Financial Guarantees for Notices and Plans of Operations

UNITED STATES DEPARTMENT OF THE INTERIORBUREAU OF LAND MANAGEMENTWASHINGTON, D.C. 20240http://www.blm.govJune 19, 2009In Reply Refer To:3809 (320) PEMS TRANSMISSION 06/26/2009Instruction Memorandum No. 2009-153Expires: 09/30/2010To:                    All Field OfficialsFrom:               Assistant Director, Minerals and Realty ManagementSubject:           Financial Guarantees for Notices and Plans of OperationsProgram Area:  Mining Law Administration, Surface Management.Purpose:  The purpose of this Instruction Memorandum (IM) is to provide policy guidance for ensuring Notices and Plans of Operations authorized under 43 CFR 3809, Surface Management Regulations, have financial guarantees that meet the requirements of the regulations.Policy/Action:  The district/field manager must ensure any authorized activity under a Notice or Plan of Operations has an acceptable financial guarantee that covers all reclamation, closure, and post-reclamation obligations that will result from proposed and ongoing operations.The operator must provide the responsible district/field office with an acceptable estimate of the reclamation and closure costs for all proposed Notices and Plans of Operations.  The operator’s estimate of the cost to reclaim and close the operations must meet the requirements of 43 CFR 3809.552(a) and 3809.554(a) and must be acceptable to the Bureau of Land Management (BLM) as required by 43 CFR 3809.554(b).  Based on a review of the reclamation cost estimate, the authorized officer must provide the operator with a written decision as to the amount of the required financial guarantee.  Operations may not commence until the operator has received written notification that the BLM has accepted and obligated the operator’s financial guarantee, and the complete Notice is accepted or Plan of Operations is approved by the district/field manager.Specific policy and procedural guidance for reviewing and accepting an operator’s reclamation cost estimate are given in Attachment 1 - Guidelines for Reviewing Reclamation Cost Estimates.Where long-term, post-reclamation obligations are identified, the financial responsibility for those obligations rests with the operator, and if it is not feasible, practical, and/or desirable to require a financial guarantee using an individual financial guarantee (43 CFR 3809.552(a)), blanket financial guarantee (43 CFR 3809.560(a)) or state approved financial guarantee (43 CFR 3809.570), the responsible district/field manager must require the establishment of a trust fund or other funding mechanism by the operator to guarantee the availability of funds to cover those post-reclamation obligations.  When a separate financial guarantee under 43 CFR 3809.552(c) is required to guarantee corrective actions for anticipated post-reclamation obligations, the operator must provide the BLM with a cost estimate for the monitoring, construction, operation, maintenance, replacement and other activities for the required facilities, treatment, or other needs documented in the Plan of Operations.  The responsible district/field manager must verify the operator’s cost estimate to carry out those corrective actions, establish the amount of funds needed in the long-term funding mechanism, and establish the agreement with the operator covering the funding mechanism.  Where the authorized officer requires a long-term funding mechanism, before commencing any on-the-ground operations under the approved Plan of Operations, the operator must establish a fund acceptable to the BLM.  If, at any time after operations have commenced, the BLM identifies the need for a funding mechanism under 43 CFR 3809.552(c), the operator must establish an acceptable fund available to the BLM to ensure the continuation of those long-term, post-reclamation treatment or maintenance requirements.Specific policy and procedural guidance for establishing a long-term, post-reclamation fund mechanism for a Plan of Operations is given in Attachment 2 - Guidelines for Establishing a Long-Term Funding Mechanism.  Guidance to aid in estimating the amount of funds that need to be deposited to meet the estimated future costs is provided in Attachment 3 - Guidelines for a Present Value Determination.The BLM must provide a periodic review of the reclamation, closure, and post-reclamation cost estimates for all ongoing operations as required by 43 CFR 3809.552(b).  The district/field manager must ensure the current cost estimates and financial guarantees continue to meet the requirements of 43 CFR 3809.552(a), 3809.552(c), and 3809.554(a).  This responsibility includes ensuring the financial guarantees, including those required under 43 CFR 3809.552(c), are adequate to meet all reclamation, closure, and post-reclamation obligations.  For each operation, the authorized officer must certify that the review has been completed and that the cost estimate(s) and financial guarantee(s) continue to meet the requirements of the regulations.  This certification will be placed in each operation’s official case file.Specific policy and procedural guidance for periodic reviews of current cost estimates and financial guarantees, including long-term funding mechanisms, are given in Attachment 1 - Guidelines for Reviewing Reclamation Cost Estimates.At the end of each fiscal year, the BLM state directors must determine if all reclamation cost estimates for Notices and Plans within their states requiring review were examined and financial guarantees are adequate to meet the requirements of the regulations.  If the reclamation cost estimate or financial guarantee for a Notice or Plan has not been reviewed within the appropriate time frame (see Attachment 1 - Guidelines for Reviewing Reclamation Cost Estimates) and/or the reclamation cost estimate or financial guarantee is inadequate, then a corrective action plan must be developed by the state directors to address the deficiencies.  By December 1 of each year, state directors must certify to the BLM Director that all reclamation cost estimates and financial guarantees requiring review have been examined and determined to be adequate.  Specific policy and procedural guidance for reviewing and certifying the adequacy of the reclamation cost estimates and financial guarantees are given in Attachment 4 - Guidelines for Preparing a Bond Review Report and State Director Certification.Time Frame:  This IM is effective immediately and will be in effect unless formally modified.Budget Impacts:  There will be minimal budget impact, but there is no estimate at this time.Background:  The revised surface management regulations (43 CFR 3809) became effective on January 20, 2001, with subsequent amendments that took effect through December 31, 2001.  The final regulations require all Notices and Plans of Operations to post full-cost financial guarantees in an amount sufficient to allow the BLM to contract a third party to reclaim the operations according to 43 CFR 3809.552(a).  The final regulations also require an operator to establish a trust fund or other funding mechanism (43 CFR 3809.552(c)) available to the BLM to ensure the continuation of any long-term, post-reclamation treatment or maintenance requirements identified in the decision document for the operation.In June 2005, the General Accounting Office (GAO) completed a review of the BLM’s surface management financial guarantee program.  The GAO report recommended several actions be taken by the BLM.  In response to these recommendations, the BLM requires each state office to generate a Bond Review Report, the BLM state directors will certify to the BLM Director that reclamation cost estimates and financial guarantees have been reviewed within regulatory and policy time frames, and develop a corrective action plan to address any deficiencies.Manual/Handbook Sections Impacted:  BLM Manual Section 3809 - This guidance will be included in the 3809 Surface Management Manual and Handbook that are now being prepared.Coordination:  The policies and procedures found in this IM were developed with input from the Office of the Solicitor, and BLM state and field offices.Contact:  If you have any questions concerning this IM, please contact me at 202-208-4201 or your staff may contact Mitchell Leverette, Chief Division of Solid Minerals (WO-320) at 202-452-5088, email address Mitchell_Leverette@blm.gov or Paul McNutt at 775-861-6604, email address Paul_McNutt@nv.blm.gov. Signed by:                                           Authenticated by:Mithcell Levette                                   Robert M. WilliamsActing, Assistant Director                   Division of IRM Governance,WO-560Minerals and Realty Management4 Attachments 1 – Guidelines for Reviewing Reclamation Cost Estimates (13 pp) 2 – Guidelines for Establishing a Long-Term Funding Mechanism (6 pp) 3 – Guidelines for a Present Value Determination (7 pp) 4 – Guidelines for Preparing a Bond Review Report and State Director Certification (1 p)