405 KAR 10:010. General requirements for performance bond and liability insurance.
RELATES TO: KRS 350.020, 350.060, 350.062, 350.064, 350.151, 350.465, 30 C.F.R. Parts 730-733, 735, 800.11, 800.60, 917, 30 U.S.C. 1253, 1255
STATUTORY AUTHORITY: KRS 350.020, 350.028, 350.060, 350.064, 350.151, 350.465, 30 C.F.R. Parts 730-733, 735, 800.11, 800.60, 917, 30 U.S.C. 1253, 1255
NECESSITY, FUNCTION, AND CONFORMITY: KRS 350.028(1), (5), 350.151(1), and 350.465(2) authorize the cabinet to promulgate administrative regulations relating to surface and underground coal mining operations. This administrative regulation establishes the requirements for filing and maintaining performance bonds and liability insurance, and bonding methods.
Section 1. Applicability. This chapter sets forth the minimum requirements for filing and maintaining performance bonds and insurance for surface coal mining and reclamation operations under KRS Chapter 350.
Section 2. Requirement to File a Bond. (1) An applicant shall not disturb surface acreage or extend any underground shafts, tunnels, or operations prior to receipt of approval from the cabinet of a performance bond covering areas to be affected by surface operations and facilities.
(2) After an application for a new, amended, revised or renewed permit to conduct surface coal mining and reclamation operations has been approved under 405 KAR Chapter 8, but before the permit is issued, the applicant shall file with the cabinet, on a form prescribed and furnished by the cabinet, a performance bond payable to the cabinet. The applicant shall file the form designated at Section 5(1)(a) of this administrative regulation for operations on lands other than federal lands, or the form designated at Section 5(1)(g) of this administrative regulation for operations on federal lands. The performance bond shall be conditioned upon the faithful performance of all the requirements of KRS Chapter 350, 405 KAR Chapters 7 through 24, and the provisions of the reclamation plan and permit, and shall cover all surface coal mining and reclamation operations to be conducted within the permit area or increment thereof until all reclamation requirements of 405 KAR Chapters 7 through 24 have been met. The amount, duration, type, conditions and terms of the performance bond shall conform to 405 KAR 10:020 and 405 KAR 10:030.
(3) No permit shall be revised or amended to include additional area unless the liability of the current bond(s) is extended to cover the entire permit area or increment as revised or amended, and the liability of the supplemental bond(s) covers the entire permit area as revised or amended. Unless these conditions are met with respect to the bond(s), the additional area shall be permitted as a separate increment of the current permit area or under a new permit.
(4) A rider to the applicable performance bond, confirming coverage of the revision, shall be submitted by the applicant if a revision to a permit does not change the acreage of the permit area or increment but:
(a) Adds a coal washer, a crush and load facility, a refuse pile, or a coal mine waste impoundment to the existing permit; or
(b) Alters the boundary of a permit area or increment.
Section 3. Bonding Methods. The method of performance bonding for a permit area shall be selected by the applicant and approved by the cabinet prior to the issuance of a permit, and shall consist of one (1) of the following methods:
(1) Method "S" - single area bonding. A single area bond is a bond which covers the entire permit area as a single undivided area, for which the applicant shall file the entire bond amount required by the cabinet prior to issuance of the permit. Liability under the bond shall extend to every part of the permit area at all times. Except as provided in 405 KAR 10:020, Section 3(2) regarding extended bond liability, there shall be no release of all or part of the bond amount for completion of a particular phase of reclamation on any part of the permit area under 405 KAR 10:040 until that phase of reclamation has been successfully completed on the entire permit area.
(2) Method "I" - incremental bonding. Incremental bonding is a method of bonding in which the permit area is divided into individual increments, each of which is bonded separately and independently, and for which bond is filed as operations proceed through the permit area.
(a) The permit area shall be divided into distinct increments which shall be subject to approval by the cabinet. Each increment shall be of sufficient size and configuration to provide for efficient reclamation operations should reclamation operations by the cabinet become necessary. If the approved postmining land use is of such nature that successful implementation of the postmining land use capability depends upon an area being integrally reclaimed, then that area shall be contained within a single increment. These increments shall be clearly identified on maps submitted in the permit application under 405 KAR Chapter 8, and the applicant shall describe the approximate time schedule for beginning operations in each increment.
(b) Prior to issuance of a permit, the applicant shall file with the cabinet the full bond amount required by the cabinet for the first increment or increments of the permit area to be disturbed, which shall be not less than the minimum bond required for the permit area required under 405 KAR 10:020, Section 2.
(c) The permittee shall not engage in any surface coal mining and reclamation operations on any increment of the permit area unless the full bond amount required by the cabinet has been filed with the appropriate regional office of the department for that increment, the cabinet has verified the validity of the bond, and written authorization to conduct surface coal mining and reclamation operations on that increment is issued by the administrator of the regional office. No credit shall be given for reclamation on other increments.
(d) The boundaries of each increment shall be physically marked at the site in a manner approved by the cabinet.
(e) The bond amount for an increment shall be released or forfeited independently of any other increment of the permit area, and liability under the performance bond shall extend only to the increment expressly covered by the bond. A single bond amount may be filed to cover more than one (1) increment, in which case the increments so covered shall be treated as a single increment.
(f) Except as provided in 405 KAR 10:020, Section 3(2) regarding extended bond liability, there shall be no release of bond for completion of a phase of reclamation on any part of an increment until that phase of reclamation has been successfully completed on the entire increment.
(g) When the bond for an increment is completely released under 405 KAR 10:040, the increment shall be deleted from the permit area.
Section 4. Requirement to File a Certificate of Liability Insurance. Each applicant for a permit shall submit to the cabinet, as part of the permit application, a certificate issued by an insurance company authorized to do business in Kentucky. The amount, duration, form, conditions and terms of this insurance shall conform to 405 KAR 10:030.
Section 5. Incorporation by Reference. (1) The following material is incorporated by reference:
(a) "Performance Bond, Form SME-42, (June, 1999)", Department for Natural Resources.
(b) "Irrevocable Standby Letter of Credit, Form SME-72, (July, 1994)", Department for Natural Resources.
(c) "Confirmation of Irrevocable Standby Letter of Credit, Form SME-72-A, (July, 1994)", Department for Natural Resources.
(d) "Certificate of Liability Insurance, Form SME-29", Department for Natural Resources.
(e) "Notice of Cancellation, Nonrenewal or Change of Liability Insurance, Form SME-30", Department for Natural Resources.
(f) "Escrow Agreement, Form SME-64, (May, 1991)", Department for Natural Resources.
(g) "Performance Bond for Surface Coal Mining and Reclamation on Federal Lands, Form SME-42-F, (June, 1999)", Department for Natural Resources.
(2) This material may be inspected, copied, or obtained at the Department for Natural Resources, #2 Hudson Hollow, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m. (8 Ky.R. 1515; eff. 1-6-83; Am. 15 Ky.R. 438; eff. 12-13-88; 21 Ky.R. 526; eff. 12-12-94; 25 Ky.R. 2935; 26 Ky.R. 377; eff. 8-16-99; TAm eff. 8-9-2007.)