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~ , r~ Mr. Robert Hagen - 2 - May 1, 1987 At the time the Division's strategy was being developed, the First National Bank of Oklahoma, the bank that provided the letters of credit for G.E.C., went bankrupt. The Attorney General sought to have the letters of credit enforceable by the Federal Reserve Board, but failed in that effort. G.E.C. also has been unable to obtain a replacement bond. Thus, the Board has been left with 5123,640 in the form of corporate bonds. The concern with the lack of reclamation progress and the loss of bond coverage was brought to the Board at the October 23, 1986 and January 20, 1987 meetings. The loss of bond significantly affected the Division's strategy. Normally, if a company failed to perform in compliance with a Board order, the Division would recommend that the bond be forfeited. In this case, this enforcement mechanism was lost. As such, the Board determined it was in the best interest of the state to work with G.E.C. to resolve issues pertaining to the reclamation plan. Alternatives were pursued over the months after the October 23, 1986 Board meeting, The Board's and Division's goal in the matter has been to achieve the reclamation. G.E.C. has generally maintained the site and worked toward reclamation of the site. As such, the Division has worked with G.E.C, to achieve the objectives of highest priority. At the time of the First National Bank failure, G.E,C. represented to the Board and Division that it too had very limited resources and was near bankruptcy. Their inability to obtain replacement bond is also evidence of this. Consequently, the Division has been careful to not divert G.E,C.'s time, effort and money away from those high priority objectives. Given the tenuous nature of the continued solvency of G.E.C., it did not seem prudent to require them to put money into efforts that were not significant with respect to the reclamation goal. Nor did it seem prudent, at that time, to put G.E.C. in a position of probable failure when there was a chance that a successful reclamation effort would come about. At the time the TDN was issued, G.E.C., EFC and the landowner were in the midst of finalizing negotiations on the disposal of EFC's refuse in the East Pit. The TDN's identified specific compliance problems at the site. There is no clear response available to the state to address the regulatory situation created by the issuance of the TDNs. As stated earlier, normally if G.E.C. failed to comply with the Board Order and the performance standards, the bond would be forfeited and the state would assume reclamation responsibility. This option was lost when the First National Bank failed. Another enforcement alternative, but one of ambiguous applicability, is the issuance of Notices of Violation. The applicability of the NOV process leads to an illogical conclusion. A failure to comply with the abatement requirements leads to failure to abate cessation orders. If the orders are not abated, one is assessed a minimum of 522,500 in civil penalties. Continued failure to abate would lead, at a minimum, to a show cause order and a permit revocation - which is exactly the situation that exists now. It seemed illogical to put G.E.C. in the enforcement system which leads to a revoked permit. Also, the state believed it would be unadvisable to penalize the company with civil penalties which would remove resources from the reclamation effort.