ADMINISTRATIVE RULES

Part 632, Nonferrous Metallic Mining and Reclamation

Natural Resources and Environmental Protection Act, 1994 PA 451 As Amended

 

Part 3, DRAFT 2, February 22, 2005

Changes to January 13 draft based on comments from subgroup in strike and bold.

From Part 632 as enacted

PART 3. FINANCIAL ASSURANCE

Requirements

Rule 301. (1) An permittee operator shall establish financial assurance in accordance with this Rule before obtaining a mining permit, and shall maintain financial assurance that is approved by the department during mining operations and during the postclosure monitoring period, until the department releases the permittee from further liability upon termination of the permit or upon transfer of the permit to another operator.

(2) The financial assurance shall be sufficient to cover the cost to administer, and to hire a third party to implement the reclamation, and remediation, and postclosure monitoring under the requirements required under of part 632 of the act, these rules, a mining permit, or orders of the department under part 632 of the act. The amount of financial assurance shall be determined as follows:

(a) The operator shall provide an itemized list of reclamation, and remediation, and postclosure monitoring activities and costs associated with all of the following:

(i) Mining activities that have occurred where reclamation has not yet been completed.

(ii) Mining activities that are anticipated to occur within the next 3 years. The operator may use projected activities and costs for a shorter period, but not less than 1 year, if the operator agrees to update the financial assurance on a corresponding schedule.

(b) The department may require financial assurance in an amount larger that than calculated by the operator under paragraph (a) based upon an independent analysis by a qualified and credible third party hired by the department.

(c) The cost estimate required under this subrule shall include at a minimum the costs for the following:

(i) Mobilization

(ii) Demobilization

(iii) Engineering Redesign

(iv) Procurement Costs

(v) Reclamation

(vi) Remediation

(vii) Administrative Oversight

(viii) Contingencies

Estimation of costs shall be based on equipment, materials, and methods normally available to a third party contractor using current handbooks, publications, or other documented costs acceptable to the department.

(c) (3) The operator shall may provide not less than 75 up to 25 percent of the required financial assurance in the form of a bond or combination of bonds statement of financial responsibility approved by the department and as described in Rule 306. The operator may shall provide the balance, if any, of the required financial assurance in the form of a statement of financial responsibility conformance bond approved by the department.

(a) The conformance bond shall be in the form of any of the following or a combination thereof:

(i) A trust fund as described in Rule 302.

(ii) A surety bond as described in Rule 303.

(iii) An irrevocable letter of credit as described in Rule 304.

(iv) A certificate of deposit or time deposit account as described in Rule 305.

(b) The operator may submit a written request to the department to adjust the amounts of any of the components of a conformance bond listed in paragraph (a), provided the total value of the conformance bond equals or exceeds the amount required under this rule. If the request meets the requirements of these rules, the department shall within 60 days after receiving the request approve the adjustment.

(3) (4) The department shall look to the financial assurance for immediate compliance with, and fulfillment of, the full conditions of the act, these rules, permit conditions, or orders of the department under this part. If the department takes action necessary to curtail and remediate any damage to the environment or public health under Sec. 63221(5) of the act , the department shall file a claim for recovery of reasonable costs with the permittee. If the permittee fails to reimburse the department for the costs of such actions within 30 60 days of the after filing of the claim, the department may recover its costs from any cash the conformance bond on deposit. For any part of the department’s costs not recovered from the permittee or the cash conformance bond, the department shall file a claim with any and all surety companies and attorney general, acting for and on behalf of the department, may bring suit for the payment of the claim, and the permittee and the financial institutions that executed a conformance bond provided under these rules, and said surety companies, and financial institutions shall be jointly and severally liable for payment of the claim; provided, the total amount of liability of any financial institution for costs under the claim shall not exceed the amount required value of the financial instrument or instruments provided by the institution under the provisions for financial assurance under these rules. If the claim is not paid within 30 days, the department, acting for and on behalf of the state, may bring suit for the payment of the claim.

(4) (5) Failure of a permittee to provide financial assurance under this rule constitutes a violation of the permit and is grounds for the department to order immediate suspension of activities at a mining operation, including the removal of metallic product from the site, pursuant to section 63221 of the act. 

Trust Fund

Rule 302. (1) Subject to Rule 301, a permittee may satisfy all or a portion of the financial assurance requirements by establishing a trust fund that conforms to the requirements of this rule. The trustee shall be a bank or other financial institution that has the authority to act as a trustee and whose trust operations are regulated and examined by a federal or state agency, and the trust agreement shall be executed on a form approved by the department.

Surety bond

Rule 303. (1) Subject to Rule 301, an operator may satisfy all or a portion of the financial assurance requirements by obtaining a surety bond that is executed on a form approved by the department and that conforms to the requirements of this rule. The surety company issuing the bond shall, at a minimum, be among those listed as acceptable sureties on federal bonds in circular 570 of the United States department of the treasury.

(2) Under the terms of the surety bond, the surety may cancel the bond by sending notice of cancellation, by certified mail, to the permittee and to the department. Cancellation shall not occur, however, during the 120 days beginning on the date of receipt of the notice of cancellation by both the permittee and the department, as evidenced by the return receipts.

(3) The surety shall not be liable for deficiencies in the performance of reclamation, remediation, and postclosure monitoring, by the permittee after the department releases the permittee from the requirements of this part in accordance with Rule 309.

(4) Upon receipt of a notice of cancellation of the surety bond from the surety, the permittee shall obtain alternate financial assurance approved by the department within 60 days. If the permittee fails to so provide, the department may issue a notice of violation or other order rendering the surety liable on the bond obligation.

Irrevocable letter of credit

Rule 304. (1) Subject to Rule 301, an operator may satisfy all or a portion of the financial assurance requirements by obtaining an irrevocable letter of credit which conforms to the requirements of this rule and which is executed on a form approved by the department. The issuing institution shall be a bank or financial 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.

(2) The letter of credit shall include all of the following information:

(a) The name of the permittee.

(b) The name and address of the mine.

(c) The amount of funds assured for reclamation, remediation, and postclosure monitoring by the letter of credit.

(3) The letter of credit shall be irrevocable and issued for a period of at least 1 year. The letter of credit shall provide that the expiration date will be automatically extended for a period of at least 1 year unless, not less than 120 days before the current expiration date, the issuing institution notifies both the permittee and the department by certified mail of a decision not to extend the expiration date. Under the terms of the letter of credit, the 120 days shall begin on the date when both the permittee and the department have received the notice, as evidenced by the return receipts.

(4) If the permittee does not establish alternate financial assurance as specified in this part and obtain written approval of such alternate assurance from the department within 90 days after receipt by both the permittee and the department of a notice from the issuing institution that it has decided not to extend the letter of credit beyond the current expiration date, then the department shall draw on the letter of credit. The department may delay the drawing if the issuing institution grants an extension of the term of the credit. During the last 30 days of any such extension, the department shall draw on the letter of credit if the permittee has failed to provide alternate financial assurance as specified in this part and obtain written approval of such assurance from the department.

Certificate of deposit or time deposit account.

Rule 305. (1) Subject to Rule 301, an operator may satisfy all or a portion of the financial assurance requirements by placing funds in an insured, negotiable certificate of deposit or time deposit account held by a bank or other financial institution regulated and examined by a federal or state agency. The value of the certificate of deposit or time deposit account shall be fully insured by an agency of the United States government, unless otherwise approved by the department.

(2) The certificate or account shall be in the sole name of the department with a maturity of not less than 6 months.

(3) The permittee shall execute an agreement with the department which identifies the reasons for which the department may cash the certificate of deposit or time deposit account. The agreement shall be executed on a form approved by the department.

(4) A certificate or time deposit account of less than a 1-year maturity shall provide for automatic renewal. A permittee shall renew or replace a certificate of deposit or time deposit account of 1 year or more not less than 60 days before the maturity date.

(5) If the permittee elects not to continue the use of the certificate of deposit or time deposit account to provide financial assurance as required, or any portion thereof, the permittee shall provide acceptable financial assurance to the department 60 days before the maturity date of the certificate of deposit or time deposit account. If the permittee fails to so provide, the department may cash the certificate of deposit or time deposit account and place the funds in a state treasury account. The department may release such funds to the permittee at such time as the permittee provides acceptable replacement financial assurance.

Statement of Financial Responsibility

Rule 302 306. (1) The statement of financial responsibility under Rule 301(2)(c) shall consist of the following:

(a) A written statement signed by the operator’s permittee’s chief financial officer that provides evidence that the operator meets the criteria specified in subrule (2) of this rule, and states that the data are derived from an independently audited year-end financial statement.

(b) An independent certified public accountant’s report on examination of the operator’s permittee’s financial statements for the latest completed fiscal year stating that the accountant has compared the data listed in the statement provided under subdivision (a) of this subrule with the amounts in the corresponding year-end financial statement and that the accountant asserts the permittee’s statement of financial responsibility meets the criteria of subrule (2) and nothing came to the attention of the accountant that caused the accountant to believe that the financial statements should be adjusted.

(2) The statement of financial responsibility under Rule 301(2)(c) shall meet all of the following criteria:

(a) The owner or operator permittee must satisfy one of the following three conditions:

(i) A current rating for its senior unsubordinated unsecured debt of AAA, AA, A, or BBB as issued by Standard and Poor's or Aaa, Aa, A or Baa as issued by Moody's.

(ii) A ratio of total liabilities to net worth less than 1.5.

(iii) A ratio of the sum of net income plus depreciation, depletion and amortization, minus $10 million, to total liabilities greater than 0.10.

(b) The operator permittee must have a tangible net worth not less than 25 percent of the financial assurance required under Rule 301 plus $10 million.

(c) The owner or operator permittee must have total assets located in the United States of not less than 25 percent of the sum of the financial assurance required under Rule 301 plus the financial assurance requirements of other parts of the act and equivalent or substantially equivalent federal or state regulations. Projected Declared mineral reserves may be utilized in determining current assets only to the extent that the value of the reserves exceeds the projected costs of development and production.

(3) If an operator a permittee ceases to meet the requirements of subrule (2) of this rule, the operator shall send notice to the department of intent to establish alternate financial assurance as specified in this part. The notice shall be sent, by certified mail, within 90 days after the end of the fiscal year for which the year-end review of the financial records shows that the operator no longer meets the requirements. The operator shall provide the alternate financial assurance within 120 days after the end of that fiscal year.

(4) The department may, based on a reasonable belief that the person no longer meets the requirements of subrule (2) of this rule, require reports of financial condition at any time from the operator permittee in addition to the information required by subrule (2) of this rule. If the department finds, on the basis of a review of such reports or other information, that the operator permittee no longer meets the requirements of subrule (2) of this rule, then the department shall notify and inform the operator permittee in writing. Within 30 days of the notification, the operator permittee shall provide alternate financial assurance as specified in this part. Failure to comply with this subrule shall be cause for immediate suspension of any or all mining activities at the permitted site.

Surety Bond; Cancellation

Rule 303. (1) A surety company may cancel a surety bond executed pursuant to these rules upon 90 days’ notice to the department before the effective date of cancellation.

(2) Forty days before the effective date of cancellation, as provided in subrule (1) of this rule, a permittee shall secure an alternate bond sufficient to satisfy the requirements for financial assurance. Failure to comply with this subrule shall be cause for the immediate suspension of any or all mining activities at the permitted site.

(3) If a surety bond is terminated, either through cancellation by the surety company or release of the bond by the department, the surety company shall remain liable for claims by the department, in amounts up to the stated value of the surety bond, attributable to any violations of part 632 of the act, these rules, a mining permit, or orders of the department under part 632 of the act, that occurred at the mining area during the time the surety bond was in effect, until the violations have been corrected and the corrections are accepted by the department.

Update of financial assurance

Rule 304. 308 (1) Every 3 years, or as the department considers necessary, a permittee shall update the financial assurance required under Rule 301 as necessary by update updating the statement of financial responsibility required under subrule (2) and shall adjusting the amount of the conformance bond to assure that the financial assurance is sufficient for the purposes of subrule (2) these rules. The update shall describe the reclamation and postclosure monitoring completed and shall contain an estimate of the cost of reclamation that has not been completed.

(2) The department shall provide notice of an adjustment of the financial assurance to any interested person who has requested such notice.

(2) (3)The financial assurance mechanism required by this rule may be satisfied in whole or in part by financial assurance provisions required by other parts of this act if those provisions address the remediation activities required under this part. 

Release of financial assurance

Rule 305. 309. (1) A permittee may file an application with the department for termination of financial assurance upon completion of reclamation and the postclosure monitoring period.

(2) Within 30 days after receipt of an application for termination of financial assurance, the department shall reach a proposed decision to grant or deny the application and shall provide notice of the proposed decision to any interested person who has requested such notice.

(3) The department shall grant or deny an application for termination of financial assurance not less than 30 days or more than 45 days after providing the notice required under subrule (2).

(4) When If the department terminates liability on a bond for the portion or the whole of the mining area grants the application, the department shall within 30 days return cash to the permittee or securities to the institution that provided the bonding instrument.

(5) If the department denies the application, the department shall notify the permittee in writing, stating the reasons for denial and recommending corrective actions necessary to secure the termination.