Financial Assurance Requirement
SMARA §2773.1(a)(3) requires that the
financial assurances [pdf] for each mining operation be adjusted annually to account for new lands disturbed, inflation, and reclamation of lands accomplished in accordance with SMARA and the site’s approved reclamation plan.
Section 3804 of the State regulations states:
“The financial assurance amount shall be calculated… and based on (1) an analysis of the physical activities and materials necessary to implement the approved reclamation plan; (2) the lead agency’s unit costs, or costs for third party contracting, for each of these activities, if applicable, (3) the number of units of each of these activities, if applicable; (4) a contingency amount not to exceed 10% of the reclamation cost. The calculated amount should not include the cost of completing mining of the site.”
Financial Assurance Cost Estimate (FACE)
In order to meet the SMARA requirement, surface mining operators must submit a Financial Assurance Cost Estimate each year. The County recommends that all mine operators submit the FACE with the completed Mine Annual Inspection Report Questionnaire.
The County will review the submitted FACE and provide comments back to the Operator. The operator has 30 days to respond to all the comments provided and prepare a revised FACE, if necessary. If the operator fails to adequately address all the comments provided or new information is submitted that warrants additional comments, the County will make a final determination and forward the FACE to the Department of Conservation, Office of Mine Reclamation (OMR) for review, pursuant to SMARA §2773.1. When OMR agrees that the FACE is adequate and meets the requirements of SMARA, the County will require the mine operator to post a Financial Assurance Mechanism.
Financial Assurance Mechanisms (FAM)
SMARA §2773.1 and Section 3800 of the State regulations (California Code of Regulations Title 14, §3804) provides that the following are acceptable Financial Assurance Mechanisms:
- Surety Bond
- Irrevocable Letters of Credit (LOC)
- Trust Funds
- Certificates of Deposit (CD)
Government agencies are also allowed to use:
- Pledge of Revenue
- Budget set aside
At a minimum, FAMs are to be made payable to
both the County and the Department of Conservation, in some cases, additionally beneficiaries may include the Department of the Interior, Bureau of Land Management or the Department of Agriculture, US Forest Service Updated FAMs must be posted when the FACE is approved by the County.