25 Pa. Code § 86.159 - Self-bonding
(a) The Department
may accept a self-bond to cover all or part of the permittee's liabilities
arising from coal mining activities. The Department will not accept a self-bond
covering long-term indeterminate liabilities. These liabilities include, but
are not limited to, obligations to treat discharges from mining activities
which exist after completion of mining and reclamation activities as required
by section 315 of The Clean Streams Law (35 P. S. §
691.315), §§
87.102,
87.207,
88.92,
88.187,
88.507 and
89.52 or restoration of soil
productivity of prime farmland as required by §§
87.177-87.181,
88.129,
88.217,
88.330,
88.381,
88.493 and
90.161-90.165. The applicant for a
self-bond shall demonstrate to the satisfaction of the Department a history of
continuous efforts to achieve compliance with Federal and State environmental
laws, that it meets financial eligibility criteria established in this section
and enters into indemnity and security agreements required by this section. An
applicant which is a subsidiary corporation may satisfy the requirements for
eligibility to self-bond by relying on its parent corporation. In this case,
the parent corporation shall meet the eligibility and reporting requirements
required by this section.
(b) The
Department, in determining an applicant's eligibility to self-bond, will be
satisfied by the applicant that it meets the following requirements:
(1) The applicant is incorporated in or
authorized to do business in this Commonwealth. If a subsidiary corporation is
a permittee or an applicant for a permit, the parent corporation of the
subsidiary corporation is not required to be incorporated in or authorized to
do business in this Commonwealth.
(2) The applicant has designated suitable
agents in this Commonwealth to receive service of suits, claims, demands and
other services of process.
(3) The
applicant has a history of continuous business operation. This requirement may
be deemed to be met if one of the following applies:
(i) The applicant's existence is the result
of a reorganization, consolidation or merger involving a company with a history
of continuous business operation.
(ii) The applicant is a majority-owned
subsidiary of a corporation with a history of continuous business
operation.
(4) The
applicant, during the last 36 calendar months, has not defaulted in the payment
of one or more of the following:
(i) Dividend
or sinking fund installment, preferred stock or installment of indebtedness for
borrowed money.
(ii) Payment of
rentals under long-term leases.
(iii) A reclamation fee payment due under
section 402 of the Surface Mining Control and Reclamation Act of 1977
(30 U.S.C.A. §
1232) for coal produced in this
Commonwealth.
(5) The
applicant, during the last 36 calendar months, has honored its obligations
under other self-bonding programs established by another state or the Federal
government.
(6) The applicant has
not had commercial surety bonds cancelled for nonpayment of premiums or fraud
or failure to comply with conditions established by the surety company as
conditions of maintaining surety bonds in force and effect.
(c) The applicant, as part of the application
for self-bonding, shall submit to the Department the following items:
(1) Financial statements for its most recent
3 fiscal years, prepared in accordance with generally accepted accounting
principles, and in sufficient detail to determine if the applicant can meet the
financial solvency tests contained in this section.
(2) Financial statements for the completed
quarters of the fiscal year in which application is made.
(3) A report, prepared by an independent
certified public accountant in conformity with generally accepted accounting
principles, containing the accountant's audit opinion or review opinion of the
financial statements for the applicant's most recent 3 fiscal years.
(4) Certification that the applicant intends
to maintain its existing corporate status for a period in excess of 5 years.
(5) Certification that forfeiture
of the aggregate amount of the applicant's self-bonds approved and furnished
for operations included under this section will not materially affect its
ability to remain in business or endanger its cash flow to the extent it could
not meet its current obligations.
(6) Other information regarding its financial
solvency, continuous business operation and compliance with environmental laws
as the Department may require.
(d) After initial submission of the
information in the application for self-bonding, the applicant shall submit
updated information as specified in subsections (b) and (c) within 90 days of
the close of each of the applicant's fiscal years. The applicant shall meet the
requirements of this section relating to eligibility to self-bond for each
succeeding fiscal year. The Department may require reports of financial
condition from the applicant and these reports shall be in addition to those
specified in this subsection. Failure of the applicant to provide reports
requested by the Department shall render the applicant ineligible to self-bond.
(e) If the applicant or the
independent certified public accountant submits false information or
representations in the application or reports required by this section, the
application will be disallowed and render the applicant ineligible to
self-bond. The applicant and the independent certified public accountant shall
be subject to
18 Pa.C.S. §§
4903 and
4904 (relating to false
swearing; and unsworn falsification to authorities).
(f) The applicant shall satisfy one of the
following financial tests in paragraph (1), (2) or (3):
(1) The applicant satisfies the following
requirements:
(i) A current rating for its
most recent bond issuance of either: AAA, AA or A as issued by Standard and
Poor's Corporation; or Aaa, Aa or A as issued by Moody's Investor Services. The
ratings may not have been assigned as a result of the bond issue being
independently insured.
(ii)
Tangible net worth at least six times the total amount of outstanding and
proposed self-bonds for coal mining activities in this Commonwealth.
(iii) Assets in the United States amounting
to at least 90% of total assets.
(2) The applicant satisfies the following
requirements:
(i) Tangible net worth of at
least $10 million.
(ii) 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.
(iii) Tangible net worth at least six times
the total amount of outstanding and proposed self-bonds for coal mining
activities in this Commonwealth.
(iv) Assets in the United States amounting to
at least 90% of total assets.
(3) The applicant satisfies the following
requirements:
(i) Possesses fixed assets in
the United States of at least $20 million.
(ii) 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.
(iii) Has
tangible net worth at least six times the total amount of outstanding and
proposed self-bonds for coal mining activities in this Commonwealth.
(iv) Has assets in the United States
amounting to at least 90% of total assets.
(g) An adverse opinion or a disclaimer of
opinion expressed by the independent certified public accountant in its report
on examination of the applicant's financial statements renders the applicant
ineligible to self-bond. The Department may determine an applicant ineligible
to self-bond on the basis of other qualifications in the opinion expressed by
the independent certified public accountant in its report on the examination of
the applicant's financial statements.
(h) The total value of outstanding plus
proposed self-bonds for coal mining activities may not exceed 25% of the
applicant's tangible net worth in the United States.
(i) The period of liability under an approved
self-bond shall be determined in accordance with §
86.151 (relating to period of
liability). The release of a self-bond shall be made under §§
86.170-86.172 (relating to scope;
procedures for seeking release of bond; and criteria for release of bond).
Liability under a self-bond is terminated upon the Department's approval of
alternative bonding, as provided for in this subchapter, submitted by the
applicant.
(j) As part of the
application for self-bonding, the applicant shall submit to the Department a
self-bond as defined in §
86.142 (relating to definitions).
The self-bond shall be perfected under the applicable statutes of the
Commonwealth and the United States at the time of execution. The security
interests supporting the self-bond shall be in accordance with the following
schedule:
(1) For tangible net worth from 6
to 6.99 times the total amount of outstanding and proposed self-bonds for coal
mining activities in this Commonwealth, the security interest shall be in an
amount equal to the amount of liability to be covered by the
self-bond.
(2) For tangible net
worth from 7 to 7.99 times the total amount of outstanding and proposed
self-bonds for coal mining in this Commonwealth, the security interest shall be
in an amount equal to 80% of the amount of liability to be covered by the
self-bond.
(3) For tangible net
worth from 8 to 8.99 times the total amount of outstanding and proposed
self-bonds for coal mining in this Commonwealth, the security interest shall be
in an amount equal to 60% of the amount of liability to be covered by the
self-bond.
(4) For tangible net
worth from 9 to 9.99 times the total amount of outstanding and proposed
self-bonds for coal mining in this Commonwealth, the security interest shall be
in an amount equal to 40% of the amount of liability to be covered by the
self-bond.
(5) For tangible net
worth equal to or in excess of 10 times the total amount of outstanding and
proposed self-bonds for coal mining in this Commonwealth, the security interest
shall be in an amount equal to 25% of the amount of liability to be covered by
the self-bond.
(6) Notwithstanding
a provision in this chapter to the contrary, the Department may require the
applicant, either initially or during the period of liability under a
self-bond, to provide additional security interests as the Department may, in
its sole discretion, determine it necessary to assure the applicant's
obligations under the self-bond are met. The determination that an applicant
may be unwilling or unable to meet its obligations under the self-bond
includes, but is not limited to, a review of individual factors such as the
applicant demonstrating a pattern of delay, resistance to or avoidance of
timely compliance with the conditions of the self-bond, the applicant's permit,
or both, and Department orders relating thereto.
(k) The self-bond shall be in a form prepared
and approved by the Department and may contain special conditions as the
Department may require to assure the Commonwealth's interests are fully
protected. The self-bond, in addition toanother term or condition of forfeiture
contained in a bond required by this subchapter, shall contain the following
terms and conditions:
(1) The self-bond will
be forfeited if either of the following occur:
(i) Ninety days after the Department is
informed by or determines that the applicant is no longer eligible to self-bond
and within the 90-day period the applicant fails to submit to the Department
acceptable security as provided for in this subchapter to cover its self-bonded
liability.
(ii) Within 90 days of
the issuance of an order to abate conditions at a site covered by a self-bond
which constitutes either an actual or potential risk of harm to the
environment, the applicant fails to, except as provided for in §
86.211 (relating to
enforcement-general), comply with the order or fails to submit to the
Department acceptable security as provided for in this subchapter in an amount
equal to the self-bonded liability.
(2) Liability under the self-bond shall be
conditioned on:
(i) The applicant faithfully
performing the following requirements:
(A) The
Surface Mining Conservation and Reclamation Act (52 P. S. §§
1396.1-1396.19b).
(B) The Clean Streams Law (35 P. S.
§§
691.1-691.1001).
(C) The Air Pollution Control Act
(35
P. S. §§
4001-4015).
(D) The Coal Refuse Disposal Control Act
(52
P. S. §§
30.51-30.66).
(E) The Solid Waste Management Act
(35
P. S. §§
6018.101-6018.1003).
(F) The Dam Safety and Encroachments Act
(32
P. S. §§
693.1-693.27).
(G) The Bituminous Mine Subsidence and Land
Conservation Act (52 P. S. §§
1406.1-1406.21).
(H) Regulations adopted by the EQB under the
acts set forth in clauses (A)-(G).
(ii) The applicant immediately notifying the
Department of a significant change in the management control or organization of
the applicant.
(iii) The applicant
immediately notifying the Department of a material adverse change to the
financial condition of the applicant, that may affect eligibility to self-bond
or diminish the value of the security interests pledged to secure the
self-bond.
(iv) The applicant,
during the period of the self-bond, applying for or consenting to the
appointment of a receiver, conservator, trustee or liquidator of itself or its
property, admitting in writing its inability to pay its debts as the debts
mature or making a general assignment for the benefit of its
creditors.
(v) During the period of
the self-bond, a creditor of the applicant attaching or executing a judgment
against the applicant so that the Department would have reasonable belief the
prospect of the applicant having sufficientassets to cover the full amount of
the self-bond or to be able to perform under the self-bond is
impaired.
(3) The
self-bond shall become immediately due and payable upon default of one or more
of the terms and conditions or the dissolution of a party to the self-bond. The
self-bond shall provide for confession of judgment and confession of execution
upon default of one or more of the terms and conditions or
dissolution.
(l) The
self-bond shall be executed by:
(1) The
applicant, except as provided in paragraphs (2) and (3).
(2) If the applicant is a subsidiary
corporation, the applicant's parent corporation shall be a party to the
self-bond which shall establish the applicant and its parent corporation as
co-indemnitors under the self-bond. Corporations applying for a self-bond, and
parent and nonparent corporations guaranteeing an applicant's self-bond, shall
submit an indemnity agreement signed by two corporate officers who are
authorized to bind their corporations. A copy of the authorization shall be
submitted to the Department along with an affidavit certifying that the
agreement is valid under all applicable Federal and State laws. In addition,
the corporate guarantor shall provide a copy of the corporate authorization
demonstrating that the corporation may guarantee the self-bond and execute the
guarantee agreement. The parent corporation may cancel its obligations under
the self-bond upon 120 days written notice to the Department, but the
cancellation will not be effective until the self-bond is replaced with an
alternate form of bonding authorized by this subchapter and approved by the
Department.
(3) If the applicant is
a partnership, joint venture or syndicate, each person with a beneficial
interest in the same shall be a party to the self-bond and shall be established
as a co-indemnitor under the self-bond.
(m) Each indemnitor under the self-bond shall
be jointly and severally liable.
(n) Only security interests acceptable to the
Department shall be used to secure the self-bond and include, but are not
limited to, account security agreements, mortgages, industrial plant mortgages,
pledges of stock and personal property liens. In accepting security interests,
the Department will exercise the degree of judgment, skill, diligence and care
under the circumstances then prevailing which persons of prudence, acting in a
like capacity and familiar with these matters, would use in the conduct of an
enterprise of like character and with like aims. If the applicant is unable or
fails to provide security interests acceptable to the Department, the applicant
shall be ineligible to self-bond. The Department may accept a security interest
in an applicant's parent corporation's assets.
(o) During the period of the self-bond and
until released in writing by the Department, the parties to the self-bond who
are indemnitors may not take action which would adversely affect the
Commonwealth's rights, title or interest in the security interests pledged to
secure the self-bond. The parties who are indemnitors shall immediately notify
the Department of a sale, merger, acquisition, reorganization, consolidation or
other action which may so affect the pledged security interests. The self-bond
shall contain provisions so that if the parties who are indemnitors take action
which adversely affects the pledged security interests, the action shall
constitute an event of default.
(p)
In addition to the indemnification and security required in subsection (j), the
Department may require a third-party guarantee of an applicant's self-bond.
Third-party guarantors shall enter into a guaranty and suretyship agreement
with the Department whereby the third-party guarantor guarantees and becomes
surety for the performance of the parties who are indemnitors under the
self-bond required by subsection (j).
(1) The
guaranty and suretyship agreement shall be perfected under the applicable
statutes of the Commonwealth and the United States at the time of execution
with security interests so that the Commonwealth's interests as indemnitee are
fully protected.
(2) Only security
interests approved by the Department shall be used to satisfy the requirements
of this subsection. The security instruments include, but are not limited to,
surety mortgages, industrial plant mortgage and security agreements and
security liens on personal property.
(q) When the Department determines that an
event of default or forfeiture under the self-bond has occurred, the
determination shall also constitute a determination of the applicant's
inability to self-bond.
(r) The
Department will upon request of the applicant, maintain the confidentiality of
the applicant's financial information and the terms and conditions of the
security interests unless the same are otherwise disclosed to governmental
agencies or the public.
(s)
Applications for a self-bond and each annual update of a self-bond shall be
accompanied by a nonrefundable check in the amount of $900 made payable to the
"Commonwealth of Pennsylvania."
(t)
Remedies provided or authorized by laws for violation of statutes, including
the acts, this chapter, the terms and conditions of the permits and orders of
the Department, are expressly preserved. Nothing in this subchapter may be
construed as an exclusive remedy. No action taken under this subchapter waives
or impairs another remedy provided by law.
Notes
The provisions of this § 86.159 amended under section 5 of The Clean Streams Law (35 P. S. § 691.5); sections 4(a) and 4.2 of the Surface Mining Conservation and Reclamation Act (52 P. S. §§ 1396.4(a) and 1396.4b); and section 1920-A of The Administrative Code of 1929 (71 P. S. § 510-20).
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