§ 800.21 - Collateral bonds.

§ 800.21 What additional requirements apply to collateral bonds?Collateral bonds.

(a) Collateral bonds, except for letters of credit, cash accounts, and real property, are shall be subject to the following conditions:

(1) The regulatory authority must shall keep custody of collateral deposited by the applicant or permittee until authorized for release or replacement as provided in this partsubchapter.

(2) The regulatory authority must shall value collateral at its current market value, not at face value.

(3) The regulatory authority must shall require that certificates of deposit be made payable to or assigned to the regulatory authority, both in writing and upon the records of the bank or other financial institution issuing the certificates. If assigned, the regulatory authority must shall require the bank or other financial institution issuing the certificate banks issuing these certificates to waive all rights of setoff or liens against the certificatethose certificates.

(4) The regulatory authority may shall not accept an individual certificate of deposit in an amount in excess of $100,000 or the maximum insurable amount insured as determined by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation.

(b) Letters of credit are shall be subject to the following conditions:

(1) The letter may be issued only by a bank organized or authorized to do business in the United States;

(2) Letters of credit must shall be irrevocable during their terms. A letter of credit used as security in areas requiring continuous bond coverage shall be forfeited and shall be collected by the regulatory authority if not replaced by other suitable bond or letter of credit at least 30 days before its expiration date.

(3) The letter of credit must shall be payable to the regulatory authority upon demand, in part or in full, upon receipt from the regulatory authority of a notice of forfeiture issued in accordance with § 800.50 of this part.

(

4) If the permittee has not replaced a letter of credit with another letter of credit or other suitable bond at least 30 days before the letter's expiration date, the regulatory authority must draw upon the letter of credit and use the cash received as a replacement bond.

(c) Real property posted as a collateral bond must shall meet the following conditions:

(1) The applicant or permittee must shall grant the regulatory authority a first mortgage, first deed of trust, or perfected first-lien security interest in real property with a right to sell or otherwise dispose of the property in the event of forfeiture under § 800.50 of this part.

(2) In order for the regulatory authority to evaluate the adequacy of the real property offered to satisfy collateral requirements, the applicant or permittee must shall submit a schedule of the real property to which shall be mortgaged or pledged to secure the obligations under the indemnity agreement. The schedule must list shall include -

(i) A description of the property;

(ii) The fair market value as determined by an independent appraisal conducted by a certified appraiser; and

(iii) Proof of possession and title to the real property.

(3) The property may include land that which is part of the permit area. However; however, land pledged as collateral for a bond under this section may shall not be disturbed under any permit while it is serving as security under this section.

(

4) The appraised fair market value determined under paragraph (c)(2)(ii) of this section is not the bond value of the real estate. In calculating the bond value of real estate, the regulatory authority must discount the appraised fair market value to account for the administrative costs of liquidating real estate, the probability of a forced sale in the event of forfeiture, and a contingency reserve for unanticipated costs including, but not limited to, unpaid real estate taxes, liens, property maintenance expenses, and insurance premiums.

(d) Cash accounts are shall be subject to the following conditions:

(1) The regulatory authority may authorize the permittee operator to supplement the bond through the establishment of a cash account in one or more federally-insured or equivalently protected accounts made payable upon demand to, or deposited directly with, the regulatory authority. The total bond , including the cash account , may shall not be less than the amount determined under § 800.14 of this part, as modified by any adjustments under § 800.15 of this part, less any amounts released under §§ 800.40 through 800.44 of this part. required under terms of performance bonds including any adjustments, less amounts released in accordance with § 800.40.

(2) Any interest paid on a cash account will shall be retained in the account and applied to the bond value of the account unless the regulatory authority has approved the payment of interest to the permitteeoperator.

(3) Certificates of deposit may be substituted for a cash account with the approval of the regulatory authority.

(4) The regulatory authority may shall not accept an individual cash account in an amount in excess of $100,000 or the maximum insurable amount insured as determined by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation.

(e)

(1) The regulatory authority must determine the estimated bond value of all collateral posted as assurance under this section . The bond value must shall be subject to a margin which is the ratio of bond value to market value, as determined by the regulatory authority. The margin shall reflect legal and liquidation fees, as well as value depreciation, marketability, and fluctuations that which might affect the net cash available to the regulatory authority to complete reclamation.

(2)

(i)

The

regulatory authority may evaluate the

bond value of collateral may be evaluated at any time

. (ii) The regulatory authority must evaluate the bond value of collateral

but it shall be evaluated as part of

the

permit renewal

process. (iii) The regulatory authority must increase or decrease

and, if necessary, the performance bond amount

required if an evaluation conducted under paragraph (e)(2)(i) or (ii) of this section determines that the bond value of collateral has

increased or decreased.

(iv)

In no case

may

shall the bond value of collateral exceed the market value

of the collateral

.

(f) Persons who have with an interest in collateral posted as a bond, and who desire notification of actions pursuant to the bond, must shall request such the notification in writing to the regulatory authority at the time that the collateral is offered.

[48 FR 32959, July 19, 1983, as amended at 81 FR 93381, Dec. 20, 2016; 82 FR 54972, Nov. 17, 2017]