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HARDROCK MINING ON FEDERAL LANDS Appendix E Financial Assurance Financial assurance is an important part of the regulatory framework to protect federal lands and the environment when an operator is unable or unwilling to perform reclamation and other obligations, and to address contingencies and future long-term post-closure management expenses. Financial assurance for mining operations raises four issues: (1) the activities and events the assurance covers; (2) the amount of the assurance; (3) the forms the assurance may take; and (4) conditions under which the financial assurance is to be released. ACTIVITIES AND EVENTS COVERED Financial assurance for reclamation of mining sites is part of mining regulatory requirements in all of the western states that have mining on federal lands. In addition, financial assurance for reclamation is required by the federal land management agencies for mining operations with approved plans of operations on federal lands. Notice-level operations under BLM regulations do not currently have to provide a financial assurance; under the regulations of some states, these small operations are also not required to post a financial assurance for reclamation. Financial assurances required by plans of operations and state reclamation laws (and some state laws governing closure of waste management units) are monetary guarantees that provide for completion of the reclamation plan for a mining site when an operator is unable or unwilling to do it. Typically, these financial assurances also include money for monitoring the success of the reclamation program, including vegetation surveys and water quality monitoring. Several states have requirements for long-term maintenance of reclaimed units. Several states—but not the Forest Service or BLM—have adopted regulatory programs that require or authorize the agencies to require financial
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HARDROCK MINING ON FEDERAL LANDS assurance for long-term protection of water quality. Some mines on federal lands have provided such assurances negotiated on a case-by-case basis with state and federal agencies, even where explicit authority to require such assurance may not have been in the regulations. AMOUNT OF FINANCIAL ASSURANCE State laws, regulations, and state and federal guidance documents cover the determination of financial assurance amounts. Financial assurances for reclamation are calculated based not on the operator 's cost to complete the work but on the cost to bring in a third party to complete the work with regulator agency and/or consultant oversight. The regulatory agency determines the costs, often based on information submitted by the operator. The equipment costs are determined based on equipment available for rental in the vicinity of the operation, fuel costs, and operator costs, typically an hourly rate. The equipment 's efficiency at material movement and rate of progression of the work is determined from such resources as the Caterpillar Performance Handbook. Building demolition and disposal is based on standard demolition costs. Seed and revegetation costs are based on actual information available from seed distributors. Knowledge of local labor rates and typical time requirements to complete the work are also used to develop detailed costs for all aspects of the site reclamation. Most financial assurance language allows for periodic review of the reclamation costs and the bond instruments to ensure that the financial assurance is adequate. Some regulations require that the full amount of financial assurance for the maximum disturbance be submitted prior to construction; others allow the financial assurance to be submitted for the amount to be disturbed at any one time, usually a year, plus the amounts previously disturbed and not successfully reclaimed prior to that time. Almost all financial assurances are for the life of the project, although regulatory language may allow for periodic review and for change to the amount or form of the assurance. For instance, financial assurance forms used in Colorado specify that the bond is for one year, but the bond is automatically renewable for subsequent years if no other bond is put in place prior to the expiration date. That allows the state to review the financial assurance on a yearly basis, but does not require them to do so in order to maintain the appropriate coverage.
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HARDROCK MINING ON FEDERAL LANDS TYPES OF FINANCIAL ASSURANCE Regulations for each state and for the federal land management agency dictate types of financial assurances that are acceptable. Typically, cash, certificates of deposit, letters of credit, and corporate sureties are accepted in all settings. Less common, but still accepted in some states, are deeds of trust for real estate or liens on equipment. Some states also accept a guarantee known as self-bonding or corporate bonding for all or a portion of the financial assurance. This is a guarantee by the company that it will complete the reclamation work, and there is no exchange of money to the regulatory agency. The company provides information to show that it is a going concern and will be solvent for the life of the operation. Publicly or privately held trust funds established by companies have been used to guarantee long-term water treatment and monitoring. Most states have regulations that dictate which state agency can hold the bond for reclamation. These regulations restrict the ability of other agencies in the state to hold a financial assurance for the same purposes. Where federal, private, or state lands are involved in an operation, the states and federal land management agencies have memoranda of understanding (MOUs) specifying which agency will hold the financial assurance. In most cases, the MOUs also determine how the assurance amount will be calculated and how it will be released. CONDITIONS FOR RELEASE Financial assurances for reclamation are required until reclamation is complete and successful. Reclamation is typically defined as the successful physical stabilization and revegetation of the site. Most states and the federal land management agencies consider partial release of the reclamation bond as portions of the work are completed. For example, if the operator has successfully completed regrading, that portion of the bond designated for regrading can be released. Procedures for release of financial assurances vary among states. In most cases, the process is a technical determination by agencies responsible for administering the provisions guaranteed by the assurance. Some states, such as Colorado and Montana, expressly provide for receipt of comments on decisions to release reclamation bonds. Trust funds for long-term monitoring and maintenance, such as for long-term water treatment, can be structured so that they are not released, but are administered by the public or private trustee to provide sufficient revenue to assure continuous funding.
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HARDROCK MINING ON FEDERAL LANDS This page in the original is blank.
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