Rules & Regulations of the State of Tennessee
Title 0400 - Environment and Conservation
Subtitle 0400-43 - Water Resources (Mineral Test Holes)
Chapter 0400-43-01 - Mineral Test Holes
Section 0400-43-01-.02 - BOND

Universal Citation: TN Comp Rules and Regs 0400-43-01-.02

Current through September 24, 2024

(1) Amount of bond

A bond is required to be in force for a test hole in the name of the owner or operator from the time a drilling permit is granted until the test hole is abandoned in accordance with this chapter. The bond for an individual test hole shall be for the sum of one thousand dollars ($1,000). An individual test hole bond shall be released upon the proper plugging of the test hole and the filing with the Supervisor of a Plug and Abandon Report.

(2) Blanket bond

In lieu of an individual bond, any owner or operator may file with the Supervisor a blanket bond in the sum of ten thousand dollars ($10,000) covering up to twenty-five (25) test holes to be drilled by the principal in the bond with the acceptance and approval by the Supervisor. A blanket bond shall be released upon the proper plugging of all test holes covered by the bond, and the filing of Plug and Abandon Reports with the Supervisor. A surety may notify the Supervisor in writing by registered mail, that the owner or operator is no longer authorized by the surety to obtain permits under said bond. If or when all test holes permitted under said bond have been abandoned in accordance with this chapter, the Supervisor shall release the bond.

(3) Relief of Responsibility

An owner or operator's bond and other responsibilities to a test hole or test holes shall be relieved upon approval by the Supervisor of a successor's application for a bond and the tendering of authorization by the permittee requesting the Supervisor to approve the successor's application.

(4) Execution of bond-exception

Acceptable bond instruments include: a bond or bonds executed by a corporate surety authorized to do business in Tennessee and that is among those listed as acceptable sureties on federal bonds in Circular 570 of the U.S. Department of the Treasury, irrevocable letters of credit, personal bonds supported by certificates of deposit or personal bonds supported by cash or certified check. The wording of all instruments must be identical to the wording furnished by the Department's Division of Financial Responsibility.

(a) Certificates of deposit used to meet the requirements of this rule must meet the following requirements:
1. The certificate of deposit shall be registered as follows, except that the phrase "Corporation XYZ" should be replaced by the name of the owner/operator: "Corporation XYZ and Tennessee Department of Environment and Conservation or Tennessee Department of Environment and Conservation".

2. The institution holding the funds shall be a commercial financial institution regulated by a federal agency or regulated by the Tennessee Department of Financial Institutions.

3. The certificate of deposit shall be automatically annually renewed with the earned interest released to the principal as accrued.

4. The original certificate of deposit or documentation of the deposit approved by the Department's Division of Financial Responsibility shall be submitted to and held by the Department.

5. Accompanying the certificate of deposit or approved documentation shall be a letter from an officer of the issuing financial institution on the institution's letterhead that contains the certificate of deposit number, the name of the owner/operator, the date the certificate of deposit was issued, and the following statement:

"Notwithstanding any contrary term or condition of the above described Certificate of Deposit, [INSERT NAME OF FINANCIAL INSTITUTION] (the "Financial Institution") hereby covenants, warrants and represents that said Certificate of Deposit shall not be subject to any right, charge, security interest, lien or claim of any kind in favor of the Financial Institution. The Financial Institution further agrees that it shall not release the Certificate of Deposit or the proceeds thereof to anyone other than to the Tennessee Department of Environment and Conservation (the "Department") without the written consent of the Department."

(b) Letters of credit used to meet the requirements of this rule must be issued by an institution which has the authority to issue letters of credit and whose letter-of-credit operations are regulated and examined by a federal or state agency.

(5) Notice of noncompliance

If the requirements with respect to proper plugging upon abandonment and submission of all required records and data on a test hole or test holes have not been met within the time limit set by the Department, the Supervisor shall cause a Notice of Noncompliance to be served upon the operator or owner and to the surety, if any, executing the bond filed by said operator or owner. Said Notice shall be mailed by certified mail to the owner or operator's address as set out in the application for a permit, to the agent for the surety, if any, at the agent's address, if known, and to the surety company, if any, at the address provided to the Tennessee Department of Commerce and Insurance for receipt of notices. The Notice shall specify in what respects the operator or owner has failed to comply with this rule or orders of the Department and shall order said operator or owner to comply in accordance therewith within sixty (60) days after service of said Notice. The surety, if any, shall be afforded the opportunity to act on behalf of the operator or owner within the time set forth in the Notice with regard to the proper plugging of the test hole or test holes and submission of required drilling records.

(6) Forfeiture Should the operator or owner, or surety, fail to comply fully with the order of the Notice of Noncompliance within the sixty (60) day requirement, then the bond shall be forfeited to the Department. Where possible, the Department, at its election, may use the monies so forfeited to plug the affected test hole or test holes.

(7) Cancelation of Bond

(a) An owner or operator must provide that their financial assurance mechanism may not cancel, terminate or fail to renew except for failure to pay for such financial instrument. If there is a failure to pay for the financial instrument, the issuing institution may elect to cancel, terminate, or fail to renew the instrument by sending notice by certified mail to the owner or operator and the Department. The cancellation must not be final for one hundred eighty (180) days after the Department's and owner or operator's receipt of cancellation notice. The owner or operator must provide an alternate financial responsibility mechanism within ninety (90) days of receipt of notice of cancellation.

(b) If the owner or operator fails to provide alternate financial assurance and obtain written approval of such assurance from the Department during the ninety (90) days following receipt by both the owner or operator and the Department of a notice of cancellation of this bond, the Supervisor shall collect the full amount of the financial assurance instrument from the financial institution and deposit this amount in a fund within the state treasury reserved for financial assurance cash bonds. If the owner or operator subsequently replaces the financial instrument with an alternate third-party financial instrument and obtains the Supervisor's written approval of such instrument, the amount held as a cash bond will be returned to the owner or operator.

Authority: T.C.A. §§ 4-5-201 et seq. and 60-1-501 et seq.

Disclaimer: These regulations may not be the most recent version. Tennessee may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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