(1) A financial warranty shall be subject to forfeiture whenever the board shall determine that any one or more of the following circumstances exist:

(a) The operator has violated a cease-and-desist order entered pursuant to section 34-32-124 and, if corrective action was proposed in such order, has failed to complete such corrective action although ample time to have done so has elapsed; or

(b) The operator is in default under his performance warranty and has failed to cure such default although he has been given written notice thereof and has had ample time to cure such default; or

(c) The financial warrantor has failed to maintain his financial warranty in good standing as required by section 34-32-117; or

(d) The financial warrantor no longer has the financial ability to carry out his obligations under this article.

(2) Whenever the board, based on information and belief, has reason to believe that a financial warranty is subject to forfeiture, the board shall so notify the operator and all financial warrantors. The board shall afford the operator and all financial warrantors the right to appear before the board at a hearing to be held not less than thirty days after the parties' receipt of said notice. Any such hearing shall be held in accordance with the provisions of article 4 of title 24, C.R.S.

(3) (a) At any such hearing, the board shall be empowered to:

(I) Withdraw or modify any determination that the financial warranty is subject to forfeiture;

(II) Settle or compromise the determination; or

(III) Confirm its determination that the financial warranty should be forfeited.

(b) Upon finding that a financial warranty should be forfeited, the board shall issue written findings of fact and conclusions of law to support its decision and shall issue an order directing affected financial warrantors to immediately deliver to the board all amounts warranted by applicable financial warranties.

(4) (a) The board, upon issuing any order pursuant to subsection (3) of this section, may request the attorney general to institute proceedings to secure or recover amounts warranted by forfeited financial warranties. The attorney general shall have the power, inter alia, to:

(I) Foreclose upon any real and personal property encumbered for the benefit of the state;

(II) Collect, present for payment, take possession of, and otherwise reduce to cash any property held as security by the board;

(III) Dispose of pledged property.

(b) The amount of any forfeited financial warranty shall be a lien in favor of this state upon any project-related fixtures or equipment offered as proof of financial responsibility pursuant to section 34-32-117 (3)(f)(V).

(c) Said lien shall have priority over all other liens and encumbrances irrespective of the date of recordation, except liens of record on June 19, 1981, and liens of the United States, the state, and political subdivisions thereof for unpaid taxes, and shall attach and be deemed perfected as of the date the board approves issuance of the operator's permit.

(5) Funds recovered by the attorney general in proceedings brought pursuant to subsection (4) of this section shall be held in the account described in section 34-32-122 and shall be used to reclaim lands covered by the forfeited warranties; except that five percent of the amount of the financial warranty shall be deposited in the mined land reclamation fund, created in section 34-32-127, to cover the administrative costs incurred by the office in performing reclamation. The board shall have a right of entry to reclaim said lands. Upon completion of such reclamation, the board shall present to the financial warrantor a full accounting and shall refund all unspent moneys.

(6) Defaulting operators shall remain liable for the actual cost of reclaiming affected lands, less any amounts expended by the board pursuant to subsection (5) of this section, notwithstanding any discharge of applicable financial warranties.

(7) Notwithstanding any provision of this section to the contrary, a corporate surety may elect to reclaim affected lands in accordance with an approved plan in lieu of forfeiting a bond penalty.