What is a Restoration Bond?
A Restoration Bond is a type of Performance Surety Bond. This particular type of surety bond is required by local councils and government agencies that issue permits for mining and quarrying type operations. This type of bond is typically a requirement for a business that is seeking a permit to start mining or other related operations at a specific site. It provides a financial guarantee that the land being disturbed for the operation of the mine, or related activity, will be returned back to either its approximate original state or an acceptable condition agreed upon by the operator and the government agency.
Restoration Bond amounts are not standard...
The amount required is usually based on a form of cost analysis used to determine the approximate cost to reclaim the land after the mining/quarrying operations have ceased. Restoration costs vary greatly depending on what type of operation is being conducted and the degree of impact on the land. And so, land restoration cost considerations include, but are not limited to, such tasks as:
- Groundwater Restoration
- Equipment removal & Disposal
- Building Demolition & Disposal
- Topsoil replacement
Restoration Bonds are not restricted to mining type activity. Generally speaking, a restoration bond may be required of any operation that alters the land to a degree that the land may not recover on its own post operation. Examples of operations that may be required to obtain a restoration bond include waste recycling plants and waste water disposal facilities.
How does the Restoration Bond work?
So as explained, this type of surety bond is put in place to guarantee that the land affected by mining or similar permitted operations, is returned back to its approximate pre-mining condition or an agreed acceptable condition. In the instance where a mine operator does not perform the land restoration, the Surety (the company providing the guarantee behind the bond) may be called upon to uphold it’s financial responsibility to the Restoration Bond.
Typically, the Surety would either be able to pay out on the bond or manage the land restoration operation themselves. In either instance, the mine operator is responsible for the financial expense incurred by the Surety. A Restoration Bond is not insurance and does not work like insurance. The mine operator is ultimately financially responsible for the land restoration.
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