16 TAC §§12.308-12.311
The Railroad Commission of Texas proposes new §§12.308-12.311,
relating to regulation of coal mining and reclamation. The proposal of new
sections is to enable the text of the coal mining and reclamation regulations
to be printed in the Texas Administrative Code. Anyone who has access to
the Texas Administrative Code, both print and electronic versions, will have
access to all the coal mining and reclamation regulations without having
to purchase separately the coal mining and reclamation regulations through
the Commission. The last three digits of the current numbering system for
the coal mining and reclamation regulations is retained under the proposed
new numbering system to retain some correlation between the current and proposed
numbering systems.
The Commission proposes the new sections for the sole purpose of renumbering
the existing regulations (now adopted by reference) and incorporating the
text into the Texas Administrative Code. No requirements are being added
to or deleted from the existing coal mining and reclamation regulations.
Minor changes to the existing coal mining and reclamation regulations are
being proposed to conform existing rules to
Texas
Register
format; update information such as the Commission's address;
correct grammar, punctuation, and capitalization errors; and update internal
references. Consequently, comments should be restricted to the proposed numbering
system; proposed changes for
Texas Register
format; updated information; corrected grammar, punctuation, and capitalization;
and updated internal references.
Mark Barnett, staff attorney, Environmental Section, Office of General
Counsel, has determined that for each year of the first five years the new
sections are in effect there will be no fiscal implications for state or
local governments as a result of enforcing or administering the sections
because the proposed new rules are substantively identical to those currently
incorporated by reference in §11.221 of this title (relating to State
Program Regulations), which was proposed for repeal in
Texas Register
on January 10, 1997.
Mr. Barnett has also determined that the public benefit anticipated as
a result of enforcing or administering the new sections will be better access
to the state regulations applicable to coal mining and reclamation operations
because the regulations will be part of the Texas Administrative Code. The
rules will be published in the
Texas Register
and the Texas Administrative Code and available electronically via the Secretary
of State's Internet address. Individuals and small businesses may experience
a reduction in the economic cost of compliance because it will be faster
and easier to obtain the text of the coal mining and reclamation regulations
directly through the Texas Administrative Code or other resources rather
than by purchasing the rules from the Commission.
Comments on the proposal may be submitted to Mark Barnett, Staff Attorney,
Environmental Section, Office of General Counsel, Railroad Commission of
Texas, P.O. Box 12967, Austin, Texas 78711-2967. Comments will be accepted
for 30 days after publication in the
Texas Register
. For more information, call Mr. Barnett at (512) 463-6801.
The new sections are proposed under the Texas Natural Resources
Code, §134.013, which authorizes the Commission to adopt and amend rules
pertaining to surface coal mining and reclamation operations.
The following is the statute, article, or code affected by the proposed
new sections: §§12.308 - 12.311, Texas Natural Resources Code,
Chapter 134.
§12.308. Form of the Performance Bond.
(a)
The form for the performance bond shall be prescribed by
the Commission in accordance with this section. The Commission may allow
for:
(1)
a surety bond;
(2)
a collateral bond;
(3)
an escrow account bond;
(4)
self-bonding; or
(5)
combined surety/escrow bonding.
(b)
Where the mining operation is owned by two or more persons
or entities, the Commission shall allow each person to provide separate financial
assurance provided that the total of such assurance is sufficient to accomplish
reclamation.
(c)
A blanket bond covering statewide or countywide operations
may be furnished if the terms and conditions thereof are sufficient to comply
with the regulations in §§12.308 through 12.311 of this title (relating
to Form, Conditions, and Terms of Performance Bond and Liability Insurance),
and if approved by the Commission.
§12.309. Terms And Conditions of The Bond.
(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; 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 it's 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 and
has not been subject to bankruptcy proceedings during that time.
(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.
§12.310. Replacement of Bonds.
(a)
The Commission may allow permittees to replace existing
bonds with other bonds if the liability which has accrued against the permittee
on the permit area is transferred to such replacement bonds.
(b)
The Commission shall not release existing performance bonds
until the permittee has submitted and the Commission has approved acceptable
replacement performance bonds. A replacement of performance bonds pursuant
to this section shall not constitute a release of bond under §§12.312
and 12.313 of this title (relating to Procedures, Criteria, and Schedule
for Release of Performance Bond).
§12.311. Terms and Conditions for Liability Insurance.
(a)
The Commission shall require the applicant to submit at
the time of permit application, a certificate certifying that the applicant
has a public liability insurance policy in force for the surface coal mining
and reclamation operation for which the permit is sought. The certificate
shall provide for personal injury and property damage protection in an amount
adequate to compensate all persons injured or property damaged as a result
of surface coal mining and reclamation operations, including use of explosives
and damage to water wells, and entitled to compensation under the applicable
provisions of state law. Minimum insurance coverage for bodily injury shall
be $500,000 for each occurrence and $1,500,000 aggregate; and minimum insurance
coverage for property damage shall be $500,000 for each occurrence and $1,000,000
aggregate.
(b)
The policy shall be maintained in full force during the
life of the permit or any renewal thereof, including completion of all reclamation
operations under this chapter (relating to Coal Mining Regulations).
(c)
The policy shall include a rider requiring that the insurer
notify the Commission whenever substantive changes are made in the policy,
including any termination or failure to renew.
(d)
The Commission may accept from the applicant, in lieu of
a certificate for a public liability insurance policy, satisfactory evidence
from the applicant that it satisfies Texas self-insurance requirements and
the requirements of this section. The Commission may, upon the request of
an applicant that is self-bonded or determined to be eligible for self-bonding
under §12.309(j)(2) of this title (relating to Terms and Conditions
of the Bond), consider such applicant to meet the self-insurance requirements
of this subsection.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's authority to adopt.
Issued in Austin, Texas, on January 10, 1997.
TRD-9700403
Mary Ross McDonald
Deputy General Counsel, Office of General Counsel
Railroad Commission of Texas
Earliest possible date of adoption: February 21, 1997
For further information, please call: (512) 463-7008