Current through Reg. 50, No. 13; March 28, 2025
(a)
Amount of bond. The performance bond shall be in an amount determined by the
Commission as provided in §
12.304 of this title (relating to
Determination of Bond Amount).
(b)
Payee. The performance bond shall be payable to the Commission.
(c) Performance requirement. The performance
bond shall be conditioned upon faithful performance of all of the requirements
of the Act, this chapter (relating to Coal Mining Regulations), and the
conditions of the permit.
(d) Time
period of bond. The duration of the bond shall be for the time period provided
in §
12.306 of this title (relating to
Period of Liability).
(e) Bonding
bank and surety company requirements.
(1) The
bond shall provide a mechanism for a bond or surety company to give prompt
notice to the Commission and the permittee of any action filed alleging the
insolvency or bankruptcy of the surety company or the bank or alleging any
violation which would result in suspension or revocation of the surety or
bank's charter or license to do business; and
(2) Upon the incapacity of a bank or surety
company by reason of bankruptcy, insolvency or suspension, or revocation of its
charter or license, the permittee shall be deemed to be without bond coverage.
The Commission shall issue a notice to any operator who is without bond
coverage and shall specify a reasonable period to replace bond coverage, not to
exceed 90 days.
(f)
Surety bonds. Surety bonds shall be subject to the following conditions:
(1) the bond shall be executed by the
operator and a corporate surety licensed to do business in the state where such
operation is located; and
(2)
surety bonds shall be non-cancellable during their term.
(g) Letters of credit. Letters of credit
shall be subject to the following conditions:
(1) the letter may only be issued by a bank
organized or authorized to do business in the U.S.;
(2) letters of credit must be irrevocable
during their terms. A letter of credit used as security in areas requiring
continuous bond coverage shall be forfeited and shall be collected by the
Commission if not replaced by another suitable bond or letter of credit at
least 30 days before its expiration date; and
(3) the letter must be payable to the
Commission in part or in full upon demand and receipt from the Commission of a
notice of forfeiture issued in accordance with §§12.314 through
12.317 of this title (relating to Performance Bond Forfeitures Criteria and
Procedures).
(h)
Collateral Bonds. Real and personal property posted as a collateral bond shall
meet the following criteria:
(1) the
applicant shall grant the Commission a mortgage or perfected first-lien
security interest in real or personal property with a right to sell or
otherwise dispose of the property in the event of forfeiture under
§§12.314 through 12.317 of this title (relating to Performance Bond
Forfeitures Criteria and Procedures);
(2) in order for the Commission to evaluate
the adequacy of the property offered to satisfy this requirement, the applicant
shall submit a schedule of the real or personal property which shall be pledged
to secure the obligations under the indemnity agreement. The list shall
include:
(A) a description of the
property;
(B) the fair market value
as determined by an appraisal conducted by an appraiser authorized by the
Commission; and
(C) proof of
possession and title to the real property; and
(3) the property may include land which is
part of the permit area; however, land pledged as security shall not be mined
under any permit.
(i)
Escrow bonding.
(1) The Commission may
authorize the operator to supplement the bond through the establishment of an
escrow account deposited in one or more accounts payable on demand only to the
Commission or deposited with the Commission directly. The total bond, including
the escrow amount, shall not be less than the amount required under terms of
performance bonds, including any adjustments, less amounts released in
accordance with release of performance bonds.
(2) Interest paid on an escrow account shall
be retained in the escrow account and applied to the bond value of the escrow
account unless the Commission has approved that the interest be paid to the
operator.
(3) Certificates of
deposit may be substituted for escrow accounts upon approval of the
Commission.
(j)
Self-bonding.
(1) Definitions. For the
purposes of this subsection only:
(A) Current
assets--Cash or other assets or resources which are reasonably expected to be
converted to cash or sold or consumed within one year or within the normal
operating cycle of the business.
(B) Current liabilities--Obligations which
are reasonably expected to be paid or liquidated within one year or within the
normal operating cycle of the business.
(C) Fixed assets--Plants and equipment, but
does not include land or coal in place.
(D) Governmental entity--Municipal
corporation, political subdivision, or public agency of the State of
Texas.
(E) Liabilities--Obligations
to transfer assets or provide services to other entities in the future as a
result of past transactions.
(F)
Net worth--Total assets minus total liabilities and is equivalent to owner's
equity.
(G) Self-bond--An indemnity
agreement in a sum certain executed by a qualified applicant, or by an
applicant and its qualified third-party guarantor, and made payable to the
Commission, with or without separate surety.
(H) SIC code--The standard industrial
classification used by Dun and Bradstreet Corporation to identify various
industry groups such as electric utility companies. Data identified by SIC code
are to be the current data for the last annual period compiled and reported by
Dun and Bradstreet Corporation.
(I)
Tangible net worth--Net worth minus intangibles such as goodwill and rights to
patents or royalties.
(2) Requirements for a business and
governmental entities. The Commission may accept a self bond from an applicant
that is a business or governmental entity if all of the following conditions
are met by the applicant:
(A) the applicant
designates a suitable agent to receive service of process in this
state;
(B) the applicant has been
in continuous operation for a period of not less than 5 years immediately
preceding the date of application .
(i) The
Commission may allow a joint venture or syndicate with less than 5 years of
continuous operation to qualify under this requirement, if each member of the
joint venture or syndicate has been in continuous operation for at least 5
years immediately preceding the date of application.
(ii) When calculating the period of
continuous operation, the Commission may exclude past periods of interruption
of the operation of the entity that were beyond the applicant's control and do
not affect the applicant's likelihood of remaining in business during the
proposed surface coal mining and reclamation operations;
(C) the applicant submits financial
information in sufficient detail to show that the applicant meets one or more
of the following criteria:
(i) the applicant
has a current rating for its most recent bond issuance of "A" or higher as
issued by either Moody's Investor Service or Standard and Poor's
Corporation;
(ii) the application
has a tangible net worth of at least $10 million, a ratio of total liabilities
to net worth of 2.5 times or less, and a ratio of current assets to current
liabilities of 1.2 times or greater; or
(iii) the applicant's fixed assets in the
United States total at least $20 million, and the applicant has a ratio of
total liabilities to net worth of 2.5 times or less, and a ratio of current
assets to current liabilities of 1.2 times or greater; or
(iv) the applicant has an investment-grade
rating for its most recent bond issuance of "Baa3" or higher from Moody's
Investor Service and "BBB-" or higher from Standard and Poor's Corporation, and
meets the requirements of either subclause (I) or (II) of this clause. If the
applicant or the guarantor of a self-bond receives an investment rating or
notification of an investment rating by Moody's Investor Service or Standard
and Poor's Corporation of any of its bonds lower than the rating included in
the application as a bond approval criterion existing at time of Commission
approval of its application for self-bonding, the guarantor and permittee
receiving such rating shall promptly notify the Commission, which shall
immediately hold a hearing to consider and determine the adequacy of the
guarantor's self-bond. The limitation contained in subclause (II)(-c-) of this
clause applies only to applicants or guarantors qualifying pursuant to
subclause (II) of this clause, and does not affect the limitation set out in
paragraph (4)(A) of this subsection for applicants or guarantors seeking
acceptance of a self-bond pursuant to clauses (i) - (iii) or (iv)(I) of this
subparagraph.
(I) The applicant:
(-a-) has a tangible net worth of at least
$10 million and fixed assets in the United States totaling at least $20
million; and
(-b-) has a ratio of
total liabilities to net worth of 2.5 or less; or a ratio of total liabilities
to net worth that is equal to or less than the industry median reported by Dun
and Bradstreet Corporation for the applicant's primary SIC code; and
(-c-) has a ratio of current assets to
current liabilities that is equal to or greater than the industry median
reported by Dun and Bradstreet Corporation for the applicant's primary SIC
code; or the applicant has a current credit rating of "4A2" or higher from Dun
and Bradstreet Corporation; or
(II) The applicant:
(-a-) has a net worth of at least $100
million and fixed assets in the United States totaling at least $200 million;
and
(-b-) has issued and currently
has outstanding securities pursuant to the provisions of the Securities Act of
1933 and is subject to the periodic financial reporting requirements
established by the Securities and Exchange Act of 1934; and
(-c-) has a total amount of outstanding and
proposed self-bonds for surface coal mining and reclamation operations not
exceeding 16 2/3 percent of the applicant's net worth in the United States;
and
(D) the applicant submits:
(i) financial statements for the most
recently completed fiscal year accompanied by a report prepared by an
independent certified public accountant in conformity with generally accepted
accounting principles and containing the accountant's audit opinion or review
opinion of the financial statements with no adverse opinion;
(ii) unaudited financial statements for
completed quarters in the current fiscal year; and
(iii) additional information as may be
requested by the Commission.
(3) Requirements for a third-party guarantee.
The Commission may accept a self-bond from an applicant and the applicant's
qualified third-party guarantor if the guarantor meets the conditions of
paragraph (2)(A), (B), (C) and (D) of this subsection as if it were the
applicant and the applicant meets the conditions of paragraph (2)(A), (B) and
(D) of this subsection. Such a written guarantee shall be referred to as a
"third-party guarantee." The terms of the third-party guarantee shall provide
for the following:
(A) if the applicant fails
to complete the reclamation plan, the guarantor shall do so or the guarantor
shall be liable under the indemnity agreement to provide funds to the
Commission sufficient to complete the reclamation plan, but not to exceed the
bond amount;
(B) the third-party
guarantee shall remain in force unless the guarantor sends notice of
cancellation by certified mail to the applicant and to the Commission at least
90 days in advance of the cancellation date, and the Commission accepts the
cancellation.
(C) the cancellation
may be accepted by the Commission if the applicant obtains suitable replacement
bonding in accordance with §
12.310 of this title (relating to
Replacement of Bonds) before the cancellation date or if the lands for which
the self-bond, or portion thereof, was accepted have not been
disturbed.
(4)
Limitations.
(A) For the Commission to accept
an applicant's self-bond, the total amount of the outstanding and proposed
self-bonds of the applicant for surface coal mining and reclamation operations
shall not exceed 25 percent of the applicant's tangible net worth in the United
States.
(B) For the Commission to
accept a third-party guarantee, the total amount of the guarantor's present and
proposed self-bonds and guaranteed self-bonds for surface coal mining and
reclamation operations shall not exceed 25 percent of the guarantor's tangible
net worth in the United States.
(5) Indemnity agreement. If the Commission
accepts an applicant's self-bond, an indemnity agreement shall be submitted
subject to the following requirements:
(A)
the indemnity agreement shall be executed by all persons and parties who are to
be bound by it, including the third-party guarantor, and shall bind each
jointly and severally;
(B)
applicants applying for a self-bond and third-parties guaranteeing an
applicant's self-bond shall submit an indemnity agreement signed by two
officers who are authorized to bind the applicant and third-party guarantor. A
copy of such authorization shall be provided to the Commission with an
affidavit certifying that such an agreement is valid under all applicable state
and federal laws. Whenever the applicant or third-party guarantor is a
corporation, each respective corporation shall provide a copy of the corporate
authorization demonstrating that the corporation may guarantee the self-bond
and execute the indemnity agreement;
(C) if the applicant is a partnership, joint
venture or syndicate, the agreement shall bind each partner or party who has a
beneficial interest, directly or indirectly, in the applicant;
(D) pursuant to §
12.314 of this title (relating to
Forfeiture of Bonds), the applicant or third-party guarantor shall be required
to complete the approved reclamation plan for the lands in default or to pay to
the Commission an amount necessary to complete the approved reclamation plan,
not to exceed the bond amount; and
(E) when under forfeiture and when necessary
to enforce the provisions of the Act and these regulations, the indemnity
agreement shall be referred by the Commission to the Attorney General to obtain
a judgement as provided by law;
(6) Current financial information. An
applicant that is self-bonded under this section shall submit to the Commission
an update of the information required under paragraph (2)(C) and (D) of this
subsection within 90 days after the close of each fiscal year following the
issuance of the self-bond or corporate guarantee. When a self-bond is
guaranteed by a third-party guarantor, both the applicant and its third-party
guarantor shall comply with this paragraph.
(7) Substitute bonding. If at any time during
the period when a self-bond is in effect, the financial conditions of the
applicant or the third-party guarantor change so that the criteria of paragraph
(2)(C) and (D) of this subsection are not satisfied, the permittee shall notify
the Commission immediately and shall submit an alternate form of bond in the
same amount as the self-bond. It is the intent of the Commission that
substitute bonds under this paragraph be timely filed in order that they may be
reviewed and acted upon by the Commission within a reasonable time, not to
exceed 90 days, from the date of notification. Should the permittee fail to
post an adequate substitute bond as required by this paragraph, the permittee
shall cease coal extraction and shall immediately begin to conduct reclamation
operations in accordance with the reclamation plan. Mining operations shall not
resume until the Commission has determined that an acceptable bond has been
posted.
(k) Combined
surety/escrow bonding. The Commission may accept a combined surety/escrow
bonding schedule provided that:
(1) a surety
bond payable to the Commission is posted in the amount determined under §
12.304 of this title (relating to
Determination of Bond Amount) for reclamation of each successive
increment;
(2) an interest-bearing
escrow account payable to the Commission with a predetermined deposit amount
and frequency is established;
(3)
the amount of the surety bond shall always be sufficient to cover the
difference between the escrow balance and the total reclamation cost;
(4) the terms and conditions of the escrow
account shall be developed jointly by the operator, surety and Commission.
Deposits to the escrow account by the operator shall be made periodically and
so reported to the Commission. Failure to make deposits on schedule shall be
just cause for action by the Commission; and
(5) a certified escrow account balance
statement shall be provided periodically to the surety and the
Commission.
(l) Persons
with an interest in collateral posted as a bond, and who desire notification of
actions pursuant to the bond, shall request the notification in writing to the
Commission at the time collateral is offered.