An irrevocable letter of credit as financial assurance is subject to the following requirements:

1. (1) The letter of credit is irrevocable and automatically extended for additional periods of one year from the expiration date unless the bank providing the letter of credit notifies the department in writing at least one hundred fifty days prior to the expiration date that it elects not to renew the letter of credit. If the letter of credit has not been replaced by suitable financial assurance at least ninety days prior to the expiration date, the board may proceed with forfeiture of the irrevocable letter or credit;

2. (2) The irrevocable letter of credit must be issued by a bank that is insured by the Federal Deposit Insurance Corporation, organized and authorized to do business in the United States, and located in this state, except that the bank need not be located in this state if the irrevocable letter of credit:

   1. (a) Can be exercised at an affiliate or subsidiary located in this state;
   2. (b) Is confirmed by a bank located in this state; or
   3. (c) Is otherwise determined to be an acceptable letter of credit by the board;
3. (3) The irrevocable letter of credit is executed on the issuing bank's letterhead using the language provided by the department. The department is required to be listed as the beneficiary on the letter of credit;
4. (4) The irrevocable letter of credit is payable to the department in full upon demand and receipt from the board of a notice that the operator has failed to comply with the provisions of SDCL chapter 45-6B, the rules adopted thereunder, or the mine permit;
5. (5) The operator must demonstrate at the time of submittal of the irrevocable letter of credit to the department that the bank issuing the irrevocable letter of credit is in good financial standing and condition, as evidenced by its rating by an appropriate rating system;
6. (6) The irrevocable letter of credit must provide that, upon expiration, if the department has not notified the bank in writing that substitute financial assurance has been provided or is not required, the bank will immediately pay the department the full amount of the irrevocable letter of credit less any previous drafts;
7. (7) The irrevocable letter of credit is not in excess of ten percent of the bank's capital surplus account as shown on a balance sheet certified by a certified public accountant;
8. (8) The sum of multiple irrevocable letters of credit issued by a bank as financial assurance for multiple permits held by an operator is not in excess of thirty percent of the bank's capital surplus account as shown on a balance sheet certified by a certified public accountant;

9. (9) As evidenced by the balance sheet referenced in subdivision (7) of this section and a certified income and revenue sheet, the bank must meet the following criteria:

   1. (a) The bank is earning at least a one-percent rate of return on total assets (net income/total assets = 0.01 or more);
   2. (b) The bank is earning at least a ten-percent return on equity (net income/total stockholders' equity = 0.10 or more); and
   3. (c) Capital or stockholder's equity must be at least five and one-half percent of total assets ((total stockholder's equity [capital stock + retained earnings])/total assets = 0.055 or more);
10. (10) The bank's qualifications, as provided in this section, must be reviewed by board staff annually prior to the time the letter of credit is renewed; and

11. (11) The irrevocable letter of credit provides that:

    1. (a) The bank will give prompt notice to the operator and the department of any notice received or action filed alleging the insolvency or bankruptcy of the bank or operator, or alleging any violations of regulatory requirements which could result in suspension or revocation of the bank's charter or license to do business; and
    2. (b) In the event the bank becomes unable to fulfill its obligations under the letter of credit for any reason, notice must be given immediately to the operator and the department.

Source: 52 SDR 24, effective September 10, 2025 .

General Authority: SDCL 45-6B-81 .

Law Implemented: SDCL 45-6B-20 , 45-6B-20.1 , 45-6B-21 , 45-6B-22 , 45-6B-23 , 45-6B-24 , 45-6B-55 , 45-6B-91 .