Learn more about environmental surety bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.
What Are Environmental Bonds?
Environmental surety bonds were created to ensure compliance by contractors of all sorts with federal environmental regulations and policies. They are required by a number of federal government entities, such as the Army Corp of Engineers and the U.S. Environmental Protection Agency for contractors remediating contaminated property or involved in projects that could possibly be harmful to the environment.
These bonds are often in the form of performance bonds or payment bonds. They guarantee compliance with environmental regulations and policies at the federal, state, and local levels. They also guarantee repair of any environmental damage that occurs as a result of the project work covered by the bond.
Who Needs Them?
Contractors engaged in activities such as the following may be required to purchase an environmental bond:
Disposing of contaminated material
Rehabilitating land that has been mined
Demolishing contaminated structures
Removing underground tanks
Installation of dewatering systems
Landfill capping and closure
Well plugging and abandonment
How Do They Work?
Like all surety bonds, environmental bonds bring together three parties:
The government agency or project owner requiring the bond is the obligee
The contractor required to purchase the bond is the principal
The underwriter that issues the bond is the surety
The terms of the bond spell out exactly what the principal is guaranteeing. The bonds must usually remain in force for a period of some years, as some environmental problems may not surface for a while after the project has been completed. During the time that the bond is in force, any party that suffers a financial loss due to the actions (or inaction) of the principal can file a claim against the bond.
The surety will determine whether the claim is valid and, if it is, will make payment to the claimant. However, the principal is the financially responsible party and must reimburse the surety for the full amount paid out on the claim.
What Do They Cost?
The obligee determines the required amount of the bond according to federal regulations and policies. The surety will set a premium rate, the percentage of that bond amount to be paid by the principal, based on the applicant’s financial capacity. The surety typically reviews an applicant’s credit score, industry experience, and personal and business financial statements to establish the appropriate premium rate. Well qualified applicants with good credit will pay a premium of between 1% and 3% of the required bond amount.
If you have been informed that you need to obtain an environmental bond, our experienced surety professionals are ready to assist.