1501:13-7-04 Self-bonding.

(A) Definitions for the purposes of this rule only:

(1) "Current assets" means cash or other assets or resources which are reasonably expected to be converted to cash or sold or consumed within one year or within the normal operating cycle of the business.

(2) "Current liabilities" means obligations which are reasonably expected to be paid or liquidated within one year or within the normal operating cycle of the business.

(3) "Fixed assets" means plants and equipment, but does not include land or coal in place.

(4) "Liabilities" means obligations to transfer assets or provide services to other entities in the future as a result of past transactions.

(5) "Net worth" means total assets minus total liabilities and is equivalent to owners' equity.

(6) "Parent corporation" means a corporation which owns or controls the applicant.

(7) "Tangible net worth" means net worth minus intangibles such as goodwill and rights to patents or royalties.

(B) If the performance security is a bond, the chief may accept a self-bond from an applicant for a permit if all of the following conditions are met by the applicant or its parent corporation guarantor:

(1) The applicant designates a suitable agent to receive service of process in the state where the proposed coal mining operation is to be conducted.

(2) The applicant has been in continuous operation as a business entity for a period of not less than five years. "Continuous operation" shall mean that business was conducted over a period of five years immediately preceding the time of application.

(a) The chief may allow a joint venture or syndicate with less than five years of continuous operation to qualify under this requirement, if each member of the joint venture or syndicate has been in continuous operation for at least five years immediately preceding the time of application.

(b) When calculating the period of continuous operation, the chief may exclude past periods of interruption to the operation of the business entity that were beyond the applicant's control and that do not affect the applicant's likelihood of remaining in business during the proposed coal mining and reclamation operations.

(3) The applicant submits financial information in sufficient detail to show that the applicant meets one of the following criteria:

(a) The applicant has a current rating for its most recent bond issuance of "A" or higher as issued by either "Moody's Investor Service" or "Standard and Poor's Corporation";

(b) The applicant has a tangible net worth of at least ten million dollars, a ratio of total liabilities to net worth of two and one-half times or less, and a ratio of current assets to current liabilities of one and one-fifth times or greater; or

(c) The applicant's fixed assets in the United States total at least twenty million dollars, and the applicant has a ratio of total liabilities to net worth of two and one-half times or less, and a ratio of current assets to current liabilities of one and one-fifth times or greater.

(4) The applicant submits:

(a) Financial statements for the most recently completed fiscal year accompanied by a report prepared by an independent certified public accountant in conformity with generally accepted accounting principles and containing the accountant's audit opinion or review opinion of the financial statements with no adverse opinion;

(b) Unaudited financial statements for completed quarters in the current fiscal year; and

(c) Additional unaudited information as requested by the chief.

(C) The chief may accept a written guarantee for an applicant's self-bond from a parent corporation guarantor, if the guarantor meets the conditions of paragraph (B) of this rule as if it were the applicant. Such a written guarantee shall be referred to as a "corporate guarantee." The terms of the corporate guarantee shall provide for the following:

(1) If the applicant fails to complete the reclamation plan, the guarantor shall do so or the guarantor shall be liable under the indemnity agreement to provide funds to the chief sufficient to complete the reclamation plan, but not to exceed the performance security amount required under rule 1501:13-7-02 of the Administrative Code.

(2) The corporate guarantee shall remain in force unless the guarantor sends notice of cancellation by certified mail to the applicant and to the chief at least ninety days in advance of the cancellation date, and the chief accepts the cancellation.

(3) The cancellation may be accepted by the chief if the applicant obtains suitable replacement performance security before the cancellation date or if the lands for which the self-bond, or portion thereof, was accepted have not been disturbed.

(D) The chief may accept a written guarantee for an applicant's self-bond from any corporate guarantor, whenever the applicant meets the conditions of paragraphs (B)(1), (B)(2) and (B)(4) of this rule, and the guarantor meets the conditions of paragraphs (B)(1) to (B)(4) of this rule. Such a written guarantee shall be referred to as a "non-parent corporate guarantee." The terms of this guarantee shall provide for compliance with the conditions of paragraph (C) of this rule. The chief may require the applicant to submit any information specified in paragraph (B)(3) of this rule in order to determine the financial capabilities of the applicant.

(E) For the chief to accept an applicant's self-bond, the total amount of the outstanding and proposed self-bonds of the applicant for coal mining and reclamation operations shall not exceed twenty-five per cent of the applicant's tangible net worth in the United States. For the chief to accept a corporate guarantee, the total amount of the parent corporation guarantor's present and proposed self-bonds and guaranteed self-bonds for coal mining and reclamation operations shall not exceed twenty-five per cent of the guarantor's tangible net worth in the United States. For the chief to accept a non-parent corporate guarantee, the total amount of the non-parent corporate guarantor's present and proposed self-bonds and guaranteed self-bonds shall not exceed twenty-five per cent of the guarantor's tangible net worth in the United States.

(F) If the chief accepts an applicant's self-bond, an indemnity agreement shall be submitted subject to the following requirements:

(1) The indemnity agreement shall be executed by all persons and parties who are to be bound by it, including the parent corporation guarantor, and shall bind each jointly and severally.

(2) A corporation applying for a self-bond, and a parent or non-parent corporation guaranteeing an applicant's self-bond shall submit an indemnity agreement signed by two corporate officers who are authorized to bind their corporation. A copy of such authorization shall be provided to the chief along with an affidavit certifying that such an agreement is valid under all applicable federal and state laws. In addition, the guarantor shall provide a copy of the corporate authorization demonstrating that the corporation may guarantee the self-bond and execute the indemnity agreement.

(3) A limited liability company shall submit an indemnity agreement signed by at least one member who is authorized to bind the company. A copy of such authorization shall be provided to the chief along with an affidavit certifying that such an agreement is valid under all applicable federal and state laws.

(4) A partnership, joint venture or syndicate shall submit an indemnity agreement that binds each partner or party who has a beneficial interest, directly or indirectly, in the applicant.

(5) Pursuant to rule 1501:13-7-06 of the Administrative Code, the applicant or parent or non-parent corporate guarantor shall be required to complete the approved reclamation plan for the lands in default or to pay to the chief an amount necessary to complete the approved reclamation plan, not to exceed the performance security amount required under rule 1501:13-7-02 of the Administrative Code. The indemnity agreement shall be confessed to judgment to the amount of the bond as provided in section 2323.13 of the Revised Code.

(G) The chief may require self-bonded applicants and parent and non-parent corporate guarantors to submit an update of the information required under paragraphs (B)(3) and (B)(4) of this rule within ninety days after the close of each fiscal year following the issuance of the self-bond or corporate guarantee.

(H) If at any time during the period when a self-bond is provided, the financial conditions of the applicant or parent or non-parent corporate guarantor change so that the criteria of paragraphs (B)(3) and (D) of this rule are not satisfied, the permittee shall notify the chief immediately and shall within ninety days provide an alternate form of performance security in the same amount as the self-bond. Should the permittee fail to provide an adequate substitute performance security pursuant to rule 1501:13-7-03 of the Administrative Code, then the permittee or operator shall cease coal extraction and shall immediately begin to conduct reclamation operations in accordance to the reclamation plan. Mining operations shall not resume until the chief has determined that an acceptable performance security has been provided.

Effective: 04/30/2009
R.C. 119.032 review dates: 02/06/2009 and 04/20/2014
Promulgated Under: 119.03
Statutory Authority: 1513.02
Rule Amplifies: 1513.08
Prior Effective Dates: 5/18/81, 10/27/82, 10/1/88, 12/27/90