KENTUCKY REGULATORY PROGRAM KENTUCKY ADMINISTRATIVE REGULATIONS (KAR) TITLE 405 NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION CABINET DEPARTMENT FOR SURFACE MINING RECLAMATION AND ENFORCEMENT [Current as of 7/22/03] 405 KAR CHAPTER 10 BOND AND INSURANCE REQUIREMENTS 405 KAR 10:001 Definitions for 405 KAR Chapter 10 405 KAR 10:010 General requirements for performance bond and liability insurance 405 KAR 10:020 Amount and duration of performance bond 405 KAR 10:030 Types, terms and conditions of performance bonds and liability insurance 405 KAR 10:035 Procedures, criteria and hearing requirements for cancellation of surety bonds after notice of 405 KAR 10:040 Procedures, criteria and schedule for release of performance bond 405 KAR 10:050 Bond forfeiture 405 KAR 10:200 Kentucky bond pool NOTE: Cross references to OSM's federal regulations, the U.S. Code ("USC") and Kentucky Revised Statutes ("KRS") are part of the Kentucky Regulatory Program's regulations. These references appear at the beginning of each subchapter under "RELATES TO" and " STATUTORY AUTHORITY". The SMCRA section number equivalents to the USC section numbers have been added to the end of these notations. In addition, specific cross references to federal regulation and statute sections were added to Kentucky regulation sections; they appear in double braces to the right of the section name and number, e.g., "SECTION 1. NOTICE OF CITIZEN SUITS. {{ 30 CFR 700.13 }}". These annotations were compiled using the preambles to OSM's approval of amendments to the Kentucky Regulatory Program published in the Federal Register and from the file of Kentucky regulatory material in the COALEX Library in LexisNexis. 405 KAR 10:001. DEFINITIONS FOR 405 KAR CHAPTER 10. RELATES TO: KRS Chapter 350, 7 CFR Part 657, 30 CFR Parts 700.5, 701.5, 707.5, 730-733, 735, 761.5, 762.5, 773.5, 800.5, 843.5, 917, 40 CFR Part 136, 30 USC 1253, 1255, 1291 {SMCRA Secs. 503, 505, 701} STATUTORY AUTHORITY: KRS Chapter 13A, 350.028, 350.465, 7 CFR Part 657, 30 CFR Parts 700.5, 701.5, 707.5, 730-733, 735, 761.5, 762.5, 773.5, 800.5, 843.5, 917, 40 CFR Part 136, 30 USC 1253, 1255, 1291 {SMCRA Secs. 503, 505, 701} NECESSITY, FUNCTION, AND CONFORMITY: KRS Chapter 350 in pertinent part requires the cabinet to promulgate rules and administrative regulations pertaining to surface coal mining and reclamation operations under the permanent regulatory program. This administrative regulation provides for the defining of certain essential terms used in 405 KAR Chapter 10. SECTION 1. DEFINITIONS. (1) "ADJACENT AREA" means land located outside the affected area or permit area, depending on the context in which "adjacent area" is used, where air, surface or groundwater, fish, wildlife, vegetation or other resources protected by KRS Chapter 350 may be adversely impacted by surface coal mining and reclamation operations. (2) "ADMINISTRATOR" or "BOND POOL ADMINISTRATOR", as used in 405 KAR 10:200, means the cabinet employee named by the secretary to assist the commission and to perform certain administrative functions in connection with the bond pool, as required by KRS 350.715. (3) "AFFECTED AREA" means any land or water area which is used to facilitate, or is physically altered by, surface coal mining and reclamation operations. The affected area includes the disturbed area; any area upon which surface coal mining and reclamation operations are conducted; any adjacent lands the use of which is incidental to surface coal mining and reclamation operations; all areas covered by new or existing roads used to gain access to, or for hauling coal to or from, surface coal mining and reclamation operations, except as provided in this definition; any area covered by surface excavations, workings, impoundments, dams, ventilation shafts, entryways, refuse banks, dumps, stockpiles, overburden piles, spoil banks, culm banks, tailings, holes or depressions, repair areas, storage areas, shipping areas; any areas upon which are sited structures, facilities, or other property or material on the surface resulting from, or incident to, surface coal mining and reclamation operations; and the area located above underground workings associated with underground mining activities, auger mining, or in situ mining. The affected area shall include every road used for the purposes of access to, or for hauling coal to or from, surface coal mining and reclamation operations, unless the road: (a) Was designated as a public road pursuant to the laws of the jurisdiction in which it is located; (b) Is maintained with public funds, and constructed in a manner similar to other public roads of the same classification within the jurisdiction; and (c) There is substantial (more than incidental) public use. (4) "APPLICANT", as used in 405 KAR 10:010, means any person seeking a permit, permit revision, permit amendment, permit renewal, or transfer, assignment, or sale of permit rights from the cabinet to conduct surface coal mining and reclamation operations pursuant to KRS Chapter 350 and all applicable administrative regulations. (5) "BOND POOL" or "KENTUCKY BOND POOL" means the voluntary alternative bonding program established at KRS 350.700 through 350.755. (6) "CABINET" is defined in KRS 350.010. (7) "CFR" means Code of Federal Regulations. (8) "COAL" means combustible carbonaceous rock, classified as anthracite, bituminous, subbituminous, or lignite by ASTM Standard D 388-77. (9) "COLLATERAL BOND" means an indemnity agreement in a sum certain payable to the cabinet executed by the permittee and which is supported by the deposit with the cabinet of cash, negotiable certificates of deposit, or an irrevocable letter of credit of any bank organized and authorized to transact business in the United States. (10) "COMMISSION" or "BOND POOL COMMISSION" means the body established at KRS 350.705. (11) "CROPLAND" means land used for the production of adapted crops for harvest, alone or in a rotation with grasses and legumes, and includes row crops, small grain crops, hay crops, nursery crops, orchard crops, and other similar specialty crops. (12) "DAY" means calendar day unless otherwise specified to be a working day. (13) "DEPARTMENT" means the Department for Surface Mining Reclamation and Enforcement. (14) "DISTURBED AREA" means an area where vegetation, topsoil, or overburden is removed or upon which topsoil, spoil, coal processing waste, underground development waste, or noncoal waste is placed by surface coal mining operations. Those areas are classified as "disturbed" until reclamation is complete and the performance bond or other assurance of performance required by 405 KAR Chapter 10 is released. (15) "FDIC" means Federal Deposit Insurance Corporation. (16) "FEDERAL LANDS" means any lands, including mineral interests, owned by the United States, without regard to how the United States acquired ownership of the lands or which agency manages the lands. It does not include Indian lands. (17) "FSLIC" means Federal Savings and Loan Insurance Corporation. (18) "HISTORICALLY USED FOR CROPLAND." (a) "HISTORICALLY USED FOR CROPLAND" means that lands have been used for cropland for any five (5) years or more out of the ten (10) years immediately preceding: 1. The application; or 2. The acquisition of the land for the purpose of conducting surface coal mining and reclamation operations. (b) Lands meeting either paragraph (a)1 or 2 of this subsection shall be considered "historically used for cropland." (c) In addition to the lands covered by paragraph (a) of this subsection, other lands shall be considered "historically used for cropland" as described below: 1. Lands that would likely have been used as cropland for any five (5) out of the last ten (10) years immediately preceding the acquisition or the application but for some fact of ownership or control of the land unrelated to the productivity of the land; and 2. Lands that the cabinet determines, on the basis of additional cropland history of the surrounding lands and the lands under consideration, are clearly cropland but fall outside the specific five (5) years in ten (10) criterion. (d) Acquisition includes purchase, lease, or option of the land for the purpose of conducting or allowing through resale, lease or option, the conduct of surface coal mining and reclamation operations. (19) "IMPOUNDMENT" means a closed basin, naturally formed or artificially built, which is dammed or excavated for the retention of water, sediment, or waste. (20) "KAR" means Kentucky administrative regulations. (21) "KRS" means Kentucky Revised Statutes. (22) "LAND USE" means specific functions, uses, or management-related activities of an area, and may be identified in combination when joint or seasonal uses occur and may include land used for support facilities that are an integral part of the use. In some instances, a specific use can be identified without active management. (23) "MONTH OF OPERATION," as used in 405 KAR 10:200, Section 7, means a calendar month in which a duty exists to reclaim a disturbed area for which a permit was issued under KRS Chapter 350. It is not necessary that coal extraction occur during the month. (24) "NOTICE OF NONCOMPLIANCE AND ORDER FOR REMEDIAL MEASURES" means a written document and order prepared by an authorized representative of the cabinet which sets forth with specificity the violations of KRS Chapter 350, 405 KAR Chapters 7 through 24, or permit conditions which the authorized representative of the cabinet determines to have occurred based upon his inspection, and the necessary remedial actions, if any, and the time schedule for completion thereof, which the authorized representative deems necessary and appropriate to correct the violations. (25) "OPERATIONS" is defined in KRS 350.010. (26) "OPERATOR" is defined in KRS 350.010. (27) "ORDER FOR CESSATION AND IMMEDIATE COMPLIANCE" means a written document and order issued by an authorized representative of the cabinet when: (a) A person to whom a notice of noncompliance and order for remedial measures was issued has failed, as determined by a cabinet inspection, to comply with the terms of the notice of noncompliance and order for remedial measures within the time limits set therein, or as subsequently extended; or (b) The authorized representative finds, on the basis of a cabinet inspection, any condition or practice or any violation of KRS Chapter 350, 405 KAR Chapters 7 through 24, or any condition of a permit or exploration approval which: 1. Creates an imminent danger to the health or safety of the public; or 2. Is causing or can reasonably be expected to cause significant, imminent environmental harm to land, air or water resources. (28) "OWNED OR CONTROLLED" and "OWNS OR CONTROLS" mean any one (1) or a combination of the relationships specified in paragraphs (a) and (b) of this definition: (a)1. Being a permittee of a surface coal mining operation; 2. Based on instruments of ownership or voting securities, owning of record in excess of fifty (50) percent of an entity; or 3. Having any other relationship that gives one (1) person authority directly or indirectly to determine the manner in which an applicant, an operator, or other entity conducts surface coal mining operations. (b) The following relationships are presumed to constitute ownership or control unless a person can demonstrate that the person subject to the presumption does not in fact have the authority directly or indirectly to determine the manner in which the relevant surface coal mining operation is conducted: 1. Being an officer or director of an entity; 2. Being the operator of a surface coal mining operation; 3. Having the ability to commit the financial or real property assets or working resources of an entity; 4. Being a general partner in a partnership; 5. Based on the instruments of ownership or the voting securities of a corporate entity, owning of record ten (10) through fifty (50) percent of the entity; or 6. Owning or controlling coal to be mined by another person under a lease, sublease, or other contract and having the right to receive the coal after mining or having authority to determine the manner in which that person or another person conducts a surface coal mining operation. (29) "PERFORMANCE BOND" means a surety bond, a collateral bond, or a combination thereof, or bonds filed pursuant to the provisions of the Kentucky Bond Pool Program (405 KAR 10:200, KRS 350.595, and KRS 350.700 through 350.755), by which a permittee assures faithful performance of all the requirements of KRS Chapter 350, 405 KAR Chapters 7 through 24, and the requirements of the permit and reclamation plan. (30) "PERMIT" means written approval issued by the cabinet to conduct surface coal mining and reclamation operations. (31) "PERMIT AREA" means the area of land and water within boundaries designated in the approved permit application, which shall include, at a minimum, all areas which are or will be affected by surface coal mining and reclamation operations under that permit. (32) "PERMITTEE" means an operator or a person holding or required by KRS Chapter 350 or 405 KAR Chapters 7 through 24 to hold a permit to conduct surface coal mining and reclamation operations during the permit term and until all reclamation obligations imposed by KRS Chapter 350 and 405 KAR Chapters 7 through 24 are satisfied. (33) "PERSON" is defined in KRS 350.010. (34) "PERSON HAVING AN INTEREST WHICH IS OR MAY BE ADVERSELY AFFECTED" or "PERSON WITH A VALID LEGAL INTEREST" shall include any person: (a) Who uses any resource of economic, recreational, aesthetic, or environmental value that may be adversely affected by coal exploration or surface coal mining and reclamation operations, or by any related action of the cabinet; or (b) Whose property is or may be adversely affected by coal exploration or surface coal mining and reclamation operations, or by any related action of the cabinet. (35) "PRIME FARMLAND" means those lands which are defined by the Secretary of Agriculture in 7 CFR 657 and which have been "historically used for cropland" as that phrase is defined above. (36) "RECLAMATION" is defined in KRS 350.010. (37) "SECRETARY" is defined in KRS 350.010. (38) "SMCRA" means Surface Mining Control and Reclamation Act of 1977 (PL 95-87), as amended. (39) "SURETY BOND" means an indemnity agreement in a sum certain, payable to the cabinet and executed by the permittee, which is supported by the performance guarantee of a corporation licensed to do business as a surety in the Commonwealth of Kentucky. (40) "SURFACE COAL MINING AND RECLAMATION OPERATIONS" is defined in KRS 350.010. (41) "SURFACE COAL MINING OPERATIONS" is defined in KRS 350.010. (42) "SUSPENDED SOLIDS" or nonfilterable residue, expressed as milligrams per liter, means organic or inorganic materials carried or held in suspension in water which are retained by a standard glass fiber filter in the procedure outlined by the U.S. EPA's regulations for waste water and analyses (40 CFR 136). (43) "TON" means 2000 pounds avoirdupois (.90718 metric ton). (44) "TOPSOIL" means the A and E soil horizon layers of the four (4) master soil horizons. (45) "U.S. EPA" means United States Environmental Protection Agency. (46) "WILLFULLY" and "WILLFUL VIOLATION" mean that a person acted either intentionally, voluntarily, or consciously, and with intentional disregard or plain indifference to legal requirements, in authorizing, ordering, or carrying out an act or omission that constituted a violation of SMCRA, KRS Chapter 350, 405 KAR Chapters 7 through 24, or a permit condition, or that constituted a failure or refusal to comply with an order issued pursuant to SMCRA, KRS Chapter 350, or 405 KAR Chapters 7 through 24. (18 Ky.R. 2468; Am. 2842; eff. 4-3-92.) 405 KAR 10:010. GENERAL REQUIREMENTS FOR PERFORMANCE BOND AND LIABILITY INSURANCE. RELATES TO: KRS 350.020, 350.060, 350.062, 350.064, 350.151, 350.465, 30 CFR Parts 730-733, 735, 800.11, 800.60, 917, 30 USC 1253, 1255 {SMCRA Secs. 503, 505} STATUTORY AUTHORITY: KRS 350.020, 350.028, 350.060, 350.064, 350.151, 350.465, 30 CFR Parts 730- 733, 735, 800.11, 800.60, 917, 30 USC 1253, 1255 {SMCRA Secs. 503, 505} NECESSITY, FUNCTION, AND CONFORMITY: KRS 350.028(1), (5), 350.151(1), and 350.465(2) authorize the cabinet to promulgate administrative regulations relating to surface and underground coal mining operations. This administrative regulation establishes the requirements for filing and maintaining performance bonds and liability insurance, and bonding methods. SECTION 1. APPLICABILITY. This chapter sets forth the minimum requirements for filing and maintaining performance bonds and insurance for surface coal mining and reclamation operations under KRS Chapter 350. SECTION 2. REQUIREMENT TO FILE A BOND. {{ 30 CFR 800.11, 800.15 }} (1) An applicant shall not disturb surface acreage or extend any underground shafts, tunnels, or operations prior to receipt of approval from the cabinet of a performance bond covering areas to be affected by surface operations and facilities. (2) After an application for a new, amended, revised or renewed permit to conduct surface coal mining and reclamation operations has been approved under 405 KAR Chapter 8, but before the permit is issued, the applicant shall file with the cabinet, on a form prescribed and furnished by the cabinet, a performance bond payable to the cabinet. The applicant shall file the form designated at Section 5(1)(a) of this administrative regulation for operations on lands other than federal lands, or the form designated at Section 5(1)(g) of this administrative regulation for operations on federal lands. The performance bond shall be conditioned upon the faithful performance of all the requirements of KRS Chapter 350, 405 KAR Chapters 7 through 24, and the provisions of the reclamation plan and permit, and shall cover all surface coal mining and reclamation operations to be conducted within the permit area or increment thereof until all reclamation requirements of 405 KAR Chapters 7 through 24 have been met. The amount, duration, type, conditions and terms of the performance bond shall conform to 405 KAR 10:020 and 405 KAR 10:030 (3) No permit shall be revised or amended to include additional area unless the liability of the current bond(s) is extended to cover the entire permit area or increment as revised or amended, and the liability of the supplemental bond(s) covers the entire permit area as revised or amended. Unless these conditions are met with respect to the bond(s), the additional area shall be permitted as a separate increment of the current permit area or under a new permit. (4) A rider to the applicable performance bond, confirming coverage of the revision, shall be submitted by the applicant if a revision to a permit does not change the acreage of the permit area or increment but: (a) Adds a coal washer, a crush and load facility, a refuse pile, or a coal mine waste impoundment to the existing permit; or (b) Alters the boundary of a permit area or increment. SECTION 3. BONDING METHODS. {{ 30 CFR 800.11(b) }} The method of performance bonding for a permit area shall be selected by the applicant and approved by the cabinet prior to the issuance of a permit, and shall consist of one (1) of the following methods: (1) Method "S" - single area bonding. A single area bond is a bond which covers the entire permit area as a single undivided area, for which the applicant shall file the entire bond amount required by the cabinet prior to issuance of the permit. Liability under the bond shall extend to every part of the permit area at all times. Except as provided in 405 KAR 10:020, Section 3(2) regarding extended bond liability, there shall be no release of all or part of the bond amount for completion of a particular phase of reclamation on any part of the permit area under 405 KAR 10:040 until that phase of reclamation has been successfully completed on the entire permit area. (2) Method "I" - incremental bonding. Incremental bonding is a method of bonding in which the permit area is divided into individual increments, each of which is bonded separately and independently, and for which bond is filed as operations proceed through the permit area. (a) The permit area shall be divided into distinct increments which shall be subject to approval by the cabinet. Each increment shall be of sufficient size and configuration to provide for efficient reclamation operations should reclamation operations by the cabinet become necessary. If the approved postmining land use is of such nature that successful implementation of the postmining land use capability depends upon an area being integrally reclaimed, then that area shall be contained within a single increment. These increments shall be clearly identified on maps submitted in the permit application under 405 KAR Chapter 8, and the applicant shall describe the approximate time schedule for beginning operations in each increment. (b) Prior to issuance of a permit, the applicant shall file with the cabinet the full bond amount required by the cabinet for the first increment or increments of the permit area to be disturbed, which shall be not less than the minimum bond required for the permit area required under 405 KAR 10:020, Section 2. (c) The permittee shall not engage in any surface coal mining and reclamation operations on any increment of the permit area unless the full bond amount required by the cabinet has been filed with the appropriate regional office of the department for that increment, the cabinet has verified the validity of the bond, and written authorization to conduct surface coal mining and reclamation operations on that increment is issued by the administrator of the regional office. No credit shall be given for reclamation on other increments. (d) The boundaries of each increment shall be physically marked at the site in a manner approved by the cabinet. (e) The bond amount for an increment shall be released or forfeited independently of any other increment of the permit area, and liability under the performance bond shall extend only to the increment expressly covered by the bond. A single bond amount may be filed to cover more than one (1) increment, in which case the increments so covered shall be treated as a single increment. (f) Except as provided in 405 KAR 10:020, Section 3(2) regarding extended bond liability, there shall be no release of bond for completion of a phase of reclamation on any part of an increment until that phase of reclamation has been successfully completed on the entire increment. (g) When the bond for an increment is completely released under 405 KAR 10:040, the increment shall be deleted from the permit area. SECTION 4. REQUIREMENT TO FILE A CERTIFICATE OF LIABILITY INSURANCE. {{ 30 CFR 800.12 }} Each applicant for a permit shall submit to the cabinet, as part of the permit application, a certificate issued by an insurance company authorized to do business in Kentucky. The amount, duration, form, conditions and terms of this insurance shall conform to 405 KAR 10:030. SECTION 5. INCORPORATION BY REFERENCE. (1) The following material is incorporated by reference: (a) "Performance Bond, Form SME-42, (June, 1999)", Department for Surface Mining Reclamation and Enforcement. (b) "Irrevocable Standby Letter of Credit, Form SME-72, (July, 1994)", Department for Surface Mining Reclamation and Enforcement. (c) "Confirmation of Irrevocable Standby Letter of Credit, Form SME-72-A, (July, 1994)", Department for Surface Mining Reclamation and Enforcement. (d) "Certificate of Liability Insurance, Form SME-29", Department for Surface Mining Reclamation and Enforcement. (e) "Notice of Cancellation, Nonrenewal or Change of Liability Insurance, Form SME-30", Department for Surface Mining Reclamation and Enforcement. (f) "Escrow Agreement, Form SME-64, (May, 1991)", Department for Surface Mining Reclamation and Enforcement. (g) "Performance Bond for Surface Coal Mining and Reclamation on Federal Lands, Form SME-42-F, (June, 1999)", Department for Surface Mining Reclamation and Enforcement. (2) This material may be inspected, copied, or obtained at the Department for Surface Mining Reclamation and Enforcement, #2 Hudson Hollow, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m. (8 Ky.R. 1515; eff. 1-6-83; Am. 15 Ky.R. 438; eff. 12-13-88; 21 Ky.R. 526; eff. 12-12-94; 25 Ky.R. 2935; 26 Ky.R. 377; eff. 8-16-99.) 405 KAR 10:020. AMOUNT AND DURATION OF PERFORMANCE BOND. RELATES TO: KRS 350.020, 350.060, 350.064, 350.093, 350.095, 350.110, 350.465 STATUTORY AUTHORITY: KRS Chapter 13A, 350.020, 350.028, 350.060, 350.064, 350.465 NECESSITY, FUNCTION, AND CONFORMITY: KRS Chapter 350 in pertinent part requires the cabinet to adopt rules and administrative regulations governing the amount and duration of performance bonds for surface coal mining and reclamation operations. This administrative regulation specifies criteria upon which to base determination of bond amounts and requires certain periods of liability during which the bonds must remain in effect. This administrative regulation provides for adjustments in bond amounts. SECTION 1. DETERMINATION OF BOND AMOUNT. The standard applied by the cabinet in determining the amount of performance bond shall be the estimated cost to the cabinet if it had to perform the reclamation, restoration and abatement work required of a person who conducts surface coal mining and reclamation operations under KRS Chapter 350, 405 KAR Chapters 7 through 24 and the permit. This amount shall be based on, but not be limited to: (1) The estimated costs submitted by the permittee in accordance with 405 KAR 8:030, Section 24(4) and 405 KAR 8:040, Section 24(4); (2) The additional estimated costs to the cabinet which may arise from applicable public contracting requirements or the need to bring personnel and equipment to the permit area after its abandonment by the permittee to perform reclamation, restoration, and abatement work; (3) All additional estimated costs necessary, expedient, and incident to the satisfactory completion of the requirements identified in this section; (4) An additional amount based on factors of cost changes during the previous five (5) years for the types of activities associated with the reclamation to be performed; and (5) Such other cost information as may be required by or available to the cabinet. SECTION 2. MINIMUM BOND AMOUNT. The minimum amount of the bond for surface coal mining and reclamation operations at the time the permit is issued or amended shall be $10,000 for the entire area under one (1) permit. SECTION 3. PERIOD OF LIABILITY. {{ 30 CFR 800.13 }} (1) Liability under performance bond(s) applicable to an entire permit area or increment thereof shall continue until all reclamation, restoration and abatement work required of persons who conduct surface coal mining and reclamation operations under requirements of KRS Chapter 350, 405 KAR Chapters 7 through 24 and the provisions of the permit have been completed, and the permit or increment terminated by release of the permittee from any further liability in accordance with 405 KAR 10:040. (2) In addition to the period necessary to achieve compliance with all requirements of KRS Chapter 350, 405 KAR Chapters 7 through 24 and the permit including the standards for the success of revegetation as required by 405 KAR 16:200 and 405 KAR 18:200, the period of liability under performance bond shall continue for a period of five (5) years beginning with the last year of augmented seeding, fertilizing, irrigation or other work. The period of liability shall begin again whenever augmented seeding, fertilizing, irrigation or other work is required or conducted on the site prior to bond release. Isolated and clearly defined portions of a bonded area requiring extended liability because of augmentation may be separated from the original area and bonded separately upon approval by the cabinet. Such areas shall be limited in extent, and not constitute a scattered, intermittent, or checkerboard pattern of failure. Access to the separated areas for remedial work may be included in the area under extended liability if deemed necessary by the cabinet. (3) If the cabinet approves a long-term intensive agricultural postmining land use in accordance with 405 KAR 16:210, augmented seeding, fertilization, irrigation or other husbandry practices normally associated with the approved postmining land use shall not require restarting the five (5) year period of liability. (4) The bond liability of the permittee shall include only those actions which the permittee is required to take under the permit, including completion of the reclamation plan in such a manner that the land will be capable of supporting a postmining land use approved under 405 KAR 16:210. Actions of third parties which are beyond the control and influence of the permittee and for which the permittee is not responsible under the permit shall not be covered by the bond. SECTION 4. ADJUSTMENT OF AMOUNT. {{ 30 CFR 800.15 }} (1) The amount of the performance bond liability applicable to a permit or increment shall be adjusted by the cabinet: (a) When the acreage in the permit area or increment is either increased or decreased; or (b) When the cabinet determines that the cost of future reclamation, restoration or abatement work has changed. When it is determined that an adjustment under this paragraph is necessary, the cabinet shall: 1. Notify the permittee, the surety, and any person with a property interest in collateral who has previously requested such notification in writing; and 2. Provide the permittee an opportunity for an informal conference on the adjustment. The requirements of 405 KAR 7:091 and 405 KAR 7:092 shall not apply to the conduct of the conference. (2) The amount of the performance bond liability applicable to a permit or increment may be adjusted by the cabinet upon application by the permittee under 405 KAR 8:010, Section 20 to delete acreage from the permit area or increment thereof where such acreage has not been affected by the surface coal mining and reclamation operation. The provisions of 405 KAR 10:040, Section 2(3) shall apply. However, a reduction due to such deletion of acreage shall not constitute a bond release and shall not be subject to the procedures of 405 KAR 10:040, Section 1. (3) The cabinet may grant reduction of the required performance bond amount if the permittee's method of operation or other circumstances will reduce the maximum estimated cost to the cabinet to complete the reclamation responsibilities and therefore warrant a reduction of the bond amount. The request shall not be considered as a request for partial bond release subject to the procedures of 405 KAR 10:040, Section 1. (4) The cabinet shall refuse to approve any reduction of the performance bond liability amount if an action for revocation or suspension of the permit covered by the bond is pending, if there is a pending action for forfeiture of the bond, or if the permittee is currently in violation of 405 KAR on that permit. (8 Ky.R. 1417; eff. 1-6-83; Am. 15 Ky.R. 441; eff. 12-13-88.) 405 KAR 10:030. TYPES, TERMS AND CONDITIONS OF PERFORMANCE BONDS AND LIABILITY INSURANCE. RELATES TO: KRS 350.020, 350.060, 350.064, 350.100, 350.110, 350.465 STATUTORY AUTHORITY: KRS Chapter 13A, 350.020, 350.028, 350.060, 350.064, 350.151, 350.465 NECESSITY, FUNCTION, AND CONFORMITY: KRS Chapter 350 in pertinent part requires the cabinet to specify types, terms, and conditions for performance bonds and liability insurance. This administrative regulation sets forth the various types and conditions which the cabinet will accept in satisfaction of the bonding requirements. This administrative regulation sets forth that bonds shall be payable to the cabinet and other conditions. This administrative regulation specifies certain alternative types of bonds, in addition to the surety bond, and the conditions upon which the cabinet will accept them. This administrative regulation specifies the terms and conditions of liability insurance. SECTION 1. TYPES OF PERFORMANCE BOND. {{ 30 CFR 800.11(e), 800.12 }} (1) The cabinet shall approve performance bonds of only those types which are set forth in this section. (2) The performance bond shall be either: (a) A surety bond; (b) A collateral bond; (c) A combination of the above bonding types; or (d) Bonds filed pursuant to the provisions of the Kentucky Bond Pool Program (405 KAR 10:200, KRS 350.595, and 350.700 through 350.755). SECTION 2. TERMS AND CONDITIONS OF PERFORMANCE BOND. {{ 30 CFR 800.5, 800.16, 800.20, 800.21, 800.40 }} (1) The performance bond shall be in an amount determined by the cabinet as provided in 405 KAR 10:020, Sections 1 and 2. (2) The performance bond shall be payable to the cabinet. (3) The performance bond shall be conditioned upon faithful performance of all of the requirements of KRS Chapter 350, 405 KAR Chapters 7 through 24 and the conditions of the permit and shall cover the entire permit area or such incremental area as the cabinet has approved pursuant to 405 KAR 10:010, Section 3(2). (4) The duration of the bond shall be for a time period provided in 405 KAR 10:020, Section 3. (5) Surety bonds shall be subject to the following conditions: (a) The cabinet shall not accept the bond of a surety company unless the bond shall not be cancelable by the surety at any time for any reason including, but not limited to, nonpayment of premium or bankruptcy of the permittee during the period of liability. Surety bond coverage for permitted lands not disturbed may be cancelled with the written approval of the cabinet, provided the surety gives written notice to both the permittee and the cabinet of the intent to cancel prior to the proposed cancellation. Such notice shall be by certified mail. Cancellation shall not be effective for lands subject to bond coverage which are affected after receipt of notice, but prior to approval by the cabinet. The cabinet may approve such cancellation only if a replacement bond has been filed by the permittee, or if the permit area has been reduced by revision to the extent that the remaining bond amount, after cancellation, is sufficient to cover all the costs attributable to the completion of reclamation operations on the reduced permit area in accordance with 405 KAR 10:020. The cabinet shall advise the surety, within thirty (30) days after receipt of a notice to cancel bond, whether the bond may be cancelled on an undisturbed area. (b) The bond shall provide that the surety and the permittee shall be jointly and severally liable. (c)1. The surety shall give prompt notice to the permittee and the cabinet of any notice received or action filed alleging the insolvency or bankruptcy of the surety, or alleging any violations of regulatory requirements which could result in suspension or revocation of the surety's license to do business. 2. In the event the surety becomes unable to fulfill its obligations under the bond for any reason, the surety shall promptly provide written notice to the permittee and the cabinet. 3. Upon the incapacity of a surety by reason of bankruptcy, insolvency, or suspension or revocation of its license or certificate of authority, the permittee shall be deemed to be without proper bond coverage and shall promptly notify the cabinet. However, nothing herein shall relieve the permittee of responsibility under the permit or the surety of liability on its bond. The cabinet shall issue a notice to the permittee specifying a reasonable period to replace bond coverage, not to exceed ninety (90) days. If an adequate bond is not posted by the end of the period allowed, the permittee shall cease coal extraction and coal processing operations and shall comply with the provisions of 405 KAR 16:010, Section 6 or 405 KAR 18:010, Section 4 and shall immediately begin to conduct reclamation operations in accordance with the reclamation plan. Coal extraction and coal processing operations shall not resume until the cabinet has determined that an acceptable bond has been posted. If an acceptable bond has not been posted by the end of the period allowed, the cabinet may suspend the permit until acceptable bond is posted. (d) A surety bond shall be executed by the operator and a corporate surety licensed to do business in the Commonwealth of Kentucky. (6) Collateral bonds may include cash deposits with the cabinet, certificates of deposit, and letters of credit. Collateral bonds, except for letters of credit, shall be subject to the following conditions: (a) The cabinet or its authorized agent shall obtain possession of and keep in custody all collateral deposited by the applicant, until authorized for release or replacement as provided in this chapter. (b) The cabinet shall require that certificates of deposit be assigned to the cabinet or its authorized agent in writing, and the assignment evidenced on the books of the bank issuing such certificates. (c) The cabinet shall not accept an individual certificate of deposit unless it is issued by a FDIC or FSLIC insured financial institution, and in no event shall the cabinet accept a denomination in excess of the maximum insurable amount as determined by FDIC and FSLIC. (d) The cabinet shall require the issuer of certificates of deposit to waive all rights of setoff or liens which it has or might have against those certificates. (e) Persons with an interest in collateral posted as a bond, and who desire notification of actions pursuant to the bond, shall request the notification in writing to the cabinet at the time the collateral is offered. (f) The cabinet shall require the applicant to deposit sufficient amounts of certificates of deposit, so as to assure that the cabinet will be able to liquidate those certificates prior to maturity, upon forfeiture, for the amount of the bond required by this chapter. (7) Letters of credit shall be subject to the following conditions: (a) The letter may only be issued by a bank organized or authorized to do business in the United States. Any letter of credit issued by a non-Kentucky lending institution must be confirmed by an approved Kentucky lending institution. (b) Letters of credit shall be irrevocable. (c) The letter must be payable to the cabinet upon demand and receipt from the cabinet of a notice of forfeiture issued in accordance with 405 KAR 10:050, or in the event the bank wishes to terminate the letter on its expiration date, the cabinet may draw upon demand. (d)1. The issuer shall give prompt notice to the permittee and the cabinet of any notice received or action filed alleging the insolvency or bankruptcy of the issuer, or alleging any violations of regulatory requirements which could result in suspension or revocation of the issuer's charter or license to do business; 2. In the event the issuer becomes unable to fulfill its obligations under the letter of credit for any reason, notice shall be given immediately to the permittee and the cabinet; 3. Upon the incapacity of an issuer by reason of bankruptcy, insolvency or suspension or revocation of its charter or license, the permittee shall be deemed to be without proper performance bond coverage and shall promptly notify the cabinet. However, nothing herein shall relieve the permittee of responsibility under the permit or the issuer of liability on the letter of credit. The cabinet shall issue a notice to the permittee specifying a reasonable period to replace bond coverage, not to exceed ninety (90) days. If an adequate bond is not posted by the end of the period allowed, the permittee shall cease coal extraction and coal processing operations and shall comply with the provisions of 405 KAR 16:010, Section 6 or 405 KAR 18:010, Section 4 and shall immediately begin to conduct reclamation operations in accordance with the reclamation plan. Coal extraction and coal processing operations shall not resume until the cabinet has determined that an acceptable bond has been posted. If an acceptable bond has not been posted by the end of the period allowed, the cabinet may suspend the permit until acceptable bond is posted. (8) When a permittee chooses to combine two (2) or more bonds for one (1) permit area or increment, the bonds may be accompanied by a schedule, acceptable to the cabinet and agreed to be all parties, which sets forth the agreed distribution of bond amounts to be released or reduced under 405 KAR 10:040 and 405 KAR 10:020, Section 4, respectively. If no schedule is submitted, the cabinet may release equal percentages of each bond. SECTION 3. SUBSTITUTION OF BONDS. (1) The cabinet may allow permittees to substitute existing surety or collateral bonds for equivalent surety or collateral bonds, if the liability which has accrued against the permittee on the permit area or increment is transferred to such substitute bonds. (2) The cabinet shall not release existing performance bonds until the permittee has submitted and the cabinet has approved acceptable substitute performance bonds. A substitution of performance bonds pursuant to this section shall not constitute a release of bond under 405 KAR 10:040. (3) The cabinet may refuse to allow substitution of bonds if an action for revocation or suspension of the permit covered by the bond is pending or if there is a pending action for forfeiture of the bond. SECTION 4. TERMS AND CONDITIONS FOR LIABILITY INSURANCE. {{ 30 CFR 800.60 }} (1) The applicant shall submit, as a part of the permit application at the time of bond submission, a certificate issued by an insurance company authorized to do business in Kentucky certifying that the applicant has a public liability insurance policy in force for the surface coal mining and reclamation operation for which the permit is sought. The certification shall be on a form prescribed by the cabinet. The policy shall provide for personal injury and property damage protection in an amount adequate to compensate for all personal injury and property damage resulting from surface coal mining and reclamation operations, including damage caused by the use of explosives and damage to water wells. Minimum insurance coverage for bodily injury and property damage shall be $300,000 for each occurrence and $500,000 aggregate. (2) The policy shall be maintained in full force during the term of the permit or any renewal thereof, and during the liability period necessary to complete all reclamation operations under 405 KAR Chapters 7 through 24, until full bond release has been granted. (3) The policy shall include a clause requiring that the insurer notify the cabinet whenever substantive changes are made in the policy, including any termination or failure to renew. (4) In the event the insurer becomes unable to fulfill its obligations under the policy, notice shall be given immediately to the permittee and the cabinet. (5) Upon the incapacity of an insurer by reason of bankruptcy, insolvency, or suspension or revocation of its license or certificate of authority, the permittee shall be deemed to be without insurance coverage and shall promptly notify the cabinet. However, nothing herein shall relieve the insurer of liability on its policy. The cabinet shall issue a notice to the permittee specifying a reasonable period to replace such coverage, not to exceed ninety (90) days. If an adequate insurance coverage is not posted by the end of the period allowed, the permittee shall cease coal extraction and coal processing operations and shall comply with the provisions of 405 KAR 16:010, Section 6 or 405 KAR 18:010, Section 4 and shall immediately begin to conduct reclamation operations in accordance with the reclamation plan. Coal extraction and coal processing operations shall not resume until the cabinet has determined that an acceptable insurance coverage has been posted. If an acceptable insurance coverage has not been posted by the end of the period allowed, the cabinet may suspend the permit until acceptable insurance coverage is posted. (8 Ky.R. 1518; eff. 1-6-83; Am. 12 Ky.R. 579; eff. 12-10-85; 15 Ky.R. 443; 1070; eff. 12-13-88.) 405 KAR 10:035. PROCEDURES, CRITERIA AND HEARING REQUIREMENTS FOR CANCELLATION OF SURETY BONDS AFTER NOTICE OF NONCOMPLIANCE ISSUED FOR FAILURE TO MAINTAIN CONTEMPORANEOUS RECLAMATION. RELATES TO: KRS 350.020, 350.060, 350.062, 350.064, 350.068, 350.151, 350.465{{ 30 CFR Part 800 }} STATUTORY AUTHORITY: KRS Chapter 13A, 350.020, 350.028, 350.060, 350.064, 350.151, 350.465 NECESSITY, FUNCTION, AND CONFORMITY: KRS Chapter 350 in pertinent part provides authority for the cabinet to approve the cancellation of surety bonds upon notice by the surety when a notice of noncompliance is issued for failure to maintain contemporaneous reclamation. This administrative regulation specifies the procedures and criteria for surety bond cancellation. This administrative regulation also sets forth certain notice and hearing requirements relating to surety bond cancellation. SECTION 1. PROCEDURES FOR REQUEST FOR AND NOTICE OF SURETY BOND CANCELLATION. (1) Notice of intent to cancel. (a) After the issuance, on or after July 13, 1984, of a notice of noncompliance for failure to maintain contemporaneous reclamation, the surety obligated on the performance bond for the permit or any increment thereof may send notice to the insured and to the department, of its intent to request cancellation of bond coverage on any area disturbed after thirty (30) days from the effective date of the surety's notice of intent to cancel, if the violation is not abated. (b) The notice of intent to cancel shall be sent by certified mail, return receipt requested, to the insured, and a copy to the Director of the Division of Field Services, of the department. The effective date of the notice of intent to cancel shall be the date on which it is received by the insured or seven (7) days after mailing of the notice by certified mail, return receipt requested, to the address contained on the permit application and any other address known to the insurer, whichever occurs first. (c) The notice of intent to cancel shall be signed by an officer, director, or attorney-in-fact of the surety company and contain at a minimum the following: 1. Name of permittee; 2. Permit number and increment number, if applicable; 3. Name of surety; 4. Bond number and amount; 5. Date of issuance of notice of noncompliance and noncompliance number; 6. Date of notice of intent to cancel; and 7. A copy of a power-of-attorney, if applicable. (2) Notice of cancellation. (a) If the surety elects to cancel pursuant to its notice of intent to cancel, the surety shall send a notice of cancellation to the insured by certified mail, return receipt requested. A copy of said notice shall also be sent to the Director of the Division of Field Services by certified mail, return receipt requested. (b) The notice of cancellation shall be on a form specified by the cabinet and shall be sworn to by an officer, director or attorney-in-fact of the surety, notarized and contain at a minimum the following: 1. Name of permittee and permit number; 2. Increment number, if applicable; 3. Name of surety and bond number; 4. Date of issuance of notice of noncompliance and noncompliance number; 5. Date the notice of intent to cancel was received by permittee; 6. Date of notice of cancellation; 7. A statement that the violation has not been abated within thirty (30) days of the effective date of the notice of intent to cancel; 8. A statement that the surety acknowledges that it will not be relieved of its liability for areas disturbed prior to the department's approval of cancellation; 9. A request for the cabinet to approve the notice of cancellation; and 10. A copy of a power-of-attorney, if applicable. (c) The notice of cancellation shall become effective upon the cabinet's approval. (3) Cabinet approval of cancellation. Within thirty (30) days of receipt of the notice of cancellation, the cabinet shall approve the surety's notice of cancellation in writing, only if the following conditions exist: (a) The violation has not been abated by the permittee; and (b) The surety has complied with the notice requirements of subsection (1) and (2) of this section; and (c) The cabinet has: 1. Revoked the permit by order of the commissioner of the department; or 2. Deleted the area subject to the cancellation by order of the commissioner of the department; or 3. Accepted and approved a substitute bond submitted by the permittee. SECTION 2. PROCEDURES FOR PERMIT REVOCATION OR DELETION OF THE AREAS SUBJECT TO CANCELLATION. The cabinet shall by order delete the areas subject to bond cancellation or revoke the permit for the entire permit area within thirty (30) days from receipt of the surety's notice of cancellation, without prior hearing, unless an acceptable substitute bond has been submitted to the cabinet. (1) The order shall be issued by the commissioner of the department, without prior hearing, based upon information available to the cabinet and the surety's notice of cancellation. (2) The permittee may request a hearing on the order of the commissioner pursuant to KRS 224.081(2). (a) A hearing requested pursuant to KRS 224.081(2) shall be requested within thirty (30) days of entry of the order of the commissioner. (b) The order of the commissioner shall be affirmed unless the permittee can affirmatively establish that bond coverage was not cancelled and the violation was abated at the time of entry of the commissioner's order, or that substitute bond was approved by the cabinet. (c) Within thirty (30) days after entry of the order of the commissioner, the order may be rescinded if the permittee can demonstrate that a substitute bond has been accepted and approved by the cabinet and the violations have been abated. SECTION 3. PROCEDURES FOR BOND RELEASE OR FORFEITURE AFTER APPROVAL OF CANCELLATION. (1) The cabinet shall not release any portion of a bond for a permit area or increment thereof, including but not limited to undisturbed acreage, after cancellation, unless and until all disturbed areas on the permit or increment have been reclaimed to the standards set forth in KRS Chapter 350 and the administrative regulations promulgated pursuant thereto, or substitute bond has been filed and approved by the cabinet and the substitute surety has expressly assumed liability for all disturbed areas of the permit or increment. (2) In the event of bond forfeiture the entire bond held by the cabinet shall be forfeited upon order of the secretary pursuant to KRS Chapter 350 and the administrative regulations pursuant thereto. (11 Ky.R. 331; Am. 577; eff. 10-9-84.) 405 KAR 10:040. PROCEDURES, CRITERIA AND SCHEDULE FOR RELEASE OF PERFORMANCE BOND. RELATES TO: KRS 350.060, 350.064, 350.093, 350.113, 350.151, 350.465, 30 CFR Parts 730-733, 735, 800.40, 917, 30 USC 1253, 1255, 1269 {SMCRA Secs. 503, 505, 519} STATUTORY AUTHORITY: KRS Chapter 13A, 350.020, 350.028, 350.060, 350.064, 350.093, 350.151, 350.465, 30 CFR Parts 730-733, 735, 800.40, 917, 30 USC 1253, 1255, 1269 {SMCRA Secs. 503, 505, 519} NECESSITY, FUNCTION, AND CONFORMITY: KRS Chapter 350 in pertinent part requires the cabinet to set out by regulation procedures and criteria for the release of performance bond. This administrative regulation specifies the procedures, criteria, and schedule, including reclamation phases, for the release and partial release of liability under performance bonds. This administrative regulation also sets forth certain notice and hearing requirements pertinent to bond release. SECTION 1. PROCEDURES FOR RELEASE OF PERFORMANCE BOND. {{ 30 CFR 800.40 }} (1) Application for bond release. The permittee or any person authorized to act on his or her behalf may or the cabinet shall, initiate an application for release of all or part of the performance bond liability applicable to a particular permit or increment after all reclamation, restoration and abatement work in a reclamation phase as defined in Section 2(4) of this administrative regulation has been completed on the entire permit area or increment. (a) Bond release applications may only be filed at times or seasons that allow the cabinet to evaluate properly the reclamation operations alleged to have been completed. (b) Within thirty (30) days of the initiation of any bond release request, the permittee shall submit copies of letters which it has sent to adjoining property owners, surface owners (their agents and lessees), local governmental bodies, planning agencies, sewage and water treatment authorities, and water companies in the locality in which the surface coal mining and reclamation operation took place, notifying them of the intention to seek release from the bond. For bond releases initiated by the cabinet, the cabinet shall undertake the notification requirements set forth in this subsection. The notices shall also state that these individuals and their representatives may participate in a bond release inspection by contacting the cabinet. These notices shall be sent at the time the permittee initiates the application for release. (c) Upon the filing of an application for bond release by a permittee, or the initiation of such release by the cabinet, the cabinet shall notify, by certified mail, within thirty (30) days of such filing or initiation, the municipality or county judge-executive where the surface coal mining operation is located. (d) Within thirty (30) days after advertising an application for bond release as per the requirements of subsection (2) of this section, the permittee, or the cabinet if it elected to advertise as per subsection (2) of this section, shall submit proof of said publication. Proof of publication shall be placed, by the cabinet, with the bond release application. Such proof of publication shall be considered part of the bond release application. (2) Public notice. At the time of initiating an application for bond release under this section, the permittee shall, and the cabinet may at permittee expense, advertise the filing of the application in the newspaper of largest bona fide circulation according to the definition in KRS 424.110 to 424.120 in the county or counties in which the permit area is located. Said advertisement shall begin within sixty (60) days of the initiation of any application for bond release whether said bond release application is initiated by the permittee or the cabinet. Should the cabinet initiate a bond release pursuant to this subsection but choose not to advertise the release pursuant to this section, and the permittee does not advertise the request for the release within the time schedules established by this subsection, the bond release application shall be denied. The advertisement shall be placed in the newspaper at least once a week for four (4) consecutive weeks. The advertisement shall contain: (a) The name of the permittee, the permit number and the date of issuance or renewal of the permit or increment; (b) The precise location and the number of acres of the lands subject to the application; (c) The type and total amount of bond filed for the permit area or increment and the reclamation phase for which release is sought; (d) The type and approximate dates of reclamation work performed; (e) A description of the results achieved as they relate to the permittee's approved reclamation plan; (f) A statement that written comments, objections, and requests for a public hearing may be submitted to the cabinet, provide the appropriate address of the cabinet, and the closing date by which comments, objections, and requests must be received; (g) A statement that a public hearing has been scheduled, including the date and location of the hearing; and (h) A statement that the schedule public hearing shall be cancelled if the cabinet does not receive a request for the public hearing by the closing date for requests for hearing. (3) Objections, comments or requests for public hearing prior to bond release. (a) Any person with a valid legal interest which might be adversely affected by release of the bond, or the responsible officer or head of any federal, state, or local governmental agency which has jurisdiction by law or special expertise with respect to any environmental, social, or economic impact involved in the operation or which is authorized to develop and enforce environmental standards with respect to such operations, shall have the right to file written objections to the proposed release from bond and, if desired, file a request for a public hearing with the cabinet within thirty (30) days after the last publication of the notice required by subsection (2) of this section. (b) The cabinet shall schedule a public hearing for each request for bond release, such hearing to be scheduled within five (5) working days of the end of the public comment period. If the cabinet does not receive a request for a public hearing by the end of the public comment period, the cabinet shall cancel the public hearing. The public hearing shall be held in the locality of the surface coal mining operation for which bond release is sought. The person requesting the release shall contact the cabinet prior to beginning advertisements under subsection (2) of this section to obtain the date and location of the public hearing in order to include this information in the advertisement. (c) The hearing under paragraph (b) of this subsection shall be legislative in nature and the provisions of 405 KAR 7:091 and 405 KAR 7:092 shall not apply. The cabinet shall have the authority to administer oaths, subpoena witnesses or written or printed material, compel the attendance of witnesses or the production of materials, and take evidence including, but not limited to, inspection of the land affected and other surface coal mining operations carried on by the applicant in the general vicinity. A verbatim record of each public hearing shall be made, and a transcript shall be made available on the motion of any party or by order of the cabinet. (d) Without prejudice to the right of an objector or the applicant and upon agreement of all parties, the cabinet may hold an informal conference in accordance with the procedures in 405 KAR 8:010, Section 11 for permit conferences to resolve such written objections in lieu of the public hearing under paragraph (b) of this subsection. The informal conference shall be held at the same time and location as was scheduled for the public hearing. The cabinet shall make a record of the informal conference unless waived by all parties, which shall be accessible to all parties. The cabinet shall also furnish all parties of the informal conference with a written finding of the cabinet on the informal conference, and the reasons for said finding. (4) Inspection and evaluation. The cabinet shall inspect and evaluate the reclamation work involved within thirty (30) days after initiation of a bond release request by the permittee, or any person authorized to act on his or her behalf, or as soon thereafter as weather conditions permit. The evaluation shall consider, among other factors, the degree of difficulty to complete any remaining reclamation, whether pollution of surface and subsurface water is occurring, the probability of future occurrence of such pollution, and the estimated cost of abating such pollution. The surface owner, agent, or lessee known to the cabinet shall be given notice of such inspection and may participate with the cabinet in making the bond release inspection. The cabinet may arrange with the permittee to allow access to the permit area, upon request by any person with an interest in bond release, for the purpose of gathering information relevant to the proceeding. (5)(a) Notice of decision. The cabinet shall as described in paragraph (b) of this subsection provide notification in writing of its decision to release or not to release all or part of the performance bond within five (5) days following receipt of proof of public advertisement as required in this section, or within five (5) days of the end of the thirty (30) day public comment period provided for in subsection (3) of this section, whichever is later. Provided, however, that if an informal conference or public hearing has been requested pursuant to subsection (3) of this section, the cabinet shall provide its notice of decision within thirty (30) days following said informal conference or public hearing. (b) The notice of the decision shall state the reasons for the decision, recommend any corrective actions necessary to secure the release, and notify the permittee, the surety, any person with an interest in collateral who has previously requested such notification in writing, persons who filed objections in writing, and objectors who were a party to the informal conference or public hearing of their right to request, within thirty (30) days of notice, a formal hearing as provided for by subsection (6) of this section. Where the decision is to release all or part of the performance bond, the notice shall state that the release shall occur fourteen (14) days after the date of the decision unless temporary relief is granted under 405 KAR 7:092, Section 12. (c) In no event shall the cabinet disapprove an application for reclamation phase I or II release of a surety bond or a bond secured by a letter of credit solely upon the permittee's failure to pay penalties or fines, if applicable reclamation requirements for the requested release have been fully met. (6) Requests for formal hearing after bond release or denial. Any person aggrieved by the decision of the cabinet to approve or disapprove a bond release application, in whole or in part, shall have the right to request a formal hearing pursuant to 405 KAR 7:092, Section 9. When the cabinet has decided to release all or part of the performance bond, the release shall not occur until fourteen (14) days after the date of the decision. At the end of that fourteen (14) days, the cabinet shall effect the release unless temporary relief is granted under 405 KAR 7:092, Section 12. SECTION 2. CRITERIA AND SCHEDULE FOR RELEASE OF PERFORMANCE BOND. {{ 30 CFR 800.40(c) }} (1) Monies pledged under performance bonds shall not be eligible for release until the permittee has met the requirements of the applicable reclamation phase as defined in subsection (4) of this section. The cabinet may release portions of the monies pledged under performance bonds applicable to a permit or increment following completion of reclamation phases on the entire permit area or entire increment. (2) The maximum portion of the monies pledged under performance bonds applicable to a permit area which may be released shall be calculated on the following basis: (a) Release an amount not to exceed sixty (60) percent of the total original bond amount on the permit area, section, or increment upon completion of phase I reclamation. (b) Release an additional amount not to exceed twenty-five (25) percent of the total original bond amount on the permit area or increment upon completion of phase II reclamation, but in all cases the amount remaining shall be sufficient to reestablish vegetation and reconstruct any drainage structures. (c) Release the remaining portion of the total performance bond on an entire permit area or increment after standards of phase III reclamation have been attained on the entire permit area or increment and final inspection and procedures of Section 1 of this administrative regulation have been satisfied. After the final bond release for phase III reclamation on an increment, the increment shall be deleted from the permit area. (3) The cabinet shall not release any monies pledged under performance bonds applicable to a permit if such release would reduce the total remaining monies pledged under performance bonds to an amount less than that necessary for the cabinet to complete the approved reclamation plan, achieve compliance with the requirements of KRS Chapter 350, 405 KAR Chapters 7 through 24 or the permit, and abate any significant environmental harm to air, water or land resources or danger to the public health and safety which might occur prior to the release of all performance bond liability for the permit area. (4) Reclamation phases are defined as follows: (a) Reclamation phase I shall be deemed to have been completed on the entire permit area or increment when the permittee completes backfilling, regrading, topsoil replacement, and drainage control including soil preparation and initial seeding and mulching in accordance with the approved reclamation plan and a report for the area has been submitted to the cabinet in accordance with 405 KAR 16:200, Section 8 or 405 KAR 18:200, Section 8; (b) Reclamation phase II shall be deemed to have been completed on the entire permit area or increment when: 1. Revegetation has been established in accordance with the approved reclamation plan and the standards for the success of revegetation, except productivity standards, have been met; 2. The lands are not contributing suspended solids to stream flow or run off outside the permit area or increment in excess of the requirements of KRS 350.420, 405 KAR Chapters 16 or 18, or the permit; 3. With respect to prime farmlands, soil productivity has been restored as required by 405 KAR 20:040, Section 6 and the plan approved under 405 KAR 8:050, Section 3; and 4. The provisions of a plan approved by the cabinet for the sound future management of any permanent impoundment by the permittee or landowner have been implemented to the satisfaction of the cabinet. (c) Reclamation phase III will be deemed to have been completed on the entire permit area or increment when the permittee has successfully completed all surface coal mining and reclamation operations in accordance with the approved reclamation plan, such that the land is capable of supporting the postmining land use approved pursuant to 405 KAR 16:210 or 405 KAR 18:220; and has achieved compliance with the requirements of KRS Chapter 350, 405 KAR Chapters 7 through 24, and the permit; and the applicable liability period under 405 KAR 10:020, Section 3(2) has expired. (8 Ky.R. 1519; eff. 1-6-83; Am. 15 Ky.R. 447; 2016; eff. 1-25-89; 17 Ky.R. 2499; eff. 4-24-91.) 405 KAR 10:050. BOND FORFEITURE. RELATES TO: KRS 350.020, 350.060, 350.064, 350.093, 350.095, 350.130, 350.131, 350.151, 350.465, 30 CFR Parts 730-733, 735, 800.50, 917, 30 USC 1253, 1255 {SMCRA Secs. 503, 505} STATUTORY AUTHORITY: KRS Chapter 13A, 350.020, 350.028, 350.060, 350.064, 350.130, 350.151, 350.465, 30 CFR Parts 730-733, 735, 800.50, 917, 30 USC 1253, 1255 {SMCRA Secs. 503, 505} NECESSITY, FUNCTION, AND CONFORMITY: KRS Chapter 350 in pertinent part requires the cabinet to regulate surface coal mining and reclamation operations in a manner as to insure that satisfactory reclamation is accomplished. This administrative regulation sets forth the procedures and criteria by means of which a bond may be forfeited to the cabinet. This administrative regulation sets forth that certain violations of KRS Chapter 350 and administrative regulations promulgated pursuant to that chapter may cause a bond to be forfeited. This administrative regulation sets forth that a hearing may be requested before forfeiture can be effected. This administrative regulation specifies a method to determine the amount of bond forfeiture. This administrative regulation establishes criteria under which unused forfeited bond funds shall be returned to the person from whom they were collected. SECTION 1. GENERAL. {{ 30 CFR 800.50 }} (1) The cabinet shall forfeit all of the remaining bond amount for any permit or increment pursuant to the procedures and criteria of this administrative regulation. (2) The cabinet may withhold forfeiture if the permittee or the surety agrees to a compliance schedule to correct the violations of the permit or bond conditions. (3) The cabinet shall withhold forfeiture and allow the surety or other financial institution providing bond to complete the reclamation plan if the surety or other financial institution can demonstrate the ability to complete the reclamation plan, including achievement of the capability to support the postmining land use approved by the cabinet, and will undertake to do so within a reasonable time frame and agrees to a compliance schedule. Neither the surety company nor other financial institution shall employ anyone to perform the measures who has been barred from mining pursuant to the provisions of KRS Chapter 350. SECTION 2. PROCEDURES. {{ 30 CFR 800.50 }} (1) If forfeiture of the bond is required by Section 3 of this administrative regulation, the cabinet shall: (a) Send written notification by certified mail, return receipt requested, to the permittee, and to the surety on the bond, if applicable, of the cabinet's determination to initiate forfeiture of the bond and the reasons for the forfeiture; (b) Advise the permittee and surety, if applicable, of their right to challenge the determination pursuant to 405 KAR 7:092, Section 9; and (c) If no hearing is requested within thirty (30) days following notification and the bond proceeds are not received, the secretary shall enter a final order of forfeiture and the cabinet shall proceed in an action for collection on the bond. (2) The cabinet may, as an alternative to following the procedures of subsection (1) of this section, initiate formal hearing procedures concerning forfeiture of the bond alone or in conjunction with the cabinet's action for other appropriate remedies against the permittee pursuant to 405 KAR 7:092, Section 5. (3) The cabinet shall utilize funds collected from bond forfeiture to complete the reclamation plan on the permit area or increment on which bond coverage applied, and to cover associated administrative expenses. The funds shall be deposited in an appropriate account for the payment of these costs. Funds remaining after reclamation shall be returned to the person from whom the forfeiture proceeds were received, subject to the cabinet's right to attach or setoff the proceeds under state law. (4) In the event the amount forfeited is insufficient to pay for the full cost of reclamation, the permittee or operator shall be liable for remaining costs. The cabinet may complete, or authorize completion of, reclamation of the bonded area and may recover from the permittee or operator all costs of reclamation in excess of the amount forfeited. (5) Return of unused forfeited bond funds for interim or permanent program permit area overlapped by permanent program permit area. If the cabinet has not completed the reclamation plan on a permit area under 405 KAR Chapter 1 or 3 for which the bond was forfeited on or after July 15, 1988, or if the cabinet has not completed the reclamation plan on a permit area under 405 KAR Chapters 7-24 for which the bond was forfeited, and if the permit area and any related off-permit disturbances are entirely contained within the permit area of a subsequent valid permit under 405 KAR Chapters 7-24 for which the bond is in force, the cabinet shall retain the funds from the forfeited bond until the entire overlapped permit area and any related off-permit disturbances have been disturbed by the overlapping permittee and then shall return the unused funds to the person from whom the forfeiture proceeds were received, subject to the cabinet's right to attach or set off the proceeds under state law. SECTION 3. CRITERIA FOR FORFEITURE. {{ 30 CFR 800.50 }} (1) A bond for a permit area or increment shall be forfeited, if the cabinet finds that: (a) The permittee has violated any of the terms or conditions of the bond and has failed to take corrective action; (b) The permittee has failed to conduct the surface mining and reclamation operations in accordance with KRS Chapter 350, the conditions of the permit or 405 KAR Chapters 7 through 24 within the time required; (c) The permit for the area or increment under bond has been revoked or the operation terminated, unless the permittee, surety, or other financial institution providing bond assumes liability pursuant to an agreement for the completion of reclamation; or (d) The permittee, surety, or other financial institution providing bond has failed to comply with a compliance schedule approved pursuant to Section 1(2) or (3) of this administrative regulation. (2) A bond may be forfeited if the cabinet finds that: (a)1. The permittee has become insolvent; or 2. A creditor of the permittee has attached or executed judgment against the permittee's equipment, materials, or facilities, at the permit area; and (b) The permittee cannot demonstrate or prove the ability to continue to operate in compliance with KRS Chapter 350, 405 KAR Chapters 7 through 24, and the permit. (3) The cabinet may forfeit a bond solely upon the permittee's failure to pay penalties or fines (if all reclamation requirements have been fully met) and retain the bond proceeds, or portion thereof as necessary to offset the penalty or fine owed (including administrative costs incurred by the cabinet), but the cabinet shall forfeit a bond under this circumstance only after the five (5) year liability period has expired; except that for surety bonds or bonds secured by a letter of credit: (a) In no event shall the cabinet take any action to forfeit a surety bond or bond secured by a letter of credit under this circumstance until reclamation phase I and II monies have been released and the five (5) year liability period has expired; and (b) If a forfeiture of a surety bond or a bond secured by a letter of credit under this circumstance has occurred, the cabinet shall not retain the surety bond or bond secured by letter of credit or any proceeds thereof and the permittee shall continue to be responsible for payment of the penalties or fines as well as administrative costs incurred by the cabinet. SECTION 4. FORFEITURE AMOUNT. The cabinet shall forfeit the entire amount of the bond for the permit area or increment. (8 Ky.R. 1521; eff. 1-6-83; Am. 15 Ky.R. 451; 1073; eff. 12-13-88; 20 Ky.R. 132; 544; eff. 9-22-93.) 405 KAR 10:200. KENTUCKY BOND POOL. RELATES TO: KRS Chapter 304, 350.020, 350.028, 350.060, 350.062, 350.064, 350.068, 350.085, 350.093, 350.095, 350.100, 350.113, 350.130, 350.135, 350.151, 350.260, 350.465, 350.700, 350.705, 350.710, 350.715, 350.720, 350.725, 350.730, 350.735, 350.740, 350.745, 350.750, 350.755, 350.990, 30 CFR Parts 730-733, 735, 800.11(e), 917, 30 USC 1253, 1255, 1259 {SMCRA Secs. 503, 505, 509} STATUTORY AUTHORITY: KRS Chapter 13A, 350.020, 350.028, 350.060, 350.062, 350.064, 350.093, 350.130, 350.151, 350.465, 350.710, 350.715, 350.720, 350.725, 350.730, 350.735, 350.740, 350.750, 30 CFR Parts 730-733, 735, 800.11(e), 917, 30 USC 1253, 1255, 1259 {SMCRA Secs. 503, 505, 509} NECESSITY, FUNCTION, AND CONFORMITY: KRS Chapter 350 in pertinent part requires the cabinet to regulate surface coal mining and reclamation operations, including requiring bond sufficient to ensure satisfactory reclamation. KRS Chapter 350 further authorizes the cabinet to establish alternative methods of meeting bonding requirements. This administrative regulation implements an alternative bonding program known as a bond pool. This administrative regulation establishes requirements for applications for membership in the bond pool; procedures for submittal of, review of, and decisions on applications, including determinations of financial standing and reclamation compliance records of applicants; procedures for acceptance of specific permit areas into coverage by the bond pool; and procedures for keeping of production records, reporting of production, and payment of fees based on coal production. SECTION 1. APPLICABILITY. This administrative regulation applies only to the voluntary alternative bonding program known as the Kentucky Bond Pool, as established at KRS 350.700 through 350.755, and to permanent program permits or increments covered under that pool. SECTION 2. FORMS. (1) The following forms, which are required to be submitted by applicants and members, are hereby incorporated by reference: (a) Application for Membership, BP-01, revised September 1, 1988; and (b) Monthly Production Report, BP-02. (2) These forms may be reviewed or obtained at the Department for Surface Mining Reclamation and Enforcement, #2 Hudson Hollow, Frankfort, Kentucky 40601, Monday through Friday, 8 a.m. to 4:30 p.m. SECTION 3. REVIEW OF DECISIONS. There shall be no administrative appeal under 405 KAR 7:092 from a decision of the commission. However, the applicant or member may, within sixty (60) days after notice of the decision, request the commission to reconsider its decision. The commission may, at its discretion, grant or deny the request for reconsideration. SECTION 4. APPLICATIONS FOR MEMBERSHIP. (1) Any person desiring membership in the bond pool shall submit an application for membership to the commission at the address established by the administrator. (2) The application shall be submitted on forms provided by the commission and shall be of the form, content, and number of originals and copies as the commission may require. The application shall be typed or printed, and shall be legible throughout. (3) Financial statements required with the application shall be prepared by a certified public accountant. Financial statements shall be kept confidential to the commission, the administrator, and cabinet personnel authorized by the administrator. (4) The application shall include an application fee of $100 by cash or by certified check, cashier's check or money order made payable to "Kentucky State Treasurer." The fee shall not be refunded in any circumstances, but shall be applied toward the membership fee if the applicant is accepted for membership. (5) The application shall be complete in all respects. SECTION 5. REVIEW OF APPLICATIONS. (1) As soon as practicable after the administrator receives the application, he shall determine whether the application is complete or incomplete. (a) If the application is incomplete, the administrator shall so notify the applicant and shall identify the additional information which is needed to make the application complete. The applicant may submit the corrected application, in whole or in part, and no additional application fee shall be required. (b) If the application is complete, the administrator shall so notify the applicant in writing. The administrator shall evaluate the complete application and any other relevant information available to the administrator, and shall submit the evaluation to the commission. The application, the administrator's evaluation, and any other relevant information available to the commission, shall form the factual basis for the commission's decision on the application. (2) The commission shall act upon the application as soon as practicable. (a) If the commission approves the application, the administrator shall provide written notice to the applicant. The notice shall specify the rating which the applicant will receive upon membership, and shall state the membership fee required. The applicant shall submit the required membership fee. As soon as practicable after receipt of the membership fee, the administrator shall provide the applicant with an official certificate of membership which shall confer actual membership as of the date of the certificate. The certificate shall state the rating assigned to the member and also shall assign the member a unique membership number. The certificate shall be signed by the chairman of the commission and by the administrator. (b) If the commission denies the application, the administrator shall provide written notice to the applicant, setting forth the reasons for denial. The notice of denial shall be signed by the chairman of the commission. (3) The commission may defer its decision on an application if the applicant, any person who owns or controls the applicant, any person who is owned or controlled by the applicant, or any person who is under common ownership or control with the applicant has appealed a notice of noncompliance and order for remedial measures or an order for cessation and immediate compliance or has a notice or order pending a penalty assessment and the notice or order pending an appeal or penalty assessment would affect the applicant's eligibility or rating. SECTION 6. DETERMINATION OF FINANCIAL STANDING. (1) If the commission or administrator prepares summaries or analyses of information contained in the applicant or member's financial statements, the summaries or analyses shall be kept confidential if necessary to ensure the confidentiality of information contained in the financial statements. (2) The financial standing of the applicant or member shall be determined based upon the financial information required in the application and other information available to the commission and cabinet. The commission may consider, but shall not be limited to, the following financial ratios and related financial information: (a) The ratio of current assets to current liabilities; (b) The ratio of net income to net sales; (c) The ratio of total liabilities to stockholders' equity; (d) The ratio of net income to owners' equity; (e) The ratio of owners' equity to total assets; and (f) The ratio of the sum of cash, marketable securities, and net receivables, to current liabilities. SECTION 7. DETERMINATION OF RECLAMATION COMPLIANCE RECORD. (1) Excellent compliance record. The applicant or member shall be deemed to have an excellent compliance record if the applicant or member, each person who owns or controls the applicant or member, each person who is owned or controlled by the applicant or member, and each person who is under common ownership or control with the applicant or member, meet all the criteria in this subsection: (a) Has never committed a violation for mining without having first obtained the required permit under KRS Chapter 350; (b) Has never forfeited a bond or had a permit revoked under KRS Chapter 350; (c) Has never avoided forfeiture of a bond under KRS Chapter 350 because a surety performed reclamation work in order to avoid forfeiture; (d) Has never been determined to have demonstrated a pattern of violations pursuant to KRS 350.028(4), 350.130(3), or 350.465(3)(f); (e) Has not been issued more than one (1) order for cessation and immediate compliance pursuant to 405 KAR 12:020, Section 3(1)(a) in the most recent thirty-six (36) months of operation and the order was abated as ordered by the cabinet in a timely manner and was not for a violation of contemporaneous reclamation requirements under 405 KAR 16:020 or 405 KAR 18:020; (f) Has not been issued more than one (1) order for cessation and immediate compliance under 405 KAR 12:020, Section 3(1)(b) in the most recent thirty-six (36) months of operation and the order was abated as ordered by the cabinet in a timely manner; (g) Has not committed more than one (1) violation of contemporaneous reclamation requirements under 405 KAR 16:020 or 405 KAR 18:020 in the most recent thirty-six (36) months of operation and the violation was abated as ordered by the cabinet in a timely manner, except the commission may for good cause and by unanimous vote exclude violations that have been terminated by the cabinet with no civil penalty; (h) Has not committed more than three (3) violations of KRS Chapter 350 or 405 KAR Chapters 7 through 24 on any one (1) permit in any twelve (12) month period of the most recent thirty-six (36) months of operation, except the commission may for good cause and by unanimous vote exclude the twelve (12) month period on one (1) permit during which the largest number of violations occurred and may for good cause and by unanimous vote exclude violations that were timely abated and terminated by the cabinet with no civil penalty; or (i) Has not had civil penalties under KRS 350.990 or 405 KAR 7:092 or 405 KAR 7:095 remaining unpaid more than thirty (30) days after they were due and payable, within the most recent thirty-six (36) months of operation. (j) To the extent information is available, the commission may take into account the performance of the applicant or member and each person who owns or controls, is owned or controlled by, or is under common ownership or control with the applicant or member, in other states and on federal lands and Indian lands under criteria similar or equivalent to those in this subsection. (2) Acceptable compliance record. The applicant or member shall be deemed to have an acceptable compliance record if the applicant or member, each person who owns or controls the applicant or member, each person who is owned or controlled by the applicant or member, and each person who is under common ownership or control with the applicant or member, meet all the criteria in this subsection: (a) Has never committed a violation for mining without having first obtained the required permit under KRS Chapter 350; (b) Has never forfeited a bond or had a permit revoked under KRS Chapter 350; (c) Has never avoided forfeiture of a bond under KRS Chapter 350 because a surety performed reclamation work to avoid forfeiture; (d) Has never been determined to have demonstrated a pattern of violations pursuant to KRS 350.028(4), 350.130(3), or 350.465(3)(f); (e) Has not been issued more than four (4) orders for cessation and immediate compliance under 405 KAR 12:020, Section 3, in the most recent thirty-six (36) months of operation and each order was abated as ordered by the cabinet in a timely manner and not more than one (1) was for a violation of contemporaneous reclamation requirements under 405 KAR 16:020 or 405 KAR 18:020; (f) Has not committed more than three (3) violations of contemporaneous reclamation requirements under 405 KAR 16:020 or 405 KAR 18:020 in the most recent thirty-six (36) months of operation, except the commission may for good cause and by unanimous vote exclude violations that were timely abated and terminated by the cabinet with no civil penalty; (g) Has not committed more than eight (8) violations of KRS Chapter 350 or 405 KAR Chapters 7 through 24 on any one (1) permit in any twelve (12) month period of the most recent thirty-six (36) months of operation, except the commission may for good cause and by unanimous vote exclude the twelve (12) month period on one (1) permit during which the largest number of violations occurred and may for good cause and by unanimous vote exclude violations that were timely abated and terminated by the cabinet with no civil penalty; or (h) Has not had civil penalties under KRS 350.990 or 405 KAR 7:092 or 405 KAR 7:095 remaining unpaid more than ninety (90) days after they were due and payable, within the most recent thirty-six (36) months of operation. (i) To the extent information is available, the commission may take into account the performance of the applicant or member and each person who owns or controls, is owned or controlled by, or is under common ownership or control with the applicant or member, in other states and on federal lands and Indian lands under criteria similar or equivalent to those in this subsection. SECTION 8. ACCEPTANCE OF PERMIT AREAS INTO BOND POOL. (1) The commission shall specifically set forth those permits, increments, or portions thereof, which have been accepted for coverage under the bond pool. Coverage shall not be effective unless so identified by the commission. (2) Eligible portions of all permits issued to the member after the date of membership shall be covered by the bond pool. (3) If a permit was issued to the member prior to the date of membership but has not been disturbed as of the date of membership, eligible portions of the permit shall be covered by the bond pool. The member shall substitute the appropriate rating based bond under KRS 350.735 for the bond originally posted for the permit area or increment. (4) For existing permits or increments which have been disturbed as of the date of membership, the bond pool shall cover all eligible undisturbed portions of the permits or increments in accordance with this subsection. (a) A permit area or increment shall not be accepted for coverage if coal removal has been completed or substantially completed on the permit area or increment. In determining whether coal removal has been substantially completed, the commission shall consider factors such as the amount or percentage of coal yet to be extracted from the permit area or increment, the acreage or percentage of the permit area or increment yet to be disturbed, and the amount of time which likely would be required to complete coal extraction from the permit area or increment. (b) Within thirty (30) days after the date of membership the member shall, for each existing permit, designate to the cabinet in writing a date, which shall be not later than ninety (90) days after the date of membership, on which eligible portions of the permit shall be covered by the bond pool. With the designation, the member shall also submit maps as required by the cabinet which clearly identify those portions of the permit area which the member expects to have disturbed as of the designated date and those portions which are expected to remain undisturbed as of that date. The cabinet may, on a case-by-case basis and for good cause, grant extensions to the thirty (30) and ninety (90) day periods in this paragraph. (c) The cabinet shall recalculate the bond amount for the permit area or increment as two (2) bond amounts for two (2) new increments. One (1) new increment shall include the portion expected to be disturbed as of the designated date, and one (1) shall include the portion expected to remain undisturbed as of the designated date. (d) The member shall, on or before the designated date, post a new bond in the amount determined by the cabinet for the increment containing the areas expected to be disturbed as of the designated date. This increment shall not be covered by the bond pool. (e) The member shall, on or before the designated date, post a new rating based bond in the amount determined by the cabinet pursuant to KRS 350.735 for the increment containing the areas expected to remain undisturbed as of the designated date. This increment shall be covered by the bond pool. This increment shall not be disturbed until the bond required under this paragraph has been posted. (f) Upon receipt and approval of acceptable bonds as required by paragraphs (d) and (e) of this subsection, and upon verification by the cabinet that the increment to be covered by the bond pool has not been disturbed, the cabinet shall release the bond originally posted for the permit area or increment. (5) Any member that submits a preliminary permit application to the cabinet shall notify the bond pool administrator in writing within fourteen (14) calendar days of the submittal date. SECTION 9. PRODUCTION RECORDS, REPORTING, AND PAYMENT OF FEES. (1)(a) Authorized representatives of the commission and administrator shall have access to all permit areas of the member for purposes of determining compliance with the requirements of this section. (b) Each member shall make any book or record necessary to substantiate the accuracy of reports and payments available at reasonable times for inspection and copying by authorized representatives of the commission and administrator. The books and records shall include, but not be limited to, those required under subsection (2) of this section, books and records related to federal reclamation fees as required under 30 CFR Part 870, and books and records related to Kentucky coal severance tax as required under KRS Chapter 143. All information copied shall be kept confidential to the administrator and commission and their authorized representatives. (c) Each member shall retain books and records for a period of six (6) years from the end of the calendar month in which a report was due. (d) Authorized representatives of the administrator and commission shall have authority to examine records of second parties involved in the sale or transfer of the ownership of coal by the member, and shall have authority to examine the records of any party selling or transferring coal to the member. (2) Each member shall maintain current books and records that separately contain the tonnage of coal extracted for each permit covered by the bond pool. (3) Determination of fees. Fees shall be determined by the weight of the coal the first time the coal is weighed. (a) The weight of the coal shall be the actual gross weight of the coal. Impurities, including water, that have not been removed prior to the first time the coal is weighed shall not be deducted from the gross weight. (b) If the member combines surface mined coal and underground mined coal before the coal is weighed, the rate for surface mined coal shall apply unless the member can substantiate the tonnage produced by surface and underground mining by acceptable engineering calculations or other procedures which the cabinet may require. (4) Reporting of tonnage and payment of fees. (a) On forms provided by the cabinet each member shall report, for each permit covered by the bond pool, all coal tonnage extracted during the reporting period. Payment of fees shall accompany the report. (b) The reporting and payment period shall be monthly. The report shall be submitted, and fees shall be paid, not later than the 20th day of the month which follows the reporting period. The report shall be submitted even if the member has zero production during the reporting period. (c) Late report or payment. If a member fails to submit a report or payment on or before the due date, five (5) percent of the original fee due shall be added to the fee for each month or fraction thereof elapsing between the due date and the date on which the report or payment is submitted. In no case shall the penalty be less than ten (10) dollars. (5) As soon as practicable after each report is received, the administrator shall examine it and shall notify the member of any underpayment or overpayment. (a) If the amount of required fee as computed by the administrator is greater than the amount submitted by the member, the administrator shall notify the member, within thirty (30) days from the date the payment was received, of the additional amount to be paid; except that in the case of a failure to submit a report or of a fraudulent report, the examination and notification may occur at any time. Additional fee payments under this paragraph shall include a penalty of five (5) percent of the amount of the deficiency for each month or fraction thereof elapsing between the original due date and the date on which the payment is submitted. (b) If the amount of required fee as computed by the administrator is less than the amount submitted by the member, the administrator shall notify the member, within thirty (30) days from the date the payment was received, of the amount of the overpayment. The member may receive credit for the overpayment against the next monthly payment or any subsequent payment. (13 Ky.R. 809; Am. 1076; eff. 12-2-86; 16 Ky.R. 641; 1202; eff. 1-9-90; 18 Ky.R. 411; 1868; eff. 11-26-91.)