[Federal Register Volume 59, Number 138 (Wednesday, July 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17633]
[[Page Unknown]]
[Federal Register: July 20, 1994]
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DEPARTMENT OF THE INTERIOR
Office of Surface Mining Reclamation and Enforcement
30 CFR Part 938
Pennsylvania 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 Pennsylvania regulatory program (hereinafter referred
to as the Pennsylvania program) approved under the Surface Mining
Control and Reclamation Act of 1977 (SMCRA). The proposed amendment
establishes a self-bonding program as an alternative to the current
financial instrument options available to the permittee for posting a
performance bond. The performance bond is required to be submitted and
approved by the regulatory authority before the permit is issued or
mining initiated.
EFFECTIVE DATE: July 20, 1994.
FOR FURTHER INFORMATION CONTACT: George J. Rieger, Acting Director,
Harrisburg Field Office, Office of Surface Mining Reclamation and
Enforcement, Harrisburg Transportation Center, Third Floor, Suite 3C,
4th and Market Streets, Harrisburg, Pennsylvania 17101. Telephone:
(717) 782-4036.
SUPPLEMENTARY INFORMATION:
I. Background on the Pennsylvania 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 Pennsylvania Program
The Secretary of the Interior conditionally approved the
Pennsylvania program on July 31, 1982. Background information on the
Pennsylvania program including the Secretary's findings, the
disposition of comments, and a detailed explanation of the conditions
of approval can be found in the July 30, 1982, Federal Register (47 FR
33050). Subsequent actions concerning conditions of approval and
program amendments can be found at 30 CFR 938.11, 938.12, 938.15 and
938.16.
II. Submission of the Proposed Amendment
On May 11, 1993, the Pennsylvania Department of Environmental
Resources (PADER) submitted to OSM the rules published in the
Pennsylvania Bulletin 20 Pa. B. 2517 and 21 Pa. B. 5142 as an amendment
(Administrative Record Number PA 823.00) to the approved regulatory
program. The amendment provides a permit applicant the option to use a
self-bond as a financial instrument instead of a surety or collateral
bond for the performance bond required by PADER before a coal mine
permit may be issued or coal mining activities conducted. The proposed
amendment also allows an eligible permittee to replace an existing
surety or collateral bond with a self-bond.
OSM announced receipt of the proposed amendment in the June 7,
1993, Federal Register (58 FR 31926), 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 July 7, 1993.
By letter dated January 24, 1994 (Administrative Record No. PA
823.07), OSM provided comments to Pennsylvania on the proposed
amendment. By letter dated February 17, 1994 (Administrative Record No.
PA 823.09), Pennsylvania submitted responses to OSM's concerns.
III. Director's Findings
Set forth below, pursuant to SMCRA and the Federal regulations at
40 CFR 732.17, are the Director's findings concerning the proposed
amendment. Any revisions not specifically addressed below are found to
be no less stringent than SMCRA and no less effective than the Federal
rules.
1. Section 86.142 Definitions
a. Adverse opinion. Pennsylvania proposes to add this definition to
mean a statement by an independent certified public accountant (CPA)
that the financial statements of the applicant do not present fairly
the financial condition of the applicant in conformity with generally
accepted accounting principles. Although there is no counterpart
Federal definition, the Federal regulations at 30 CFR 800.23(b)(4)(i)
require that the applicant submit a financial statement for the latest
complete fiscal year accompanied by a report by an independent
certified public accountant and containing the accountant's audit
opinion or review opinion. If either opinion contains an adverse
opinion, the self-bond application must be denied. The independent
CPA's audit or review opinion is required on the accuracy of the
information in the financial statement. An Environmental Protection
Agency (EPA) proposed rule (52 FR 12786, April 17, 1987) in discussing
a firm's financial tests states that an ``adverse opinion, indicates
that, in the opinion of the auditor, a firm's financial statement does
not present the firm's financial position, results of operations, or
changes in financial position in a manner that conforms to generally
accepted accounting principles. . . .'' Although the EPA discussion is
not controlling on OSM, it is being used for guidance. While there is
no Federal definition, the Director finds the proposed definition to be
not inconsistent with the requirements of SMCRA and the Federal
regulations because the application of the definition will aid
Pennsylvania in applying a uniform standard in determining whether or
not a self-bond application should be rejected.
b. Applicant. Pennsylvania proposes to add a definition for
``applicant'' to mean a permittee or an applicant for a permit who is
applying to self-bond under this subchapter. There is no corresponding
Federal definition for ``applicant'' under the self-bonding rules.
However, at 30 CFR 701.5 the Federal definition of ``applicant'' means
any person seeking a permit, permit revision, renewal, and transfer,
assignment, or sale of permit rights from a regulatory authority to
conduct surface coal mining and reclamation operations or, where
required, seeking approval for coal exploration. Under section 86.1,
the State's general definition of applicant means any person who seeks
to obtain a permit from the Department to conduct coal mining
activities under this chapter. Pennsylvania is proposing an additional
definition of ``applicant'' at section 86.142 to include an existing
permittee or applicant for a permit who is applying to utilize a self-
bond. At first blush it appears that the two definitions conflict with
each other. Upon further examination, the definition of ``applicant''
found at section 86.142 will not supersede the general definition of
applicant found at section 86.1 because the entity defined under
section 86.142 already has to be a permittee or in the process of
becoming one. By its own terms, the section 86.142 definition only
concerns the self-bonding regulations. Therefore, the definition of
``applicant'' as it is applied in the self-bonding regulations is
consistent with the self-bonding regulations at 30 CFR 800.23.
c. Continuous business operations. Pennsylvania proposes to add
this definition to mean operations in which the applicant has been in
business and operating for at least 10 years prior to the filing of its
self-bonding application unless the applicant's existence results from
a reorganization, consolidation or merger involving a company with this
longevity. If the applicant is a majority-owned subsidiary of a
corporation, it may rely upon its parent corporation's business
history, which has a 10-year business history.
The Pennsylvania definition allows applicants that were once one
type of entity but that are now a different type of entity, either as a
result of a merger, consolidation or a reorganization, to become self-
bonded so long as one of the entities was in existence for 10 years.
The Federal regulation at 30 CFR 800.23(b)(2) requires a self-bonding
applicant to be in continuous operation for a period of not less than 5
years immediately preceding the self-bond application. Events beyond
the control of the applicant and not affecting its continuance as an
entity may be excluded. The purpose behind the Federal rule was to
``show the business entity's intent and ability to remain in operation
and undertake the subsequent mining and reclamation.'' 48 FR 36418,
36420 (August 10, 1993). Thus, it appears that Pennsylvania's use of
its definition may not fulfill the purpose of the Federal rule if the
new entity was not in existence for at least 5 years. However, this
definition if taken in concert with sections 86.159(b)(5), (c)(4), and
(j), which are discussed below, insures as much as the 5-year
continuous business operation requirement does, that the applicant will
be in existence to complete the mining and the subsequent reclamation.
Section 86.159(b)(5), which requires that the applicant must have
honored in the last 3 years all of its self-bonding obligations and
section 86.159(b)(6), which prohibits the acceptance of an applicant
whose surety bonds were canceled for nonpayment of premiums, fraud or
failure to comply with the terms of the surety bond, are both
indicators of a history for compliance with bonding obligations and as
such are good indicators of a continuance in the future of complying
with such obligations. Section 86.159(c)(4), which requires an
applicant to certify that it will maintain its corporate status for at
least 5 years, is more than just a statement because this certification
is subject to criminal penalties for false swearing. Section 86.159(j),
which requires the applicant, on a sliding scale of liability and net
worth, to submit a security interest to Pennsylvania is an expression
of confidence of the company that it expects to be in existence for the
term of the permit and to have the security interest which was
proffered to the State, released. Therefore, based on the above
discussion, the Director finds that the definition of ``continuous
business operation'' in conjunction with the above-noted sections is no
less effective than 30 CFR 800.23(b)(2).
d. Current asset. Pennsylvania is proposing a new definition to
mean cash or other assets which are reasonably expected to be converted
to cash or sold or consumed within 1 year or within the normal
operating cycle of the business. The Director finds that the proposed
definition is substantively identical to and no less effective than the
Federal definition of ``current asset'' at 30 CFR 800.23(a).
e. Current liability. The State proposes this definition to mean an
obligation which is reasonably expected to be paid or liquidated within
1 year or within the normal operating cycle of the business. The
Director finds that the proposed definition is substantively identical
to the Federal definition of ``current liabilities'' at 30 CFR
800.23(a).
f. Disclaimer of opinion. The State proposes this definition to
mean a statement by an independent certified public accountant (CPA)
that he does not express an opinion on the financial statements of the
applicant. Pursuant to section 86.159(g), an application will be
rejected if a disclaimer of opinion is expressed by the CPA. There is
no counterpart Federal definition for this term. However, the EPA
discussed this term when it was proposing financial responsibility for
owners of underground petroleum storage tanks. While EPA's discussions
are not controlling on OSM's decision, it is helpful. EPA stated that a
disclaimer of opinion meant that ``the auditor does not express an
opinion on the firm's financial statement. Auditors issue disclaimers
of opinion of their examinations of a firm's financial statements have
been limited in some way or if there are uncertainties regarding the
firm's financial statements.'' 52 FR 12786 (April 17, 1987). The
Director concludes that application of this definition will assist
Pennsylvania in determining whether or not the applicant is a suitable
candidate for self-bonding. Therefore, the Director finds this
definition not inconsistent with the requirements of SMCRA and the
Federal regulations.
g. Financial statement. The State is proposing a new definition to
mean a formal report of the applicant's status of accounts at a
particular time, prepared to show the operating results and financial
condition of the applicant's business. The term includes, but is not
limited to, the balance sheet, income statement, and statement of
change in financial position prepared in accordance with generally
accepted accounting principles. There is no counterpart Federal
definition for this term. However, the State's definition follows basic
accounting principles. Therefore, the Director finds the proposed
definition to be not inconsistent with the requirements of SMCRA and
the Federal regulations.
h. Fixed asset. The State proposes that this term includes plants
and equipment, but does not include land or coal in place. Since this
proposed rule is substantively identical to the Federal definition of
``fixed asset,'' the Director finds that it is no less effective than
the Federal rule.
i. Independent certified public accountant. Pennsylvania proposes
this definition to mean a certified public accountant not dependent on
or subject to the direct control of the applicant. There is no
counterpart Federal definition.
However, the Federal regulations at 30 CFR 800.23(b)(4) require an
independent certified public accountant's (CPA) audit or review opinion
on the accuracy of the information in the financial statement. By
letter of February 17, 1994 (Administrative Record No. 823.09),
Pennsylvania stated that the purpose of the definition was to address
those circumstances where the CPA was a sole practitioner whose primary
client was the applicant. The Director believes the application of this
definition to be an additional safeguard to Pennsylvania's self-bonding
program. Therefore, the Director finds the proposed definition to be
not inconsistent with the requirements of SMCRA and the Federal
regulations.
j. Liability. Pennsylvania proposes to add this definition to mean
an obligation to transfer assets or provide services to other entities
in the future as a result of past transactions. The Director finds that
the proposed definition is substantively identical to the Federal
definition of ``liability'' at 30 CFR 800.23(a).
k. Net worth. Pennsylvania proposes to modify its definition to
mean total assets minus total liabilities and is equivalent to owner's
equity. The Director finds that the proposed definition is identical to
the Federal definition of ``net worth'' at 30 CFR 800.23(a).
l. Parent corporation. Pennsylvania proposes to add this definition
to mean the corporation which directly owns or controls the corporation
which is the applicant. The Director finds that the proposed definition
is substantively identical to the Federal definition of ``parent
corporation'' at 30 CFR 800.23(a).
m. Self-bond. Pennsylvania proposes to revise its definition of
``self-bond'' to mean an indemnity agreement in a sum certain payable
to the Department, executed by the permittee and by each individual and
business organization capable of influencing or controlling the
investment or financial practices of the permittee by virtue of his
authority as an officer or ownership of all or a significant part of
the permittee, and supported by agreements granting the Department a
security interest in real or personal property pledged to secure
performance by the permittee. The proposed State and Federal
definitions of ``self-bond'' are similar with the additional
requirements in the State's rule for indemnification by the controllers
and significant owners of the self-bonded permittee, and for the
pledging of real or personal property collateral to secure the self-
bond. In addition, to those reasons discussed at Finding 1.c., the
State's requirement for collateralized self-bonds serves to provide
security for the self-bonding obligation and elevates the State's
position to that of a secured creditor if there is a bankruptcy of the
self-bonded permittee. Therefore, the Director finds that the State's
revised definition of ``self-bond'' is no less effective than the
corresponding Federal requirements at 30 CFR 800.5(c).
n. Tangible net worth. Pennsylvania proposes to add this definition
to mean net worth minus intangibles such as goodwill and rights to
patents or royalties. The Director finds that the proposed definition
is identical to and no less effective than the Federal definition of
``tangible net worth'' at 30 CFR 800.23(a).
o. Liquidity ratio. Pennsylvania proposes to delete this
definition. Since there is no counterpart Federal definition for
``liquidity ratio,'' the Director finds that the deletion of this
definition does not render the Pennsylvania program less effective than
the Federal requirements at 30 CFR 800.23
p. Quick assets. Pennsylvania proposes to delete this definition.
There is no counterpart Federal definition for ``quick assets.''
Therefore, the Director finds that the deletion of this definition does
not render the Pennsylvania program less effective than the Federal
requirements at 30 CFR 800.23.
q. Retained earnings. Pennsylvania proposes to delete this
definition. Since there is no counterpart Federal definition for
``retained earnings,'' the Director finds that the deletion of this
definition does not render the Pennsylvania program less effective than
the Federal requirements at 30 CFR 800.23.
2. Section 86.159
Pennsylvania is proposing to revise section 86.159 to establish the
procedures and criteria to be used by the regulatory authority in
determining whether a coal mine permittee is eligible to use self-
bonding in lieu of a surety or collateral bond.
The Federal self-bonding rules at 30 CFR 800.23 establish minimum
standards of financial eligibility to self-bond for States that wish to
allow self-bonding. These rules also allow a regulatory authority to
accept the guarantee of a qualified parent corporation for its
subsidiaries. ``States choosing to allow self-bonding may adopt more
detailed rules that reflect the financial structures of the local
industry, if necessary to provide the regulatory authority additional
protection from risk of forfeiture.'' 48 FR 36418, 36419 (August 10,
1983).
a. Section 86.159(a). Pennsylvania proposes in paragraph (a) that
the regulatory authority may accept a self-bond to cover all or part of
the permittee's liabilities arising from coal mining activities. The
State also proposes that an applicant which is a subsidiary may satisfy
the requirements for eligibility to self-bond by relying on its parent
corporation. The corresponding Federal requirements are similar with
the exception of conditions added by the State to address mining
activities that may not be self-bonded such as long-term facilities,
acid mine drainage, and restoration of prime farmland. The Federal
self-bonding rules do not limit self-bond coverage to certain mining
activities. Pennsylvania stated in its May 12, 1990, Pennsylvania
Bulletin that it was difficult to determine an applicant's financial
eligibility to self-bond certain types of liabilities. The acceptance
of a self-bond by a state regulatory authority is discretionary and the
Director finds it is within the State's discretion to exclude certain
liabilities from coverage by a self-bond. The Federal regulation at 30
CFR 773.15 prohibits a regulatory authority from issuing a permit if
the permit applicant is, among other things, in violation of SMCRA or
state and federal laws pertaining to air or water environmental
protection. Pennsylvania's requirement that the applicant must have a
positive compliance history with federal and state laws is not
inconsistent with the Federal regulations. There is also no Federal
counterpart that applicants must pledge collateral (see Finding 1.c.)
and provide required security agreements in order for the State to
allow an applicant to self-bond. However, the Director finds that these
requirements are not inconsistent with the self-bonding regulations at
30 CFR 800.23.
b. Section 86.159 (b) (5), (6), and (c)(4). These sections, which
have no Federal counterparts, are discussed at the Director's Finding
1.c.
c. Sections 86.159 (b) (1), (2), (c) (1), (2), (3), (5), and (6)
and (f). Pennsylvania is proposing that, to be acceptable, the
applicant or its parent corporation must (1) be authorized to do
business in Pennsylvania, (2) designate a suitable agent to receive
service of process, (3) have a history of continuous business
operation, (4) meet certain financial criteria, and (5) submit
financial statements of its most recent three fiscal years and any
completed quarters in the current fiscal year.
The State's proposed amendment at subsection (b)(1) establishes the
requirement that the applicant must be incorporated in or authorized to
do business in Pennsylvania. There is no counterpart Federal
regulation. However, the Director finds that the proposed rule is not
inconsistent with the requirements of SMCRA and no less effective than
the Federal regulations.
The State is proposing at subsection (b)(2) that the applicant
designate suitable agents in Pennsylvania to receive service of suits,
claims, demands and other services of process. Since this provision is
substantively identical to paragraph (b)(1) of 30 CFR 800.23 of the
corresponding Federal rule, the Director finds that it is no less
effective than the Federal rule.
The State proposes at subsection (b)(3) that the applicant's
history of continuous business operation is met if the applicant's
existence is the result of a reorganization, consolidation or merger
involving a company with a history of continuous business operation or
the applicant is a majority-owned subsidiary of a corporation with a
history of continuous business operation. The Federal regulations at 30
CFR 800.23(b) allow an applicant to qualify for a self-bond even if it
did not meet the 5 years of continuous business operation, so long as
its parent corporation did meet the 5-year requirement. Pennsylvania's
approach, of allowing an applicant to rely on its parent's time of
operation, is consistent with 30 CFR 800.23(b). For a complete
discussion of the term ``continuous business operation,'' see the
Director's Finding at 1.c.
Pennsylvania's proposed subsection (c) and the Federal regulations
for financial statements are similar; however, the State's proposed
rule at subsection (c) requires 3 years of audited financial statements
and the Federal regulations require 1 year. Both require the submittal
of unaudited quarters for the current year. Both require that the
audited financial statements must be accompanied by a report prepared
by an independent certified public accountant (CPA) that contains the
accountant's audit or review opinion of the financial statements with
no adverse opinion. In addition, the State's proposed rule requires
that forfeiture of the aggregate of Pennsylvania self-bonds would not
affect its ability to stay in business or endanger cash flow needed for
its current obligations. There are no counterpart Federal regulations
for these proposed requirements; however, they have the effect of
strengthening the proposed self-bonding program and are no less
effective than the Federal regulations. The Director, therefore, finds
that the proposed rule at subsection (c) is no less effective than the
counterpart Federal regulations at 30 CFR 800.23(b)(4).
Pennsylvania is proposing at subsection (f) that the applicant for
self-bonding meet one of the three following financial criteria:
(1) 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;
(2) A tangible net worth of at least 10 million, 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; or
(3) Fixed assets in the United States of at least 20 million and 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.
The State's proposed rules are essentially the same as the
corresponding Federal regulations at 30 CFR 800.23(b)(3) (i), (ii), and
(iii). In addition to meeting one of the three basic tests, the State's
proposed rules also require the applicant to have a tangible net worth
that is six times its total self-bonds in Pennsylvania and that amounts
to 90 percent of its total assets. This requirement is similar to a
financial assurance requirement of the EPA's regulations for hazardous
waste facilities (47 FR 15032, April 7, 1982). In it preamble, EPA
stated that ``This requirement was included to help ensure
accessibility to funds in the event of bankruptcy or other default.''
There is no counterpart Federal requirement for these additional
tangible net worth components of the basic financial tests in OSM's
regulations at 30 CFR 800.23(b). However, this rule implements the
Pennsylvania statute requiring the same. The rules add the assurance of
the financial stability of the applicant. Therefore, the State's
proposed rules at subsection (f) are no less effective than the Federal
regulations at 30 CFR 800.23(b)(3) (i), (ii), and (iii).
d. Section 86.159(b)(4). Pennsylvania is proposing at subsection
(b)(4) that, in the past 36 months, the applicant has not defaulted on
any payments of dividend or sinking fund installments, lease rentals
and reclamation fees. There are no counterpart Federal regulations.
However, the Director finds that the proposed rule is not inconsistent
with the requirements of SMCRA and no less effective than the Federal
regulations.
e. Section 86.159(d). The Federal regulations at 30 CFR 800.23(f)
allow the regulatory authority to request update information from the
applicant within 90 days after the close of each fiscal year following
the issuance of the self-bond or corporate guarantee. This was intended
to give the regulatory authority flexibility to require additional
information if it believed it was necessary. Pennsylvania has submitted
a similar requirement at subsection (d) requesting some of the
financial information specified in the Federal rule. Since this is
discretionary on the part of the regulatory authority, the Director
finds that the proposed rule is no less effective than the Federal
regulations at 30 CFR 800.23(f).
f. Section 86.159(e). Pennsylvania is proposing at subsection (e)
that if the applicant or the CPA submits false information the
application will be disallowed and render the applicant ineligible to
self-bond. In addition, this section subjects the applicant and the CPA
to criminal penalties for false swearing. There is no direct Federal
counterpart. However, the Federal rules envision that an applicant will
answer truthfully. Therefore, the Director finds that the proposed rule
is not inconsistent with the requirements of SMCRA and the Federal
regulations.
g. Section 86.159(g). The State's proposed rule at subsection (g)
is similar to the Federal regulations at 30 CFR 800.23(b)(4)(i) which
require submittal of an accountant's audit opinion or review opinion on
the financial statements with no adverse opinion. However, the State
has expanded its rule at this section to disqualify an applicant on the
basis of both an adverse opinion and a disclaimer opinion by an
accountant. In addition, an applicant may be determined to be
ineligible to self-bond on the basis of other qualifications in the
opinion expressed by the CPA. The Director finds that the proposed rule
is no less effective than the counterpart Federal regulations at 30 CFR
800.23(b)(4)(i).
h. Section 86.159(h). Pennsylvania is proposing at subsection (h)
that the total value of outstanding plus proposed self-bonds for coal
mining activities may not exceed 25 percent of the applicant's tangible
net worth in the United States. This is similar to the counterpart
Federal rule at 30 CFR 800.23(d). However, the Federal rule also
requires for corporate guarantees that the total amount of the parent
corporation guarantor's present and proposed self-bonds and guaranteed
self-bonds for coal mining activities shall not exceed 25 percent of
the guarantor's net worth in the United States. Under the proposed
Pennsylvania self-bonding rules, the parent corporation is always a
party to the self-bond and is established as a co-indemnitor under the
self-bond. In applying the proposed Pennsylvania rule, an applicant may
rely on its parent's qualifications to be accepted under the self-
bonding rules. If this is so, the parent is thus subject to the 25
percent requirements. The Director finds the proposed rule is no less
effective than the counterpart Federal regulations at 30 CFR 800.23(d).
i. Section 86.159(i). Pennsylvania is proposing at subsection (i)
that the period of liability under a self-bond is determined in
accordance with the existing bonding regulations. Similarly, the
release of a self-bond is to be governed by the existing regulations.
Pennsylvania also proposes that the liability under a self-bond is
terminated upon the Department's approval of alternative bonding
submitted by the applicant. The Director finds the cross-references to
other rules is consistent with the Federal bonding regulations at 30
CFR 800.13 and 800.40 and its replacement provision is similar to and
no less effective than the counterpart Federal provision at 30 CFR
800.30.
j. Section 86.159(j). Pennsylvania's proposed rule at subsection
(j) requires that part of all of the self-bond amount be collateralized
by the permittee's pledge of security interests in real or personal
property. There are no counterpart Federal requirements of this kind in
the Federal self-bonding program. These regulations implement
Pennsylvania's statute requiring the same. Unlike collateral bonds,
these security interests for self-bonds are not always the full amount
of the bond. The amount of collateral required by the State's proposed
rules is determined on a sliding scale of liability and net worth. This
collateral is in addition to all the self-bonding rules. Also, as
discussed at the Director's Finding 1.c., the requirement that the
applicant submit a security interest to Pennsylvania is an expression
of confidence of the company that it expects to be in existence for the
term of the permit and to have the security interest which was
proffered to the State released. Therefore, the Director finds that the
State's proposal to require full or partial collateral is no less
effective than the Federal regulations.
k. Section 86.159(k) (1), (2) and (3). Proposed subsections (k)(1)
through (k)(3) provide the Department with the authority to require
appropriate forfeiture terms and conditions within the indemnity
agreement that are in addition to the general forfeiture requirements
of Pennsylvania's bonding program.
Pennsylvania proposes a subsection (k)(1) that the self-bond will
be forfeited if 90 days after the Department is informed 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 subchapter F to cover its self-
bonded liability. The Federal rules at 30 CFR 800.23(g) contain a
similar requirement with the statement that if the permittee fails to
post an adequate substitute bond the provisions of 30 CFR 800.16(e)
shall apply. Under 30 CFR 800.16(e) the operator would have to cease
coal extraction and immediately begin reclamation operations. At
section 86.151(h) one of the requirements is that the applicant
complete the reclamation plan. At section 86.159(k)(2) liability under
the self-bond is conditioned on the applicant complying with the
various environmental statutes and regulations including Pennsylvania's
Surface Mining Conservation and Reclamation Act. This obligation also
falls upon the parent who under section 86.159(l)(2) is co-indemnitor
under the self-bond. This along with the requirement that the self-bond
becomes due and payable upon default is consistent with the Federal
regulations at 30 CFR 800.23(e)(4), which require the applicant, parent
or non-parent corporate guarantor to complete reclamation or to pay
costs of reclamation. Subsection (k)(2) also requires the applicant or
its parent to notify Pennsylvania if there is a material adverse change
in its financial condition. The Federal regulations at 30 CFR 800.23(g)
also require a similar notification concerning the change in financial
condition. Therefore, the Director finds that the proposed amendment is
no less effective than 30 CFR 800.23 (e)(4) and (g).
At subsection (k)(3) Pennsylvania specifies conditions that relate
to performance under the mining permit and Pennsylvania mining statutes
and regulations and certain commercial lending based criteria relative
to the value of the underlying pledged assets. There are no counterpart
Federal regulations. However, the Director finds that the proposed
rules are not inconsistent with SMCRA and no less effective than the
Federal regulations.
l. Section 86.159(l). Pennsylvania is proposing that the applicant
be a party to the self-bond, which is consistent with the definition of
self-bond at 30 CFR 800.5. In addition, at subsection (l)(2)
Pennsylvania is requiring that all parent corporations be a party to
the self-bond whenever its subsidiary is an applicant for a self-bond.
This is different than the Federal rules at 30 CFR 800.23(e) which only
require a parent to be a party to the bond when it is a parent
corporation guarantor. Nonetheless, the Director finds this requirement
will reduce the risk of a bond forfeiture and therefore finds it no
less effective than 30 CFR 800.23(e)(1).
The Federal regulations at 30 CFR 800.23(e)(2) provide signature
requirements for corporate indemnity agreements as well as
authorizations and affidavits to assure a corporation is bound to the
terms of the agreement. The Federal regulations require that two
authorized corporate officers for the applicant as well as the parent
corporation execute the agreements; whereas the State's rule does not
require two signatures of all the indemnitors. In the preamble to the
final self-bonding rules (48 FR 36418, August 10, 1983), OSM explained
in response to a comment that ``OSM does not consider it a burden on
the corporation to obtain the signatures of two corporate officers on
the indemnity agreement. For such an infrequent and important action,
the approval of two corporate officers will better assure that the
corporation and OSM are protected from possible unauthorized actions of
an individual. This requirement is retained.'' The Federal regulations
require an affidavit from the corporation(s) certifying that entering
into the indemnity agreement is valid under all applicable Federal and
State laws. Pennsylvania lacks this requirement for all of its
indemnitors. In addition, this section of the Federal regulations also
requires that the signatories provide the regulatory authority with
documents that evidence their authority to bind the corporation (e.g.
board of directors resolutions) and authorization for the parent
corporation to enter into the indemnity agreement. Again, Pennsylvania
does not require this. Even though the State requires the applicant and
the parent to be co-indemnitors under the self-bond, the Director finds
that the proposed rule is less effective than the Federal rule because
it lacks all the requirements discussed above. Accordingly, the
Director is requiring that Pennsylvania amend its program to be no less
effective than 30 CFR 800.23(e)(2).
Finally, Pennsylvania at subsection 86.159(1)(3) requires each
person with a beneficial interest in a partnership, joint venture or
syndicate to be a party and co-indemnitor under the self-bond. This is
substantively identical to the Federal requirement at 30 CFR
800.23(e)(3) and is, therefore, no less effective than the Federal
regulation.
m. Section 86.159(m). Pennsylvania proposes at subsection (m) that
each indemnitor under the self-bond shall be jointly and severally
liable. As the proposed amendment is substantively identical to
language found at 30 CFR 800.23(e)(1), the Director finds it no less
effective than the Federal rule.
n. Section 86.159(n). Pennsylvania is proposing at subsection (n)
the types of security interests that may be used to secure the self-
bond. In addition, this section sets out the standard the Department
will use in determining the acceptability of the security interest
being pledged. There are no counterpart Federal regulations. However,
the Director finds the proposed rule is not inconsistent with the
requirements of SMCRA and no less effective than the Federal
regulations.
o. Section 86.159(o). Pennsylvania is proposing at subsection (o)
that 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. This proposed rule provides for default if the applicant takes
action that would reduce the value of the pledged assets. There are no
counterpart Federal regulations. However, this provision provides
protection for Pennsylvania's security interests, hence the Director
finds the proposed rule is not inconsistent with the requirements of
SMCRA and no less effective than the Federal regulations.
p. Section 86.159(p). Pennsylvania proposes at section (p) that 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. A third-party guarantor shall guarantee and
become surety for the performance of the parties who are indemnitors
under the self-bond required by subsection (j). The guarantor must
submit a perfected security interest that is acceptable to
Pennsylvania. It should be noted that these third-party guarantors
under the Pennsylvania program are not the same as a non-parent
corporate guarantor under 30 CFR 800.23(c)(2), since the applicant and/
or its parent must still meet the financial qualification regardless of
any third-party guarantors. There are no counterpart Federal
regulations. However, the Director finds the proposed rule is not
inconsistent with the requirements of SMCRA and no less effective than
the Federal regulations.
q. Section 86.159(q). Pennsylvania is proposing at subsection (q)
that 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. There are no counterpart Federal self-bonding regulations.
However, the Director finds that the provisions of the proposed rule
are not inconsistent with the bonding requirements under 30 CFR Part
800.
r. Section 86.159(r). Pennsylvania proposes at subsection (r) that,
at the request of the applicant, the Department will maintain the
confidentiality of the applicant's financial information and the terms
and the conditions of the security interests unless it is allowed to be
disclosed under other laws. There is no comparable Federal counterpart.
These regulations implement Pennsylvania's statute at 52 P.S.
Secs. 1396.4 and 1406.6, which prohibit such disclosure. Therefore, the
Director finds that the rule is not inconsistent with the requirements
of SMCRA and the Federal regulations.
s. Section 86.159(s). Pennsylvania is proposing at subsection (s)
that applications for a self-bond and each annual update of a self-bond
shall be accompanied by a nonrefundable fee in the amount of $900.
There are no counterpart Federal regulations. However, in a comparable
Federal rule at 30 CFR 777.17, permit fees are allowed so long as they
do not exceed the costs to the regulatory authority. Pursuant to the
October 10, 1987, Pennsylvania Bulletin, Pennsylvania stated that the
$900 fee was needed to cover the costs of reviewing and verifying the
application and to obtain the services of an outside consultant to
analyze the applicant's eligibility or continuing eligibility.
Therefore, the Director finds that the fee is reimbursement of the
costs to Pennsylvania and finds the proposed rule is not inconsistent
with SMCRA and the Federal regulations.
t. Section 86.159(t). Proposed subsection (t) establishes the
regulatory authority of the Department to seek remedies against a
permittee or applicant apart from those specifically set forth in the
proposed self-bonding rules. There are no counterpart Federal
regulations. However, it is not inconsistent with SMCRA and the Federal
regulations because it clarifies that the remedies under SMCRA are not
the only ones available to Pennsylvania.
u. Section 86.166(b). Pennsylvania is revising this paragraph to
correct the rule reference concerning release of bonds from ``Part 4 of
this subchapter'' to ``86.170-86.173 (relating to release of bonds).''
The Director finds that this revision is nonsubstantive in nature and
will not render the Pennsylvania program inconsistent with the
requirements of SMCRA and the Federal regulations.
v. Section 86.166(c). Pennsylvania prohibited a permittee from
replacing its existing bond with a self-bond. Pennsylvania is now
proposing to delete this prohibition. Since the corresponding Federal
rule at 30 CFR 800.30(a) allows permittees to replace existing bonds
with other bonds that provide equivalent coverage, the Director finds
that the revised State rule is no less effective than the Federal rule.
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. No public comments were
received, and because no one requested an opportunity to testify at a
public hearing, no hearing was held.
Agency Comments
Pursuant to 30 CFR 732.17(h)(ii)(i), the Director solicited
comments from various Federal and State agencies with an actual or
potential interest in the Pennsylvania program. The Department of
Labor, Mine Safety and Health Administration (MSHA), commented that the
proposed amendment would have no effect on MSHA operations or
regulations. The Department of Agriculture, Soil Conservation Service,
stated that the proposed changes would not have any significant effects
on the environmental integrity of the regulations. The Department of
the Interior, Bureau of Mines, and the U.S. Army Corps of Engineers
responded that they had no comments.
Environmental Protection Agency (EPA) Concurrence
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 (42 U.S.C. 7401 et seq.).
None of the revisions that Pennsylvania proposed to make in this
amendment pertain to air or water quality standards. Therefore, OSM did
not request EPA's concurrence.
Pursuant to 30 CFR 732.17(h)(11)(i), OSM solicited comments on the
proposed amendment from EPA (Administrative Record No. PA 823.01). The
EPA responded that it concurred with the proposed amendment.
V. Director's Decision
Based on the above findings, the Director approves the proposed
amendment as submitted by Pennsylvania on May 11, 1993, and clarified
on February 17, 1994. As discussed at Finding 2.1., the Director finds
that, for the most part, the Pennsylvania program does not have a
counterpart to the Federal rules at 30 CFR 800.23(e)(2). The Director
is, therefore, requiring Pennsylvania to further amend its program to
correct the identified deficiencies.
In accordance with 30 CFR 732.17(f)(1), the Director is also taking
this opportunity to clarify in the required amendment section at 30 CFR
938.16 that, within 60 days of the publication of this final rule,
Pennsylvania must either submit a proposed written amendment, or a
description of an amendment to be proposed that meets the requirements
of SMCRA and 30 CFR Chapter VII and a timetable for enactment that is
consistent with Pennsylvania's established administrative or
legislative procedures.
The Federal regulations at 30 CFR Part 938 codifying decisions
concerning the Pennsylvania 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
conform their programs with the Federal standards without undue delay.
Consistency of State and Federal standards is required by SMCRA.
For administrative reasons, the Director is reiterating the removal
of required amendments (i), (j), and (k) as set forth in 57 FR 48733
(October 28, 1992).
Effect of the 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. Thus any changes to the State program are not enforceable
until approved by OSM. The Federal regulations at 30 CFR 732.17(g)
prohibit any unilateral changes to approved State programs. In the
oversight of the Pennsylvania program, the Director will recognize only
the statutes, regulations and other materials approved by him, together
with any consistent implementing policies, directives and other
materials, and will require the enforcement by Pennsylvania of only
such provisions.
VI. Procedural Determinations
Executive Order 12866
This rule is exempted from review by the Office of Management and
Budget under Executive Order 12866.
Executive Order 12778
The Department of the Interior has conducted the reviews required
by section 2 of Executive Order 12778 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 the Office of Management and Budget 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.
List of Subjects in 30 CFR Part 938
Intergovernmental relations, Surface mining, Underground mining.
Dated: July 13, 1994.
Ronald C. Recker,
Acting Assistant Director, Eastern Support Center.
For the reasons set forth in the preamble, Title 30, Chapter VII,
Subchapter T of the Code of Federal Regulations is amended as set forth
below:
PART 938--PENNSYLVANIA
1. The authority citation for Part 938 continues to read as
follows:
Authority: 30 U.S.C. 1201 et seq.
2. Section 938.15 is amended by adding paragraph (bb) to read as
follows:
Sec. 938.15 Approval of regulatory program amendments.
* * * * *
(bb) The following amendment to the Pennsylvania regulatory
program, as submitted to OSM on May 11, 1993, and clarified by letter
dated February 17, 1994, is approved, except as noted herein, effective
July 20, 1994. Revisions to Title 25, Pennsylvania Code Sections
86.142, 86.159, and 86.166 concerning self-bonding provisions, except
to the extent that Section 86.159(l)(2) does not contain all the
requirements for the execution of indemnity agreements.
3. In Sec. 938.16, paragraphs (i), (j), and (k) are removed and
reserved and a new paragraph (nnn) is added to read as follows:
Sec. 938.16 Required regulatory program amendments.
* * * * *
(nnn) By September 19, 1994, Pennsylvania shall submit either a
proposed amendment or a description of an amendment to be proposed,
together with a timetable for adoption, to revise section 86.159(l)(2)
to require two officer signatures for each corporate indemnitor, an
affidavit from the corporation(s) certifying that entering into the
indemnity agreement is valid under all applicable Federal and State
laws, and documents that evidence the authority of the signatories to
bind the corporation and an authorization by the parent corporation to
enter into the indemnity agreement.
[FR Doc. 94-17633 Filed 7-19-94; 8:45 am]
BILLING CODE 4310-05-M
