OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

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COALEX STATE INQUIRY REPORT - 263

September 1993

Olga Brunning

Department of Natural Resources

Tawes Building

580 Taylor Avenue

Annapolis, Maryland 21401

TOPIC: BOND RELEASE/BOND FORFEITURE

INQUIRY: A portion of a permitted area was ripe for bond release; however, the 

permittee never requested release of the bond. As a result of later problems on that 

permitted area, the permittee was sent a notice of bond forfeiture. Can the permittee get 

back some of the bond for the portion of the permitted area that was ripe for release or 

is the entire bond forfeited? 

SEARCH RESULTS: Research was conducted using COALEX, LEXIS and prior 

COALEX State Inquiry Reports. According to the regulations and their preambles in the 

Federal Register, the permittee must make a written request from the regulatory 

authority and follow certain regulations before any of its bond is released. While some of 

the decisions indicate that the amount of bond forfeited (entire versus partial or 

proportional) depends on the language of the bond itself, the most important factor in 

bond forfeiture is the permittee's need to comply with the regulations and completion of 

its approved reclamation plan. 

Copies of the materials listed below are attached, as indicated.

COALEX REPORTS

COALEX STATE INQUIRY REPORT - 102, "Forfeiture of reclamation bonds; 

liability period" (1989).

COALEX STATE INQUIRY REPORT - 105. "Bond forfeiture - relationship of bond 

to permitted area" (1989).

Both Reports include cases that discuss forfeiture of all or only a portion of the bonds. A 

description of the most relevant cases follow. A copy of the Reports are attached. All of 

the materials included with the Reports are listed in the ATTACHMENTS section; 
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

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however, only the cases from these Reports that are discussed are included with this 

Report. 

AMERICAN CASUALTY CO. v COMMONWEALTH OF PENNA., DEPT. OF 

ENVIRONMENTAL RESOURCES (DER), 441 A 2d 1383 (Pa Commonw Ct 1982). 

The court ruled that the bonds issued by American Casualty to Blue Coal Corp. were 

penal in nature and that DER "need not prove damages in order to collect on the 

bonds": "The nature of bonds must be determined from the language of the bond as 

well as [the Act]." The Act "requires the filing of bonds conditioned on the faithful 

performance of all of the Act's requirements." 

MORCOAL CO. v COMMONWEALTH, 459 A 2d 1303 (Pa Commw Ct 1983). 

Morcoal contended that the bonds were indemnity bonds which required DER to prove 

actual damages sustained in order to collect. The court agreed with DER that the intent 

of the Mining Act was "that the bonds are penal and, therefore, DER is not required to 

prove damages actually sustained in order to collect on the bonds."

COMMONWEALTH v OGDEN, 501 A 2d 311 (Pa Commwealth Ct 1985).

The court concluded that all "bonds required by statute are 'statutory' in nature" and the 

bonds, here are penal in nature. However, the court stated that the "characterization of 

the bonds does not control; but rather the areas covered by the bonds.... We hold that 

each bond was issued as part of a specific permit and not as an umbrella to cover all 

mining being performed by the operator". It would be more appropriate for a portion of 

or an entire bond to be forfeited "to complete reclamation on non-permitted areas only 

when the permitted area is adjacent to or contiguous to the affected off-permit area or is 

one in which the ecological harm may be traced directly to the specifically permitted 

area."

ADDITIONAL DECISIONS

ROCKWOOD INSURANCE CO. v COMMONWEALTH, EHB Docket Nos. 78-168-S & 

78-166-S, 1981 EHB 424 (1981).

"Rockwood raises another argument with regard to the nature of the bonds not 

addressed in American Casualty, supra. Rockwood correctly points out that liability 

accrues upon its bonds in proportion to the area of land affected at a rate set forth per 

acre in the bond and that liability can be released upon said bonds on a proportional 

basis. Rockwood argues that this is an indication that the bonds are not intended to be 

penal. However the rate of accrual, has no affect where, as here, the entire bonded 

area has been affected by mining operations. As to the release of a portion of the bond, 

the board notes that...an operator who has completed a separate step of his approved 

reclamation plan may request the release of the portion of the bond which related to the 
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

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completed portion of the reclamation plan. Conversely, unless or until released by the 

DER, the bonds remain in full force and effect and, of course, there is not testimony 

here that any portion of any of the bonds at issue has been released."

KING COAL CO. v COMMONWEALTH, EHB Docket No. 83-112-G, 1985 EHB 104 

(March, 1985). KING COAL CO. v COMMONWEALTH, EHB Docket No. 83-112-G, 

1985 Pa Envirn LEXIS 61, 1985 EHB 604 (July, 1985). 

In the initial decision, the Board ruled that "DER is entitled to forfeit that portion of the 

bond which corresponds to the acreage affected multiplied by the per acre liability 

specified in the bond terms, whether or not a portion of the permit has been 

reclaimed.... Where the bond does not provide that liability shall accrue in proportion to 

the acreage affected, but rather provides that liability shall be for the full amount of the 

bond, DER is entitled to forfeit the entire amount of the bond if it is demonstrated that 

more than de minimis violations exist on any portion of the permit area for which the 

bond was posted."

In the second decision, the Board, reconsidering one of its earlier Conclusions of Law, 

determined that it could not establish guidelines "for deciding when declaring a bond 

forfeiture for a violation which was somewhat more than de minimis might be" an error.

MARTIN v COMMONWEALTH, 570 A 2d 122 (Pa Commw Ct 1990). MARTIN AND 

AMERICAN INSURANCE CO. v COMMONWEALTH, EHB Docket No. 85-120-R, 

1988 Pa Envirn LEXIS 186 (1988).

Applying the principles of American Casualty, the court stated that Pa SMCRA "requires 

a reclamation plan and when the petitioner requested the return of his bonds he was 

required to file a report attesting to the completion of reclamation.... Because completion 

of reclamation and a report attesting to such completion are required by the statute and 

regulation upon which the bonds were conditioned, reclamation is a part of the term 

'surface mining' in the context of liability, and, therefore it is the filing of the completion 

report which triggers the five-year period of liability after which forfeiture of the bonds 

would be untimely."

THE RONDELL CO. v COMMONWEALTH, EHB Docket Nol 85-136-F, 1988 Pa 

Envirn LEXIS 151 (1988).

The Board denied Rondell and DER's motions for summary judgment finding that DER 

failed to break down the violations by specific mining permits and had not specified how 

much acreage had been affected under each permit. Also deferred until "the end of the 

proceeding" was Rondell's contention that "DER was barred from forfeiting some of 

these bonds because its inspectors issued inspection reports recommending that the 

bonds be released".
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

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CRATTY, GOWER & HYDIKE, INC. v COMMONWEALTH, EHB Docket No. 91-029-

E, 1991 Pa Envirn LEXIS 110 (1991).

DER sought a ruling "that the bonds in question, though posted in increments for 

various phases of them mining of this site, nevertheless apply to the entire site." The 

Board agreed, stating "The bond contains no language indicating DER's interpretation 

of this language is in error. Finally, we have previously held that unless the bond is 

written for liability to accrue proportionally to the acreage affected, a deficiency 

anywhere on the bonded are caused by mining is ground for the bond's forfeiture."

The Board did not rule on CGH's assertion that "DER unconstitutionally forced it to 

waive the right to seek partial bond release by DER when a quantifiable portion of the 

site reclamation was completed" as DER failed to address the issue in its supporting 

brief.

REGULATORY HISTORY

The following Federal Register preambles to final rules and an OSM Directive are 

enclosed for background.

44 FR 14902 (MARCH 13, 1979). Permanent Program Final Preamble -- Final rule. 

Part 807: Procedures criteria and schedule for the release of bonds. Part 808 

Performance bond forfeiture criteria and procedures.

45 FR 52306 (AUGUST 6, 1980). Final rules. Performance bonding.

48 FR 32932 (JULY 19, 1983). Final rule. Bonding and insurance requirements.

Sec. 800.40(a)(1). "The permittee may file an application with the regulatory authority 

for the release of all or part of a performance bond."

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

(Issued 5/87).

53 FR 994 (JANUARY 14, 1988). Final rule. Bond release application.

56 FR 59992 (NOVEMBER 26, 1991). Final rule.

DOI "is amending its bonding regulations to require a written affirmation of the 

completion of each phase of land reclamation when bond release for that phase is being 

sought."

ATTACHMENTS
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT

U.S. Department of the Interior

Search conducted by: Joyce Zweben Scall Page 5 of 6

1. COALEX STATE INQUIRY REPORT - 102, "Forfeiture of reclamation bonds; 

liability period" (1989). 

A. "Regulating Financial Responsibility For Bankrupt Operators", Douglas F. 

Brennan, July, 1987. 

B. *COMMONWEALTH v OGDEN, 501 A. 2d 311 (Pa. Commw. Ct. 1985) 

C. PERSONAL SERVICE INSURANCE CO. v MAMONE, Slip Opinion (Ohio 

Ct. App. 1986) [No. 85 CA 1, Fourth Appellate Dist.] 

D. PERSONAL SERVICE INSURANCE CO. v MAMONE, Slip Opinion (Ohio 

Ct. App. 1985) [No.418, Fourth Appellate District] 

E. PERSONAL SERVICE INSURANCE CO. v MAMONE, Slip Opinion (Ohio 

Ct. App. 1985) [No. 419, Fourth Appellate District] 

F. PERSONAL SERVICE INSURANCE CO. v MAMONE, Slip Opinion (Ohio 

Ct. App. 1985) [No. CA-85-1, Fifth Appellate District] 

G. PERSONAL SERVICE INSURANCE CO. v MAMONE, Slip Opinion (Ohio 

Ct. App. 1985) [No. CA-85-4, Fifth Appellate District) 

H. NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION 

CABINET v INTEGRITY INSURANCE CO., 759 S.W. 2d 67 (Ky. Sup. Ct. 

1988) 

I. ALLIED FIDELITY INSURANCE CO. v ENVIRONMENTAL QUALITY 

COUNCIL, 753 P. 2d 1038 (Wyo. Sup. Ct. 1988)

2. COALEX STATE INQUIRY REPORT - 105. "Bond forfeiture - relationship of 

bond to permitted area" (1989). 

A. COALEX STATE INQUIRY REPORT - 102 and its attachments 

B. 30 C.F.R. Sec. 800.50 Forfeiture of bonds 

C. 30 C.F.R. Sec. 800.40 Requirements to release performance bonds 

D. 30 C.F.R. Sec. 800.11 Requirement to file a bond 

E. 25 Pa. Code Sec. 86.182 Procedures 

F. 25 Pa. Code Sec. 86.171 Procedures for seeking release of bond 

G. 25 Pa. Code Sec. 86.172 Criteria and schedule for release of bond 

H. PERSONAL SERVICE INSURANCE CO. v CALL, 459 N.E.2d 1307 

(1983) 

I. TIGER CORP. v CALL, 456 N.E.2d 554 (1982) 

J. STATE OF TENNESSEE v GULF AMERICAN FIRE & CASUALTY CO., 

680 S.W.2d 455 (1984) 

K. *MORCOAL CO. v COMMONWEALTH OF PENNSYLVANIA, 459 A.2d 

1303 (1983) 

L. *AMERICAN CASUALTY CO. v COMMONWEALTH OF 

PENNSYLVANIA, 441 A.2d 1981 (1982) 

M. AMERICAN DRUGGISTS INSURANCE CO. v COMMONWEALTH OF 

KENTUCKY, 670 S.W.2d 485 (1984) 

N. SOUTHWEST PENNSYLVANIA NATURAL RESOURCES, INC. v

COMMONWEALTH OF PENNSYLVANIA, 465 A.2d 108 (1983) 

O. CITY OF INDEPENDENCE v MAYNARD, 495 N.E.2d 444 (1985)

[NOTE: Only the asterisked items are included with the Reports.] 
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3. ROCKWOOD INSURANCE CO. v COMMONWEALTH, EHB Docket Nos. 78-

168-S & 78-166-S, 1981 EHB 424 (1981). 

4. KING COAL CO. v COMMONWEALTH, EHB Docket No. 83-112-G, 1985 EHB 

104 (March, 1985). 

5. KING COAL CO. v COMMONWEALTH, EHB Docket No. 83-112-G, 1985 Pa 

Envirn LEXIS 61, 1985 EHB 604 (July, 1985). 

6. MARTIN v COMMONWEALTH, 570 A 2d 122 (Pa Commw Ct 1990). 

7. MARTIN AND AMERICAN INSURANCE CO. v COMMONWEALTH, EHB Docket 

No. 85-120-R, 1988 Pa Envirn LEXIS 186 (1988). 

8. THE RONDELL CO. v COMMONWEALTH, EHB Docket Nol 85-136-F, 1988 Pa 

Envirn LEXIS 151 (1988). 

9. CRATTY, GOWER & HYDIKE, INC. v COMMONWEALTH, EHB Docket No. 91-

029-E, 1991 Pa Envirn LEXIS 110 (1991). 

10.44 FR 14902 (MARCH 13, 1979). Permanent Program Final Preamble -- Final 

rule. Part 807 Procedures criteria and schedule for the release of bonds. Part 

808 Performance bond forfeiture criteria and procedures. 

11.45 FR 52306 (AUGUST 6, 1980). Final rules. Performance bonding. 

12.48 FR 32932 (JULY 19, 1983). Final rule. Bonding and insurance requirements. 

13.OSM DIRECTIVE, Subject No. REG-10, Transmittal No. 339, "Bond Forfeiture" 

(Issued 5/87). 

14.53 FR 994 (JANUARY 14, 1988). Final rule. Bond release application. 

15.56 FR 59992 (NOVEMBER 26, 1991). Final rule. 

*NOTE: Only the asterisked items are included with the Reports.