25 Pa. Code § 86.158 - Special terms and conditions for collateral bonds
(a) The Department will obtain possession of
and keep in custody collateral deposited by the permittee until authorized for
release or replacement as provided in this subchapter.
(b) Collateral bonds pledging negotiable
government securities are subject to the following conditions:
(1) The Department will determine the current
market value of government securities for the purpose of establishing the value
of the securities for bond deposit.
(2) The current market value, less any legal
and liquidation costs, is at least equal to the amount of the required bond
amount.
(3) The Department may
periodically revalue the securities and may require additional amounts if the
current market value is insufficient to satisfy the bond amount requirements
for the facility. At a minimum, the Department shall require any necessary
additional amounts with each permit renewal.
(4) The operator may request and receive the
interest accruing on governmental securities with the Department as the
interest becomes due and payable. The Department will not make interest
payments for postforfeiture interest accruing during appeals, and after
resolution of the appeals, when the forfeiture is adjudicated and decided in
favor of the Commonwealth.
(c) A collateral bond pledging certificates
of deposit is subject to the following conditions:
(1) The Department will require that
certificates of deposit be assigned to the Department, in writing, and the
assignment recorded upon the books of the bank issuing the
certificates.
(2) The Department
will not accept an individual certificate of deposit for denominations in
excess of $100,000, or maximum insurable amount as determined by the Federal
Deposit Insurance Corporation and the Federal Savings and Loan Insurance
Corporation.
(3) The Department
will require the banks issuing these certificates of deposit to waive rights of
setoff or liens which they have or might have against those
certificates.
(4) The Department
will only accept automatically-renewable certificates of deposit.
(5) The Department will require the permittee
to deposit sufficient amounts of certificates of deposit, to assure that the
Department will be able to liquidate those certificates prior to maturity, upon
forfeiture, for the amount of the bond required by this subchapter.
(6) The Department will only accept
certificates of deposit from banks or banking institutions licensed or
chartered to do business in the United States.
(7) The Department will not accept
certificates of deposit from banks which have failed or unduly delayed in
making payment on defaulted certificates of deposit.
(8) The permittee is not entitled to interest
accruing after forfeiture is declared by the Department unless the forfeiture
declaration is ruled invalid by a court having jurisdiction over the
Department, and the ruling is final.
(d) A collateral bond pledging a letter of
credit is subject to the following conditions:
(1) The letter of credit shall be a standby
letter of credit issued by a Federally-insured or equivalently protected bank
or banking institution, chartered or authorized to do business in the United
States which agrees to jurisdiction within this Commonwealth.
(2) A letter of credit is irrevocable. The
Department may accept a letter of credit which is irrevocable for a term of a
year if:
(i) The letter of credit is
automatically renewable for additional terms unless the bank gives at least 90
days prior written notice to the Department and the permittee of its intent to
terminate the credit at the end of the current term.
(ii) The Department has the right to draw
upon the credit before the end of its term and convert it into a cash
collateral bond, if the permittee fails to replace the letter of credit with
other acceptable bond within 30 days of the bank's notice to terminate the
credit.
(3) The letter
shall be payable to the Department in part or in full upon demand and receipt
from the Department of a notice of forfeiture issued inaccordance with
§§
86.180-86.182 and
86.185-86.190, or demand for payment
under paragraph (2)(ii).
(4) The
Department will not accept letters of credit from a bank for a permittee, on
permits held by that permittee, in excess of 10% of the bank's capital surplus
account as shown on a balance sheet certified by a certified public
accountant.
(5) A letter of credit
written by Commonwealth banks or other institutions is governed by:
(i) The laws of the Commonwealth, including
13 Pa.C.S. §§
1101-9507 (relating to Uniform
Commercial Code).
(ii) The current
version of the Uniform Customs and Practices for Documentary
Credits, published by the International Chamber of Commerce.
(iii) A bank or other institution outside
this Commonwealth which writes letters of credit, shall agree to be governed by
the documents identified within this subsection.
(6) Letters of credit shall provide that the
bank will give prompt notice to the permittee and the Department of notices
received or actions filed alleging the insolvency or bankruptcy of the bank, or
alleging violations of regulatory requirements which could result in suspension
or revocation of the bank's charter or license to do business.
(7) The Department will not accept letters of
credit from a bank that has failed or unduly delayed in making payment on a
defaulted letter of credit.
(e) A collateral bond in the form of a life
insurance policy is subject to the following conditions:
(1) The policy shall be fully paid and
noncancellable with a cash surrender value irrevocably assigned to the
Department at least equal to the amount of the required bond, and which may not
be borrowed against and may not be utilized for any other purpose.
(2) The policy shall be a single-premium,
ordinary whole life policy.
(3) The
policy shall be designed so that in the event of the death of the insured, the
Department receives from the proceeds of the policy an amount equal to the
amount of the bond. The Department will hold the proceeds as cash collateral
until release of all or part of the bond is authorized by the
Department.
(4) The insurance
company shall be licensed by the Insurance Commissioner to do business in this
Commonwealth or be designated by the Insurance Commissioner as an eligible
surplus lines insurer.
(5) The
policy shall bear no liens, loans or encumbrances, and none shall become
effective without the prior written consent of the Department.
(6) The person applying for the permit or the
permittee, once the permit is issued, shall own the policy.
(7) The Department will maintain possession
of the policy until authorized for bond release or replacement.
(f) A collateral bond in the form
of an annuity or trust fund is subject to the following conditions:
(1) The amount of the trust fund or annuity
shall be determined and set by the Department. The amount shall be that amount
determined by the Department as necessary to meet the bonding requirements
established by the Department for a permittee.
(2) The trust fund or annuity shall be in a
form and contain terms and conditions as required by the Department. At a
minimum, trust fund or annuity shall provide that:
(i) The Department is irrevocably established
as the beneficiary of the trust fund or of the proceeds from the
annuity.
(ii) Investment objectives
of the trust fund or annuity shall be specified by the Department.
(iii) Termination of the trust fund or
annuity may occur only as specified by the Department.
(iv) Release of money to the permittee from
the annuity or trust fund may be made only upon written authorization of the
Department.
(3) A
financial institution serving as a trustee or issuing an annuity shall be a
State-chartered or National bank or other financial institution with trust
powers or a trust company with offices located in this Commonwealth and whose
activities are examined or regulated by a State or Federal agency. An insurance
company issuing an annuity shall be licensed or authorized to do business in
this Commonwealth by the Insurance Commissioner or be designated by the
Insurance Commissioner as an eligible surplus lines insurer.
(4) Trust funds and annuities, as described
in this subsection, are established under government authority for the public
purpose to guarantee that moneys are available for the Department to pay for
treatment of postmining pollutional discharges or reclamation of the mine site
or both. Trust funds and annuities constitute property of the Commonwealth and,
as such, any earnings, profits and distributions shall have the same tax status
accorded the Commonwealth.
(g) Collateral shall be in the name of the
permittee, and shall be pledged and assigned to the Department free of rights
or claims. The pledge or assignment shall vest in the Department a property
interest in the collateral which shall remain until released under the terms of
this chapter, and will not be affected by the bankruptcy, insolvency or other
financial incapacity of the operator, as allowed by law. The Department will
ensure that ownership rights to deposited collateral are established to make
the collateral readily available upon forfeiture. The Department may require
proof of ownership and other means, such as secondary agreements, as it deems
necessary to meet the requirements of this chapter.
Notes
The provisions of this § 86.158 amended under section 5 of The Clean Streams Law (35 P.S. § 691.5); sections 4(a) and 4.2 of the Surface Mining Conservation and Reclamation Act (52 P.S. §§ 1396.4(a) and 1396.4b); section 3.2 of the Coal Refuse Disposal Control Act (52 P.S. § 30.53b); section 7(b) of The Bituminous Mine Subsidence and Land Conservation Act (52 P.S. § 1406.7(b)); and section 1920-A of The Administrative Code of 1929 (71 P.S. § 510-20).
This section cited in 25 Pa. Code § 86.155 (relating to scope).
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