Subject: 

U· S· DEPARTMENT OF THE INTERIOR su~:ou:nbcr: 

OFFICE OF SURFACE MININGr.:----:--:~~---1 RECLAMATION AND ENFORCEMENT T~tta! Number: 

DIRECTIVES SYSTEM 

./7Bo.nd Forfeiture 

Data: 5/~6/87 

Approval: '-.. /. f(J -( 7.. f::'::Lu,. I Tltle: Director 

I 

1. PURPOSE. The purpose of this directive is to provide 

guidance for the forfeiture of performance bonds held for 

surface coal mining operations on Federal lands, Indian lands 

and in States with Federal programs. This directive is not 

intended to apply to State regulatory authorities (SRA'sl; 

however, it does provide guidance where there is a 

Federal-State cooperative agreement or wherever OSMRE is a co~obligee of a surety, collateral or self-bond. The directive 

is intended to provide general procedural and policy guidance - which may be supplemented by Field Directives to further define 

organizational involvement in the bond forfeiture process. 

2. DEFINITIONS. 

a. Cooperative A~reement. - An agreement pursuant to 

Section 5Z3(c) of theurface Mining Control and Reclamation 

Act of 1977 (SMCRA) and Subchapter D of Title 30 of the Code of 

Federal Regulations (the Federal Lands Program) which allows 

any State with an approved program to regulate surface coal 

mining and reclamation operations on Federal lands within that 

State. 

b. Federal Program. -A program established by the 

Secretary pursuant to Section 504 of SMCRA to regulate coal 

exploration and surface coal mining and reclamation operations 

on non-Federal and non-Indian lands within a State. 

c. Bond Forfeiture. -Actions taken by the obligee to 

collect from the surety, the issuer of collateral or the 

guarantor of any self-bond, the amount of the performance bond 

upon failure of the permittee to perform the condi~ions for 

which the bond was given. Bond forfeiture begins with 

notification of the surety and principal and ends with the 

collection of the bond amount or an agreement with the surety 

or other party to satisfactorily perform the actions for which 

the bond was issued. 

d. Performance Bond. - A surety bond, collateral bond, 

self-bond, or a combination thereof, made payable to the 

regulatory authority and conditioned upon the performance of 

all the appropriate requirements of SMCRA, a State or Federal 

regulatory program, the Federal lands program, the permit and 

the approved reclamation plan. 
e~ Surety. • One who promises to pay money or perform other acts in the event a, principal/permi·ttee fails to perform 

all the appropriate requirements of SMCRA, a State or Federal 

regulatory program, or the permit, lqcluding completion of the 

approved reclamation plan. A surety is usually a corporation 

licensed to do busfness as a surety in the state where the 

operation 1s located. 

f. Principa1. -The person or corporation ultimately 

liabie, whose performance of actions under the permit is 

guaranteed Jy the surety. 

g. Oblt~or. -Person who· promises to perform some 

obligation un er the bond. 

h. Obligee. The party to whom a bond Is given. 

3. POLICY/PROCEOURES. 

a. Policy. • It is OSMRE's pol icy that: 

(1) 3ond forfeiture will be used whenever the 

appropriate official determines that other enforcement actions 

have not been or will not be effective to ensure compliance 

with SMCRA. The bond forfeiture process may be initiated at 

the discretion of the appropriate official who shall consider 

the individual circumstances of the permit and the 

reasonableness of pursuing other enforce~ent actions~ Bond 

forfeiture is the ultimate means to obtain reclamation. 

(2) The bonq forfeiture process may be initiated when 

a permittee fails to conduct the approved rec1amatlon, fails to 

abate a violation or ff the terms and conditions of the permit 

are violated. 

(3} The bond forfeiture process and reclamation of 

the affected mining sites will be completed in a timely manner, 

as described in the procedures of this directive and any related field directives. 

(4) Reclamation performed by the permittee, surety or 

other party In lieu of bond collection shall be in accordance 

with the approved reclamation plan. 

{5) When the amount of the performance bond has been 

collected and appears to be insufficient, OSMRE may take action 

to initiate reclamation wfth funds available pursuant to 

Section c. (7) of this directive, and take appropriate actions 

to collect the additional casts of reclamation from the 

Permittee. 

• 
(6) When the amount of the performance bond has been 

collected but is insufficient to do the reclamation in 

accordance with the approved reclamation plan, OSMRE may implement an alternative reclamation plan giving consideration 

to the surface owner's land use plans. 

(7) OSMRE cannot assign its claims against the 

principal/permittee or otherwise subrogate the government's interests in order to collect the bond from the surety. When 

collecting a bond OSMRE officials should not sign any releases 

or "settlement agreements" which assign OSMRE's claims against the principal. 

(8) After the bond amount is paid by the surety, OSMRE can agree to a total release of the surety against all 

future claims on bond. 

(9) The permittee shall be provided the right to 

appeal the notice of bond forfeiture to the Office of Hearings and Appeals under 43 CFR 4.1280. 

b. Responsibilities. 

(1 l Director. The Director of OSMRE provides policy guidance and approves procedures for bond forfeiture. 

(2) Deputy Director for Operations and Technical 

Services (OTS). The Deputy Director of oTs implements these 

procedures and assures consistent application by Field 

Operations, including approval of any field directives 

implementing this directive. 

(3) Assistant Director for Field Operations (ADFO). The Assistant Directors for Field Operations assure the 

collection of forfeited bond funds and completion of 

reclamation. This includes: coordinating legal and technical 

aspects of bond collection with the appropriate Field Office 

Director and Field Solicitor; consulting with State regulatory authorities, Federal land management agencies and surface 

owners; monitoring contracts for the completion of reclamation 

activities; and approving proposed forfeiture actions and 

subsequent reclamation work conducted on Federal lands in 

States with cooperative agreements. The ADFO's are also 

responsible for developing and implementing any policy field 

directives under this directive. 

(4) Field Office Director (FOD). The Field Office 

Directors initiate bond forfeiture procedures and provide assistance to the Assistant Directors for Field Operations. FOD's are also responsible for developing and implementing procedural directives on bond forfeiture • 

• 

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e. Procedures When OSMRE is the Regulatory Authority. 

(1) When to Initiate the Bond Forfeiture Process. 

The bond forfeiture process can begin under any of the 

following circumstances: 

(a) 30 days after a Failure To Abate Cessation 

Order (FTACO) has been issued and abatement has not occurred. 

(b) 120 days prior to the expiration of a permit 

on which there has been a temporary cessation of production and 

no application for renewal has been received. 

(e) After a permit has been revoked and the 

reclamation is not completed within the period specified by the 

revocation decision. 

(d) Whenever a permittee has filed for 

bankruptcy or a creditor has filed a claim against the 

collateral posted by a permittee. 

(e) 30 calendar days prior to bond expiration if 

the permittee fails to file a new bond. 

(f) After all other enforcement actions have 

been exhausted to resolve a compliance problem. 

(2) How to Initiate the Bon~ Forfeiture Process. The 

forfeiture process is initiated by an inspector or any other 

OSMRE official, by preparing a Request to Begin Forfeiture 

(RBF), which is sent to the Field Office Director or Assistant 

Director for Field Operations, as appropriate. Appendix 1 

contains the format for the RBF. 

(a) After receiving an RBF, the ADFO or FOD may 

designate an official to be responsible for handling all 

matters relating to the forfeiture request. This designated 

official will coordinate with the Regional Solicitor's office 

and any other appropriate official to determine if the 

permittee has appealed the notice of violation (NOV), cessation 

order (CO) or other action upon which the forfeiture action is 

based. 

(b) The designated official must review all the 

available information and make a determination whether the 

forfeiture action should be pursued in lieu of, or in 

conjunction with other enforcement actions. Consideration 

should be given to the history of violations, the seriousness 

of the violation, hazards to health and safety, and the 

likelihood that the government's interests will be protected 

and that the permittee will properly reclaim the site. 

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) 
(3) Forfeiture Notification. 

(a) If the recommendation to proceed with the 

bond forfeiture action is approved by the ADFO or FOD, a notice 

of bond forfeiture will be prepared following the letter format 

in Appendix 2. Copies of the signed notices of bond forfeiture will be sent to the Deputy Director, Program Operations and 

Technical Services. In addition, the notice of bond forfeiture 

should be sent to the surety or other responsible party guaranteeing the permittee's collateral, using the letter 

format provided in Appendix 3. The ADFO or FOD will determine 

if a field survey should be performed at this time. 

(b) The notice of bond forfeiture states that 

OSMRE has determined the permittee to be in default of the 

terms of the permit and that OSMRE intends to collect the 

performance bond or collateral 30 calendar days from the date 

of receipt of the letter. The notification letter should 

include: 

1. Permitnumber; 

2. Acreage of lands subject to forfeiture; 3. The reasons for the forfeiture; 4. The amount and identification of 

bond(s) subject to forfeiture; 5. The conditions under which forfeiture 

may be avoided. 

(c) The notice of bond forfeiture allows the 

permittee 30 calendar days to request an informal conference to 

discuss actions to avoid forfeiture. The letter also provides 

an opportunity for an appeal by the permittee of the decision 

to forfeit. These letters must be sent by certified mail to 

ensure timely notification. · 

(4) Informal Conference. Forfeiture actions will 

temporarily cease if the permittee requests an informal 

conference in writing, within 30 calendar days. The surety should be invited to attend the informal conference. Whenever 

such a conference is held, the ADFO or FOD will ensure that a 

complete field survey of the mine site is made. 

(a) Where appropriate, the survey team should 

include technical personnel from the OSMRE Field Operations Offices. The team must assess the reclamation work to be done 

at the permit site, as well as the approximate cost of such 

reclamation work. The survey team will also prepare conditions 

and a schedule for the completion of reclamation work, in 

accordance with the approved reclamation plan, which shall be 

presented to the permittee at the informal conference. 

(b) Any agreement between OSMRE and the permittee at the informal conference shall be written and should identify the actions which will rectify the problems and result in the 

withdrawal of the forfeiture action. Appropriate OSMRE staff 

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will monitor the permittee's compliance with the agreement. The agreement should contain provisions for reinstatement of 

forfeiture in the event of noncompliance. 

agreement, 

withdrawn. 

reached or 

agreement, 

proceeding 

(c) After successful implementation of the 

the forfeiture notification will be formally In the event that a satisfactory agreement is not 

the permittee fails to comply with the negotiated 

OSMRE will reinstate the forfeiture notification by 

to collect the bond amount. 

(5) Bond Collection Letter. The ADFO or FOD will 

send·a collection letter to the surety using the form letter 

provided in Appendix 4. The letter specifies the amount of 

bond to be paid, the ~ddress to which payment must be sent, and 

the name of the payee. The bond collection letter is sent to 

the surety when: the permittee has failed to request an 

informal conference within the time allowed; the permittee or 

other party has failed to negotiate a satisfactory compliance 

agreement; the appeal of the forfeiture by the permittee is 

ended; or the compliance agreement has not been implemented. 

(6) Collection and Deposit of Forfeiture Bond Money. When forfeited funds are received they will be immediately sent 

to the Chief, Division of Finance, Denver Finance Center by the 

Collections Officer. Denver Finance will furnish the Chief, Division of Budget, Planning and Management Analysis a copy of 

the abstract of remittance for each bond forfeiture so that an 

apportionment request from the Office of Management and Budget (OMB) can be initiated. OSMRE's Denver Finance Center is 

responsible for establishing the proper accounts, crediting the 

collected forfeited funds or collateral and for certifying funds available for expenditure for reclamation. If the surety fails to relinquish the amount of the bond or insists upon subrogation of the government's interests as a condition of 

payment of the bond, the appropriate ADFO or FOD will notify the Solicitor's Office in writing to initiate proceedings to 

collect the bond amount. 

(a) It is OSMRE's policy not to agree to any subrogation of interests or to assign claims against the 

permittee as a condition for bond payment. 

(b) After the bond amount is collected, OSMRE 

may agree to release the surety against any and all future 

claims relating to that bond. 

(c) Procedures for acceptance of forfeited funds 

and proper transfer to the Denver Finance Center are provided in a separate directive. (FIN-5) 

(7) Com~letion of Reclamation. The Denver Finance 

Center will estab ish a separate account for each bond 

forfeiture and notify the Division of Budget, Planning and 

Management Analysis (DBMA). The DBMA will obtain an 

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l 
apportionment of funds from OMB and warrant from Treasury and 

then allocate the funds to the appropriate office. The ADFO or 

FOD will then contract for completion of the reclamation, 

monitor the contractor's performance and approve the completed 

work. 

(a) In the event the amount forfeited is 

insufficient to pay for the full cost of reclamation, .the AD or 

FOD may complete reclamation of the bonded area to the extent 

the forfeited funds allow and, with assistance from the Field 

Solicitor, implement actions to recover from the permittee the 

additional funds needed to fully reclaim the areas. If changes in the reclamation plan are needed, the ADFO or FOD will 

coordinate development of a new reclamation plan with the 

appropriate surface managing Federal agency, surface owner or 

Indian tribe. 

(b) In the event the amount forfeited is more 

than the amount necessary to complete reclamation, the ADFO or 

FOD will approve the return of the unused funds to the surety 

or party from whom they were collected. 

d. Procedures Where There is a Federal-State Cooperative Agreement 

Under the Federal Lands Program authorized by SMCRA, 

the responsibility for bond forfeiture and completion of 

reclamation with the forfeited funds may be delegated to a 

State regulatory authority, (SRA). In States where this 

delegation has occurred, the State regulatory authority will be 

responsible for implementing the bond forfeiture procedures in 

accordance with the approved State program and the 

Federal-State cooperative agreement. It is expected that all 

cooperative agreements will be reviewed for adequate provisions for bond forfeiture procedures and notification consistent with 

this directive. 

(1 l Permit Issued by SRA 

Where, under the Federal-State cooperative 

agreement, the permit is issued by the SRA, the forfeiture will 

be initiated by the SRA under State procedures. SRA's should 

be requested to send a copy of any forfeiture notification to 

the appropriate OSMRE ADFO or FOD. Where the amount of the 

forfeited funds is insufficient to cover the cost of 

reclamation according to the approved plan, OSMRE will 

coordinate with the appropriate Federal land managing agency or 

Indian tribe to modify and approve an alternate reclamation 

plan, if necessary. OSMRE will also coordinate with the SRA 

and the Solicitor's Office to collect from the permittee the 

additional funds needed to reclaim the site. 

(2) Permit Jointly Issued. Where, under the 

Federal-State cooperative agreement, the permit is issued 

jointly and the SRA and OSMRE are co-obligee's, the SRA will 

generally initiate the bond forfeiture action. The SRA should 

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• 

send copies of the bond forfeiture initiating document to 

OSMRE; however, it is the responsibility of the ADFO or FOD to 

ensure that such notification occurs. 

(a) Where the amount of the forfeited funds are 

insufficient to cover the cost of reclamation according to the 

approved plan, OSMRE will review the proposed reclamation plan, 

coordinate with the appropriate Federal land management agency 

or Indian tribe, and provide written concurrence to the SRA on 

any alternative reclamation plan. OSMRE will co-sign any check 

received from the surety or guarantor. OSMRE will also monitor 

the reclamation in such cases and provide technical assistance 

to the SRA if requested. 

(b) If the amount of the forfeited bond or 

collateral is sufficient to cover the cost of reclamation, the 

State should be instructed to return any unused portion of the 

forfeited funds to the surety or other party from whom the 

funds were collected. 

(c) If an agreement between the permittee or 

surety and the SRA is negotiated, the SRA must obtain the 

concurrence of OSMRE. OSMRE will coordinate with the 

appropriate Federal land management agency or Indian tribe 

before giving concurrence. 

4. Reporting Requirements. None 

5. References. 

a • S MC RA 5 21 ( a ) ( 4 ) 

b. SMCRA 525 (d) 

c. 30 CFR 800.50 

d. 43 CFR 4.1280 

e. OSMRE Directive FIN-S 

6. Effect on Other Documents. None 

7. Effective Date. Upon Issuance. 

8. Contact. Frank Mancino, Division of Permit and 

Environmental Analysis, (202) 343-7952 • 

-8-

) 
UNITED STATES DEPARTf.f:NT OF THE INTERIOR 

OFFICE OF SURFACE MINING AND RECLAMATION 

BOND FORFEITURE REFERRAL 

Referral No. 

Appendix 1 

(to be completed by F"'i~el~d~O~fnf~ic~e~) 

CoiJ1)any Name ___________ _ Pennit No. ------- Add~ss~-------------------------

Telephone. _____________ _ County _______ _ 

Is expeditP.d action requi~d? _ ___,yes __ .no 

Briefly describe the reasons for the recommended action (supporting detailed infonnation, background documents, and court referral must be 

attached where appropriate): 

Are there enforcement actions which have been taken against other 

persons concerning issues related to this same mine site? 

___yes __ no 

Are there enforcement actions which have been taken against other 

pennits or operations associated with this pennittee? ___yes __ no 

If yes, identify the permits/operations, persons and/or companies involved and describe the type, dates, and status of enforcement 

actions (supporting detailed information and background documents must 

be attached l. 

Permit Issue Date Expiration Date 

Is the operation currently mining? yes __ no ·------ Is a 11 penni tted co a 1 extraction comp 1 eted? yes no 

Is ~clamation work currently being done? ~s --no 

Is the site abandoned without completion of reclamat1on or maintenance? 

___yes __ no 

Originator------------~----- Date. ______ _ 

Da"te ------ Supervisor _______________ ___ 
Appendix 2 

(Date) 

NOTICE OF BOND FORFEITURE 

(Name) 

(Address) 

Re: (Penni ttee) 

Pennit No. ____ _ 

___ County, (State) 

Dear ----------------

You are hereby notified that the Office of Surface Mining Reclamation 

and Enforcement is initiating forfeiture effective on (date of letter) 

on the perfonnance bond for Pennit No. -------in the amount 

of-------- for failure to comply with the tenns of the pennit 

and bond agreement. This action is taken pursuant to the Surface 

Mining Control and Reclamation Act of 1977, 30 USC 1201 et ~··and 

its attendant regulations at 30 CFR Part 800. The perfonnance bond on 

this pennit is Surety Bond No. issued by (Surety) 

--------in the amount of -------
(Name) 2 

This forfeiture Explanation is a result of your failure to abate the violations 

stated in the following Notices of Violation and Cessation Orders: I of why Bond 

Notice of Violations 

(NuiiGerl 

Issued 

(Date) 

Cessation Order 

(NuiiGerl 

Issued 

(Date) 

You may prevent bond forfeiture from proceeding by taking one of the 

following actions: (1 l satisfactorily abate the above violations 

within 30 days of the date of this notice, (2) show cause why we 

should not proceed with forfeiture, or (3) satisfactorily abate the 

above violations within the time limits given in a reclamation 

agreement which you or another party have signed. 

In order to arrange a reclamation agreement with us or to show cause 

why we should proceed to collect the bonds (or collateral), you must 

submit a written request for a conference to me at the letterhead 

address within 20 calendar days from the date_ you receive this notice, 

but no later than 30 calendar days from the date of this notice. 

Pursuant to 43 CFR 4.1280, you have the right to an administrative 

appeal of this bond forfeiture decision. Such appeal must be filed in 

• 

writing within 20 days from the date you receive this decision, but no 

later than 30 days from the date of this notice. The notice of appeal 

forfeiture 

action is 

being taken. 

Identify 

permit revocation, or 

expiration 

dates, bond 

expi ration, 

bankruptcy 

filings, 

etc. 

must be sent to the 1 etterhead address and a copy ·sent at the same time 

) 
(Name) 

to the U.S. Department of the Interior, Board of Land Appeals, 4015 

Wilson Boulevard, Arlington, Virginia 22203. 

We will proceed with collection of the performance bond 30 calendar 

days from the date of this notice if you have not satisfactorily 

abated the violations above (or corrected the reasons for 

non-compliance), requested a conference, or filed an administrative 

appeal. 

cc: (Surety Company) 

(Address) 

Sincerely, 

3 
Appendix 3 

(Name) 

(Address) 

Re: (Permittee l 

Permit No. ____ _ 

___ County, (State) 

Dear --------

The Office of Surface Mining Reclamation and Enforcement (OSMRE) has 

found that (coal company), permittee for permit No. ___ , is not in 

compliance with the terms and conditions of the approved permit. The 

enclosed notice, which was sent to the permittee contains the specific 

reasons for the decision. 

In accordance with the provisions of performance bond No. ----

failure of the principal to fulfill the specified obligations will 

result in a forfeiture of the bond. As the surety, you may 

participate with (the permittee) should the permittee request a 
(Name) 

conference within 30 calendar days from the date on the enclosed 

notice. We will proceed with collection of the performance bond 30 

calendar days from the date of this notice if the permittee has not 

abated the violations (corrected the reason for non-compliance), 

requested a conference, or filed an administrative appeal. 

Sincerely, 

Enclosure 

cc: Assistant Director, Eastern or Western Field Operations 

DD/OTS 

2 

) 
(Address of Surety) 

Dear Sir: 

Appendix 4 

LETTER OF COLLECTION 

Re:(Address of Principals I 

Permittee) 

Under the authority of the Surface Mining Control and Reclamation Act of 1977, (SMCRA) the Office of Surface Mining Reclamation and Enforcement (OSMRE) hereby requires payment of (amount of bond to be collected) for surety bond No. ________ __ 

On (date of Notice of Bond Forfeiture) we sent you a copy of the (permittee's name) Notice of Bond Forfeiture. Our records show that no wr1tten request for a conference was received, and that the required actions to bring the permit into compliance with the terms of the permit and bond agreement have not occurred. Therefore, under SMCRA and the regulations at 30 CFR Part 800, OSMRE demands payment of (amount of bond), within 30 calendar days from the date of this letter. This amount represents the total of the surety bond issued for (permittee's name), Permit No. , County, (State). 

Payment of this amount within the time period specified will result in the release of the surety from all future claims under this bond. However, OSMRE will not subrogate the Government's interests or assign any future claims against the permittee as a condition of payment of the forfeited bond amount. Unless we receive payment by (date) , proceedings will be instituted in the appropriate district court of the United States to collect this bond. 
Please make your check or money payable to DOI, Office of 

Surface Mining Reclamation and Enforcement, and mail to: 

(Assistant Director FO or ~ie1d Office Director) 

2 

To assure proper credit for payments, please write the bond 

number and permittee's name on the front of the check or money order. 

Sincerely, 

cc: Field Solicitor, DD/OTS 

ADFO or FO 

\