[Federal Register Volume 62, Number 213 (Tuesday, November 4, 1997)]
[Rules and Regulations]
[Pages 59569-59578]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29132]
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DEPARTMENT OF THE INTERIOR
Office of Surface Mining Reclamation and Enforcement
30 CFR Part 914
[SPATS No. IN-134-FOR; State Program Amendment No. 95-12]
Indiana Regulatory Program
AGENCY: Office of Surface Mining Reclamation and Enforcement (OSM),
Interior.
ACTION: Final rule; approval of amendment.
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SUMMARY: OSM is approving with certain exceptions a proposed amendment
to the Indiana regulatory program (hereinafter referred to as the
``Indiana program'') under the Surface Mining Control and Reclamation
Act of 1977 (SMCRA). Indiana proposed revisions to the Indiana Surface
Coal Mining and Reclamation Act (ISMCRA) as enacted by the Indiana
General Assembly (1995) in Senator Enrolled Act 125 (SEA 125). The
proposed amendment, concerning the submittal of affected area status
reports and performance bonding, is intended to revise the Indiana
program to be consistent with SMCRA and incorporate State initiatives.
EFFECTIVE DATE: November 4, 1997.
FOR FURTHER INFORMATION CONTACT: Andrew R. Gilmore, Director,
Indianapolis Field Office, Office of Surface Mining Reclamation and
Enforcement, Minton-Capehart Federal Building, 575 North Pennsylvania
Street, Room 301, Indianapolis, IN 46204-1521, Telephone (317) 226-
6166.
SUPPLEMENTARY INFORMATION:
I. Background on the Indiana Program
II. Submission of the Proposed Amendment
III. Director's Findings
IV. Summary and Disposition of Comments
V. Director's Decision
VI. Procedural Determinations
I. Background on the Indiana Program
On July 29, 1982, the Secretary of the Interior conditionally
approved the Indiana program. Background information on the Indiana
program, including the Secretary's findings, the disposition of
comments, and the conditions of approval can be found in the July 26,
1982, Federal Register (47 FR 32107). Subsequent actions concerning the
conditions of approval and program amendments can be found at 30 CFR
914.10, 914.15, and 914.16.
II. Submission of the Proposed Amendment
By letter dated September 11, 1995 (Administrative Record No. IND-
1510), the Indiana Department of Natural Resources (IDNR) submitted a
proposed amendment to its program pursuant to SMCRA. Indiana submitted
the proposed amendment as its own initiative. SEA 125 amends ISMCRA by
adding new sections and revising existing sections, concerning affected
area status reports and performance bonding, to recodified Indiana Code
(IC) 14-8. The provisions of the ISMCRA that Indiana proposes to add at
recodified IC 14-8 are: IC 14-8-42.5, definition of ``collateral''; IC
14-8-2-49.5, definition of ``comparative balance sheet''; IC 14-8-2-
49.6, definition of ``comparative income statement''; IC 14-8-2-274.5,
definition of ``Surface Mining Control and Reclamation Act.'' The
provisions of the ISMCRA that Indiana proposes to revise or add at
recodified IC 14-34 are: IC 14-34-5-10, affected area status reports;
IC 14-34-6-14.3 and IC 14-34-14.6, general requirements of performance
bonding; IC 14-34-7-0.5, definition of ``collateral''; IC 14-34-7-0.6,
definition of ``comparative balance sheet''; IC 14-34-7-0.7, definition
of ``comparative income statement''; IC 14-34-7-2.5, definition of
``Surface Mining Control and Reclamation Act''; IC 14-34-7-1,
definition of ``liabilities''; IC-14-34-7-4(b), definition of ``current
liabilities''; IC 14-34-7-4(d), conditions for self-bonding; IC 14-34-
7-4(e), (f) and (g), additional conditions for self-bonding; IC 14-34-
7-4.1, replacement of self-bonds; IC 14-34-7-5, corporate guarantee; IC
14-34-7-7, indemnity agreement conditions; IC 14-34-7-7.1, use of
collateral to support a self-bond; IC 14-34-7-8, information
requirements for self-bonding; IC 14-34-7-9, requirements for a change
in financial conditions; IC 14-34-7-10, self-bonding report
requirements; IC 14-34-7-11, self-bond coverage requirements: IC 14-34-
7-12, self-bond Phase I grading
[[Page 59570]]
release requirements; and IC 14-34-7-13, nonseverability provision.
OSM announced receipt of the proposed amendment in January 22,
1996, Federal Register (61 FR 1551), and in the same document opened
the public comment period and provided an opportunity for a public
hearing on the adequacy of the proposed amendment. The public comment
period closed on February 21, 1996.
During its review of the amendment, OSM identified concerns
relating to duplicate bond coverage/reclamations agreements, IC 14-34-
6-14.6; definition of ``liabilities,'' IC 14-34-7-1; self-bonding
qualifying criteria, IC 14-34-7-4; collateral self-bonds, IC 14-34-7-
7.1; and report of qualified independent public accounting consultant,
IC 14-34-7-10. OSM notified Indiana of these concerns by letter dated
September 13, 1996 (Administrative Record No. INC-1543).
By letter dated October 25, 1996 (Administrative Record No. IND-
1545), Indiana responded to most of OSM's concerns by submitting
additional explanatory information. By letter dated August 4, 1997
(Administrative Record No. IND-1584), Indiana responded to OSM's
editorial concerns by submitting Senate Enrolled Act 7, which contained
technical corrections to its proposed amendment. Because the additional
information merely clarified certain provisions of Indiana's proposed
amendment, OSM did not reopen the public comment period.
III. Director's Findings
Set forth below, pursuant to SMCRA and the Federal regulations at
30 CFR 732.15 and 732.17, are the Director's findings concerning the
proposed amendment.
Revisions not specifically discussed below concern nonsubstantive
wording changes, or revised cross-references and paragraph notations to
reflect organizational changes resulting from this amendment.
A. Revisions to Indian's Statutes That Are Substantively Identical to
the Corresponding Federal Provisions
1. Indiana proposes to revise the following statute that contains
language that is identical in meaning to the counterpart Federal
regulation indicated in brackets IC 14-34-7-5, Self-Bonding Corporate
Guarantee [30 CFR 800.23(c)(1)].
Because the above proposed revision is identical in meaning to the
corresponding Federal regulation, the Director finds that Indiana's
proposed statute is no less stringent than SMCRA and no less effective
than the Federal rule.
B. Revisions to Indiana's Statutes That Are Not Substantively Identical
to the Corresponding Federal Provisions
1. IC 14-8-2-42.5 and IC 14-34-7-0.5 Definition of Collateral
Indiana proposes to add a definition of ``Collateral'' to its
statutes. At IC 14-8-2-42.5, Indiana proposes to add language as
follows.
``Collateral,'' for purposes of IC 14-34-7, has the meaning set
forth in IC-14-34-7-0.5.
At IC 14-34-7-0.5, Indiana proposes to add the following definition
of ``Collateral.''
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.
Indiana's proposed language at IC 14-34-7-0.5(1) and (2) would
allow operators to use as collateral the same forms of collateral
approved by the Federal regulation that define ``Collateral bond'' at
30 CFR 800.5(b)(5) and (6). The Federal regulation at 30 CFR 800.5(b)
do not include a provision that allows personal property to be used as
collateral, but neither do they specifically prohibit the use of
personal property for collateral.
With the exception of personal property, Indiana is proposing
collateral mechanisms to support a self-bond that are similar to the
collateral mechanisms allowed in the federal program to support a
permittee's indemnity agreement as bond. The Federal self-bonding
regulations at 30 CFR 800.23 do not contain a counterpart to Indiana's
revised statutes providing for the use of personal property as
collateral for self-bonds. The Federal regulations at 30 CFR 800.21 do
allow the use of real property and government-backed securities as
collateral for indemnity agreements. OSM eliminated the use of personal
property as collateral in a July 19, 1983, Federal Register notice (48
FR 32932). In that notice OSM stated that ``because of potential
problems, including potential loss of the property, difficulties
obtaining appraisals of such items, fluctuations in value, and the
potential attachment of liens, personal property as a general form of
collateral was deleted from the Federal definition of acceptable
collateral.'' Indiana's proposal to allow self-bonding applicants to
collateralize a self-bond with personal property is similar to the
State of Wyoming's self-bonding program approved by OSM (55 FR 30227,
July 25, 1990). As stated in the preamble to the approval of the
Wyoming regulations, OSM said that the State had addressed all of OSM's
concerns about the use of personal property, namely that with a minimum
value of $1 million per unit, the concern that property would be small
and hard to track is resolved. The Indiana proposal also requires a per
unit property value of $1 million. In addition, the State plans to
accept the value of property at the difference between the marke t
value of the State's projected liquidation costs. This is consistent
with the requirements under the Federal regulations to adjust the value
of collateral by a margin that represents liquidation cost in order to
avoid inflating the value of the property as bonding collateral. Both
the Wyoming self-bonding program and the proposed Indiana self-bonding
revisions require the applicant to meet certain financial tests in
order to use collateral to support the self-bond. In Wyoming, the tests
are an alternate set of tests. Indiana is proposing that an applicant
meet two out of the three standard financial tests in order to pledge
personal property collateral; therefore, this provides extra assurance
that the applicant will have the financial resources necessary to
perform the reclamation should the property decrease in value. Like the
Wyoming program, Indiana's proposal requires that the applicant provide
the State with a perfected, first lien security interest. Therefore,
the concern over liens is resolved. The State's proposal to require
maintenance reports will help assure that the collateral is maintained
in good working order. As with the Wyoming program, the Director finds
that the State's proposed use of personal property to collaterlize
self-bond is not inconsistent with not less effective that the Federal
regulations. Therefore, the Direct's is approving Indiana's proposed
definitions for the term collateral at IC 14-8-2-42.5 and IC 14-34-7-
0.5.
[[Page 59571]]
2. IC 14-8-2-274.5 and IC 14-34-7-2.5 Definition of Surface Mining
Control and Reclamation Act
Indiana proposes to add a definition of ``Surface Mining Control
and Reclamation Act,'' to its statutes. At IC 14-8-2-274.5, Indiana
proposes to add language as follows.
``Surface Mining Control and Reclamation Act,'' for purpose of
IC 14-34-7, has the meaning set forth in IC 14-34-7-2.5.
At IC 14-34-7-2.5, Indiana proposes to add the following definition
of ``Surface Mining Control and Reclamation Act.''
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).
The Federal regulations at 30 CFR 705.5 define the term ``Act'' to
mean the Surface Mining Control and Reclamation Act of 1977, Pub. L.
95-87. Indiana's proposed definition at IC 14-34-7-2.5, which refers to
the Surface Mining Control and Reclamation Act of 1977 (30 U.S.C. 1201
through 1328) as the ``Surface Mining Control and Reclamation Act,''
would not render the Indiana statutes less stringent than SMCRA or less
effective than the Federal regulations at 30 CFR 705.5. Therefore, the
Director is approving Indiana's definition of at IC 14-8-2-274.5 and IC
14-34-7.2.5.
3. IC 14-34-7-1 Definition of Liabilities
Indiana's existing statute at IC 14-34-7-1 is identical to the
Federal definition of libitlities at 30 CFR 800.23(a). The State
proposes to amend the definition of liabilities as:
``obligations to transfer assets or provide services to other
entities in the future as a result of past transaction. The term
does not include amounts that are required to be recorded for
financial accounting purpose under Statement of Financial Accounting
Standards number 106 issued by the Financial Accounting Standards
Board and effective December 1990.''
The State proposes to allow companies to exclude FAS 106
obligations form liabilities for the purpose of applying for self-
bonding.
As outlined in OSM's September 13, 1996, letter to Indiana, this
proposal is deemed to be less effective than the counterpart Federal
regulations. The Federal regulations require that all liabilities be
shown on an applicant's balance sheet prepared in accordance with
Generally Accepted Accounting Principles (GAAP). GAAP follows the
accounting rules established by the Financial Accounting Standards
Board (FASB), a private organization funded by professional accounting
associations.
In its October 25, 1996, response to OSM's letter, the State
supports its position that FAS 106 liabilities do not need to be
included in an applicant's financial statement by referring to public
comments dated February 6, 1996 (Administrative Record Number IND-
1532), as its justification.
OSM does not believe that these comments reflect the most current
and/or the most accurate information on FAS 106 and its effects on
self-bonding applicants. Therefore, OSM continues to consider the
State's proposed definition of liabilities to be less effective than
the Federal regulations for the reasons discussed below.
The information and journal articles that the comments referred to
have subsequently been updated by more current thinking and journal
articles on the subject. In addition, the State has not provided any
evidence that eliminating FAS 106 liabilities from an applicant's
balance sheet provides the same level of information and accuracy for
financial reporting that is gained by reporting all liabilities (as
required by the FASB). Part of the FAS 106 liability includes, the
current portion of the liability (for retirees for the current year).
Eliminating the total FAS 106 obligation from the balance sheet would
result in an inaccurate accounting of the applicant's current
obligations. This would result in a current ratio that does not
represent the actual current obligations of the applicant.
Below is an analysis of the FAS 106 obligations and reasons why
removing the obligations from an applicant's balance sheet is less
effective than the Federal regulations. A new accounting rule, FAS 106,
issued by the FASB in December 1990, requires companies to accrue the
costs of postretirement health benefits and to show this as a liability
on their balance sheets starting in 1993. Prior to 1993, these
obligations were recognized on a pay-as-you-go-basis. FAS 106
obligations include health benefits earned during an employee's active
employment and paid out at retirement. Computing the amount of the
liability involves a number of factors including long-term interest
rates and the health care cost trend rate. As stated in ``FAS 106 Still
Looms Large,'' published in the January 23, 1995, issue of Pensions and
Investments, ``While many investment managers and financial analysts
believe 1993's big writeoffs and resulting earnings losses put the bad
news behind, there will be ongoing, albeit smaller, financial problems
associated with FAS 106, that could produce a drag on earnings,
according to benefits specialists and actuaries.''
The State's proposed change to the definition of liabilities would
allow self-bonding applicants to compute the self-bond qualifying
ratios and financial limitations based on pre-FAS 106 financial data,
thereby applying the 25 percent of net worth test to pre-FAS 106 net
worth. Under this proposal, the State would not know the extent and the
effects of the applicant's FAS 106 obligation on the applicant's long-
term financial condition. This could result in the State accepting a
self-bond from an applicant whose long-term FAS 106 obligations are
material enough to threaten the future viability of the self-bonding
arrangement. While the obligation as a whole does not represent a cash
outlay in any given accounting period, it eventually must be paid
whether a company amortizes the amount (delayed recognition) or
accounts for it on an ``immediate recognition basis.'' While some
components of the FAS 106 obligation are estimated, to recognize only
that part of the obligation being paid to current retirees, or to
exclude the liability altogether, results in an inaccurate picture of a
companys' long term financial condition. The longer the life of the
mine for which a self-bonding arrangement is sought, the greater the
significance of the FAS 106 obligation because of the long-term nature
of reclamation.
Articles published in the February and March 1993, issues of
Corporate Cashflow Magazine and Financial World state that bond rating
services such as Moody's and Standard and Poor's will consider the
effects of FAS 106 when rating a company's bond issues. Companies'
bonds will be rated on the basis of both pre-FAS 106 and post-FAS 106
financials. One of the articles advises readers to ``Ignore FAS 106 at
your peril * * *'' and that `` `Over time there will be credit-
quality implications for those companies that are unable to recoup FAS
106 losses through earnings or some other balance-sheet enhancement,
such as issuing new stock,' says Joseph C. Bencivenga, managing
director and head of corporate bond research for Salomon Brothers. Adds
Brown Brothers' Hill: `Future claims on cash should not be overlooked
by equity investors in their investment decision-making. This is
especially true for the more labor-intensive, unionized industries with
large postretirement benefit liabilities, where retired employees
sometimes have a claim on cash equal to that of the shareholders.' ''
In the January 23, 1995, issue of Pensions and Investments, the
[[Page 59572]]
article entitled ``FAS 106 Still Looms Large,'' states that ``In 1993,
most companies adopted FAS 106 and recognized obligations for past
service liabilities on the balance sheet, resulting in writedowns of 7%
to 12% in book value among Standard & Poor's 500 companies alone.''
The above articles on FAS 106 are in contrast to earlier articles
on the subject published in 1989 and 1991 that indicated that bond
rating services, Moody's and Standard and Poor's (S&P), would ignore
the effects of FAS 106 and that bond ratings would stay the same.
However, as indicated in the above 1993 and 1995 articles, after
companies began implementing the requirement in 1993, the post-retiree
health benefit obligations far exceeded amounts anticipated causing
rating companies such as S&P and Moody's to take a second look at the
effects of these obligations. According to ``FAS 106 Still Looms
Large,'' in the January 23, 1995, issue of Pensions and Investments,
``liabilities that resulted in billions of dollars in reduced
operations earnings last year still hold some expensive surprises.
Industry sources warn there may be additional reductions in earnings
linked to higher ongoing annual expenses caused by Financial Accounting
Standards FAS 106.''
In its summary to the FAS 106 statement, the FASB stated that one
of the Board's objectives in issuing this Statement is`` * * * to
enhance the ability of users of the employer's financial statement to
understand the extent and effects of the employer's undertaking to
provide postretirement benefits to its employees by disclosing relevant
information about the obligation and cost of the postretirement benefit
plan and how those amounts are measured.''
A commenter (Administrative Record Number IND-1532), in support of
the State's proposed amendment, stated that the Indiana statute (SEA
125) was ``enacted to remedy a situation resulting from a change in
accounting standards [FAS 106] which occurred subsequent to the
original enactment of statutory provisions governing self-bonding in
Indiana in 1988, as a result of which most Indiana coal producers are
no longer eligible to self-bond.'' The commenter believes that the
Federal self-bonding regulations should also be revised in light of the
FAS 106 change to accounting principles especially because ``credit-
rating agencies, including the bond rating agencies referred to in
section 800.23(b)(3)(i) [S&P and Moody's], have decided not to change
credit ratings based on FAS 106.'' To support the State's proposal, the
commenter cited an article published in 1989, prior to the 1993
implementation of FAS 106 and prior to the financial industry knowing
the actual effects of implementing FAS 106.
OSM disagrees with the commenter that bond rating companies have
decided not to change credit [bond] ratings and that the best approach
is to follow the lead of credit-rating agencies as justification for
changing the self-bonding regulations. Based on OSM's discussions with
Standard and Poor's (S&P) and Dun and Bradstreet (D&B), and in
reviewing current literature as discussed above, OSM believes that the
effects of FAS 106 apply to many aspects of an applicant's financial
statement and are too complex to be discounted by simply removing the
obligation from liabilities. S&P and Moody's employ many variables
related to FAS 106 obligations when establishing a company's bond
rating. FAS 106 obligations are considered.
During its review of the State's proposal, OSM conducted research
to determine how the credit industry is treating FAS 106 obligations in
underwriting decisions. Financial analysts from (S&P) and (D&B)
discussed their procedures for recognizing the FAS 106 obligation with
OSM. One senior analyst from S&P said that S&P recognizes the FAS 106
transaction as a ``non-cash'' charge and retains the prior bond rating
if the fundamentals of a company have not changed. According to S&P's
written guidance, ``Corporate Finance Criteria,'' S&P states that FAS
106 obligations:
``are not viewed in the same light as straight debt, since amounts
to be paid in future years are subject to change. Nonetheless, S&P
believes that, for analytic purposes, the entire unfunded APBO
[Accumulated Postretirement Benefit Obligation] should be reflected
in the balance sheet as a liability regardless of whether a company
opts for immediate or delayed recognition [of the liability] under
FAS 106 * * *. Moreover, it is critical to have one basis for
analysis to allow comparison between companies. In assessing capital
structure, S&P makes balance sheet adjustments so that the unfunded
APBO is fully recognized * * *. In cases where a company's retiree
medical liability burden is material, S&P does not rely on any
single figure as a definitive representation of the OPEB [Employers'
Accounting for Post-retirement Benefits other than pensions].
Rather, the analysis may consider several alternative estimates and
financial ratios based on each * * *. The level of cash outlays has
the most immediate impact on a company's financial health. Given the
trend of dramatic increases in spending for these benefits, S&P
focuses on prospective cash outlays * * *. In assessing the
significance of OPEBs and other debt-like obligations to a company,
the ratio of total liabilities to net worth becomes a more
significant ratio.''
As shown above, S&P considers the effects of FAS 106 when assigning
bond ratings; and in fact, S&P adjusts the obligation so that it is
fully recognized (rather than amortized) in order to have a basis of
comparison between companies. If an applicant can retain an A or higher
bond rating after implementing FAS 106, and after being analyzed by S&P
or Moody's, it may still qualify for self-bonding.
In discussions with OSM, two Dun and Bradstreet financial analysts
indicated that they might drop a company's Dun and Bradstreet credit
rating as a result of FAS 106; however, this would be based on many
considerations including whether a company made a profit and had
positive cash flow after implementing FAS 106. One analyst said that if
the financial effects of a one-time charge were significant, but other
items in the financial statement indicated the company was strong, he
might change the credit rating to a ``blank'' rating [no rating
assigned] with notes of explanation. Both analysts indicated that
following a company's implementation of FAS 106, factors that are
heavily weighed during the credit rating process are a company's cash
flow, profitability, and ranking when compared with industry peers
(industry norms).
Bond ratings and credit ratings may or may not be changed depending
on the overall financial condition of the company being rated.
Therefore, eliminating the FS 106 obligation from liabilities based on
assumptions that the liability is being ignored by the rating services
and the investment and credit industries is incorrect.
Based on the above discussion, the Director is not approving the
proposed revision to Indiana's definition of liabilities at IC 14-34-7-
1, and is requiring Indiana to remove the disapproved language. To be
no less effective than the Federal regulations, the State needs to
retain its current approved definition of liabilities that requires all
liabilities be reported in the application, and not exclude FAS 106
obligations from the definition of liabilities. A possible future
option for dealing with FAS 106-type obligations would be to develop
alternative self-bonding criteria, no less effective than the Federal
regulations, that recognize FAS 106 obligations as a liability while
still allowing financially strong companies to qualify for self-
bonding.
[[Page 59573]]
4. IC 14-34-6-14.3 Release of Bond From Undisturbed Areas
Indiana proposes to add the following new section at 14-34-6-14.3.
The director may release the bond, deposit, or letter of credit
covering an area that has not been disturbed by surface mining
activities. A release under this subsection is not subject to the
public notice and hearing requirements set forth in sections 7
through 14 of this chapter.
Indiana's proposed language is similar to the Federal provision at
30 CFR 800.15(c) where a permittee may request reduction of the bond
amount upon submission of evidence to the regulatory authority that the
method of operation or other circumstances reduces the estimated cost
for the regulatory authority to reclaim the bonded area. Under this
provision, bond adjustments which involve undisturbed land or revision
of the cost estimate of reclamation are not considered bond releases
subject to the performance bond release requirements at 30 CFR 800.40.
Therefore, Indiana's proposed new section at 1C 14-34-6-14.3 would not
render Indiana's statutes less stringent than SMCRA or less effective
than the Federal regulations.
The Director notes that Indiana's reference to the term
``subsection'' in the proposed statute should be ``section'' and is
requesting Indiana to correct this error.
5. IC 14-34-7-4(b) Definition of Current Liabilities
Indiana proposes to revise IC 14-34-7-4(b) by making nonsubstantive
language changes, designating the existing provision as (b)(1), and
adding (b)(2). Subsection (b)(2 specifies that ``current liabilities''
also include dividends payable on preferred stock within one (1)
quarter, if declared, or one (1) year, if a pattern of declaring
dividends each quarter is apparent from past business practice.
Existing IC 14-34-7-4(b) is substantially the same as the Federal
definition of ``current liabilities'' at 30 CFR 800.23(a). Indiana's
proposed additional language at (b)(2) would add specificity to the
definition of ``current liabilities'' and would not render the State
statutes less stringent than SMCRA or less effective than the Federal
regulations at 30 CFR 800.23(a).
6. IC 14-34-7-8 Information Requirements for Self-Bonding
Indiana proposes to add a provision at IC 14-34-7-8(2) that
requires submission of unaudited financial statements for completed
quarters in the current fiscal year not later than sixty (60) days
after the end of each quarter. The Federal regulations at 30 CFR
800.23(b)(4) also require submission of such statements but do not set
a specific time for submittal. Indiana's proposed requirement clarifies
when the statements are to be submitted, and it will not render the
State statutes less stringent than SMCRA or less effective than the
Federal regulations.
C. Revisions to Indiana's Statutes With No Corresponding Federal
Provisions
1. IC 14-8-2-49.5 and IC 14-34-7-0.6 Definition of Comparative Balance
Sheet
Indiana proposes to add a definition of ``Comparative balance
sheet'' to its statutes. At IC 14-8-2-49.5, Indiana proposes to add
language as follows.
``Comparative balance sheet'', for purposes of IC 14-34-7, has
the meaning set forth in IC 14-34-7-0.6.
At IC 14-34-7-0.6, Indiana proposes to add the following definition
of ``Comparative balance sheet.''
As used in this chapter, comparative balance sheet means items
accounts from a number of the operator's successive yearly balance
sheets arranged side by side in a single statement.
Although SMCRA and the Federal regulations do not include a
definition for ``comparative balance sheet,'' the term, as defined by
Indiana, is a generally accepted accounting term. Therefore, the
Director is approving Indiana's proposed definitions at IC 14-8-2-49.5
and IC 14-34-7-0.6. The Director notes that an apparent typographical
error exists in the proposed definition at IC 14-8-2-49.5, where ``item
accounts'' should read ``item amounts,'' and is requesting Indiana to
correct this error.
2. IC 14-8-2-49.6 and IC 14-34-7-0.7 Definition of Comparative
Income Statement
Indiana proposes to add a definition of ``Comparative income
statement'' to its statutes. At IC 14-8-2-49.6, Indiana proposes to add
language as follows.
``Comparative income statement'', for purposes of IC 14-34-7,
has the meaning set forth in IC 14-34-7-0.7.
At IC 14-34-7-0.7, Indiana proposes to add the following definition
of ``Comparative income statement.''
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.
Although SMCRA and the Federal regulations do not include a
definition for ``comparative income statement,'' the term, as defined
by Indiana, is a generally accepted accounting term.
Therefore, the Director is approving Indiana's proposed definitions
at
IC 14-8-2-49.6 and IC 14-34-7-0.7.
3. IC 14-34-5-10 Affected Area Status Reports
Indiana proposes to amend IC 14-34-5-10, pertaining to affected
area status reports, by removing time specific submittal requirements,
adding language authorizing the State to adopt content and data filing
requirements under its regulations, and making nonsubstantive wording
changes.
There are no counterpart provisions in the Federal regulations that
require submission of affected area status reports; however, the
States' proposed changes at IC 14-34-5-10 are not inconsistent with
SMCRA or less effective than the Federal regulations.
4. IC 14-34-6-14.6 Duplicate Bond Coverage/Reclamation Agreements
At IC 14-34-6-14.6, Indiana proposed to add a new section to its
statutes. Subsection (a) specifies that the proposed section applies
when an applicant or permittee submits a bond, deposit, or letter of
credit covering an area that has been disturbed by surface coal mining
activities and is covered by another bond, deposit, or letter of credit
previously submitted by another permittee.
Indiana's proposed provision at subsection (b) allows release of
the previously submitted bond, deposit, or letter of credit when the
director of IDNR accepts the bond, deposit, or letter of credit
submitted by the new applicant or permittee for the previously
disturbed area. The new bond, deposit, or letter of credit is subject
to the bonding standards of IC 14-34-6, sections 7 through 14. In its
September 13, 1996, letter to Indiana, OSM expressed concern that as
proposed at IC 14-34-6-14(6), the first bond could be released prior to
issuance of the second permit, and if for some reason a permit is never
issued to the second operator, the state could be left with an
unreclaimed and unbonded site, since the previously submitted bond
would have already been released. In its October 25, 1996, response to
OSM's letter, Indiana explained that for the purposes of bond, the term
``accept'' at proposed IC 14-34-6-14.6(b)(1) coincides with permit
approval. The new bond would not be approved until the replacement
permit was approved an no previous bond would be considered for release
until that time. Also, both companies would have to agree as to the
acreage size and location and an acceptance of liability statement
would have to be received from the new
[[Page 59574]]
permittee. Indiana supported its explanation by referring to its rule
at 310 IAC 12-4-15 which states that the director of IDNR shall not
release existing performance bonds until the permittee has submitted
and the director of IDNR has approved acceptable replacement
performance bonds. Indiana's proposed provision at subsection (b) is
not inconsistent with the Federal regulations at 30 CFR Part 800 that
require permit areas to be adequately bonded or the bonding
requirements at 30 CFR 774.17 for transfer, assignment, or sale of
permit rights. The Director is approving subsection (b) with the
understanding that Indiana will place conditions on the permit of the
second permittee that require assumption of the reclamation obligation
of the previous permittee, that specifically give notice to the second
permittee of the State's intention to release the previous permittee's
bond in reliance on the assumption of liability by the second
permittee, and that require any surety bond or other contract securing
the reclamation obligation of the second permittee to reflect the
assumption of liability and the intent to release the previous bond.
Indiana's proposed provision at subsection (c) allows two or more
persons who are applicants or permittees, when each has filed a bond,
deposit, or letter of credit covering the same area, to enter into an
agreement, subject to approval by the director of IDNR, that allocates
responsibility among the persons for the reclamation of the area. There
are no counterpart provision in the Federal regulations that address
overlapping permit areas that are double-bonded, but this proposed
provision is not inconsistent with the Federal regulations at 30 CFR
Part 800 that require permit areas, or increments of permit areas, to
be adequately bonded.
Based on the above discussion, the Director is approving IC 14-34-
6-14.6.
5. IC 14-34-7-4(d)-(g) Conditions for Self-Bonding
On its own initiative, the State proposed to revise IC 14-34-7-4 by
making subsection (d) subject to new subsection (f), which pertains to
requirements for an applicant to meet industry norms for the financial
ratio tests, and by specifying at subsection (d) that the qualifying
criteria in Section 4 must be met by the applicant at the time the
self-bond is accepted [approved by the State as the bond].
The State also proposes to expand the existing standard qualifying
criteria at subsection (d). The State is adding criteria at (d)(3),
(4), (5), and (6) that require an applicant not to be subject to any
outstanding cessation order issued under the State program or the
Surface Mining Control and Reclamation Act, not owe any civil penalties
or fees, not be delinquent in paying penalties or fees, and not be
listed on the Applicant Violator system (AVS).
The State is adding a provision at (d)(7)(A), previously codified
as (d)(3)(A), that requires an applicant to identify the bond rating
service [Moody's or Standard and Poor's] that rated its bond issues.
The State is adding a provision to (d)(7)(B), and (C), previously
codified a (d)(3)(B) and (C), that requires an applicant to document
its ratio values for the ratio of current assets to current liabilities
and the ratio of total liabilities net worth for the four (4) years
preceding the application, in addition to the existing requirement to
demonstrate that the applicant met the required values for the year
[fiscal year] immediately preceding the application. The State is
adding subsection (e) that requires the applicant to add the proposed
self-bond amount, excluding any amount currently accrued for
reclamation that appears on the balance sheet, to either current
liabilities or total liabilities before calculating the required
financial ratio tests included in subsection (d)(7)(B) or (d)(7)(C).
The provisions added at subsections (d)(3), (4), (5), (6), and (7)
that address an applicant's compliance status are no less effective
than the Federal regulations. These proposals are consistent with OSM's
preamble to the final self-bonding regulations (48 FR 36418, August 10,
1983) where in response to comments OSM stated that it ``agrees that
the regulatory authority should consider the operator's past history of
compliance and patterns of violation in deciding whether to allow an
operator to self-bond. OSM does not intend to establish regulations
which would detail how a history of compliance should be judged,
however, and leaves this to the regulatory authority who has the final
responsibility to accept or reject an application to self-bond.'' The
proposed addition to subsection (d)(7)(A) requiring the applicant to
identify which rating company rated the applicant's bonds would provide
the State with more detailed information about the bond applicant's
bond rating.
The State proposes to add new requirements at subsection (d)(8)(C)
and (D), previously subsection (d)(4), that require an application to
include comparative income statements and comparative balance sheets
for a five-year period preceding the application, a list of liens filed
against any assets of the applicant in any jurisdiction in the United
States for an amount that is more than 2 percent of the applicant's net
worth, a list of every action pending against the applicant, a list of
every unsatisfied judgment rendered against the applicant within the
seven years preceding the application, and a list of any petitions or
bankruptcy actions against the applicant. under Indiana's proposed
action at subsection (g), the State is requiring details about the
listed liens, actions, and petitions such as jurisdiction, case number,
parties, and status.
The proposed additional information that must be submitted with an
application by the applicant or the applicant's corporate guarantor at
subsection (d)(8)(C) and (D) is not inconsistent with the Federal
regulation at 30 CFR 800.23(b)(4)(iii) that allows a regulatory
authority to require additional unaudited information.
The State is adding subsection (f) that requires an applicant's
financial ratios to be at least as favorable as those reported by Dun
and Bradstreet's report of ``Industry Norms and Key Business Ratios.''
The proposed addition at subsection (f) requires that an
applicant's key business ratios [as reported by Dun & Bradstreet] must
be ``at least as favorable as those listed for the medium performers in
the Dun and Bradstreet listing of Industry Norms and Key Business
Ratios.'' This requirements is in addition to the requirements at
subsections (d)(7)(B) and (C) for applicants to meet the standard
financial tests of at least 1.2:1 for the ratio of current assets to
current liabilities and not more than 2.5:1 for the ratio of total
liabilities to net worth. Comparing an applicant to its industry norms
would provide the State with information about how the applicant
currently compares with its industry and can be useful in seeing
financial trends.
In its October 25, 1996, response to OSM's letter dated September
13, 1996, the State explains and reaffirms that the qualifying criteria
of the existing rules at subsections (d)(7)(B)(ii) and (iii) take
precedence over the proposed qualifying criteria at subsection (f).
OSM's letter recognized that the criteria proposed at subsection (f)
are in addition to the criteria at subsection (d) but suggested that
the State clarify that the criteria at subsection (d) would be the true
qualifying criteria in any case. Given the financial criteria at
subsection (d) must be met at a minimum, the State's proposal is no
less effective than the Federal regulations.
[[Page 59575]]
OSM recommends that the State clarify which industry norms the
applicant is required to meet at subsection (f). The Dun and Bradstreet
industry norms report includes 15 different ratios. In addition,
specifying time periods during which the norms must be met is important
because the norms are dynamic and are updated periodically in the Dun
and Bradstreet database. A cautious approach to comparing an applicant
with industry norms is recommended since the norms could indicate an
overall weak industry.
Based upon the above discussions, the Director finds that the
proposed revisions to Indiana's self-bonding criteria at IC 14-34-7-
4(d) through (g) are not inconsistent with the Federal requirements for
self-bonding at 30 CFR 800.23(b), and the Director is approving them.
6. IC 14-34-7-4.1 Self-Bonding Reapplication and Replacement
The State proposes to add requirements at IC 14-34-7-4.1 for self-
bonded permittees to either replace existing self-bonds in effect on
January 1, 1995, with another allowable form of bond or reapply for
self-bonding under the revised, proposed self-bonding provisions. If an
application is not accepted under the proposed provisions, then the
self-bond must be replaced with another allowable form of bond.
There is no direct Federal counterpart to the State proposal
revisions; however, that part of the State's proposal that pertains to
requirements for existing self-bonded permittees who no longer meet the
criteria is not inconsistent with 30 CFR 800.23(g) which requires a
self-bond to be replaced within 90 days of the permittee becoming aware
that it no longer meets the criteria for self-bonding. Therefore, the
Director is approving this new section.
7. IC 14-34-7-7 Self-Bonding Indemnity Agreement
The State proposes to add a provision at section 7(1) that requires
all parties to the indemnity agreement to be liable to the director of
IDNR for the costs of pursuing forfeiture of any self-bond posted by
the permittee and liable for the costs of reclamation that are in
excess of the forfeited self-bond amount. At section 7(6), the State is
adding a requirement that all bonds and guarantees must be indemnified
corporately and personally by all principals.
The existing State statute is substantively the same as the Federal
counterpart regulations that require all parties bound to the agreement
to execute an indemnity agreement for the sum of the self-bond. The
State statute and Federal regulations require that the indemnity
agreement be executed by two authorized corporate officers of all the
parties bound and that the applicant or corporate guarantor must
complete the approved reclamation plan or pay to the director of IDNR
the amount necessary to complete the approved reclamation plan.
The State's proposed additional requirements for the self-bonding
indemnity agreement do not have direct Federal counterpart
requirements. However, the State's proposed requirements are not
inconsistent with or less effective than the Federal regulations at 30
CFR 800.23(e) and 30 CFR 800.50(d)(1), and the Director is approving
the proposed revisions at IC 14-34-7-7. Requiring that all self-bonds
and guarantees be indemnified corporately and personally by all
principals affords the State additional protection against nonpayment
in the event of bond forfeiture.
8. IC 14-34-7-7.1 Collaterized Self-Bonds
As also discussed in finding No. B.1, Indiana proposes to revise
its program to allow the use of collateral for securing self-bonds. The
existing State statute requires that self-bonding applicants qualify on
the basis of financial criteria at IC 14-34-7-4 without additional
collateral. The Federal regulations at 30 CFR 800.23 do not contain a
counterpart to Indiana's revised regulations; however, a similar
proposal was approved for the Wyoming program on July 25, 1990 (55 CFR
30221).
The State proposes to allow a self-bonding applicant who cannot
qualify on the basis of meeting the financial criteria or limitations
at IC 14-34-7-4 to offer collateral in the form of real property,
government-backed securities, and/or personal property. The real
property must be located in Indiana, and a perfected, first-lien
security interest made in favor of and deposited with the IDNR.
Securities must be backed by the United States or the state government,
and they must be endorsed to the order of and placed in the possession
of the director of IDNR. The personal property must be located within
the State, owned by the operator, and valued at more than $1 million
per property unit. In addition to the offer of collateral, the
applicant must execute an indemnity agreement that complies with IC 14-
34-7-7.
For any property collateral offered to support a self-bond, the
property must be valued at the difference between the fair market value
of the property and reasonable expenses the IDNR anticipates incurring
in selling the property. The fair market value must be determined by an
appraiser proposed by the applicant. A description of the property and
a statement of any liens, encumbrances, or adverse judgments imposed on
the property and any pending litigation relating to the property is
also required.
Real property may not include lands that are in the process of
being mined or reclaimed or lands that are the subject of a mining
application. Although, the operator may offer land that has been
released from bond. Securities offered as collateral may include only
securities that meet the definition of collateral at IC 14-34-7-0.5.
Personal property must be in the possession of the operator; must be
encumbered; and not include property already being used as collateral,
goods that the operator sells in the ordinary course of business,
fixtures, or certificates of deposit that are not federally insured.
Evidence of ownership of property offered as collateral must be
submitted in specified forms.
In order to offer personal property collateral, Indiana requires
the applicant to satisfy the financial requirements in IC 14-34-7-
4(d)(7) (B) and (C), which are two of the standard financial tests in
the Indiana program. This proposal is similar to the approved Wyoming
self-bonding program except that in the Wyoming program personal
property collateral is only accepted when the applicant cannot meet the
standard tests but can meet an alternative set of financial tests.
If personal property is accepted as collateral, quarterly and
annual maintenance reports from the applicant are required. The
director of IDNR may also require quarterly or annual inspections of
the personal property. The director of IDNR shall require possession of
the personal property or a mortgage or security agreement executed by
the applicant with the right and power to sell or otherwise dispose of
the property so as to ensure reclamation. While in possession of the
IDNR, any income received from the collateral shall be remitted to the
applicant. An applicant may substitute other property for any property
accepted and held as collateral under specified conditions. If
collateral is posted to support a self-bond, the applicant shall notify
all persons that have an interest in the collateral and provide copies
of the notices to director of IDNR.
In its October 13, 1996, letter to Indiana, OSM expressed concern
[[Page 59576]]
regarding three provisions in the State's collateral proposal that
appeared to be less effective than the Federal regulations at 30 CFR
800.21 for collateral bonding.
(1) To be no less effective than the Federal regulations, the State
needs to require that the market value of the individual or combined
collateral (adjusted by a margin of value for the State's cost of
liquidation) equals or exceeds the required bond amount under the self-
bond indemnity agreement. In its October 25, 1996, response, the State
explained that it intended to implement its proposed statute at section
7.1(b)(1) so that the cost of liquidating the property used as
collateral will be deducted from the market value when determining the
bonding value of the collateral. Given that the State will implement
the proposed section to require that the collateral value, less
liquidation costs, equal the required bond amount, this portion of the
proposal is consistent with the Federal requirements at 30 CFR 800.21
and therefore no less effective than the Federal regulations.
(2) To be no less effective than the Federal regulations for real
property collateral at 30 CFR 800.21(c)(2), the State must require that
real property be appraised by an independent certified appraiser. In
its response to OSM's concerns, the State indicated that while not
stated, it intends to only accept appraisers who are ``professionally
qualified.'' According to the Indiana Real Estate Appraisal Licensurer
and Certification Board, Indiana statutes at IC 25-34.1-8-10 requires
that appraisers in Indiana be licensed and certified. On September 22,
1997 (Administrative Record No. IND-1591), OSM discussed this issue
with Indiana. Indiana stated that coal operators are required to comply
with all Indiana rules and statutes, and they will be required to
comply with IC 25-34.1-8-10. Therefore, Indiana's proposal is
consistent with SMCRA and no less effective than the Federal
regulations at 30 CFR 800.21(c)(2).
(3) The State's proposed statute at subsection (b)(2) requires that
real property liens and encumbrances be disclosed in the application.
This implies that the State has discretion to accept encumbered real
property. In its letter, OSM stated that to be no less effective than
the Federal regulations on real property collateral, the State must
require that any real property accepted as collateral be unencumbered.
In its response to this concern, the State explained that it does not
intend to accept property that is encumbered and that it included the
disclosure requirement as an aid to learning of liens and other
encumbrances that might not otherwise be apparent (so as to prohibit
acceptance of encumbered property). While the language is not clear in
this regard, the State indicated that it will implement this proposal
so that only unencumbered property is acceptable as collateral.
Therefore, the proposal is consistent with SMCRA and no less effective
than the Federal regulations at 30 CFR 800.21(c).
The Director finds that Indiana's proposed provisions at IC 14-34-
7-7.1 are not inconsistent with the Federal regulations at 30 CFR
800.23 concerning self-bonding and are no less effective than the
Federal regulations at 30 CFR 800.21 concerning collateral bonds.
Therefore, the Director is approving Indiana's proposed provisions at
IC 14-34-7-7.1.
9. IC 14-34-7-10 Self-Bonding Report Requirements
At IC 14-34-7-10, Indiana proposes to add a new section to its
statutes to require that self-bonding applicants provide the director
of IDNR with an independent public accounting consultant's report if
requested. This is in addition to the financial statements and a report
prepared by an independent certified public accountant that is required
under IC 14-34-7-4(d)(8) and IC 14-34-7-8. The report shall be provided
within 90 days after the applicant is notified that the report is
required. The consultant must verify that the financial information
required under IC 14-34-7-4 was prepared in accordance with generally
accepted accounting principles and that the accounting principles were
applied consistently for each year of the period for which the
information is submitted. The consultant must also state the amount and
reason for any restatement of the financial information that is
necessary to meet the consistency requirement. Finally, the consultant
must state whether any information reviewed would lead him to conclude
that the applicant would not meet the requirements of IC 14-34-7-4 at
the end of each of the three fiscal years ending after the month the
report is completed. This report may also be required after the
applicant's self-bond is accepted, but not more than once every three
years unless the consultant cannot project the applicant's ability to
meet the self-bonding financial criteria for each of the three fiscal
years. If the consultant is unable to conclude that the applicant would
meet the requirements of IC 14-34-7-4 for each of the three fiscal
years, the applicant must submit an updated report annually. If the
applicant fails to submit a report, the director of IDNR shall refuse
to accept the self-bond until the applicant files the report. If a
permittee who has posted a self-bond fails to submit a report when
required by the director of IDNR, the permittee may be required to post
an alternate form of bond.
In its letter of October 30, 1996 (Administrative Record No. IND-
1545), Indiana indicated that the purpose of the option of financial
projections is intended to give the director of IDNR a greater
understanding for any future problems that may be anticipated that
could influence the applicant's financial stability and is viewed as
another tool for assessing risk.
There are no Federal counterpart provisions for a qualified
independent public accounting consultant report that projects an
applicant's future ability to meet self-bonding requirements. However,
the State's proposed provisions are not inconsistent with the Federal
regulations at 30 CFR 800.23(b)(4)(i) that require that an applicant's
financial statements be audited by an independent certified public
accountant with no adverse opinion or 30 CFR 800.23(f) that allow
regulatory authorities to require updated financial information and
independent certified public accountants' reports annually. Therefore,
considering that the provisions in IC 14-34-7-10 are in addition to the
State's counterparts to 30 CFR 800.23(b)(4)(i) and (f), the Director is
approving them.
10. IC 14-34-7-11 Self-Bond Coverage Requirements
Indiana proposes to add provisions requiring permit increments that
are self-bonded to be 100 percent self-bonded. For example, bond
coverage of a permit increment could not consist of a combination of a
surety bond and a self-bond. This is not inconsistent with SMCRA or the
Federal regulations at 30 CFR Part 800 which allow permit increment
bonding and require the regulatory authority to prescribe by regulation
terms and conditions for performance bonds, including self-bonds.
The State also proposes to allow self-bond coverage on areas where
as of July 1, 1995, grading has been deferred, or the approved deferral
extended. However, areas where grading was deferred after July 1, 1995,
may not be bonded by self-bonds or the Indiana bond pool. The State
proposes to remove the self-bonding and bond pool option from companies
that have been given approval to defer grading of an area in order to
assure more long-term
[[Page 59577]]
certainty by requiring other forms of bond such as corporate surety
bonds for grading-deferred areas. There are no Federal counterpart
regulations for bond coverage of grading deferral areas. The State's
bonding provisions at this section are not inconsistent with SMCRA or
the Federal regulations at 30 CFR 800.23 on self-bonding in that self-
bonding is a discretionary bonding program intended for financially
strong companies that are in compliance with the statute, permit, and
regulations. Therefore, the Director approves Indiana's proposed
statute at IC 14-34-7-11.
11. IC 14-34-7-12 Self-Bond Phase I Grading Release Requirements
Indiana proposes additions to the self-bonding statutes that
restrict the use of self-bonding when an area requires Phase I
reclamation or is eligible for a Phase I grading release but the
permittee has not applied for the release before the ``second November
1 after the year in which the coal was removed from the site covered by
the self-bond.'' If this occurs, or if a release application is filed
within the required time frame but not approved, then the permittee
must replace the self-bond with another form of bond within 90 days.
Permittees must also submit annual reports of acres under self-bond
that have been affected and reclaimed.
Indiana proposes to exempt acreage and structures used to
facilitate active mining and reclamation operations from the
requirements of this section.
The State's proposal restricts the use of self-bonding for areas
that have been used for fly or bottom ash disposal, flue gas
byproducts, or coal processing wastes to 10 years after disturbance or
after the acceptance of the self-bond, whichever is later. An
alternative form of bond must be posted for the area within 90 days of
its becoming ineligible for self-bonding.
If Indiana determines that an area is no longer eligible for self-
bonding and an alternative form of bond is posted, the area is never
again eligible for self-bonding and may not be bonded by Indiana's
surface coal mine reclamation bond pool.
There are no direct counterpart provisions in SMCRA or the Federal
regulations. The Director finds that the State's proposal is not
inconsistent with SMCRA or the Federal regulations at 30 CFR 800.23
that allow regulatory authorities to accept self-bonds, and she is
approving IC 14-34-7-12.
12. IC 14-34-7-13
Indiana proposes to add the following new section at IC 14-34-7-13.
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.
There are no counterparts to this proposal in SMCRA or the Federal
regulations. However, as discussed in the findings above, the proposed
amendments to IC 14-34-7 have no direct Federal counterparts.
Therefore, the proposal to declare them void under the circumstances
specified would not render the Indiana program less stringent than
SMCRA or less effective than the Federal regulations. However, in
accordance with 30 CFR 732.17(b)(3), Indiana must notify OSM of any
actions it takes because of IC 14-34-7-13 that would effect or change
any of the proposals at IC 14-34-7 that are being approved in this
document.
IV. Summary and Disposition of Comments
Public Comments
The Director solicited public comments and provided an opportunity
for a public hearing on the proposed amendment. Comments were received
from the Indiana Coal Council and the National Coal Association. These
comments have been addressed in finding No. III.B.3. Because no one
requested an opportunity to speak at a public hearing, no hearing was
held.
Federal Agency Comments
Pursuant to 30 CFR 732.17(h)(11)(i), the Director solicited
comments on the proposed amendment from various Federal agencies with
an actual or potential interest in the Indiana program. No Federal
agencies responded.
Environmental Protection Agency (EPA)
Pursuant to 30 CFR 732.17(h)(11)(ii), OSM is required to obtain the
written concurrence of the EPA with respect to those provisions of the
proposed program amendment that relate to air or water quality
standards promulgated under the authority of the Clean Water Act (33
U.S.C. 1251 et seq.) or the Clean Air Act (12 U.S.C. 7401 et seq.).
None of the revisions that Indiana proposed to make in its
amendment pertain to air or water quality standards. Therefore, OSM did
not request the EPA's concurrence.
Pursuant to 732.17(h)(11)(i), OSM solicited comments on the
proposed amendment from EPA (Administrative Record No. IND-1515). It
did not respond to OSM's request.
Historical Preservation Officer (SHPO) and the Advisory Council on
Historic Preservation (ACHP)
Pursuant to 30 CFR 732.17(h)(4), OSM is required to solicit
comments on proposed amendments which may have an effect on historic
properties from the SHPO and ACHP. OSM solicited comments on the
proposed amendment from the SHPO and ACHP (Administrative Record No.
IND-1515). Neither SHPO nor ACHP responded to OSM's request.
V. Director's Decision
Based on the above findings, the Director is approving with certain
exceptions, the proposed amendment as submitted by Indiana on September
11, 1995.
The Director is not approving, as discussed in finding No. B.3, the
new language Indiana is proposing to add to its definition of
``liabilities'' at IC 14-34-7-1 that would allow companies to exclude
FAS 106 obligations from liabilities for the purpose of applying for
self-bonding. Furthermore, the Director is requiring Indiana to remove
this language and to notify OSM when the removal is completed.
The Director is approving, as discussed in finding No. C.4, IC 14-
34-6-14.6(b) with the understanding that Indiana will place conditions
on the permit of the second permittee that require assumption of the
reclamation obligation of the previous permittee, that specifically
give notice to the second permittee of the State's intention to release
the previous permittee's bond in reliance on the assumption of
liability by the second permittee, and that require any surety bond or
other contract securing the reclamation obligation of the second
permittee to reflect the assumption of liability and the intent to
release the previous bond.
The Director notes, as discussed in finding No. B.4, that Indiana's
reference to the term ``subsection'' in its statute at IC 14-34-6-14.3
should be ``section'' and, as discussed in finding No. C.1, Indiana's
reference to ``item accounts'' in its definition at IC 14-34-7-0.6
should be ``item amounts.''
The Federal regulations at 30 CFR Part 914, codifying decisions
concerning the Indiana program, are being amended to implement this
decision. This final rule is being made effective immediately to
expedite the State program amendment process and to encourage States to
bring their programs into conformity with the Federal standards without
undue delay. Consistency of State and Federal standards is required by
SMCRA.
[[Page 59578]]
Effect of Director's Decision
Section 503 of SMCRA provides that a State may not exercise
jurisdiction under SMCRA unless the State program is approved by the
Secretary. Similarly, 30 CFR 732.17(a) requires that any alteration of
an approved State program be submitted to OSM for review as a program
amendment. The Federal regulations at 30 CFR 732.17(g) prohibit any
unilateral changes to approved State programs. In the oversight of the
Indiana program, the Director will recognize only the statutes,
regulations and other materials approved by OSM, together with any
consistent implementing policies, directives and other materials, and
will require the enforcement by Indiana of only such provisions.
VI. Procedural Determinations
Executive Order 12866
This rule is exempted from review by the Office of Management and
Budget (OMB) under Executive Order 12866 (Regulatory Planning and
Review).
Executive Order 12988
The Department of the Interior has conducted the reviews required
by section 3 of Executive Order 12988 (Civil Justice Reform) and has
determined that, to the extent allowed by law, this rule meets the
applicable standards of subsections (a) and (b) of that section.
However, these standards are not applicable to the actual language of
State regulatory programs and program amendments since each such
program is drafted and promulgated by a specific State, not by OSM.
Under sections 503 and 505 of SMCRA (30 U.S.C. 1253 and 1255) and 30
CFR 730.11, 732.15, and 732.17(h)(10), decisions on proposed State
regulatory programs and program amendments submitted by the States must
be based solely on a determination of whether the submittal is
consistent with SMCRA and its implementing Federal regulations and
whether the other requirements of 30 CFR Parts 730, 731, and 732 have
been met.
National Environmental Policy Act
No environmental impact statement is required for this rule since
section 702(d) of SMCRA (30 U.S.C. 1292(d)) provides that agency
decisions on proposed State regulatory program provisions do not
constitute major Federal actions within the meaning of section
102(2)(C) of the National Environmental Policy Act (42 U.S.C.
4332(2)(C)).
Paperwork Reduction Act
This rule does not contain information collection requirements that
require approval by OMB under the Paperwork Reduction Act (44 U.S.C.
3507 et seq.).
Regulatory Flexibility Act
The Department of the Interior has determined that this rule will
not have a significant economic impact on a substantial number of small
entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
The State submittal which is the subject of this rule is based upon
corresponding Federal regulations for which an economic analysis was
prepared and certification made that such regulations would not have a
significant economic effect upon a substantial number of small
entities. Accordingly, this rule will ensure that existing requirements
previously promulgated by OSM will be implemented by the State. In
making the determination as to whether this rule would have a
significant economic impact, the Department relied upon the data and
assumptions for the corresponding Federal regulations.
Unfunded Mandates
OSM has determined and certifies pursuant to the Unfunded Mandates
Reform Act (2 U.S.C. 1502 et seq.) that this rule will not impose a
cost of $100 million or more in any given year on local, state, or
tribal governments or private entities.
List of Subjects in 30 CFR Part 914
Intergovernmental relations, Surface mining, Underground mining.
Dated: October 20, 1997.
Brent Wahlquist,
Regional Director, Mid-Continent Regional Coordinating Center.
For the reasons set out in the preamble, Title 30, Chapter VII,
Subchapter T of the Code of Federal Regulations is amended as set forth
below:
PART 914--INDIANA
1. The authority citation for Part 914 continues to read as
follows:
Authority: 30 U.S.C. 1201 et seq.
2. Section 914.15 is amended in the table by adding a new entry in
chronological order by ``Date of Final Publication'' to read as
follows:
Sec. 914.15 Approval of Indiana regulatory program amendments.
* * * * *
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Original amendment submission date Date of final publication Citation/description
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* * * * * * *
September 11, 1995....................... November 4, 1997........................ IC 14-8-2-42.5, -49.5, -
49.6, -274.5; 14-34-5-10;
14-34-6-14.3, -14.6; 14-34-
7-0.5, -0.6, -0.7, -2.5, -
4 (b), (d) through (g), -
4.1, -5, -7, -7.1, -8, -9,
-10, -11, -12, -13.
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[FR Doc. 97-29132 Filed 11-3-97; 8:45 am]
BILLING CODE 4310-05-M
