Stat. section 23:1168(a)(4); 
La. Admin. Code tit. 40, Pt. I, section 1725 (requiring amount of 
securities or surety bond to be at least $100,000, or at least 110% of 
the average workers' compensation losses incurred over the most recent 
three year period, or at least 110% of the total amount of unpaid 
workers' compensation reserves at the time of application, whichever is 
greatest); Minn. Stat. section 79A.04, subd. 2 (setting 110 percent 
security deposit for self-insurance); N.C. Code section 97-185(a1), 
(b2) (requiring security deposit of at least 100% of the individual 
self-insurer's total undiscounted outstanding claims liability per the 
most recent report from a qualified actuary, but not less than $500,000 
or such greater amount or such greater amount as the Commissioner 
prescribes based on, but not limited to, the financial condition of the 
individual self-insurer and the risk retained by the individual self-
insurer); Tenn. Comp. R. & Regs. 0780-01-83-.05(2) (setting 125 percent 
security deposit); Tx. Labor 407.064(d) (requiring security deposit of 
the greater of $300,000 or 125% of applicant's incurred liabilities for 
compensation). Additionally, by adopting this change, OWCP would no 
longer have to continuously monitor or collect information about each 
operator's financial situation. Furthermore, as explained in greater 
detail below, the Department has determined that the anticipated 
benefits of this change outweigh the costs.
20 CFR 726.106 Type of Security
    Current Sec.  726.106 is retained in its entirety. OWCP proposes to 
make stylistic changes to Sec.  726.106. No alteration in meaning 
either results from or is intended by these changes. In addition to 
these stylistic changes, OWCP proposes to revise paragraph (a) to 
clarify that an operator may not provide any form of security other 
than those provided for in Sec.  726.104(b). This change merely 
clarifies existing requirements.
20 CFR 726.107 Deposits of Negotiable Securities With Federal Reserve 
Banks or the Treasurer of the United States; Authority To Sell Such 
Securities; Interest Thereon
    OWCP proposes to substantially revise Sec.  726.107 to clarify and 
update the treatment of negotiable securities.
    New paragraph (a) retains the requirements that deposits of 
securities provided for by the regulations in this part must be made 
with any Federal Reserve bank or any branch of a Federal Reserve bank 
designated by OWCP, or the Treasurer of the United States. New 
paragraph (a) also adds a requirement that any such deposit must be 
held in the name of the Department of Labor.
    New paragraph (b) provides that, if a self-insurer defaults on its 
obligations under the Act, OWCP has the power, in its discretion, to 
(1) collect the interest on such securities as it may become due; (2) 
sell any or all of the securities; and (3) apply the collected interest 
or proceeds from the sale of securities to the payment of any benefits 
for which the self-insurer may be liable. This paragraph largely 
restates existing requirements.
    New paragraph (c) provides that, if a self-insurer with deposits of 
securities has neither defaulted nor appealed from a determination made 
by OWCP under Sec.  726.104, OWCP will allow the self-insurer to 
collect interest on the security deposit. This change will replace 
existing provisions of current Sec.  726.106, which provide that OWCP 
may authorize a self-insurer to collect interest on the securities 
deposited by a self-insurer when OWCP deems it

[[Page 3354]]

unnecessary to resort to such securities for the payment of benefits.
    In light of these changes, OWCP also proposes to retitle Sec.  
726.107 to read: ``How Negotiable Securities Are Handled.''
20 CFR 726.108 Withdrawal of Securities
    OWCP proposes to substantially revise current Sec.  726.108, to 
clarify the circumstances under which a self-insurer may make 
withdrawals of any form of security.
    New paragraph (a) provides that no withdrawal of any form of 
security (indemnity bonds, negotiable securities, and/or letters of 
credit) may be made except upon express written authorization by OWCP.
    New paragraph (b) provides that, if a self-insurer wishes to 
withdraw securities, it must submit a written request, which must 
include (1) an updated actuarial report using OWCP-mandated actuarial 
assumptions to support why the existing security levels are no longer 
applicable; or (2) replacement securities in the amount and form 
approved by OWCP.
    These changes are intended to protect the Trust Fund by preventing 
a self-insured operator from taking actions with respect to its 
security deposit that could hinder OWCP's ability to use those 
securities to pay benefits. Furthermore, because new Sec.  726.108 
applies to all forms of security, not only negotiable securities, OWCP 
proposes to retitle Sec.  726.108 to read: ``Withdrawal of 
Securities.''
20 CFR 726.109 Increase in the Amount of Security
    OWCP proposes to delete and replace current Sec.  726.109. New 
Sec.  726.109 provides that OWCP may, at its discretion, increase the 
amount of security a self-insurer is required to post whenever OWCP 
determines that the amount of security on deposit is insufficient to 
secure the payment of benefits and medical expenses under the Act. OWCP 
might make such a determination, for example, if it learns that the 
data on which an operator's liability estimate were based have 
significantly changed or an operator acquires new mines or employees.
    New Sec.  726.109 no longer allows OWCP to reduce an operator's 
required security amount between self-insurance renewal authorizations. 
OWCP believes it is not necessary to allow for a reduction in an 
operator's security amount in between renewals, which would occur every 
12 months, because that process would simply allow an operator to 
relitigate OWCP's original determination, even after an operator has 
exhausted the appeal process. Disallowing operators from requesting 
decreases in their security amounts would thus preserve OWCP's limited 
resources to review and process self-insurance applications. 
Furthermore, if an operator believes that its projected liabilities 
have decreased due to a change in circumstances, the operator will have 
an opportunity to request a lower security amount during the annual 
renewal process.
    Furthermore, reducing an operator's security amount could only 
increase the risk that an operator's liabilities could transfer to the 
Trust Fund. This change thus better protects the Trust Fund, consistent 
with Congress's intent that the coal operators who exposed coal miners 
to coal dust be responsible for paying black lung benefits, not 
taxpayers. If an operator disagrees with OWCP's determination to 
increase its security amount, it would be free to appeal that 
determination using the appeals process set forth in Sec.  726.116.
    In light of these changes, OWCP proposes to retitle Sec.  726.109 
to read: ``Increase in the Amount of Security.''
20 CFR 726.110 Filing of Agreement and Undertaking
    OWCP proposes to amend Sec.  726.110 to update the requirements for 
filing of an agreement and undertaking.
    Current paragraphs (a) and (b) are retained. Current paragraph 
(a)(3) provides that, in an agreement and undertaking, the applicant 
must agree to provide security in a form approved by OWCP and in an 
amount established by OWCP ``as elected in the application.'' OWCP 
proposes to delete ``as elected in the application'' to make clear that 
OWCP, not the applicant, has the final say as to which form or forms of 
security a particular operator may or must post.
    Paragraph (c) is new. It provides that any operator authorized to 
self-insure must notify OWCP of any changes to its business structure, 
including the purchase or sale of any coal mining operations, that 
could affect the operator's liability for benefits under the Act. It 
further provides that the operator must provide such notification to 
OWCP within 30 days of such change, but clarifies that an operator's 
liability following such a change remains governed by Subpart G of 
these regulations, 20 CFR 725.490-725.497. The purpose of this change 
is to ensure that operators promptly notify OWCP of changes that could 
require or justify an increase in the operator's security amount.
    Paragraph (d) is also new. It provides that OWCP may, at its 
discretion, request any information from a self-insured operator that 
may affect the operator's liability for benefits under the Act. The 
purpose of this change is likewise to ensure that OWCP can request 
information that could require or justify an increase in the operator's 
security amount.
20 CFR 726.111 Notice of Authorization to Self-Insure
    Current Sec.  726.111 is retained in its entirety. OWCP proposes to 
make stylistic changes to Sec.  726.111. No alteration in meaning 
either results from or is intended by these changes. In addition to 
these stylistic changes, OWCP proposes to add a new sentence, providing 
that OWCP will also notify the applicant of the date on which its 
authorization is effective, the date on which such authorization will 
expire, and the date by which the applicant must apply to renew that 
authorization if it intends to continue self-insuring its liabilities. 
The purpose of this addition is to ensure that the appropriate dates 
and deadlines are clear and clearly communicated to the applicant.
20 CFR 726.112 Reports Required of Self-Insurer; Examination of 
Accounts of Self-Insurer
    Current Sec.  726.112 is retained in its entirety. OWCP proposes to 
make stylistic changes to Sec.  726.112. No alteration in meaning 
either results from or is intended by these changes.
20 CFR 726.113 Disclosure of Confidential Information
    Current Sec.  726.113 is retained in its entirety. OWCP proposes to 
make stylistic changes to Sec.  726.113. No alteration in meaning 
either results from or is intended by these changes.
20 CFR 726.114 Authorization and Reauthorization Timeframes
    OWCP proposes to delete and replace current Sec.  726.114 to 
substantially revise the timeframe for authorizations and 
reauthorizations.
    New paragraph (a) provides that no initial or renewed authorization 
to self-insure may be granted for a period in excess of 12 months 
unless OWCP determines that extenuating circumstances justify a longer 
period. This change thus shortens the existing maximum allowable 
authorization period from 18 months to 12 months.\3\

[[Page 3355]]

The purpose of this change is to require self-insured operators to 
provide information to OWCP more frequently, thereby ensuring that the 
security amounts set by OWCP are based on up-to-date information. For 
instance, operators will be required to submit data concerning their 
existing claims and employee figures each year, which could alert OWCP 
to potential changes in an operator's projected liabilities. This 
process will also allow OWCP to better track other potentially relevant 
information, including a self-insured operator's subsidiaries, 
corporate officers, mines, and the like. Requiring renewal applications 
on an annual basis also makes sense insofar as most operators operate 
on twelve-month fiscal calendars. This approach would also give outside 
stakeholders confidence that OWCP is adequately enforcing compliance 
with these regulations and ensuring that self-insured operators post 
sufficient security.
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    \3\ The existing regulations provide an 18-month period only for 
a company's initial self-insurance authorization. After the initial 
authorization, self-insurers ``will receive from the Office each 
year a bond form for execution in contemplation of reauthorization, 
and the submission of such bond duly executed in the amount 
indicated by the Office will be deemed and treated as such self-
insurer's application for reauthorization for the ensuing fiscal 
year.'' 20 CFR 726.114(a).
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    New paragraph (b) provides that each operator authorized to self-
insure must apply for reauthorization 90 days prior to the 12-month 
authorization expiration date. This change will ensure that OWCP has 
the opportunity to act on an operator's application for reauthorization 
to self-insure before the operator's existing authorization expires.
    In light of these changes, OWCP proposes to retitle Sec.  726.114 
to read: ``Authorization and Reauthorization Timeframes.''
20 CFR 726.115 Revocation of Authorization to Self-Insure
    OWCP proposes to restructure and make stylistic changes to current 
Sec.  726.115 for clarity. No alteration in meaning either results from 
or is intended by these changes. In addition, OWCP proposes one 
substantive change. Current Sec.  726.115 provides that the failure or 
insolvency of the surety on an operator's indemnity bond can provide 
good cause for OWCP to withdraw the operator's authorization to self-
insure. OWCP proposes to revise Sec.  726.115 to clarify that the same 
result will obtain if any other financial institution holding any form 
of security provided by an operator fails or becomes insolvent. OWCP 
believes this change simply recognizes that there is no valid reason to 
treat the failure of a surety any differently than the failure of any 
other financial institution holding security on behalf of an operator. 
OWCP also proposes to change ``communication of the Office'' to 
``request made by OWCP'' for clarity.
20 CFR 726.116 Appeal Process
    Section 726.116 is new. It establishes and clarifies the process 
for an operator to appeal a self-insurance determination made by OWCP.
    Paragraph (a) sets forth the process to file an appeal. It provides 
that any applicant who wishes to appeal a determination made by OWCP 
must submit a request for review to the Division of Coal Mine Workers' 
Compensation (DCMWC) within 30 days after such determination. It also 
provides that the 30-day deadline to appeal may not be extended. This 
method is consistent with general appellate practices and 30 days 
provides operators with sufficient time to determine whether to appeal 
a determination.
    Paragraph (b) sets forth the process for submitting briefs and 
evidence. It provides that, within 30 days of submitting a request for 
review, the applicant must submit any evidence and/or briefing on which 
the applicant intends to rely. It also provides that DCMWC may, at its 
discretion, extend this deadline upon a showing of good cause by the 
applicant.
    Paragraph (c) sets forth the process for requesting an informal 
conference on an appeal. Paragraph (c)(1) provides that an applicant 
may request an informal conference and that such requests must be made 
when the applicant submits briefing in support of its request for 
review. Paragraph (c)(2) provides that, if an applicant requests a 
conference, DCMWC will hold a conference between DCMWC, the Office of 
the Solicitor, and the applicant's representatives. Paragraph (c)(3) 
provides that, if the applicant does not request a conference, DCMWC 
may either decide the appeal on the record or schedule a conference on 
its own initiative. Paragraph (c)(4) provides that the conference will 
be limited to the issues identified in the applicant's written 
materials. Again, this method is consistent with general appellate 
practices and provides an applicant with an adequate opportunity to be 
heard on its appeal.
    Paragraph (d) sets forth DCMWC's obligations in the review process. 
It provides that DCMWC will review the previous determination in light 
of the evidence and arguments submitted and issue a supplemental 
decision.
    Paragraph (e) sets forth the process for further appeals. Paragraph 
(e)(1) provides that any applicant aggrieved by a supplemental 
determination made by DCMWC may request further review by the Director 
of OWCP within 30 days of such supplemental determination. Paragraph 
(e)(2) provides that the Director of OWCP will review the supplemental 
determination and evidence of record only and that the applicant may 
not submit new evidence or arguments to the Director of OWCP. Paragraph 
(e)(3) provides that the Director of OWCP will issue a final agency 
decision within 30 days of receipt of an appeal. This requirement will 
ensure that there is a final agency action that is reviewable in the 
Federal courts as provided in the Administrative Procedure Act, 5 
U.S.C. 701 et seq. See also 5 U.S.C. 704.

IV. Administrative Law Considerations

A. Information Collection Requirements

    The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq., 
and its implementing regulations, 5 CFR part 1320, require that the 
Department consider the impact of paperwork and other information 
collection burdens imposed on the public. A Federal agency generally 
cannot conduct or sponsor a collection of information, and the public 
is generally not required to respond to an information collection, 
unless it is approved by the Office of Management and Budget (OMB) 
under the PRA and displays a currently valid OMB Control Number. In 
addition, notwithstanding any other provisions of law, no person may 
generally be subject to penalty for failing to comply with a collection 
of information that does not display a valid Control Number. See 5 CFR 
1320.5(a) and 1320.6.
    Although the proposed rules contain information collections within 
the meaning of the PRA (see proposed Sec.  726.102), these collections 
are not new. They are currently approved for use in the black lung 
program by OMB under Control Number 1240-0057 (CM-2017 Application or 
Renewal of Self-Insurance Authority; and CM-2017b Report of Claims 
Information for Self-Insured Operators). Aside from the removal of the 
collection associated with form CM-2017a, the requirements for 
completion of the forms and the information collected on the forms will 
not change if this rule is adopted in final. Since that is the only 
change being made to the collections, the overall burdens imposed by 
the information collections will be reduced if this proposal is 
adopted.
    The information collection package for this proposal has been 
submitted to OMB for review under 44 U.S.C. 3504, paragraph (c) of the 
Paperwork Reduction Act of 1995, as amended.

[[Page 3356]]

Comments may be sent by the methods listed in the ADDRESSES section of 
this preamble.
    OWCP is particularly interested in comments that address the 
following:
     Whether the collection of information is necessary for the 
proper performance of the functions of the Agency, including whether 
the information has practical utility;
     The accuracy of OWCP's estimate of the burden of the 
collection of information, including the validity of the methodology 
and assumptions used;
     Methods to enhance the quality, utility, and clarity of 
the information to be collected; and
     Minimizing the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.
    OMB Control Number: 1240-0057.
    Affected Public: Business or other for-profit.
    Number of Respondents: 61.
    Frequency: Annually.
    Number of Responses: 122.
    Annual Burden Hours: 244.
    Annual Respondent or Recordkeeper Cost: $34,000.
    OWCP Form(s): OWCP Forms CM-2017 (Application or Renewal of Self-
Insurance Authority), CM-2017b (Report of Claims Information for Self-
Insured Operators).

B. Executive Orders 12866 and 13563 (Regulatory Planning and Review)

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of the available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity).
    Under Executive Order 12866, the Office of Information and 
Regulatory Affairs of OMB determines whether a regulatory action is 
significant and, therefore, subject to the requirements of the E.O. and 
review by OMB. Section 3(f) of Executive Order 12866 defines a 
``significant regulatory action'' as an action that is likely to result 
in a rule that (1) has an annual effect on the economy of $100 million 
or more, or adversely affects in a material way a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local or tribal governments or communities 
(also referred to as economically significant); (2) creates serious 
inconsistency or otherwise interferes with an action taken or planned 
by another agency; (3) materially alters the budgetary impacts of 
entitlement grants, user fees, or loan programs, or the rights and 
obligations of recipients thereof; or (4) raises novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, reducing costs, harmonizing rules, and promoting 
flexibility. It also instructs agencies to review ``rules that may be 
outmoded, ineffective, insufficient, or excessively burdensome, and to 
modify, streamline, expand, or repeal them.''
    The Department has considered the proposed rule with these 
principles in mind and has determined that the anticipated benefits of 
this regulation outweigh the costs. The discussion below sets out the 
rule's anticipated economic impact, including factors favoring adoption 
of the proposal. The Office of Information and Regulatory Affairs of 
OMB has determined that the Department's rulemaking is not an 
``economically significant regulatory action'' under Section 3(f)(1) of 
Executive Order 12866.
1. Economic Considerations
    The proposed rule will have an economic impact on coal mine 
operators that currently participate in the self-insurance program, as 
well as any new applicants. The proposed rule nevertheless would be 
necessary to better protect the Trust Fund, reduce the administrative 
burdens on OWCP and operators, and bring clarity to the self-insurance 
process.
    As explained in the preamble, prior security requirements have 
proven inadequate to protect the Trust Fund when a self-insured 
operator becomes insolvent. From 2014 to 2016, three self-insured coal 
operators entered bankruptcy with combined collateral of $27.4 million; 
the resulting transfer of black lung liabilities to the Trust Fund was 
eventually estimated to be $865 million. See U.S. Government 
Accountability Office, Federal Black Lung Benefits Program: Improved 
Oversight of Coal Mine Operator Insurance is Needed, at 13 (Feb. 2020), 
available at https://www.gao.gov/products/gao-20-21. Had this proposed 
rule been in effect at the time, the three operators would have had far 
more in collateral, producing dollar-for-dollar savings for the Trust 
Fund. Of note, the amount of the coal operators' future black lung 
liability was originally estimated in 2019 to be around $313 million to 
$325 million. This was revised to $865 million in 2020 due to a variety 
of factors, including increases in black lung benefit award rates and 
higher medical treatment costs. Because the amount of a coal operator's 
future black lung liability is inherently unpredictable to some degree 
and can increase over time, requiring collateral at 120% better 
protects the Trust Fund than a lower percentage.
    Moreover, the existing financial scoring process has proven overly 
cumbersome and costly to OWCP in terms of time and resources. The 
proposed rule would eliminate the financial scoring process and require 
all self-insured operators to post security equal to 120 percent of 
their projected black lung liabilities. By requiring sufficient 
security based simply on projected liabilities, the financial scoring 
process is no longer needed, removing the burden on the agency to 
attempt to assess risk by collecting and analyzing the information in 
the form CM-2017a. The proposed rule would also remove certain minimum 
requirements that would become unnecessary, including the requirement 
that an operator's average current assets over the preceding three 
years exceed its current liabilities.
    This analysis provides the Department's estimate of the economic 
impact of the proposed rule, both on the economy as a whole and on 
individual operators. The Department invites comments on this analysis 
from all interested parties. The Department is particularly interested 
in comments addressing the Department's evaluation of the impact of the 
proposed rule on operators that currently participate in the self-
insurance program.
a. Data Considered
    To determine the proposed rule's general economic impact, the 
Department calculated how the rulemaking would affect several 
stakeholder groups, including: (i) OWCP, (ii) taxpayers, (iii) 
commercially insured operators, and (iv) self-insured operators.
i. OWCP
    The proposed rule change does not impose additional demands on OWCP 
resources and in fact will result in a reduction in administration 
costs.\4\ It

[[Page 3357]]

eliminates the need for OWCP to repeatedly perform annual financial 
health assessments on each self-insured operator. This produces a 
short-term savings in the administrative costs to perform the analysis, 
including both costs associated with OWCP time and contractors hired to 
assist OWCP in this analysis. The proposed rule would require OWCP to 
review actuarial liability estimates every three years and monitor 
authorized self-insureds for compliance with eligibility requirements, 
but these are not new costs because OWCP is already performing those 
functions under the current guidelines. The savings in administrative 
expenses is estimated to be, at a minimum, equivalent to the annual 
cost of one full-time financial analyst.
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    \4\ In the 2017 Information Collection Request, when the form 
CM-2017a was first approved, OWCP estimated that analyzing the 
information collected in that form would cost the agency $3,279.94 
annually. No longer requiring this form should save the agency this 
cost.
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ii. Taxpayers
    The proposed rule provides taxpayers with both short- and long-term 
benefits. In the short term, taxpayers will benefit from lower 
administration expenses, because savings can be used elsewhere in the 
government without requiring additional tax revenues. In the long term, 
the proposed rule reduces taxpayers' financial exposure by reducing the 
risk that the Trust Fund--which has borrowed from the U.S. Treasury's 
general fund nearly every year since 1979 to make needed expenditures--
will need to assume liabilities of self-insured operators that become 
insolvent. The proposed rule would require security deposits that are 
120 percent of the actuarial liability, instead of only partial 
security deposits as is currently the case for most self-insured 
operators. Under the current guidelines, the Trust Fund remains 
partially exposed to the risk of coal operator bankruptcies for 
operators considered at low or medium risk of failing to meet their 
obligations; under the current guidelines, these operators must provide 
security for 70 percent and 85 percent respectively of their black lung 
liabilities. Even operators considered high risk under the current 
guidelines, and therefore required to provide security for 100 percent 
of their black lung liabilities, present some risk that their projected 
liabilities will prove too low. Moreover, due to the pending appeals 
discussed above, a number of operators have securities on deposit with 
OWCP that are substantially less than those required under the existing 
guidelines.
    Requiring a 120 percent liability security deposit transfers the 
risk of insufficient securities to commercial security bond 
underwriters and banks that specialize in financial risk assessments 
and are better equipped than OWCP to assess the financial stability of 
coal mine operators (and who are compensated for assuming that risk via 
operators' purchase of surety bonds or other forms of security). The 
proposed rule would require self-insured operators to post additional 
security in the aggregate, which would cover the claims for which they 
are responsible if they were to default on their claim payments (based 
on the operators' current estimates of their actuarial liabilities). 
This means the burden for self-insured operators' liabilities would 
remain with them instead of transferring to the Trust Fund and, 
indirectly, to taxpayers.
iii. Commercially Insured Operators
    The proposed rule will not impose additional costs on operators 
that secure their BLBA liabilities through commercial insurance. The 
proposed rule affects only the eligibility criteria, security 
requirements, and other procedures for operators that secure their 
liabilities by qualifying to self-insure. At most, commercially insured 
operators might choose to reassess whether, in light of these changes, 
commercial insurance remains the most cost-effective option for 
securing their liabilities or, instead, whether to switch to self-
insurance. The cost of any such assessment would be de minimis.
iv. Self-Insured Operators
    The proposed rule could increase costs for current operators that 
are self-insured. In 2019, OWCP identified a total of 20 operators that 
were, or recently had been, actively mining coal and participating in 
the self-insurance program. Four of these operators have since gone 
bankrupt and are not included in this impact analysis. Of the remaining 
16 self-insured operators, seven have commercial insurance for their 
current operations, but self-insure their legacy liabilities. Nine 
secure both their current and legacy liabilities through self-
insurance.
    The proposed rule would apply to the 16 operators noted above. 
Table 1 lists the 16 operators' actuarially estimated liabilities, 
securities currently on deposit, the present security requirement under 
current guidelines, and future security requirements under the proposed 
rule.

Table 1: Self-Insured Coal Mine Operators Actuarial Liabilities and 
Security Deposits
[GRAPHIC] [TIFF OMITTED] TP19JA23.001


[[Page 3358]]


    The proposed rule does not impose additional reporting or filing 
requirements on the coal operators currently in the self-insurance 
program beyond notifying OWCP of any business structure changes that 
could affect the operator's liability for benefits under the Act. If 
anything, the proposed rule decreases administrative burdens. Operators 
are required to continue updating their actuarial liability estimates 
on a three-year cycle but are no longer required to file quarterly 
financial reports. There will be a cost to the operators for the time 
required to review and understand the rule. Because of the small number 
of affected establishments, this rule familiarization cost is de 
minimis in aggregate and is not included in the rule's total cost 
estimate.
    The proposed rule requires self-insured operators to adjust the 
amount of their security deposits to reach 120 percent of their 
reported actuarial black lung liability. Table 1 reflects that 15 of 
the 16 current self-insured operators would be required to increase 
their security deposits as a result. For each operator, the cost of the 
increase in security deposits depends on which security deposit option 
the operator employs (since different security options have different 
costs) and amount of the required increase.
    Operators with security deposits in the form of indemnity bonds 
will incur a cost determined by the commercial bond underwriters. OWCP 
does not have direct information on the cost of these bonds, as pricing 
is a function of multiple qualitative and quantitative attributes of 
each operator and is determined by underwriters on a case-by-case 
basis. Each underwriter has their own pricing formula and offers 
various payment options. To estimate the cost impacts of the proposed 
rule, an annual premium ranging from 2 percent to 12 percent of the 
additional security was used as an estimate. This range is based on a 
review of public data from several different surety companies; however, 
actual costs could be higher or lower.\5\ The agency welcomes comment 
on these assumptions and estimates. Additionally, this analysis focuses 
solely on surety bonds because that is both the most widely used option 
among currently self-insured operators and the most cost-effective 
option.
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    \5\ In reaching this estimate, OWCP reviewed publicly available 
estimates of surety bond premiums from BondExchange; Bryant Surety 
Bonds; Insureon; JW Surety Bonds; Lance Surety Bond Associates, 
Inc.; NNA Surety Bonds; Surety Bonds Direct; Surety Solutions; and 
Value Penguin. Note that these are for surety bonds generally, not 
surety bonds for coal companies specifically. The 2 to 12 percent 
range was then developed based on this public data.
---------------------------------------------------------------------------

    For operators with security deposits in the form of negotiable 
securities, the additional costs would consist of the opportunity costs 
of the additional deposits (i.e., the difference in return between 
funds held in such accounts and funds invested elsewhere, such as in 
higher-performing investments or reinvested into the operations of the 
business itself). One common convention to estimate hypothetical 
returns on forgone investments is to use a company or industry-level 
Weighted Average Cost of Capital (WACC); the median WACC for the metals 
and mining industry is currently around 9.4 percent, although the WACC 
for coal mining companies specifically, and in particular for 
individual coal mining companies, may be higher or lower. The 
opportunity costs for these operators could be estimated by calculating 
the difference between their WACC and the annual return earned on their 
security deposit and multiplying that figure by the dollar increase in 
their security. OWCP has not quantified these costs for two principal 
reasons. First, as noted above, most self-insured operators use 
indemnity bonds as security. OWCP does not anticipate that these 
operators will begin using negotiable securities. Second, annual 
indemnity bond costs are likely to be lower than the one-time payment 
of negotiable securities and associated opportunity costs, making 
indemnity bonds the more cost-effective option. As this economic 
analysis demonstrates, OWCP predicts that any increased indemnity bond 
costs associated with this rulemaking will not have a significant 
impact on self-insured operators. Furthermore, any operators that 
currently use negotiable securities to secure some or all of their 
liabilities can continue using those securities in combination with 
indemnity bonds to comply with any increased security requirement 
(i.e., some portion of the operator's liabilities could be secured with 
negotiable securities and the remainder could be secured with indemnity 
bonds).
    Table 2 calculates the estimated increased costs of a larger 
indemnity bond for each operator and compares this figure to each 
operator's annual revenues. Annual revenues are represented by a three-
year average over the 2018-2020 time period, as reported by S&P or 
operator-provided financial statements. Annual costs are estimated as 
the average of the maximum and minimum annual premium (i.e., the 
midpoint of the 2 percent to 12 percent range). As shown in Table 2, 
the estimated annual impact for operators as a percentage of annual 
revenue ranges from a high of 0.941 percent to less than 0.1 percent 
(including one negative value).\6\
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    \6\ Surety bonds are generally paid for annually, and the 
premium is paid up front at the beginning of the year or charged a 
finance fee for a payment plan. Discounting is not presented in 
Table 2 because the average estimated cost represents one annual 
premium payment, rather than the total net present value of all 
future payments.
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    OWCP invites additional information from commenters on the cost of 
these bonds.

[[Page 3359]]

Table 2: Estimated Annual Cost of Increased Security Deposit in the 
Form of Indemnity Bonds
[GRAPHIC] [TIFF OMITTED] TP19JA23.002

b. Economic Impact Summary
    The Office of Management and Budget uses a $100 million-dollar 
annual threshold for determining the proposed rule's economic 
significance. See, e.g., E.O. 12866 (defining regulation that has 
annual effect on the economy of $100 million or more as 
``significant''). Based on this test, the self-insurance proposal would 
not be ``economically significant.''
    Operator securities on deposit are estimated to change by nearly 
$720 million. This, however, represents an estimate of the projected 
liabilities over the lifetime of all claims for all self-insured 
companies. Even if they were all to go bankrupt simultaneously--which 
is extremely unlikely--the estimated liabilities represent benefits 
payments over the lifetime of the impacted miners and survivors. As an 
illustration, consider the annual payout in recent years from the 
estimated $865 million transfer of black lung liabilities to the Trust 
Fund as a result of the three bankruptcies from 2014 to 2016. From 
fiscal years 2015 through 2022, the Trust Fund paid out between $8 
million and $30 million per year to active beneficiaries as a direct 
result of those three bankruptcies. OWCP does not have the ability to 
predict bankruptcies with certainty, as explained elsewhere in this 
preamble as a rationale for proposing to eliminate the financial 
scoring process. Nevertheless, given the fact that $865 million in 
projected liabilities has thus far not resulted in more than $30 
million in disbursements to active beneficiaries per year, OWCP 
predicts that the share of benefits paid from this additional $720 
million in securities on deposit will not exceed $30 million in any 
given year.
    Furthermore, OWCP estimates ranges from approximately $14 million 
to $86 million on an annual basis, with a mid-range estimate of $50 
million. In Table 2 above, the minimum and maximum estimated costs of 
change in securities are based on 2 percent and 12 percent, 
respectively, of the total change in secured position for each 
operator. OWCP used an annual premium ranging from 2 percent to 12 
percent of the additional security based on a review of public data 
from several different surety companies. OWCP used estimates for surety 
bonds because that is both the most widely used option among currently 
self-insured operators and likely to be the most cost-effective option.
    The combined opportunity cost on the current self-insurance 
operators is less than 0.1 percent of aggregate average annual 
revenues. Even for the operator facing the largest increase as a 
portion of revenues (Company 1 in Table 2), the expected impact is less 
than 1 percent of average annual revenues. The impact on the coal 
industry overall is smaller than that of the self-insured operator 
group because there is no impact (0.0 percent) on commercially insured 
operators.
2. Other Considerations
    The Department considered alternative options and methods before 
proposing these changes to the self-insurance program. Specifically, 
the Department considered imposing a 100 percent security requirement 
(20 points lower than the proposed rule) or a 140 percent security 
requirement (20 points greater than the proposed rule). These 
alternative requirements were subjectively selected for the purpose of 
sensitivity testing. In both cases the overall impact remains below the 
aggregate 1 percent of revenue thresholds.
    After considering these alternatives, the Department determined 
that the 120 percent security requirement is more cost-effective than 
the 100 percent or 140 percent requirements. Relative to the 
hypothetical 100 percent requirement, the 120 percent requirement 
better protects the Trust Fund because if an operator's actuarial 
estimates prove too low, any liabilities not covered by the operator's 
securities would ultimately transfer to the Trust Fund. Even when 
operators use OWCP's mandated actuarial assumptions, the operator's 
actuarial report will reflect, ultimately, a best estimate of the 
operator's existing and future liabilities. Insofar as any projection 
of future events is inherently fallible, an operator's actual 
liabilities could turn out to be greater than its earlier estimates. 
Indeed, prior operator

[[Page 3360]]

bankruptcies have demonstrated that an operator's actual black lung 
liabilities can far exceed their prior actuarially projected 
liabilities. See U.S. Government Accountability Office, Federal Black 
Lung Benefits Program: Improved Oversight of Coal Mine Operator 
Insurance is Needed, at 13 (Feb. 2020), available at https://www.gao.gov/products/gao-20-21 (noting that the estimated transfer in 
benefit liabilities to the Trust Fund pursuant to three bankruptcies 
went from $325 million in 2019 to $865 million in 2020). This approach 
is also consistent with the practices of some state workers' 
compensation programs, as described in more detail in the Section-by-
Section Explanation. See, e.g., Minn. Stat. section 79A.04, subd. 2 
(setting 110 percent security deposit for self-insurance); Tenn. Comp. 
R. & Regs. 0780-01-83-.05(2) (setting 125 percent security deposit).
    The hypothetical 140 percent requirement, by contrast, proved too 
onerous. As reflected in Table 2B below, although the overall impact of 
the 140 percent requirement remained below the aggregate 1 percent of 
revenue thresholds, it did have an impact on at least one operator in 
excess of the 1 percent of revenue threshold.
    OWCP also considered not proposing any changes, thereby maintaining 
the current existing security levels. As with the alternative of 
requiring 100 percent for all operators, this approach would not 
adequately protect the Trust Fund and would maintain the challenges and 
administrative burden of the financial scoring model described earlier 
in this preamble. That model was not able to consistently predict which 
operators were at risk of experiencing financial difficulties, and it 
imposed significant burdens on OWCP to continuously monitor the 
financial health of individual operators on a quarterly basis. OWCP 
therefore considered, but ultimately rejected, maintaining the 
financial scoring model.
    In light of all of these considerations, the Department has 
preliminarily determined that setting a security requirement as a 
single percentage of projected black lung liabilities, regardless of 
assessments of financial health, and setting that percentage at 120 
percent strikes the right balance between adequately protecting the 
Trust Fund and accommodating operators' interests. OWCP seeks comment 
on this preliminary determination.

Table 2A: Estimated Annual Costs of Increased Security Deposit at 100 
Percent
[GRAPHIC] [TIFF OMITTED] TP19JA23.003


[[Page 3361]]



Table 2B: Estimated Annual Costs of Increased Security Deposit at 140 
Percent
[GRAPHIC] [TIFF OMITTED] TP19JA23.004

C. Regulatory Flexibility Act and Executive Order 13272 (Proper 
Consideration of Small Entities in Agency Rulemaking)

    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601 et seq., 
requires an agency to prepare a regulatory flexibility analysis when it 
proposes regulations that will have ``a significant economic impact on 
a substantial number of small entities'' or to certify that the 
proposed regulations will have no such impact, and to make the analysis 
or certification available for public comment.
    The Department has determined that a regulatory flexibility 
analysis under the RFA is not required for this rulemaking. For the 
mining industry, SBA uses three levels of employee counts to define 
small mining operations:

NAICS 212111 Bituminous Coal and Lignite Surface Mining--1,250 
employees
NAICS 212112 Bituminous Coal Underground Mining--1,500 employees
NAICS 212113 Anthracite Mining--250 employees

    According to the SBA criteria, 6 of the 16 self-insured operators, 
or 38 percent, are considered small firms. Under this proposed rule, 
the combined impact on these 6 operators would be 0.2 percent of annual 
revenues, with a range from 0.1 percent to 0.4 percent. Again, these 
impacts are very small, and for that reason the proposed rule is not 
considered to have a significant economic impact on a substantial 
number of small operators. The overall impact on the large operators is 
less than 0.1 percent of annual revenues.\7\
---------------------------------------------------------------------------

    \7\ The RFA does not define ``significant'' or ``substantial.'' 
5 U.S.C. 601. It is widely accepted, however, that ``[t]he agency is 
in the best position to gauge the small entity impacts of its 
regulations.'' SBA Office of Advocacy, ``A Guide for Government 
Agencies: How to Comply with the Regulatory Flexibility Act,'' at 18 
(August 2017), available at https://cdn.advocacy.sba.gov/wp-content/uploads/2019/06/21110349/How-to-Comply-with-the-RFA.pdf. One measure 
for determining whether an economic impact is ``significant'' is the 
percentage of revenue affected. For this rule, the Department used 
as a standard of significant economic impact whether the costs for a 
small entity equal or exceed 3 percent of the entity's annual 
revenue.
    The Department has used the threshold of 3 percent of revenues 
for the definition of significant economic impact in a number of 
recent rulemakings. See, e.g., Wage and Hour Division, Establishing 
a Minimum Wage for Contractors, Notice of Proposed Rulemaking, 79 FR 
34568, 34603 (June 17, 2014); Office of Federal Contract Compliance 
Programs, Government Contractors, Requirement To Report Summary Data 
on Employee Compensation, Notice of Proposed Rulemaking, 79 FR 
46562, 46591 (Aug. 8, 2014). The 3 percent standard is also 
consistent with the standards utilized by various other Federal 
agencies in conducting their regulatory flexibility analyses. See, 
e.g., Department of Health and Human Services Centers for Medicare & 
Medicaid Services, ``Medicare and Medicaid Programs; Regulatory 
Provisions To Promote Program Efficiency, Transparency, and Burden 
Reduction; Part II; Final Rule,'' 79 FR 27105, 27151 (May 12, 2014).
---------------------------------------------------------------------------

    Details of the factual basis for economic significance are provided 
in the Industry Profile and Analysis section of this report. Tables 3A 
and 3B show the impact on small and large self-insured operators.

[[Page 3362]]

Table 3A: Small Self-Insured Coal Mine Operators
[GRAPHIC] [TIFF OMITTED] TP19JA23.005

Table 3B: Large Self-Insured Coal Mine Operators
[GRAPHIC] [TIFF OMITTED] TP19JA23.006

    Based on these facts, the Department certifies that this proposed 
rule will not, if promulgated, have a significant economic impact on a 
substantial number of small entities. Thus, an initial regulatory 
flexibility analysis is not required. The Department, however, invites 
comments from members of the public who believe the proposed rule would 
have a significant economic impact on a substantial number of small 
coal mine operators. The Department has provided the Chief Counsel for 
Advocacy of the Small Business Administration with a copy of this 
certification. See 5 U.S.C. 605.
Industry Profile and Analysis
Types of Operations
    The United States coal mine industry consists of hundreds of mines 
controlled by hundreds of operators. Coal mine operators vary in size 
from owners of multiple mines to operators of single mines. The two 
main categories of coal mining operations are surface and underground, 
but many operators are also involved in other coal-related enterprises, 
including steel production, mining technology and support services, 
petroleum products, other mineral mining operations, and energy 
generation. Coal mining is the only focus of some operators, while for 
others it is only incidental to their main enterprise. For purposes of 
this analysis, operators engaged in surface mining or with multiple 
streams of revenue were classified as Surface operations (NAICS = 
212111). Other operators were classified as Underground (NAICS = 
212112) or Anthracite (NAICS = 212113) depending on their main source 
of revenues. The SBA classification of small entities was applied 
according to the operator's NAICS code type of operations.
Revenues Versus Coal Production
    Typically, coal operators are analyzed on the basis of measures 
such as coal production, coal reserves, and mine productivity. Among 
self-insured operators, there are differences in the proportion of coal 
mining operations covered by self-insurance, and the proportion of 
operators' total operations that are mining related. To determine the 
impact of the rule change, total company revenues were used, because an 
individual operator could have multiple revenue streams available to 
support their workers' compensation costs. As noted, 38 percent of the 
self-insured operators are classified as ``small'' using employee 
counts, under the SBA's definitions. However, 50 percent are classified 
as ``major'' coal producers based on coal production. The ``major'' 
classification is based on the US Energy Information Administration 
(``EIA'') criterion--of producing more than 5 million short tons of 
coal per year.

[[Page 3363]]

Table 4: Coal Production by Operator
[GRAPHIC] [TIFF OMITTED] TP19JA23.007

D. Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531 
et seq., directs agencies to assess the effects of Federal regulatory 
actions on state, local, and tribal governments, and the private 
sector, ``other than to the extent that such regulations incorporate 
requirements specifically set forth in law.'' The proposed rule does 
not include any Federal mandate that may result in increased 
expenditures by state, local, or tribal Governments, or increase 
expenditures by the private sector by more than $100 million, and 
therefore is not covered by the Unfunded Mandates Reform Act.

E. Executive Order 13132 (Federalism)

    The Department has reviewed this proposed rule in accordance with 
Executive Order 13132 regarding federalism and has determined that it 
does not have ``federalism implications.'' E.O. 13132, 64 FR 43255 
(Aug. 4, 1999). The proposed rule will not ``have substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government'' if 
promulgated as a final rule. Id.

F. Executive Order 12988 (Civil Justice Reform)

    The proposed rule meets the applicable standards in Sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden.

G. Congressional Review Act

    The proposed rule is not a ``major rule'' as defined in the 
Congressional Review Act, 5 U.S.C. 801 et seq. If promulgated as a 
final rule, this rule will not result in: an annual effect on the 
economy of $100 million or more; a major increase in costs or prices 
for consumers, individual industries, Federal, state, or local 
Government agencies, or geographic regions; or significant adverse 
effects on competition, employment, investment, productivity, 
innovation, or on the ability of United States-based enterprises to 
compete with foreign-based enterprises in domestic and export markets.

List of Subjects in 20 CFR Part 726

    Administrative practice and procedure, Black lung benefits, Coal 
miners, Mines, Penalties.
    For the reasons set forth in the preamble, the Department of Labor 
proposes to amend 20 CFR part 726 as follows:

PART 726--BLACK LUNG BENEFITS; REQUIREMENTS FOR COAL MINE 
OPERATOR'S INSURANCE

0
1. The authority citation for part 726 continues to read as follows:

    Authority:  5 U.S.C. 301; 30 U.S.C. 901 et seq., 902(f), 925, 
932, 933, 934, 936; 33 U.S.C. 901 et seq.; 28 U.S.C. 2461 note 
(Federal Civil Penalties Inflation Adjustment Act of 1990 (as 
amended by the Federal Civil Penalties Inflation Adjustment Act 
Improvements Act of 2015)); Pub. L. 114-74 at sec. 701; 
Reorganization Plan No. 6 of 1950, 15 FR 3174; Secretary's Order 10-
2009, 74 FR 58834.
0
2. For the reasons set forth in the preamble, revise Subpart B as 
follows:

Subpart B--Authorization of Self-Insurers

Sec.
726.101 Who May be Authorized to Self-Insure.
726.102 Application for Authority to Become a Self-Insurer; How 
Filed; Information to be Submitted.
726.103 Application for Authority to Self-Insure; Effect of 
Regulations Contained in this Part.
726.104 Action by OWCP upon Application of Operator.
726.105 Fixing the Amount of Security.
726.106 Type of Security.

[[Page 3364]]

726.107 How Negotiable Securities Are Handled.
726.108 Withdrawal of Securities.
726.109 Increase in the Amount of Security.
726.110 Filing of Agreement and Undertaking.
726.111 Notice of Authorization to Self-Insure.
726.112 Reports Required of Self-Insurer; Examination of Accounts of 
Self-Insurer.
726.113 Disclosure of Confidential Information.
726.114 Authorization and Reauthorization Timeframes.
726.115 Revocation of Authorization to Self-Insure.
726.116 Appeal Process.


Sec.  726.101   Who May be Authorized to Self-Insure.

    (a) Pursuant to section 423 of part C of title IV of the Act, 
authorization to self-insure against liability incurred by coal mine 
operators on account of the total disability or death of miners due to 
pneumoconiosis may be granted or denied in the discretion of the 
Secretary. The provisions of this subpart describe the minimum 
requirements established by the Secretary for determining whether any 
particular coal mine operator may be authorized as a self-insurer.
    (b) The minimum requirements which must be met by any operator 
seeking authorization to self-insure are as follows:
    (1) The operator must demonstrate the administrative capacity to 
fully service such claims as may be filed against it; and,
    (2) Such operator must obtain security, in a form approved by OWCP 
(see Sec.  726.104) and in an amount to be determined by OWCP (see 
Sec.  726.105).
    (c) No application will be approved until OWCP receives security in 
the amount and in the form determined by OWCP. If the applicant is 
seeking authorization to self-insure for the first time, it is not 
authorized to self-insure while its application is under review.
    (d) No operator whose application for authorization to self-insure 
or to renew authorization to self-insure may reapply until 12 months 
after a final decision denying such application.


Sec.  726.102  Application for Authority to Become a Self-Insurer; How 
Filed; Information to be Submitted.

    (a) How filed. An application for authorization to self-insure or 
to renew authorization to self-insure must be submitted electronically 
in the manner prescribed by OWCP. Such application must be signed by 
the applicant and if the applicant is not an individual, by the 
principal officer of the applicant duly authorized to make such 
application.
    (b) Information to be submitted. Each application for authority to 
self-insure or to renew authorization to self-insure must contain the 
following:
    (1) Any application forms required by OWCP.
    (2) An actuarial report using OWCP-mandated assumptions, unless the 
applicant has submitted an actuarial report within the preceding 3 
years. An applicant must submit a new actuarial report every 3 years. 
The operator may submit an additional actuarial report using alternate 
assumptions. Such additional report must be accompanied by a statement 
from the applicant explaining why it believes the alternative 
assumptions are appropriate.
    (3) A statement of the employer's payroll report for each of the 
preceding 3 years.
    (4) A statement of the average number of employees engaged in 
employment within the purview of the Act for each of the preceding 3 
years.
    (5) A list of the mine or mines to be covered by any particular 
self-insurance agreement. Each such mine or mines listed shall be 
described by name and reference shall be made to the Federal 
Identification Number assigned such mine by the Bureau of Mines, U.S. 
Department of the Interior.
    (6) A statement demonstrating the applicant's administrative 
capacity to provide or procure adequate servicing for a claim including 
both medical and dollar claims.
    (7) In addition to the aforementioned, OWCP may in its discretion, 
require the applicant to submit such further information or such 
evidence as OWCP may deem necessary.
    (c) Who may file. An application for authorization to self-insure 
(including an application to renew authority to self-insure) may be 
filed by any parent or subsidiary corporation, partner or partnership, 
party to a joint venture or joint venture, individual, or other 
business entity which may be determined liable for the payment of black 
lung benefits under part C of title IV of the Act, regardless of 
whether such applicant is directly engaged in the business of mining 
coal. However, in each case for which authorization to self-insure is 
granted, the agreement and undertaking filed pursuant to Sec.  726.110 
and the security deposit must be respectively filed by and deposited in 
the name of the applicant only.


Sec.  726.103   Application for Authority to Self-Insure; Effect of 
Regulations Contained in this Part.

    As appropriate, each of the regulations, interpretations and 
requirements contained in this part 726 including those described in 
subpart C of this part are binding upon each applicant under this 
subpart, and the applicant's consent to be bound by all requirements of 
the said regulations are deemed to be included in and a part of the 
application, as fully as though written therein.


Sec.  726.104   Action by OWCP upon Application of Operator.

    (a) Within 30 days after determining that an applicant's 
application for authorization to self-insure or to renew authorization 
to self-insure is complete, OWCP will issue a written determination 
either denying the application or determining the amount of security 
which must be given by the applicant to guarantee the payment of 
benefits and the discharge of all other obligations which may be 
required of such applicant under the Act. OWCP may extend the 30-day 
deadline if it determines that additional evidence is needed or that 
the applicant's evidence is not in compliance with OWCP's requirements.
    (b) The applicant will thereafter be notified that they may give 
security in the amount fixed by OWCP (see Sec.  726.105):
    (1) In the form of an indemnity bond with sureties satisfactory to 
OWCP;
    (2) By a deposit of negotiable securities with a Federal Reserve 
Bank in compliance with Sec. Sec.  726.106(c) and 726.107; or
    (3) In the form of a letter of credit issued by a financial 
institution satisfactory to OWCP (except that a letter of credit is not 
sufficient by itself to satisfy a self-insurer's obligations under this 
part).
    (c) If the applicant is receiving authorization to self-insure for 
the first time, OWCP will notify the applicant that:
    (1) its authorization to self-insure is contingent upon submitting 
the required security and completed agreement and undertaking; and
    (2) the applicant's authorization to self-insure is effective for 
12 months from the date such security and completed agreement and 
undertaking are received by OWCP.
    (d) If OWCP renews the applicant's authorization to self-insure, 
OWCP will notify the applicant that:
    (1) If there are no changes in the required security amount, the 
applicant's authorization to self-insure is granted and effective for 
12 months from the date the applicant's completed agreement and 
undertaking is received by OWCP or
    (2) If changes are needed to the existing security amount, the 
applicant's

[[Page 3365]]

authorization to self-insure is not granted until the applicant has 
submitted the required security and signed agreement and undertaking. 
The applicant's authorization to self-insure will be effective for 12 
months from the date such updated security and completed agreement and 
undertaking are received by OWCP.
    (e) Any applicant who cannot meet the security deposit requirements 
imposed by OWCP should proceed to obtain a commercial policy or 
contract of insurance and submit proof of such coverage within 30 days 
after OWCP notifies the applicant of its decision. Any applicant for 
authorization to self-insure whose application has been denied or who 
believes that the security deposit requirements imposed by OWCP are 
excessive may appeal such determination in the manner set forth in 
Sec.  726.116.


Sec.  726.105  Fixing the Amount of Security.

    Any operator approved to self-insure must submit 120 percent of the 
actuarial estimated liabilities (all present and future liabilities), 
as determined by OWCP based on the actuarial report or reports 
submitted with the operator's application or on file with OWCP, other 
information submitted with the operator's application, or any other 
materials or information that OWCP deems relevant.


Sec.  726.106  Type of Security.

    (a) OWCP will determine the type or types of security which an 
applicant must or may procure. An operator may not provide any form of 
security other than those provided for in Sec.  726.104(b).
    (b) In the event the indemnity bond option is selected, the bond 
must be in such form and contain such provisions as OWCP prescribes: 
Provided that only corporations may act as sureties on such indemnity 
bonds. In each case in which the surety on any such bond is a surety 
company, such company must be one approved by the U.S. Treasury 
Department under the laws of the United States and the applicable rules 
and regulations governing bonding companies (see Department of 
Treasury's Circular-570).
    (c) If the form of negotiable securities is selected, the operator 
must deposit the amount fixed by OWCP in any negotiable securities 
acceptable as security for the deposit of public moneys of the United 
States under regulations issued by the Secretary of the Treasury. (See 
31 CFR part 225.) The approval, valuation, acceptance, and custody of 
such securities is hereby committed to the several Federal Reserve 
Banks and the Treasurer of the United States.


Sec.  726.107  How Negotiable Securities Are Handled.

    (a) Deposits of securities provided for by the regulations in this 
part must be made with any Federal Reserve bank or any branch of a 
Federal Reserve bank designated by OWCP, or the Treasurer of the United 
States, and must be held in the name of the Department of Labor.
    (b) If the self-insurer defaults on its obligations under the Act, 
OWCP has the power, in its discretion, to:
    (1) collect the interest as it may become due;
    (2) sell any or all of the securities; and
    (3) apply the collected interest or proceeds from the sale of 
securities to the payment of any benefits for which the self-insurer 
may be liable.
    (c) If a self-insurer with deposits of securities has neither 
defaulted nor appealed from a determination made by OWCP under Sec.  
726.104, OWCP may allow the self-insurer to collect interest on the 
security deposit.


Sec.  726.108  Withdrawal of Securities.

    (a) Withdrawal of any form of security (indemnity bonds, negotiable 
securities, and/or letters of credit) is prohibited except upon express 
written authorization by OWCP.
    (b) If a self-insurer wishes to withdraw securities, it must submit 
a written request, and must submit either an updated actuarial report 
using OWCP-mandated actuarial assumptions to support why the existing 
security levels are no longer applicable or replacement securities in 
the amount and form approved by OWCP. If OWCP approves the operator's 
request to withdraw and replace its securities, the operator must 
provide the replacement securities before it withdraws its existing 
securities.


Sec.  726.109   Increase in the Amount of Security.

    OWCP may, at its discretion, increase the amount of security a 
self-insurer is required to post whenever it determines that the amount 
of security on deposit is insufficient to secure the payment of 
benefits and medical expenses under the Act.


Sec.  726.110  Filing of Agreement and Undertaking.

    (a) In addition to the requirement that adequate security be 
procured as set forth in this subpart, the applicant for the 
authorization to self-insure must, as a condition precedent to 
receiving such authorization, execute and file with OWCP an agreement 
and undertaking in a form prescribed and provided by OWCP in which the 
applicant must agree:
    (1) To pay when due, as required by the Act, all benefits payable 
on account of total disability or death of any of its employee-miners;
    (2) To furnish medical, surgical, hospital, and other attendance, 
treatment, and care as required by the Act;
    (3) To provide security in a form approved by OWCP (see Sec.  
726.104) and in an amount established by OWCP (see Sec.  726.105);
    (4) To authorize OWCP to sell any negotiable securities so 
deposited or any part thereof, and to pay from the proceeds thereof 
such benefits, medical, and other expenses and any accrued penalties 
imposed by law as OWCP may find to be due and payable.
    (b) When an applicant has provided the requisite security, it must 
submit to OWCP a completed agreement and undertaking, together with 
satisfactory proof that its obligations and liabilities under the Act 
have been secured.
    (c) Any operator authorized to self-insure must notify OWCP of any 
changes to its business structure, including the purchase, sale, or 
lease of any coal mining operations, that could affect the operator's 
liability for benefits under the Act. The operator must provide such 
notification to OWCP within 30 days of such change. In all events, 
however, an operator's liability following a change or sale is governed 
by Subpart G of these regulations, 20 CFR 725.490-725.497.
    (d) OWCP may, at its discretion, require an operator to provide any 
information that may affect the operator's liability for benefits under 
the Act.


Sec.  726.111  Notice of Authorization to Self-Insure.

    Upon receipt of a completed agreement and undertaking and 
satisfactory proof that adequate security has been provided, OWCP will 
notify an applicant for authorization to self-insure in writing that it 
is authorized to self-insure to meet the obligations imposed upon such 
operator by section 415 and part C of title IV of the Act. OWCP will 
also notify the applicant of the date on which its authorization is 
effective, the date on which such authorization will expire, and the 
date by which the applicant must apply to renew such authorization if 
the applicant intends to continue self-insuring its liabilities under 
the Act.

[[Page 3366]]

Sec.  726.112   Reports Required of Self-Insurer; Examination of 
Accounts of Self-Insurer.

    (a) Each operator who has been authorized to self-insure under this 
part must submit to OWCP reports containing such information as OWCP 
may from time to time require or prescribe.
    (b) Whenever it deems it to be necessary, OWCP may inspect or 
examine the books of account, records, and other papers of a self-
insurer for the purpose of verifying any financial statement submitted 
to OWCP by the self-insurer or verifying any information furnished to 
OWCP in any report required by this section, or any other section of 
the regulations in this part, and such self-insurer must permit OWCP or 
its duly authorized representative to make such an inspection or 
examination as OWCP may require. In lieu of this requirement OWCP may 
in its discretion accept an adequate report of a certified public 
accountant.
    (c) Failure to submit or make available any report or information 
requested by OWCP from an authorized self-insurer pursuant to this 
section may, in appropriate circumstances, result in a revocation of 
the authorization to self-insure.


Sec.  726.113  Disclosure of Confidential Information.

    Any financial information or records, or other information relating 
to the business of an authorized self-insurer or applicant for the 
authorization of self-insurance obtained by OWCP is exempt from public 
disclosure to the extent provided in 5 U.S.C. 552(b) and the applicable 
regulations of the Department of Labor promulgated thereunder. (See 29 
CFR part 70.)


Sec.  726.114   Authorization and Reauthorization Timeframes.

    (a) No initial or renewed authorization to self-insure may be 
granted for a period in excess of 12 months unless OWCP determines that 
extenuating circumstances exist to allow an extension.
    (b) If an applicant is seeking to renew its authority to self-
insure, the applicant must file its application no later than 90 days 
before its existing authorization period ends.


Sec.  726.115   Revocation of Authorization to Self-Insure.

    OWCP may suspend or revoke the authorization of any self-insurer 
for good cause, including but not limited to:
    (a) failure by a self-insurer to comply with any provision or 
requirement of law or of the regulations in this part, or with any 
lawful order or request made by OWCP;
    (b) the failure or insolvency of the surety on its indemnity bond, 
if such bond is used as security, or any other financial institution 
holding any form of security provided by an operator; or
    (c) impairment of financial responsibility of such self-insurer.


Sec.  726.116  Appeal Process.

    (a) How to appeal. Any applicant that wishes to appeal OWCP's 
determination on an application must submit a written request for 
review to OWCP in the form and manner prescribed by OWCP within 30 days 
of such determination. This deadline may not be extended.
    (b) What to submit. Within 30 days after filing written request for 
review, the applicant must submit any evidence and/or briefing on which 
it intends to rely. OWCP may, at its discretion, extend this deadline 
at the applicant's request upon a showing of good cause.
    (c) Conferences.
    (1) The applicant may request an informal conference to present its 
position. Such request must be made in writing when the applicant 
submits evidence and briefing in support of its request for review.
    (2) If the applicant requests a conference, OWCP will hold one with 
the applicant's representatives.
    (3) If the applicant does not request a conference, OWCP may either 
decide the appeal on the record or, at its discretion, schedule a 
conference on its own initiative.
    (4) The conference will be limited to the issues identified in the 
applicant's written materials.
    (d) OWCP's review. OWCP will review the previous determination in 
light of any new evidence or additional information submitted and issue 
a supplemental determination.
    (e) Further appeals.
    (1) Any applicant aggrieved by a supplemental determination made by 
OWCP may request further review by the Director of OWCP within 30 days 
of such supplemental determination.
    (2) The Director of OWCP will review the supplemental decision and 
evidence of record only. The applicant may not submit new evidence or 
arguments to the Director of OWCP.
    (3) The Director of OWCP will issue a final agency decision.

    Signed at Washington, DC.
Christopher J. Godfrey,
Director, Office of Workers' Compensation Programs.
[FR Doc. 2023-00534 Filed 1-18-23; 8:45 am]
BILLING CODE 4510-CK-P