Section 096-200-4-17 - Financial Assurance and Insurance RequirementsA.Requirements. Financial assurance and insurance is required for all advanced exploration and mining activities and must be posted and fully funded prior to the issuance of a mining permit. (1) The Permittee shall continuously maintain financial assurance, as a condition of the mining permit, until the Department determines that all reclamation, closure, post-closure maintenance and monitoring, and corrective actions have been completed.(2) The Permittee shall be required to maintain financial assurance for as long as the Department determines that the mining operation and any associated waste material could create an unreasonable threat to public health and safety or the environment.(3) Financial assurance must be available and made payable to the Department when requested by the Department.(4) Financial assurance may not be canceled by the Permittee unless it is replaced by alternative mechanisms in the appropriate amount and with the express written consent of the Commissioner after 30 days public notice in a paper of statewide coverage.(5) Financial assurance must be fully valid, binding, and enforceable under state and federal law.(6) All financial assurances obtained under this Chapter must be in a form such that it would not be subject to discharge under any and all provisions of the Bankruptcy Reform Act of 1978, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23, 11 U.S.C. § 101et seq. (as may be further amended from time to time) (the "United States Bankruptcy Code") and must be in a form such that it will not be considered property of the bankruptcy estate under any and all provisions of the United States Bankruptcy Code in the event that a bankruptcy petition is filed by or against the Permittee.(7) All forms of financial assurance and terms and conditions of financial assurances must be approved by the Department and must be analyzed by individuals with documented experience in material handling and construction, mining costs, and financial analysis. If the Department does not have adequate in-house expertise, the Department shall hire third-parties with documented experience in material handling and construction, mining costs, risk analysis, and financial analysis to analyze and evaluate the proposed terms and conditions of financial assurance required for the Applicant or Permittee. The individuals and company hired to perform this function shall have no conflict of interest with the applicant, related persons, applicant's consultants, attorneys or any of their employees. All costs of the third-party evaluation must be paid by the Applicant pursuant to 38 M.R.S. §352(4-A).(8) Failure of financial providers. The financial assurance shall provide a mechanism for a bank or guarantor to give prompt notice by certified mail to the Department and the Permittee of any administrative or judicial action filed or initiated alleging the insolvency or bankruptcy of the bank or the Permittee, or alleging any violations which could result in suspension or revocation of the bank charter or license to do business.(9) Upon incapacity of a bank or guarantor by reason of bankruptcy, insolvency, suspension or revocation of charter or license for any other reason, the Permittee shall be deemed to be without financial assurance coverage and shall cease mining and immediately begin to conduct reclamation, closure, post-closure maintenance and monitoring, and corrective actions measures in accordance with the mine plan. The Department may, for good cause shown, grant up to two 30-day extensions prior to the initiation of reclamation and closeout measures. Mining operations shall not resume until the Department has determined that an acceptable replacement financial assurance has been provided.(10) Advance notice (a) The Permittee shall notify the Department within 30 days thereof if its and/or its parent company's credit rating falls below investment grade as determined by Moody's Investor Services, Standard & Poor, or other comparable ratings service.(b) If the Permittee's and/or its parent company's credit rating falls below investment grade, within 30 days of such determination the Permittee shall secure an irrevocable standby letter of credit in an amount and form approved by the Commissioner.(c) The Permittee shall notify the Department of the availability on line of quarterly financial statements (filed by it and/or its parent company) within 30 days of when such statements are filed with the United States Securities and Exchange Commission (SEC). If quarterly financial statements become unavailable on line, the Permittee shall submit these statements in writing to the Department within 30 days of when such statements are filed with the SEC.B.Coverage of Financial Assurance(1) Financial assurance under this section applies to mining, including advanced exploration, and reclamation operations that are subject to a mining permit. The amount of financial assurance must be sufficient to cover the cost for the Department to administer, and hire a 3rd-party to implement all necessary investigation, monitoring, closure, post-closure, treatment, remediation, corrective action, reclamation, operation and maintenance activities under the environmental protection, reclamation and closure plan, including, but not limited to: (a) The cost to investigate all possible releases of contaminants at the site, monitor all aspects of the mining operation, close the mining operation in accordance with the closure plan, conduct treatment activities of all expected fluids and wastes generated by the mining operation for a minimum of 100 years, implement remedial activities for all possible releases and maintenance of structures and waste units as if these units have released contaminants to the groundwater and surface water, conduct corrective actions for potential environmental impacts to groundwater and surface water resources as identified in the environmental impact assessment and conduct all other necessary activities at the mine site in accordance with the environmental protection, reclamation and closure plan; and(b) The cost to respond to a worst-case catastrophic mining event or failure, including, but not limited to, the cost of restoring, repairing and remediating any damage to public facilities or services, to private property or to the environment resulting from the event or failure.(2) An Applicant for a mining permit must include with its application a review of the proposed financial assurance amounts required under 38 M.R.S. §490-RR(2) and this Chapter as performed by a qualified, independent 3rd-party reviewer approved by the Department. The costs of the 3rd-party reviewer must be paid by the Applicant. Estimates of the costs of a worst-case catastrophic mining event or failure under subsection 17(B)(1)(b) provided by the applicant may not include costs to the applicant associated with the loss of use of any mining operation or facility or the costs of repairing any damaged mining operation or facility to restore operations or other functions.(3) The Applicant or Permittee must provide detailed documentation of the estimated cost to implement the activities in the mine plan and the provisions of subsection 9(I)(5) of this Chapter with the application for permit, in the corrective action plan, and in other submittals as follows: (a) Cost estimates must be in current United States dollar value;(b) No salvage value attributed to the sale of products, wastes, facility structures, equipment, land or other assets may be used for estimating purposes; and(c) Cost estimates must be re-evaluated and updated at any time that the Department requires a corrective action, a change to the mining permit or changes to the cost estimates, and the financial assurance amount must be adjusted accordingly within 30 days of the filing of a new or modified corrective action plan, mine plan or when the permit or cost estimates are changed.(4) The Applicant or Permittee must provide financial assurance in the amount determined by the 3rd-party reviewer under subsection 17(B)(2) to be sufficient for the Department to conduct all activities listed under subsection 17(B)(1). Financial assurance estimates provided by the Applicant and reviewed by the 3rd-party reviewer under this section must use the highest cost option for all estimates, include a minimum 20% contingency to account for unexpected expenses, assume that all activities are to be completed concurrently, and base cost estimates on the maximum permitted quantities and volumes.(5) The financial assurance must be updated annually and adjusted using the implicit price deflator for gross national product as published by the United States Department of Commerce, Survey of Current Business, and must be submitted to the Department on or before March 15 of each year. The financial assurance shall not be adjusted downward in the event of a negative implicit price deflator.(6) The financial assurance must not include funds from the Maine Mining Oversight Fund as established at 36 M.R.S. §2866.(7) Without limitation, changes in the financial assurance may be required due to modifications of the permit, changed financial or site conditions, technology changes, inflation, anticipated changes in mining activity and waste unit utilization, or changes in requirements for closure, post-closure maintenance, corrective action or reclamation. The Permittee shall annually report to the Department, subject to the Department's approval, an estimate of cost changes as provided in this Chapter on or before March 15. The permit remains in effect only if all required deposits or increases are made within 30 days of the due date provided in this rule. The obligation to make deposits or increases ceases only upon approval from the Department.C.Allowable Forms of Financial Assurance. The financial assurance must consist of a trust fund that is secured with any of the following forms of negotiable property, or a combination thereof as approved by the Department: (1) A cash account in one or more federally insured accounts;(2) Negotiable bonds issued by the United States, a state or municipality having a Standard and Poor's credit rating of AAA or AA, or an equivalent rating from a national securities rating service; or(3) Negotiable certificates of deposit in one or more federally insured depositories. The financial assurance must be in a form that cannot be canceled, withdrawn, revoked, or otherwise reduced without the express written consent of the Department.
D.General Terms and Conditions of Financial Assurance(1) Trust fund requirements. The Permittee must deposit the required financial assurance in a trust fund prior to the issuance of a mining permit. The trust fund must be fully funded with one or more of the instruments identified in subsection 17(C) above. (a) The Department shall be a party to the trust agreement as beneficiary and shall have the right to withdraw and use part or all of the funds in the trust fund or to require the liquidation of the assets of the trust fund, at its sole discretion, to carry out the Act requirements including all associated regulations, permit, and other requirements as the Department determines necessary. The trust agreement must provide that there shall be no withdrawals from the trust fund except as authorized in writing by the Department.(b) The trust fund must not constitute an asset of the trustee or Permittee, and must be established in such a manner so as to ensure the funds in the account will be available to the Department and not any creditor, including in the event of bankruptcy or reorganization of the trustee or Permittee. The Permittee shall pay all costs of managing the fund and compensating the trustee.(c) The trustee must not invest assets of the trust fund in any real estate or real estate investment trust, any contract for the future sale or delivery of commodities or foreign currency, any state, municipal or corporate bond, or any other equity instrument or security, except that assets of the trust fund may be invested in securities issued by the United States Treasury.(d) The trustee shall notify the Department immediately in the event that any payment from the Permittee is not remitted by the due date.(e) The trustee shall submit to the Department an annual statement of deposits, letters of credit, investments, and any income and principal in the trust fund, and changes in the same over the prior year.(f) The financial institution serving as a trustee is subject to Department approval and is limited to the following:(i) A bank or trust company chartered by the State of Maine;(ii) A national bank chartered by the Office of the Comptroller of Currency; or(iii) An operating subsidiary of a national bank chartered by the Office of the Comptroller of Currency.E.Financial Assurance Mechanisms.(1) Cash accounts and Certificates of Deposits. When the Department has authorized the Applicant or Permittee to meet its financial assurance obligations through the establishment of a trust fund secured with a cash account or certificate of deposit, the following requirements apply:(a) Any interest paid on a cash account must be retained in the account and applied to the account; and(b) The Department shall require that certificates of deposit be made payable to or assigned to the Department, both in writing and upon the records of the bank issuing the certificates. If assigned, the Department shall require the banks issuing these certificates to waive all rights of setoff or liens against the certificates prior to the Department's acceptance.(2) Negotiable bonds. The Department may authorize the Applicant or Permittee to meet its financial assurance obligations through the establishment of a trust fund secured with negotiable bonds.(a) Negotiable bonds shall have a fair market value at the time of permit approval in excess of the financial assurance amount by at least 10%. The amount of such excess shall reflect changes in value anticipated over a period of 5 years, including depreciation, appreciation, marketability, and market fluctuation. In any event, the Department shall require a margin for legal fees and costs of disposition of the bonds in the event of forfeiture.(b) The financial assurance value of the negotiable bonds used to secure a trust fund may be evaluated at any time by the trustee or the Department. The Permittee shall increase the assets in the trust fund as necessary. In no case shall the value attributed to the negotiable bonds exceed market value.F.Release of Financial Assurance(1) When requesting release of financial assurance funds, the Permittee shall submit to the Department: (a) An environmental evaluation of the mining operation, mining site, affected areas, waste units, reclamation, and any required corrective action to ensure that any remaining problems are identified and corrected before financial assurance funds are released;(b) A detailed cost breakdown of the expended funds and the amount of money requested by the Permittee to be released from the trust fund; and(c) A detailed cost breakdown of the funds needed to complete the actions contained in subsection 17(F)(1)(a) above.(2) At the time the financial assurance release request is filed with the Department, the Permittee shall submit proof that notice of the request has been mailed by certified mail to abutters, as determined by local tax records or other reliable means, to the municipal office of the municipality(ies) where the project is located and, if the project is located in the unorganized or deorganized areas of the State, to the appropriate county commissioners. The notice must also be published once per week for 4 successive weeks in a newspaper with statewide circulation. Copies of the published notice must be submitted with the application. The notice must include the following information:(a) The Permittee's name;(b) Permit number and approval date;(c) The precise location of the real property affected;(e) The type and amount of financial assurance;(f) The type and appropriate dates of reclamation, closure, post-closure maintenance, monitoring, and corrective actions;(g) A description of compliance with the Permittee's approved permit and mine plan; and(h) The name and address of the Department contact, to whom written comments, objections, or requests for public hearings on the financial assurance release request may be submitted.(3) The Department shall provide notice of the receipt of the request for release of financial assurance to the Department of Inland Fisheries and Wildlife, Department of Agriculture, Conservation and Forestry, and other state and federal agencies deemed appropriate.(4) The Department shall post the public notice on the Department webpage dedicated to this permit.(5) Release inspection by the Department. Upon receipt of the complete request for release of financial assurance, the Department shall conduct a release inspection and evaluation of the reclamation, closure, post-closure maintenance and monitoring, and corrective actions completed at the mine site. The surface owner or lessor of the real property, other state and federal agencies as listed in this section, and any persons who have requested advance notice of the inspection shall be given notice of the release inspection and may be present at that inspection as may other members of the interested public to the extent reasonably practicable. The Department may arrange with the Permittee to allow access to the permit area, upon request, by any person with an interest in the financial assurance release, for the purpose of gathering information relevant to the proceeding. Nothing in this subsection prevents the Department from making additional inspections of the reclamation, closure, post-closure maintenance and monitoring, and corrective actions completed at the mine site(6) Public Hearing (a) The Department shall hold a public hearing on all requests for release of the financial assurance, and the Department shall inform all persons who have requested notice of hearings and persons who have filed written objections in regard to the request of the time and place of the hearing at least 30 days in advance of the public hearing. The hearing shall be held in the area of the permitted facility.(b) The date, time, and location of the public hearing shall be advertised by the Department in a newspaper of statewide circulation once a week for two consecutive weeks. All persons who have submitted a written request in advance to the Department to receive notices of hearings shall be provided notice at least 30 days prior to the hearing. The hearing procedures of 06-096 C.M.R. ch. 3 will be followed.(c) Within 90 days after a public hearing has been held pursuant to this section, the Department shall notify in writing the Permittee, trustee or other persons with an interest in collateral, and the persons who either filed objections in writing or participants in the hearing proceedings who supplied their contact information to the Department, if any, of the decision to release the financial assurance. The Department does not release the Permittee from any mining obligations, reclamation, closure, post-closure, or corrective action requirements or third party liability as a result of releasing any funds.(d) If the Department denies the release application or portion thereof, the Department shall notify the Permittee and any person with an interest in collateral, in writing, stating the reason for denial.G.Forfeiture of Financial Assurance to the Department. If a Permittee refuses or is unable to conduct or complete reclamation, closure, post-closure maintenance and monitoring, and corrective actions of the mining operation, if the terms and conditions of the permit are not met, or if the Permittee fails to comply with the conditions under which the financial assurance was accepted, the Department shall take the following action to require forfeiture of all or part of the financial assurance for the mine or an increment of the mine.(1) Send written notification by certified mail, return receipt requested, to the Permittee and the Trustee informing them of the determination to forfeit all or part of the financial assurance, including the reasons for the forfeiture, and the amount to be forfeited. The amount shall be based on the estimated total costs of completing reclamation, closure, post-closure maintenance and monitoring, and corrective actions.(2) Upon failure to comply with the conditions under which the financial assurance was accepted, the Department may cause the forfeiture of any and all financial assurances to complete reclamation, closure, post-closure maintenance and monitoring, and corrective actions for which the financial assurance was provided. Financial assurance liability shall extend to the entire mining site under conditions of forfeiture.H.Insurance Requirement. The Applicant must include, as part of its application, and the Permittee must provide annually thereafter as part of the mining and reclamation report required under subsection 26(B) of this Chapter, proof of comprehensive general liability insurance for the site for sudden and accidental occurrences. Non-sudden occurrence insurance may be required by the Department on a case by case basis and, and shall be required whenever there are land disposal units, land storage units, or mine waste units. The insurance underwriter(s) must be approved by the Department. Requirements include, but are not limited to, the following:(1) Liability insurance coverage must be provided during operation, reclamation, corrective actions, closure, and, where mine wastes will remain on the site after closure, during the postclosure maintenance period;(2) The level of coverage for sudden and accidental insurance must be at least $10 million per occurrence and $20 million annual aggregate, unless because of a greater risk, a higher minimum is required by the Department for a particular site;(3) The level of coverage for non-sudden insurance must be at least $6 million per occurrence and $12 million annual aggregate, unless because of a greater risk, a higher minimum is required by the Department for a particular site;(4) All liability insurance coverage amounts must be exclusive of legal defense costs;(5) An Applicant/Permittee may not self-insure. If liability insurance is unavailable, an irrevocable letter of credit drawn upon a reputable bank which meets the following criteria may be utilized in lieu of liability insurance for sudden and accidental and non-sudden occurrences:(a) Letters of credit must meet the terms below, and be unconditional, irrevocable, issued for a period of at least 1 year, and otherwise be in a form satisfactory to the Department.(i) Any irrevocable letter of credit must be issued by a separate financial institution from the trust fund financial institution.(ii) A letter of credit must be issued by:(A) A bank chartered by the State of Maine;(B) A national bank chartered by the Office of the Comptroller of Currency; or(C) An operating subsidiary of a national bank chartered by the Office of the Comptroller of Currency; and(b) When a letter of credit is used as liability insurance, the issuing financial institutions must be acceptable to the Department and the institution must have sufficient resources and assets to demonstrate that there is certainty the money will be available should the Department need to draw the funds;(c) The Permittee and the letter of credit institution must be independent of one another; and(d) The letter of credit must be modeled after the respective instrument language in 40 CFR 264.151 as modified to cover mining activities and meet the needs of this Chapter.(6) The liability insurance policy may not be written as a "claims made" policy unless approved by the Department.06-096 C.M.R. ch. 200, § 4-17