Virginia Regulatory Program

DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation and Enforcement

30 CFR Part 946

[VA-110-FOR]

Virginia 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 a proposed amendment to the Virginia

permanent regulatory program (hereinafter referred to as the Virginia

program) under the Surface Mining Control and Reclamation Act of 1977

(SMCRA). The proposed amendment changes the Virginia Coal Surface

Mining Control and Reclamation Act to add ``letter of credit'' as an

acceptable form of collateral bond to satisfy the performance bonding

requirements of the Virginia Act. The amendment is intended to revise

the State program to be consistent with the Federal regulations.

EFFECTIVE DATE: May 3, 1999.

FOR FURTHER INFORMATION CONTACT: Mr. Robert A. Penn, Director, Big

Stone Gap Field Office, Office of Surface Mining Reclamation and

Enforcement, 1941 Neeley Road, Suite 201, Compartment 116, Big Stone

Gap, Virginia 24219, Telephone: (540) 523-4303.

SUPPLEMENTARY INFORMATION:

I. Background on the Virginia Program.

II. Submission of the Amendment.

III. Director's Findings.

IV. Summary and Disposition of Comments.

V. Director's Decision.

VI. Procedural Determinations.

I. Background on the Virginia Program

On December 15, 1981, the Secretary of the Interior conditionally

approved the Virginia program. You can find background information on

the Virginia program, including the Secretary's findings, the

disposition of comments, and the conditions of approval in the December

15, 1981, Federal Register (46 FR 61085-61115). You can find later

actions on conditions of approval and program amendments at 30 CFR

946.11, 946.12, 946.13, 946.15, and 946.16.

II. Submission of the Amendment

By letter dated July 31, 1997, (Administrative Record Number VA-

921), the Virginia Department of Mines, Minerals and Energy (DMME)

stated that the Virginia legislature has amended, effective July 1,

1997, the Virginia Coal Surface Mining Control and Reclamation Act at

Section 45.1-241(C). The amendment adds ``letter of credit'' as an

acceptable form of collateral bond that the DMME may accept to satisfy

the performance bonding requirements of the Virginia Act.

We announced receipt of the proposed amendment in the August 25,

1997, Federal Register (62 FR 44924), invited public comment, and

provided an opportunity for a public hearing on the adequacy of the

proposed amendment. The comment period closed on September 24, 1997. No

one requested to speak at a public hearing, so no hearing was held.

During our review of the amendment, we identified concerns with the

language of the amendment. We notified Virginia of our concerns on

October 20, 1997 (Administrative Record Number VA-932). Virginia

responded to our questions by letter dated October 23, 1997

(Administrative Record Number VA-933).

We reviewed the State's comments and responded to them by letter

dated November 26, 1997 (Administrative Record Number VA-942). In our

response, we asked the State to provide an attorney general's opinion

that cites the statutory and/or regulatory basis for the interpretation

submitted by the DMME in its October 23, 1997, letter. The DMME

obtained an opinion from the Virginia Office of the Attorney General by

Memorandum dated October 27, 1998 (Administrative Record Number VA-

958). By letter dated June 4, 1998 (Administrative Record Number VA-

956) Virginia deleted two sentences that were proposed in the July 31,

1997 submission. In a separate request we asked the DMME whether its

use of the term ``financial institution authorized to do business in

the United States,'' at 45.1-241(C), is consistent with the Federal

regulation at 30 CFR 800.21(b)(1) which states that letters of credit

may be issued only by a bank organized or authorized to do business in

the United States. The DMME responded by letter dated February 23, 1999

(Administrative Record Number VA-972).

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 to the Virginia program.

As amended, Section 45.1-241(C) of the Virginia Coal Surface Mining

Control and Reclamation Act provides for letters of credit as follows.

The Director may also accept a letter of credit on certain

designated funds issued by a financial institution authorized to do

business in the United States. The letters of credit shall be

irrevocable, unconditional, shall be payable to the Department upon

demand, and shall afford to the Department protection equivalent to

a corporate surety's bond. The issuer of the letter of credit shall

give prompt notice to the permittee and the Department of any notice

received or action filed alleging the insolvency or bankruptcy of

the issuer, or alleging any violations of regulatory requirements

which could result in suspension or revocation of the issuer's

charter or license to do business. In the event the issuer becomes

unable to fulfill its obligations under the letter of credit for any

reason, the issuer shall immediately notify the permittee and the

Department. Upon the incapacity of an issuer by a reason of

bankruptcy, insolvency or suspension or revocation of its charter or

license, the permittee shall be deemed to be without proper

performance bond coverage and shall promptly notify the Department,

and the Department shall then issue a notice to the permittee

specifying a reasonable period, which shall not exceed ninety days,

to replace the bond coverage. If an adequate bond is not posted by

the end of the period allowed, the permittee shall cease coal

extraction and coal processing operations and shall immediately

begin to conduct reclamation operations in accordance with the

reclamation plan. Coal extraction and coal processing operations

shall not resume until the Department has determined that an

acceptable bond has been posted. If an acceptable bond has not been

posted by the end of the period allowed, the Department may suspend

the permit until acceptable bond is posted. The letter of credit

shall be provided on the form and format established

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by the Director. Nothing herein shall relieve the permittee of

responsibility under the permit or the issuer of liability on the

letter of credit.

After we reviewed the amendment, we made the following comments to

the DMME. First, for letters of credit, there is no requirement that

there be an indemnity agreement for a sum certain executed by the

permittee, as is required by the Federal regulations at 30 CFR

800.5(b). Second, there is no requirement that when a letter of credit

is used as security in areas requiring continuous bond coverage it

shall be forfeited and shall be collected by the regulatory authority

if not replaced by other suitable bond or letter of credit at least 30

days before its expiration date as is required by 30 CFR 800.21(b)(2).

The DMME responded to our comments by letter dated October 23, 1997

(Administrative Record Number VA-933). The DMME explained their

interpretation of the proposed amendment, how the amendment would be

implemented, and why they believe the amendment is consistent with the

Federal standards. The federal definition of ``collateral bond'' at 30

CFR 800.5(b) states that it is ``an indemnity agreement in a sum

certain executed by the permittee as principal'' which then lists types

of collateral, that includes irrevocable letters of credit. Virginia's

proposed statutory amendment does not state that a letter of credit is

a collateral bond nor that the permittee will execute an indemnity

agreement. Virginia's regulatory definition of ``collateral bond'' at 4

VAC 25-130-700.5 also requires an indemnity agreement in a sum certain

executed by the permittee which then lists types of collateral but it

does not include irrevocable letters of credit. The DMME stated that

the Virginia definition of ``collateral bond'' (at 4 VAC 25-130-700.5)

and the Federal definition at 30 CFR 800.5 differ only to the extent

the Virginia definition does not specifically list ``letter of credit''

as a form of collateral bond, while the Federal definition does. The

DMME explained that it omitted references to ``letters of credit'' from

the rule because authority to accept a letter of credit as a

performance bond did not previously exist under the enabling

legislation (45.1-241). Virginia obtained a revision to 45.1-241(C) in

mid-1997. The Virginia Act now provides for the acceptances of

``letters of credit'' as a performance bond. The DMME stated that it

believes that a ``letter of credit'' is a type of collateral bond even

though it is not specifically listed as such in the Virginia rule at

VAC 25-130.700.5. The DMME further stated that since a ``letter of

credit'' is considered to be a collateral bond, the DMME interprets the

standards for collateral bonds to be applicable. The DMME stated,

therefore, that it intends that any ``letter of credit'' accepted as a

performance bond will meet the standards for ``collateral bonds'' and

will be an indemnity agreement in a sum certain executed by the

permittee and deposited with the DMME as is required for collateral

bonds (Administrative Record No. VA-933). Also, Virginia's proposed

amendment to its statute and its existing regulation concerning

collateral bonds at 4 VAC 25-130-800.21 lacks a counterpart to the

Federal requirements concerning collateral bonds at 30 CFR

800.21(b)(2). Section 800.21(b)(2) requires that thirty days before the

letter of credit expires that it be replaced with another bond or be

forfeited. The DMME explained that the enabling statutory revision to

45.1-241(C) does provide DMME with the authority to collect the

proceeds from a letter of credit should the term of the letter of

credit expire before the bond is replaced or released. Section 45.1-

241(C) specifies that the letter of credit ``shall be payable to the

Department upon demand.'' The DMME stated that it will interpret the

phrase ``shall be payable to the Department upon demand'' as Virginia's

``intent to demand payment at least 30 days prior to an expiration date

of such a letter of credit.'' (Admin. record no. VA-933).

We reviewed the DMME's interpretation, and in our response, we

asked the State to provide an attorney general's opinion that cites the

statutory and/or regulatory basis for the interpretation submitted by

the DMME in its October 23, 1997, letter. By memorandum dated October

27, 1998 (Administrative Record Number VA-958) the Virginia Attorney

General's Office provided the DMME with its opinion that the provisions

of Section 45.1-241.C, Code of Virginia, are consistent with the

requirements of the Federal surface mining program. That opinion

further states that Section 45.1-241.C may be implemented by the

Virginia Division of Mined Land Reclamation (DMLR) in a manner

consistent with both the Federal and Virginia program bonding

requirements under the authority of Section 45.1-230, Code of Virginia.

Finally, Virginia's statute states that a letter of credit may be

accepted on certain designated funds issued by a financial institution

authorized to do business in the United States. We asked the DMME

whether its use of the term ``financial institution authorized to do

business in the United States,'' at 45.1-241(C), is consistent with the

Federal regulation at 30 CFR 800.21(b)(1) which states that letters of

credit may be issued only by a bank organized or authorized to do

business in the United States. In its response, the DMME stated that

its intention is to apply all the criteria specified at subsection (b),

including (b)(1).

We find that the amendments to Section 45.1-241(C) concerning

letters of credit are not inconsistent with SMCRA and can be approved.

We are making this finding and approving the amendment to (1) the

extent that Virginia will implement this amendment as it stated in its

letters dated October 23, 1997, and February 23, 1999, and (2) to the

extent that a bank issues letters of credit. In addition, and as we

discussed above, the Virginia program regulations lack certain

counterparts to the Federal provisions concerning letters of credit at

30 CFR 800.5(b)(4) and 800.21(b)(2). Specifically, Virginia's

definition of ``collateral bond'' at 4 VAC 25-130-700.5 lacks a

counterpart to the letter of credit provision in the Federal definition

of ``collateral bond'' at 30 CFR 800.5(b)(4). Also, Virginia's

regulation concerning collateral bonds at 4 VAC 25-130-800.21 lacks a

counterpart to the Federal requirements concerning collateral bonds at

30 CFR 800.21(b)(2). Lastly, Virginia's use of the term ``financial

institution'' needs to be amended or defined so that letters of credit

are only issued by banks organized or authorized to transact business

in the United States as required in 30 CFR 800.5(b)(4) and

800.21(b)(2). Therefore, we are requiring that the Virginia program

regulations be further amended, or the Virginia program be otherwise

amended, to be no less effective than the Federal regulations

concerning letters of credit at 30 CFR 800.5(b)(4) and 800.21(b)(2).

IV. Summary and Disposition of Comments

Federal Agency Comments

Pursuant to section 503(b) of SMCRA and 30 CFR 732.17(h)(11)(I),

comments were solicited from various interested Federal agencies. The

U.S. Department of Labor, Mine Safety and Health Administration (MSHA)

responded (Administrative Record Number VA-924) and recommended that

the proposed language be denied. MSHA stated that the proposed changes

do not appear to offer the financial surety of the present system. MSHA

stated that a letter of credit does not reflect the financial solvency

sufficient for the authorization of surety and could be obtained under

inflated values of

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property, equipment, or other collateral. Completion of reclamation

operations after mining is completed or reimbursement to the State, if

the bond is forfeited, seems more a positive objective under the

present system, MSHA stated.

The Director does not concur with the concern. The Director notes

that the Federal regulations at 30 CFR 800.5(b) and 800.21(b)(2)

authorized the use of letters of credit as a form of collateral bond to

meet the performance bond requirements of 30 CFR 800.11. If a letter of

credit bond is forfeited, the bank must pay the bond amount to the

regulatory authority.

The U.S. Fish and Wildlife Service (USFWS) responded

(Administrative Record Number VA-923). USFWS stated that the proposed

amendment is not likely to adversely affect Federally listed species or

designated critical habitat in Virginia.

Public Comments

The Virginia Department of Historic Resources commented and stated

that it finds that the amendments submitted by the DMME will not affect

historic properties.

Environmental Protection Agency (EPA)

Under 30 CFR 732.17(h)(11)(ii), the Director is required to obtain

the written concurrence of the Administrator of the EPA with respect to

any provisions of a State 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 (42 U.S.C. 7401 et

seq.). The Director has determined that this amendment contains no

provisions in these categories and that EPA's concurrence is not

required.

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

proposed amendment from EPA. The EPA did not provide any comments.

V. Director's Decision

Based on the findings above we are approving Virginia's amendment

concerning letters of credit as submitted by letter dated July 31,

1997, amended by letter dated June 4, 1998, and clarified by letters

dated October 23, 1997 and February 23, 1999, and Memorandum dated

October 27, 1998. We are approving this amendment to the extent that

Virginia will implement this amendment as it stated in its letters

dated October 23, 1997, and February 23, 1999, and to the extent that a

bank issues letters of credit. In addition, we are requiring that the

Virginia program regulations be further amended, or the Virginia

program be otherwise amended, to be no less effective than the Federal

regulations at 30 CFR 800.5(b), and 30 CFR 800.21(b)(2) concerning

letters of credit.

The Federal regulations at 30 CFR Part 946 codifying decisions

concerning the Virginia 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.

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

counterpart 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 counterpart Federal regulations.

Unfunded Mandates

This rule will not impose a cost of $100 million or more in any

given year on any governmental entity or the private sector.

List of Subjects in 30 CFR Part 946

Intergovernmental relations, Surface mining, Underground mining.

Dated: April 16, 1999.

Allen D. Klein,

Regional Director, Appalachian 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 946--VIRGINIA

1. The authority citation for Part 946 continues to read as

follows:

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

2. Section 946.15 is amended in the table by adding a new entry in

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

follows:

Sec. 946.15 Approval of Virginia regulatory program amendments.

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Date of final

Original amendment submission date publication Citation/description

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July 31, 1997....................... May 3, 1999........... Code of Virginia at Sec. 45.1-241(C) concerning letter of credit.

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3. Section 946.16 is amended by amending paragraph (a) to read as

follows:

Section 946.16 Required regulatory program amendments.

* * * * *

(a) By July 2, 1999, Virginia must submit either a proposed

amendment or a description of an amendment to be proposed, together

with a timetable for adoption, to revise the Virginia program

regulations, or otherwise amend the Virginia program, to be no less

effective than the Federal regulations at 30 CFR 800.5(b), and 30 CFR

800.21(b)(2) concerning letters of credit.

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[FR Doc. 99-11035 Filed 4-30-99; 8:45 am]

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