Chapter 14. Performance Bonds
Regulation .01 Bond Requirements.LinkCopy Citation
A.
After an application for a new, revised, or renewed permit to conduct surface coal mining and reclamation operations has been approved, but before the permit is issued, the operator shall file a performance bond with the Bureau, as required by Environment Article, §15-507, Annotated Code of Maryland. The bond covers the entire approved area or an identified increment of land within the approved area upon which the operator shall initiate and conduct surface coal mining and reclamation operations.
B.
The bond shall be payable to the State, shall be on forms provided by the Bureau, and shall be conditioned upon the permittee faithfully performing every requirement of Environment Article, Title 15, Subtitle 5, Annotated Code of Maryland, the Regulatory Program, the permit, and the reclamation plan.
C.
An operator may not disturb surface acreage or extend any underground shafts, tunnels, or operations before receipt of approval from the Bureau of the performance bonds covering the surface acreage to be affected.
D.
Liability on the performance bonds shall cover all surface coal mining and reclamation operations to be conducted within the permit area during the life of the mine. After the amount of the bonds has been determined for the permit area, the operator may either file the entire amount of bond required during the term of the permit, or an incremental bond schedule and the amount of bond required for the first increment in the schedule.
E.
When the operator elects to file the amount of the bond in increments, he shall identify the initial and successive incremental areas for bonding on the permit application map submitted under COMAR 26.20.02. Before issuing the permit, the Bureau shall determine the bond amount required for the initial incremental area and the operator shall file the bond on the initial incremental area of the permit. The operator shall file with the Bureau the required bond amount for succeeding increments before initiating surface coal mining and reclamation operations on the increments.
Regulation .02 Form of Performance Bonds.LinkCopy Citation
In accordance with Environment Article, Title 15, Subtitle 5, Annotated Code of Maryland, the Bureau may accept either:
A.
A surety bond executed by the operator and a corporate surety licensed to do business in the State; or
B.
A collateral bond in one of the following forms:
(1)
A deposit of cash or negotiable bonds of the U.S. Government having a market value equal to the required bond amount,
(2)
A certificate of deposit equal to the required bond, issued by a bank in the State and accompanied by a written agreement of the bank to pay on demand to the State, or
(3)
An irrevocable letter of credit that is equivalent to the required bond, issued by a bank in the State that expressly states that the total sum is guaranteed to be available and payable directly to the State on demand in the event of forfeiture. The irrevocable letter of credit may not expire during the anticipated life of the mining activities and the reclamation period after that.
Regulation .03 Amount of Performance Bonds.LinkCopy Citation
A.
The amount of the performance bonds required for a surface coal mining and reclamation permit shall be the estimated cost to perform the reclamation and restoration work required to achieve compliance with the Regulatory Program, and requirements of the permit, if the work had to be contracted out by the Bureau in the event of forfeiture.
B.
This amount shall be based on, but not limited to:
(1)
The estimated costs submitted by the permittee;
(2)
The additional estimated costs to the Bureau which may arise from applicable public contracting requirements, including the need to bring personnel and equipment to the permit area after its abandonment by the permittee to perform reclamation and restoration work;
(3)
An additional amount based on factors of cost changes during the preceding 5 years for the types of activities associated with the reclamation to be performed; and
(4)
Other cost information that may be required by or available to the Bureau.
C.
The minimum amount of the general bond shall be $1,500 per acre for the approved open acre limit.
D.
The minimum amount of the revegetation bond shall be $600 per acre of affected land.
E.
The minimum amount of the total bonds shall be $10,000 for the entire area under one permit.
Regulation .04 Adjustment of Bond Amount.LinkCopy Citation
A.
The amount of the performance bond liability applicable to a permit shall be adjusted by the Bureau as acreage in the permit area is revised, or when the cost of future reclamation or restoration work changes. The Bureau shall notify the permittee, the surety, and any person with a property interest in collateral who has requested notification in accordance with Regulation .06D of this chapter of any proposed bond adjustment and provide the permittee an opportunity for an informal conference on the adjustment.
B.
A permittee may request reduction of the required performance bond amount upon submission of evidence to the Bureau proving that the permittee's method of operation or other circumstances will reduce the maximum estimated cost to the Bureau to complete the reclamation of the bond amount. The request shall be considered as a request for partial bond release.
C.
In addition, when the permittee submits the annual mining and reclamation progress report for a permit, the amount of bond required for the operation may be adjusted by the Bureau to the amounts required to assure completion of reclamation and revegetation.
Regulation .05 Duration of Performance Bonds.LinkCopy Citation
A.
Liability under performance bonds applicable to a permit shall continue until all reclamation and restoration work required by the Regulatory Program and the provisions of the permit have been completed, and the permit terminated by the release of the permittee from any further liability.
B.
In addition, except on lands eligible for remining, the period of liability for a bond shall continue for a minimum period of not less than 5 years, beginning with the last year of augmented seeding, fertilizing, irrigation, or other work. The period of liability shall begin again when augmented seeding, fertilizing, irrigation, or other work is ordered by the Bureau to correct a failure to maintain the permanent vegetative cover required under COMAR 26.20.29 on the site.
C.
On lands eligible for remining included in permits issued before September 30, 2004, or any later date authorized by the federal Surface Mining Control and Reclamation Act, or any renewal thereof, the period of liability for a bond shall continue for a period of not less than 2 full years, beginning with the last year of augmented seeding, fertilizing, irrigation, or other work. The period of liability of not less than 2 full years shall begin again when augmented seeding, fertilizing, irrigation, or other work is ordered by the Bureau to correct a failure to maintain the permanent vegetative cover required under COMAR 26.20.29 on the site.
D.
If the Bureau approves a long-term intensive agricultural post-mining land use, the applicable period of liability shall commence at the date of initial planting for such long-term intensive agricultural land use.
Regulation .06 Conditions of Bonds.LinkCopy Citation
A.
Surety bonds are subject to the following conditions:
(1)
The Bureau may not accept the bond of a surety company unless the bond is totally noncancellable by the surety, regardless of time or reason, including but not limited to nonpayment of premium or bankruptcy of the permittee during the period of liability;
(2)
The Bureau may provide in the bond that the amount shall be confessed to judgment upon forfeiture;
(3)
The bond shall provide that the surety and the permittee shall be jointly and severally liable;
(4)
The bond shall provide that:
(a)
The surety will give prompt notice to the permittee and the Bureau of any notice received or action filed alleging the insolvency or bankruptcy of the surety, or alleging any violations of regulatory requirements which could result in suspension or revocation of the surety's license to do business;
(b)
If the surety becomes unable to fulfill its obligations under the bond for any reason, notice shall be given immediately to the permittee and the Bureau.
B.
Collateral bonds shall be subject to the following conditions:
(1)
The Bureau shall obtain possession of and keep in custody all collateral deposited by the applicant, until authorized for release or replacement;
(2)
The Bureau shall value collateral at its current market value, not face value;
(3)
The Bureau shall require that certificates of deposit be made payable to the Bureau, in writing, and upon the books of the bank issuing these certificates;
(4)
The Bureau may not accept an individual certificate for a denomination in excess of $100,000, or maximum insurable amount as determined by FDIC;
(5)
The Bureau shall require the bank issuing these certificates to waive all rights of setoff or liens which it has or might have against these certificates, and to agree in writing that these certificates are payable in full to the Bureau upon demand;
(6)
The Bureau shall accept only automatically renewable certificates of deposit;
(7)
The applicant shall deposit sufficient amounts of certificates of deposit, to assure that the Bureau will be able to liquidate those certificates before maturity, upon forfeiture, for the amount of the bond required; and
(8)
The bank shall give prompt notice to the Bureau and the permittee of any notice received or action filed alleging:
(a)
The insolvency or bankruptcy of the bank or the permittee, or
(b)
Any violations of regulatory requirements which could result in suspension or revocation of the bank's charter or license to do business.
C.
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 Maryland;
(2)
The letter shall be irrevocable until released by the Bureau;
(3)
The letter shall be payable to the Bureau in full upon demand and receipt from the Bureau of a notice of forfeiture;
(4)
The Bureau may not accept a letter of credit in excess of 10 percent of the bank's capital surplus account as shown on a balance sheet certified by a certified public accountant, except when, before or at the time of issuance of the letter of credit, the issuing bank has set aside sufficient funds in a segregated deposit account, clearly marked for that purpose, to cover the bank's maximum liability under the letter of credit;
(5)
The Bureau may not accept letters of credit from a single bank for any person on all permits held by that person in excess of three times the company's maximum single obligation, except when, before or at the time of issuance of the letter of credit, the issuing bank has set aside sufficient funds in a segregated deposit account, clearly marked for that purpose, to cover the bank's maximum liability under the additional letters of credit;
(6)
Before accepting a letter of credit secured by a segregated deposited account, the Bureau shall require the bank issuing the letter of credit to execute a satisfactory waiver of all rights of setoff or liens which the bank has or might have against any segregated deposit account which secures the letter of credit;
(7)
The Bureau may require in the letter of credit that the amount shall be confessed to judgment upon forfeiture; and
(8)
The letter of credit shall provide that:
(a)
The bank will give prompt notice to the permittee and the Bureau of any notice received or action filed alleging the insolvency or bankruptcy of the bank, or alleging any violations or regulatory requirements which could result in suspension or revocation of the bank's charter or license to do business, and
(b)
If the bank becomes unable to fulfill its obligations under the letter of credit for any reason, notice shall be given immediately to the permittee and the Bureau.
D.
A person with an interest in any collateral posted as a bond who desires notification of actions pursuant to the bond, shall request the notification, in writing, to the Bureau at the time the collateral is posted as bond.
E.
Upon the incapacity of a bank or surety company holding the bond by reason of bankruptcy, insolvency, or suspension or revocation of a charter or license, the permittee is considered to be without bond coverage and shall promptly notify the Bureau. The Bureau, upon receipt of notification shall notify, in writing, any permittee who is considered to be without bond coverage due to the bankruptcy, insolvency, or suspension or revocation of a charter or license of a bank or surety company and specify a reasonable period, not to exceed 90 days, to replace bond coverage and inform the permittee that additional acreage may not be disturbed on the permit. If an adequate bond is not posted by the end of the period allowed, the permittee shall cease coal extraction and shall immediately begin to conduct reclamation operations in accordance with the reclamation plan. Mining operations may not resume until the Bureau has determined that acceptable bond has been posted.
Regulation .07 Replacement of Bonds.LinkCopy Citation
A.
The Bureau may allow permittees to replace existing surety or collateral bonds with other surety or collateral bonds, if the liability which has accrued against the permittee on the permit area is transferred to those replacement bonds.
B.
The Bureau may not release existing performance bonds until the permittee has submitted and the Bureau has approved acceptable replacement performance bonds.
Regulation .08 Criteria and Schedule for Release of Performance Bond.LinkCopy Citation
A.
The Bureau may not release any liability under any performance bonds until it finds that the permittee has met the requirements of the applicable reclamation phase as defined in §E of this regulation. The Bureau may release portions of the liability under performance bonds applicable to a permit following completion of reclamation phases on portions of the permit.
B.
Acreage may be released from the permit area only after Reclamation Phase III has been completed on the entire permit.
C.
The Bureau may not release any liability under performance bonds applicable to a permit if the release would reduce the total remaining liability under performance bonds to an amount less than that necessary for the Bureau to complete the approved reclamation plan, achieve compliance with the requirements of the Regulatory Program or the permit, and abate any significant environmental harm to the air, water, or land resources or danger to the public health and safety which might occur before the release of all lands from the permit area. If the permit area includes an alternative postmining land use plan, the Bureau shall also retain sufficient liability for the Bureau to contract for any additional work which would be required to achieve compliance with the general standards for revegetation if the permittee fails to implement the approved alternative postmining land use plan within the 2 years required.
D.
The Bureau shall generally release liability under performance bonds in accordance with the following schedule:
(1)
The portion of the bond submitted in accordance with Regulation .03C of this chapter may be released upon completion of all Reclamation Phase I work on the permit and the submission of a bond release application, unless the permittee requests a reduction of the open acre limit before the completion of all Reclamation Phase I work;
(2)
For acreage on which Reclamation Phase II has been completed and for which a bond release application has been submitted, a portion of the bond for performance not to exceed 50 percent of the per acre rate submitted in accordance with Regulation .03D of this chapter may be released;
(3)
For acreage on which Reclamation Phase III has been completed and for which a bond release application has been submitted, the remaining amount of bond equal to 50 percent of the per acre rate submitted in accordance with Regulation .03D of this chapter may be released;
(4)
On lands eligible for remining, for acreage on which Reclamation Phases II and III have been completed and for which a bond release application has been submitted, bond in the amount of the per acre rate submitted in accordance with Regulation .03D of this chapter may be released.
E.
For the purposes of this chapter:
(1)
Reclamation Phase I is deemed to have been completed when the permittee completes backfilling, regrading, topsoil replacement, seeding, mulching, and drainage control in accordance with the approved reclamation plan.
(2)
Reclamation Phase II is deemed to have been completed when:
(a)
Revegetation has been established in accordance with the approved reclamation plan and the standards for the success of revegetation are met;
(b)
The lands are not contributing suspended solids to stream flow or runoff outside the permit area in excess of the requirements of the Regulatory Program, or the permit;
(c)
With respect to prime farmlands, soil productivity has been returned to the level of yield required;
(d)
The provisions of a plan approved by the Bureau for the sound future management of any permanent impoundment by the permittee or land owner have been implemented to the satisfaction of the Bureau;
(e)
The Land Reclamation Committee has inspected and approved the revegetation of the area; and
(f)
All temporary drainage control structures not authorized to remain on the permit area to be released are removed and the affected area regraded, seeded, mulched, or all permanent structures are inspected and their deficiencies repaired by the operator.
(3)
Reclamation Phase III is deemed to have been completed when the permittee has successfully completed surface coal mining and reclamation operations in accordance with the approved reclamation plan and achieved compliance with the requirements of the Regulatory Program, the permit, and the applicable liability period has expired.
Regulation .09 Procedures for Release of Bonds.LinkCopy Citation
A.
Application for Release.
(1)
The permittee may file an application with the Bureau for release of all or part of the bond required under Regulation .01A of this chapter for a particular permit in accordance with Regulation .08D of this chapter. Applications may be filed only at times or seasons that allow the Bureau to evaluate properly the reclamation operations presented in the applications as having been completed. These times and seasons will be identified by the Bureau.
(2)
The application shall include copies of letters sent to adjoining property owners, surface owners, local government bodies, planning agencies, sewage and water treatment authorities, and water companies in the locality of the permit area, notifying them of:
(a)
The permittee's intention to seek release of performance bonds; and
(b)
The permittee's opportunity to submit comments or objections, or request an informal conference.
(3)
For the purpose of §A(2) of this regulation, “adjoining property owners” means a property owner whose property touches or bounds the permit area, or whose property boundary is within 300 feet of the permit area.
(4)
Within 30 days after filing the application for release, the permittee shall submit proof of publication of the advertisement required by §B of this regulation. The proof of advertisement shall be considered part of the bond release application.
(5)
The permittee shall include in the application for bond release a notarized statement which certifies that all applicable reclamation activities have been accomplished in accordance with the requirements of Environment Article, Title 15, Subtitle 5, Annotated Code of Maryland, the Regulatory Program, and the approved reclamation plan. A certification shall be submitted for each application or phase of bond release.
B.
Advertisement of Filing of Application.
(1)
At the time of filing of an application for bond release, the permittee shall advertise the filing of the application in a newspaper of general circulation in the county of the permit area.
(2)
The advertisement shall:
(a)
Be placed in the newspaper at least once a week for 4 consecutive weeks;
(b)
Identify the name of the permittee, the number of the permit and the issuance date of the permit;
(c)
Identify the location and the number of acres of the lands subject to the application;
(d)
Identify the type and amount of bond filed on the permit and the total amount of bond for which release is sought;
(e)
Identify the type and dates of reclamation work performed; and
(f)
State that written comments or objections may be submitted to the office of the Bureau, provide the address of the Bureau's office, and the closing date by which comments, objections, and requests must be received.
C.
Written comments, objections, or requests for an informal conference to a proposed bond release may be filed with the Bureau by any person within 30 days following the last advertisement of the filing of the application.
D.
Inspection by the Bureau. The Bureau shall inspect and evaluate the reclamation work involved within 30 days after receiving a complete application for bond release, or as soon after that as weather conditions permit. The surface owner, or agent, or lessee shall be given notice of this inspection and may participate with the Bureau in making the inspection.
E.
Informal Conferences.
(1)
The Bureau shall schedule a conference if written objections are filed and a conference is requested. The conference shall be held at the offices of the Bureau.
(2)
Notice of an informal conference shall be published in a newspaper of general circulation in the locality of the conference, at least 2 weeks before the date of the conference.
(3)
The Bureau shall set a date for inspection of the permit area by any party to an informal conference, and include information on participation in this inspection in the notice published under §E(2) of this regulation.
(4)
The informal conference shall be held within 30 days from the date of notice.
(5)
An electronic or stenographic record shall be made of the conference and the record maintained for access by the parties, until final release of the bond.
F.
In determining whether to release all or part of a bond, the Bureau shall consider:
(1)
Whether the permittee has met the criteria for release;
(2)
The degree of difficulty in completing any remaining reclamation, or restoration work: and
(3)
Whether pollution of surface and subsurface water is occurring, the probability of future pollution or the continuance of any present pollution, and the estimated cost of abating any pollution.
G.
If no informal conference has been held, the Bureau shall notify the permittee, anyone who filed comments or objections, and any other known interested parties, in writing, of its decision as to whether to release all or part of the bond within 60 days from the receipt of the completed application, or within 30 days from the close of the public comment period, whichever occurs last.
H.
If there has been an informal conference, the notification of the decision shall be made to the permittee and all interested parties within 30 days after conclusion of the conference.
I.
The notice of the decision shall state the reasons for the decision, recommend any corrective actions necessary to secure the release, and indicate the requirements for requesting an adjudicatory hearing pursuant to Regulation .11 of this chapter.
J.
The Bureau may not release a bond until:
(1)
The town, city, or other municipality nearest to the operation, or the county in which the operation is located, has received at least 30 days notice of a proposed release by certified mail; and
(2)
The right to request an adjudicatory hearing has not been exercised, or a final decision of the Bureau has been entered approving the release after an adjudicatory hearing.
Regulation .10 Repealed.LinkCopy Citation
Regulation .11 Adjudicatory Hearings on Bond Release.LinkCopy Citation
A.
Within 30 days of receipt of notice of a decision by the Bureau on a bond release application, the permittee or any person adversely affected by the decision may request an adjudicatory hearing.
B.
Adjudicatory hearings shall be held in accordance with the procedures contained in COMAR 26.20.34.
C.
The party seeking to reverse the decision of the Bureau shall have the burden of proof.
D.
The Bureau shall render a final decision on bond release within 60 days of the completion of an adjudicatory hearing.
Regulation .12 Bond Forfeiture.LinkCopy Citation
A.
Bonds may be forfeited if the Bureau finds any of the following:
(1)
The permittee has violated any of the terms or conditions of the bond;
(2)
The permittee has failed to conduct mining operations in accordance with the conditions of the permit and the Regulatory Program;
(3)
The permit for the area under bond has been revoked, unless the operator assumes liability for completion of reclamation work;
(4)
The permittee has become insolvent, failed in business, been adjudicated a bankrupt, filed a petition in bankruptcy or for a receiver, or had a receiver appointed by any court;
(5)
A creditor of the permittee has attached or executed a judgment against the permittee's equipment, materials, or facilities at the permit area; or
(6)
The permittee cannot demonstrate or prove the ability to continue to operate in compliance with the Regulatory Program and the permit.
B.
Bond forfeiture shall be in accordance with the procedures contained in COMAR 26.20.33.
C.
An operator may not engage in open-pit mining if he has forfeited any prior bond posted under the Regulatory Program. A permit may not be issued to an applicant owned or controlled by someone who has forfeited a bond.
D.
In the event the forfeited bond is insufficient to pay for the full cost of reclamation, the permittee shall be liable for remaining costs. The Bureau may:
(1)
Complete or authorize completion of reclamation of the permit area; and
(2)
Recover from the permittee all costs of reclamation in excess of the amount forfeited.
Regulation .13 Deep Mine Bonding Requirements.LinkCopy Citation
A.
Deep mine operations in the State shall comply with all of the bonding provisions of this chapter unless specifically indicated otherwise in this regulation. This requirement is independent of and in addition to any bonding requirements for these operations under the deep mining provisions of Environment Article, Title 15, Subtitle 6, Annotated Code of Maryland.
B.
The amount of bond under this chapter shall be calculated with respect to the general surface effects of deep mining controlled by these regulations, and any special considerations as provided in COMAR 26.20.13.
C.
Bond liability with respect to subsidence shall cover all effects of planned subsidence, and measures undertaken to prevent damage to surface facilities, including construction, site preparation, and relocations. Release of bond coverage for damage from planned subsidence may be obtained upon final inspection and approval by the Bureau, and without regard to the liability period of Regulation .05 of this chapter or criteria for release in Regulation .08 of this chapter.
D.
When subsidence-related material damage to land, structures, or facilities protected under COMAR 26.20.13.09 occurs, or when contamination, diminution, or interruption to a water supply protected under COMAR 26.20.13.05C occurs, the Bureau shall require the permittee to obtain additional performance bond until the repair, compensation, or replacement is completed, in the amount of:
(1)
The estimated cost of the repairs, if the permittee will be repairing;
(2)
The decrease in value, if the permittee will be compensating the owner; or
(3)
The estimated cost to replace the water supply, if the permittee will be replacing the water supply.
E.
If the repair, compensation, or replacement is completed within 90 days of the occurrence of damage, no additional bond is required. The Bureau may extend the requirement to post bond beyond 90 days, but not to exceed 1 year, if the permittee demonstrates and the Bureau finds, in writing:
(1)
One of the following:
(a)
That subsidence is not complete;
(b)
That not all probable subsidence-related material damage has occurred to lands or protected structures; or
(c)
That not all reasonably anticipated changes have occurred affecting the protected water supply; and
(2)
That it would be unreasonable to complete the repair of the subsidence-related material damage to lands or protected structures, or the replacement of protected water supply, within 90 days.
Chapter annotations
Authority: Environment Article, §§15-503 and 15-603, Annotated Code of Maryland
History: Effective date:
History: Regulations .01—.13 were previously codified as COMAR 08.13.09.15A—M, respectively. Recodification occurred in April, 1993. For a history of these regulations before April, 1993, see "Administrative History of COMAR 08.13.09 before April, 1993" which follows COMAR 26.20.01.
History: Regulation .01 amended effective August 15, 1994 (21:16 Md. R. 1382)
History: Regulation .05B amended effective August 15, 1994 (21:16 Md. R. 1382)
History: Regulation .08 amended effective August 15, 1994 (21:16 Md. R. 1382)
History: Regulation .09 amended effective August 15, 1994 (21:16 Md. R. 1382)
History: Regulation .10 repealed effective August 15, 1994 (21:16 Md. R. 1382)
History: Regulation .13 amended effective February 13, 1995 (22:3 Md. R. 152)
History: Regulation .13A amended effective August 15, 1994 (21:16 Md. R. 1382)
History: Chapter recodified from COMAR 08.20.14 to COMAR 26.20.14, June 1996
History: Regulation .04 amended effective March 22, 1999 (26:6 Md. R. 488)
History: Regulation .05 amended effective March 22, 1999 (26:6 Md. R. 488)
History: Regulation .06 amended effective March 22, 1999 (26:6 Md. R. 488)
History: Regulation .08D amended effective March 22, 1999 (26:6 Md. R. 488)
History: Regulation .09A amended effective July 8, 2002 (29:13 Md. R. 993)
History: Regulation .09B amended effective March 22, 1999 (26:6 Md. R. 488)
History: Regulation .12D adopted effective March 22, 1999 (26:6 Md. R. 488)
History: Regulation .13D, E adopted effective March 14, 2005 (32:5 Md. R. 581)