SECTION 460:30-4-12. Collateral bonds

(a)   Collateral bonds, except for letters of credit, cash accounts, and real property, shall be subject to the following conditions:

(1)   The Department shall keep custody of collateral deposited by the applicant until authorized for release or replacement as provided in this Subchapter.

(2)   The Department shall value collateral at its current market value, not at face value.

(3)   The Department shall require that certificates of deposit be made payable to or assigned to the Department, both in writing and upon the records of the bank issuing the certificates. If assigned, the Department shall require the banks issuing these certificates to waive all rights of setoff or liens against those certificates.

(4)   The Department shall not accept an individual certificate of deposit in an amount in excess of 100,000.00 dollars or the maximum insurable amount as determined by the Federal deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation.

(5)   The Department shall only accept automatically renewable certificates of deposit.

(b)   Letters of credit shall be subject to the following conditions:

(1)   The letter may be issued only by a bank organized or authorized to do business in the United States;

(2)   Letters of credit shall be irrevocable during their terms. A letter of credit used as security in areas requiring continuous bond coverage shall be forfeited and shall be collected by the Department if not replaced by other suitable bond or letter of credit at least 30 days before its expiration date.

(3)   The letter of credit shall be payable to the Department upon demand, in part or in full, upon receipt from the Department of a notice of forfeiture issued in accordance with Section 460:30-4-16 of this Subchapter.

(c)   Real property posted as a collateral bond shall meet the following conditions:

(1)   The applicant shall grant the Department a first mortgage, first deed of trust, or perfected first lien security interest in real property with a right to sell or otherwise dispose of the property in the event of forfeiture under Section 460:30-4-16 of this Subchapter.

(2)   In order for the Department to evaluate the adequacy of the real property offered to satisfy collateral requirements, the applicant shall submit a schedule of the real property which shall be mortgaged or pledged to secure the obligations under the indemnity agreement. The list shall include:

(A)   A description of the property;

(B)   The fair market value as determined by an independent appraisal conducted by a certified appraiser; and

(C)   Proof of possession and title to unencumbered real property.

(3)   The property may include land which is part of the permit area; however, land pledged as collateral for a bond under this Section shall not be disturbed under any permit while it is serving as security under this Section.

(d)   Cash accounts shall be subject to the following conditions:

(1)   The Department may authorize the operator to supplement the bond through the establishment of a cash account in one or more federally-insured or equivalently protected accounts made payable upon demand to or deposited directly with, the Department. The total bond including the cash account shall not be less than the amount required under terms of performance bonds including any adjustments, less amounts released in accordance with Section 460:30-4-15 of this Subchapter.

(2)   Any interest paid on a cash account shall be retained in the account and applied to the bond value of the account unless the Department has approved the payment of interest to the operator.excess of 100,000.00 dollars or the maximum insurable amount as determined by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation.

(3)   Certificates of deposit may be substituted for a cash account with the approval of the Department.

(4)   The Department shall not accept an individual cash account in the amount in excess of 100,00.00 dollars or the maximum insurable amount as determined by the Federal Deposit Insurance Corporation or Federal Savings and Loan Insurance Corporation.

(e)   Bond collateral.

(1)   The estimated bond value of all collateral posted as assurance under this Section shall be subject to a margin which is the ratio of bond value to market value, as determined by the Department The margin shall reflect legal and liquidation fees, as well as value depreciation, marketability, and fluctuations which might affect the net cash available to the Department to complete reclamation.

(2)   The bond value of collateral may be evaluated at any time, but it shall be evaluated as part of permit renewal and, if necessary, the performance bond amount increased or decreased. In no case shall the bond value of collateral exceed the market value.

(f)   Persons with an interest in collateral posted as a bond, and who desire notification of actions pursuant to the bond, shall request the notification in writing to the Department at the time collateral is offered.

[Source: Added at 28 Ok Reg 2371, eff 9-11-11]