(1) A permit shall not be issued under this article until the board receives the performance and financial warranties described in subsections (2), (3), and (4) of this section.

(2) A "performance warranty" is a written promise made by the operator to the board to comply with this article and shall be in such form as the board may prescribe. Whenever two or more persons or entities are named as operators in a single permit, such operators may limit the scope of their individual performance warranties if such warranties, in the aggregate, warrant the performance of all requirements of this article.

(3) (a) A "financial warranty" is a written promise a party makes to the board to be responsible for reclamation costs, up to the amount specified in subsection (4) of this section, and includes proof of financial responsibility. A financial warranty shall be in such form as the board may prescribe and may be provided by the operator, by a third party, or by any combination of persons or entities.

(b) The board may accept interests in real and personal property as financial warranties to the extent of a specified percentage of the estimated value of such property. A person offering such a financial warranty shall submit information to show clear title to and the value of such property.

(c) The board may refuse to accept a financial warranty if:

(I) The value of such warranty is dependent upon the success, profitability, or continued operation of the mine; or

(II) It determines that such warranty cannot reasonably be converted to cash within one hundred eighty days of forfeiture.

(d) For construction materials operations:

(I) This subsection (3) shall apply on July 1, 1993, to a deed of trust used as collateral for a new financial warranty completed on or after such date;

(II) This subsection (3) shall be effective on January 1, 1996, with respect to a:

(A) Financial warranty that is collateral for a deed of trust used as collateral for a financial warranty in existence on July 1, 1993, and subsequent amendments of such deed of trust; and

(B) Financial warranty completed before July 1, 1993, if the value of such financial warranty includes a construction material value or if construction material value is used to update such warranty. The value of a financial warranty described in this sub-subparagraph (B) shall include the construction material value for the life of the warranty.

(e) An instrument offered as a financial warranty pursuant to this subsection (3) shall provide that the board may recover any necessary costs it incurs, including attorney fees, in foreclosing on or realizing collateral used to secure such financial warranty in the event of forfeiture.

(f) Proof of financial responsibility may consist of one or more of the following, subject to approval by the board:

(I) A surety bond issued by a corporate surety authorized to do business in this state;

(II) A letter of credit issued by a bank authorized to do business in the United States;

(III) A certificate of deposit;

(IV) A deed of trust or security agreement encumbering real or personal property and creating a first lien in favor of this state;

(V) Assurance, in such form as the board may require, that:

(A) Upon commencement of production, the operator will establish an individual reclamation fund to be held by an independent trustee for the board, upon such terms and conditions as the board may prescribe, and funded by periodic cash payments representing such fraction of receipts as will, in the opinion of the board, provide assurance that funds will be available for reclamation;

(B) Prior to the issuance of a permit, the operator will provide another form of financial warranty as described in this paragraph (f). As the reclamation fund increases in value, the other form of financial warranty may be decreased in value so long as the sum of financial warranties is the amount specified in subsection(4) of this section.

(C) Project-related fixtures and equipment, excluding rolling stock, owned or to be owned by the financial warrantor within the permit area will have a salvage value at least equal to the amount of the financial warranty or the appropriate portion of such warranty;

(D) Existing liens and encumbrances applicable to project-related fixtures and equipment shall be subordinated to the lien described in section 34-32.5-118; except that liens in favor of the United States, a state, or a political subdivision shall not be so subordinated;

(E) Project-related fixtures and equipment shall be maintained in good operating condition and will not be removed from the permit area without the prior consent of the board;

(VI) A certified financial statement for the financial warrantor's most recent fiscal year and a certification by an independent auditor that:

(A) The financial warrantor is the issuer of one or more currently outstanding senior credit obligations that have been rated by a nationally recognized rating organization;

(B) The obligations enjoy a rating by such rating organization of 'A' or better;

(C) The financial warrantor's net worth was at least twice the amount of all financial warranties made by such warrantor as of the close of the most recent fiscal year;

(VII) A certified financial statement for the financial warrantor's most recent fiscal year and a certification by an independent auditor that as of the close of such year the financial warrantor's:

(A) Net worth was at least ten million dollars and was equal to or greater than twice the amount of all financial warranties;

(B) Tangible fixed assets in the United States were worth at least twenty million dollars;

(C) Total liabilities-to-net-worth ratio was not more than two to one;

(D) Net income, excluding nonrecurring items, was positive. Nonrecurring items that affect net income shall be stated in order to determine if they materially affect self-bonding capacity.

(VIII) Proof that the operator is a department or division of state government or a unit of county or municipal government.

(g) Proof of financial responsibility submitted or revised on or after July 1, 1993, shall be in compliance with subsection (4) of this section.

(4) (a) The board shall prescribe the amount and duration of financial warranties, taking into account the nature, extent, and duration of the proposed mining operation and the magnitude, type, and estimated cost of planned reclamation.

(b)

(I) In a single year during the life of a permit the amount of required financial warranties shall not exceed the estimated cost of fully reclaiming all lands to be affected in such year plus all lands affected in previous permit years and not yet fully reclaimed. For purposes of this paragraph (b), reclamation costs shall be computed with reference to current reclamation costs. A financial warranty shall be sufficient to assure the completion of reclamation of affected lands if, because of forfeiture, the office has to complete such reclamation and shall include an additional amount equal to five percent of the amount of the financial warranty to defray administrative costs incurred by the office in conducting the reclamation.

(II) The office and the board shall take reasonable measures to assure the continued adequacy of a financial warranty.

(c) (I) The board may:

(A) From time to time and for good cause shown, increase or decrease the amount and duration of a required financial warranty;

(B) By rule or permit condition, require that proof of value of all or any group of warranties held by the board be submitted on a periodic basis;

(C) By rule or permit condition, limit certain types of warranties to specific purposes or require that a specified percentage of the total bond be held in easily valued and convertible instruments.

(II) A financial warrantor shall have sixty days after the date of notice of an adjustment to fulfill the new requirements.

(5) (a) An operator may file a written notice of completion with the office whenever such operator believes that any or all requirements of this article have been completed with respect to any or all of such operator's affected lands. Within sixty days after receiving such notice, or as soon as weather conditions permit, the office shall inspect affected lands and the reclamation described in the notice to determine if the operator has complied with all applicable requirements.

(b) If the board or office finds that an operator has successfully complied with any or all requirements of this article, it shall release all performance and financial warranties applicable to such requirements. Releases shall be in writing and delivered promptly to the owner or operator after the date of such finding.

(c) If the board or office finds that an operator has not complied with applicable requirements of this article, it shall advise the operator of such noncompliance not more than sixty days after the date of the inspection.

(d) If the office fails to conduct an inspection within the time specified in paragraph (a) of this subsection (5) or to advise the operator of deficiencies within the time specified in paragraph (c) of this subsection (5), then all financial warranties applicable to the reclamation described in the notice shall be deemed released as a matter of law.

(6) (a) A financial warranty shall be maintained in good standing for the entire life of a permit issued under this article. A financial warrantor shall immediately notify the board of an event that may impair its warranty.

(b) Each financial warrantor who provides proof of financial responsibility in a form described in subsection (3)(f)(IV) to (3)(f)(VII) or subsection (8) of this section shall cause to be filed with the board a certification by an independent auditor. Such certification shall be filed annually and shall provide that, as of the close of the financial warrantor's most recent fiscal year, such financial warrantor continued to meet all applicable requirements of such subparagraphs (IV) to (VII). A financial warrantor who no longer meets such requirements shall cause to be filed an alternate form of financial warranty.

(c) A financial warrantor who provides proof of financial responsibility in a form described in paragraph (b) of this subsection (6) shall notify the board within sixty days after a net loss is incurred in a quarterly period.

(d) Whenever the board receives a notice under paragraph (a) or (c) of this subsection (6), fails to receive a certification or substitute warranty as required by paragraph (b) of this subsection (6), or otherwise has reason to believe that a financial warranty has been materially impaired, it may convene a hearing for the purpose of determining whether impairment has in fact occurred.

(e) Whenever the board convenes a hearing pursuant to this subsection (6), it may hire an independent consultant to provide expert advice at the hearing. The fees of any such consultant shall be paid by the financial warrantor, and no consultant shall be hired until the financial warrantor signs a written fee agreement in such form as the board may prescribe. If a financial warrantor refuses to sign such an agreement, the board may, without hearing, order such financial warrantor to provide an alternate form of financial warranty.

(f) If the board finds, at any hearing held pursuant to this subsection (6), that a financial warranty has been materially impaired, it may order the financial warrantor to provide an alternate form of financial warranty.

(g) A financial warrantor shall have ninety days to provide any alternate warranty required under this subsection (6).

(h) All hearings held under this subsection (6) shall comply with the requirements of article 4 of title 24, C.R.S.

(7) For purposes of this section, a "Rating of 'A' or better" means that a nationally recognized rating organization has determined that the obligations are at least of an upper-medium grade. This means that the factors giving security to the principal and interest are considered to be adequate but elements may be present that suggest the possibility of adverse effects if economic and trade conditions change.

(8) (a) The board or office may accept a first-priority lien on project-related fixtures and equipment that must remain on site for the reclamation plan to be performed in lieu of including the cost of acquiring and installing such fixtures and equipment in the amount of the financial warranty prescribed pursuant to subsection (4) of this section.

(b) The board or office may accept a first-priority lien on project-related fixtures and equipment that must be demolished or removed from the site under a reclamation plan and may, in its discretion, accept such a lien as a portion of the proof of financial responsibility if the amount credited does not exceed the cost of demolishing and removing such fixtures and equipment or the market value of such fixtures and equipment, whichever is less.

(c) Any fixtures and equipment accepted pursuant to this subsection (8) shall be insured and maintained in good operating condition and shall not be removed from the permit area without the prior consent of the board. A financial warrantor that provides a lien on such equipment and fixtures shall file an annual report with the office in sufficient detail to fully describe the condition, value, and location of all pledged fixtures and equipment. Such financial warrantor shall not pledge such equipment and fixtures to secure any other obligation and shall immediately notify the office of any other interest that arises in the pledged property.