Reclamation bonds are required by the Bureau of Land Management and other State agencies to protect the land from irresponsible operators of oil or water wells, coal mines, rock quarries, etcetera. For instance, the State requires wells to be capped when well operations cease so that people or animals won’t fall down the hole left behind after the well has been deemed no longer fruitful.
Another example is mining; the State requires that no sheer walls be left behind for people or animals to fall from and if a quarry is filled with water that there is at least one side where there is an easy exit. This bond is a financial guarantee and cannot be cancelled without the bond immediately going into claim therefore applicants must be strictly underwritten. Bond premium rates range from 1% to 10%+ of the bond penalty depending on the applicant’s financial strength and credit score, it is not uncommon to require full collateral on this bond if the applicant has a poor credit report and or a relatively low personal net worth.
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