Alabama Surface Mining Bonds

What Is the Purpose of the Alabama Surface Mining Bonds?

Surface Mining Bonds for both coal and non-fuel minerals are required for operators prior to starting mining and reclamation operations in Alabama. Surface Mining Reclamation Bonds provide a guarantee to the obligee that if the operator fails to dutifully perform according to the applicable rules, regulations, and laws, there will be compensation available for the damages.

Who Needs an Alabama Surface Mining Bond?

Any person conducting or controlling surface mining and reclamation operations must have a permit bond on file. The bond should be purchased after a permit has been approved but before it is issued. 

According to the Alabama Surface Mining Act of 1969 (Code of Alabama, 1975, 9-16-1 through 9-16-15), Surface mining and reclamation of non-fuel minerals requires a bond to be filed with the Alabama Department of Labor Commissioner. Non-fuel minerals include sand, clay, ores, gravel, and other minerals. Not included in this bond or permit are marble, chert, limestone, dolomite, and coal. Exclusions to this chapter are included in Chapter.

Surface coal mining operations must file a bond with the Alabama Surface Mining Commission. pursuant to Title 9, Chapter 16, Article 3 of the Code of Alabama 1975. Exclusions from this chapter are listed in Section 9-16-99 of the Code of Alabama, 1975.

What Do Surety Companies Need to Know About Alabama Surface Mining Bonds?

Claims generally arise from failure to abide by the laws and regulations and lack of cooperation with the obligee regarding hazardous site conditions or improper abandonment.

Losses on Surface Mining Bonds are rare, according to surety industry experts, because of the difficult application process and regulations in place with both regulatory agencies. Sureties will generally review the operator’s credit, business and personal financials, years of experience, minerals being mined, estimated remaining lifetime of the well, and the ratio of land available for mining to the total plat of land. Some surety companies choose to collect collateral to ensure there are funds available should there be a claim payout. 

Non-fuel mineral surface mining operator’s bond amount is $2,500 per acre of land to be disturbed. Coal surface mining operator’s bond amount is never less than $10,000, but is based on what it would cost the State Regulatory Authority to do the reclamation, abatement, and restoration work under the Alabama Surface Mining Control and Reclamation Act of 1981. The bond amount will reflect the difficulty of reclamation based on site factors including hydrology, topography, revegetation potential, and typography. The bond amount may be adjusted annually.

For surface mining operations of non-fuel minerals, any complaint either from the public or pursued by the Director of the Department of Labor will result in a notice to the operator for which they must show up to a hearing or have a representative show up for them. According to Section 9-16-11 of the Code of Alabama, 1975, civil action can also be taken by the Director and the bond can be forfeited. 

For coal surface mining and reclamation operations, an inspection will be done following any information regarding the operator is in violation of the Code of Alabama, 1975, Title 9, Chapter 16, Article 3. A hearing may be conducted to determine an applicable penalty. The performance bond may be forfeited for lack of cooperation with the hearing officer.

Bond claims are often the last resort after other disciplinary action has failed.

Are There Any Alternatives to Alabama Surface Mining Bonds?

Cash deposits or security deposits may be accepted in lieu of a surety bond by both regulatory agencies. It must be approved by the governing entity and is oftentimes equal to or greater than the bond amount.

How Much Do Alabama Surface Mining Bonds Cost?

The bond cost is heavily dependent on the underwriting factors and bond limit, but generally, rates start at 1% of the bond limit.

How Are Alabama Surface Mining Bonds Filed?

For non-fuel surface mining and reclamation operations, the bond is to be signed, notarized, fit with the company seal, and accompanied by a Power of Attorney. The original bond must be filed to the following address:

State of Alabama
Department of Industrial Relations
649 Monroe Street
Montgomery, AL 36131

Coal surface mining and reclamation bonds require signatures from the surety company and the operator. It is to be filed at the following address:

State of Alabama
Surface Mining Commission
PO Box 2390
Jasper, AL 35502-2390

Can Surface Mining and Reclamation Operation Bonds Be Cancelled?

The bond for non-fuel mining operations can be cancelled with a 90-day written notice to the State of Alabama Department of Labor Commissioner. Surface mining and reclamation bonds for coal operations cannot be cancelled. The bond must be released by the Alabama Surface Mining Commission upon the operator following Section 9-16-89 of the Code of Alabama, 1975.

Are Alabama Surface Mining Bonds Renewable?

Yes, bonds must be in place until the completion of surface mining and reclamation operations. Bonds are most commonly offered in 1-, 2-, and 3-year terms. The bond limit can change on an annual basis, so it is important for surety providers to adjust the bond when applicable.