SURETY BOND UPDATE: Changes Made to the Kentucky Revised Statutes Allows Alternative Bonding Program for Surface Coal Mining and Reclamation Permit Applicants

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In April of this year, the honorable Governor of Kentucky signed House Bill 261. The said bill contains several changes, one of which pertains to the surety bond requirement of surface coal mining and reclamation operations permit applicants.

In the State of Kentucky, a permit is required in order to perform surface coal mining and reclamation.

As stated in stated in Section 3. KRS 350.064 of the Kentucky Revised Statutes (KRS):

Bonding-Program-for-Surface-Coal-Mining-and-Reclamation-Permit-Applicants

After a surface coal mining and reclamation permit application has been approved but before the permit is issued, the applicant shall file with the regulatory authority, on a form prescribed and furnished by the regulatory authority, a reclamation bond for performance payable, as appropriate, to the state, and conditional upon faithful performance of all the requirements of this chapter and the permit. The reclamation bond shall cover that area of land within the permit area upon which the applicant will initiate and conduct surface coal mining and reclamation operations within the initial term of the permit. As succeeding increments of surface coal mining and reclamation operations are to be initiated and conducted within the permit area, the permittee shall file with the cabinet an additional bond or bonds to cover the increments in accordance with this section.”

Prior to amending the bonding requirement, surface coal mining and reclamation operations permit applicants were allowed to submit their own reclamation bond without separate sureties as long as the applicant demonstrates to the cabinet the following:

  • Existence of a suitable agent to receive service of process
  • A history of financial solvency and continuous operation sufficient for authorization to self-insure or bond the amount in lieu of the establishment of a bonding program

Following the passage of House Bill 261, the cabinet “may approve an alternative system that will achieve the objectives and purposes of the bonding program.”

In addition the reclamation bond, if the permitee makes changes to the original reclamation plan, the said permitee must furnish a supplemental bond. The bond amount will be determined based on the Kentucky Revised Statutes for each approved increase in acre or fraction of an acre.

A reduction in acreage coverage will reduce the bond amount as well, but the reduction will not be less than $10,000.

 

What is a Reclamation Bond?

It is a surety bond that guarantees the protection against environmental degradation from coal mining. These bonds are dependent on relevant statutes and regulations.

A reclamation bond’s purpose is to ensure the compliance of the permit holder to the proper coal mining procedures in order to avoid the adverse effects of mining.

One of the conditions of a reclamation bond is for the permitee to reclaim the land immediately and to avoid mining lands that are not feasible.

Just like other surety bonds, a reclamation bond is a legally binding contract between three parties: Principal, Obligee, and the Surety.

  • Principal – Surface coal mining and reclamation operations permit applicant
  • Obligee – State of Kentucky
  • Surety – Surety Bond Authority

 

The principal is the party who will purchase the bond and who will fulfill the obligations set forth in the bond. The surety is the party who will guarantee the fulfillment of the principal’s obligations to the obligee (beneficiary of the bond).

 

How to Get a Reclamation Bond

The first step is to APPLY FOR A RECLAMATION BOND.

Once we have received your application, we’ll inform you about the documents that you must submit in order to move forward to the next step of the bonding process, which is underwriting.

During the underwriting process, our expert underwriter will assess the following:

  • Your financial capability
  • Your business or job performance history
  • Your credit score

 

Once the indemnity agreement has been signed and the bond premium paid, the reclamation bond will immediately be sent to you.

 

Need a bond now? APPLY HERE.

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