N.M. Admin. Code § 19.8.14.1409

Current through Register Vol. 36, No. 1, January 14, 2025

Section 19.8.14.1409 - COLLATERAL BONDS

A. Collateral bonds, except for letters of credit, cash accounts, and real property, shall be subject to the following conditions:

(1) the director shall keep custody of collateral deposited by the applicant until authorized for release or replacement as provided in 19.8.14 NMAC;

(2) the director shall value collateral at its current market value, not at face value;

(3) the director shall require that certificates of deposit be made payable to or assigned to the state of New Mexico, both in writing and upon the records of the bank issuing the certificates; if assigned, the director shall require the banks issuing these certificates to waive all rights of setoff or liens against those certificates;

(4) the director shall not accept an individual certificate of deposit in an amount in excess of $100,000 or the maximum insurable amount as determined by the federal deposit insurance corporation or the federal savings and loan insurance corporation.

B. Letters of credit shall be subject to the following conditions:

(1) the letter may be issued only by a bank organized or authorized to do business in the United States;

(2) letters of credit shall be irrevocable during their terms; a letter of credit used as security in areas requiring continuous bond coverage shall be forfeited and shall be collected by the state of New Mexico if not replaced by other suitable bond or letter of credit at least 30 days before its expiration date;

(3) the letter of credit shall be payable to the state of New Mexico upon demand, in part or in full, upon receipt from the director of a notice of forfeiture issued in accordance with 19.8.14.1413 NMAC.

C. Real property posted as a collateral bond shall meet the following conditions:

(1) The applicant shall grant the state of New Mexico a first mortgage, first deed of trust, or perfected first-lien security interest in real property with a right to sell in accordance with state law or otherwise dispose of the property in the event of forfeiture under 19.8.14.1414 NMAC.

(2) In order for the director to evaluate the adequacy of the real property offered to satisfy collateral requirements, the applicant shall submit a schedule of the real property which shall be mortgaged or pledged to secure the obligations under the indemnity agreement. The list shall include:

(a) a description of the property;

(b) the fair market value as determined by an independent appraisal conducted by a qualified appraiser, previously approved by the director; and

(c) proof of possession and title to the real property.

(3) The property may include land which is part of the permit area; however, land pledged as collateral for a bond under this section shall not be disturbed under any permit while it is serving as security under this section.

D. Cash accounts shall be subject to the following conditions:

(1) the director may authorize the operator to supplement the bond through the establishment of a cash account in one or more federally-insured or equivalently protected accounts made payable upon demand to, or deposited directly with, the state of New Mexico; the total bond including the cash account shall not be less than the amount required under terms of performance bonds including any adjustments, less amounts released in accordance with 19.8.14.1412 NMAC;

(2) any interest paid on a cash account shall be retained in the account and applied to the bond value of the account unless the director has approved the payment of interest to the operator;

(3) certificates of deposit may be substituted for a cash account with the approval of the director;

(4) the director shall not accept an individual cash account in an amount in excess of $100,000 or the maximum insurable amount as determined by the federal deposit insurance corporation or the federal savings and loan insurance corporation.

E. Fluctuating collateral value.

(1) If the nature of the collateral proposed to be given as security for a bond is subject to fluctuations in value over time, the director shall require that such collateral have a fair market value at the time of permit approval in excess of the bond amount by a reasonable margin. The amount of such margin shall reflect changes in value anticipated as probable of occurrence over a period of five years, including depreciation, appreciation, marketability and market fluctuation. In any event, the director shall require a margin for legal fees and costs of disposition of the collateral.

(2) The annual report shall report percentage changes in the fair market value of any collateral accepted by the director pursuant to this subsection since the time of the last report.

(3) The bond value of collateral may be evaluated at any time but it shall be evaluated as part of permit renewal and, if necessary, the performance bond amount increased or decreased. In no case shall the bond value of collateral exceed the market value.

F. 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 director at the time collateral is offered.

N.M. Admin. Code § 19.8.14.1409

11-29-97; 19.8.14.1409 NMAC - Rn, 19 NMAC 8.2.14.1409, 9-29-2000; A, 12-31-2007