OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Michael Tucker Page 1 of 2

COALEX STATE INQUIRY REPORT - 5

July 19, 1984

Anthony F. Abar, Director

Maryland Bureau of Mines

69 Hill Street

Frostburg, Maryland 21532

TOPIC: BOND FORFEITURE

INQUIRY: Search states for cases where regulatory authority has forfeited bond which is in 

excess of cost of reclamation. Can the state forfeit the total amount of the bond even though it is 

in an amount greater than the cost of reclamation or must part of it be returned to the permittee 

or surety company?

BACKGROUND: Mr. Abar has information on a Kentucky case where the lower court agreed 

with the defendant; then the Kentucky Court of Appeals affirmed the decision, stating that the 

Department of Natural Resources could forfeit the total amount.

SEARCH RESULTS:

A LEXIS search was performed to locate the case in issue, AMERICAN DRUGGISTS 

INSURANCE CO. v COMMONWEALTH OF KENTUCKY DEPARTMENT FOR NATURAL 

RESOURCES AND ENVIRONMENTAL PROTECTION AND MIDEASTERN CONSTRUCTION 

AND COAL CO., No. 83-CA-807-MR, slip op. (Ky Ct App November 11, 1983).

In AMERICAN DRUGGIST, the Kentucky Court of Appeals affirmed a lower court decision 

granting forfeiture of the entire bonded sum. The court, citing the language of KRS 350.060(14), 

stated that the bonded amount was a "penal" sum, not merely a performance bond, and held 

that failure to perform all reclamation requirements resulted in total bond forfeiture. No other 

cases were located which referred to this decision.

A search was conducted of COALEX Federal Register notices and of the Legislative History 

File. No documents concerning excess bond forfeiture or penal sums were identified. In a 

review of the Maryland statutes for surface mining reclamation, there was no language located 

specifically indicating that reclamation bonds in Maryland were intended to be penal in nature.

A follow-up search was made of federal and state cases in LEXIS. In a similar tone to that of the 

Kentucky Court of Appeals, a recent Pennsylvania court ruled that reclamation bonds under that 

state's surface mining act are intended to be penal, and that the Pennsylvania Department of 

Environmental Resources was not required to prove damages actually sustained in order to 

collect on the bonds. (MORCOAL CO. v COMMONWEALTH OF PENNSYLVANIA, 

DEPARTMENT OF ENVIRONMENTAL RESOURCES, 459 A 2d 1303 (Pa Commw Ct 1983)) 

On the other hand, in GENERAL INSURANCE CO. OF AMERICA, et al. v CITY OF 

COLORADO SPRINGS, 638 P 2d 752 (1981), the Supreme Court of Colorado reversed a 

Colorado Court of Appeals decision and held that a surety bond issued pursuant to a municipal 

ordinance was not a penalty bond, and that nonperformance by the developer did not entitle the 

city to recover the full amount irrespective of damages. No federal cases were located.
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Michael Tucker Page 2 of 2

ATTACHMENTS:

A. AMERICAN DRUGGISTS INSURANCE CO. v COMMONWEALTH OF KENTUCKY 

DEPARTMENT FOR NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION 

AND MIDEASTERN CONSTRUCTION AND COAL CO., No. 83-CA-807-MR, slip op. (Ky Ct 

App November 11, 1983).

B. KRS 350-060(14).

C. MORCOAL CO. v COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF 

ENVIRONMENTAL RESOURCES, 459 A 2d 1303 (Pa Commw Ct 1983).

D. GENERAL INSURANCE CO. OF AMERICA, et al. v CITY OF COLORADO SPRINGS, 638 

P 2d 752 (1981).