(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
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