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 orconstructive deposit, as appropriate, with the director of one (1) ormore of the following types of property in support of a self-bond:
(1) A perfected, first-lien security interest in favor of thedepartment of natural resources in real property located inIndiana that meets the requirements of this chapter.
(2) Securities backed by the full faith and credit of the UnitedStates 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 bythe applicant, the market value of which is more than onemillion 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 successiveyearly 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 ofsuccessive 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 totransfer assets or provide services to other entities in the future as aresult of past transactions. The term does not include amounts thatare required to be recorded for financial accounting purposes underStatement of Financial Accounting Standards number 106 issued bythe Financial Accounting Standards Board and effective December1990.
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 andReclamation Act" means the federal Surface Mining Control andReclamation 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 orroyalties.
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 orother assets or resources that are reasonably expected to be convertedto 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 orliquidated within one (1) year or within the normal operatingcycle 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 eachquarter is apparent from past business practice.
(c) As used in this section, "fixed assets" means plants andequipment. The term does not include land or coal in place.
(d) Subject to subsection (f), the director may accept a self-bondfrom an applicant for a permit if all of the following conditions aremet by the applicant or the applicant's corporate guarantor at the timethe self-bond is accepted:
(1) The applicant designates a suitable agent to receive serviceof process in Indiana.
(2) The applicant has been in continuous operation as a businessentity for at least five (5) years immediately preceding the timeof application.
(A) The director may allow a joint venture or syndicate withless than five (5) years of continuous operation to qualify
under this requirement if each member of the joint ventureor syndicate has been in continuous operation for at leastfive (5) years immediately preceding the time of application.
(B) When calculating the period of continuous operation, thedirector may exclude periods of interruption to the operationof the business entity that:
(i) were beyond the applicant's control; and
(ii) do not affect the applicant's likelihood of remaining inbusiness during the proposed surface coal mining andreclamation operations.
(3) The applicant is not subject to any outstanding cessationorder issued under IC 13-4.1-11-5 (before its repeal),IC 14-34-15-6, or the Surface Mining Control and ReclamationAct.
(4) The applicant does not owe any civil penalties underIC 13-4.1-12 (before its repeal), IC 14-34-16, or the SurfaceMining 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 andReclamation Act, and is not delinquent in the payment of anyfees or civil penalties.
(6) The applicant's permit has never been suspended under thisarticle or IC 13-4.1 (before its repeal), and the applicant is notlisted on the Applicant Violator System (AVS).
(7) The applicant submits financial information in sufficientdetail to demonstrate that the applicant satisfies at least one (1)of the following criteria:
(A) The applicant has a current rating for the applicant'smost 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 theapplicant and provide any additional relevant informationconcerning 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 than2.5:1.
(iii) A ratio of current assets to current liabilities of at least1.2:1.
The ratio requirements set forth in this clause must be metfor the year immediately preceding the application, and mustbe documented for the four (4) years preceding theapplication. An explanation shall be included for any year inwhich the ratios of the applicant did not meet therequirements set forth in this clause. The failure of anapplicant to meet the ratio requirements set forth in thisclause for any of the four (4) years preceding the applicationdoes 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 leasttwenty million dollars ($20,000,000).
(ii) A ratio of total liabilities to net worth of not more than2.5:1.
(iii) A ratio of current assets to current liabilities of at least1.2:1.
The ratio requirements set forth in this clause must be metfor the applicant's fiscal year immediately preceding theapplication, and must be documented for the four (4) yearspreceding the application. An explanation shall be includedfor any year in which the ratios of the applicant did not meetthe requirements set forth in this clause. The failure of anapplicant to meet the ratio requirements set forth in thisclause for any of the four (4) years preceding the applicationdoes not necessarily disqualify an applicant for self-bondingunder this chapter.
(8) The applicant submits the following:
(A) Financial statements for the most recently completedfiscal year accompanied by a report prepared by anindependent certified public accountant:
(i) in conformity with generally accepted accountingprinciples; and
(ii) containing the accountant's audit opinion or reviewopinion of the financial statements with no adverseopinion.
(B) Unaudited financial statements for completed quarters inthe current fiscal year.
(C) Comparative financial data from a five (5) year period,that must include a comparative income statement and acomparative balance sheet.
(D) A statement listing:
(i) every lien filed against any assets of the applicant inany jurisdiction in the United States for an amount that ismore than two percent (2%) of the applicant's net worth;
(ii) every action pending against the applicant;
(iii) every judgment rendered against the applicant withinthe seven (7) years preceding the application that remainsunsatisfied and for an amount that is more than twopercent (2%) of the applicant's net worth; and
(iv) any petitions or actions in bankruptcy against theapplicant, including actions for reorganization.
(E) Additional unaudited information requested by thedirector.
(e) If an applicant submits financial information to demonstratethat 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-bondamount included in the current liabilities or total liabilities for the
year of the application. The operator may deduct from the totalliabilities the costs currently accrued for reclamation that appear onthe balance sheet current in the year of the application.
(f) Notwithstanding subsection (d)(7), the director may not accepta self-bond from an applicant unless the financial ratios of theapplicant are at least as favorable as those listed for the mediumperformers in the Dun and Bradstreet listing of Industry Norms andKey Business Ratios.
(g) Each lien, action, and petition listed under subsection(d)(8)(E) must be identified by the named parties, the jurisdiction inwhich the matter was filed, the case number, and the final dispositionor 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 onJuly 1, 1995, must be replaced in one (1) of the following ways:
(1) The self-bond may be replaced by another form of bondallowed under IC 13-4.1-6.
(2) The self-bonded permittee may reapply for self-bondingunder this chapter.
(b) If the application of a permittee submitted under subsection(a)(2) is not accepted, the permittee must replace its self-bond withanother 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 isreferred to as a "corporate guarantee".
(b) The director may accept a corporate guarantee for anapplicant's self-bond from a corporate guarantor if, at the time theself-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 anapplicant under section 4 of this chapter.
(c) The terms of a corporate guarantee must provide for thefollowing:
(1) If the applicant fails to complete the reclamation plan, theguarantor shall complete the reclamation plan or the guarantoris liable under the indemnity agreement to provide money to thedepartment sufficient to complete the reclamation plan, but notto exceed the bond amount.
(2) The corporate guarantee remains in force unless:
(A) the guarantor sends notice of cancellation by certifiedmail 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 beaccepted by the director if:
(A) the applicant obtains a suitable replacement bondallowed under IC 13-4.1-6 (before its repeal) or IC 14-34-6before the cancellation date; or
(B) the land or parts of the land for which the self-bond wasaccepted 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, thetotal amount of the outstanding and proposed self-bonds of theapplicant for surface coal mining and reclamation operations in theUnited States may not exceed twenty-five percent (25%) of theapplicant's tangible net worth in the United States.
(b) For the director to accept a corporate guarantee, the totalamount of the corporate guarantor's present and proposed self-bondsand guaranteed self-bonds for surface coal mining and reclamationoperations 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, anindemnity agreement shall be submitted to the director. Theindemnity agreement must meet the following requirements:
(1) The indemnity agreement must provide in express terms thatthe persons or parties bound by the agreement are liable to thedirector for all costs incurred by the director:
(A) in pursuing forfeiture of any self-bonds posted by thepermittee for whom the indemnity agreement was submitted;and
(B) in reclaiming those areas at which the permittee forwhom the indemnity agreement was submitted retains excessmonetary 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 bebound 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 corporateguarantor guaranteeing a self-bond must submit an indemnityagreement signed by two (2) corporate officers who are
authorized to bind the corporation. The director must be givena copy of the authorization and an affidavit certifying that theindemnity agreement is valid under all applicable state andfederal laws. A corporate guarantor must give the director acopy of the corporate authorization demonstrating that thecorporation may guarantee the self-bond and execute theindemnity agreement.
(4) If the applicant is a partnership, joint venture, or syndicate,the agreement must bind each partner or party who has abeneficial interest, directly or indirectly, in the applicant.
(5) The applicant or corporate guarantor must complete theapproved reclamation plan for the land as to which a bond hasbeen forfeited for failure to reclaim or pay to the director anamount necessary to complete the approved reclamation plan,not to exceed the bond amount.
(6) All bonds and guarantees must be indemnified corporatelyand 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-bondapplication
Sec. 7.1. (a) If an application for self-bonding is rejected based onthe information required by section 4 of this chapter or limitations setforth in section 4 of this chapter, the applicant may offer collateral(as defined in section 0.5 of this chapter) and an indemnityagreement to support the applicant's self-bond application. Anindemnity agreement offered under this subsection is subject to therequirements of section 7 of this chapter.
(b) The following information must be provided about collateraloffered under subsection (a) to support a self-bond:
(1) The value of the property. The property must be valued atthe difference between the fair market value of the property andreasonable expenses the department anticipates incurring inselling the property. The fair market value must be determinedby an appraiser proposed by the applicant. The director mayreject an appraiser proposed by the applicant. An appraisal ofproperty must be performed expeditiously and a copy of theappraisal 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 issatisfactory for deposit under this section, and a statement of:
(A) all liens, encumbrances, or adverse judgments imposedon the property; and
(B) any pending litigation relating to the property.
(c) The director has full discretion in accepting collateral offeredunder subsection (a) to support a self-bond.
(d) Real property offered as collateral under subsection (a) maynot include lands that are in the process of being mined or reclaimed
or lands that are the subject of an application under this chapter. Theoperator may offer land that was formerly subject to a bond if thebond has been released.
(e) Securities offered as collateral under subsection (a) mayinclude only securities that meet the definition of collateral set forthin 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 ofbusiness.
(3) Fixtures.
(4) Certificates of deposit that are not federally insured or thatare issued by a depository that is unacceptable to the director.
(g) Evidence of ownership of property offered as collateral undersubsection (a) must be submitted in one (1) of the following forms:
(1) If the property offered is real property, the interest of theapplicant must be evidenced by a title certificate or similarevidence of title and encumbrance prepared by an abstractoffice 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 interestmust be evidenced by possession of the original or a notarizedcopy of the certificate or a certified statement of account froma brokerage house.
(3) If the property offered is personal property, evidence ofownership must be submitted in a form that:
(A) is satisfactory to the director; and
(B) affirmatively establishes unencumbered title to theproperty of the operator.
(h) An applicant that offers personal property as collateral undersubsection (a), in addition to submitting the evidence required bysubsection (g), must satisfy the financial requirements set forth insection 4(d)(7)(B) and 4(d)(7)(C) of this chapter.
(i) If the director accepts personal property from an applicant ascollateral under subsection (a), the director shall require thefollowing:
(1) Quarterly and annual maintenance reports prepared by theapplicant.
(2) A perfected, first lien security interest in the property infavor of the department of natural resources. The securityinterest must be perfected through:
(A) the filing of a financing statement; or
(B) surrender of possession of the collateral to thedepartment under subsection (k).
(j) If the director accepts personal property from an applicant ascollateral under subsection (a), the director may require quarterly orannual inspections of the personal property by a qualified
representative of the department.
(k) If the director accepts personal property from an applicant ascollateral 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 applicantin favor of the department.
(l) The property interest conveyed under subsection (k) vests inthe department to secure the right and power to sell or otherwisedispose of the property by public or private proceedings so as toensure reclamation of the affected lands in accordance with thereclamation plan.
(m) A mortgage executed under subsection (k)(2) must beexecuted and recorded so as to be first in time and constitute noticeof the interest of the department in the property to any prospectivesubsequent purchaser of the property.
(n) Any income received from the collateral during the periodwhen the collateral is in the possession of the department shall beremitted to the applicant.
(o) If collateral is left in the possession of the applicant, thesecurity agreement executed under subsection (k)(2) must requirethat, upon default, the applicant shall assemble the collateral andmake it available to the department at a place designated by thedepartment that is reasonably convenient to both parties. All costs oftransporting and assembling the collateral shall be borne by theapplicant.
(p) With the consent of the director, an applicant may substituteother property for any property accepted and held as collateral underthis section. Property may be substituted under this subsection onlyif:
(1) all the information required concerning property originallysubmitted as collateral is provided concerning the proposedsubstitute collateral; and
(2) all requirements of this section are met with respect to theproposed substitute collateral so that all obligations relating tomining operations are secured under all periods of time.
(q) If collateral is posted under subsection (a) to support aself-bond, the applicant shall:
(1) notify all persons that have an interest in the collateral of theposting of the collateral and of all other actions affecting thecollateral; 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 andcorporate 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 theclose of each fiscal year; and
(2) information required under section 4(d)(8)(B) of this chapteron a quarterly basis not later than sixty (60) days after the endof 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 isposted, the financial conditions of the applicant or the corporateguarantor change so that the criteria of sections 4(d)(7), 4(f), and 6of this chapter are no longer satisfied, the permittee shall do thefollowing:
(1) Notify the director immediately.
(2) Within ninety (90) days of the change in financial conditionpost an alternate form of bond in the same amount as theself-bond.
(b) If the applicant does not post an alternate form of bond withinninety (90) days of the change in financial condition, the applicantmust 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 financialinformation required under section 4 of this chapter, a reportprepared by a qualified independent public accounting consultantselected from a list of public accounting consultants approved by thedirector. The director shall consider the information in the reportwhen 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 morethan 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 section4 of this chapter was prepared in accordance with generallyaccepted accounting principles;
(2) verify that the accounting principles referred to insubdivision (1) were applied consistently for each year of theperiod for which the information is submitted;
(3) state the amount of, and reason for, any restatement of thefinancial information referred to in subdivision (1) that isnecessary to meet the requirements of subdivision (2); and
(4) state whether any information reviewed during thepreparation of the report would lead the consultant to conclude
that the applicant would not meet the requirements of section 4of this chapter at the end of each of the three (3) fiscal yearsending after the calendar month in which the report iscompleted.
(d) If the consultant who prepares a report under this section isunable to provide the information required by subsection (c)(4), theapplicant for whom the report is prepared shall submit an updatedreport annually.
(e) An applicant shall submit a report required under this sectionnot later than ninety (90) days after the director notifies the applicantor permittee that the report is required.
(f) If an applicant fails to submit a report required undersubsection (a), the director shall refuse to accept the self-bond of theapplicant until the applicant files the report.
(g) If a permittee who has posted a self-bond under this chapterfails to submit a report required under subsection (b), the directormay require the permittee to post an alternate form of bond not laterthan ninety (90) days after the deadline for the submission of thereport.
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-bondunder this chapter in an increment unless, when the self-bond isinitially approved under this chapter, the total area of the incrementis one hundred percent (100%) self-bonded.
(b) When a self-bond is initially accepted from a permit applicantunder this chapter, the self-bond may cover areas subject to thepermit 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 subjectto a grading deferral that is in existence on July 1, 1995, if thegrading deferral is subsequently extended beyond its originalterm; but
(2) an area subject to the permit as to which a grading deferralis granted after July 1, 1995, may not be covered byself-bonding.
(d) An area described in subsection (c)(2):
(1) must be covered by another form of bond allowed underIC 14-34-6; and
(2) may not be covered by the surface coal mine reclamationbond 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 thischapter does not file an application for a Phase I grading release withthe department before the second November 1 after the year in which
the coal was removed from the site covered by the self-bond, thepermittee shall replace the self-bond with an alternate form of bondwithin ninety (90) days of the November 1 deadline establishedunder this subsection.
(b) If:
(1) a permittee who posted a self-bond under this chapter filesan application for a Phase I grading release with the departmentbefore the second November 1 after the year in which the coalwas 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 ofbond not later than ninety (90) days after the denial of the applicationfor a Phase I grading release becomes a final order of the department.
(c) All acreage and structures that are within a permitted area andare used to facilitate active mining and reclamation operations areexempt from subsection (b). Areas described in this subsectioninclude, 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 determinewhat areas are used to facilitate active mining and reclamationoperations.
(e) A permittee shall submit annual reports to the department ina form that the director considers necessary to facilitate the effectivemonitoring of acres under self-bonding that have been affected andreclaimed.
(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 coalcombustion units; or
(C) coal processing wastes;
is no longer eligible for self-bonding ten (10) years after thedisturbance of the area or the self-bonding of the area, whichever islater. An alternative form of bond must be posted for the area underIC 14-34-6 not later than ninety (90) days after the area becomesineligible for self-bonding under this subsection.
(g) Whenever an area is determined to be no longer eligible forself-bonding, and an alternative form of bond is posted underIC 14-34-6, the area:
(1) is never again eligible for self-bonding; and
(2) may not be bonded by the surface coal mine reclamationbond 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 toIC 14-34-7-1, as amended by SEA 125-1995, are held invalid orotherwise unenforceable, the other amendments to IC 14-34-7 madeby SEA 125-1995 are also void.
As added by P.L.176-1995, SEC.23.