Federal Register / Vol. 62, No. 213 / Tuesday, November 4, 1997 / Rules and Regulations 59569

the Federal Register a proposed new

paragraph (f) to add to 29 CFR 2204.105

containing its Rules of Procedure

concerning eligibility under the Equal

Access to Justice Act, 62 FR 42957

(August 11, 1997). The new paragraph is

based on the model rule of the (former)

Administrative Conference of the

United States, adopted in large part by

most federal agencies, concerning

aggregation of the net worth and number

of employees of the applicant with those

of its affiliates. At the same time, the

Commission also proposed to change all

references to the ‘‘EAJ Act’’ in 29 CFR

Part 2204 to read ‘‘EAJA’’ to conform to

the common shortened reference term

for the Equal Access to Justice Act. The

only comments that the Commission

received were from the Office of the

Solicitor, U.S. Department of Labor,

which supports the changes as

proposed. The Commission thanks that

office for its time and interest.

List of Subjects in 29 CFR Part 2204

Claims, Equal access to justice,

Lawyers.

For the reasons set forth in the

preamble, the Occupational Safety and

Health Review Commission amends

Title 29, Chapter XX, Part 2204 of the

Code of Federal Regulations to read as

follows:

PART 2204—IMPLEMENTATION OF

THE EQUAL ACCESS TO JUSTICE

ACT IN PROCEEDINGS BEFORE THE

OCCUPATIONAL SAFETY AND

HEALTH REVIEW COMMISSION

1. The authority citation for Part 2204

continues to read as follows:

Authority: Sec. 203(a)(1), Pub. L. 96–481,

94 Stat. 2325 (5 U.S.C. 504(c)(1)); Pub. L. 99–

80, 99 Stat. 183.

PART 2204—[AMENDED]

2. All references in Part 2204 to ‘‘EAJ

Act’’ are revised to read ‘‘EAJA’’

wherever they appear.

3. A new paragraph (f) is added to

§ 2204.105 to read as follows:

§ 2204.105 Eligibility of applicants.

* * * * *

(f) The net worth and number of

employees of the applicant and all of its

affiliates shall be aggregated to

determine eligibility. Any individual,

corporation, or other entity that directly

or indirectly controls or owns a majority

of the voting shares or other interest of

the applicant, or any corporation or

other entity of which the applicant

directly or indirectly owns or controls a

majority of the voting shares or other

interest, will be considered an affiliate

for purposes of this part, unless such

treatment would be unjust and contrary

to the purposes of the EAJA in light of

the actual relationship between the

affiliated entities. In addition, financial

relationships of the applicant other than

those described in this paragraph may

constitute special circumstances that

would make an award unjust.

Dated: October 29, 1997.

Stuart E. Weisberg,

Chairman.

Daniel Guttman,

Commissioner.

[FR Doc. 97–29101 Filed 11–3–97; 8:45 am]

BILLING CODE 7600–01–M

DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation

and Enforcement

30 CFR Part 914

[SPATS No. IN–134–FOR; State Program

Amendment No. 95–12]

Indiana Regulatory Program

AGENCY: Office of Surface Mining

Reclamation and Enforcement (OSM),

Interior.

ACTION: Final rule; approval of

amendment.

SUMMARY: OSM is approving with

certain exceptions a proposed

amendment to the Indiana regulatory

program (hereinafter referred to as the

‘‘Indiana program’’) under the Surface

Mining Control and Reclamation Act of

1977 (SMCRA). Indiana proposed

revisions to the Indiana Surface Coal

Mining and Reclamation Act (ISMCRA)

as enacted by the Indiana General

Assembly (1995) in Senator Enrolled

Act 125 (SEA 125). The proposed

amendment, concerning the submittal of

affected area status reports and

performance bonding, is intended to

revise the Indiana program to be

consistent with SMCRA and incorporate

State initiatives.

EFFECTIVE DATE: November 4, 1997.

FOR FURTHER INFORMATION CONTACT:

Andrew R. Gilmore, Director,

Indianapolis Field Office, Office of

Surface Mining Reclamation and

Enforcement, Minton-Capehart Federal

Building, 575 North Pennsylvania

Street, Room 301, Indianapolis, IN

46204–1521, Telephone (317) 226–6166.

SUPPLEMENTARY INFORMATION:

I. Background on the Indiana Program

II. Submission of the Proposed Amendment

III. Director’s Findings

IV. Summary and Disposition of Comments

V. Director’s Decision

VI. Procedural Determinations

I. Background on the Indiana Program

On July 29, 1982, the Secretary of the

Interior conditionally approved the

Indiana program. Background

information on the Indiana program,

including the Secretary’s findings, the

disposition of comments, and the

conditions of approval can be found in

the July 26, 1982, Federal Register (47

FR 32107). Subsequent actions

concerning the conditions of approval

and program amendments can be found

at 30 CFR 914.10, 914.15, and 914.16.

II. Submission of the Proposed

Amendment

By letter dated September 11, 1995

(Administrative Record No. IND–1510),

the Indiana Department of Natural

Resources (IDNR) submitted a proposed

amendment to its program pursuant to

SMCRA. Indiana submitted the

proposed amendment as its own

initiative. SEA 125 amends ISMCRA by

adding new sections and revising

existing sections, concerning affected

area status reports and performance

bonding, to recodified Indiana Code (IC)

14–8. The provisions of the ISMCRA

that Indiana proposes to add at

recodified IC 14–8 are: IC 14–8–42.5,

definition of ‘‘collateral’’; IC 14–8–2–

49.5, definition of ‘‘comparative balance

sheet’’; IC 14–8–2–49.6, definition of

‘‘comparative income statement’’; IC 14–

8–2–274.5, definition of ‘‘Surface

Mining Control and Reclamation Act.’’

The provisions of the ISMCRA that

Indiana proposes to revise or add at

recodified IC 14–34 are: IC 14–34–5–10,

affected area status reports; IC 14–34–6–

14.3 and IC 14–34–14.6, general

requirements of performance bonding;

IC 14–34–7–0.5, definition of

‘‘collateral’’; IC 14–34–7–0.6, definition

of ‘‘comparative balance sheet’’; IC 14–

34–7–0.7, definition of ‘‘comparative

income statement’’; IC 14–34–7–2.5,

definition of ‘‘Surface Mining Control

and Reclamation Act’’; IC 14–34–7–1,

definition of ‘‘liabilities’’; IC–14–34–7–

4(b), definition of ‘‘current liabilities’’;

IC 14–34–7–4(d), conditions for selfbonding; IC 14–34–7–4(e), (f) and (g),

additional conditions for self-bonding;

IC 14–34–7–4.1, replacement of selfbonds; IC 14–34–7–5, corporate

guarantee; IC 14–34–7–7, indemnity

agreement conditions; IC 14–34–7–7.1,

use of collateral to support a self-bond;

IC 14–34–7–8, information requirements

for self-bonding; IC 14–34–7–9,

requirements for a change in financial

conditions; IC 14–34–7–10, self-bonding

report requirements; IC 14–34–7–11,

self-bond coverage requirements: IC 14–

34–7–12, self-bond Phase I grading
59570 Federal Register / Vol. 62, No. 213 / Tuesday, November 4, 1997 / Rules and Regulations

release requirements; and IC 14–34–7–

13, nonseverability provision.

OSM announced receipt of the

proposed amendment in January 22,

1996, Federal Register (61 FR 1551),

and in the same document opened the

public comment period and provided an

opportunity for a public hearing on the

adequacy of the proposed amendment.

The public comment period closed on

February 21, 1996.

During its review of the amendment,

OSM identified concerns relating to

duplicate bond coverage/reclamations

agreements, IC 14–34–6–14.6; definition

of ‘‘liabilities,’’ IC 14–34–7–1; selfbonding qualifying criteria, IC 14–34–7–

4; collateral self-bonds, IC 14–34–7–7.1;

and report of qualified independent

public accounting consultant, IC 14–34–

7–10. OSM notified Indiana of these

concerns by letter dated September 13,

1996 (Administrative Record No. INC–

1543).

By letter dated October 25, 1996

(Administrative Record No. IND–1545),

Indiana responded to most of OSM’s

concerns by submitting additional

explanatory information. By letter dated

August 4, 1997 (Administrative Record

No. IND–1584), Indiana responded to

OSM’s editorial concerns by submitting

Senate Enrolled Act 7, which contained

technical corrections to its proposed

amendment. Because the additional

information merely clarified certain

provisions of Indiana’s proposed

amendment, OSM did not reopen the

public comment period.

III. Director’s Findings

Set forth below, pursuant to SMCRA

and the Federal regulations at 30 CFR

732.15 and 732.17, are the Director’s

findings concerning the proposed

amendment.

Revisions not specifically discussed

below concern nonsubstantive wording

changes, or revised cross-references and

paragraph notations to reflect

organizational changes resulting from

this amendment.

A. Revisions to Indian’s Statutes That

Are Substantively Identical to the

Corresponding Federal Provisions

1. Indiana proposes to revise the

following statute that contains language

that is identical in meaning to the

counterpart Federal regulation indicated

in brackets IC 14–34–7–5, Self-Bonding

Corporate Guarantee [30 CFR

800.23(c)(1)].

Because the above proposed revision

is identical in meaning to the

corresponding Federal regulation, the

Director finds that Indiana’s proposed

statute is no less stringent than SMCRA

and no less effective than the Federal

rule.

B. Revisions to Indiana’s Statutes That

Are Not Substantively Identical to the

Corresponding Federal Provisions

1. IC 14–8–2–42.5 and IC 14–34–7–0.5

Definition of Collateral

Indiana proposes to add a definition

of ‘‘Collateral’’ to its statutes. At IC 14–

8–2–42.5, Indiana proposes to add

language as follows.

‘‘Collateral,’’ for purposes of IC 14–34–7,

has the meaning set forth in IC–14–34–7–0.5.

At IC 14–34–7–0.5, Indiana proposes

to add the following definition of

‘‘Collateral.’’

As used in this chapter, collateral means

the actual or constructive deposit, as

appropriate, with the director of one (1) or

more of the following types of property in

support of a self-bond:

(1) A perfected, first-lien security interest

in favor of the department of natural

resources in real property located in Indiana

that meets the requirements of this chapter.

(2) Securities backed by the full faith and

credit of the United States government, or

state government securities, that are: (A)

acceptable to; (B) endorsed to the order of;

and (C) placed in the possession of; the

director.

(3) Personal property that is located in

Indiana and owned by the applicant, the

market value of which is more than one

million dollars ($1,000,000) per property

unit.

Indiana’s proposed language at IC 14–

34–7–0.5(1) and (2) would allow

operators to use as collateral the same

forms of collateral approved by the

Federal regulation that define

‘‘Collateral bond’’ at 30 CFR 800.5(b)(5)

and (6). The Federal regulation at 30

CFR 800.5(b) do not include a provision

that allows personal property to be used

as collateral, but neither do they

specifically prohibit the use of personal

property for collateral.

With the exception of personal

property, Indiana is proposing collateral

mechanisms to support a self-bond that

are similar to the collateral mechanisms

allowed in the federal program to

support a permittee’s indemnity

agreement as bond. The Federal selfbonding regulations at 30 CFR 800.23 do

not contain a counterpart to Indiana’s

revised statutes providing for the use of

personal property as collateral for selfbonds. The Federal regulations at 30

CFR 800.21 do allow the use of real

property and government-backed

securities as collateral for indemnity

agreements. OSM eliminated the use of

personal property as collateral in a July

19, 1983, Federal Register notice (48 FR

32932). In that notice OSM stated that

‘‘because of potential problems,

including potential loss of the property,

difficulties obtaining appraisals of such

items, fluctuations in value, and the

potential attachment of liens, personal

property as a general form of collateral

was deleted from the Federal definition

of acceptable collateral.’’ Indiana’s

proposal to allow self-bonding

applicants to collateralize a self-bond

with personal property is similar to the

State of Wyoming’s self-bonding

program approved by OSM (55 FR

30227, July 25, 1990). As stated in the

preamble to the approval of the

Wyoming regulations, OSM said that the

State had addressed all of OSM’s

concerns about the use of personal

property, namely that with a minimum

value of $1 million per unit, the concern

that property would be small and hard

to track is resolved. The Indiana

proposal also requires a per unit

property value of $1 million. In

addition, the State plans to accept the

value of property at the difference

between the marke t value of the State’s

projected liquidation costs. This is

consistent with the requirements under

the Federal regulations to adjust the

value of collateral by a margin that

represents liquidation cost in order to

avoid inflating the value of the property

as bonding collateral. Both the

Wyoming self-bonding program and the

proposed Indiana self-bonding revisions

require the applicant to meet certain

financial tests in order to use collateral

to support the self-bond. In Wyoming,

the tests are an alternate set of tests.

Indiana is proposing that an applicant

meet two out of the three standard

financial tests in order to pledge

personal property collateral; therefore,

this provides extra assurance that the

applicant will have the financial

resources necessary to perform the

reclamation should the property

decrease in value. Like the Wyoming

program, Indiana’s proposal requires

that the applicant provide the State with

a perfected, first lien security interest.

Therefore, the concern over liens is

resolved. The State’s proposal to require

maintenance reports will help assure

that the collateral is maintained in good

working order. As with the Wyoming

program, the Director finds that the

State’s proposed use of personal

property to collaterlize self-bond is not

inconsistent with not less effective that

the Federal regulations. Therefore, the

Direct’s is approving Indiana’s proposed

definitions for the term collateral at IC

14–8–2–42.5 and IC 14–34–7–0.5.
Federal Register / Vol. 62, No. 213 / Tuesday, November 4, 1997 / Rules and Regulations 59571

2. IC 14–8–2–274.5 and IC 14–34–7–2.5

Definition of Surface Mining Control

and Reclamation Act

Indiana proposes to add a definition

of ‘‘Surface Mining Control and

Reclamation Act,’’ to its statutes. At IC

14–8–2–274.5, Indiana proposes to add

language as follows.

‘‘Surface Mining Control and Reclamation

Act,’’ for purpose of IC 14–34–7, has the

meaning set forth in IC 14–34–7–2.5.

At IC 14–34–7–2.5, Indiana proposes

to add the following definition of

‘‘Surface Mining Control and

Reclamation Act.’’

As used in this chapter, Surface Mining

Control and Reclamation Act means the

federal Surface Mining Control and

Reclamation Act of 1977 (30 U.S.C. 1201

through 1328).

The Federal regulations at 30 CFR

705.5 define the term ‘‘Act’’ to mean the

Surface Mining Control and

Reclamation Act of 1977, Pub. L. 95–87.

Indiana’s proposed definition at IC 14–

34–7–2.5, which refers to the Surface

Mining Control and Reclamation Act of

1977 (30 U.S.C. 1201 through 1328) as

the ‘‘Surface Mining Control and

Reclamation Act,’’ would not render the

Indiana statutes less stringent than

SMCRA or less effective than the

Federal regulations at 30 CFR 705.5.

Therefore, the Director is approving

Indiana’s definition of at IC 14–8–2–

274.5 and IC 14–34–7.2.5.

3. IC 14–34–7–1 Definition of

Liabilities

Indiana’s existing statute at IC 14–34–

7–1 is identical to the Federal definition

of libitlities at 30 CFR 800.23(a). The

State proposes to amend the definition

of liabilities as:

‘‘obligations to transfer assets or provide

services to other entities in the future as a

result of past transaction. The term does not

include amounts that are required to be

recorded for financial accounting purpose

under Statement of Financial Accounting

Standards number 106 issued by the

Financial Accounting Standards Board and

effective December 1990.’’

The State proposes to allow

companies to exclude FAS 106

obligations form liabilities for the

purpose of applying for self-bonding.

As outlined in OSM’s September 13,

1996, letter to Indiana, this proposal is

deemed to be less effective than the

counterpart Federal regulations. The

Federal regulations require that all

liabilities be shown on an applicant’s

balance sheet prepared in accordance

with Generally Accepted Accounting

Principles (GAAP). GAAP follows the

accounting rules established by the

Financial Accounting Standards Board

(FASB), a private organization funded

by professional accounting associations.

In its October 25, 1996, response to

OSM’s letter, the State supports its

position that FAS 106 liabilities do not

need to be included in an applicant’s

financial statement by referring to

public comments dated February 6,

1996 (Administrative Record Number

IND–1532), as its justification.

OSM does not believe that these

comments reflect the most current and/

or the most accurate information on

FAS 106 and its effects on self-bonding

applicants. Therefore, OSM continues to

consider the State’s proposed definition

of liabilities to be less effective than the

Federal regulations for the reasons

discussed below.

The information and journal articles

that the comments referred to have

subsequently been updated by more

current thinking and journal articles on

the subject. In addition, the State has

not provided any evidence that

eliminating FAS 106 liabilities from an

applicant’s balance sheet provides the

same level of information and accuracy

for financial reporting that is gained by

reporting all liabilities (as required by

the FASB). Part of the FAS 106 liability

includes, the current portion of the

liability (for retirees for the current

year). Eliminating the total FAS 106

obligation from the balance sheet would

result in an inaccurate accounting of the

applicant’s current obligations. This

would result in a current ratio that does

not represent the actual current

obligations of the applicant.

Below is an analysis of the FAS 106

obligations and reasons why removing

the obligations from an applicant’s

balance sheet is less effective than the

Federal regulations. A new accounting

rule, FAS 106, issued by the FASB in

December 1990, requires companies to

accrue the costs of postretirement health

benefits and to show this as a liability

on their balance sheets starting in 1993.

Prior to 1993, these obligations were

recognized on a pay-as-you-go-basis.

FAS 106 obligations include health

benefits earned during an employee’s

active employment and paid out at

retirement. Computing the amount of

the liability involves a number of factors

including long-term interest rates and

the health care cost trend rate. As stated

in ‘‘FAS 106 Still Looms Large,’’

published in the January 23, 1995, issue

of Pensions and Investments, ‘‘While

many investment managers and

financial analysts believe 1993’s big

writeoffs and resulting earnings losses

put the bad news behind, there will be

ongoing, albeit smaller, financial

problems associated with FAS 106, that

could produce a drag on earnings,

according to benefits specialists and

actuaries.’’

The State’s proposed change to the

definition of liabilities would allow selfbonding applicants to compute the selfbond qualifying ratios and financial

limitations based on pre-FAS 106

financial data, thereby applying the 25

percent of net worth test to pre-FAS 106

net worth. Under this proposal, the

State would not know the extent and the

effects of the applicant’s FAS 106

obligation on the applicant’s long-term

financial condition. This could result in

the State accepting a self-bond from an

applicant whose long-term FAS 106

obligations are material enough to

threaten the future viability of the selfbonding arrangement. While the

obligation as a whole does not represent

a cash outlay in any given accounting

period, it eventually must be paid

whether a company amortizes the

amount (delayed recognition) or

accounts for it on an ‘‘immediate

recognition basis.’’ While some

components of the FAS 106 obligation

are estimated, to recognize only that

part of the obligation being paid to

current retirees, or to exclude the

liability altogether, results in an

inaccurate picture of a companys’ long

term financial condition. The longer the

life of the mine for which a self-bonding

arrangement is sought, the greater the

significance of the FAS 106 obligation

because of the long-term nature of

reclamation.

Articles published in the February

and March 1993, issues of Corporate

Cashflow Magazine and Financial

World state that bond rating services

such as Moody’s and Standard and

Poor’s will consider the effects of FAS

106 when rating a company’s bond

issues. Companies’ bonds will be rated

on the basis of both pre-FAS 106 and

post-FAS 106 financials. One of the

articles advises readers to ‘‘Ignore FAS

106 at your peril * * *’’ and that

‘‘ ‘Over time there will be credit-quality

implications for those companies that

are unable to recoup FAS 106 losses

through earnings or some other balancesheet enhancement, such as issuing new

stock,’ says Joseph C. Bencivenga,

managing director and head of corporate

bond research for Salomon Brothers.

Adds Brown Brothers’ Hill: ‘Future

claims on cash should not be

overlooked by equity investors in their

investment decision-making. This is

especially true for the more laborintensive, unionized industries with

large postretirement benefit liabilities,

where retired employees sometimes

have a claim on cash equal to that of the

shareholders.’ ’’ In the January 23, 1995,

issue of Pensions and Investments, the
59572 Federal Register / Vol. 62, No. 213 / Tuesday, November 4, 1997 / Rules and Regulations

article entitled ‘‘FAS 106 Still Looms

Large,’’ states that ‘‘In 1993, most

companies adopted FAS 106 and

recognized obligations for past service

liabilities on the balance sheet, resulting

in writedowns of 7% to 12% in book

value among Standard & Poor’s 500

companies alone.’’

The above articles on FAS 106 are in

contrast to earlier articles on the subject

published in 1989 and 1991 that

indicated that bond rating services,

Moody’s and Standard and Poor’s (S&P),

would ignore the effects of FAS 106 and

that bond ratings would stay the same.

However, as indicated in the above 1993

and 1995 articles, after companies began

implementing the requirement in 1993,

the post-retiree health benefit

obligations far exceeded amounts

anticipated causing rating companies

such as S&P and Moody’s to take a

second look at the effects of these

obligations. According to ‘‘FAS 106 Still

Looms Large,’’ in the January 23, 1995,

issue of Pensions and Investments,

‘‘liabilities that resulted in billions of

dollars in reduced operations earnings

last year still hold some expensive

surprises. Industry sources warn there

may be additional reductions in

earnings linked to higher ongoing

annual expenses caused by Financial

Accounting Standards FAS 106.’’

In its summary to the FAS 106

statement, the FASB stated that one of

the Board’s objectives in issuing this

Statement is‘‘ * * * to enhance the

ability of users of the employer’s

financial statement to understand the

extent and effects of the employer’s

undertaking to provide postretirement

benefits to its employees by disclosing

relevant information about the

obligation and cost of the postretirement

benefit plan and how those amounts are

measured.’’

A commenter (Administrative Record

Number IND–1532), in support of the

State’s proposed amendment, stated that

the Indiana statute (SEA 125) was

‘‘enacted to remedy a situation resulting

from a change in accounting standards

[FAS 106] which occurred subsequent

to the original enactment of statutory

provisions governing self-bonding in

Indiana in 1988, as a result of which

most Indiana coal producers are no

longer eligible to self-bond.’’ The

commenter believes that the Federal

self-bonding regulations should also be

revised in light of the FAS 106 change

to accounting principles especially

because ‘‘credit-rating agencies,

including the bond rating agencies

referred to in section 800.23(b)(3)(i)

[S&P and Moody’s], have decided not to

change credit ratings based on FAS

106.’’ To support the State’s proposal,

the commenter cited an article

published in 1989, prior to the 1993

implementation of FAS 106 and prior to

the financial industry knowing the

actual effects of implementing FAS 106.

OSM disagrees with the commenter

that bond rating companies have

decided not to change credit [bond]

ratings and that the best approach is to

follow the lead of credit-rating agencies

as justification for changing the selfbonding regulations. Based on OSM’s

discussions with Standard and Poor’s

(S&P) and Dun and Bradstreet (D&B),

and in reviewing current literature as

discussed above, OSM believes that the

effects of FAS 106 apply to many

aspects of an applicant’s financial

statement and are too complex to be

discounted by simply removing the

obligation from liabilities. S&P and

Moody’s employ many variables related

to FAS 106 obligations when

establishing a company’s bond rating.

FAS 106 obligations are considered.

During its review of the State’s

proposal, OSM conducted research to

determine how the credit industry is

treating FAS 106 obligations in

underwriting decisions. Financial

analysts from (S&P) and (D&B)

discussed their procedures for

recognizing the FAS 106 obligation with

OSM. One senior analyst from S&P said

that S&P recognizes the FAS 106

transaction as a ‘‘non-cash’’ charge and

retains the prior bond rating if the

fundamentals of a company have not

changed. According to S&P’s written

guidance, ‘‘Corporate Finance Criteria,’’

S&P states that FAS 106 obligations:

‘‘are not viewed in the same light as straight

debt, since amounts to be paid in future years

are subject to change. Nonetheless, S&P

believes that, for analytic purposes, the entire

unfunded APBO [Accumulated

Postretirement Benefit Obligation] should be

reflected in the balance sheet as a liability

regardless of whether a company opts for

immediate or delayed recognition [of the

liability] under FAS 106 * * *. Moreover, it

is critical to have one basis for analysis to

allow comparison between companies. In

assessing capital structure, S&P makes

balance sheet adjustments so that the

unfunded APBO is fully recognized * * *. In

cases where a company’s retiree medical

liability burden is material, S&P does not rely

on any single figure as a definitive

representation of the OPEB [Employers’

Accounting for Post-retirement Benefits other

than pensions]. Rather, the analysis may

consider several alternative estimates and

financial ratios based on each * * *. The

level of cash outlays has the most immediate

impact on a company’s financial health.

Given the trend of dramatic increases in

spending for these benefits, S&P focuses on

prospective cash outlays * * *. In assessing

the significance of OPEBs and other debt-like

obligations to a company, the ratio of total

liabilities to net worth becomes a more

significant ratio.’’

As shown above, S&P considers the

effects of FAS 106 when assigning bond

ratings; and in fact, S&P adjusts the

obligation so that it is fully recognized

(rather than amortized) in order to have

a basis of comparison between

companies. If an applicant can retain an

A or higher bond rating after

implementing FAS 106, and after being

analyzed by S&P or Moody’s, it may still

qualify for self-bonding.

In discussions with OSM, two Dun

and Bradstreet financial analysts

indicated that they might drop a

company’s Dun and Bradstreet credit

rating as a result of FAS 106; however,

this would be based on many

considerations including whether a

company made a profit and had positive

cash flow after implementing FAS 106.

One analyst said that if the financial

effects of a one-time charge were

significant, but other items in the

financial statement indicated the

company was strong, he might change

the credit rating to a ‘‘blank’’ rating [no

rating assigned] with notes of

explanation. Both analysts indicated

that following a company’s

implementation of FAS 106, factors that

are heavily weighed during the credit

rating process are a company’s cash

flow, profitability, and ranking when

compared with industry peers (industry

norms).

Bond ratings and credit ratings may or

may not be changed depending on the

overall financial condition of the

company being rated. Therefore,

eliminating the FS 106 obligation from

liabilities based on assumptions that the

liability is being ignored by the rating

services and the investment and credit

industries is incorrect.

Based on the above discussion, the

Director is not approving the proposed

revision to Indiana’s definition of

liabilities at IC 14–34–7–1, and is

requiring Indiana to remove the

disapproved language. To be no less

effective than the Federal regulations,

the State needs to retain its current

approved definition of liabilities that

requires all liabilities be reported in the

application, and not exclude FAS 106

obligations from the definition of

liabilities. A possible future option for

dealing with FAS 106-type obligations

would be to develop alternative selfbonding criteria, no less effective than

the Federal regulations, that recognize

FAS 106 obligations as a liability while

still allowing financially strong

companies to qualify for self-bonding.
Federal Register / Vol. 62, No. 213 / Tuesday, November 4, 1997 / Rules and Regulations 59573

4. IC 14–34–6–14.3 Release of Bond

From Undisturbed Areas

Indiana proposes to add the following

new section at 14–34–6–14.3.

The director may release the bond, deposit,

or letter of credit covering an area that has

not been disturbed by surface mining

activities. A release under this subsection is

not subject to the public notice and hearing

requirements set forth in sections 7 through

14 of this chapter.

Indiana’s proposed language is similar

to the Federal provision at 30 CFR

800.15(c) where a permittee may request

reduction of the bond amount upon

submission of evidence to the regulatory

authority that the method of operation

or other circumstances reduces the

estimated cost for the regulatory

authority to reclaim the bonded area.

Under this provision, bond adjustments

which involve undisturbed land or

revision of the cost estimate of

reclamation are not considered bond

releases subject to the performance bond

release requirements at 30 CFR 800.40.

Therefore, Indiana’s proposed new

section at 1C 14–34–6–14.3 would not

render Indiana’s statutes less stringent

than SMCRA or less effective than the

Federal regulations.

The Director notes that Indiana’s

reference to the term ‘‘subsection’’ in

the proposed statute should be

‘‘section’’ and is requesting Indiana to

correct this error.

5. IC 14–34–7–4(b) Definition of

Current Liabilities

Indiana proposes to revise IC 14–34–

7–4(b) by making nonsubstantive

language changes, designating the

existing provision as (b)(1), and adding

(b)(2). Subsection (b)(2 specifies that

‘‘current liabilities’’ also include

dividends payable on preferred stock

within one (1) quarter, if declared, or

one (1) year, if a pattern of declaring

dividends each quarter is apparent from

past business practice. Existing IC 14–

34–7–4(b) is substantially the same as

the Federal definition of ‘‘current

liabilities’’ at 30 CFR 800.23(a).

Indiana’s proposed additional language

at (b)(2) would add specificity to the

definition of ‘‘current liabilities’’ and

would not render the State statutes less

stringent than SMCRA or less effective

than the Federal regulations at 30 CFR

800.23(a).

6. IC 14–34–7–8 Information

Requirements for Self-Bonding

Indiana proposes to add a provision at

IC 14–34–7–8(2) that requires

submission of unaudited financial

statements for completed quarters in the

current fiscal year not later than sixty

(60) days after the end of each quarter.

The Federal regulations at 30 CFR

800.23(b)(4) also require submission of

such statements but do not set a specific

time for submittal. Indiana’s proposed

requirement clarifies when the

statements are to be submitted, and it

will not render the State statutes less

stringent than SMCRA or less effective

than the Federal regulations.

C. Revisions to Indiana’s Statutes With

No Corresponding Federal Provisions

1. IC 14–8–2–49.5 and IC 14–34–7–0.6

Definition of Comparative Balance Sheet

Indiana proposes to add a definition

of ‘‘Comparative balance sheet’’ to its

statutes. At IC 14–8–2–49.5, Indiana

proposes to add language as follows.

‘‘Comparative balance sheet’’, for purposes

of IC 14–34–7, has the meaning set forth in

IC 14–34–7–0.6.

At IC 14–34–7–0.6, Indiana proposes

to add the following definition of

‘‘Comparative balance sheet.’’

As used in this chapter, comparative

balance sheet means items accounts from a

number of the operator’s successive yearly

balance sheets arranged side by side in a

single statement.

Although SMCRA and the Federal

regulations do not include a definition

for ‘‘comparative balance sheet,’’ the

term, as defined by Indiana, is a

generally accepted accounting term.

Therefore, the Director is approving

Indiana’s proposed definitions at IC 14–

8–2–49.5 and IC 14–34–7–0.6. The

Director notes that an apparent

typographical error exists in the

proposed definition at IC 14–8–2–49.5,

where ‘‘item accounts’’ should read

‘‘item amounts,’’ and is requesting

Indiana to correct this error.

2. IC 14–8–2–49.6 and IC 14–34–7–0.7

Definition of Comparative Income Statement

Indiana proposes to add a definition

of ‘‘Comparative income statement’’ to

its statutes. At IC 14–8–2–49.6, Indiana

proposes to add language as follows.

‘‘Comparative income statement’’, for

purposes of IC 14–34–7, has the meaning set

forth in IC 14–34–7–0.7.

At IC 14–34–7–0.7, Indiana proposes

to add the following definition of

‘‘Comparative income statement.’’

As used in this chapter comparative

income statement means an operator’s

income statement amounts for a number of

successive yearly periods arranged side by

side in a single statement.

Although SMCRA and the Federal

regulations do not include a definition

for ‘‘comparative income statement,’’

the term, as defined by Indiana, is a

generally accepted accounting term.

Therefore, the Director is approving

Indiana’s proposed definitions at

IC 14–8–2–49.6 and IC 14–34–7–0.7.

3. IC 14–34–5–10 Affected Area Status

Reports

Indiana proposes to amend IC 14–34–

5–10, pertaining to affected area status

reports, by removing time specific

submittal requirements, adding

language authorizing the State to adopt

content and data filing requirements

under its regulations, and making

nonsubstantive wording changes.

There are no counterpart provisions

in the Federal regulations that require

submission of affected area status

reports; however, the States’ proposed

changes at IC 14–34–5–10 are not

inconsistent with SMCRA or less

effective than the Federal regulations.

4. IC 14–34–6–14.6 Duplicate Bond

Coverage/Reclamation Agreements

At IC 14–34–6–14.6, Indiana proposed

to add a new section to its statutes.

Subsection (a) specifies that the

proposed section applies when an

applicant or permittee submits a bond,

deposit, or letter of credit covering an

area that has been disturbed by surface

coal mining activities and is covered by

another bond, deposit, or letter of credit

previously submitted by another

permittee.

Indiana’s proposed provision at

subsection (b) allows release of the

previously submitted bond, deposit, or

letter of credit when the director of

IDNR accepts the bond, deposit, or letter

of credit submitted by the new applicant

or permittee for the previously

disturbed area. The new bond, deposit,

or letter of credit is subject to the

bonding standards of IC 14–34–6,

sections 7 through 14. In its September

13, 1996, letter to Indiana, OSM

expressed concern that as proposed at

IC 14–34–6–14(6), the first bond could

be released prior to issuance of the

second permit, and if for some reason a

permit is never issued to the second

operator, the state could be left with an

unreclaimed and unbonded site, since

the previously submitted bond would

have already been released. In its

October 25, 1996, response to OSM’s

letter, Indiana explained that for the

purposes of bond, the term ‘‘accept’’ at

proposed IC 14–34–6–14.6(b)(1)

coincides with permit approval. The

new bond would not be approved until

the replacement permit was approved

an no previous bond would be

considered for release until that time.

Also, both companies would have to

agree as to the acreage size and location

and an acceptance of liability statement

would have to be received from the new
59574 Federal Register / Vol. 62, No. 213 / Tuesday, November 4, 1997 / Rules and Regulations

permittee. Indiana supported its

explanation by referring to its rule at

310 IAC 12–4–15 which states that the

director of IDNR shall not release

existing performance bonds until the

permittee has submitted and the

director of IDNR has approved

acceptable replacement performance

bonds. Indiana’s proposed provision at

subsection (b) is not inconsistent with

the Federal regulations at 30 CFR Part

800 that require permit areas to be

adequately bonded or the bonding

requirements at 30 CFR 774.17 for

transfer, assignment, or sale of permit

rights. The Director is approving

subsection (b) with the understanding

that Indiana will place conditions on

the permit of the second permittee that

require assumption of the reclamation

obligation of the previous permittee,

that specifically give notice to the

second permittee of the State’s intention

to release the previous permittee’s bond

in reliance on the assumption of

liability by the second permittee, and

that require any surety bond or other

contract securing the reclamation

obligation of the second permittee to

reflect the assumption of liability and

the intent to release the previous bond.

Indiana’s proposed provision at

subsection (c) allows two or more

persons who are applicants or

permittees, when each has filed a bond,

deposit, or letter of credit covering the

same area, to enter into an agreement,

subject to approval by the director of

IDNR, that allocates responsibility

among the persons for the reclamation

of the area. There are no counterpart

provision in the Federal regulations that

address overlapping permit areas that

are double-bonded, but this proposed

provision is not inconsistent with the

Federal regulations at 30 CFR Part 800

that require permit areas, or increments

of permit areas, to be adequately

bonded.

Based on the above discussion, the

Director is approving IC 14–34–6–14.6.

5. IC 14–34–7–4(d)–(g) Conditions for

Self-Bonding

On its own initiative, the State

proposed to revise IC 14–34–7–4 by

making subsection (d) subject to new

subsection (f), which pertains to

requirements for an applicant to meet

industry norms for the financial ratio

tests, and by specifying at subsection (d)

that the qualifying criteria in Section 4

must be met by the applicant at the time

the self-bond is accepted [approved by

the State as the bond].

The State also proposes to expand the

existing standard qualifying criteria at

subsection (d). The State is adding

criteria at (d)(3), (4), (5), and (6) that

require an applicant not to be subject to

any outstanding cessation order issued

under the State program or the Surface

Mining Control and Reclamation Act,

not owe any civil penalties or fees, not

be delinquent in paying penalties or

fees, and not be listed on the Applicant

Violator system (AVS).

The State is adding a provision at

(d)(7)(A), previously codified as

(d)(3)(A), that requires an applicant to

identify the bond rating service

[Moody’s or Standard and Poor’s] that

rated its bond issues. The State is

adding a provision to (d)(7)(B), and (C),

previously codified a (d)(3)(B) and (C),

that requires an applicant to document

its ratio values for the ratio of current

assets to current liabilities and the ratio

of total liabilities net worth for the four

(4) years preceding the application, in

addition to the existing requirement to

demonstrate that the applicant met the

required values for the year [fiscal year]

immediately preceding the application.

The State is adding subsection (e) that

requires the applicant to add the

proposed self-bond amount, excluding

any amount currently accrued for

reclamation that appears on the balance

sheet, to either current liabilities or total

liabilities before calculating the required

financial ratio tests included in

subsection (d)(7)(B) or (d)(7)(C).

The provisions added at subsections

(d)(3), (4), (5), (6), and (7) that address

an applicant’s compliance status are no

less effective than the Federal

regulations. These proposals are

consistent with OSM’s preamble to the

final self-bonding regulations (48 FR

36418, August 10, 1983) where in

response to comments OSM stated that

it ‘‘agrees that the regulatory authority

should consider the operator’s past

history of compliance and patterns of

violation in deciding whether to allow

an operator to self-bond. OSM does not

intend to establish regulations which

would detail how a history of

compliance should be judged, however,

and leaves this to the regulatory

authority who has the final

responsibility to accept or reject an

application to self-bond.’’ The proposed

addition to subsection (d)(7)(A)

requiring the applicant to identify

which rating company rated the

applicant’s bonds would provide the

State with more detailed information

about the bond applicant’s bond rating.

The State proposes to add new

requirements at subsection (d)(8)(C) and

(D), previously subsection (d)(4), that

require an application to include

comparative income statements and

comparative balance sheets for a fiveyear period preceding the application, a

list of liens filed against any assets of

the applicant in any jurisdiction in the

United States for an amount that is more

than 2 percent of the applicant’s net

worth, a list of every action pending

against the applicant, a list of every

unsatisfied judgment rendered against

the applicant within the seven years

preceding the application, and a list of

any petitions or bankruptcy actions

against the applicant. under Indiana’s

proposed action at subsection (g), the

State is requiring details about the listed

liens, actions, and petitions such as

jurisdiction, case number, parties, and

status.

The proposed additional information

that must be submitted with an

application by the applicant or the

applicant’s corporate guarantor at

subsection (d)(8)(C) and (D) is not

inconsistent with the Federal regulation

at 30 CFR 800.23(b)(4)(iii) that allows a

regulatory authority to require

additional unaudited information.

The State is adding subsection (f) that

requires an applicant’s financial ratios

to be at least as favorable as those

reported by Dun and Bradstreet’s report

of ‘‘Industry Norms and Key Business

Ratios.’’

The proposed addition at subsection

(f) requires that an applicant’s key

business ratios [as reported by Dun &

Bradstreet] must be ‘‘at least as favorable

as those listed for the medium

performers in the Dun and Bradstreet

listing of Industry Norms and Key

Business Ratios.’’ This requirements is

in addition to the requirements at

subsections (d)(7)(B) and (C) for

applicants to meet the standard

financial tests of at least 1.2:1 for the

ratio of current assets to current

liabilities and not more than 2.5:1 for

the ratio of total liabilities to net worth.

Comparing an applicant to its industry

norms would provide the State with

information about how the applicant

currently compares with its industry

and can be useful in seeing financial

trends.

In its October 25, 1996, response to

OSM’s letter dated September 13, 1996,

the State explains and reaffirms that the

qualifying criteria of the existing rules at

subsections (d)(7)(B)(ii) and (iii) take

precedence over the proposed

qualifying criteria at subsection (f).

OSM’s letter recognized that the criteria

proposed at subsection (f) are in

addition to the criteria at subsection (d)

but suggested that the State clarify that

the criteria at subsection (d) would be

the true qualifying criteria in any case.

Given the financial criteria at subsection

(d) must be met at a minimum, the

State’s proposal is no less effective than

the Federal regulations.
Federal Register / Vol. 62, No. 213 / Tuesday, November 4, 1997 / Rules and Regulations 59575

OSM recommends that the State

clarify which industry norms the

applicant is required to meet at

subsection (f). The Dun and Bradstreet

industry norms report includes 15

different ratios. In addition, specifying

time periods during which the norms

must be met is important because the

norms are dynamic and are updated

periodically in the Dun and Bradstreet

database. A cautious approach to

comparing an applicant with industry

norms is recommended since the norms

could indicate an overall weak industry.

Based upon the above discussions, the

Director finds that the proposed

revisions to Indiana’s self-bonding

criteria at IC 14–34–7–4(d) through (g)

are not inconsistent with the Federal

requirements for self-bonding at 30 CFR

800.23(b), and the Director is approving

them.

6. IC 14–34–7–4.1 Self-Bonding

Reapplication and Replacement

The State proposes to add

requirements at IC 14–34–7–4.1 for selfbonded permittees to either replace

existing self-bonds in effect on January

1, 1995, with another allowable form of

bond or reapply for self-bonding under

the revised, proposed self-bonding

provisions. If an application is not

accepted under the proposed

provisions, then the self-bond must be

replaced with another allowable form of

bond.

There is no direct Federal counterpart

to the State proposal revisions; however,

that part of the State’s proposal that

pertains to requirements for existing

self-bonded permittees who no longer

meet the criteria is not inconsistent with

30 CFR 800.23(g) which requires a selfbond to be replaced within 90 days of

the permittee becoming aware that it no

longer meets the criteria for selfbonding. Therefore, the Director is

approving this new section.

7. IC 14–34–7–7 Self-Bonding

Indemnity Agreement

The State proposes to add a provision

at section 7(1) that requires all parties to

the indemnity agreement to be liable to

the director of IDNR for the costs of

pursuing forfeiture of any self-bond

posted by the permittee and liable for

the costs of reclamation that are in

excess of the forfeited self-bond amount.

At section 7(6), the State is adding a

requirement that all bonds and

guarantees must be indemnified

corporately and personally by all

principals.

The existing State statute is

substantively the same as the Federal

counterpart regulations that require all

parties bound to the agreement to

execute an indemnity agreement for the

sum of the self-bond. The State statute

and Federal regulations require that the

indemnity agreement be executed by

two authorized corporate officers of all

the parties bound and that the applicant

or corporate guarantor must complete

the approved reclamation plan or pay to

the director of IDNR the amount

necessary to complete the approved

reclamation plan.

The State’s proposed additional

requirements for the self-bonding

indemnity agreement do not have direct

Federal counterpart requirements.

However, the State’s proposed

requirements are not inconsistent with

or less effective than the Federal

regulations at 30 CFR 800.23(e) and 30

CFR 800.50(d)(1), and the Director is

approving the proposed revisions at IC

14–34–7–7. Requiring that all self-bonds

and guarantees be indemnified

corporately and personally by all

principals affords the State additional

protection against nonpayment in the

event of bond forfeiture.

8. IC 14–34–7–7.1 Collaterized SelfBonds

As also discussed in finding No. B.1,

Indiana proposes to revise its program

to allow the use of collateral for

securing self-bonds. The existing State

statute requires that self-bonding

applicants qualify on the basis of

financial criteria at IC 14–34–7–4

without additional collateral. The

Federal regulations at 30 CFR 800.23 do

not contain a counterpart to Indiana’s

revised regulations; however, a similar

proposal was approved for the Wyoming

program on July 25, 1990 (55 CFR

30221).

The State proposes to allow a selfbonding applicant who cannot qualify

on the basis of meeting the financial

criteria or limitations at IC 14–34–7–4 to

offer collateral in the form of real

property, government-backed securities,

and/or personal property. The real

property must be located in Indiana,

and a perfected, first-lien security

interest made in favor of and deposited

with the IDNR. Securities must be

backed by the United States or the state

government, and they must be endorsed

to the order of and placed in the

possession of the director of IDNR. The

personal property must be located

within the State, owned by the operator,

and valued at more than $1 million per

property unit. In addition to the offer of

collateral, the applicant must execute an

indemnity agreement that complies with

IC 14–34–7–7.

For any property collateral offered to

support a self-bond, the property must

be valued at the difference between the

fair market value of the property and

reasonable expenses the IDNR

anticipates incurring in selling the

property. The fair market value must be

determined by an appraiser proposed by

the applicant. A description of the

property and a statement of any liens,

encumbrances, or adverse judgments

imposed on the property and any

pending litigation relating to the

property is also required.

Real property may not include lands

that are in the process of being mined

or reclaimed or lands that are the

subject of a mining application.

Although, the operator may offer land

that has been released from bond.

Securities offered as collateral may

include only securities that meet the

definition of collateral at IC 14–34–7–

0.5. Personal property must be in the

possession of the operator; must be

encumbered; and not include property

already being used as collateral, goods

that the operator sells in the ordinary

course of business, fixtures, or

certificates of deposit that are not

federally insured. Evidence of

ownership of property offered as

collateral must be submitted in

specified forms.

In order to offer personal property

collateral, Indiana requires the applicant

to satisfy the financial requirements in

IC 14–34–7–4(d)(7) (B) and (C), which

are two of the standard financial tests in

the Indiana program. This proposal is

similar to the approved Wyoming selfbonding program except that in the

Wyoming program personal property

collateral is only accepted when the

applicant cannot meet the standard tests

but can meet an alternative set of

financial tests.

If personal property is accepted as

collateral, quarterly and annual

maintenance reports from the applicant

are required. The director of IDNR may

also require quarterly or annual

inspections of the personal property.

The director of IDNR shall require

possession of the personal property or a

mortgage or security agreement

executed by the applicant with the right

and power to sell or otherwise dispose

of the property so as to ensure

reclamation. While in possession of the

IDNR, any income received from the

collateral shall be remitted to the

applicant. An applicant may substitute

other property for any property accepted

and held as collateral under specified

conditions. If collateral is posted to

support a self-bond, the applicant shall

notify all persons that have an interest

in the collateral and provide copies of

the notices to director of IDNR.

In its October 13, 1996, letter to

Indiana, OSM expressed concern
59576 Federal Register / Vol. 62, No. 213 / Tuesday, November 4, 1997 / Rules and Regulations

regarding three provisions in the State’s

collateral proposal that appeared to be

less effective than the Federal

regulations at 30 CFR 800.21 for

collateral bonding.

(1) To be no less effective than the

Federal regulations, the State needs to

require that the market value of the

individual or combined collateral

(adjusted by a margin of value for the

State’s cost of liquidation) equals or

exceeds the required bond amount

under the self-bond indemnity

agreement. In its October 25, 1996,

response, the State explained that it

intended to implement its proposed

statute at section 7.1(b)(1) so that the

cost of liquidating the property used as

collateral will be deducted from the

market value when determining the

bonding value of the collateral. Given

that the State will implement the

proposed section to require that the

collateral value, less liquidation costs,

equal the required bond amount, this

portion of the proposal is consistent

with the Federal requirements at 30 CFR

800.21 and therefore no less effective

than the Federal regulations.

(2) To be no less effective than the

Federal regulations for real property

collateral at 30 CFR 800.21(c)(2), the

State must require that real property be

appraised by an independent certified

appraiser. In its response to OSM’s

concerns, the State indicated that while

not stated, it intends to only accept

appraisers who are ‘‘professionally

qualified.’’ According to the Indiana

Real Estate Appraisal Licensurer and

Certification Board, Indiana statutes at

IC 25–34.1–8–10 requires that

appraisers in Indiana be licensed and

certified. On September 22, 1997

(Administrative Record No. IND–1591),

OSM discussed this issue with Indiana.

Indiana stated that coal operators are

required to comply with all Indiana

rules and statutes, and they will be

required to comply with IC 25–34.1–8–

10. Therefore, Indiana’s proposal is

consistent with SMCRA and no less

effective than the Federal regulations at

30 CFR 800.21(c)(2).

(3) The State’s proposed statute at

subsection (b)(2) requires that real

property liens and encumbrances be

disclosed in the application. This

implies that the State has discretion to

accept encumbered real property. In its

letter, OSM stated that to be no less

effective than the Federal regulations on

real property collateral, the State must

require that any real property accepted

as collateral be unencumbered. In its

response to this concern, the State

explained that it does not intend to

accept property that is encumbered and

that it included the disclosure

requirement as an aid to learning of

liens and other encumbrances that

might not otherwise be apparent (so as

to prohibit acceptance of encumbered

property). While the language is not

clear in this regard, the State indicated

that it will implement this proposal so

that only unencumbered property is

acceptable as collateral. Therefore, the

proposal is consistent with SMCRA and

no less effective than the Federal

regulations at 30 CFR 800.21(c).

The Director finds that Indiana’s

proposed provisions at IC 14–34–7–7.1

are not inconsistent with the Federal

regulations at 30 CFR 800.23 concerning

self-bonding and are no less effective

than the Federal regulations at 30 CFR

800.21 concerning collateral bonds.

Therefore, the Director is approving

Indiana’s proposed provisions at IC 14–

34–7–7.1.

9. IC 14–34–7–10 Self-Bonding Report

Requirements

At IC 14–34–7–10, Indiana proposes

to add a new section to its statutes to

require that self-bonding applicants

provide the director of IDNR with an

independent public accounting

consultant’s report if requested. This is

in addition to the financial statements

and a report prepared by an

independent certified public accountant

that is required under IC 14–34–7–

4(d)(8) and IC 14–34–7–8. The report

shall be provided within 90 days after

the applicant is notified that the report

is required. The consultant must verify

that the financial information required

under IC 14–34–7–4 was prepared in

accordance with generally accepted

accounting principles and that the

accounting principles were applied

consistently for each year of the period

for which the information is submitted.

The consultant must also state the

amount and reason for any restatement

of the financial information that is

necessary to meet the consistency

requirement. Finally, the consultant

must state whether any information

reviewed would lead him to conclude

that the applicant would not meet the

requirements of IC 14–34–7–4 at the end

of each of the three fiscal years ending

after the month the report is completed.

This report may also be required after

the applicant’s self-bond is accepted,

but not more than once every three

years unless the consultant cannot

project the applicant’s ability to meet

the self-bonding financial criteria for

each of the three fiscal years. If the

consultant is unable to conclude that

the applicant would meet the

requirements of IC 14–34–7–4 for each

of the three fiscal years, the applicant

must submit an updated report

annually. If the applicant fails to submit

a report, the director of IDNR shall

refuse to accept the self-bond until the

applicant files the report. If a permittee

who has posted a self-bond fails to

submit a report when required by the

director of IDNR, the permittee may be

required to post an alternate form of

bond.

In its letter of October 30, 1996

(Administrative Record No. IND–1545),

Indiana indicated that the purpose of

the option of financial projections is

intended to give the director of IDNR a

greater understanding for any future

problems that may be anticipated that

could influence the applicant’s financial

stability and is viewed as another tool

for assessing risk.

There are no Federal counterpart

provisions for a qualified independent

public accounting consultant report that

projects an applicant’s future ability to

meet self-bonding requirements.

However, the State’s proposed

provisions are not inconsistent with the

Federal regulations at 30 CFR

800.23(b)(4)(i) that require that an

applicant’s financial statements be

audited by an independent certified

public accountant with no adverse

opinion or 30 CFR 800.23(f) that allow

regulatory authorities to require updated

financial information and independent

certified public accountants’ reports

annually. Therefore, considering that

the provisions in IC 14–34–7–10 are in

addition to the State’s counterparts to 30

CFR 800.23(b)(4)(i) and (f), the Director

is approving them.

10. IC 14–34–7–11 Self-Bond Coverage

Requirements

Indiana proposes to add provisions

requiring permit increments that are

self-bonded to be 100 percent selfbonded. For example, bond coverage of

a permit increment could not consist of

a combination of a surety bond and a

self-bond. This is not inconsistent with

SMCRA or the Federal regulations at 30

CFR Part 800 which allow permit

increment bonding and require the

regulatory authority to prescribe by

regulation terms and conditions for

performance bonds, including selfbonds.

The State also proposes to allow selfbond coverage on areas where as of July

1, 1995, grading has been deferred, or

the approved deferral extended.

However, areas where grading was

deferred after July 1, 1995, may not be

bonded by self-bonds or the Indiana

bond pool. The State proposes to

remove the self-bonding and bond pool

option from companies that have been

given approval to defer grading of an

area in order to assure more long-term
Federal Register / Vol. 62, No. 213 / Tuesday, November 4, 1997 / Rules and Regulations 59577

certainty by requiring other forms of

bond such as corporate surety bonds for

grading-deferred areas. There are no

Federal counterpart regulations for bond

coverage of grading deferral areas. The

State’s bonding provisions at this

section are not inconsistent with

SMCRA or the Federal regulations at 30

CFR 800.23 on self-bonding in that selfbonding is a discretionary bonding

program intended for financially strong

companies that are in compliance with

the statute, permit, and regulations.

Therefore, the Director approves

Indiana’s proposed statute at IC 14–34–

7–11.

11. IC 14–34–7–12 Self-Bond Phase I

Grading Release Requirements

Indiana proposes additions to the selfbonding statutes that restrict the use of

self-bonding when an area requires

Phase I reclamation or is eligible for a

Phase I grading release but the permittee

has not applied for the release before the

‘‘second November 1 after the year in

which the coal was removed from the

site covered by the self-bond.’’ If this

occurs, or if a release application is filed

within the required time frame but not

approved, then the permittee must

replace the self-bond with another form

of bond within 90 days. Permittees must

also submit annual reports of acres

under self-bond that have been affected

and reclaimed.

Indiana proposes to exempt acreage

and structures used to facilitate active

mining and reclamation operations from

the requirements of this section.

The State’s proposal restricts the use

of self-bonding for areas that have been

used for fly or bottom ash disposal, flue

gas byproducts, or coal processing

wastes to 10 years after disturbance or

after the acceptance of the self-bond,

whichever is later. An alternative form

of bond must be posted for the area

within 90 days of its becoming

ineligible for self-bonding.

If Indiana determines that an area is

no longer eligible for self-bonding and

an alternative form of bond is posted,

the area is never again eligible for selfbonding and may not be bonded by

Indiana’s surface coal mine reclamation

bond pool.

There are no direct counterpart

provisions in SMCRA or the Federal

regulations. The Director finds that the

State’s proposal is not inconsistent with

SMCRA or the Federal regulations at 30

CFR 800.23 that allow regulatory

authorities to accept self-bonds, and she

is approving IC 14–34–7–12.

12. IC 14–34–7–13

Indiana proposes to add the following

new section at IC 14–34–7–13.

For purposes of IC 1–1–1–8, if the

amendments to IC 14–34–7–1, as amended by

SEA 125–1995, are held invalid or otherwise

unenforceable, the other amendments to IC

14–34–7 made by SEA 125–1995 are also

void.

There are no counterparts to this

proposal in SMCRA or the Federal

regulations. However, as discussed in

the findings above, the proposed

amendments to IC 14–34–7 have no

direct Federal counterparts. Therefore,

the proposal to declare them void under

the circumstances specified would not

render the Indiana program less

stringent than SMCRA or less effective

than the Federal regulations. However,

in accordance with 30 CFR 732.17(b)(3),

Indiana must notify OSM of any actions

it takes because of IC 14–34–7–13 that

would effect or change any of the

proposals at IC 14–34–7 that are being

approved in this document.

IV. Summary and Disposition of

Comments

Public Comments

The Director solicited public

comments and provided an opportunity

for a public hearing on the proposed

amendment. Comments were received

from the Indiana Coal Council and the

National Coal Association. These

comments have been addressed in

finding No. III.B.3. Because no one

requested an opportunity to speak at a

public hearing, no hearing was held.

Federal Agency Comments

Pursuant to 30 CFR 732.17(h)(11)(i),

the Director solicited comments on the

proposed amendment from various

Federal agencies with an actual or

potential interest in the Indiana

program. No Federal agencies

responded.

Environmental Protection Agency (EPA)

Pursuant to 30 CFR 732.17(h)(11)(ii),

OSM is required to obtain the written

concurrence of the EPA with respect to

those provisions of the proposed

program amendment that relate to air or

water quality standards promulgated

under the authority of the Clean Water

Act (33 U.S.C. 1251 et seq.) or the Clean

Air Act (12 U.S.C. 7401 et seq.).

None of the revisions that Indiana

proposed to make in its amendment

pertain to air or water quality standards.

Therefore, OSM did not request the

EPA’s concurrence.

Pursuant to 732.17(h)(11)(i), OSM

solicited comments on the proposed

amendment from EPA (Administrative

Record No. IND–1515). It did not

respond to OSM’s request.

Historical Preservation Officer (SHPO)

and the Advisory Council on Historic

Preservation (ACHP)

Pursuant to 30 CFR 732.17(h)(4), OSM

is required to solicit comments on

proposed amendments which may have

an effect on historic properties from the

SHPO and ACHP. OSM solicited

comments on the proposed amendment

from the SHPO and ACHP

(Administrative Record No. IND–1515).

Neither SHPO nor ACHP responded to

OSM’s request.

V. Director’s Decision

Based on the above findings, the

Director is approving with certain

exceptions, the proposed amendment as

submitted by Indiana on September 11,

1995.

The Director is not approving, as

discussed in finding No. B.3, the new

language Indiana is proposing to add to

its definition of ‘‘liabilities’’ at IC 14–

34–7–1 that would allow companies to

exclude FAS 106 obligations from

liabilities for the purpose of applying for

self-bonding. Furthermore, the Director

is requiring Indiana to remove this

language and to notify OSM when the

removal is completed.

The Director is approving, as

discussed in finding No. C.4, IC 14–34–

6–14.6(b) with the understanding that

Indiana will place conditions on the

permit of the second permittee that

require assumption of the reclamation

obligation of the previous permittee,

that specifically give notice to the

second permittee of the State’s intention

to release the previous permittee’s bond

in reliance on the assumption of

liability by the second permittee, and

that require any surety bond or other

contract securing the reclamation

obligation of the second permittee to

reflect the assumption of liability and

the intent to release the previous bond.

The Director notes, as discussed in

finding No. B.4, that Indiana’s reference

to the term ‘‘subsection’’ in its statute at

IC 14–34–6–14.3 should be ‘‘section’’

and, as discussed in finding No. C.1,

Indiana’s reference to ‘‘item accounts’’

in its definition at IC 14–34–7–0.6

should be ‘‘item amounts.’’

The Federal regulations at 30 CFR

Part 914, codifying decisions concerning

the Indiana program, are being amended

to implement this decision. This final

rule is being made effective immediately

to expedite the State program

amendment process and to encourage

States to bring their programs into

conformity with the Federal standards

without undue delay. Consistency of

State and Federal standards is required

by SMCRA.
59578 Federal Register / Vol. 62, No. 213 / Tuesday, November 4, 1997 / Rules and Regulations

Effect of Director’s Decision

Section 503 of SMCRA provides that

a State may not exercise jurisdiction

under SMCRA unless the State program

is approved by the Secretary. Similarly,

30 CFR 732.17(a) requires that any

alteration of an approved State program

be submitted to OSM for review as a

program amendment. The Federal

regulations at 30 CFR 732.17(g) prohibit

any unilateral changes to approved State

programs. In the oversight of the Indiana

program, the Director will recognize

only the statutes, regulations and other

materials approved by OSM, together

with any consistent implementing

policies, directives and other materials,

and will require the enforcement by

Indiana of only such provisions.

VI. Procedural Determinations

Executive Order 12866

This rule is exempted from review by

the Office of Management and Budget

(OMB) under Executive Order 12866

(Regulatory Planning and Review).

Executive Order 12988

The Department of the Interior has

conducted the reviews required by

section 3 of Executive Order 12988

(Civil Justice Reform) and has

determined that, to the extent allowed

by law, this rule meets the applicable

standards of subsections (a) and (b) of

that section. However, these standards

are not applicable to the actual language

of State regulatory programs and

program amendments since each such

program is drafted and promulgated by

a specific State, not by OSM. Under

sections 503 and 505 of SMCRA (30

U.S.C. 1253 and 1255) and 30 CFR

730.11, 732.15, and 732.17(h)(10),

decisions on proposed State regulatory

programs and program amendments

submitted by the States must be based

solely on a determination of whether the

submittal is consistent with SMCRA and

its implementing Federal regulations

and whether the other requirements of

30 CFR Parts 730, 731, and 732 have

been met.

National Environmental Policy Act

No environmental impact statement is

required for this rule since section

702(d) of SMCRA (30 U.S.C. 1292(d))

provides that agency decisions on

proposed State regulatory program

provisions do not constitute major

Federal actions within the meaning of

section 102(2)(C) of the National

Environmental Policy Act (42 U.S.C.

4332(2)(C)).

Paperwork Reduction Act

This rule does not contain

information collection requirements that

require approval by OMB under the

Paperwork Reduction Act (44 U.S.C.

3507 et seq.).

Regulatory Flexibility Act

The Department of the Interior has

determined that this rule will not have

a significant economic impact on a

substantial number of small entities

under the Regulatory Flexibility Act (5

U.S.C. 601 et seq.). The State submittal

which is the subject of this rule is based

upon corresponding Federal regulations

for which an economic analysis was

prepared and certification made that

such regulations would not have a

significant economic effect upon a

substantial number of small entities.

Accordingly, this rule will ensure that

existing requirements previously

promulgated by OSM will be

implemented by the State. In making the

determination as to whether this rule

would have a significant economic

impact, the Department relied upon the

data and assumptions for the

corresponding Federal regulations.

Unfunded Mandates

OSM has determined and certifies

pursuant to the Unfunded Mandates

Reform Act (2 U.S.C. 1502 et seq.) that

this rule will not impose a cost of $100

million or more in any given year on

local, state, or tribal governments or

private entities.

List of Subjects in 30 CFR Part 914

Intergovernmental relations, Surface

mining, Underground mining.

Dated: October 20, 1997.

Brent Wahlquist,

Regional Director, Mid-Continent Regional

Coordinating Center.

For the reasons set out in the

preamble, Title 30, Chapter VII,

Subchapter T of the Code of Federal

Regulations is amended as set forth

below:

PART 914—INDIANA

1. The authority citation for Part 914

continues to read as follows:

Authority: 30 U.S.C. 1201 et seq.

2. Section 914.15 is amended in the

table by adding a new entry in

chronological order by ‘‘Date of Final

Publication’’ to read as follows:

§ 914.15 Approval of Indiana regulatory

program amendments.

* * * * *

Original amendment submission date Date of final publication Citation/description

* * * * * * *

September 11, 1995 ........... November 4, 1997 ............. IC 14–8–2–42.5, –49.5, –49.6, –274.5; 14–34–5–10; 14–34–6–14.3, –14.6; 14–34–

7–0.5, –0.6, –0.7, –2.5, –4 (b), (d) through (g), –4.1, –5, –7, –7.1, –8, –9, –10,

–11, –12, –13.

[FR Doc. 97–29132 Filed 11–3–97; 8:45 am]

BILLING CODE 4310–05–M

DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 311

OSD Privacy Program

AGENCY: Office of the Secretary, DOD.

ACTION: Final rule.

SUMMARY: The Office of the Secretary of

Defense is exempting a system of

records identified as DUSP 11, entitled

POW/Missing Personnel Office Files.

The exemption is needed to protect

information properly classified under

E.O. 12958, Classified National Security

Information.

EFFECTIVE DATE: October 1, 1997.

FOR FURTHER INFORMATION CONTACT: Mr.

David Bosworth at (703) 695–0970.