[Federal Register Volume 64, Number 84 (Monday, May 3, 1999)]
[Rules and Regulations]
[Pages 23542-23545]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11035]


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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

[[Page 23543]]

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

[[Page 23544]]

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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[[Page 23545]]



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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.
* * * * *
[FR Doc. 99-11035 Filed 4-30-99; 8:45 am]
BILLING CODE 4310-05-P