Indiana Regulatory Program

DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation and Enforcement

30 CFR Part 914

[SPATS No. IN-134-FOR; State Program Amendment No. 95-12]

Indiana Regulatory Program

AGENCY: Office of Surface Mining Reclamation and Enforcement (OSM),

Interior.

ACTION: Final rule; approval of amendment.

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SUMMARY: OSM is approving with certain exceptions a proposed amendment

to the Indiana regulatory program (hereinafter referred to as the

``Indiana program'') under the Surface Mining Control and Reclamation

Act of 1977 (SMCRA). Indiana proposed revisions to the Indiana Surface

Coal Mining and Reclamation Act (ISMCRA) as enacted by the Indiana

General Assembly (1995) in Senator Enrolled Act 125 (SEA 125). The

proposed amendment, concerning the submittal of affected area status

reports and performance bonding, is intended to revise the Indiana

program to be consistent with SMCRA and incorporate State initiatives.

EFFECTIVE DATE: November 4, 1997.

FOR FURTHER INFORMATION CONTACT: Andrew R. Gilmore, Director,

Indianapolis Field Office, Office of Surface Mining Reclamation and

Enforcement, Minton-Capehart Federal Building, 575 North Pennsylvania

Street, Room 301, Indianapolis, IN 46204-1521, Telephone (317) 226-

6166.

SUPPLEMENTARY INFORMATION:

I. Background on the Indiana Program

II. Submission of the Proposed Amendment

III. Director's Findings

IV. Summary and Disposition of Comments

V. Director's Decision

VI. Procedural Determinations

I. Background on the Indiana Program

On July 29, 1982, the Secretary of the Interior conditionally

approved the Indiana program. Background information on the Indiana

program, including the Secretary's findings, the disposition of

comments, and the conditions of approval can be found in the July 26,

1982, Federal Register (47 FR 32107). Subsequent actions concerning the

conditions of approval and program amendments can be found at 30 CFR

914.10, 914.15, and 914.16.

II. Submission of the Proposed Amendment

By letter dated September 11, 1995 (Administrative Record No. IND-

1510), the Indiana Department of Natural Resources (IDNR) submitted a

proposed amendment to its program pursuant to SMCRA. Indiana submitted

the proposed amendment as its own initiative. SEA 125 amends ISMCRA by

adding new sections and revising existing sections, concerning affected

area status reports and performance bonding, to recodified Indiana Code

(IC) 14-8. The provisions of the ISMCRA that Indiana proposes to add at

recodified IC 14-8 are: IC 14-8-42.5, definition of ``collateral''; IC

14-8-2-49.5, definition of ``comparative balance sheet''; IC 14-8-2-

49.6, definition of ``comparative income statement''; IC 14-8-2-274.5,

definition of ``Surface Mining Control and Reclamation Act.'' The

provisions of the ISMCRA that Indiana proposes to revise or add at

recodified IC 14-34 are: IC 14-34-5-10, affected area status reports;

IC 14-34-6-14.3 and IC 14-34-14.6, general requirements of performance

bonding; IC 14-34-7-0.5, definition of ``collateral''; IC 14-34-7-0.6,

definition of ``comparative balance sheet''; IC 14-34-7-0.7, definition

of ``comparative income statement''; IC 14-34-7-2.5, definition of

``Surface Mining Control and Reclamation Act''; IC 14-34-7-1,

definition of ``liabilities''; IC-14-34-7-4(b), definition of ``current

liabilities''; IC 14-34-7-4(d), conditions for self-bonding; IC 14-34-

7-4(e), (f) and (g), additional conditions for self-bonding; IC 14-34-

7-4.1, replacement of self-bonds; IC 14-34-7-5, corporate guarantee; IC

14-34-7-7, indemnity agreement conditions; IC 14-34-7-7.1, use of

collateral to support a self-bond; IC 14-34-7-8, information

requirements for self-bonding; IC 14-34-7-9, requirements for a change

in financial conditions; IC 14-34-7-10, self-bonding report

requirements; IC 14-34-7-11, self-bond coverage requirements: IC 14-34-

7-12, self-bond Phase I grading

[[Page 59570]]

release requirements; and IC 14-34-7-13, nonseverability provision.

OSM announced receipt of the proposed amendment in January 22,

1996, Federal Register (61 FR 1551), and in the same document opened

the public comment period and provided an opportunity for a public

hearing on the adequacy of the proposed amendment. The public comment

period closed on February 21, 1996.

During its review of the amendment, OSM identified concerns

relating to duplicate bond coverage/reclamations agreements, IC 14-34-

6-14.6; definition of ``liabilities,'' IC 14-34-7-1; self-bonding

qualifying criteria, IC 14-34-7-4; collateral self-bonds, IC 14-34-7-

7.1; and report of qualified independent public accounting consultant,

IC 14-34-7-10. OSM notified Indiana of these concerns by letter dated

September 13, 1996 (Administrative Record No. INC-1543).

By letter dated October 25, 1996 (Administrative Record No. IND-

1545), Indiana responded to most of OSM's concerns by submitting

additional explanatory information. By letter dated August 4, 1997

(Administrative Record No. IND-1584), Indiana responded to OSM's

editorial concerns by submitting Senate Enrolled Act 7, which contained

technical corrections to its proposed amendment. Because the additional

information merely clarified certain provisions of Indiana's proposed

amendment, OSM did not reopen the public comment period.

III. Director's Findings

Set forth below, pursuant to SMCRA and the Federal regulations at

30 CFR 732.15 and 732.17, are the Director's findings concerning the

proposed amendment.

Revisions not specifically discussed below concern nonsubstantive

wording changes, or revised cross-references and paragraph notations to

reflect organizational changes resulting from this amendment.

A. Revisions to Indian's Statutes That Are Substantively Identical to

the Corresponding Federal Provisions

1. Indiana proposes to revise the following statute that contains

language that is identical in meaning to the counterpart Federal

regulation indicated in brackets IC 14-34-7-5, Self-Bonding Corporate

Guarantee [30 CFR 800.23(c)(1)].

Because the above proposed revision is identical in meaning to the

corresponding Federal regulation, the Director finds that Indiana's

proposed statute is no less stringent than SMCRA and no less effective

than the Federal rule.

B. Revisions to Indiana's Statutes That Are Not Substantively Identical

to the Corresponding Federal Provisions

1. IC 14-8-2-42.5 and IC 14-34-7-0.5 Definition of Collateral

Indiana proposes to add a definition of ``Collateral'' to its

statutes. At IC 14-8-2-42.5, Indiana proposes to add language as

follows.

``Collateral,'' for purposes of IC 14-34-7, has the meaning set

forth in IC-14-34-7-0.5.

At IC 14-34-7-0.5, Indiana proposes to add the following definition

of ``Collateral.''

As used in this chapter, collateral means the actual or

constructive deposit, as appropriate, with the director of one (1)

or more of the following types of property in support of a self-

bond:

(1) A perfected, first-lien security interest in favor of the

department of natural resources in real property located in Indiana

that meets the requirements of this chapter.

(2) Securities backed by the full faith and credit of the United

States government, or state government securities, that are: (A)

acceptable to; (B) endorsed to the order of; and (C) placed in the

possession of; the director.

(3) Personal property that is located in Indiana and owned by

the applicant, the market value of which is more than one million

dollars ($1,000,000) per property unit.

Indiana's proposed language at IC 14-34-7-0.5(1) and (2) would

allow operators to use as collateral the same forms of collateral

approved by the Federal regulation that define ``Collateral bond'' at

30 CFR 800.5(b)(5) and (6). The Federal regulation at 30 CFR 800.5(b)

do not include a provision that allows personal property to be used as

collateral, but neither do they specifically prohibit the use of

personal property for collateral.

With the exception of personal property, Indiana is proposing

collateral mechanisms to support a self-bond that are similar to the

collateral mechanisms allowed in the federal program to support a

permittee's indemnity agreement as bond. The Federal self-bonding

regulations at 30 CFR 800.23 do not contain a counterpart to Indiana's

revised statutes providing for the use of personal property as

collateral for self-bonds. The Federal regulations at 30 CFR 800.21 do

allow the use of real property and government-backed securities as

collateral for indemnity agreements. OSM eliminated the use of personal

property as collateral in a July 19, 1983, Federal Register notice (48

FR 32932). In that notice OSM stated that ``because of potential

problems, including potential loss of the property, difficulties

obtaining appraisals of such items, fluctuations in value, and the

potential attachment of liens, personal property as a general form of

collateral was deleted from the Federal definition of acceptable

collateral.'' Indiana's proposal to allow self-bonding applicants to

collateralize a self-bond with personal property is similar to the

State of Wyoming's self-bonding program approved by OSM (55 FR 30227,

July 25, 1990). As stated in the preamble to the approval of the

Wyoming regulations, OSM said that the State had addressed all of OSM's

concerns about the use of personal property, namely that with a minimum

value of $1 million per unit, the concern that property would be small

and hard to track is resolved. The Indiana proposal also requires a per

unit property value of $1 million. In addition, the State plans to

accept the value of property at the difference between the marke t

value of the State's projected liquidation costs. This is consistent

with the requirements under the Federal regulations to adjust the value

of collateral by a margin that represents liquidation cost in order to

avoid inflating the value of the property as bonding collateral. Both

the Wyoming self-bonding program and the proposed Indiana self-bonding

revisions require the applicant to meet certain financial tests in

order to use collateral to support the self-bond. In Wyoming, the tests

are an alternate set of tests. Indiana is proposing that an applicant

meet two out of the three standard financial tests in order to pledge

personal property collateral; therefore, this provides extra assurance

that the applicant will have the financial resources necessary to

perform the reclamation should the property decrease in value. Like the

Wyoming program, Indiana's proposal requires that the applicant provide

the State with a perfected, first lien security interest. Therefore,

the concern over liens is resolved. The State's proposal to require

maintenance reports will help assure that the collateral is maintained

in good working order. As with the Wyoming program, the Director finds

that the State's proposed use of personal property to collaterlize

self-bond is not inconsistent with not less effective that the Federal

regulations. Therefore, the Direct's is approving Indiana's proposed

definitions for the term collateral at IC 14-8-2-42.5 and IC 14-34-7-

0.5.

[[Page 59571]]

2. IC 14-8-2-274.5 and IC 14-34-7-2.5 Definition of Surface Mining

Control and Reclamation Act

Indiana proposes to add a definition of ``Surface Mining Control

and Reclamation Act,'' to its statutes. At IC 14-8-2-274.5, Indiana

proposes to add language as follows.

``Surface Mining Control and Reclamation Act,'' for purpose of

IC 14-34-7, has the meaning set forth in IC 14-34-7-2.5.

At IC 14-34-7-2.5, Indiana proposes to add the following definition

of ``Surface Mining Control and Reclamation Act.''

As used in this chapter, Surface Mining Control and Reclamation

Act means the federal Surface Mining Control and Reclamation Act of

1977 (30 U.S.C. 1201 through 1328).

The Federal regulations at 30 CFR 705.5 define the term ``Act'' to

mean the Surface Mining Control and Reclamation Act of 1977, Pub. L.

95-87. Indiana's proposed definition at IC 14-34-7-2.5, which refers to

the Surface Mining Control and Reclamation Act of 1977 (30 U.S.C. 1201

through 1328) as the ``Surface Mining Control and Reclamation Act,''

would not render the Indiana statutes less stringent than SMCRA or less

effective than the Federal regulations at 30 CFR 705.5. Therefore, the

Director is approving Indiana's definition of at IC 14-8-2-274.5 and IC

14-34-7.2.5.

3. IC 14-34-7-1 Definition of Liabilities

Indiana's existing statute at IC 14-34-7-1 is identical to the

Federal definition of libitlities at 30 CFR 800.23(a). The State

proposes to amend the definition of liabilities as:

``obligations to transfer assets or provide services to other

entities in the future as a result of past transaction. The term

does not include amounts that are required to be recorded for

financial accounting purpose under Statement of Financial Accounting

Standards number 106 issued by the Financial Accounting Standards

Board and effective December 1990.''

The State proposes to allow companies to exclude FAS 106

obligations form liabilities for the purpose of applying for self-

bonding.

As outlined in OSM's September 13, 1996, letter to Indiana, this

proposal is deemed to be less effective than the counterpart Federal

regulations. The Federal regulations require that all liabilities be

shown on an applicant's balance sheet prepared in accordance with

Generally Accepted Accounting Principles (GAAP). GAAP follows the

accounting rules established by the Financial Accounting Standards

Board (FASB), a private organization funded by professional accounting

associations.

In its October 25, 1996, response to OSM's letter, the State

supports its position that FAS 106 liabilities do not need to be

included in an applicant's financial statement by referring to public

comments dated February 6, 1996 (Administrative Record Number IND-

1532), as its justification.

OSM does not believe that these comments reflect the most current

and/or the most accurate information on FAS 106 and its effects on

self-bonding applicants. Therefore, OSM continues to consider the

State's proposed definition of liabilities to be less effective than

the Federal regulations for the reasons discussed below.

The information and journal articles that the comments referred to

have subsequently been updated by more current thinking and journal

articles on the subject. In addition, the State has not provided any

evidence that eliminating FAS 106 liabilities from an applicant's

balance sheet provides the same level of information and accuracy for

financial reporting that is gained by reporting all liabilities (as

required by the FASB). Part of the FAS 106 liability includes, the

current portion of the liability (for retirees for the current year).

Eliminating the total FAS 106 obligation from the balance sheet would

result in an inaccurate accounting of the applicant's current

obligations. This would result in a current ratio that does not

represent the actual current obligations of the applicant.

Below is an analysis of the FAS 106 obligations and reasons why

removing the obligations from an applicant's balance sheet is less

effective than the Federal regulations. A new accounting rule, FAS 106,

issued by the FASB in December 1990, requires companies to accrue the

costs of postretirement health benefits and to show this as a liability

on their balance sheets starting in 1993. Prior to 1993, these

obligations were recognized on a pay-as-you-go-basis. FAS 106

obligations include health benefits earned during an employee's active

employment and paid out at retirement. Computing the amount of the

liability involves a number of factors including long-term interest

rates and the health care cost trend rate. As stated in ``FAS 106 Still

Looms Large,'' published in the January 23, 1995, issue of Pensions and

Investments, ``While many investment managers and financial analysts

believe 1993's big writeoffs and resulting earnings losses put the bad

news behind, there will be ongoing, albeit smaller, financial problems

associated with FAS 106, that could produce a drag on earnings,

according to benefits specialists and actuaries.''

The State's proposed change to the definition of liabilities would

allow self-bonding applicants to compute the self-bond qualifying

ratios and financial limitations based on pre-FAS 106 financial data,

thereby applying the 25 percent of net worth test to pre-FAS 106 net

worth. Under this proposal, the State would not know the extent and the

effects of the applicant's FAS 106 obligation on the applicant's long-

term financial condition. This could result in the State accepting a

self-bond from an applicant whose long-term FAS 106 obligations are

material enough to threaten the future viability of the self-bonding

arrangement. While the obligation as a whole does not represent a cash

outlay in any given accounting period, it eventually must be paid

whether a company amortizes the amount (delayed recognition) or

accounts for it on an ``immediate recognition basis.'' While some

components of the FAS 106 obligation are estimated, to recognize only

that part of the obligation being paid to current retirees, or to

exclude the liability altogether, results in an inaccurate picture of a

companys' long term financial condition. The longer the life of the

mine for which a self-bonding arrangement is sought, the greater the

significance of the FAS 106 obligation because of the long-term nature

of reclamation.

Articles published in the February and March 1993, issues of

Corporate Cashflow Magazine and Financial World state that bond rating

services such as Moody's and Standard and Poor's will consider the

effects of FAS 106 when rating a company's bond issues. Companies'

bonds will be rated on the basis of both pre-FAS 106 and post-FAS 106

financials. One of the articles advises readers to ``Ignore FAS 106 at

your peril * * *'' and that `` `Over time there will be credit-

quality implications for those companies that are unable to recoup FAS

106 losses through earnings or some other balance-sheet enhancement,

such as issuing new stock,' says Joseph C. Bencivenga, managing

director and head of corporate bond research for Salomon Brothers. Adds

Brown Brothers' Hill: `Future claims on cash should not be overlooked

by equity investors in their investment decision-making. This is

especially true for the more labor-intensive, unionized industries with

large postretirement benefit liabilities, where retired employees

sometimes have a claim on cash equal to that of the shareholders.' ''

In the January 23, 1995, issue of Pensions and Investments, the

[[Page 59572]]

article entitled ``FAS 106 Still Looms Large,'' states that ``In 1993,

most companies adopted FAS 106 and recognized obligations for past

service liabilities on the balance sheet, resulting in writedowns of 7%

to 12% in book value among Standard & Poor's 500 companies alone.''

The above articles on FAS 106 are in contrast to earlier articles

on the subject published in 1989 and 1991 that indicated that bond

rating services, Moody's and Standard and Poor's (S&P), would ignore

the effects of FAS 106 and that bond ratings would stay the same.

However, as indicated in the above 1993 and 1995 articles, after

companies began implementing the requirement in 1993, the post-retiree

health benefit obligations far exceeded amounts anticipated causing

rating companies such as S&P and Moody's to take a second look at the

effects of these obligations. According to ``FAS 106 Still Looms

Large,'' in the January 23, 1995, issue of Pensions and Investments,

``liabilities that resulted in billions of dollars in reduced

operations earnings last year still hold some expensive surprises.

Industry sources warn there may be additional reductions in earnings

linked to higher ongoing annual expenses caused by Financial Accounting

Standards FAS 106.''

In its summary to the FAS 106 statement, the FASB stated that one

of the Board's objectives in issuing this Statement is`` * * * to

enhance the ability of users of the employer's financial statement to

understand the extent and effects of the employer's undertaking to

provide postretirement benefits to its employees by disclosing relevant

information about the obligation and cost of the postretirement benefit

plan and how those amounts are measured.''

A commenter (Administrative Record Number IND-1532), in support of

the State's proposed amendment, stated that the Indiana statute (SEA

125) was ``enacted to remedy a situation resulting from a change in

accounting standards [FAS 106] which occurred subsequent to the

original enactment of statutory provisions governing self-bonding in

Indiana in 1988, as a result of which most Indiana coal producers are

no longer eligible to self-bond.'' The commenter believes that the

Federal self-bonding regulations should also be revised in light of the

FAS 106 change to accounting principles especially because ``credit-

rating agencies, including the bond rating agencies referred to in

section 800.23(b)(3)(i) [S&P and Moody's], have decided not to change

credit ratings based on FAS 106.'' To support the State's proposal, the

commenter cited an article published in 1989, prior to the 1993

implementation of FAS 106 and prior to the financial industry knowing

the actual effects of implementing FAS 106.

OSM disagrees with the commenter that bond rating companies have

decided not to change credit [bond] ratings and that the best approach

is to follow the lead of credit-rating agencies as justification for

changing the self-bonding regulations. Based on OSM's discussions with

Standard and Poor's (S&P) and Dun and Bradstreet (D&B), and in

reviewing current literature as discussed above, OSM believes that the

effects of FAS 106 apply to many aspects of an applicant's financial

statement and are too complex to be discounted by simply removing the

obligation from liabilities. S&P and Moody's employ many variables

related to FAS 106 obligations when establishing a company's bond

rating. FAS 106 obligations are considered.

During its review of the State's proposal, OSM conducted research

to determine how the credit industry is treating FAS 106 obligations in

underwriting decisions. Financial analysts from (S&P) and (D&B)

discussed their procedures for recognizing the FAS 106 obligation with

OSM. One senior analyst from S&P said that S&P recognizes the FAS 106

transaction as a ``non-cash'' charge and retains the prior bond rating

if the fundamentals of a company have not changed. According to S&P's

written guidance, ``Corporate Finance Criteria,'' S&P states that FAS

106 obligations:

``are not viewed in the same light as straight debt, since amounts

to be paid in future years are subject to change. Nonetheless, S&P

believes that, for analytic purposes, the entire unfunded APBO

[Accumulated Postretirement Benefit Obligation] should be reflected

in the balance sheet as a liability regardless of whether a company

opts for immediate or delayed recognition [of the liability] under

FAS 106 * * *. Moreover, it is critical to have one basis for

analysis to allow comparison between companies. In assessing capital

structure, S&P makes balance sheet adjustments so that the unfunded

APBO is fully recognized * * *. In cases where a company's retiree

medical liability burden is material, S&P does not rely on any

single figure as a definitive representation of the OPEB [Employers'

Accounting for Post-retirement Benefits other than pensions].

Rather, the analysis may consider several alternative estimates and

financial ratios based on each * * *. The level of cash outlays has

the most immediate impact on a company's financial health. Given the

trend of dramatic increases in spending for these benefits, S&P

focuses on prospective cash outlays * * *. In assessing the

significance of OPEBs and other debt-like obligations to a company,

the ratio of total liabilities to net worth becomes a more

significant ratio.''

As shown above, S&P considers the effects of FAS 106 when assigning

bond ratings; and in fact, S&P adjusts the obligation so that it is

fully recognized (rather than amortized) in order to have a basis of

comparison between companies. If an applicant can retain an A or higher

bond rating after implementing FAS 106, and after being analyzed by S&P

or Moody's, it may still qualify for self-bonding.

In discussions with OSM, two Dun and Bradstreet financial analysts

indicated that they might drop a company's Dun and Bradstreet credit

rating as a result of FAS 106; however, this would be based on many

considerations including whether a company made a profit and had

positive cash flow after implementing FAS 106. One analyst said that if

the financial effects of a one-time charge were significant, but other

items in the financial statement indicated the company was strong, he

might change the credit rating to a ``blank'' rating [no rating

assigned] with notes of explanation. Both analysts indicated that

following a company's implementation of FAS 106, factors that are

heavily weighed during the credit rating process are a company's cash

flow, profitability, and ranking when compared with industry peers

(industry norms).

Bond ratings and credit ratings may or may not be changed depending

on the overall financial condition of the company being rated.

Therefore, eliminating the FS 106 obligation from liabilities based on

assumptions that the liability is being ignored by the rating services

and the investment and credit industries is incorrect.

Based on the above discussion, the Director is not approving the

proposed revision to Indiana's definition of liabilities at IC 14-34-7-

1, and is requiring Indiana to remove the disapproved language. To be

no less effective than the Federal regulations, the State needs to

retain its current approved definition of liabilities that requires all

liabilities be reported in the application, and not exclude FAS 106

obligations from the definition of liabilities. A possible future

option for dealing with FAS 106-type obligations would be to develop

alternative self-bonding criteria, no less effective than the Federal

regulations, that recognize FAS 106 obligations as a liability while

still allowing financially strong companies to qualify for self-

bonding.

[[Page 59573]]

4. IC 14-34-6-14.3 Release of Bond From Undisturbed Areas

Indiana proposes to add the following new section at 14-34-6-14.3.

The director may release the bond, deposit, or letter of credit

covering an area that has not been disturbed by surface mining

activities. A release under this subsection is not subject to the

public notice and hearing requirements set forth in sections 7

through 14 of this chapter.

Indiana's proposed language is similar to the Federal provision at

30 CFR 800.15(c) where a permittee may request reduction of the bond

amount upon submission of evidence to the regulatory authority that the

method of operation or other circumstances reduces the estimated cost

for the regulatory authority to reclaim the bonded area. Under this

provision, bond adjustments which involve undisturbed land or revision

of the cost estimate of reclamation are not considered bond releases

subject to the performance bond release requirements at 30 CFR 800.40.

Therefore, Indiana's proposed new section at 1C 14-34-6-14.3 would not

render Indiana's statutes less stringent than SMCRA or less effective

than the Federal regulations.

The Director notes that Indiana's reference to the term

``subsection'' in the proposed statute should be ``section'' and is

requesting Indiana to correct this error.

5. IC 14-34-7-4(b) Definition of Current Liabilities

Indiana proposes to revise IC 14-34-7-4(b) by making nonsubstantive

language changes, designating the existing provision as (b)(1), and

adding (b)(2). Subsection (b)(2 specifies that ``current liabilities''

also include dividends payable on preferred stock within one (1)

quarter, if declared, or one (1) year, if a pattern of declaring

dividends each quarter is apparent from past business practice.

Existing IC 14-34-7-4(b) is substantially the same as the Federal

definition of ``current liabilities'' at 30 CFR 800.23(a). Indiana's

proposed additional language at (b)(2) would add specificity to the

definition of ``current liabilities'' and would not render the State

statutes less stringent than SMCRA or less effective than the Federal

regulations at 30 CFR 800.23(a).

6. IC 14-34-7-8 Information Requirements for Self-Bonding

Indiana proposes to add a provision at IC 14-34-7-8(2) that

requires submission of unaudited financial statements for completed

quarters in the current fiscal year not later than sixty (60) days

after the end of each quarter. The Federal regulations at 30 CFR

800.23(b)(4) also require submission of such statements but do not set

a specific time for submittal. Indiana's proposed requirement clarifies

when the statements are to be submitted, and it will not render the

State statutes less stringent than SMCRA or less effective than the

Federal regulations.

C. Revisions to Indiana's Statutes With No Corresponding Federal

Provisions

1. IC 14-8-2-49.5 and IC 14-34-7-0.6 Definition of Comparative Balance

Sheet

Indiana proposes to add a definition of ``Comparative balance

sheet'' to its statutes. At IC 14-8-2-49.5, Indiana proposes to add

language as follows.

``Comparative balance sheet'', for purposes of IC 14-34-7, has

the meaning set forth in IC 14-34-7-0.6.

At IC 14-34-7-0.6, Indiana proposes to add the following definition

of ``Comparative balance sheet.''

As used in this chapter, comparative balance sheet means items

accounts from a number of the operator's successive yearly balance

sheets arranged side by side in a single statement.

Although SMCRA and the Federal regulations do not include a

definition for ``comparative balance sheet,'' the term, as defined by

Indiana, is a generally accepted accounting term. Therefore, the

Director is approving Indiana's proposed definitions at IC 14-8-2-49.5

and IC 14-34-7-0.6. The Director notes that an apparent typographical

error exists in the proposed definition at IC 14-8-2-49.5, where ``item

accounts'' should read ``item amounts,'' and is requesting Indiana to

correct this error.

2. IC 14-8-2-49.6 and IC 14-34-7-0.7 Definition of Comparative

Income Statement

Indiana proposes to add a definition of ``Comparative income

statement'' to its statutes. At IC 14-8-2-49.6, Indiana proposes to add

language as follows.

``Comparative income statement'', for purposes of IC 14-34-7,

has the meaning set forth in IC 14-34-7-0.7.

At IC 14-34-7-0.7, Indiana proposes to add the following definition

of ``Comparative income statement.''

As used in this chapter comparative income statement means an

operator's income statement amounts for a number of successive

yearly periods arranged side by side in a single statement.

Although SMCRA and the Federal regulations do not include a

definition for ``comparative income statement,'' the term, as defined

by Indiana, is a generally accepted accounting term.

Therefore, the Director is approving Indiana's proposed definitions

at

IC 14-8-2-49.6 and IC 14-34-7-0.7.

3. IC 14-34-5-10 Affected Area Status Reports

Indiana proposes to amend IC 14-34-5-10, pertaining to affected

area status reports, by removing time specific submittal requirements,

adding language authorizing the State to adopt content and data filing

requirements under its regulations, and making nonsubstantive wording

changes.

There are no counterpart provisions in the Federal regulations that

require submission of affected area status reports; however, the

States' proposed changes at IC 14-34-5-10 are not inconsistent with

SMCRA or less effective than the Federal regulations.

4. IC 14-34-6-14.6 Duplicate Bond Coverage/Reclamation Agreements

At IC 14-34-6-14.6, Indiana proposed to add a new section to its

statutes. Subsection (a) specifies that the proposed section applies

when an applicant or permittee submits a bond, deposit, or letter of

credit covering an area that has been disturbed by surface coal mining

activities and is covered by another bond, deposit, or letter of credit

previously submitted by another permittee.

Indiana's proposed provision at subsection (b) allows release of

the previously submitted bond, deposit, or letter of credit when the

director of IDNR accepts the bond, deposit, or letter of credit

submitted by the new applicant or permittee for the previously

disturbed area. The new bond, deposit, or letter of credit is subject

to the bonding standards of IC 14-34-6, sections 7 through 14. In its

September 13, 1996, letter to Indiana, OSM expressed concern that as

proposed at IC 14-34-6-14(6), the first bond could be released prior to

issuance of the second permit, and if for some reason a permit is never

issued to the second operator, the state could be left with an

unreclaimed and unbonded site, since the previously submitted bond

would have already been released. In its October 25, 1996, response to

OSM's letter, Indiana explained that for the purposes of bond, the term

``accept'' at proposed IC 14-34-6-14.6(b)(1) coincides with permit

approval. The new bond would not be approved until the replacement

permit was approved an no previous bond would be considered for release

until that time. Also, both companies would have to agree as to the

acreage size and location and an acceptance of liability statement

would have to be received from the new

[[Page 59574]]

permittee. Indiana supported its explanation by referring to its rule

at 310 IAC 12-4-15 which states that the director of IDNR shall not

release existing performance bonds until the permittee has submitted

and the director of IDNR has approved acceptable replacement

performance bonds. Indiana's proposed provision at subsection (b) is

not inconsistent with the Federal regulations at 30 CFR Part 800 that

require permit areas to be adequately bonded or the bonding

requirements at 30 CFR 774.17 for transfer, assignment, or sale of

permit rights. The Director is approving subsection (b) with the

understanding that Indiana will place conditions on the permit of the

second permittee that require assumption of the reclamation obligation

of the previous permittee, that specifically give notice to the second

permittee of the State's intention to release the previous permittee's

bond in reliance on the assumption of liability by the second

permittee, and that require any surety bond or other contract securing

the reclamation obligation of the second permittee to reflect the

assumption of liability and the intent to release the previous bond.

Indiana's proposed provision at subsection (c) allows two or more

persons who are applicants or permittees, when each has filed a bond,

deposit, or letter of credit covering the same area, to enter into an

agreement, subject to approval by the director of IDNR, that allocates

responsibility among the persons for the reclamation of the area. There

are no counterpart provision in the Federal regulations that address

overlapping permit areas that are double-bonded, but this proposed

provision is not inconsistent with the Federal regulations at 30 CFR

Part 800 that require permit areas, or increments of permit areas, to

be adequately bonded.

Based on the above discussion, the Director is approving IC 14-34-

6-14.6.

5. IC 14-34-7-4(d)-(g) Conditions for Self-Bonding

On its own initiative, the State proposed to revise IC 14-34-7-4 by

making subsection (d) subject to new subsection (f), which pertains to

requirements for an applicant to meet industry norms for the financial

ratio tests, and by specifying at subsection (d) that the qualifying

criteria in Section 4 must be met by the applicant at the time the

self-bond is accepted [approved by the State as the bond].

The State also proposes to expand the existing standard qualifying

criteria at subsection (d). The State is adding criteria at (d)(3),

(4), (5), and (6) that require an applicant not to be subject to any

outstanding cessation order issued under the State program or the

Surface Mining Control and Reclamation Act, not owe any civil penalties

or fees, not be delinquent in paying penalties or fees, and not be

listed on the Applicant Violator system (AVS).

The State is adding a provision at (d)(7)(A), previously codified

as (d)(3)(A), that requires an applicant to identify the bond rating

service [Moody's or Standard and Poor's] that rated its bond issues.

The State is adding a provision to (d)(7)(B), and (C), previously

codified a (d)(3)(B) and (C), that requires an applicant to document

its ratio values for the ratio of current assets to current liabilities

and the ratio of total liabilities net worth for the four (4) years

preceding the application, in addition to the existing requirement to

demonstrate that the applicant met the required values for the year

[fiscal year] immediately preceding the application. The State is

adding subsection (e) that requires the applicant to add the proposed

self-bond amount, excluding any amount currently accrued for

reclamation that appears on the balance sheet, to either current

liabilities or total liabilities before calculating the required

financial ratio tests included in subsection (d)(7)(B) or (d)(7)(C).

The provisions added at subsections (d)(3), (4), (5), (6), and (7)

that address an applicant's compliance status are no less effective

than the Federal regulations. These proposals are consistent with OSM's

preamble to the final self-bonding regulations (48 FR 36418, August 10,

1983) where in response to comments OSM stated that it ``agrees that

the regulatory authority should consider the operator's past history of

compliance and patterns of violation in deciding whether to allow an

operator to self-bond. OSM does not intend to establish regulations

which would detail how a history of compliance should be judged,

however, and leaves this to the regulatory authority who has the final

responsibility to accept or reject an application to self-bond.'' The

proposed addition to subsection (d)(7)(A) requiring the applicant to

identify which rating company rated the applicant's bonds would provide

the State with more detailed information about the bond applicant's

bond rating.

The State proposes to add new requirements at subsection (d)(8)(C)

and (D), previously subsection (d)(4), that require an application to

include comparative income statements and comparative balance sheets

for a five-year period preceding the application, a list of liens filed

against any assets of the applicant in any jurisdiction in the United

States for an amount that is more than 2 percent of the applicant's net

worth, a list of every action pending against the applicant, a list of

every unsatisfied judgment rendered against the applicant within the

seven years preceding the application, and a list of any petitions or

bankruptcy actions against the applicant. under Indiana's proposed

action at subsection (g), the State is requiring details about the

listed liens, actions, and petitions such as jurisdiction, case number,

parties, and status.

The proposed additional information that must be submitted with an

application by the applicant or the applicant's corporate guarantor at

subsection (d)(8)(C) and (D) is not inconsistent with the Federal

regulation at 30 CFR 800.23(b)(4)(iii) that allows a regulatory

authority to require additional unaudited information.

The State is adding subsection (f) that requires an applicant's

financial ratios to be at least as favorable as those reported by Dun

and Bradstreet's report of ``Industry Norms and Key Business Ratios.''

The proposed addition at subsection (f) requires that an

applicant's key business ratios [as reported by Dun & Bradstreet] must

be ``at least as favorable as those listed for the medium performers in

the Dun and Bradstreet listing of Industry Norms and Key Business

Ratios.'' This requirements is in addition to the requirements at

subsections (d)(7)(B) and (C) for applicants to meet the standard

financial tests of at least 1.2:1 for the ratio of current assets to

current liabilities and not more than 2.5:1 for the ratio of total

liabilities to net worth. Comparing an applicant to its industry norms

would provide the State with information about how the applicant

currently compares with its industry and can be useful in seeing

financial trends.

In its October 25, 1996, response to OSM's letter dated September

13, 1996, the State explains and reaffirms that the qualifying criteria

of the existing rules at subsections (d)(7)(B)(ii) and (iii) take

precedence over the proposed qualifying criteria at subsection (f).

OSM's letter recognized that the criteria proposed at subsection (f)

are in addition to the criteria at subsection (d) but suggested that

the State clarify that the criteria at subsection (d) would be the true

qualifying criteria in any case. Given the financial criteria at

subsection (d) must be met at a minimum, the State's proposal is no

less effective than the Federal regulations.

[[Page 59575]]

OSM recommends that the State clarify which industry norms the

applicant is required to meet at subsection (f). The Dun and Bradstreet

industry norms report includes 15 different ratios. In addition,

specifying time periods during which the norms must be met is important

because the norms are dynamic and are updated periodically in the Dun

and Bradstreet database. A cautious approach to comparing an applicant

with industry norms is recommended since the norms could indicate an

overall weak industry.

Based upon the above discussions, the Director finds that the

proposed revisions to Indiana's self-bonding criteria at IC 14-34-7-

4(d) through (g) are not inconsistent with the Federal requirements for

self-bonding at 30 CFR 800.23(b), and the Director is approving them.

6. IC 14-34-7-4.1 Self-Bonding Reapplication and Replacement

The State proposes to add requirements at IC 14-34-7-4.1 for self-

bonded permittees to either replace existing self-bonds in effect on

January 1, 1995, with another allowable form of bond or reapply for

self-bonding under the revised, proposed self-bonding provisions. If an

application is not accepted under the proposed provisions, then the

self-bond must be replaced with another allowable form of bond.

There is no direct Federal counterpart to the State proposal

revisions; however, that part of the State's proposal that pertains to

requirements for existing self-bonded permittees who no longer meet the

criteria is not inconsistent with 30 CFR 800.23(g) which requires a

self-bond to be replaced within 90 days of the permittee becoming aware

that it no longer meets the criteria for self-bonding. Therefore, the

Director is approving this new section.

7. IC 14-34-7-7 Self-Bonding Indemnity Agreement

The State proposes to add a provision at section 7(1) that requires

all parties to the indemnity agreement to be liable to the director of

IDNR for the costs of pursuing forfeiture of any self-bond posted by

the permittee and liable for the costs of reclamation that are in

excess of the forfeited self-bond amount. At section 7(6), the State is

adding a requirement that all bonds and guarantees must be indemnified

corporately and personally by all principals.

The existing State statute is substantively the same as the Federal

counterpart regulations that require all parties bound to the agreement

to execute an indemnity agreement for the sum of the self-bond. The

State statute and Federal regulations require that the indemnity

agreement be executed by two authorized corporate officers of all the

parties bound and that the applicant or corporate guarantor must

complete the approved reclamation plan or pay to the director of IDNR

the amount necessary to complete the approved reclamation plan.

The State's proposed additional requirements for the self-bonding

indemnity agreement do not have direct Federal counterpart

requirements. However, the State's proposed requirements are not

inconsistent with or less effective than the Federal regulations at 30

CFR 800.23(e) and 30 CFR 800.50(d)(1), and the Director is approving

the proposed revisions at IC 14-34-7-7. Requiring that all self-bonds

and guarantees be indemnified corporately and personally by all

principals affords the State additional protection against nonpayment

in the event of bond forfeiture.

8. IC 14-34-7-7.1 Collaterized Self-Bonds

As also discussed in finding No. B.1, Indiana proposes to revise

its program to allow the use of collateral for securing self-bonds. The

existing State statute requires that self-bonding applicants qualify on

the basis of financial criteria at IC 14-34-7-4 without additional

collateral. The Federal regulations at 30 CFR 800.23 do not contain a

counterpart to Indiana's revised regulations; however, a similar

proposal was approved for the Wyoming program on July 25, 1990 (55 CFR

30221).

The State proposes to allow a self-bonding applicant who cannot

qualify on the basis of meeting the financial criteria or limitations

at IC 14-34-7-4 to offer collateral in the form of real property,

government-backed securities, and/or personal property. The real

property must be located in Indiana, and a perfected, first-lien

security interest made in favor of and deposited with the IDNR.

Securities must be backed by the United States or the state government,

and they must be endorsed to the order of and placed in the possession

of the director of IDNR. The personal property must be located within

the State, owned by the operator, and valued at more than $1 million

per property unit. In addition to the offer of collateral, the

applicant must execute an indemnity agreement that complies with IC 14-

34-7-7.

For any property collateral offered to support a self-bond, the

property must be valued at the difference between the fair market value

of the property and reasonable expenses the IDNR anticipates incurring

in selling the property. The fair market value must be determined by an

appraiser proposed by the applicant. A description of the property and

a statement of any liens, encumbrances, or adverse judgments imposed on

the property and any pending litigation relating to the property is

also required.

Real property may not include lands that are in the process of

being mined or reclaimed or lands that are the subject of a mining

application. Although, the operator may offer land that has been

released from bond. Securities offered as collateral may include only

securities that meet the definition of collateral at IC 14-34-7-0.5.

Personal property must be in the possession of the operator; must be

encumbered; and not include property already being used as collateral,

goods that the operator sells in the ordinary course of business,

fixtures, or certificates of deposit that are not federally insured.

Evidence of ownership of property offered as collateral must be

submitted in specified forms.

In order to offer personal property collateral, Indiana requires

the applicant to satisfy the financial requirements in IC 14-34-7-

4(d)(7) (B) and (C), which are two of the standard financial tests in

the Indiana program. This proposal is similar to the approved Wyoming

self-bonding program except that in the Wyoming program personal

property collateral is only accepted when the applicant cannot meet the

standard tests but can meet an alternative set of financial tests.

If personal property is accepted as collateral, quarterly and

annual maintenance reports from the applicant are required. The

director of IDNR may also require quarterly or annual inspections of

the personal property. The director of IDNR shall require possession of

the personal property or a mortgage or security agreement executed by

the applicant with the right and power to sell or otherwise dispose of

the property so as to ensure reclamation. While in possession of the

IDNR, any income received from the collateral shall be remitted to the

applicant. An applicant may substitute other property for any property

accepted and held as collateral under specified conditions. If

collateral is posted to support a self-bond, the applicant shall notify

all persons that have an interest in the collateral and provide copies

of the notices to director of IDNR.

In its October 13, 1996, letter to Indiana, OSM expressed concern

[[Page 59576]]

regarding three provisions in the State's collateral proposal that

appeared to be less effective than the Federal regulations at 30 CFR

800.21 for collateral bonding.

(1) To be no less effective than the Federal regulations, the State

needs to require that the market value of the individual or combined

collateral (adjusted by a margin of value for the State's cost of

liquidation) equals or exceeds the required bond amount under the self-

bond indemnity agreement. In its October 25, 1996, response, the State

explained that it intended to implement its proposed statute at section

7.1(b)(1) so that the cost of liquidating the property used as

collateral will be deducted from the market value when determining the

bonding value of the collateral. Given that the State will implement

the proposed section to require that the collateral value, less

liquidation costs, equal the required bond amount, this portion of the

proposal is consistent with the Federal requirements at 30 CFR 800.21

and therefore no less effective than the Federal regulations.

(2) To be no less effective than the Federal regulations for real

property collateral at 30 CFR 800.21(c)(2), the State must require that

real property be appraised by an independent certified appraiser. In

its response to OSM's concerns, the State indicated that while not

stated, it intends to only accept appraisers who are ``professionally

qualified.'' According to the Indiana Real Estate Appraisal Licensurer

and Certification Board, Indiana statutes at IC 25-34.1-8-10 requires

that appraisers in Indiana be licensed and certified. On September 22,

1997 (Administrative Record No. IND-1591), OSM discussed this issue

with Indiana. Indiana stated that coal operators are required to comply

with all Indiana rules and statutes, and they will be required to

comply with IC 25-34.1-8-10. Therefore, Indiana's proposal is

consistent with SMCRA and no less effective than the Federal

regulations at 30 CFR 800.21(c)(2).

(3) The State's proposed statute at subsection (b)(2) requires that

real property liens and encumbrances be disclosed in the application.

This implies that the State has discretion to accept encumbered real

property. In its letter, OSM stated that to be no less effective than

the Federal regulations on real property collateral, the State must

require that any real property accepted as collateral be unencumbered.

In its response to this concern, the State explained that it does not

intend to accept property that is encumbered and that it included the

disclosure requirement as an aid to learning of liens and other

encumbrances that might not otherwise be apparent (so as to prohibit

acceptance of encumbered property). While the language is not clear in

this regard, the State indicated that it will implement this proposal

so that only unencumbered property is acceptable as collateral.

Therefore, the proposal is consistent with SMCRA and no less effective

than the Federal regulations at 30 CFR 800.21(c).

The Director finds that Indiana's proposed provisions at IC 14-34-

7-7.1 are not inconsistent with the Federal regulations at 30 CFR

800.23 concerning self-bonding and are no less effective than the

Federal regulations at 30 CFR 800.21 concerning collateral bonds.

Therefore, the Director is approving Indiana's proposed provisions at

IC 14-34-7-7.1.

9. IC 14-34-7-10 Self-Bonding Report Requirements

At IC 14-34-7-10, Indiana proposes to add a new section to its

statutes to require that self-bonding applicants provide the director

of IDNR with an independent public accounting consultant's report if

requested. This is in addition to the financial statements and a report

prepared by an independent certified public accountant that is required

under IC 14-34-7-4(d)(8) and IC 14-34-7-8. The report shall be provided

within 90 days after the applicant is notified that the report is

required. The consultant must verify that the financial information

required under IC 14-34-7-4 was prepared in accordance with generally

accepted accounting principles and that the accounting principles were

applied consistently for each year of the period for which the

information is submitted. The consultant must also state the amount and

reason for any restatement of the financial information that is

necessary to meet the consistency requirement. Finally, the consultant

must state whether any information reviewed would lead him to conclude

that the applicant would not meet the requirements of IC 14-34-7-4 at

the end of each of the three fiscal years ending after the month the

report is completed. This report may also be required after the

applicant's self-bond is accepted, but not more than once every three

years unless the consultant cannot project the applicant's ability to

meet the self-bonding financial criteria for each of the three fiscal

years. If the consultant is unable to conclude that the applicant would

meet the requirements of IC 14-34-7-4 for each of the three fiscal

years, the applicant must submit an updated report annually. If the

applicant fails to submit a report, the director of IDNR shall refuse

to accept the self-bond until the applicant files the report. If a

permittee who has posted a self-bond fails to submit a report when

required by the director of IDNR, the permittee may be required to post

an alternate form of bond.

In its letter of October 30, 1996 (Administrative Record No. IND-

1545), Indiana indicated that the purpose of the option of financial

projections is intended to give the director of IDNR a greater

understanding for any future problems that may be anticipated that

could influence the applicant's financial stability and is viewed as

another tool for assessing risk.

There are no Federal counterpart provisions for a qualified

independent public accounting consultant report that projects an

applicant's future ability to meet self-bonding requirements. However,

the State's proposed provisions are not inconsistent with the Federal

regulations at 30 CFR 800.23(b)(4)(i) that require that an applicant's

financial statements be audited by an independent certified public

accountant with no adverse opinion or 30 CFR 800.23(f) that allow

regulatory authorities to require updated financial information and

independent certified public accountants' reports annually. Therefore,

considering that the provisions in IC 14-34-7-10 are in addition to the

State's counterparts to 30 CFR 800.23(b)(4)(i) and (f), the Director is

approving them.

10. IC 14-34-7-11 Self-Bond Coverage Requirements

Indiana proposes to add provisions requiring permit increments that

are self-bonded to be 100 percent self-bonded. For example, bond

coverage of a permit increment could not consist of a combination of a

surety bond and a self-bond. This is not inconsistent with SMCRA or the

Federal regulations at 30 CFR Part 800 which allow permit increment

bonding and require the regulatory authority to prescribe by regulation

terms and conditions for performance bonds, including self-bonds.

The State also proposes to allow self-bond coverage on areas where

as of July 1, 1995, grading has been deferred, or the approved deferral

extended. However, areas where grading was deferred after July 1, 1995,

may not be bonded by self-bonds or the Indiana bond pool. The State

proposes to remove the self-bonding and bond pool option from companies

that have been given approval to defer grading of an area in order to

assure more long-term

[[Page 59577]]

certainty by requiring other forms of bond such as corporate surety

bonds for grading-deferred areas. There are no Federal counterpart

regulations for bond coverage of grading deferral areas. The State's

bonding provisions at this section are not inconsistent with SMCRA or

the Federal regulations at 30 CFR 800.23 on self-bonding in that self-

bonding is a discretionary bonding program intended for financially

strong companies that are in compliance with the statute, permit, and

regulations. Therefore, the Director approves Indiana's proposed

statute at IC 14-34-7-11.

11. IC 14-34-7-12 Self-Bond Phase I Grading Release Requirements

Indiana proposes additions to the self-bonding statutes that

restrict the use of self-bonding when an area requires Phase I

reclamation or is eligible for a Phase I grading release but the

permittee has not applied for the release before the ``second November

1 after the year in which the coal was removed from the site covered by

the self-bond.'' If this occurs, or if a release application is filed

within the required time frame but not approved, then the permittee

must replace the self-bond with another form of bond within 90 days.

Permittees must also submit annual reports of acres under self-bond

that have been affected and reclaimed.

Indiana proposes to exempt acreage and structures used to

facilitate active mining and reclamation operations from the

requirements of this section.

The State's proposal restricts the use of self-bonding for areas

that have been used for fly or bottom ash disposal, flue gas

byproducts, or coal processing wastes to 10 years after disturbance or

after the acceptance of the self-bond, whichever is later. An

alternative form of bond must be posted for the area within 90 days of

its becoming ineligible for self-bonding.

If Indiana determines that an area is no longer eligible for self-

bonding and an alternative form of bond is posted, the area is never

again eligible for self-bonding and may not be bonded by Indiana's

surface coal mine reclamation bond pool.

There are no direct counterpart provisions in SMCRA or the Federal

regulations. The Director finds that the State's proposal is not

inconsistent with SMCRA or the Federal regulations at 30 CFR 800.23

that allow regulatory authorities to accept self-bonds, and she is

approving IC 14-34-7-12.

12. IC 14-34-7-13

Indiana proposes to add the following new section at IC 14-34-7-13.

For purposes of IC 1-1-1-8, if the amendments to IC 14-34-7-1,

as amended by SEA 125-1995, are held invalid or otherwise

unenforceable, the other amendments to IC 14-34-7 made by SEA 125-

1995 are also void.

There are no counterparts to this proposal in SMCRA or the Federal

regulations. However, as discussed in the findings above, the proposed

amendments to IC 14-34-7 have no direct Federal counterparts.

Therefore, the proposal to declare them void under the circumstances

specified would not render the Indiana program less stringent than

SMCRA or less effective than the Federal regulations. However, in

accordance with 30 CFR 732.17(b)(3), Indiana must notify OSM of any

actions it takes because of IC 14-34-7-13 that would effect or change

any of the proposals at IC 14-34-7 that are being approved in this

document.

IV. Summary and Disposition of Comments

Public Comments

The Director solicited public comments and provided an opportunity

for a public hearing on the proposed amendment. Comments were received

from the Indiana Coal Council and the National Coal Association. These

comments have been addressed in finding No. III.B.3. Because no one

requested an opportunity to speak at a public hearing, no hearing was

held.

Federal Agency Comments

Pursuant to 30 CFR 732.17(h)(11)(i), the Director solicited

comments on the proposed amendment from various Federal agencies with

an actual or potential interest in the Indiana program. No Federal

agencies responded.

Environmental Protection Agency (EPA)

Pursuant to 30 CFR 732.17(h)(11)(ii), OSM is required to obtain the

written concurrence of the EPA with respect to those provisions of the

proposed program amendment that relate to air or water quality

standards promulgated under the authority of the Clean Water Act (33

U.S.C. 1251 et seq.) or the Clean Air Act (12 U.S.C. 7401 et seq.).

None of the revisions that Indiana proposed to make in its

amendment pertain to air or water quality standards. Therefore, OSM did

not request the EPA's concurrence.

Pursuant to 732.17(h)(11)(i), OSM solicited comments on the

proposed amendment from EPA (Administrative Record No. IND-1515). It

did not respond to OSM's request.

Historical Preservation Officer (SHPO) and the Advisory Council on

Historic Preservation (ACHP)

Pursuant to 30 CFR 732.17(h)(4), OSM is required to solicit

comments on proposed amendments which may have an effect on historic

properties from the SHPO and ACHP. OSM solicited comments on the

proposed amendment from the SHPO and ACHP (Administrative Record No.

IND-1515). Neither SHPO nor ACHP responded to OSM's request.

V. Director's Decision

Based on the above findings, the Director is approving with certain

exceptions, the proposed amendment as submitted by Indiana on September

11, 1995.

The Director is not approving, as discussed in finding No. B.3, the

new language Indiana is proposing to add to its definition of

``liabilities'' at IC 14-34-7-1 that would allow companies to exclude

FAS 106 obligations from liabilities for the purpose of applying for

self-bonding. Furthermore, the Director is requiring Indiana to remove

this language and to notify OSM when the removal is completed.

The Director is approving, as discussed in finding No. C.4, IC 14-

34-6-14.6(b) with the understanding that Indiana will place conditions

on the permit of the second permittee that require assumption of the

reclamation obligation of the previous permittee, that specifically

give notice to the second permittee of the State's intention to release

the previous permittee's bond in reliance on the assumption of

liability by the second permittee, and that require any surety bond or

other contract securing the reclamation obligation of the second

permittee to reflect the assumption of liability and the intent to

release the previous bond.

The Director notes, as discussed in finding No. B.4, that Indiana's

reference to the term ``subsection'' in its statute at IC 14-34-6-14.3

should be ``section'' and, as discussed in finding No. C.1, Indiana's

reference to ``item accounts'' in its definition at IC 14-34-7-0.6

should be ``item amounts.''

The Federal regulations at 30 CFR Part 914, codifying decisions

concerning the Indiana program, are being amended to implement this

decision. This final rule is being made effective immediately to

expedite the State program amendment process and to encourage States to

bring their programs into conformity with the Federal standards without

undue delay. Consistency of State and Federal standards is required by

SMCRA.

[[Page 59578]]

Effect of Director's Decision

Section 503 of SMCRA provides that a State may not exercise

jurisdiction under SMCRA unless the State program is approved by the

Secretary. Similarly, 30 CFR 732.17(a) requires that any alteration of

an approved State program be submitted to OSM for review as a program

amendment. The Federal regulations at 30 CFR 732.17(g) prohibit any

unilateral changes to approved State programs. In the oversight of the

Indiana program, the Director will recognize only the statutes,

regulations and other materials approved by OSM, together with any

consistent implementing policies, directives and other materials, and

will require the enforcement by Indiana of only such provisions.

VI. Procedural Determinations

Executive Order 12866

This rule is exempted from review by the Office of Management and

Budget (OMB) under Executive Order 12866 (Regulatory Planning and

Review).

Executive Order 12988

The Department of the Interior has conducted the reviews required

by section 3 of Executive Order 12988 (Civil Justice Reform) and has

determined that, to the extent allowed by law, this rule meets the

applicable standards of subsections (a) and (b) of that section.

However, these standards are not applicable to the actual language of

State regulatory programs and program amendments since each such

program is drafted and promulgated by a specific State, not by OSM.

Under sections 503 and 505 of SMCRA (30 U.S.C. 1253 and 1255) and 30

CFR 730.11, 732.15, and 732.17(h)(10), decisions on proposed State

regulatory programs and program amendments submitted by the States must

be based solely on a determination of whether the submittal is

consistent with SMCRA and its implementing Federal regulations and

whether the other requirements of 30 CFR Parts 730, 731, and 732 have

been met.

National Environmental Policy Act

No environmental impact statement is required for this rule since

section 702(d) of SMCRA (30 U.S.C. 1292(d)) provides that agency

decisions on proposed State regulatory program provisions do not

constitute major Federal actions within the meaning of section

102(2)(C) of the National Environmental Policy Act (42 U.S.C.

4332(2)(C)).

Paperwork Reduction Act

This rule does not contain information collection requirements that

require approval by OMB under the Paperwork Reduction Act (44 U.S.C.

3507 et seq.).

Regulatory Flexibility Act

The Department of the Interior has determined that this rule will

not have a significant economic impact on a substantial number of small

entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).

The State submittal which is the subject of this rule is based upon

corresponding Federal regulations for which an economic analysis was

prepared and certification made that such regulations would not have a

significant economic effect upon a substantial number of small

entities. Accordingly, this rule will ensure that existing requirements

previously promulgated by OSM will be implemented by the State. In

making the determination as to whether this rule would have a

significant economic impact, the Department relied upon the data and

assumptions for the corresponding Federal regulations.

Unfunded Mandates

OSM has determined and certifies pursuant to the Unfunded Mandates

Reform Act (2 U.S.C. 1502 et seq.) that this rule will not impose a

cost of $100 million or more in any given year on local, state, or

tribal governments or private entities.

List of Subjects in 30 CFR Part 914

Intergovernmental relations, Surface mining, Underground mining.

Dated: October 20, 1997.

Brent Wahlquist,

Regional Director, Mid-Continent Regional Coordinating Center.

For the reasons set out in the preamble, Title 30, Chapter VII,

Subchapter T of the Code of Federal Regulations is amended as set forth

below:

PART 914--INDIANA

1. The authority citation for Part 914 continues to read as

follows:

Authority: 30 U.S.C. 1201 et seq.

2. Section 914.15 is amended in the table by adding a new entry in

chronological order by ``Date of Final Publication'' to read as

follows:

Sec. 914.15 Approval of Indiana regulatory program amendments.

* * * * *

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Original amendment submission date Date of final publication Citation/description

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* * * * * * *

September 11, 1995....................... November 4, 1997........................ IC 14-8-2-42.5, -49.5, -

49.6, -274.5; 14-34-5-10;

14-34-6-14.3, -14.6; 14-34-

7-0.5, -0.6, -0.7, -2.5, -

4 (b), (d) through (g), -

4.1, -5, -7, -7.1, -8, -9,

-10, -11, -12, -13.

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[FR Doc. 97-29132 Filed 11-3-97; 8:45 am]

BILLING CODE 4310-05-M