CHAPTER 7. SELF-BONDING
IC 14-34-7
Chapter 7. Self-Bonding
IC 14-34-7-0.5
"Collateral" defined
Sec. 0.5. As used in this chapter, "collateral" means the actual or
constructive deposit, as appropriate, with the director of one (1) or
more of the following types of property in support of a self-bond:
(1) A perfected, first-lien security interest in favor of the
department of natural resources in real property located in
Indiana that meets the requirements of this chapter.
(2) Securities backed by the full faith and credit of the United
States government, or state government securities, that are:
(A) acceptable to;
(B) endorsed to the order of; and
(C) placed in the possession of;
the director.
(3) Personal property that is located in Indiana and owned by
the applicant, the market value of which is more than one
million dollars ($1,000,000) per property unit.
As added by P.L.176-1995, SEC.8.
IC 14-34-7-0.6
"Comparative balance sheet" defined
Sec. 0.6. As used in this chapter, "comparative balance sheet"
means item accounts from a number of the operator's successive
yearly balance sheets arranged side by side in a single statement.
As added by P.L.176-1995, SEC.9.
IC 14-34-7-0.7
"Comparative income statement" defined
Sec. 0.7. As used in this chapter, "comparative income statement"
means an operator's income statement amounts for a number of
successive yearly periods arranged side by side in a single statement.
As added by P.L.176-1995, SEC.10.
IC 14-34-7-1
"Liabilities" defined
Sec. 1. As used in this chapter, "liabilities" means obligations to
transfer assets or provide services to other entities in the future as a
result of past transactions. The term does not include amounts that
are required to be recorded for financial accounting purposes under
Statement of Financial Accounting Standards number 106 issued by
the Financial Accounting Standards Board and effective December
1990.
As added by P.L.1-1995, SEC.27. Amended by P.L.176-1995,
SEC.11.
IC 14-34-7-2
"Net worth" defined
Sec. 2. As used in this chapter, "net worth":
(1) means:
(A) total assets; minus
(B) total liabilities; and
(2) is equivalent to owners' equity.
As added by P.L.1-1995, SEC.27.
IC 14-34-7-2.5
"Surface Mining Control and Reclamation Act" defined
Sec. 2.5. As used in this chapter, "Surface Mining Control and
Reclamation Act" means the federal Surface Mining Control and
Reclamation Act of 1977 (30 U.S.C. 1201 through 1328).
As added by P.L.176-1995, SEC.12.
IC 14-34-7-3
"Tangible net worth" defined
Sec. 3. As used in this chapter, "tangible net worth" means:
(1) net worth; minus
(2) intangibles such as goodwill and rights to patents or
royalties.
As added by P.L.1-1995, SEC.27.
IC 14-34-7-4
"Current assets" defined
Sec. 4. (a) As used in this section, "current assets" means cash or
other assets or resources that are reasonably expected to be converted
to cash or sold or consumed within:
(1) one (1) year; or
(2) the normal operating cycle of the business.
(b) As used in this section, "current liabilities" means:
(1) obligations that are reasonably expected to be paid or
liquidated within one (1) year or within the normal operating
cycle of the business; plus
(2) dividends payable on preferred stock within:
(A) one (1) quarter, if declared; or
(B) one (1) year, if a pattern of declaring dividends each
quarter is apparent from past business practice.
(c) As used in this section, "fixed assets" means plants and
equipment. The term does not include land or coal in place.
(d) Subject to subsection (f), the director may accept a self-bond
from an applicant for a permit if all of the following conditions are
met by the applicant or the applicant's corporate guarantor at the time
the self-bond is accepted:
(1) The applicant designates a suitable agent to receive service
of process in Indiana.
(2) The applicant has been in continuous operation as a business
entity for at least five (5) years immediately preceding the time
of application.
(A) The director may allow a joint venture or syndicate with
less than five (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
five (5) years immediately preceding the time of application.
(B) When calculating the period of continuous operation, the
director may exclude periods of interruption to the operation
of the business entity that:
(i) were beyond the applicant's control; and
(ii) do not affect the applicant's likelihood of remaining in
business during the proposed surface coal mining and
reclamation operations.
(3) The applicant is not subject to any outstanding cessation
order issued under IC 13-4.1-11-5 (before its repeal),
IC 14-34-15-6, or the Surface Mining Control and Reclamation
Act.
(4) The applicant does not owe any civil penalties under
IC 13-4.1-12 (before its repeal), IC 14-34-16, or the Surface
Mining Control and Reclamation Act.
(5) The applicant does not owe any fees under this article,
IC 13-4.1 (before its repeal), or the Surface Mining Control and
Reclamation Act, and is not delinquent in the payment of any
fees or civil penalties.
(6) The applicant's permit has never been suspended under this
article or IC 13-4.1 (before its repeal), and the applicant is not
listed on the Applicant Violator System (AVS).
(7) The applicant submits financial information in sufficient
detail to demonstrate that the applicant satisfies at least one (1)
of the following criteria:
(A) The applicant has a current rating for the applicant's
most recent bond issuance of "A" or higher as issued by:
(i) Moody's Investor Service; or
(ii) Standard and Poor's Corporation.
The applicant must identify the rating service used by the
applicant and provide any additional relevant information
concerning how the service arrived at the specific ratings.
(B) The applicant has the following:
(i) A tangible net worth of at least ten million dollars
($10,000,000).
(ii) A ratio of total liabilities to net worth of not more than
2.5:1.
(iii) A ratio of current assets to current liabilities of at least
1.2:1.
The ratio requirements set forth in this clause must be met
for the year immediately preceding the application, and must
be documented for the four (4) years preceding the
application. An explanation shall be included for any year in
which the ratios of the applicant did not meet the
requirements set forth in this clause. The failure of an
applicant to meet the ratio requirements set forth in this
clause for any of the four (4) years preceding the application
does not necessarily disqualify an applicant for self-bonding
under this chapter.
(C) The applicant has the following:
(i) Fixed assets in the United States that total at least
twenty million dollars ($20,000,000).
(ii) A ratio of total liabilities to net worth of not more than
2.5:1.
(iii) A ratio of current assets to current liabilities of at least
1.2:1.
The ratio requirements set forth in this clause must be met
for the applicant's fiscal year immediately preceding the
application, and must be documented for the four (4) years
preceding the application. An explanation shall be included
for any year in which the ratios of the applicant did not meet
the requirements set forth in this clause. The failure of an
applicant to meet the ratio requirements set forth in this
clause for any of the four (4) years preceding the application
does not necessarily disqualify an applicant for self-bonding
under this chapter.
(8) The applicant submits the following:
(A) Financial statements for the most recently completed
fiscal year accompanied by a report prepared by an
independent certified public accountant:
(i) in conformity with generally accepted accounting
principles; and
(ii) containing the accountant's audit opinion or review
opinion of the financial statements with no adverse
opinion.
(B) Unaudited financial statements for completed quarters in
the current fiscal year.
(C) Comparative financial data from a five (5) year period,
that must include a comparative income statement and a
comparative balance sheet.
(D) A statement listing:
(i) every lien filed against any assets of the applicant in
any jurisdiction in the United States for an amount that is
more than two percent (2%) of the applicant's net worth;
(ii) every action pending against the applicant;
(iii) every judgment rendered against the applicant within
the seven (7) years preceding the application that remains
unsatisfied and for an amount that is more than two
percent (2%) of the applicant's net worth; and
(iv) any petitions or actions in bankruptcy against the
applicant, including actions for reorganization.
(E) Additional unaudited information requested by the
director.
(e) If an applicant submits financial information to demonstrate
that the applicant satisfies the criteria set forth in subsection
(d)(7)(B) or (d)(7)(C), the two (2) ratios set forth in subsection
(d)(7)(B) or (d)(7)(C) shall be calculated with the proposed self-bond
amount included in the current liabilities or total liabilities for the
year of the application. The operator may deduct from the total
liabilities the costs currently accrued for reclamation that appear on
the balance sheet current in the year of the application.
(f) Notwithstanding subsection (d)(7), the director may not accept
a self-bond from an applicant unless the financial ratios of the
applicant are at least as favorable as those listed for the medium
performers in the Dun and Bradstreet listing of Industry Norms and
Key Business Ratios.
(g) Each lien, action, and petition listed under subsection
(d)(8)(E) must be identified by the named parties, the jurisdiction in
which the matter was filed, the case number, and the final disposition
or the current status of any action still pending.
As added by P.L.1-1995, SEC.27. Amended by P.L.176-1995,
SEC.13.
IC 14-34-7-4.1
Method of replacement of self-bonds
Sec. 4.1. (a) Before January 1, 1996, all self-bonds in effect on
July 1, 1995, must be replaced in one (1) of the following ways:
(1) The self-bond may be replaced by another form of bond
allowed under IC 13-4.1-6.
(2) The self-bonded permittee may reapply for self-bonding
under this chapter.
(b) If the application of a permittee submitted under subsection
(a)(2) is not accepted, the permittee must replace its self-bond with
another form of bond allowed under IC 14-34-6.
As added by P.L.176-1995, SEC.14.
IC 14-34-7-5
"Corporate guarantee" defined
Sec. 5. (a) A written guarantee accepted under this section is
referred to as a "corporate guarantee".
(b) The director may accept a corporate guarantee for an
applicant's self-bond from a corporate guarantor if, at the time the
self-bond is accepted, the following conditions are met:
(1) The guarantee is in writing.
(2) The applicant satisfies the requirements of section 4(d)(1),
4(d)(2), and 4(d)(8) of this chapter.
(3) The guarantor meets the conditions imposed upon an
applicant under section 4 of this chapter.
(c) The terms of a corporate guarantee must provide for the
following:
(1) If the applicant fails to complete the reclamation plan, the
guarantor shall complete the reclamation plan or the guarantor
is liable under the indemnity agreement to provide money to the
department sufficient to complete the reclamation plan, but not
to exceed the bond amount.
(2) The corporate guarantee remains in force unless:
(A) the guarantor sends notice of cancellation by certified
mail to:
(i) the applicant; and
(ii) the director;
at least ninety (90) days before the cancellation date; and
(B) the director accepts the cancellation.
(3) A notice of cancellation of a corporate guarantee may be
accepted by the director if:
(A) the applicant obtains a suitable replacement bond
allowed under IC 13-4.1-6 (before its repeal) or IC 14-34-6
before the cancellation date; or
(B) the land or parts of the land for which the self-bond was
accepted have not been disturbed.
As added by P.L.1-1995, SEC.27. Amended by P.L.176-1995,
SEC.15.
IC 14-34-7-6
Self-bond or corporate guarantee; percentage of net worth
Sec. 6. (a) For the director 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 in the
United States may not exceed twenty-five percent (25%) of the
applicant's tangible net worth in the United States.
(b) For the director to accept a corporate guarantee, the total
amount of the corporate guarantor's present and proposed self-bonds
and guaranteed self-bonds for surface coal mining and reclamation
operations in the United States may not exceed twenty-five percent
(25%) of the guarantor's tangible net worth in the United States.
As added by P.L.1-1995, SEC.27.
IC 14-34-7-7
Indemnity agreement
Sec. 7. If the director accepts an applicant's self-bond, an
indemnity agreement shall be submitted to the director. The
indemnity agreement must meet the following requirements:
(1) The indemnity agreement must provide in express terms that
the persons or parties bound by the agreement are liable to the
director for all costs incurred by the director:
(A) in pursuing forfeiture of any self-bonds posted by the
permittee for whom the indemnity agreement was submitted;
and
(B) in reclaiming those areas at which the permittee for
whom the indemnity agreement was submitted retains excess
monetary liability to the director under IC 14-34-6-16(c).
(2) The indemnity agreement must:
(A) be executed by all persons and parties who are to be
bound by the agreement, including the corporate guarantor;
and
(B) bind each party jointly and severally.
(3) A corporation applying for a self-bond and a corporate
guarantor guaranteeing a self-bond must submit an indemnity
agreement signed by two (2) corporate officers who are
authorized to bind the corporation. The director must be given
a copy of the authorization and an affidavit certifying that the
indemnity agreement is valid under all applicable state and
federal laws. A corporate guarantor must give the director a
copy of the corporate authorization demonstrating that the
corporation may guarantee the self-bond and execute the
indemnity agreement.
(4) If the applicant is a partnership, joint venture, or syndicate,
the agreement must bind each partner or party who has a
beneficial interest, directly or indirectly, in the applicant.
(5) The applicant or corporate guarantor must complete the
approved reclamation plan for the land as to which a bond has
been forfeited for failure to reclaim or pay to the director an
amount necessary to complete the approved reclamation plan,
not to exceed the bond amount.
(6) All bonds and guarantees must be indemnified corporately
and personally by all principals.
As added by P.L.1-1995, SEC.27. Amended by P.L.176-1995,
SEC.16.
IC 14-34-7-7.1
Collateral and indemnity agreement to support self-bond
application
Sec. 7.1. (a) If an application for self-bonding is rejected based on
the information required by section 4 of this chapter or limitations set
forth in section 4 of this chapter, the applicant may offer collateral
(as defined in section 0.5 of this chapter) and an indemnity
agreement to support the applicant's self-bond application. An
indemnity agreement offered under this subsection is subject to the
requirements of section 7 of this chapter.
(b) The following information must be provided about collateral
offered under subsection (a) to support a self-bond:
(1) The value of the property. The property must be valued at
the difference between the fair market value of the property and
reasonable expenses the department anticipates incurring in
selling the property. The fair market value must be determined
by an appraiser proposed by the applicant. The director may
reject an appraiser proposed by the applicant. An appraisal of
property must be performed expeditiously and a copy of the
appraisal must be furnished to the director and the applicant.
The applicant must pay the cost of the appraisal.
(2) A description of the property, indicating that the property is
satisfactory for deposit under this section, and a statement of:
(A) all liens, encumbrances, or adverse judgments imposed
on the property; and
(B) any pending litigation relating to the property.
(c) The director has full discretion in accepting collateral offered
under subsection (a) to support a self-bond.
(d) Real property offered as collateral under subsection (a) may
not include lands that are in the process of being mined or reclaimed
or lands that are the subject of an application under this chapter. The
operator may offer land that was formerly subject to a bond if the
bond has been released.
(e) Securities offered as collateral under subsection (a) may
include only securities that meet the definition of collateral set forth
in section 0.5 of this chapter.
(f) Personal property offered as collateral under subsection (a)
must be in the possession of the operator, must be unencumbered,
and may not include the following:
(1) Property that is already being used as collateral.
(2) Goods that the operator sells in the ordinary course of
business.
(3) Fixtures.
(4) Certificates of deposit that are not federally insured or that
are issued by a depository that is unacceptable to the director.
(g) Evidence of ownership of property offered as collateral under
subsection (a) must be submitted in one (1) of the following forms:
(1) If the property offered is real property, the interest of the
applicant must be evidenced by a title certificate or similar
evidence of title and encumbrance prepared by an abstract
office that is:
(A) authorized to transact business in Indiana; and
(B) satisfactory to the director.
(2) If the property offered is a security, the operator's interest
must be evidenced by possession of the original or a notarized
copy of the certificate or a certified statement of account from
a brokerage house.
(3) If the property offered is personal property, evidence of
ownership must be submitted in a form that:
(A) is satisfactory to the director; and
(B) affirmatively establishes unencumbered title to the
property of the operator.
(h) An applicant that offers personal property as collateral under
subsection (a), in addition to submitting the evidence required by
subsection (g), must satisfy the financial requirements set forth in
section 4(d)(7)(B) and 4(d)(7)(C) of this chapter.
(i) If the director accepts personal property from an applicant as
collateral under subsection (a), the director shall require the
following:
(1) Quarterly and annual maintenance reports prepared by the
applicant.
(2) A perfected, first lien security interest in the property in
favor of the department of natural resources. The security
interest must be perfected through:
(A) the filing of a financing statement; or
(B) surrender of possession of the collateral to the
department under subsection (k).
(j) If the director accepts personal property from an applicant as
collateral under subsection (a), the director may require quarterly or
annual inspections of the personal property by a qualified
representative of the department.
(k) If the director accepts personal property from an applicant as
collateral under subsection (a), the director shall, as applicable,
require:
(1) possession by the department of the personal property; or
(2) a mortgage or security agreement executed by the applicant
in favor of the department.
(l) The property interest conveyed under subsection (k) vests in
the department to secure the right and power to sell or otherwise
dispose of the property by public or private proceedings so as to
ensure reclamation of the affected lands in accordance with the
reclamation plan.
(m) A mortgage executed under subsection (k)(2) must be
executed and recorded so as to be first in time and constitute notice
of the interest of the department in the property to any prospective
subsequent purchaser of the property.
(n) Any income received from the collateral during the period
when the collateral is in the possession of the department shall be
remitted to the applicant.
(o) If collateral is left in the possession of the applicant, the
security agreement executed under subsection (k)(2) must require
that, upon default, the applicant shall assemble the collateral and
make it available to the department at a place designated by the
department that is reasonably convenient to both parties. All costs of
transporting and assembling the collateral shall be borne by the
applicant.
(p) With the consent of the director, an applicant may substitute
other property for any property accepted and held as collateral under
this section. Property may be substituted under this subsection only
if:
(1) all the information required concerning property originally
submitted as collateral is provided concerning the proposed
substitute collateral; and
(2) all requirements of this section are met with respect to the
proposed substitute collateral so that all obligations relating to
mining operations are secured under all periods of time.
(q) If collateral is posted under subsection (a) to support a
self-bond, the applicant shall:
(1) notify all persons that have an interest in the collateral of the
posting of the collateral and of all other actions affecting the
collateral; and
(2) provide copies of the notices provided under subdivision (1)
to the director.
As added by P.L.176-1995, SEC.17.
IC 14-34-7-8
Updated information for self-bond or corporate guarantee
Sec. 8. The director shall require self-bonded applicants and
corporate guarantors to submit:
(1) an update of the information required under section 4(d)(7),
4(d)(8), and 4(f) of this chapter within ninety (90) days after the
close of each fiscal year; and
(2) information required under section 4(d)(8)(B) of this chapter
on a quarterly basis not later than sixty (60) days after the end
of each quarter;
following the issuance of the self-bond or corporate guarantee.
As added by P.L.1-1995, SEC.27. Amended by P.L.176-1995,
SEC.18.
IC 14-34-7-9
Change in financial condition
Sec. 9. (a) If at any time during the period when a self-bond is
posted, the financial conditions of the applicant or the corporate
guarantor change so that the criteria of sections 4(d)(7), 4(f), and 6
of this chapter are no longer satisfied, the permittee shall do the
following:
(1) Notify the director immediately.
(2) Within ninety (90) days of the change in financial condition
post an alternate form of bond in the same amount as the
self-bond.
(b) If the applicant does not post an alternate form of bond within
ninety (90) days of the change in financial condition, the applicant
must cease coal extraction and immediately begin reclamation.
As added by P.L.1-1995, SEC.27. Amended by P.L.176-1995,
SEC.19.
IC 14-34-7-10
Report of public accounting consultant
Sec. 10. (a) An applicant shall submit, in addition to the financial
information required under section 4 of this chapter, a report
prepared by a qualified independent public accounting consultant
selected from a list of public accounting consultants approved by the
director. The director shall consider the information in the report
when deciding whether to accept the self-bond of an applicant.
(b) The director may also require reports described in subsection
(a) after the director accepts the applicant's self-bond, but not more
than one (1) time every three (3) years while the self-bond is posted,
except as provided in subsection (d).
(c) A consultant who prepares a report under this section must:
(1) verify that the financial information required under section
4 of this chapter was prepared in accordance with generally
accepted accounting principles;
(2) verify that the accounting principles referred to in
subdivision (1) were applied consistently for each year of the
period for which the information is submitted;
(3) state the amount of, and reason for, any restatement of the
financial information referred to in subdivision (1) that is
necessary to meet the requirements of subdivision (2); and
(4) state whether any information reviewed during the
preparation of the report would lead the consultant to conclude
that the applicant would not meet the requirements of section 4
of this chapter at the end of each of the three (3) fiscal years
ending after the calendar month in which the report is
completed.
(d) If the consultant who prepares a report under this section is
unable to provide the information required by subsection (c)(4), the
applicant for whom the report is prepared shall submit an updated
report annually.
(e) An applicant shall submit a report required under this section
not later than ninety (90) days after the director notifies the applicant
or permittee that the report is required.
(f) If an applicant fails to submit a report required under
subsection (a), the director shall refuse to accept the self-bond of the
applicant until the applicant files the report.
(g) If a permittee who has posted a self-bond under this chapter
fails to submit a report required under subsection (b), the director
may require the permittee to post an alternate form of bond not later
than ninety (90) days after the deadline for the submission of the
report.
As added by P.L.176-1995, SEC.20.
IC 14-34-7-11
Incremental self-bonds; coverage of deferred grading areas
Sec. 11. (a) The director may not accept an applicant's self-bond
under this chapter in an increment unless, when the self-bond is
initially approved under this chapter, the total area of the increment
is one hundred percent (100%) self-bonded.
(b) When a self-bond is initially accepted from a permit applicant
under this chapter, the self-bond may cover areas subject to the
permit on which, as of July 1, 1995, grading has been deferred.
(c) After a self-bond is accepted under this chapter:
(1) coverage under the self-bond continues on any area subject
to a grading deferral that is in existence on July 1, 1995, if the
grading deferral is subsequently extended beyond its original
term; but
(2) an area subject to the permit as to which a grading deferral
is granted after July 1, 1995, may not be covered by
self-bonding.
(d) An area described in subsection (c)(2):
(1) must be covered by another form of bond allowed under
IC 14-34-6; and
(2) may not be covered by the surface coal mine reclamation
bond pool established by IC 14-34-8.
As added by P.L.176-1995, SEC.21.
IC 14-34-7-12
Alternate forms of self-bonds; monitoring of reclamation
Sec. 12. (a) If a permittee who posted a self-bond under this
chapter does not file an application for a Phase I grading release with
the department before the second November 1 after the year in which
the coal was removed from the site covered by the self-bond, the
permittee shall replace the self-bond with an alternate form of bond
within ninety (90) days of the November 1 deadline established
under this subsection.
(b) If:
(1) a permittee who posted a self-bond under this chapter files
an application for a Phase I grading release with the department
before the second November 1 after the year in which the coal
was removed from the site covered by the self-bond; but
(2) the application is rejected by the department;
the permittee shall replace the self-bond with an alternate form of
bond not later than ninety (90) days after the denial of the application
for a Phase I grading release becomes a final order of the department.
(c) All acreage and structures that are within a permitted area and
are used to facilitate active mining and reclamation operations are
exempt from subsection (b). Areas described in this subsection
include, but are not limited to, the following:
(1) Processing sites.
(2) Tipples.
(3) Railroad sidings.
(4) Buildings.
(5) Haul roads.
(6) Topsoil stockpiles.
(7) Sediment ponds.
(d) For the purposes of subsection (c), the director shall determine
what areas are used to facilitate active mining and reclamation
operations.
(e) A permittee shall submit annual reports to the department in
a form that the director considers necessary to facilitate the effective
monitoring of acres under self-bonding that have been affected and
reclaimed.
(f) An area that:
(1) is not subject to the time limitations set forth in subsection
(b); and
(2) has been used for the disposal of:
(A) coal combustion fly or bottom ash;
(B) flue gas desulfurization byproducts generated by coal
combustion units; or
(C) coal processing wastes;
is no longer eligible for self-bonding ten (10) years after the
disturbance of the area or the self-bonding of the area, whichever is
later. An alternative form of bond must be posted for the area under
IC 14-34-6 not later than ninety (90) days after the area becomes
ineligible for self-bonding under this subsection.
(g) Whenever an area is determined to be no longer eligible for
self-bonding, and an alternative form of bond is posted under
IC 14-34-6, the area:
(1) is never again eligible for self-bonding; and
(2) may not be bonded by the surface coal mine reclamation
bond pool established under IC 14-34-8-3.
As added by P.L.176-1995, SEC.22. Amended by P.L.2-1997,
SEC.55.
IC 14-34-7-13
Effect of invalidation of IC 14-34-7-1
Sec. 13. For purposes of IC 1-1-1-8, if the amendments to
IC 14-34-7-1, as amended by SEA 125-1995, are held invalid or
otherwise unenforceable, the other amendments to IC 14-34-7 made
by SEA 125-1995 are also void.
As added by P.L.176-1995, SEC.23.