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In late 2010, the Kentucky Department for Natural Resources (DNR) and the Lexington Field Office of the U.S. Office of Surface Mining (OSM) completed a joint special study on reclamation bonding for coal mining operations in Kentucky. In January 2011, OSM determined that the Kentucky regulatory program contained several reclamation bonding deficiencies.

On May 1, 2012, OSM issued a letter to the department for Part 733 of the Surface Mining Control and Reclamation Act of 1977 (SMCRA), requiring the implementation of program changes to resolve the issues. Prominent among those changes was the promulgation of House Bill 66, now codified as KRS 350.500 through 350.521. Enacted March 22, 2013, this legislation established the Kentucky Reclamation Guaranty Fund (fund), the Fund Commission and the Office of the Reclamation Guaranty Fund (ORGF), to support the commission and administer its affairs.

The fund is a revolving, interest-bearing account that will provide financial assistance to the cabinet in the event the permit-specific reclamation bond is insufficient to complete reclamation on a mine site. Participation in the fund is mandatory, unless permittees elect to provide a full-cost bond in accordance with specific calculation methods.

The fund received initial capitalization from the assets of the former voluntary Kentucky Bond Pool, which was abolished by the above legislation. Additional initial capitalization resulted from a start-up assessment and a one-time acreage fee. Subsequent additional revenue is generated from tonnage and acreage fees paid annually, depending on the operational status of each permit.

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