OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Joyce Zweben Scall Page 1 of 4

COALEX STATE COMPARISON REPORT - 306

November 1994

Steven Lachman, Assistant Counsel

Office of Chief Counsel

Pennsylvania Department of Environmental Resources

Office of Chief Counsel

400 Waterfront Drive

Pittsburgh, Pennsylvania 15222

TOPIC: PROCEDURES FOR FORFEITURE OF SURETY BONDS

INQUIRY: Pennsylvania recently amended its SMCRA to require bond sureties to pay 

the amount of a forfeited bond within 30 days of receiving notice of the forfeiture. One 

challenger to this amendment argued that the requirement of payment prior to a hearing 

is a deprivation of due process, prohibited by the 14th Amendment. This case was 

settled, but additional challenges are anticipated. Do any other states require the 

payment of forfeited surety bonds prior to a hearing on the merits of the forfeiture? If 

yes, have there been any challenges to the legislation and what was the outcome? 

What information on the federal regulations is available? 

SEARCH RESULTS: A telephone survey of IMCC states was conducted. The states 

were asked whether they required payment of the bonds prior to a hearing on the merits 

of the forfeiture. For some states, a description of Pennsylvania's procedures for 

forfeiting surety bonds was provided and a comparison of procedures requested. 

1. Pennsylvania site: 52 PS Sec. 1396.4(h) 

2. SMCRA site: 525(d) 

3. Federal regulations site: 30 CFR Sec. 800.50 (formerly Sec. 808.11)

A description of Pennsylvania's procedure appears below, followed by the results of the 

survey. Copies of several state code sections, an OSM Directive, Federal Register 

preambles to federal regulations and a COALEX State Inquiry Report are attached for 

your review. 

PENNSYLVANIA'S PROCEDURE

Procedures for revoking bond are separate from procedures for forfeiture of bonds. 

When a final determination is made to revoke a permit, both the permittee and the 

surety are notified. Notice of intent to forfeit bonds is then sent to the permittee and 
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Joyce Zweben Scall Page 2 of 4

surety indicating that the permittee has 30 days to correct site conditions; both the 

permittee and the surety have the right to request a conference. If the site conditions 

are not corrected, the state issues a notice of forfeiture to the permittee and the surety 

with a demand letter requesting payment of the forfeited bonds within 30 days. If the 

surety does not pay within that time frame, the state may move to collect. The surety 

has the right to file an appeal of the bond forfeiture with the Pennsylvania Environmental 

Hearing Board.

ALABAMA 

Alabama does not require payment of forfeited bonds prior to a hearing on the merits. 

There have been few problems with sureties on forfeited bonds.

ARKANSAS

Arkansas does not require payment of forfeited bonds prior to a hearing on the merits.

ILLINOIS

The surety is not required to pay on the forfeited bonds prior to getting a hearing. A 

surety can appeal decisions on bond forfeiture but not decisions on permit revocation.

INDIANA

Once a determination is made to revoke a permit, the permittee and surety are sent a 

demand letter stating that the permittee has 30 days to complete reclamation or the 

bond is forfeited. During this period both the permittee and surety have several options: 

1. The permittee can complete the reclamation. 

2. A settlement agreement may be concluded with the surety whereby the surety 

completes the reclamation with the understanding that failure to perform the all 

required work will result in demand for the amount of the bonds.

3. The surety can request a hearing on the forfeiture (but not on the earlier permit 

revocation).

4. The bonds are forfeited.

There has been little litigation on bond forfeitures. 

KENTUCKY

Two and a half years ago, a reclamation procedure was instituted which resulted in a 

reduction of surety challenges to bond forfeiture. Sureties are sent copies of violations. 

If "failure-to-abate" Cessation Orders (COs) are not contested and permits are to be 

revoked, the state attorneys begin the process of seeking bond forfeiture. A letter is sent 

to the surety giving them 30 days to declare if they will exercise the right to complete the 
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Joyce Zweben Scall Page 3 of 4

reclamation plan in lieu of forfeiture. If the surety wishes to perform the reclamation, a 

reclamation agreement is completed, or the surety may decide to pay. At the end of 30 

days, if the surety has not responded, a demand letter is sent requesting the forfeited 

amount. 

In some situations where permittees have challenged violations and requested 

hearings, the regulatory authority may request that the hearing officer revoke the permit 

and forfeit the bond. In this circumstance, a surety may challenge bond forfeiture at a 

hearing.

MISSOURI

At present, permit revocation and bond forfeiture proceedings are considered at the 

same time. While the surety is notified regarding possible permit revocation and bond 

forfeiture and may participate in the hearing, only the permittee, not the surety, has 

appeal rights. 

Missouri is considering amending its regulations. One possible change may be to send 

the surety a demand letter after the hearing to revoke a permit in order to give the 

surety an opportunity to negotiate with the regulatory authority.

OHIO 

In Ohio, sureties are notified of NOVs and COs; this serves as a "pre-notification" of

impending bond forfeiture. Permit revocation and bond forfeiture can occur at separate 

proceedings or at the same time. Bond forfeiture orders are written to both the permittee 

and the surety. The permittee is informed that their right to reclaim is forfeited; the 

surety is informed that the permittee has forfeited the right reclaim and the surety has 

60 days to determine if it will complete the reclamation work. If the surety decides to 

conduct the reclamation, an agreement is completed with the regulatory authority; if the 

surety does not decide to reclaim, the regulatory authority demands forfeiture. The 

surety has the right to appeal the bond forfeiture, but not the permit revocation.

VIRGINIA 

A notice of intent to forfeit bond is sent to both the permittee and the surety. The 

permittee has 30 days to correct site conditions. If the conditions are not corrected, a 

notice of forfeiture is sent to the permittee and the surety with a letter requesting 

payment on the bond. However, a hold is put on collection if the notice of forfeiture is 

appealed by the surety.

WEST VIRGINIA

The current regulations call for a letter to be sent to the permittee with notification that 

the permit will be revoked in 30 days; a copy is sent to the surety. If the permittee does 
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Joyce Zweben Scall Page 4 of 4

not request a hearing, a final revocation notice is sent to the permittee and the surety. 

The final notice provides the surety 14 days to determine if it will perform the 

reclamation or pay.

A new law, passed by the state legislature to take effect in July, 1994, calls for the 

forfeited bond to be paid to the special state reclamation fund when a permit is revoked. 

The special reclamation fund will be used to pay for reclamation. Any moneys remaining 

from a bond after reclamation of the originally permitted area is completed will remain in 

the reclamation fund rather than be returned to the surety. Industry is preparing to sue 

West Virginia because the state changed its regulations, amending its SMCRA 

program, prior to approval from OSM. [NOTE: A copy of the statute section is attached.]

ATTACHMENTS

A. SMCRA Section 525(d) 

B. State Code Sections 

1. Pennsylvania: 52 P.S. Section 1396.4(h) (1994). 

2. W. Va. Code Section 22-3-17 (1994). 

3. Colorado: Reg. Sec. 3.04.1 (1982). 

4. Indiana: 310 IAC 12-4-17 (1983). 

5. Ohio: 

a. Reg. Sec. 1501:13-7-06 (1989). 

b. Statute Sec. 1513.18 (1986).

6. Virginia: Reg. Sec. 480-03-19.800.50 (1985).

C. OSM Directive, Subject No. REG-10, Transmittal No. 339, "Bond Forfeiture" 

(Issued date: 5/26/87). 

D. Federal Register Notices 

1. 44 FR 14902 (March 13, 1979). 

a. Part 808. 

b. Part 805.

2. 46 FR 16276 (March 12, 1981). Performance bonding. 

3. 46 FR 42082 (August 19, 1981). Performance bonding. 

4. 46 FR 45082 (September 9, 1981). Performance bonding. 

5. 48 FR 32932 (July 19, 1983). Parts 800 and 808.

E. COALEX State Inquiry Report - 146 , "Surety's right to a hearing in bond 

forfeiture proceedings" (1990). Enclosed with one attachment: 

1. ALLIED FIDELITY INSURANCE CO. v ENVIRONMENTAL QUALITY 

COUNCIL, 753 P 2d 1038 (Wyoming 1988).