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(1) Letters of credit are subject to the following conditions:

(a) The letter must be issued by a bank organized or authorized to do business in the United States.

(b) The letter must be irrevocable prior to a release by the department in accordance with ARM 17.24.1111.

(c) The letter must be payable to the department in part or in full upon demand and receipt from the department of a notice of forfeiture issued in accordance with ARM 17.24.1117.

(d) The letter must not be for an amount in excess of 10% of the bank's capital surplus account as shown on a balance sheet certified by a certified public accountant for the most recent annual reporting period.

(e) Using the balance sheet referenced in (1)(d) and a certified income and revenue sheet, the bank must meet the three following criteria:

(i) the bank must be earning at least a 1% return on total assets (net income/total assets = 0.01 or more);

(ii) the bank must be earning at least a 10% return on equity (net income/total stockholders equity = 0.1 or more); and

(iii) capital or stockholders' equity must be at least 5.5% of total assets ((total stockholders equity [capital stock + capital surplus + retained earnings])/total assets = 0.055 or more).

(f) The bank's qualifications must be reviewed yearly prior to the time the letter of credit is renewed.

(g) The department may not accept letters of credit from a bank for any person, on all permits held by that person, in excess of three times the company's maximum single obligation.

(h) The department may provide in the indemnity agreement that the amount must be confessed to judgment upon forfeiture, if this procedure is authorized by state law.

(i) The department shall provide that:

(i) the bank shall give prompt notice to the permittee and the department of any notice received or action filed alleging the insolvency or bankruptcy of the bank or permittee, or alleging any violations of regulatory requirements that could result in suspension or revocation of the bank's charter or license to do business;

(ii) in the event the bank becomes unable to fulfill its obligations under the letter of credit for any reason, the bank shall immediately give notice to the permittee and the department; and

(iii) upon the incapacity of a bank by reason of bankruptcy, insolvency or suspension or revocation of its charter or license, or upon the inability of a bank to fulfill its obligation under the letter of credit for any reason, the permittee must be deemed to be without performance bond coverage and shall promptly notify the department. Upon notification received through the procedures of (a) and (b) or from the permittee, the department shall, in writing, notify the operator who is without bond coverage and specify a reasonable period, not to exceed 90 days, to replace bond coverage. If an adequate bond is not posted by the end of the period allowed, the operator shall cease coal extraction and shall comply with the provisions of ARM 17.24.522 and shall immediately begin to conduct reclamation operations in accordance with the reclamation plan. Mining operations must not resume until the department has determined that an acceptable bond has been posted.


History: 82-4-204, MCA; IMP, 82-4-223, 82-4-232, 82-4-235, MCA; NEW, 1980 MAR p. 725, Eff. 4/1/80; AMD, 1989 MAR p. 30, Eff. 1/13/89; TRANS, from DSL, 1996 MAR p. 3042; AMD, 2004 MAR p. 2548, Eff. 10/22/04; AMD, 2010 MAR p. 911, Eff. 4/16/10.

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