CO Code § 34-32-117 (2021)
2021 Colorado Code|Title 34 - Mineral Resources|Article 32 - Colorado Mined Land Reclamation Act|§ 34-32-117. Warranties of Performance - Warranties of Financial Responsibility - Release of Warranties - Applicability

  No permit may be issued under this article until the board receives performance and financial warranties as described in subsections (2), (3), and (4) of this section.    A “performance warranty” shall consist of a written promise to the board, by the operator, to comply with all requirements of this article. Performance warranties shall be in such form as the board may prescribe. Whenever two or more persons or entities are named as operators in a single permit, the operators may limit the scope of their individual performance warranties so long as their warranties, in the aggregate, warrant performance of all requirements of this article.      A “financial warranty” shall consist of a written promise, to the board, to be responsible for reclamation costs up to the amount specified by the board pursuant to subsection (4) of this section, together with proof of financial responsibility. Financial warranties may be provided by the operator, by any third party, or by any combination of persons or entities and shall be in such form as the board may prescribe.    The board may accept interests in real and personal property as financial warranties to the extent of a specified percentage of the estimated value of any such property. Any person offering such financial warranty shall submit information necessary to show clear title to and the value of such property.    The board may refuse to accept any form of financial warranty if:   The value of the financial warranty offered is dependent upon the success, profitability, or continued operation of the mine; or    The board determines that the financial warranty offered cannot reasonably be converted to cash within one hundred eighty days of forfeiture.       For nondesignated mining operations:   This subsection (3) shall be applicable July 1, 1993, to deeds of trust which are used as collateral for new financial warranties completed on or after such date;    This subsection (3) shall be applicable on January 1, 1996, to:   Deeds of trust existing as of July 1, 1993, and subsequent updates of these same deeds of trust used as collateral for financial warranties; and    Any financial warranty completed before July 1, 1993, if the value of any such financial warranty includes any mineral value or if mineral value is used to update any such financial warranty. The value of any financial warranty described in this sub-subparagraph (B) shall include mineral value for the life of the warranty.          Any instrument offered as a financial warranty pursuant to this subsection (3) shall provide that the board may recover any necessary costs, including attorney fees, it incurs in foreclosing on or realizing any collateral used to secure such financial warranty if such financial warranty is forfeited.    Proof of financial responsibility may consist of any one or more of the following, subject to approval by the board:   A surety bond issued by a corporate surety authorized to do business in this state;    A letter of credit issued by a bank authorized to do business in the United States;    A certificate of deposit;    A deed of trust or security agreement encumbering real or personal property and creating a first lien in favor of the state;    Assurance, in such form as the board may require, that:   Upon commencement of production, the operator will establish an individual reclamation fund, to be held by an independent trustee for the board, upon such terms and conditions as the board may prescribe, which trust fund shall be funded by periodic cash payments representing such fraction of receipts as will, in the opinion of the board, provide assurance that funds will be available for reclamation;    Prior to issuance of a permit, the operator will provide another form of financial warranty as described in this paragraph (f). As the reclamation fund increases in value, the other form of financial warranty may be decreased in value so long as the sum of financial warranties is that amount specified by subsection (4) of this section.    Project-related fixtures and equipment (excluding rolling stock) owned or to be owned by the financial warrantor within the permit area will have a salvage value at least equal to the amount of the financial warranty, or the appropriate portion thereof;    Existing liens and encumbrances applicable to said fixtures and equipment, other than liens in favor of the United States or this state, any other state, and any political subdivisions, will be subordinated to the lien described in section 34-32-118 (4)(b); and    Said fixtures and equipment will be maintained in good operating condition and will not be removed from the permit area without the prior consent of the board;       and    Repealed.    Proof that the operator is a department or division of state government or a unit of county or municipal government.       Any proof of financial responsibility submitted or revised on or after July 1, 1993, shall be in compliance with paragraphs (a), (b), and (c) of subsection (4) of this section.         The board shall prescribe the amount and duration of financial warranties, taking into account the nature, extent, and duration of the proposed mining operation and the magnitude, type, and estimated cost of planned reclamation.      In any single year during the life of a permit, the amount of required financial warranties must not exceed the estimated cost of fully reclaiming all lands to be affected in said year, plus all lands affected in previous permit years and not yet fully reclaimed. For the purpose of this subsection (4)(b)(I), reclamation costs shall be computed with reference to current reclamation costs. The amount of the financial warranty must be sufficient to assure the completion of reclamation of affected lands if the office has to complete the reclamation due to forfeiture, including all measures commenced or reasonably foreseen to assure the protection of water resources, including costs necessary to cover water quality protection, treatment, and monitoring as may be required by permit. The financial warranty must include an additional amount equal to five percent of the amount of the financial warranty to defray the administrative costs incurred by the office in conducting the reclamation. (b) (I) In any single year during the life of a permit, the amount of required financial warranties must not exceed the estimated cost of fully reclaiming all lands to be affected in said year, plus all lands affected in previous permit years and not yet fully reclaimed. For the purpose of this subsection (4)(b)(I), reclamation costs shall be computed with reference to current reclamation costs. The amount of the financial warranty must be sufficient to assure the completion of reclamation of affected lands if the office has to complete the reclamation due to forfeiture, including all measures commenced or reasonably foreseen to assure the protection of water resources, including costs necessary to cover water quality protection, treatment, and monitoring as may be required by permit. The financial warranty must include an additional amount equal to five percent of the amount of the financial warranty to defray the administrative costs incurred by the office in conducting the reclamation.    The office and the board shall take reasonable measures to assure the continued adequacy of any financial warranty.         The board may: (c) (I) The board may:   From time to time for good cause shown, increase or decrease the amount and duration of required financial warranties;    By rule or permit condition require proof of value on a periodic basis of all or any group of warranties held by the board; and    By rule or permit condition limit certain types of warranties to specific purposes only or require a designated percentage of the total bond be held in easily valued and convertible instruments.       A financial warrantor shall have sixty days after the date of notice of any such adjustment to fulfill all new requirements.            An operator may file a written notice of completion with the office whenever such operator believes such operator has completed any or all requirements of this article with respect to any or all of such operator's affected lands except for any such lands in designated mining operations. The office shall, within sixty days after receiving said notice, or as soon thereafter as weather conditions permit, inspect lands and reclamation described in the notice to determine if the operator has complied with all applicable requirements.    If the board or office finds that the operator has successfully complied with any or all requirements of this article, it shall release all performance and financial warranties applicable to said requirements. Releases shall be in writing and shall be delivered to the owner or operator promptly after the date of such finding.    If the board or office finds that the operator has not complied with applicable requirements of this article, it shall so advise the operator not more than sixty days after the date of the inspection.    If the office fails to conduct an inspection within the time specified in paragraph (a) of this subsection (5) or fails to advise the operator of deficiencies within the time specified in paragraph (c) of this subsection (5), then all financial warranties applicable to reclamation described in the notice shall be deemed released as a matter of law. (5.5)     An operator may file a written notice of completion with the office upon completion of all requirements of this article with respect to any or all of such operator's affected lands at a designated mining operation. (a) (I)An operator may file a written notice of completion with the office upon completion of all requirements of this article with respect to any or all of such operator's affected lands at a designated mining operation.    The office shall inspect lands and reclamation described in any such written notice to determine if the operator has complied with all applicable requirements within sixty days after receiving such notice or as soon thereafter as weather conditions permit.       If the board or office finds that the operator has complied with all requirements of this article, it shall promptly deliver a written release of any performance and financial warranties, or portion thereof, to the owner or operator according to the following schedule:   An appropriate amount of the financial warranty for the applicable permit area shall be released when the operator completes the requirements of the approved reclamation plan; and    The performance warranty and the remaining portion of the financial warranty shall be released on such schedule as the board may prescribe; except that all remaining portions of the warranty shall be released at the end of the period described in paragraph (e) of this subsection (5.5) if, at that time, the affected land has been reclaimed for a beneficial use and is in compliance with all applicable performance standards.         If the board or office finds that the operator has not complied with applicable requirements of this article, it shall so advise the operator not more than sixty days after the date of an inspection conducted pursuant to paragraph (a) or (e) of this subsection (5.5). (c) (I) If the board or office finds that the operator has not complied with applicable requirements of this article, it shall so advise the operator not more than sixty days after the date of an inspection conducted pursuant to paragraph (a) or (e) of this subsection (5.5).    If the operator is not entitled to a release of the financial warranty, or portion thereof, pursuant to paragraph (b) of this subsection (5.5), the board or office may specify a reclamation schedule and adjust the amount of the financial warranty pursuant to paragraph (c) of subsection (4) of this section.       If the office fails to conduct an inspection within the time specified in paragraph (a) or (e) of this subsection (5.5) or fails to advise the operator of any deficiencies within the time specified in paragraph (c) of this subsection (5.5), then that portion of the financial warranties applicable to reclamation described in the notice or request for release shall be deemed released as a matter of law.    At such time as the board or office may prescribe, but no more than five years after the release of a portion of the financial warranty as described in subparagraph (I) of paragraph (b) of this subsection (5.5), the operator may file a written request for release of the performance warranty and the remaining portion of the financial warranty. The office shall inspect any lands and reclamation described in the request within sixty days after receiving such request or as soon thereafter as weather conditions permit to determine whether the affected land has been reclaimed for a beneficial use and is in compliance with all applicable performance standards.            Financial warranties shall be maintained in good standing for the entire life of any permit issued under this article. Financial warrantors shall immediately notify the board of any event which may impair their warranties.      Each financial warrantor providing proof of financial responsibility in a form described in subsection (3)(f)(IV), (3)(f)(V), or (8) of this section shall annually cause to be filed with the board a certification by an independent auditor that, as of the close of the financial warrantor's most recent fiscal year, the financial warrantor continued to meet all applicable requirements of the applicable subsection. Financial warrantors that no longer meet the requirements shall instead cause to be filed an alternate form of financial warranty. (b) (I) Each financial warrantor providing proof of financial responsibility in a form described in subsection (3)(f)(IV), (3)(f)(V), or (8) of this section shall annually cause to be filed with the board a certification by an independent auditor that, as of the close of the financial warrantor's most recent fiscal year, the financial warrantor continued to meet all applicable requirements of the applicable subsection. Financial warrantors that no longer meet the requirements shall instead cause to be filed an alternate form of financial warranty.    Repealed.       Each financial warrantor providing proof of financial responsibility in a form described in subsection (3)(f)(IV), (3)(f)(V), or (8) of this section shall notify the board within sixty days of any net loss incurred in any quarterly period.    Whenever the board receives a notice under paragraph (a) or (c) of this subsection (6), fails to receive a certification or substitute warranty as required by paragraph (b) of this subsection (6), or otherwise has reason to believe that a financial warranty has been materially impaired, it may convene a hearing for the purpose of determining whether impairment has in fact occurred.    Whenever the board elects to convene a hearing pursuant to this subsection (6), it may hire an independent consultant to provide expert advice at the hearing. The fees of any such consultant shall be paid by the financial warrantor, and no consultant shall be hired until the financial warrantor signs a written fee agreement in such form as the board may prescribe. In the event that a financial warrantor refuses to sign such an agreement, the board may, without hearing, order the financial warrantor to provide an alternate form of financial warranty.    At any hearing held pursuant to this subsection (6), if the board finds that a financial warranty has been materially impaired, it may order the financial warrantor to provide an alternate form of financial warranty.    A financial warrantor shall have ninety days to provide any alternate warranty required under this subsection (6).    All hearings held under this subsection (6) shall comply with all requirements of article 4 of title 24, C.R.S.    (Deleted by amendment,L. 93, p. 1184, § 10, effective July 1, 1993.)       For the purposes of this section:   “Rating of 'A' or better” means that the rating organization has determined that the obligations are at least of an upper-medium grade, meaning that factors giving security to the principal and interest are considered adequate but that elements may be present which suggest the possibility of adverse effects if economic and trade conditions change.    (Deleted by amendment,L. 93, p. 1184, § 10, effective July 1, 1993.)         The board or office may, in its discretion, accept a first priority lien in the amount of the financial warranty prescribed pursuant to subsection (4) of this section on any project-related fixtures and equipment that must remain on-site in order for the reclamation plan to be performed in lieu of including the cost of acquiring and installing such fixtures and equipment.    The board or office may accept a first priority lien on any project-related fixtures and equipment that must be demolished or removed from the site under the reclamation plan. The board or office may, in its discretion, accept such a lien as a portion of the proof of financial responsibility if the amount credited for such lien does not exceed the cost of demolishing and removing the subject fixtures and equipment or the market value of such fixtures and equipment, whichever is less.    Any fixtures and equipment accepted pursuant to this subsection (8) shall be insured and maintained in good operating condition and shall not be removed from the permit area without the prior consent of the board. Each financial warrantor providing a lien on such equipment and fixtures shall file an annual report with the office in sufficient detail to fully describe the condition, value, and location of all pledged fixtures and equipment. Such financial warrantor shall not pledge such equipment and fixtures to secure any other obligation and shall immediately notify the office of any other interest that arises in the pledged property.        History. Source: L. 76: Entire article R&RE, p. 742, § 1, effective July 1. L. 77: (1)(a), (1)(b), (2), (3), and (6) amended, p. 1562, § 2, effective June 2. L. 79: (1)(e) added, p. 1252, § 4, effective May 25. L. 81: (1)(e) amended, p. 1678, § 4, effective April 30; entire section R&RE, p. 1670, § 9, effective June 19. L. 91: (3)(a)(IX) amended, p. 757, § 33, effective April 4. L. 93: Entire section amended, p. 1184, § 10, effective July 1. L. 2019: (3)(f)(VI) and (3)(f)(VII) repealed and (4)(b)(I) and (6)(b) amended,(HB 19-1113), ch. 73, p. 267, § 2, effective August 2; (6)(c) amended,(HB 19-1113), ch. 73, p. 267, § 2, effective August 2, 2020.    Editor's note:    This section is similar to former § 34-32-112 as it existed prior to 1976.    Subsection (6)(b)(II)(B) provided for the repeal of subsection (6)(b)(II), effective September 1, 2021. (SeeL. 2019, p. 267.)