BLM s Bonding Program

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1 BLM s Bonding Program Presented by Mitchell Leverette Bureau of Land Management Washington, DC IMCC Bonding Workshop August 21, 2013

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3 Public Lands held by BLM and FS

4 BLM Mining Law Financial Guarantee- Overview

5 Reclamation Bonds Reclamation Financial Assurance What Source of funds to indemnify BLM when mine operator doesn t comply Why - Required when surface disturbance or resource damage is expected, and BLM needs assurance that reclamation will occur (43 CFR )

6 When Reclamation Bonds Are Required The operator must provide an acceptable reclamation cost estimate that meets the 3809 regulations for all new plans and notices and modified pre-existing plans and notices Financial guarantee required before operations begin for notices and plans Not required for casual use

7 General Bond Requirements Funds must be guaranteed and negotiable at full value to BLM Funds must be accessible to BLM at all times Funds must not be available to permittee without release by BLM

8 Financial Guarantees Types Individual Financial Guarantee Blanket Financial Guarantee Financial Guarantee with a State

9 Individual Financial Guarantee Estimated cost as if BLM were to hire a third party contractor Must also cover interim reclamation May require a trust fund for continuation of long term treatments Types Surety bond Cash Irrevocable letter of credit from bank authorized to conduct business in USA CD or savings account Negotiable US government, state or municipal securities or bonds Insurance, must have an A.M. Best rating of superior or equivalent

10 Blanket Financial Guarantee These cover more than one notice or plan level operation, either statewide or nationwide The terms and conditions must be sufficient to cover entire cost

11 State-Approved Financial The guarantee must be redeemable by the Secretary of the Interior through the BLM Guarantee It must be held by a state agency for the same operations covered by the notice or plan It provides the same amount of financial guarantee

12 Long Term Trusts Purpose To ensure continuation of long-term treatment to achieve water quality standards Other long-term, post-mining maintenance requirements Funding Must Be Adequate Adequate to provide for construction, long-term operation, maintenance, or replacement of any treatment facilities or infrastructure When Can a Trust Fund Be Required During plan review After plan review and approval

13 Bond Adjudication Operator submits reclamation cost estimate (RCE) Must be submitted before Plan approval, usually submitted after initial plan submittal but before or during early stages of NEPA BLM Reviews RCE Adequate amount- District/Field Office issues decision amount Inadequate RCE requires operator to submit new estimate or revisions Operator provides the BLM with an acceptable financial guarantee

14 Determining Reclamation Costs Step 1 Identify Each Reclamation Task Step 2 Direct Reclamation Costs Step 3 Indirect Reclamation Costs Step 4 Calculate total costs

15 Reclamation Cost Estimate Assumptions The estimate must cover all relevant operation, maintenance and administrative costs for all reclamation required under the filed Notice or approved Plan of Operations. The cost estimate may however provide more reclamation details than is specified in the Notice or Plan; Costs must be estimated as if BLM were hiring a third party contractor to perform all required reclamation; Costs must include the use of off-site equipment as if the project area was vacated, and the estimate must include all associated mobilization and demobilization costs; The estimate must include, when applicable, all interim maintenance required to keep the area of operation in compliance with applicable safety and environmental requirements while reclamation contracts are developed and executed;

16 Reclamation Cost Estimate Assumptions (continued) The estimate must cover costs to construct and maintain any long-term treatment facilities or post-closure structures required by the filed Notice or approved Plan of Operations; and Where applicable, labor costs must be based on federally mandated labor rates, as required by the Davis-Bacon Act and the Federal Acquisition Regulations (FAR) for contracts over $2,000. If the reclamation is solely for the dismantling, demolition, or removal of improvements, then contracting is under the Service Contract Act and Davis-Bacon wage rates do not apply. If construction, alteration or repair of the improvements is contemplated, even if it is under a separate contract, then the Davis-Bacon wages apply

17 Cost Estimating References Caterpillar Performance Handbook BLM Solid Minerals Reclamation Handbook, H California Department of Transportation Labor Surcharge & Equipment Rental Rate The Blue Book of Building and Construction, bluebook.com The Mine Cost Service, Western Mine Engineering Means Heavy Construction Cost Data, by R.S. Means Co. Handbook for Calculation of Reclamation Bond Amounts, USDI, Office of Surface Mining The Cost Estimating Guide for Road Construction, by USDA, Forest Service Sherpa for Reclamation Bonds (BLM software)

18 Bond Maintenance Bond may be adjusted due to reclamation performed, contract renewal, or BLM changes to mine plan Responsibility of mineral specialist and State bond coordinator to review and maintain bond on a periodic basis BLM Periodic Reviews Notices- 2 years Plans of Operations- 3 years Will require increases when necessary

19 Collecting on a Bond When? Authorized officer determines that permittee fails to meet the terms and conditions of contract. Process 1. Notify permittee and surety by certified mail 2. State the violation 3. Give a reasonable time to comply 4. If a surety company, first request that they perform the corrective action

20 Release of Bond Liability Conditions for Release 1. All terms and conditions have been complied with 2. Transfer of the plan or notice with a new bond 3. Acceptable substitution of bond has been made May differ from State to State

21 Annual Bond Certification Annually, by December 1, BLM State Directors certify to the BLM Director that all financial guarantees have been review timely and are adequate to cover current costs of reclamation. Total Amount held: $2.4 Billion (October 2012) Total Cases with Bonds: 1626