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Snell &Wilmer L.L.P. than federal regulation, and thus, would violate the mandate of C.C.R. § 34-33-108 and invalidate the regulations. VI. COLORADO'S REGULATIONS DO NOT AUTHORIZE DMG TO INSTITUTE BOND FORFEITURE PROCEEDINGS DUE TO SURETY INCAPACITY The Clark letter states that if Powderhom fails to obtain a replacement bond, the regulatory agency will "be required to forfeit the Bond and demand that Frontier immediately pay to DMG the full $2.6 million face amount of the Bond" Clazk Letter, p. 10. Even if DMG has the authority to issue an NOV to Powderhor for failure to obtain a replacement bond, it does not have the authority to order the allegedly inadequate bond to be forfeited. It is swell-settled principle of administrative law that an agency possesses only the powers granted to it by statute or regulation. 2 C.C.R. § 407-2, Rule 3.04.1 sets forth the criteria for forfeiture of performance bonds, none of which authorize forfeiture due to surety incapacity. Accordingly, the assertion that DMG has the authority to order the Bond to be forfeited if Powderhor does not obtain an acceptable replacement is without merit. The only authority in DMG under the present circumstances is to order that reclamation be initiated under the reclamation plan. VII. ANY EFFORT TO FIND POWDERHORN IN VIOLATION OR TO FORECLOSE ITS BOND WOULD BE INEQUITABLE AS POWDERHORN IS NOT CONDUCTING COAL MINING OPERATIONS AND IS PROCEEDING WITHACTIVITIES NECESSARY TO IMPLEMENT ITS RECLAMATIONPLANINACCORDANCE WITHSTATELAW Powderhom understands how Frontier's current status creates a difficult situation from the State's perspective. However, should the State determine that Frontier's status creates an unabated violation by Powderhom, it will have unfair and probably unintended consequences to both Powderhom and Quaker, which could affect the bankruptcy reorganization, and possibly the ability of the company to carry out the reclamation plan. An unabated violation could result in a permit block against Quaker and its subsidiaries under the Applicant Violator System. Even were the State inclined to seek foreclose of the Bond, State law identifies limited circumstances under which DMG may take such drastic measures. In particular, the regulations state that a bond may be forfeited when the "permittee has violated any of the terms or conditions of the bond and has failed to take adequate corrective action." 2 CCR 407-2, 3.04.1(1)(a) (emphasis added). Here, Powderhor has violated no term or condition of its Bond. Rather, the State is directly imputing a violation as a result of the status of Frontier, despite the fact that Frontier has not been found incapable of meeting its surety obligations. -8-