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STTTES OL I1HIL61SON Pr,t <br />, n o ~ ~ ~.~ <br />Robert D. Clark, Esq. <br />Cheryl A. Linden, Esq. <br />Mazch 12, 2001 <br />Page 7 <br />These changes answer industry's concern for unfav treatment of an <br />operator following loss of bond due to incapacity of the operator's <br />bonding agent. <br />48 Fed. Reg. 32,932 (1983). Given the fact that enforcement action was considered and rejected <br />by OSM, Colorado's regularion is clearly more stringent than the federal regulation and thus <br />violates the mandate of C_C.R. § 34-33-108. <br />S. Colorado's Regulations Do Not Authorize DMG to Institute Bond Forfeiture <br />Proceedings Due to Surety Incapacity. <br />The Clark letter states that if Powderhom fails to obtain a replacement bond, the <br />regulatory agency will "be required to forfeit [he Bond and demand that Frontier immediately <br />pay to DMG the full $2.6 million face amount of the Bond." Clazk Letter, p. 10. Even if DMG <br />has the authority to issue an NOV and CO to Powderhom for failure to obtain a replacement <br />bond, it does not have the authority to order the allegedly inadequate bond to be forfeited. It is a <br />well-settled principle of administrative law that an agency possesses only the powers granted to <br />it by statute or ree lation. 2 C.C.R. § 407-2, Rule 3.04.1 sets forth the criteria for forfeiture of <br />performance bonds, none of which authorize fozfeiture due to surety incapacity. Accordingly, <br />the assertion that, DMG has the authority to order the Frontier bond to be forfeited if Powderhorn <br />does not obtain an acceptable replacement bond is without merit. <br />SUMMARY <br />We feel strongly that potential litigation over the issue of Frontiers' bonds would be a <br />distraction from the issues relevant to the agency, i.e. performance of reclamation. As long as <br />the Debtor is performing reclamation and its Reorganization Plan is consistent with meeting <br />those obligations the agency has no basis for bond forfeiture. If and when the permittee fails to <br />meet its obligations on the ground the surety's obligations aze due. Frontier, through its <br />reinsurance treaty is fully capable of performing its bonded obligations. <br />Sincer~el~yQyo , <br />~-'C.e.r <br />William T. Gorton III <br />WTG:cs <br />