§ 86.159. Self-bonding.
(a) The Department may accept a self-bond to cover all or part of the permittee’s liabilities arising from coal mining activities. The Department will not accept a self-bond covering long-term indeterminate liabilities. These liabilities include, but are not limited to, obligations to treat discharges from mining activities which exist after completion of mining and reclamation activities as required by section 315 of The Clean Streams Law (35 P. S. § 691.315), § § 87.102, 87.207, 88.92, 88.187, 88.507 and 89.52 or restoration of soil productivity of prime farmland as required by § § 87.177—87.181, 88.129, 88.217, 88.330, 88.381, 88.493 and 90.161—90.165. The applicant for a self-bond shall demonstrate to the satisfaction of the Department a history of continuous efforts to achieve compliance with Federal and State environmental laws, that it meets financial eligibility criteria established in this section and enters into indemnity and security agreements required by this section. An applicant which is a subsidiary corporation may satisfy the requirements for eligibility to self-bond by relying on its parent corporation. In this case, the parent corporation shall meet the eligibility and reporting requirements required by this section.
(b) The Department, in determining an applicant’s eligibility to self-bond, will be satisfied by the applicant that it meets the following requirements:
(1) The applicant is incorporated in or authorized to do business in this Commonwealth. If a subsidiary corporation is a permittee or an applicant for a permit, the parent corporation of the subsidiary corporation is not required to be incorporated in or authorized to do business in this Commonwealth.
(2) The applicant has designated suitable agents in this Commonwealth to receive service of suits, claims, demands and other services of process.
(3) The applicant has a history of continuous business operation. This requirement may be deemed to be met if one of the following applies:
(i) The applicant’s existence is the result of a reorganization, consolidation or merger involving a company with a history of continuous business operation.
(ii) The applicant is a majority-owned subsidiary of a corporation with a history of continuous business operation.
(4) The applicant, during the last 36 calendar months, has not defaulted in the payment of one or more of the following:
(i) Dividend or sinking fund installment, preferred stock or installment of indebtedness for borrowed money.
(ii) Payment of rentals under long-term leases.
(iii) A reclamation fee payment due under section 402 of the Surface Mining Control and Reclamation Act of 1977 (30 U.S.C.A. § 1232) for coal produced in this Commonwealth.
(5) The applicant, during the last 36 calendar months, has honored its obligations under other self-bonding programs established by another state or the Federal government.
(6) The applicant has not had commercial surety bonds cancelled for nonpayment of premiums or fraud or failure to comply with conditions established by the surety company as conditions of maintaining surety bonds in force and effect.
(c) The applicant, as part of the application for self-bonding, shall submit to the Department the following items:
(1) Financial statements for its most recent 3 fiscal years, prepared in accordance with generally accepted accounting principles, and in sufficient detail to determine if the applicant can meet the financial solvency tests contained in this section.
(2) Financial statements for the completed quarters of the fiscal year in which application is made.
(3) A report, prepared by an independent certified public accountant in conformity with generally accepted accounting principles, containing the accountant’s audit opinion or review opinion of the financial statements for the applicant’s most recent 3 fiscal years.
(4) Certification that the applicant intends to maintain its existing corporate status for a period in excess of 5 years.
(5) Certification that forfeiture of the aggregate amount of the applicant’s self-bonds approved and furnished for operations included under this section will not materially affect its ability to remain in business or endanger its cash flow to the extent it could not meet its current obligations.
(6) Other information regarding its financial solvency, continuous business operation and compliance with environmental laws as the Department may require.
(d) After initial submission of the information in the application for self-bonding, the applicant shall submit updated information as specified in subsections (b) and (c) within 90 days of the close of each of the applicant’s fiscal years. The applicant shall meet the requirements of this section relating to eligibility to self-bond for each succeeding fiscal year. The Department may require reports of financial condition from the applicant and these reports shall be in addition to those specified in this subsection. Failure of the applicant to provide reports requested by the Department shall render the applicant ineligible to self-bond.
(e) If the applicant or the independent certified public accountant submits false information or representations in the application or reports required by this section, the application will be disallowed and render the applicant ineligible to self-bond. The applicant and the independent certified public accountant shall be subject to 18 Pa.C.S. § § 4903 and 4904 (relating to false swearing; and unsworn falsification to authorities).
(f) The applicant shall satisfy one of the following financial tests in paragraph (1), (2) or (3):
(1) The applicant satisfies the following requirements:
(i) A current rating for its most recent bond issuance of either: AAA, AA or A as issued by Standard and Poor’s Corporation; or Aaa, Aa or A as issued by Moody’s Investor Services. The ratings may not have been assigned as a result of the bond issue being independently insured.
(ii) Tangible net worth at least six times the total amount of outstanding and proposed self-bonds for coal mining activities in this Commonwealth.
(iii) Assets in the United States amounting to at least 90% of total assets.
(2) The applicant satisfies the following requirements:
(i) Tangible net worth of at least $10 million.
(ii) A ratio of total liabilities to net worth of 2.5 times or less and a ratio of current assets to current liabilities of 1.2 times or greater.
(iii) Tangible net worth at least six times the total amount of outstanding and proposed self-bonds for coal mining activities in this Commonwealth.
(iv) Assets in the United States amounting to at least 90% of total assets.
(3) The applicant satisfies the following requirements:
(i) Possesses fixed assets in the United States of at least $20 million.
(ii) Has a ratio of total liabilities to net worth of 2.5 times or less and a ratio of current assets to current liabilities of 1.2 times or greater.
(iii) Has tangible net worth at least six times the total amount of outstanding and proposed self-bonds for coal mining activities in this Commonwealth.
(iv) Has assets in the United States amounting to at least 90% of total assets.
(g) An adverse opinion or a disclaimer of opinion expressed by the independent certified public accountant in its report on examination of the applicant’s financial statements renders the applicant ineligible to self-bond. The Department may determine an applicant ineligible to self-bond on the basis of other qualifications in the opinion expressed by the independent certified public accountant in its report on the examination of the applicant’s financial statements.
(h) The total value of outstanding plus proposed self-bonds for coal mining activities may not exceed 25% of the applicant’s tangible net worth in the United States.
(i) The period of liability under an approved self-bond shall be determined in accordance with § 86.151 (relating to period of liability). The release of a self-bond shall be made under § § 86.170—86.172 (relating to scope; procedures for seeking release of bond; and criteria for release of bond). Liability under a self-bond is terminated upon the Department’s approval of alternative bonding, as provided for in this subchapter, submitted by the applicant.
(j) As part of the application for self-bonding, the applicant shall submit to the Department a self-bond as defined in § 86.142 (relating to definitions). The self-bond shall be perfected under the applicable statutes of the Commonwealth and the United States at the time of execution. The security interests supporting the self-bond shall be in accordance with the following schedule:
(1) For tangible net worth from 6 to 6.99 times the total amount of outstanding and proposed self-bonds for coal mining activities in this Commonwealth, the security interest shall be in an amount equal to the amount of liability to be covered by the self-bond.
(2) For tangible net worth from 7 to 7.99 times the total amount of outstanding and proposed self-bonds for coal mining in this Commonwealth, the security interest shall be in an amount equal to 80% of the amount of liability to be covered by the self-bond.
(3) For tangible net worth from 8 to 8.99 times the total amount of outstanding and proposed self-bonds for coal mining in this Commonwealth, the security interest shall be in an amount equal to 60% of the amount of liability to be covered by the self-bond.
(4) For tangible net worth from 9 to 9.99 times the total amount of outstanding and proposed self-bonds for coal mining in this Commonwealth, the security interest shall be in an amount equal to 40% of the amount of liability to be covered by the self-bond.
(5) For tangible net worth equal to or in excess of 10 times the total amount of outstanding and proposed self-bonds for coal mining in this Commonwealth, the security interest shall be in an amount equal to 25% of the amount of liability to be covered by the self-bond.
(6) Notwithstanding a provision in this chapter to the contrary, the Department may require the applicant, either initially or during the period of liability under a self-bond, to provide additional security interests as the Department may, in its sole discretion, determine it necessary to assure the applicant’s obligations under the self-bond are met. The determination that an applicant may be unwilling or unable to meet its obligations under the self-bond includes, but is not limited to, a review of individual factors such as the applicant demonstrating a pattern of delay, resistance to or avoidance of timely compliance with the conditions of the self-bond, the applicant’s permit, or both, and Department orders relating thereto.
(k) The self-bond shall be in a form prepared and approved by the Department and may contain special conditions as the Department may require to assure the Commonwealth’s interests are fully protected. The self-bond, in addition toanother term or condition of forfeiture contained in a bond required by this subchapter, shall contain the following terms and conditions:
(1) The self-bond will be forfeited if either of the following occur:
(i) Ninety days after the Department is informed by or determines that the applicant is no longer eligible to self-bond and within the 90-day period the applicant fails to submit to the Department acceptable security as provided for in this subchapter to cover its self-bonded liability.
(ii) Within 90 days of the issuance of an order to abate conditions at a site covered by a self-bond which constitutes either an actual or potential risk of harm to the environment, the applicant fails to, except as provided for in § 86.211 (relating to enforcement—general), comply with the order or fails to submit to the Department acceptable security as provided for in this subchapter in an amount equal to the self-bonded liability.
(2) Liability under the self-bond shall be conditioned on:
(i) The applicant faithfully performing the following requirements:
(A) The Surface Mining Conservation and Reclamation Act (52 P. S. § § 1396.1—1396.19b).
(B) The Clean Streams Law (35 P. S. § § 691.1—691.1001).
(C) The Air Pollution Control Act (35 P. S. § § 4001—4015).
(D) The Coal Refuse Disposal Control Act (52 P. S. § § 30.51—30.66).
(E) The Solid Waste Management Act (35 P. S. § § 6018.101—6018.1003).
(F) The Dam Safety and Encroachments Act (32 P. S. § § 693.1—693.27).
(G) The Bituminous Mine Subsidence and Land Conservation Act (52 P. S. § § 1406.1—1406.21).
(H) Regulations adopted by the EQB under the acts set forth in clauses (A)—(G).
(ii) The applicant immediately notifying the Department of a significant change in the management control or organization of the applicant.
(iii) The applicant immediately notifying the Department of a material adverse change to the financial condition of the applicant, that may affect eligibility to self-bond or diminish the value of the security interests pledged to secure the self-bond.
(iv) The applicant, during the period of the self-bond, applying for or consenting to the appointment of a receiver, conservator, trustee or liquidator of itself or its property, admitting in writing its inability to pay its debts as the debts mature or making a general assignment for the benefit of its creditors.
(v) During the period of the self-bond, a creditor of the applicant attaching or executing a judgment against the applicant so that the Department would have reasonable belief the prospect of the applicant having sufficientassets to cover the full amount of the self-bond or to be able to perform under the self-bond is impaired.
(3) The self-bond shall become immediately due and payable upon default of one or more of the terms and conditions or the dissolution of a party to the self-bond. The self-bond shall provide for confession of judgment and confession of execution upon default of one or more of the terms and conditions or dissolution.
(l) The self-bond shall be executed by:
(1) The applicant, except as provided in paragraphs (2) and (3).
(2) If the applicant is a subsidiary corporation, the applicant’s parent corporation shall be a party to the self-bond which shall establish the applicant and its parent corporation as co-indemnitors under the self-bond. Corporations applying for a self-bond, and parent and nonparent corporations guaranteeing an applicant’s self-bond, shall submit an indemnity agreement signed by two corporate officers who are authorized to bind their corporations. A copy of the authorization shall be submitted to the Department along with an affidavit certifying that the agreement is valid under all applicable Federal and State laws. In addition, the corporate guarantor shall provide a copy of the corporate authorization demonstrating that the corporation may guarantee the self-bond and execute the guarantee agreement. The parent corporation may cancel its obligations under the self-bond upon 120 days written notice to the Department, but the cancellation will not be effective until the self-bond is replaced with an alternate form of bonding authorized by this subchapter and approved by the Department.
(3) If the applicant is a partnership, joint venture or syndicate, each person with a beneficial interest in the same shall be a party to the self-bond and shall be established as a co-indemnitor under the self-bond.
(m) Each indemnitor under the self-bond shall be jointly and severally liable.
(n) Only security interests acceptable to the Department shall be used to secure the self-bond and include, but are not limited to, account security agreements, mortgages, industrial plant mortgages, pledges of stock and personal property liens. In accepting security interests, the Department will exercise the degree of judgment, skill, diligence and care under the circumstances then prevailing which persons of prudence, acting in a like capacity and familiar with these matters, would use in the conduct of an enterprise of like character and with like aims. If the applicant is unable or fails to provide security interests acceptable to the Department, the applicant shall be ineligible to self-bond. The Department may accept a security interest in an applicant’s parent corporation’s assets.
(o) During the period of the self-bond and until released in writing by the Department, the parties to the self-bond who are indemnitors may not take action which would adversely affect the Commonwealth’s rights, title or interest in the security interests pledged to secure the self-bond. The parties who are indemnitors shall immediately notify the Department of a sale, merger, acquisition, reorganization, consolidation or other action which may so affect the pledged security interests. The self-bond shall contain provisions so that if the parties who are indemnitors take action which adversely affects the pledged security interests, the action shall constitute an event of default.
(p) In addition to the indemnification and security required in subsection (j), the Department may require a third-party guarantee of an applicant’s self-bond. Third-party guarantors shall enter into a guaranty and suretyship agreement withthe Department whereby the third-party guarantor guarantees and becomes surety for the performance of the parties who are indemnitors under the self-bond required by subsection (j).
(1) The guaranty and suretyship agreement shall be perfected under the applicable statutes of the Commonwealth and the United States at the time of execution with security interests so that the Commonwealth’s interests as indemnitee are fully protected.
(2) Only security interests approved by the Department shall be used to satisfy the requirements of this subsection. The security instruments include, but are not limited to, surety mortgages, industrial plant mortgage and security agreements and security liens on personal property.
(q) When the Department determines that an event of default or forfeiture under the self-bond has occurred, the determination shall also constitute a determination of the applicant’s inability to self-bond.
(r) The Department will upon request of the applicant, maintain the confidentiality of the applicant’s financial information and the terms and conditions of the security interests unless the same are otherwise disclosed to governmental agencies or the public.
(s) Applications for a self-bond and each annual update of a self-bond shall be accompanied by a nonrefundable check in the amount of $900 made payable to the ‘‘Commonwealth of Pennsylvania.’’
(t) Remedies provided or authorized by laws for violation of statutes, including the acts, this chapter, the terms and conditions of the permits and orders of the Department, are expressly preserved. Nothing in this subchapter may be construed as an exclusive remedy. No action taken under this subchapter waives or impairs another remedy provided by law.
Authority The provisions of this § 86.159 amended under section 5 of The Clean Streams Law (35 P. S. § 691.5); sections 4(a) and 4.2 of the Surface Mining Conservation and Reclamation Act (52 P. S. § § 1396.4(a) and 1396.4b); and section 1920-A of The Administrative Code of 1929 (71 P. S. § 510-20).
Source The provisions of this § 86.159 adopted December 19, 1980, 10 Pa.B. 4789, effective July 31, 1982, 12 Pa.B. 2382; amended July 30, 1982, 12 Pa.B. 2473, effective July 31, 1982, 12 Pa.B. 2382; amended May 11, 1990, effective upon publication of notice in the Pennsylvania Bulletin that the amendments have been approved by the OSM, 20 Pa.B. 2517; amended August 19, 1994, effective August 20, 1994, 24 Pa.B. 4195; amended June 17, 2011, effective June 18, 2011, 41 Pa.B. 3084; amended August 21, 2015, effective August 22, 2015, 45 Pa.B. 4904. Immediately preceding text appears at serial pages (237101) to (237104) and (357493) to (357495).
Cross References This section cited in 25 Pa. Code § 86.155 (relating to scope); and 25 Pa. Code § 86.282 (relating to participation requirements).
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