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Reclamation Bonds

Reclamation Bonds

The reclamation bond is a type of performance surety bond. It’s required by BLM – the Bureau of Land Management – and it is required by some state government agencies that provide permits for specific mining operations.

A reclamation bond is usually a requirement if your business wants a permit to begin mining or a related operation at a certain sight. The purpose of the reclamation bond is to offer a financial guarantee that the land is being disturbed for the mine’s operation (or a related activity) and will be returned to its former (original) state or an acceptable condition that’s agreed on by the government agency and the operator.

The Cost of Reclamation Bonds

The amounts of reclamation bonds aren’t standard. Usually, the amount you must pay is determined by the approximate cost of reclaiming the land after mining operations have ended. The actual reclamation costs can vary depending on the mining operation being conducted and the total impact to the land. Some of the considerations that come into play when determining land reclamation costs include (but aren’t limited to):

  • Revegetation
  • Topsoil replacement
  • Building demolition and disposal
  • Equipment removal and disposal
  • Groundwater restoration

A reclamation bond isn’t restricted to a single mining activity. These bonds may require an operation that changes the land so much that it cannot recover alone once the process is complete. A few examples of operations where reclamation bonds are needed include wastewater disposal facilities and waste recycling plants. Of course, the most popular and prolific type of reclamation is coal mining.

The Purpose of Reclamation Bonds

Reclamation bonds are used to guarantee the land affected by mining or a similar permitted operation is returned to the pre-mining condition to a condition that is agreed to be “acceptable.” If the mine operator doesn’t perform the land reclamation, then the Surety (the company that provides the guarantee behind the bond) could be called to uphold its financial responsibility regarding the reclamation bond.

In most situations, the surety would pay out on the bond, or it would manage the land reclamation project. In either case, the mine operator will be responsible for the financial expense that’s incurred by the surety company. Reclamation bonds aren’t insurance and they don’t work like insurance. Like most surety bonds they rely on the principle of indemnity and ultimately, the mine operator is financially responsible for the reclamation of the land.

Challenges in Underwriting Reclamation Bonds

Reclamation bonds have gotten more difficult to write over the years. This is in large part to the bankruptcies of some of America’s largest mining companies. As the world looks at alternatives to fossil fuels, mineral prices often decrease and put additional pressure on mining companies. Often the reclamation of these lands can take years and once the surety gets on, they can’t get off. As such, they want to make sure that the Principal on the bond has the financial strength to complete the obligation.

What’s Needed to Apply for the Reclamation Bond?

If you need to apply for a reclamation bond, there are several things you need in addition to a credit check and the application. This includes:

  • Specific bond forms: the agency that requires the bond be in place will usually require the bond be written on a form with specific wording. The surety underwriter needs to review the verbiage as a part of the underwriting.
  • Reclamation plan: documents that describe the requirements for the land reclamation.

You can work with the professionals to ensure you have everything needed for the bond request. By getting assistance with this process, you can feel confident that you will get the bond you need to begin the project or job being done. MG Surety has many bond companies that write reclamation bonds. We will work with you to find the best solution to your situation. We are surety experts and we want to be your bond broker for life. Contact us today!