Surety bonds issued for environmentally intensive activities such as mining, oil and gas production, or waste disposal implicate a complex combination of technical issues, regulatory oversight, and surety law. Stites & Harbison has assembled a team of experienced lawyers including the former Manager of the Kentucky office of Skelly and Loy Engineers, a nationally-recognized mining engineering and environmental consulting firm with mining design, regulatory program development and reclamation design experience throughout the United States; a Ph.D. biologist; a former senior attorney of the Kentucky Natural Resources and Environmental Protection Cabinet; and a former Interstate Mining Compact Commission attorney.
Our team has achieved particular success in spearheading the sureties’ responses in many complex matters where mining principals, hazardous waste facility operators, oil and gas well operators and landfill operators have come close to default or actually defaulted on their bonded obligations. The firm has also assisted surety clients participation in state and federal rulemaking, in underwriting analysis, and has advocated the sureties’ interests during the bankruptcy of the bonded principals. When necessary, seeking indemnification and salvage is often the final stage in closing a file.
The firm’s team combines its knowledge of environmental, property, mineral, surety and bankruptcy law, and the intricate regulatory framework that governs the environmental sectors, along with its understanding of the technical, “in the dirt” requirements of reclamation and site closure/post closure. These efforts often result in the release of bonds and/or resolution of claims with substantial savings under penal bond amounts. In fact, because of the innovative approaches to surety reclamation, several projects managed by the Stites & Harbison surety law team have been recognized by engineering, professional and mining trade associations.
Underwriting factors include environmental obligations as well as the corporate structure and control of the mining entities. In proposed large surety programs, involving penal amounts of hundreds or millions of dollars, we have conducted the due diligence of the principal’s operations and regulatory status to aid underwriters in decision making. Patterns of mining company ownership, investment, and organizational framework are changing, and these changes make underwriting and the accompanying risk analysis more difficult. With the goal of protecting the surety in the event of default, we have helped surety clients evaluate the risks and have developed industry specific Indemnity Agreements.
Though it may benefit a surety to solve problems with its principals outside of bankruptcy, many of the most complicated cases the firm handles are under the umbrella of bankruptcy court jurisdiction. The firm’s surety team includes bankruptcy attorneys who have practiced in bankruptcy courts throughout the country. The intersection of substantive and technical environmental law, suretyship and bankruptcy creates a complex mixture, often with conflicting policies. Stites & Harbison’s attorneys have been in the surety industry’s corner in some of the largest bankruptcy cases in the U.S. involving the extractive and environmental industries including Safety-KIeen and Horizon Natural Resources, Inc.
Environmental Regulatory Agency Experience
We have counseled many clients including the major sureties in the U.S. regarding mining/environmental reclamation, landfill closure/post closure and resource recovery matters ranging in amounts of liability from under $100,000 to over $500 million. Matters have involved as few as one to over 400 mines or facilities. We approach each matter carefully with the knowledge that there are many considerations when devising a strategy to mitigate surety exposure. Our practice in this area is national, having successfully negotiated workouts or developing plans to the benefit of the clients and the environment and/or providing underwriting support related to programs administered by the following agencies:
- United States Department of Interior
- Bureau of Land Management
- Fish and Wildlife Service
- U.S. Forest Service
- Office of Surface Mining
- United States Environmental Protection Agency
- Alabama Department of Industrial Relations
- Colorado Department of Minerals and Geology
- Illinois Department of Natural Resources
- Indiana Department of Natural Resources
- Kentucky Energy and Environment Cabinet
- Missouri Department of Natural Resources
- Montana Department of Environmental Quality
- Nevada Department of Environmental Protection
- Ohio Department of Natural Resources
- Oklahoma Department of Environmental Quality
- Pennsylvania Department of Environmental Protection
- Pennsylvania Land Commission
- Utah Department of Natural Resources
- Virginia Department of Mines, Minerals and Energy
- West Virginia Department of Natural Resources
- Wyoming Department of Environmental Quality
Surety Run-off and Rehabilitation
When mitigating surety exposure is critical such as in a surety run-off program or in a surety rehabilitation or liquidation many of the skills developed by our environmental surety team have saved clients millions of dollars. We represent several surety companies in run-off where mitigating exposure is critical to whether a run-off program is successful. As another example, we have been special counsel to Frontier Insurance Company in Rehabilitation and under the Supervision of the New York Insurance Department handling surety bond claims related to extractive and waste industry principals across the United States. Totaling close to $1 billion in surety exposure, we have been effective in dealing with federal, state and local governmental obligees in resolving claims through very carefully negotiated surety reclamation or closure plans.
Stites & Harbison environmental attorneys address several environmental issues that have been on-going over the past couple of months in this combined client alert.