(1) A financial warranty shall be subject to forfeiture whenever the board determines that one or more of the following circumstances exist:

(a) The operator has violated a cease-and-desist order entered pursuant to section 34-32.5-124 and, if corrective action was proposed in such order, has failed to complete such corrective action although ample time to do so has elapsed; or

(b) The operator is in default under a performance warranty and has failed to cure such default although the operator has been given written notice and has had ample time to do so; or

(c) The financial warrantor has failed to maintain a financial warranty in good standing as required by section 34-32.5-117; or

(d) The financial warrantor no longer has the financial ability to carry out any obligations required under this article.

(2) When the board has reason to believe a financial warranty is subject to forfeiture, it shall so notify the operator and all financial warrantors. The board shall grant the operator and all financial warrantors the right to appear before the board at a hearing to be held not less than thirty days after the parties' receipt of such notice. Any such hearing shall be held in accordance with article 4 of title 24, C.R.S.

(3) (a) At a hearing held pursuant to subsection (2) of this section, the board may withdraw or modify any determination that the financial warranty is subject to forfeiture, settle or compromise the determination, or confirm its determination that the financial warranty should be forfeited.

(b) Upon finding that a financial warranty should be forfeited, the board shall issue written findings of fact and conclusions of law to support its decision and shall issue an order directing affected financial warrantors to immediately deliver to the board all amounts warranted by applicable financial warranties.

(4) (a) The board, upon issuing an order pursuant to subsection (3) of this section, may request the attorney general to institute proceedings to secure or recover amounts warranted by forfeited financial warranties. The attorney general shall have the power, inter alia, to:

(I) Foreclose upon any real and personal property encumbered for the benefit of the state;

(II) Collect, present for payment, take possession of, and otherwise reduce to cash any property held as security by the board;

(III) Dispose of pledged property.

(b) The amount of a forfeited financial warranty shall constitute a lien upon project-related fixtures or equipment offered as proof of financial responsibility pursuant to section 34-32.5-117. Such lien shall be in favor of this state.

(c) The lien described in paragraph (b) of this subsection (4) shall have priority over all other liens and encumbrances, irrespective of the date of recordation, except liens of record on June 19, 1981, and liens of the United States, this state, and political subdivisions of this state for unpaid taxes and shall attach and be deemed perfected as of the date the board approves issuance of the operator's permit.

(5) Funds recovered by the attorney general in proceedings brought pursuant to subsection (4) of this section shall be held in the special account described in section 34-32.5-122 and shall be used to reclaim lands covered by forfeited warranties; except that five percent of the amount of such forfeited warranties shall be deposited in the mined land reclamation fund, created in section 34-32-127, to cover administrative costs incurred by the office in performing reclamation. The board shall have a right of entry to reclaim such lands, and upon completion of such reclamation the board shall present a full accounting to the financial warrantor and shall refund all unspent moneys.

(6) Notwithstanding any discharge of applicable financial warranties, an operator in default shall remain liable for the actual cost of reclaiming affected lands less any amounts expended by the board pursuant to subsection (5) of this section.

(7) Notwithstanding any provision of this section to the contrary, a corporate surety may elect to reclaim affected lands in accordance with an approved plan in lieu of forfeiting a bond penalty.