[Senate Hearing 109-256]
[From the U.S. Government Publishing Office]
S. Hrg. 109-256
AMEND THE SURFACE MINING CONTROL AND RECLAMATION ACT OF 1977
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
ON
S. 961
A BILL TO AMEND THE SURFACE MINING ACT OF 1977 TO REAUTHORIZE AND
REFORM THE ABANDONED MINE RECLAMATION PROGRAM, AND FOR OTHER PURPOSES
S. 1701
A BILL TO AMEND THE SURFACE MINING ACT OF 1977 TO IMPROVE THE
RECLAMATION OF ABANDONED MINES
__________
SEPTEMBER 27, 2005
Printed for the use of the
Committee on Energy and Natural Resources
______
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska RON WYDEN, Oregon
RICHARD M. BURR, North Carolina, TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri DIANNE FEINSTEIN, California
CONRAD BURNS, Montana MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia JON S. CORZINE, New Jersey
GORDON SMITH, Oregon KEN SALAZAR, Colorado
JIM BUNNING, Kentucky
Alex Flint, Staff Director
Judith K. Pensabene, Chief Counsel
Bob Simon, Democratic Staff Director
Sam Fowler, Democratic Chief Counsel
Karen Billups, Deputy Chief Counsel
Patty Beneke, Democratic Senior Counsel
Mike Connor, Democratic Counsel
C O N T E N T S
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STATEMENTS
Page
Alexander, Hon. Lamar, U.S. Senator from Tennessee............... 76
Allen, Hon. George, U.S. Senator from Virginia................... 33
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................ 3
Bunning, Hon. Jim, U.S. Senator from Kentucky.................... 37
Craig, Hon. Larry E., U.S. Senator from Idaho.................... 4
Finkenbinder, David, Vice President, Congressional Affairs,
National Mining Association.................................... 66
Gauvin, Charles, President and CEO, Trout Unlimited, Arlington,
VA............................................................. 47
Green, Evan J., Administrator, Wyoming Abandoned Mine Land
Program, Department of Environmental Quality, State of Wyoming. 17
Hohmann, Steve, Director, Division of Abandoned Mine Lands,
Kentucky Department of Natural Resources....................... 23
Kane, Daniel J., International Secretary-Treasurer, United Mine
Workers of America, Fairfax, VA................................ 52
Lewis, Lorraine, Executive Director, UMWA Health and Retirement
Funds.......................................................... 60
McElwaine, Andrew, President and CEO, Pennsylvania Environmental
Council, Harrisburg, PA........................................ 40
Salazar, Hon. Ken, U.S. Senator from Colorado.................... 34
Santorum, Hon. Rick, U.S. Senator from Pennsylvania.............. 2
Shirley, Joe, Jr., President, The Navajo Nation, Window Rock, AZ. 11
Shope, Thomas D., Chief of Staff, Office of Surface Mining, U.S.
Department of the Interior..................................... 5
Talent, Hon. James M., U.S. Senator from Missouri................ 3
Thomas, Hon. Craig, U.S. Senator from Wyoming.................... 1
APPENDIXES
Appendix I
Responses to additional questions................................ 79
Appendix II
Additional material submitted for the record..................... 111
AMEND THE SURFACE MINING CONTROL AND RECLAMATION ACT OF 1977
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TUESDAY, SEPTEMBER 27, 2005
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 10 a.m. in room
SD-366, Dirksen Senate Office Building, Hon. Craig Thomas
presiding.
OPENING STATEMENT OF HON. CRAIG THOMAS,
U.S. SENATOR FROM WYOMING
Senator Thomas. Let's call the committee to order. Mr.
Domenici asked me to preside and get us going here. He may show
up somewhat later. I hope so.
I want to thank you all for being here. This is a
continuing issue with us, of course, the AML reauthorization.
We've been through it several times, and I'm, frankly, pleased
that we are here. I hope that we can, this time, come up with a
program to renew, and not simply extend it through
authorization of the appropriations, as was the done the last
time.
So, that's why we're here. Of course, the Abandoned Mine
Land Reclamation has resulted in the cleanup of some of the
Nation's worst abandoned coal mines. As you know, the program
is funded through a fee on nearly every ton of coal. The
existing law has always credited half of the fees to the States
and the Indian tribes and half to the Federal Government.
Currently, the AML fee is scheduled to expire on June 30, 2006.
So, there are some time constraints.
It's important to remember that the reclamation program
does not retire at that time. A common misconception exists
that the reclamation program ends. It's only an affirmative
action by Congress that would end reclamation. Reclamation of
abandoned coal mines is important, and I will oppose any
legislation initiative to terminate that program. In fact, I
believe more money should be directed to the program. I'm not
convinced, of course, that others all share this view.
We must take a look at the current AML Trust Fund account
balance to understand how I came to this conclusion. As of July
1, 2005, the Reclamation Fund held $1.7 billion of
unappropriated funds. Under existing law, of the more than $1.7
billion already collected and held in trust, $1.1 billion is
due to the States and the Indian tribes. Under existing law, my
State of Wyoming is owed more than $450 million.
The release of these funds over the last quarter century
would have had a tremendous impact on the communities
throughout the United States. It's frustrating for all of us--
the States and the tribes--to see so much money available, yet
untouchable.
The bill I introduced 2 weeks ago, in addition to returning
the money to the States and the tribes, extends the AML fee for
an additional 10 years, ensuring the money continues to flow
into this worthwhile program. My proposal also contains a
mechanism that would allow the States and the Indian tribes
more timely access to their share of the AML fee. And I
recognize that my proposal is not as comprehensive as some
others that have been circulated. It does not address the
issues related to healthcare. It does extend the existing
program. Before creating new obligations, we must ensure that
the existing programs are being honored.
So, we are committed to finding a solution, even though
there are different ideas. Whatever the solution, it will
require a compromise, of course. And, therefore, we're here to
seek to deal with this issue.
[The prepared statements of Senator Santorum and Talent
follow:]
Prepared Statement of Hon. Rick Santorum, U.S. Senator
From Pennsylvania
Mr. Chairman, my strong support for the reauthorization of the
Abandoned Mine Land (AML) fund brings me to submit this statement for
the Committee's record.
Since its inception, the AML fund has provided a valuable resource
in the cleansing of our nation's streams and lands in the wake of
mining exploration. My home state of Pennsylvania, in fact, has the
most abandoned mine land sites in the nation and has utilized the Fund
to improve the quality of our environment. It is evident that more
needs to be done to fix this problem.
I am proud to represent the Commonwealth of Pennsylvania that has
been one of our nation's leaders in the reclamation of abandoned mine
lands. Pennsylvania has been working hard to reclaim its abandoned
mines and has completed hundreds of stream pollution abatement
projects. Despite the successes seen through the implementation of
Pennsylvania's initiatives, there is a clear necessity to reauthorize
the federal AML fund. According to the National Abandoned Mine Land
Inventory, my home Commonwealth of Pennsylvania has over $1 billion
worth of Priority 1 and 2 abandoned mine land sites.
These statistics should not come as a surprise to your committee.
As you are aware, AML problems are primarily located in states with
high historic production. Historic production records show that the
eastern United States accounts for 94 percent of all of the country's
AML problems. Pennsylvania is no exception. The pressing situation
facing our state today is that one-third of all national mining legacy
problems are in Pennsylvania. Abandoned coal mines have adversely
impacted at least 44 of Pennsylvania's 67 counties, covering 189,000
acres of land and approximately 3,100 miles of streams.
I recognize the difficulty in assessing and properly allocating
funds to address all of our nation's AML sites. However, I believe that
across the nation and especially in Pennsylvania, there is a pressing
need to more equitably shift the funding priority from current
production sites to historic production sites. This would ensure that
all abandoned mines could begin to be restored and re-utilized in an
environmentally friendly and expeditious manner.
While the economic costs associated with reclaiming AML sites has
increased, the human toll has also mounted in recent years. Because of
the prevalence of AML sites throughout our nation, deaths associated
with these sites have been far too commonplace. Last year, in
Pennsylvania alone, five fatalities were associated with AML sites. In
my opinion, this is five too many.
Given the large-scale damage and dangers experienced by my
constituents, I believe it is essential that the reauthorization of the
AML fund protect coalfield communities and restore damaged natural
resources. It is my great hope that the experiences of my constituents
and the coal-mining heritage of my Commonwealth will weigh heavily as
your committee continues the process of reauthorizing the AML fund.
For these reasons, Mr. Chairman, I am pleased that you and your
committee have taken up this important issue nearly a year before the
fund expires. I look forward to working with you and your committee as
this progress continues. As the mining legacy in my home state shows,
AML sites impact the safety of communities, affect environmental
quality, and hinder economic progress. It is essential to my
Commonwealth and my constituents that we extend and reform the
abandoned mine land reclamation program for the safety of our nation,
the safety of our environment, and the safety of our economy.
______
Prepared Statement of Hon. James M. Talent, U.S. Senator From Missouri
AML is a worthy and important program that we need to continue.
But we need to find a way to do it that addresses all of the myriad
of issues comprehensively and not in a piecemeal fashion, and we need
to do it in such a way that provides balance between the States and
certainty without excessive cost or a changing of the financial
expectations of the mine workers and their survivors.
I appreciate Sen. Thomas's efforts to fix a flaw in the
administration of the AML fund--we should keep our promise and return
to the States that paid the AML fees the amounts the law says should be
returned (50%). That's fair.
We also should make sure that the fees are not overly burdensome.
But I think we need a more comprehensive solution.
We're trying to do a lot more with the AML funds with respect to
retiree health benefits than was envisioned in 1992. There are a lot
more ``orphaned'' retirees in the program than was originally
envisioned.
There's also a lot more in the way of projects being done that are
beyond the core mission of reclaiming pre-1977 abandoned mines. These
things are good and helpful, but it seems that we will never complete
the job we started in 1977.
It also seems to me that there should be some finality to the
program, both with respect to the pre-1977 priority reclamation sites
and with respect to the inclusion of retirees to be paid for by the
fees. It seems we have a moving target as to the total reclamation
costs, one that seemingly we will never reach.
In his prepared testimony, Mr. Finkenbinder points out the poor
history of estimates of reclamation costs and their eventual cost,
noting that in 1986 we expected to pay for all of the top priority
projects ($811 million) by 1992. But in 1992, we had spent $870 billion
on high priority projects and yet the remaining projects were now
estimated to cost $2.6 billion. Now the inventory of reclamation
projects is up to nearly $3 billion, and this after $8 billion in fees
have been recovered. And yet we seem to be no closer to solving the
problem.
Mr. Chairman, I would like to submit for the record a letter I
received from a number of coal companies, mine workers and other coal
interests. It includes a proposal that attempts to comprehensively
address funding for all of the reclamation and retiree health benefit
issues we are dealing with here. I appreciate the attempt, but at a
cost of $3.1 billion, I think it may be too costly.
We need to find another way of addressing these issues
comprehensively. Nevertheless, this compromise proposal will inform our
debate and may lead us to a better solution that addresses the needs of
all interested parties.
Let me call on the Senator from New Mexico.
STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR
FROM NEW MEXICO
Senator Bingaman. Thank you very much, Mr. Chairman, for
having the hearing. I think this is a very useful way for us to
begin serious deliberation in this Congress on this issue.
This Abandoned Mine Land Program that was started in 1977
is very important. The work of the program is far from
completed. The Office of Surface Mining estimates that there
are $3 billion worth of priority-one and -two problems that
threaten public health and safety and $3.6 billion worth of
general welfare problems that remain un-reclaimed.
In my home State of New Mexico, according to OSM's data,
there is still coal-related work to do. There are dangerous
piles and embankments to remediate, hazardous waters to
reclaim, and vertical mine openings to close. In addition, the
Surface Mining Act allows AML funding to be used to remediate
not only abandoned coal mines, but also, importantly, abandoned
hard-rock mine sites, in certain circumstances.
I understand that non-coal reclamation work is also
important on several Indian reservations, including the Navajo
Reservation. I want to ensure that funding for this important
non-coal work is also continued.
In 1992, interest from the AML Fund has served as a source
of revenue to address another very crucial issue, and that is
coal-miner retiree health benefits. Providing such benefits
presents an ongoing and a difficult issue for us here. The
legislation before the committee today addresses this issue.
I'm obviously interested in ensuring that we do right by these
retired coalminers, and I look forward to hearing from
witnesses for the United Mine Workers of America and the UMWA
Health Benefits Fund.
The issue of crucial importance to this bill involves the
Indian tribes. Absent from the bills is a provision to allow
tribes to be granted primacy for the regulatory program under
title 5 of the Surface Mining Act. I believe this change in law
is long overdue. I appreciate President Shirley, of The Navajo
Nation, being here today to testify on this and other aspects
of the legislation.
This is an important issue for our States, for Indian
tribes. It's also an important national issue. I think it is
imperative that Congress take action to extend the
authorization and collect the coal reclamation fee before that
authority expires.
So, again, thank you for having the hearing.
Senator Thomas. Thank you, sir.
The Senator from Idaho.
STATEMENT OF HON. LARRY E. CRAIG, U.S. SENATOR
FROM IDAHO
Senator Craig. Well, thank you very much, Mr. Chairman.
Your legislation, and that introduced by Senator
Rockefeller, are the two pieces we're looking at today, and I
thank you for getting in front of the expiration date by nearly
a year to examine this and move this committee, with its
authority, in the right direction to deal with reauthorization.
Obviously, I, personally, from a State standpoint, don't
have a dog in this fight. You have a $450 million dog. By
Wyoming or Idaho standards, that's a big dog. And I think
that's something that has to be recognized, that we don't just
buildup large funds that the Federal Government can use for
budgetary purposes, but they move in the direction they were
intended to move.
I've also looked at--and I know that it is not in the
jurisdiction of this committee--the issue of reach-back and
super-reach-back. That's a Finance Committee issue, I believe.
I know that Senator Talent and Senator Bunning are interested
in that. And I, too, am interested in that, to try to get that
resolved. But I hope this hearing allows us to move forward and
to reauthorize, in a timely manner, this important legislation.
I also note that your legislation probably expedites the
issue of the unappropriated funds as it relates to States, and
allows that to return to States more quickly, as it should. And
I'm supportive of your effort there.
So, I'm here to listen this morning, and gain more
information on the issue.
Thank you.
Senator Thomas. Thank you, sir.
And thank all of you who have come to testify today. It's
very important that we hear from you and hear the specific
concerns and information that you have.
I am especially pleased, of course, to have Mr. Green here,
from Wyoming, and thank you, sir.
On our first panel, we have Mr. Thomas Shope, Chief of
Staff, Office of Surface Mining, U.S. Department of the
Interior; Mr. Joe Shirley, Jr., president, The Navajo Nation,
Window Rock, Arizona; Mr. Evan Green, administrator, Abandoned
Mine Lands Division, the State of Wyoming, Cheyenne, Wyoming;
Mr. Steve Hohmann, director, Division of Abandoned Mine Lands,
State of Kentucky.
Gentlemen, welcome. Your full statement will be put into
the record, and if you could summarize your statement in about
5 minutes, why, that would help us get through our work, and
then we'll have an opportunity to ask questions.
So, Mr. Shope, if we may begin with you, sir.
STATEMENT OF THOMAS D. SHOPE, CHIEF OF STAFF, OFFICE OF SURFACE
MINING, U.S. DEPARTMENT OF THE INTERIOR
Mr. Shope. Thank you, Senator.
Mr. Chairman and members of the committee, thank you for
the opportunity to participate in this hearing and to discuss
the important issues raised by the approaching expiration of
the Office of Surface Mining's authority to collect the
abandoned mine-land fee.
I'd like to thank Senator Thomas for introducing his bill,
S. 1701, as well as Senator Rockefeller for introducing his
bill, S. 961. We applaud the efforts of these sponsors seeking
to reauthorize OSM's authority to collect the AML fee and to
make positive changes to this important program.
As we enter the third year of this reauthorization effort,
it's important to keep in mind that there are an estimated 3.5
million Americans who live less than one mile from a dangerous
high-priority abandoned mine site. The lives, health, and
safety of these citizens are threatened daily by these sites.
People are frequently injured, and too often die, as a result
of the hazards of abandoned coal-mine lands.
The administration believes that the AML problem is a
national problem that calls for a national solution. The
administration believes AML funding needs to be focused on the
areas most damaged by this Nation's reliance on coal for
industrial development and wartime production that occurred
long before the establishment of reclamation requirements in
the Surface Mining Control and Reclamation Act. The AML
problems that currently exist in so many States are directly
related to a State's historic coal production. Focusing the
future distribution of fees based on historic production will
put more money where the problems are, where it is most needed.
As you consider the proposals that have been advanced to
address these needs, the administration urges that you consider
some fundamental principles that we believe should be reflected
in any legislation seeking to reauthorize AML fee-collection
authority.
We believe that any proposal should expedite the cleanup of
high-priority health- and safety-related abandoned coal mines,
should provide for the expedited payment of unappropriated
State-share balances to certified States and tribes, and should
do so within the President's mandatory and discretionary
spending limits.
To honor these principles and finish the job, legislation
must strike a balance that addresses both the ongoing problems
faced by States with high-priority coal-related health and
safety issues, while not placing it--at a disadvantage those
States and tribes where the majority of fees are currently
generated.
The introduction of S. 1701 and S. 961 show a continued
commitment by Congress to reach resolution of the issues under
debate. I think all of us share a commitment to reform OSM's
fee-collection authority to fulfill our mandate to address
high-priority health and safety concerns, and to do so in a
manner that directs the funds to the States and tribes where
they are most needed.
The administration supports the proposed elimination of the
AML allocation for the RAMP program found within S. 1701 and S.
961 and the reallocation of those fees for high-priority needs.
However, under the allocation structures of both proposals, at
the fee rate and collection periods proposed, we believe an
insufficient amount of funds will be collected and available to
finish the job of reclaiming the high-priority health and
safety coal sites on the current inventory.
The administration also supports the principle of honoring
the commitments made to States and tribes under the current law
through the expedited payment of unappropriated State-share
balances. In fact, the administration proposed additional
funding in its fiscal year 2005 and 2006 budgets to provide
for, among other things, the accelerated return of State share.
However, we believe the proposed repayment plan in S. 1701,
including provisions for mandatory spending, is not consistent
with the administration's budget and program priorities.
We have submitted written testimony that more fully
explains the administration's views on the problems with the
current AML distribution, as well as analysis of the individual
provisions of the bills under consideration. We believe the
introduction of S. 1701 and S. 961 signal the continuation of
constructive efforts and a productive discussion to amend and
reform the AML program.
There is much work to be done to ensure that reforming the
AML fee-collection authority, allocation formula, and other
needed reforms become a reality before the looming expiration
date. We recognize that these issues can be contentious. But
those of us at the Office of Surface Mining are eager to
continue working through them with the committee.
Once again, we thank the committee for this opportunity to
present the administration's views on these important
legislative proposals.
[The prepared statement of Mr. Shope follows:]
Prepared Statement of Thomas D. Shope, Chief of Staff, Office of
Surface Mining Reclamation and Enforcement, U.S. Department of the
Interior
Mister Chairman and members of the Committee, thank you for the
opportunity to participate in this hearing and to discuss the important
issues raised by the approaching expiration of the Office of Surface
Mining Reclamation and Enforcement's (OSM's) authority to collect the
Abandoned Mine Land (AML) fee. I would like to thank Senator Thomas for
introducing his bill, S. 1701, as well as Senator Rockefeller for
introducing his bill, S. 961. We applaud the efforts of these sponsors
seeking to reauthorize OSM's authority to collect the AML fee, set to
expire on June 30, 2006, and to make positive changes to this important
program. We look forward to working with the Senate on the important
issues surrounding the collection and use of the AML fee.
As we enter the third year of this reauthorization effort, it is
important to keep in mind that there are an estimated 3.5 million
Americans who live less than one mile from a dangerous, high-priority
abandoned mine site whose lives, health and safety are threatened daily
by these sites. People are frequently injured and too often die as a
result of the hazards of abandoned mine lands.
The Administration believes that the AML problem is a national
problem that calls for a national solution. The Administration believes
AML funding needs to be focused on the areas most damaged by this
nation's reliance on coal for industrial development and wartime
production, long before the establishment of reclamation requirements
in the Surface Mining Control and Reclamation Act of 1977 (SMCRA). We
believe that shifting the program's focus to historic production, which
is directly related to the AML problems that currently exist in so many
states, and distributing future fees based on need, offers a national
solution for reducing the current, ongoing threats to the health and
safety of millions of citizens living, working and recreating in our
Nation's coalfields.
The Administration supports the repayment of the unappropriated
balances for certified states. However, we cannot support creating new
mandatory spending programs with which to make such repayment.
Moreover, while the allocation formula has improved, neither proposal
would adequately expedite the cleanup of high priority lands, and
therefore the Administration cannot support the allocation provisions
as drafted. For the reasons noted here, we cannot support the bills as
drafted; however, we would like to work with the Committee to reach an
agreeable solution.
BACKGROUND
Since the enactment of the SMCRA by Congress in 1977, the AML
program has reclaimed thousands of dangerous sites left by abandoned
coal mines, resulting in increased safety for millions of Americans.
Specifically, more than 285,000 acres of abandoned coal mine sites have
been reclaimed through $3.5 billion in grants to States and Tribes
under the AML program. In addition, hazards associated with more than
27,000 open mine portals and shafts, 2.9 million feet of dangerous
highwalls, and 16,000 acres of dangerous piles and embankments have
been eliminated and the land has been reclaimed. Despite these
impressive accomplishments, $3 billion in construction costs alone are
needed to reclaim the high priority health and safety coal related
problems remaining.
Even if we were to use all of the AML fees collected between now
and June 30, 2006, the date the fee collection authority is scheduled
to expire, as well as the unappropriated balance of $1.6 billion, we
would still have insufficient funds to address the health and safety-
related surface mining problems in part because of the fund's current
distribution formula. Even under a simple extension of the current law
and the current distribution formula, it would take non-certified
states an average of 47 more years to complete reclamation. In some
cases, remediation could take nearly a century.
We do not believe the current allocation system will enable us to
complete the job of reclamation in the most efficient way we believe
Congress intended. We view the expiration of the current AML fee
collection authority as an opportunity to reform the AML program and
the distribution formula, and put it on track to finish the job of
reclaiming abandoned coal mine problems.
SMCRA'S FEE ALLOCATION PROBLEM
SMCRA requires that all money collected from tonnage fees assessed
against industry on current coal production ($0.35/surface mined ton;
$0.15/deep mined ton; and $0.10/lignite) be deposited into one of
several accounts established within the AML fund. Fifty percent (50%)
of the fee income generated from current coal production in any one
state is allocated to an account established for that state. Likewise,
50% of the fee income generated from current coal production on Indian
lands is allocated to a separate account established for the tribe
having jurisdiction over such Indian lands. The funds in these state or
tribal share accounts can only be used to provide AML grant money to
the state or tribe for which the account is established.
Twenty percent (20%) of the total fee income is allocated to the
``Historic Production Account.'' Each state or tribe is entitled to a
percentage of the annual expenditure from this account in an amount
equal to its percentage of the nation's total historic coal
production--that is, coal produced prior to 1977. As is the case with
state or tribal share money, each state or tribe must follow the
priorities established in SMCRA in making spending decisions using
money from the historic production account. However, unlike the
allocation of state or tribal share money, once the state or tribe
certifies that all abandoned coalmine sites have been reclaimed, it is
no longer entitled to further allocations from the historic production
account.
Ten percent (10%) of the total fee income is allocated to an
account for use by the Department of Agriculture for administration and
operation of its Rural Abandoned Mine Program (RAMP).
The remaining 20% of the total fee income is allocated to cover
Federal operations, including the Federal Emergency Program, the
Federal High-Priority Program, the Clean Streams Program, the Fee
Compliance Program, and overall program administrative costs.
In the early years of Abandoned Mine Reclamation Program, most of
the fees collected went directly to cleaning up abandoned coal mine
sites. Some states and tribes with fewer abandoned coal mine sites
finished their reclamation work relatively soon. However, under current
law, those states and tribes are still entitled to receive half of the
fees collected from coal companies operating in their states. In the
early years of the program this didn't cause a considerable problem,
because the Eastern states, where 93% of the hazardous sites are
located, were also the states where most of the coal was being mined
and were, therefore, receiving the majority of the AML fees.
However, beginning in the 1980s, a shift occurred whereby the
majority of the coal mined in this country began coming from mines in
Western states. This shift revealed an inherent tension in the AML
program which now allocates a large part of AML fees to states that
have no abandoned coal mine sites left to clean up. By contrast, each
year less and less money is being spent to reclaim the hundreds of
dangerous, life-threatening sites. Currently, only 52 percent of the
money is being used for the primary purpose for which it is collected--
reclaiming high priority abandoned coal mine sites. That percentage
will continue to decline each year unless the law is reauthorized and
amended and the fundamental problem is corrected.
The Administration believes any legislation seeking to reauthorize
the AML fee collection authority must reflect the following principles:
Expedite the cleanup of high priority heath and safety
abandoned coal mines.
Provide for the expedited payment of unappropriated balances
to certified States and Tribes.
The total cost must not exceed the President's Budget and
must not include mandatory funding.
These principles recognize the need to strike a balance that
addresses both the ongoing problems faced by states with high priority
coal-related health and safety issues while not placing those states
where the majority of fees are currently generated at a disadvantage.
In light of those principles, we offer the following analysis of the
key elements of the bills under consideration by this Committee.
BILL ANALYSIS
There are three factors that must be considered in order to
complete high priority work; the fee rate, the length of time
authorized to collect the fee, and the way the money is allocated
toward high priority reclamation or other uses.
FEE ALLOCATIONS
Both S. 1701 and S. 961 would continue the current practice of
allocating 50% of the fees collected in a state to that state or
tribe's ``State-share'' or ``tribal-share'' account, without regard to
that state or tribe's coal reclamation needs.
S. 1701 would add a new provision requiring that all aggregate
unappropriated State-share and tribal-share balances (as of October 1,
2006) be returned to those States and Indian tribes between December
31, 2006 and December 31, 2010. The schedule and amount to be paid each
year would be dependent upon the total State-share balance with larger
balances requiring a longer payout period. These payments would not be
subject to Congressional appropriation.
While the Administration agrees with the principal of honoring the
commitments made to states and tribes under the current law, and has
proposed additional funding in its FY 2005 and FY 2006 budget to
provide for, inter alia, the accelerated return of State-share, the
Administration cannot support the proposed repayment plan including
provisions for mandatory spending because it is not consistent with the
Administration's budget and program priorities.
Both S. 1701 and S. 961 would increase the percentage of funding
that goes towards the historical production allocation, and thereby
accelerate the cleanup of high priority sites by discontinuing the RAMP
allocation and increasing the historical production (that portion
distributed based on need) allocation from 20% to 30% of the AML fee
revenues.
The Administration supports the elimination of the AML allocation
for the RAMP program and the reallocation of those fees for high
priority needs
aml reclamation fee rates/length of collection period
S. 1701 modifies reclamation fee rates with stepped decreases
through the life of the extension to September 30, 2016, a 10 year
extension. An estimated total of $2.8 billion would be collected over
the life of this proposed extension.
S. 961 maintains the fee rates currently established by law but
extends the OSM's authority to collect those fees through 2019, a 13
year extension. An estimated total of $4.4 billion would be collected
over the life of this proposed extension.
As previously indicated, under the allocation structures of both
proposals, at the fee rate and collection periods proposed, an
insufficient amount of funds will be collected and available to finish
the job of reclaiming the high priority health and safety coal sites on
the current inventory.
UNITED MINE WORKERS OF AMERICA COMBINED BENEFIT FUND (CBF)
While providing health care benefits is not part of OSM's mission,
providing for the transfer of funds to the CBF, equivalent to the
amount of interest earned on the AML fund, is an important obligation.
Both S. 1701 and S. 961 honor the commitments made to the 16,500
unassigned beneficiaries of the CBF under current law by maintaining
these transfers including the assignment of interest ``stranded'' from
prior years. S. 1701 also adjusts the annual cap on transfers to the
CBF from the amount of estimated AML fund interest earnings during the
current fiscal year to the amount of interest actually earned during
the prior fiscal year.
S. 961 expands the obligations of the interest transferred to
include two additional UMWA plans. Interest would be made available for
UMWA plans in the following order of priority: the CBF, the 1992 Plan,
and the 1993 Plan. In addition, any unappropriated balance of the RAMP
allocation would be available for these transfers, beginning with FY
2004. The Administration does not support paying benefits for
additional beneficiaries, beyond the unassigned beneficiaries in the
CBF, out of the AML fund.
MINIMUM PROGRAM FUNDING
Both S. 1701 and S. 961 provide that no State or tribe with an
approved AML program would receive an annual grant of less than $2
million. This provision would ensure that States and tribes with
relatively little historic production would receive an amount conducive
to the operation of a viable reclamation program. The Administration is
concerned about provisions in both bills that add Tennessee as a
minimum program state regardless of the existing SMCRA requirements for
a state to maintain an active regulatory (Title V) program before it is
entitled to receive AML grants. The precedent of allowing a non-primacy
state to receive AML grants could have a detrimental effect on the
overall state-federal primacy scheme which has proven to be an
effective method of surface mining regulation. Furthermore, both
proposals call for removing current provisions which restrict the
granting of funds to minimum programs based upon need. This removal
would result in a further diversion of needed funds from either the
historical production account or the federal operations account. In
order to ensure that efforts focus on priority sites, the
Administration would prefer to see this minimum restricted to states
with high priority problem sites.
REMINING
Both bills take a positive step in reinstating remining incentives
which have now expired. These incentives provide reduced revegetation
responsibility periods for remining operations and an exemption from
the permit block sanction for violations resulting from an
unanticipated event or condition on lands eligible for remining. S.
1701 also authorizes the Secretary to adopt other remining incentives
through the promulgation of regulations, thereby leveraging those funds
to achieve more reclamation of abandoned mine lands and waters.
AML RECLAMATION PRIORITY
Both bills impact a state's or tribe's autonomy to make
expenditures from the AML fund on eligible lands and water for coal-
related sites by altering the current priority structure. Both S. 1701
and S. 961 amend the current priority system to eliminate the general
welfare component of priorities 1 and 2, leaving public health and
safety as the principle elements of those priorities. S. 961 takes an
additional step of requiring a scrub of the AML inventory to eliminate
all general welfare entries since 1998. S. 1701 proposes adding
environmental restoration of adjacent lands to the P1 category.
S. 1701 and S. 961 both require that priority 3 environmental work
be undertaken only if it is incidental to a priority 1 or 2 project.
Finally, S. 961 eliminates the P4 and P5 priorities, which relate to
construction of public facilities and development of publicly owned
land.
Both S. 1701 and S. 961 remove the existing 30 percent cap on the
amount of a State's allocation that may be used for replacement of
water supplies adversely affected by past coal mining practices.
Removing the cap is consistent with the goal of focusing fund
expenditures on high-priority problems. The lack of potable water is
one of the most serious problems resulting from past coal mining
practices, particularly in Appalachia.
ACID MINE DRAINAGE SET ASIDE
Both S. 1701 and S. 961 modify the existing provision in SMCRA that
allows States to set aside ten percent of grant awards made from their
State-share and historical production allocations. Both bills eliminate
the option to place those monies in a special State trust fund for use
for AML reclamation purposes. Both bills also propose streamlining the
requirements for the placement of those monies into accounts for the
abatement and treatment of acid mine drainage. S. 1701 calls for
increasing the percentage of grant awards that may be set aside in
these accounts from 10% to 20%.
STATE COLLECTION OF AML FEES
S. 1701 adds a new section to SMCRA to allow States and Indian
tribes the ability to collect reclamation fees and retain half of the
fees collected in lieu of receiving a State-share allocation. As
proposed, a State or tribe has the option to collect the AML fee,
retain 50% and provide the remaining 50% to the Secretary of the
Interior. States and tribes would have to use the retained funds for
the purposes and priorities established under the AML program. The
Administration has concerns regarding this provision. First, the OSM is
very proud of our 99.9% collection rate of AML fees. This achievement
is the result of our employee's years of experience and expertise as
well as an efficient infrastructure to support the collection of these
fees. The efficacy and cost of having 26 different agencies collecting
and processing AML fees, in addition to maintaining the federal
infrastructure to collect and account for the fees submitted to it, is
a substantial issue of concern. In addition, issues of equity arise
over the inability of smaller AML programs to staff and maintain this
collection function as compared to programs with larger revenue and
capacity. Finally, the constitutionality of a state or tribal AML
program collecting the federally imposed AML fee is an unanswered area
of concern.
COST
The Administration is concerned about the cost of both S. 1701 and
S. 961. As discussed above, the Administration believes any bill to
reauthorize the AML should not exceed the cost assumed in the
President's budget.
CONCLUSION
The problems posed by mine sites that were either abandoned or
inadequately reclaimed prior to the enactment of SMCRA do not lend
themselves to easy, overnight solutions. To the contrary, these long-
standing health and safety problems require legislation that strikes a
balance by providing states and tribes with the funds needed to
complete reclamation, while fulfilling the funding commitments made to
states and tribes under SMCRA.
We believe the introduction of S. 1701 and S. 961 signal the
continuation of constructive efforts and a productive debate to amend
and reform OSM's fee collection.authority to fulfill the mandate of
SMCRA to address these high priority healthy and safety concerns in a
manner that directs the funds to the states and tribes where they are
needed. As noted earlier, the current fee collection authority is
scheduled to expire on June 30, 2006. There is much work to be done to
ensure that reforming the AML fee collection authority, allocation
formula, and other needed reforms become a reality. We recognize that
these issues can be contentious, but we are eager to continue working
through these issues with the Committee. We look forward to an open and
productive dialogue to amend and.reform OSM's fee collection authority
to fulfill the mandate of SMCRA to address these high priority healthy
and safety concerns in a manner that directs the funds to the states
and tribes where they are needed.
We thank the Committee for this opportunity to present the
Administration's views on these important legislative proposals and we
look forward to working together as Congress continues consideration of
these important measures.
Senator Thomas. Okay. Thank you, sir. Appreciate it.
Mr. Shirley.
STATEMENT OF JOE SHIRLEY, JR., PRESIDENT,
THE NAVAJO NATION, WINDOW ROCK, AZ
Mr. Shirley. Thank you, Chairman Thomas, Senator Bingaman,
committee members. Thank you for the opportunity to testify
before you this morning on the Surface Mining Control and
Reclamation Act of 1977.
The Surface Mining Control and Reclamation Act of 1977 is
tremendously important to The Navajo Nation and the Navajo
people. SMCRA has allowed The Navajo Nation to clean up most of
the environmental and physical hazards presented by the 1,300-
plus abandoned mine lands that exist on Navajo land.
As a certified tribe, The Navajo Nation has also used funds
from the Abandoned Mine Land Trust Fund for Public Safety
Infrastructure Projects, or PFPs. These projects, entirely
within the scope of SMCRA, allow certified States and tribes to
address the many impacts to communities caused by past and
present mining activities. The Navajo Nation believes it is
essential to maintain SMCRA and the AML fee to provide
essential cleanup of abandoned mines and rehabilitation for
communities affected by mining.
Mining companies have reaped the benefits of Navajo coal
for decades, but have given so little back to the communities
which have been affected by their activities. They have
polluted our water, soil, and air, and have not rectified the
communities or the sites they have disturbed when the leave.
The issue of abandoned mines is more than just a problem
with the mines themselves, although the environmental and
physical hazards posed by many of the mines are severe. The
problem is: How do you put communities back together when the
mining companies simply walk away?
SMCRA benefits a way--presents a way of helping these
communities. Through the AML fee collection, The Navajo Nation
has contributed approximately $186 million to the AML Trust
Fund, of which our nation has been entitled to an estimated $93
million. The Navajo Nation's total expenditure of the AML funds
for reclamation and other projects is approximately $62
million.
Since 1994, The Navajo Nation has been a certified tribe,
meaning that it has completed the rehabilitation of its
abandoned coal mines and is now allowed to use its tribal share
of the reclamation fee for PFPs to help communities that are
impacted by mining activities, pursuant to section 411 of
SMCRA.
The Navajo Nation currently has an unappropriated AML Trust
Fund balance of approximately $32 million that the U.S. Office
of Surface Mining and Reclamation Enforcement has not yet
disbursed. This is a small fraction of the overall balance of
the AML Trust fund. But, for The Navajo Nation, the rightful
disbursement of this money represents a tremendous opportunity
to help the Navajo people that have been affected by coal-
mining activities.
The Navajo Nation encourages the committee to increase, or
at least continue, the allocation of the reclamation fee
collected annually to the tribes, under section 402(G)(1)(b);
promptly disburse the unappropriated AML Trust Fund balances of
States and Tribes; extend the expiration date for the
reclamation fee beyond September 2018; continue to allow the
flexibility to allow certified States and tribes to spend AML
funds pursuant to the goals and objectives of SMCRA; allow The
Navajo Nation the opportunity to apply for primacy under title
5, subject to applicable SMCRA regulations.
First, The Navajo Nation requests that the committee
increase and/or continue the allocation of the reclamation fees
collected annually to the tribes under section 402(G)(1)(b).
The Navajo Nation opposes any amendment to section 402(G)(1)(b)
that will deny us our allocation and divert it to States which
have not yet completed reclamation activities. This would
effectively penalize The Navajo Nation for taking the
responsibility to reclaim the most hazardous and harmful mines
on Navajo land. The Navajo Nation has been certified under
section 411 of SMCRA. Because we are certified, we use our
annual allocation under section 402(G)(1)(b) to fund public-
facility projects. These projects help build infrastructure
such as roads, waste management systems, and water services. We
desperately need our allocation of the reclamation fees, and
urge the committee to raise the tribal share of the reclamation
fee so we may confront our infrastructure problems.
At the very least, we recommend that tribes continue to
receive the 50-percent allocation currently authorized by
SMCRA.
Second, The Navajo Nation requests that our unappropriated
balance of approximately $32 million be promptly released. We
seek the expeditious return of our Trust Fund balance while
remaining an active participant in SMCRA.
Third, The Navajo Nation requests that the reclamation fee
expiration date be extended to at least September 2018. We
believe that this will allow OSM enough time to clean up
priority sites and meet the goals of SMCRA.
Finally, The Navajo Nation requests that the tribes
participating in SMCRA be treated on equal footing with the
States and become eligible to apply for tribal primacy under
title 5 of SMCRA. We believe that Congress originally intended
SMCRA to treat Indian tribes as States are treated in regards
to regulating mining activities.
The Navajo Nation is ready to assume primacy over the
regulation enforcement of coal mining on our land.
In closing, The Navajo Nation has long supported
reauthorization of SMCRA. The AML fee allocation provides an
important opportunity for The Navajo Nation to not only finish
the last of the reclamation activities, but also to continue
the PFPs to help those communities impacted by mining.
The Navajo Nation has strongly supported the release of the
unappropriated Trust Fund balance and the ability to collect
our own AML fees. While The Navajo Nation is encouraged by the
efforts of Senator Thomas in S. 1701 to address the concerns of
the AML program, we urge the committee to include the primacy
provisions in their legislation to ensure that The Navajo
Nation will have the ability to be treated like States and
determine for itself how it will manage its own surface mining
and reclamation activities.
Thank you for the opportunity to provide this testimony to
the committee.
[The prepared statement of Mr. Shirley follows:]
Prepared Statement of Joe Shirley, Jr., President, The Navajo Nation
INTRODUCTION
Thank you for the opportunity to submit this testimony for the
record concerning the Navajo Nation's position on the reauthorization
of the Surface Mining Control and Reclamation Act of 1977 (SMCRA),
Public Law 95-87. The purpose of this hearing is to discuss two pieces
of legislation that address SMCRA; S. 1701 and S. 961 both titled the
``Abandoned Mine Land Reform Act of 2005.'' I would like to discuss the
position of the Navajo Nation regarding SMCRA reauthorization in
general, the beneficial uses of the Abandoned Mine Land (AML) funds,
and the expansion of SMCRA to allow the Navajo Nation to finally apply
for the ability to regulate mining activities on Navajo land.
The Navajo Nation is the largest federally recognized Native
American Tribe in the United States with close to 300,000 Tribal
members, and a sovereign territory roughly equivalent in size to the
State of West Virginia. The Navajo Nation is one of three coal-
producing Tribes in the country along with the Hopi Tribe and the Crow
Tribe. While the Navajo Nation has benefited financially from mining on
our lands, we have also experienced the negative effects of what mining
has left behind. As companies folded their mining operations, many of
them simply removed their machinery and left open scars behind. Each
abandoned mine presents a physical and environmental, and in some cases
a radiological, hazard for the Navajo people and our land.
Mining companies have reaped the benefits of Navajo coal for
decades to fuel coal-fired power plants that have aided the rapid
expansion of the American Southwest. While the coal mining companies
and the power plant operators have earned tremendous profits, and the
economies of Phoenix, Albuquerque, and Las Vegas, among other
population centers, have boomed, the Navajo Nation, the home to this
precious resource continues to exist in a condition that most Americans
would find deplorable. The majority of Navajo people live without the
modern conveniences of electricity, running water, and sewage systems.
The unemployment rate on the Navajo Nation hovers around 50%, while the
poverty rate is approximately 56%. The State of West Virginia, which as
noted earlier is approximately the same size of the Navajo Nation, has
18,000 miles of paved road; the Navajo Nation has only 2000 miles of
paved roads.
The reason for presenting these statistics to you today is less to
use this hearing as an opportunity to illustrate the dire situation
faced by so many Navajos, but to point out that the companies that have
for decades come in and taken our coal have given so little back to the
communities which have been affected by their activities. They have
polluted our water, soil, and air, and have done little to rectify the
communities or the sites they have disturbed when they leave. The issue
of abandoned mines is more than just a problem with the mines
themselves, although the environmental and physical hazards posed by
many of the mines are severe, the problem is how do you put communities
back together when the mining companies simply walk away?
SMCRA presents a way of helping these communities. Through the AML
fee collection the Navajo Nation has contributed approximately $186
million to the AML Trust Fund, of which the Nation has been entitled to
an estimated $93 million. The Navajo Nation's total expenditure of AML
funds for reclamation and other projects is approximately $62 million.
Since 1994, the Navajo Nation has been a certified Tribe, meaning that
it has completed the rehabilitation of its abandoned coal mines and is
now allowed to use its Tribal share of the reclamation fee for Public
Facility Infrastructure Projects (PFPs) to help communities that have
been impacted by mining activities pursuant to Sec. 411 of SMCRA.
The Navajo Nation currently has an unappropriated AML trust fund
balance of approximately $32 million that the U.S. Office of Surface
Mining Reclamation and Enforcement (OSM) has not yet dispersed. This is
a small fraction of the overall balance of the AML Trust Fund, but for
the Navajo Nation the rightful disbursement of this money represents a
tremendous opportunity to help the Navajo people that have been
affected by coal mining activities. No one would argue that the AML
Trust Fund has been dispersed efficiently, but it is essential to the
Navajo Nation that this fee continues and that the Navajo Nation be
allowed to use its Tribal share to further develop these PFPs.
THE NAVAJO NATION POSITION IN BRIEF
In recognizing the importance of the reauthorization of SMCRA to
the Navajo people, the Intergovernmental Relations Committee of the
Navajo Nation Council approved a resolution asking Congress to:
1. Increase, or at least continue, the allocation of the
reclamation fee collected annually to the Tribes under
Sec. 402(g)(1)(B);
2. Promptly disburse the unappropriated AML Trust Fund balances of
States and Tribes;
3. Extend the expiration date for the reclamation fee beyond
September 2018;
4. Continue to allow the flexibility to allow certified States and
Tribes to spend AML funds pursuant to the goals and objectives of
SMCRA;
5. Allow the Navajo Nation the opportunity to apply for primacy
under Title V, subject to applicable SMCRA regulations.
DISCUSSION
Reauthorization
The Navajo Nation urges the Committee to move quickly to
reauthorize SMCRA. While the program has been criticized for how it has
released the funds to which States and Tribes are entitled, and for
amassing such a large balance in the AML Trust Fund, currently at
almost $2 billion, the program itself is well designed in concept if
not in application. Throughout the country, thousands of dangerous
abandoned mines and impacted communities that have been affected by
mining activity. The portion of the AML fee that the federal government
retains for its own uses provides the best way to encourage current
mining companies to rectify the activities of past mining where there
is little current mining to generate the fees necessary to mount a
successful rehabilitation. Similarly, the portion of the AML fee that
is supposed to be returned to the States and Tribes allows those
sovereign entities to clean up the past and present impacts of mining.
The Navajo Nation applauds the work of the Committee to streamline the
AML program and to continue this rehabilitation opportunity so vital to
the health and well-being of the Navajo people.
AML Fee Collection
The Navajo Nation urges the committee to increase, or at least
continue, the collection and allocation of reclamation fees. The AML
fee collection and Tribal share allocation provide an important
resource for the Navajo Nation to continue the clean up of abandoned
mine lands and the rehabilitation of communities impacted by past
mining. Since the inception of this program, the Navajo Nation has
reclaimed over 1,300 mine sites and addressed many of the physical and
environmental hazards posed by these sites. In 1990, SMCRA was amended
to allow the use of the Tribal share to reclaim abandoned uranium and
coppermines where they constitute a hazard to public health and safety,
and to facilitate land and water projects and public facility projects
in areas impacted by mining activities. In order to use these funds for
projects other than abandoned coal mine lands, a State or Tribe must be
certified that it has completed its coal mine clean up. The Navajo
Nation received its certification in 1994. Since that time, in
compliance with Sec. 411 of SMCRA, the Navajo Nation has used the AML
funds to aid communities impacted by past or present mining through a
competitive proposal process. If the project is approved, the Tribal
share allocation is used to leverage further financing for the
construction of infrastructure projects such as roads, electrical power
lines, waste management, and municipal water systems.
The Navajo Nation will strongly support legislation that increases
or continues the reclamation fee and continues the ability of States
and Tribes to use the State or Tribal share for the clean up of
abandoned mine lands and PFPs. The Navajo Nation opposes any attempt to
change Sec. 402(g)(1)(B) to no longer allow a certified State or Tribe
to receive its 50% allocation and divert this money to States or Tribes
that have not completed their reclamation activities. A change of this
sort would essentially punish the Navajo Nation for quickly and
efficiently reclaiming its abandoned mine lands and receiving its
certification status.
The Navajo Nation desperately needs the allocation of reclamation
fees to confront the vast infrastructure problems existing on Navajo
land. The Navajo Nation has complied with the requirements of SMCRA and
has made tremendous strides in not only reclaiming abandoned mine lands
but also in rehabilitating the communities effected by past and present
mining activities.
At a minimum, the Navajo Nation recommends to the Committee to
maintain the 50% allocation currently authorized under SMCRA. However,
given the infrastructure problems faced by the Navajo Nation and other
Tribes, we urge the committee to increase the Tribal share to help
Tribes address these infrastructure issues.
Extension of the Reclamation Fee Expiration Date
Since September 30, 2004, the AML reclamation fee has continued
through a series of congressionally mandated extensions. The Navajo
Nation requests that any reauthorization of SMCRA extend the expiration
date to at least September 2018. The number of abandoned mine sites in
the U.S. is vast, and the impacts of past mining are felt in many
communities. An extension to 2018 would allow the OSM a sufficient
period of time to rehabilitate their priority sites and allow States
and Tribes to achieve the goals and objectives of SMCRA.
Trust Fund Balance
The Navajo Nation's share of the unappropriated AML Trust Fund
balance is currently around $32 million. This is money that exists due
to the coal mining activities on the Navajo Nation, and as such, the
Navajo Nation has a right to expect this money will be retuned to the
Nation as per SMCRA. The Navajo Nation does not object to aiding the
cleanup of abandoned mine sites across the nation using the portion of
the AML fee allocated to OSM. However, the Navajo Nation does object to
having almost $32 million sitting in a trust fund for no appreciable
reason to help shore up the federal budget when there are so many
Navajo people and communities that can be helped by using this money as
it was originally intended. The Navajo Nation desperately needs this
money to continue cleanup AML problems and infrastructure development.
Primacy
Within Indian Country, there is no greater principal than that of
sovereignty and self-determination. The ability of the Tribes to
determine for ourselves what is best for our land and our people has
been recognized repeatedly by the federal government. Congress too
recognized this principal in 1977 during the consideration and passage
of SMCRA. SMCRA allows States to apply for and receive the ability to
regulate surface mining activities on State and Federal lands in
Sec. 503. While Congress seems to have been unsure of how best to allow
Tribes to apply for and receive primacy over mining activities, it
directed the Secretary to consult with Indian Tribes and conduct a
study to determine how best to facilitate the granting of primacy over
Tribal lands. The purpose of this study was to propose legislation that
would authorize Tribes to apply for and receive primacy to assume the
regulatory duties over the administration and enforcement of surface
mining on Indian lands in a manner to similar to that of States.
In the ensuing 28 years, the Secretary has failed to propose
legislation that would allow Native Nations to assume primacy as
directed by Congress. The Navajo Nation has worked extensively with the
Department of Interior to facilitate this proposed legislation.
1982: OSM entered into a Cooperative Agreement with the
Navajo, Crow, and Hopi Tribes, funding them to conduct several
activities, including developing Tribal regulations on surface
mining that are necessary prerequisites for assuming Tribal
primacy;
1984: DOI provided a report to Congress which recommended
Tribes be allowed to obtain approval of either partial or full
regulatory programs;
1984: Congress passed Public Law 100-71 on Tribal Primacy
authorizing the AML programs for the Navajo, Hopi, and Crow
Tribes without first obtaining regulatory programs;
1986: The Government Accounting Office recommended to the
House Committee on Interior and Insular Affairs that regulatory
capabilities of Tribes to assume primacy should be assessed;
1987: OSM responds to the Committee with a report assessing
the readiness of the three Tribes to assume primacy. OSM stated
that the Navajo Nation was the most qualified Tribal entity to
assume primacy for control of the surface coal mine
reclamation.
1989: Funding for the Title V program under the Cooperative
Agreement with OSM ceased in 1989, because DOI abandoned the
pursuance of Tribal primacy legislation;
1992: Congress passed the Energy Policy Act, which amended
Section 710 of SMCRA and provided for annual coal grants to
four coal-owning Tribes. House Report No. 102-474(viii) p.
2313, reveals the intent behind Title XXV, '2514 of the Energy
Policy Act of 1992, which amended Sec. 710 of SMCRA:
``This section provides that the Navajo, Hopi, Northern
Cheyenne, and Crow Tribes will be eligible for funding to
operate Tribal offices of surface coal mining regulation. Each
of these Tribes have significant coal resources located on
their reservations. Funding for these offices will allow for
the development of Tribal regulations and provide Tribal
employment and training in the area of mining and mineral
resource regulation. The Committee intends these offices to
work cooperatively with the Office of Surface Mining
Reclamation and Enforcement of the Department of Interior in
all matters relating to surface mining activities on Indian
lands. The Committee intends this section to provide each of
the Tribes with the ability to be more involved and gain
expertise in the regulatory activities regarding surface mining
operations on Indian lands. This section is not intended to
alter, expand, or diminish the current regulatory jurisdiction
of these Tribes over all lands within the exterior boundaries
of their reservations.''
1996: After four years, DOI finally provided limited funding
to the coal owning Tribes in accordance with the Congressional
amendment to Sec. 710.
The Navajo Nation has cooperated with OSM and we believe we have
the necessary expertise to assume full primacy over all regulatory and
inspection aspects of surface mining on the Navajo Nation. Despite
having 28 years to make their recommendations, OSM has failed to
introduce or advocate on behalf of Tribal primacy legislation. Congress
has had the Secretary's recommendations regarding Tribal primacy for 18
years; however, OSM is not authorized to accept applications for
primacy until authorized by Congress.
Twenty-four coal mining States have obtained primacy from OSM for
the authority to regulate, inspect, and enforce surface coal mining
within those states since 1977. The Navajo Nation has the ability and
the experience to assume authority over the regulation and enforcement
of coal mining on Navajo land. While the Navajo Nation understands that
there may be some jurisdictional question that require Tribes and OSM
to continue to work together to address, the Navajo Nation requests
simply that Congress allow Tribes the opportunity to apply for Tribal
primacy and become eligible to receive 100% of the cost associated with
the approved program. The Navajo Nation believes it can regulate and
inspect existing mining operations in a timely and efficient manner.
OSM cannot respond to inspection requests and managerial duties in an
expeditious manner because the three nearest offices are in Denver,
Colorado, Farmington, New Mexico, and Albuquerque, New Mexico. The
Navajo Nation can respond and oversee the operations of Navajo mines
quickly and responsibly, with less cost to the federal government.
Therefore, we urge this Committee to adopt language that would
authorize the application and granting of primacy to Native Nations.
The following is proposal language that would satisfy this
requirement. We are aware that there have been several other proposals
that would also allow the Navajo Nation to apply for primacy. The
Navajo Nation would work with any potential sponsor to facilitate this
change.
SECTION 710 (J)
``Notwithstanding any other provision of this section, Indian
Tribes may be considered as states under Sections 503 and 504,
and apply for and receive primacy under the provision of
504(e). Grants for developing, administering, and enforcing
Tribal programs shall be provided in accordance with the
provisions of Section 705, except that Tribes shall be eligible
for 100% of the cost of developing, administering, and
enforcing the approved program.''
The Navajo Nation respectfully requests that the Committee approve
an amendment to SMCRA that would allow the Navajo Nation to apply for
primacy. Without this legislative change the Navajo Nation would never
be able to apply for primacy to regulate surface mining and reclamation
activities on our own lands. Finally, it is important to note again
that the Navajo Nation is not asking for a legislative change that
grants it primacy. We are simply asking for the ability to be treated
like a State and apply for primacy.
Pending Legislation
After reviewing the pending legislation, the Navajo Nation feels
that the S. 1701 introduced by Senator Thomas comes the closest to
satisfying the Navajo Nation's needs. First, S. 1701 extends the AML
fee collection until 2016. While not the extension to 2018 that the
Navajo Nation feels would be a sufficient amount of time to finish
reclamation activities, this point is outweighed by the other benefits
of the legislation. Second, S. 1701 begins to disburse the
unappropriated trust fund balances beginning next year. For the Navajo
Nation with a balance of approximately $32 million this amounts to
three payments equal to one quarter of the total balance paid out for
three years. The Navajo Nation strongly supports this provision.
Third, Senator Thomas' legislation continues to allow AML
allocations to be used for PFPs. The importance of continuing to allow
SMCRA allocations to be used for PFPs cannot be underestimated for the
Navajo Nation. Finally, Senator Thomas' legislation proposes a unique
solution to the current problem of undisbursed funds sitting in the
federal treasury. Namely, S. 1701 allows States and Tribes to collect
their own AML fees and then provide 50% to the federal government. The
Navajo Nation strongly supports this move to ensure that States and
Tribes receive their allocations in a timely manner as opposed to
waiting for the money to be appropriated.
CONCLUSION
The Navajo Nation has long supported the reauthorization of SMCRA.
The AML fee allocation provides an important opportunity for the Navajo
Nation to not only finish the last of the reclamation activities, but
also to continue the PFPs to help those communities impacted by mining.
The Navajo Nation also strongly supports the release of the
unappropriated trust fund balance and the ability to collect our own
AML fees. While the Navajo Nation is encouraged by the efforts of
Senator Thomas and S. 1701 to address the concerns of the AML program,
we urge the committee to include the primacy provisions in the
legislation to ensure that the Navajo Nation will have the ability to
be treated like States and determine for themselves how they will
manage their own surface mining and reclamation activities. The Navajo
Nation has established that it has the expertise and processes in place
to effectively handle this authority. Thank you for the opportunity to
provide this testimony to the Committee.
Senator Thomas. Thank you, sir. I'm glad you're here.
Mr. Green.
STATEMENT OF EVAN J. GREEN, ADMINISTRATOR, WYOMING ABANDONED
MINE LAND PROGRAM, DEPARTMENT OF ENVIRONMENTAL QUALITY, STATE
OF WYOMING
Mr. Green. Thank you, Senator Thomas.
My name is Evan Green. I'm the administrator of the
Abandoned Mine Land Division of the Wyoming Department of
Environmental Quality. I'm here today to testify on behalf of
the State of Wyoming on the reauthorization of the abandoned
mine-land reclamation fee.
I wish to thank the Senate Energy and Natural Resources
Committee for inviting Wyoming to present our views on this
important issue.
I would also like to recognize the hard work by Members of
Congress, by the Office of Surface Mining, and by the AML
States and tribes in attempting to craft a reauthorization
proposal that will be fair to all entities with an interest in
the outcome of this deliberation.
My thanks also go to your individual staffs for their
assistance in this process.
As to the specific bills before you today, Wyoming supports
the reauthorization concepts contained in S. 1701 offered by
Senator Thomas. We have some serious concerns with several
provisions of S. 961 sponsored by Senator Rockefeller.
The interests of the Nation's most productive coal-
producing State with respect to S. 1701 are:
First, a prompt release of Wyoming's share of the AML Trust
fund. S. 1701 provides for a payout of these funds over a 5-
year period. And this schedule is acceptable.
Second, a fair share of future AML revenues returned to the
State with the flexibility to use these funds to address the
impacts of mineral development. S. 1701 meets this criterion.
Third, a reduced fee structure that lowers the tax burden
on Wyoming coal producers. S. 1701 provides a phased fee
reduction over the course of the program extension.
Wyoming also appreciates the option of allowing States to
collect the reclamation fee.
As to S. 961, Wyoming cannot agree to provisions which do
not address the State's needs. For example, Wyoming coal
producers would pay almost $2 billion in reclamation fees over
the term of the extension, but the State would continue to
receive only about 25 to 30 percent of collections, as we have
in the past. SMCRA promised 50-percent return, and that promise
should be honored.
Wyoming's Trust Fund of $450 million would not be returned,
and there is no commitment that Wyoming or other States would
receive Trust Fund balances in future years.
And, finally, Wyoming would remain subject to the
limitations on project prioritization currently in SMCRA. As a
certified State, Wyoming should have the authority to decide
how to spend the funds generated by our coal producers.
Just a few words on Wyoming's track record. Wyoming's
record of administering its AML program demonstrates our
commitment to the program and its appropriate application to
meet the needs of our State. Wyoming has used AML funds very
efficiently. We maintain a 95-percent obligation rate, which
means that the money is put to work quickly on the ground to
address hazardous sites. Our administrative costs are less than
5 percent.
Wyoming has closed more than 1,300 hazardous mine openings,
reclaimed over 30,000 acres of disturbed land, and controlled
or abated 22 mine fires. Thirty-five miles of hazardous high
walls have been reduced to safer slopes, and over $115 million
have been spent to mitigate and prevent coal-mine subsidence in
Wyoming communities.
In regards to work remaining, Wyoming's continuing
inventory of historic mining districts has identified almost
400 additional coal sites, and over 650 non-coal sites that
continue to pose a hazard to Wyoming citizens and to visitors
to our State. Control of mine fires in response to ongoing
subsidence and emergency situations are not included in this
total. These will continue to be a liability to Wyoming in the
future.
Mining activities have impacted every one of Wyoming's 23
counties. Many communities continue to suffer the direct
effects of energy development and the boom-and-bust nature of
the State's economy.
Infrastructure projects, such as public water systems,
hospitals, health clinics, and other projects addressing public
health and safety, will continue to be a priority.
All of the States and tribes have continuing reclamation
needs under the legitimate and original purposes of SMCRA.
Wyoming believes the reauthorization legislation should honor
the government's commitment to return the States' and tribes'
share of the AML Trust Fund and that all participating States
and tribes should be fairly treated.
I, again, appreciate the opportunity to present Wyoming's
position today.
Thank you.
[The prepared statement of Mr. Green follows:]
Prepared Statement of Evan J. Green, Administrator, Wyoming Abandoned
Mine Land Program, Department of Environmental Quality, State of
Wyoming
Good Morning, Mr. Chairman. My name is Evan Green. I am the
Administrator of the Wyoming Abandoned Mine Land Division of the
Department of Environmental Quality. I wish to thank Chairman Domenici
and the members of the Senate Committee on Energy and Natural Resources
for inviting the State of Wyoming to testify at this hearing today.
I have been invited here today to speak briefly on the
reauthorization of Abandoned Mine Land Reclamation fee, and changes to
the Surface Mining Control and Reclamation Act of 1977 as proposed by
S. 1701 and S. 961. As you know, I speak from the perspective of our
nations largest producer of coal and therefore, the nations largest
source of AML funds. I commend you for your willingness to hear from
representatives of coal producing states and other interested parties
about this important issue. As always, Wyoming stands ready to work
with the Congress in addressing the shortcomings of SMCRA and the need
for a fair and equitable distribution of past collections and future
revenues from the AML fee.
SUMMARY OF WYOMING'S POSITION
I wish to begin by saying that Wyoming supports many of the AML fee
reauthorization concepts contained in S. 1701 sponsored by Senators
Thomas and Enzi of Wyoming. This approach addresses both the serious
reclamation needs facing our state and provides relief for our mining
industry.
To be specific, we request that this Committee support S. 1701 on
the following items:
A prompt release of Wyoming's share of long overdue funds
from the AML Trust Fund. S. 1701 provides this release over a
five-year period; a time frame we find acceptable.
Guaranteeing a fair share of future AML revenues to complete
the reclamation of abandoned mine sites in Wyoming, and address
the impacts of energy development on Wyoming communities and
the State's infrastructure. Wyoming appreciates the opportunity
provided by S. 1701 to collect reclamation fees and retain the
State's 50% share.
A reduced fee structure that lowers the tax burden on
Wyoming coal producers.
In contrast, however, there are provisions in S. 961 that do not
address the needs of our country's largest and most productive coal
producing state. For example:
Wyoming's coal producers would pay almost $2 billion in
reclamation fees over the term of the extension, but the state
would continue to receive only 25-30% of what it pays in going
forward. Since 1977, SMCRA has promised a 50% return to the
states, that law and promise, must finally be kept.
Wyoming's trust fund of $450 million, money owed the state
pursuant to laws passed by this body, must be returned in a
timely fashion.
Escalating construction costs, inflation, and a lack of
interest on the fund depreciate the real value of Wyoming's
share of this account. Congress promised not only Wyoming, but
also other coal producing states this money, but has never kept
this promise. We believe strongly that this funding denial
should not stand.
There is no commitment that Wyoming, or other states, will
receive trust fund balances in future years.
Wyoming would remain subject to the limitations on project
prioritization currently in SMCRA. As a certified state,
Wyoming should have the authority to decide how to spend the
funds generated by our coal producers.
HISTORY
When the Surface Mining Control and Reclamation Act was enacted in
1977, it included a fee on coal production. Proceeds from the fee were
placed in the Abandoned Mine Land (AML) fund. By law, one-half of the
fees collected in each state or on tribal lands were to be returned to
the state or tribe of origin. The other half of the collections were to
be spent at the discretion of the Secretary of the Interior to address
reclamation issues of national importance. All AML expenditures,
including state and tribal shares and the OSM's allocation, are subject
to the federal budgeting process and annual appropriation by Congress.
Since the middle of the 19th Century, Wyoming has been a major
source of energy, fueling America's industrial revolution and
supporting its subsequent development. The transcontinental railroad
project in the 1860's created both the demand for coal to operate
locomotives, and the transportation artery for coal delivery to areas
of demand. Wyoming sites along the transcontinental route, now Carbon,
Sweetwater, Lincoln and Uinta Counties, were mined extensively. As the
network of rail lines expanded to serve more and more areas, so did the
market for Wyoming coal. Mines opened in Sheridan and Campbell counties
to supply demands nationwide for clean and inexpensive coal. Coal has
been mined on some scale in nearly every one of Wyoming's 23 counties,
and Wyoming citizens continue to live with that legacy. As will be
discussed below, ongoing inventory efforts continue to show a much more
extensive amount of reclamation than is currently recognized by the
OSM. Further, small towns no longer supported by these historic mines
are saddled with deteriorating infrastructure that requires attention.
These needs can be adequately met only through a fair and balanced
reauthorization bill, such as S. 1701.
Despite the bills intent and the clear mandate of law, Congress has
never appropriated to states and tribes the 50% of fee collections
guaranteed by law. Wyoming, for example, has received only 29% of fees
collected in our state since the approval of its reclamation plan in
1983. This is a refusal of the Federal Government to discharge the
obligations it placed on itself under law.
We are very concerned that Wyoming's coal producers will be asked
to bear the largest burden of AML fee collections without the return of
an equitable portion of those funds to Wyoming. In 2004, Wyoming
producers paid over $130,000,000, yet Wyoming's AML program received
only $29,900,000 in distributions. That's only 22.5% of money Wyoming
contributed, while other states have received 40%, 50% and even over
100% of their contributions.
Appropriations from Congress to address AML problems in Wyoming and
other coal states are constrained by budget ceilings established by
Office of Management and Budget. Annual AML distributions to states and
tribes have never reached the 50% of AML fee collections mandated by
Congress in SMCRA. As a result, the AML Trust Fund now contains almost
$1.5 billion, of which $972 million is the states share balance, which
by law is to be distributed to AML states and tribes.
Through fiscal 2004, Wyoming coal companies have paid over $2
billion into the fund. Only about 29% of these collections have
returned to the State. Wyoming has received only $529,706,000 in annual
allocations. Over $450,000,000 million of Wyoming's state share resides
in the AML fund. This money, now idle in this federal account, could be
put to productive use reclaiming hazardous mine sites and mitigating
the deleterious effects of mining and mineral processing activities in
Wyoming communities.
OBLIGATIONS TO COMBINED BENEFITS FUND
The 1992 Coal Act shifted the AML Trust Fund interest away from
reclamation and towards the social needs of the dependents of the
United Mine Workers and the desires of the bituminous coal operators by
subsidizing shortfalls in the Combined Benefits Fund (CBF).
These social priorities have steered AML funds away from the needs
of states and tribes, especially those states that produce the lion's
share of the Nation's coal. Again, we recognize the need for the fund
and support its goals.
ACCOMPLISHMENTS OF THE WYOMING AML PROGRAM
Since implementation of the Surface Mining Control and Reclamation
Act of 1977, Wyoming coal producers have paid over $2 billion dollars
in reclamation fees into the AML Trust Fund. In return, Wyoming has
received about $530 million dollars, or 29% of these total collections,
far less than what it is owed under law. Wyoming consistently maintains
an obligation rate in excess of 95% of funds received, and spends less
than 4% on administrative costs. As to the application and
administration of this fund, Wyoming's hands are clean.
Since the inception of the AML program, Wyoming has closed 1,300
hazardous mine openings, reclaimed over 30,000 acres of disturbed land,
and abated or controlled 22 mine fires. Thirty-five miles of hazardous
highwalls have been reduced to safer slopes, and over $115 million have
been spent to mitigate and prevent coal mine subsidence in residential
and commercial areas of several Wyoming communities. Wyoming has also
partnered with the BLM, the Forest Service, and the National Park
Service to eliminate mine-related hazards on federal lands. In
addition, Wyoming has invested $96 million in infrastructure projects
such as public water systems, flood control projects, health clinics,
schools, roads and other projects to abate public safety problems in
communities impacted by mining.
Today, Wyoming is the largest producer of coal in the nation, with
production expanding at a rate of about 6% a year. Unfortunately,
Wyoming has not enjoyed economic diversification and remains largely
dependent on mineral extraction, primarily coal, oil and gas. While
Wyoming has certainly benefited from our abundance of natural
resources, the State has suffered, and continues to suffer, from the
effects of an inequitable distribution of AML funds. Wyoming has been,
and expects to continue to be, the single largest contributor to the
AML reclamation fund. This contribution has enabled some states to
receive more money than they have contributed to the program, while
Wyoming has never received our fair share of the money we sent to
Washington.
In essence, Wyoming has not only provided the bulk of funding for
AML reclamation in other states, but has handled revenues returned to
the State in an effective and efficient program to protect our citizens
from mine related hazards and to mitigate the impact of mining
activities on Wyoming Communities.
CERTIFICATION ISSUES
Wyoming is subject to continuing criticism for its decision to
certify in 1984. Based on information at the time, Wyoming believed
that sufficient funding (the full 50% of collections) would be
available to address known P1 and P2 coal sites. We now know that this
honest and legitimate reliance was misplaced. Also, the state placed a
high priority on reclaiming the vast and extremely hazardous pits and
high walls left by uranium extraction in the 1960's and 1970's; a
perfectly legitimate concern at that time. Finally, it must be
remembered that the federal government reviewed and approved of
Wyoming's certification.
At the time, Wyoming also assumed that the AML program would expire
in 1992 and decided to exercise the State's option to address both coal
and non-coal hazards to public health and safety. Again, the
certification was applied for by Wyoming, and was granted by the
federal government. Wyoming's critics have used our certified status to
claim that Wyoming has completed its reclamation of abandoned mine land
sites or has no remaining hazards to be addressed.
Nothing could be further from the truth. Criticism of Wyoming's
status is, therefore, inappropriate and is, if anything, a diversion
from the real and difficult issues imposed by this law. Wyoming still
has a substantial internal inventory of P1 and P2 coal sites, some of
which were unknown at the time of certification.
HAZARDS REMAINING TO BE RECLAIMED IN WYOMING
In Wyoming, the impacts associated with historic mining include
30,000 acres of land undermined by coal production in Sweetwater County
alone. Sheridan County and Lincoln County each have over 5,000 acres
undermined by historic coal mining. While a portion of these areas at
risk are rural, some are in immediate proximity to cities, towns or
recreation areas on public land. Each season, Wyoming AML identifies
new subsidence features, failed shaft closures, mine openings, erosion
into mine workings and other Priority 1 hazards. Incidentally, Wyoming
sets the standard for mitigation of potential subsidence through a
wealth of experience in Rock Springs, Hanna and Glenrock. Since the
cost of mitigating subsidence-prone areas is extremely high, Wyoming
AML mitigates large scale subsidence in only those areas that have been
developed for residential or commercial use. Priority 1 hazards in
rural areas are evaluated and addressed under either the State AML
rapid response program, or under the normal AML project priority
system.
Wyoming AML is currently in the final stages of a major statewide
inventory process, the first comprehensive study of its kind, to
identify both existing hazards and areas where deteriorating conditions
(rotting support timbers, subsidence, failed closures, etc.) will
create hazards in the future. Inventories conducted in the early days
of the Wyoming AML program were based on aerial photography and USGS
mapping, techniques that only scratched the surface of remaining work.
Today's inventory effort includes a wealth of resources integrated for
the first time into a comprehensive overview of potential AML projects.
Inventory personnel reviewed historic mine maps from the Bureau of
Mines records, from company files, museum records, and archives of the
Wyoming State Geologic Survey. Files and records from the Department of
Energy (uranium), from Federal Land Management Agencies, and from the
U.S. Geologic Survey were reviewed in detail for information on the
location of mines and mining districts.
The results of this intensive research were validated by site
inspections in the field during the 2004 field season. Results from the
inventory project verify that there are 393 additional P1 and P2 coal
sites and 650 non-coal sites. As it has done in the past, Wyoming will
move forward to address the challenges faced by abandoned mine lands.
WYOMING'S POSITION ON REAUTHORIZATION OF THE RECLAMATION FEE
Because Wyoming has been a responsible custodian of the funds
entrusted to our AML program, your Committee can have confidence in
taking the following actions
1. Return of Trust Fund
Wyoming has never received the 50% return of collections promised
in SMCRA. Wyoming wants a prompt return of the money now held in the
AML Trust Fund from previous contributions by the State's coal
producers. This is only the fulfillment of obligations Congress imposed
by law upon itself.
Because annual AML appropriations to States and Tribes have lagged
behind AML fee collections, the AML fund has a current balance of $1.5
billion. Every year that these funds are not returned to the states and
tribes of origin, the real value of these funds declines because of
inflation and the rising cost of reclamation construction. Wyoming's
state share balance in this account is estimated to exceed $475 million
by September 30, 2005. These funds, now idle in a federal account,
should be put to productive use reclaiming hazardous mine sites and
mitigating the deleterious effects of mining activities on Wyoming
communities. This requires that the funds be returned without
conditions, so the certified states are able to use the funds, as they
deem appropriate.
2. A Fair Share of Future Revenues
Wyoming wants it's legally mandated 50% of future fee collections
returned to the State to address remaining hazardous coal and non-coal
mine sites.
The reauthorization proposals currently under consideration will
require Wyoming coal producers to pay $1 to $1.5 billion dollars into
the AML Trust Fund in the next 10 to 15 years. Wyoming recognizes that
the problems in Eastern States must be addressed, but the state making
the largest financial contribution to the AML program should receive
just compensation from future fee collections. Wyoming citizens remain
at risk from the hazards of abandoned mines, as do citizens in other
states with similar issues. Visitors to our vast public lands and
magnificent recreation areas encounter unexpected dangerous conditions
that could claim an innocent life. Wyoming communities are impacted by
the boom and bust cycles of mineral extraction, and S. 1701 would allow
the State to address those impacts. Future revenues are needed to
respond to the remaining hazards identified through Wyoming's
aggressive pursuit and identification of remaining coal and non-coal
mining hazards. Much work remains to be done to protect our citizens
and visitors to our state from such hazards. Money from future revenues
is required to give our state the capacity to respond to ongoing
conditions that will exist in perpetuity. The result of Wyoming's
inventory work is not yet reflected in the Abandoned Mine Land
Information System (AMLIS).
The Abandoned Mine Land Reclamation program in Wyoming has been an
outstanding example of Federal-State cooperation in the remediation of
hazards to public health and safety resulting from past mining
practices. We ask the opportunity to continue that relationship with
sufficient funds to complete the work envisioned by the original
drafters of SMCRA.
3. Reduction of Reclamation Fees
Wyoming wants the burden of reclamation fees on Wyoming coal
producers reduced. Coal production in Wyoming continues to increase at
6 to 8 percent a year. This increase in production will offset a
portion of the fee reduction and will generate funds for additional
reclamation work nationwide. All coal producers, as well as energy
consumers, would benefit from a reduction in reclamation fees.
4. Objections to S. 961
As discussed above, Wyoming has strong concerns with the proposal
contained in S. 961. Wyoming strongly objects to any proposal that
would continue to tax Wyoming coal producers and fail to return its
legal share of those collections to the State. We believe that the bill
sponsored by Senators Thomas and Enzi is fair to all states and tribes
with AML programs.
CONCLUSION
All of the States and Tribes have continuing needs under the
legitimate purposes of SMCRA. As Congress debates reauthorization of
the AML fee, the discussion should begin with the premise that the
Federal Government will honor its commitment to the States and the
Tribes to return their share of the AML trust fund, and that all
participating States and Tribes should be fairly treated by
reauthorization legislation.
We believe Congress should go further than S. 1701, which omits
some critical elements of reforming SMCRA once and for all. S. 971,
while putting forward positive and constructive ideals, also falls
short in Wyoming's view. What is needed is comprehensive reform
addressing each and every element of SMCRA so that all stakeholders may
be able to fulfill their obligations.
Wyoming respectfully requests that we continue to be consulted and
included in future discussions. We are proud of our role in supporting
the nation's economy, industry, and environment. We cannot forget that
the ultimate resolution to this issue will affect the health and safety
of our citizens, the quality of our environment, and the well being of
our communities.
In conclusion, Wyoming wishes to thank the Senate and Natural
Resources Committee for the opportunity to be heard on these important
issues.
Senator Thomas. Thank you, sir.
Mr. Hohmann.
STATEMENT OF STEVE HOHMANN, DIRECTOR, DIVISION OF ABANDONED
MINE LANDS, KENTUCKY DEPARTMENT OF NATURAL RESOURCES
Mr. Hohmann. Good morning, Mr. Chairman. My name is Steve
Hohmann, and I'm director of the Division of Abandoned Mine
Lands within the Kentucky Department for Natural Resources.
I'm appearing here today on behalf of the National
Association of Abandoned Mine Land Programs and the Interstate
Mining Compact Commission, and I thank you for the opportunity
to discuss pending legislation that addresses the future of the
Abandoned Mine Reclamation Program.
In particular, I would like to address the views of the
States and tribes regarding the future collections of AML fees,
adequate funding for our Abandoned Mine Land Programs, and
related legislative adjustments.
Over the past 25 years, tens of thousands of acres of mined
land have been reclaimed, thousands of mine openings have been
closed, and safeguards for people, property, and the
environment have been put in place by State reclamation
programs. Please remember that the AML Program is, first and
foremost, designed to protect public health and safety. The
bulk of State and tribal AML projects directly correct an AML
feature that threatens someone's personal safety or welfare.
For example, last year, in my home State of Kentucky, the AML
Program reclaimed over 125 abandoned mine hazards, including 19
dangerous landslides and 73 mine openings. We also improved
water quality in 5.6 miles of stream. All together, these
abatement projects removed abandoned-mine hazards that
threatened over 3,500 Kentuckians.
Additionally in 2005, the Kentucky AML Program completed
six water-supply projects that installed 59 miles of water line
directly providing 823 households with potable water. Many
hundreds more residents were able to tap into AML-installed
water-mains.
Although the States and tribes have made significant
progress abating AML hazards, the escalating costs of
reclamation, coupled with decreasing AML grants, hinders our
ability to reduce the AML problem inventory. AML sites tend to
get worse over time, thus increasing reclamation costs. And
inflation exacerbates these costs.
The inventory is also dynamic. The States and tribes are
finding new high-priority problems each year, especially as we
see many of our urban areas grow closer to what were formerly
rural abandoned-mine sites.
The States and tribes, through the IMCC and the National
Association of Abandoned Mine Land Programs and the Western
Governors Association have, over the past several years,
advanced proposed amendments to SMCRA that reflect a minimalist
approach to AML reform. They are as follows:
First, to extend fee-collection authority to at least 2020
to allow enough time to collect sufficient money to address the
significant AML problems that remain.
Second, to adjust the procedure by which States and tribes
receive their annual allocations.
Third, to eliminate the Rural Abandoned Mine Program, or
RAMP, and to reallocate those moneys to the historic coal-
production share.
Fourth, to assure adequate funding for minimum program
States who have consistently received less than their promised
share of funding over the past several years.
Fifth, to address a few other select provisions that will
enhance the overall effectiveness of the AML program, such as
re-mining incentives and State AMD set-aside programs.
And, finally, to address how the accumulated unappropriated
State- and tribal-share balances in the fund will be
distributed, while, at the same time, assuring that an adequate
State-share continues for the balance of the program.
In general, Mr. Chairman, we can support most of the
provisions contained in S. 1701 and S. 961 that have been
introduced by Senators Thomas and Rockefeller. As a bottom
line, we believe that Congress should take expedited action to
preserve--and, ideally, enhance--this vital program. In this
regard, if there are opportunities to amend these bills, we
have a few suggestions.
First, we do not believe it is necessary to adjust the
current priority scheme in section 403 to eliminate the
general-welfare provision, or priorities four and five. To our
knowledge, there is no evidence of abuse by the States or
tribes regarding our selection of AML projects. However, to the
extent that Congress believes the priority system should be
adjusted in some way, we believe it would be appropriate to
increase the Acid Mine Drainage Set-aside Program from 10
percent to, ideally, 30 percent.
Second, in terms of reducing AML fees, as proposed in S.
1701, we do not believe such a reduction is necessary, simply
because the fee has never been adjusted for inflation over the
past 27 years. However, if Congress believes that a fee--a
reduction in the fee is necessary, then it is critical to
extend fee collection to at least 2020 to allow enough time to
collect sufficient money to address the significant AML hazards
that remain in the inventory.
And, finally, we trust that any moneys diverted for use by
the Combined Benefit Fund will be limited to interest on the
AML Trust Fund only, and not to the principal. We believe it is
essential that the principal in the fund be maintained for its
intended purposes.
We appreciate the opportunity to present this testimony
today, Mr. Chairman, and look forward to working with you in
the future.
Thank you.
[The prepared statement of Mr. Hohmann follows:]
Prepared Statement of Steve Hohmann, Director, Division of Abandoned
Mine Lands, Kentucky Department for Natural Resources
Good morning, Mr. Chairman. My name is Steve Hohmann and I am
Director of the Division of Abandoned Mine Lands within the Kentucky
Department for Natural Resources. I am appearing here today on behalf
of the National Association of Abandoned Mine Land Programs (NAAMLP)
and the Interstate Mining Compact Commission (IMCC). The NAAMLP
consists of 30 states and Indian tribes with a history of coal mining
and coal mine related hazards. These states and tribes are responsible
for 99.5% of the Nation's coal production. All of the states and tribes
within the Association administer AML programs funded and overseen by
the Office of Surface Mining (OSM). I am also representing IMCC, an
organization of 21 states throughout the country that together produce
some 60% of the Nation's coal as well as important noncoal minerals.
Each IMCC member state has active coal mining operations as well as
numerous abandoned mine lands within its borders and is responsible for
regulating those operations and addressing mining-related environmental
issues, including the remediation of abandoned mines. I am pleased to
appear before the Committee to discuss pending legislation that
addresses the future of the Abandoned Mine Reclamation Program, which
is established under Title IV of the Surface Mining Control and
Reclamation Act of 1977 (SMCRA). In particular, I would like to address
the views of the states and tribes regarding several reauthorization
issues including the future collection of AML fees from coal producers,
adequate funding for our abandoned mine land programs, and related
legislative adjustments to Title IV of SMCRA.
Mr. Chairman, all parties affected by AML reauthorization agree
that, during the past quarter of a century, significant and remarkable
work has been accomplished pursuant to the abandoned mine lands program
under SMCRA. Much of this work has been documented by the states and
tribes and by OSM in various publications, especially during the past
few years, including the twentieth anniversary report of OSM and a
corresponding report by the states and tribes. In addition, OSM's
Abandoned Mine Land Inventory System (AMLIS) provides a fairly accurate
accounting of the work undertaken by most of the states and tribes over
the life of the AML program and also provides an indication of what is
left to be done.
My comments today are intended to be representative of where I
believe the states and tribes are coming from when we look to the
future of the AML program. We strongly feel that the future of the AML
program should continue to focus on the underlying principles and
priorities upon which SMCRA was founded--protection of the public
health and safety, environmental restoration, and economic development
in the coalfields of America. Over the past 25 years, tens of thousands
of acres of mined land have been reclaimed, thousands of mine openings
have been closed, and safeguards for people, property and the
environment have been put in place. Based on information maintained by
OSM's Division of Reclamation Support, as of June 30, 2005, the states
and tribes have obligated 96% of all AML funds received. Also, based on
information maintained by OSM in its Abandoned Mine Land Inventory
System (AMLIS), as of June 30, 2005, $1.9 billion worth of priority 1
and 2 coal-related problems have been funded and reclaimed. Another
$354 million worth of priority 3 problems have been funded or completed
(many in conjunction with a priority 1 or 2 project) and $398 million
worth of noncoal problems have been funded or reclaimed.
It should be noted that any monetary figures related to the amount
of AML work accomplished to date are based on OSM calculations used for
purposes of recording funded and completed AML projects in AMLIS. What
they do not reflect, however, is the fact that a significant amount of
money is spent by the states and tribes for related project and
construction costs that do not find their way into the AMLIS figures
based on how those numbers have been traditionally calculated by OSM.
These costs (which amount to hundreds of millions of dollars for all
states and tribes) include engineering, aerial surveys, realty work,
inspections, and equipment--all of which are part of the normal,
routine project/construction costs incurred as part of not only AML
work, but of any construction-related projects. There is no dispute
between OSM and the states and tribes about the legitimacy or nature of
these items being a part of the true cost of AML construction projects.
In fact, OSM's own Federal Assistance Manual for AML Projects
recognizes these costs as ``project and related construction costs''.
As a result, the actual amount of money that has been spent by the
states and tribes for construction or project costs is approximately
$2.9 billion--$2.6 billion of which was for coal projects and $.3
billion for noncoal projects. Also, of the $3.4 billion provided to
states and tribes in Title IV monies over the years, only $500 million
has been spent on true administrative costs, which reflects a modest
average of 15%.
I could provide numerous success stories from around the country
where the states' and tribes' AML programs have saved lives and
significantly improved the environment. Suffice it to say that the AML
Trust Fund, and the work of the states and tribes pursuant to the
distribution of moneys from the Fund, have played an important role in
achieving the goals and objectives set forth by Congress when SMCRA was
enacted--including protecting public health and safety, enhancing the
environment, providing employment, and adding to the economies of
communities impacted by past coal mining. We must remember that the AML
program is first and foremost designed to protect public health and
safety. Even though accomplishments in the inventory are reported in
acreage for the sake of consistency, the bulk of state and tribal AML
projects directly correct an AML feature that threatens someone's
personal safety or welfare. In fact, OSM is currently revamping the
inventory to include data on health and safety features and the number
of citizens safeguarded from the hazards associated with those
features. While state and tribal AML programs do complete significant
projects that benefit the environment, the primary focus has been on
eliminating health and safety hazards first and the inventory of
completed work reflects this fact.
What the inventory also reflects, at least to some degree, is the
escalating cost of addressing these problems as they continue to go
unattended due to insufficient appropriations from the Fund for state
and tribal AML programs. Unaddressed sites tend to get worse over time,
thus increasing reclamation costs. Inflation exacerbates these costs.
The longer the reclamation is postponed, the less reclamation will be
accomplished. The inventory is also dynamic, which we believe was
anticipated from the inception of the program. The states and tribes
are finding new high priority problems each year, especially as we see
many of our urban areas grow closer to what were formerly rural
abandoned minesites. New sites also continually manifest themselves due
to time and weather. For instance, new mine subsidence events and
landslides will develop and threaten homes, highways and the health and
safety of coalfield residents. This underscores the need for continual
inventory updates, as well as constant vigilance to protect citizens.
In addition, as several states and tribes certify that their abandoned
coal mine problems have been corrected, they are authorized to address
the myriad health and safety problems that attend abandoned noncoal
mines. In the end, the real cost of addressing priority 1 and 2 AML
coal problems likely exceeds $6 billion. The cost of remediating all
coal-related AML problems, including acid mine drainage (priority 3
sites), could be 5 to 10 times this amount and far exceeds available
monies.
A word about the plight of those states that have traditionally
been labeled as ``minimum program'' states due to their minimal coal
production and thus minimal AML fee collection: the evolving inventory
concerns mentioned previously, as well as the increasing cost of
undertaking AML projects, are both exacerbated in these states. Do not
be misled by the term ``minimum'' when we speak of these programs,
since many of these states have not been minimally impacted by pre-
SMCRA mining. The minimum program states struggle to simply maintain a
cost-effective AML program with their most recent annual $1.5 million
allocations, much less undertake AML projects that can approach one
million dollars. Without the statutorily authorized amount of $2
million mandated by Congress in the 1990 amendments to Title IV of
SMCRA, these states will continue to be forced to fund or even delay
high priority projects over several years. Not only is this dangerous,
it is not cost-effective. As your Committee considers amendments to
Title IV of SMCRA, we urge you to resolve the dilemma faced by the
minimum program states and to provide meaningful and immediate relief.
When considering the economic impacts of potential AML legislation,
it should also be kept in mind that, since grants were first awarded to
the states and tribes for AML reclamation, over $3 billion has been
infused into the local economies of the coalfields. These are the same
economies that have been at least partially depressed by the same
abandoned mine land problems that the program is designed to correct.
In fact, those dollars spent in economically depressed parts of the
country could be considered part of an investment in redevelopment of
those regions. The AML program translates into jobs, additional local
taxes, and an increase in personal income for the Nation's economy. For
each $1 spent on construction, $1.23 returns to the Nation's economy.
For each $1 million in construction, 48.7 jobs are created (U.S. Forest
Service IMPLAN, 1992 data for non-residential and oil and gas
construction). The AML expenditures over the past 25 years have
returned over $4 billion to the economy and have created some 150,000
jobs. While this is significant, much more growth could occur if the
entire Fund was used for its intended purposes. For example, it is
estimated that $300 million will be collected from AML receipts in FY
2006 (assuming no fee adjustment). If the federal government returned
all $300 million to the local economies for abandoned mine land re-
construction, almost 7,000 additional jobs could be created with an
additional $175 million boost to coal region economies. In this manner,
money would be going to work for the communities who are experiencing
the consequences of pre-law mining practices as intended by SMCRA.
The ability of the states to accomplish the needed reclamation
identified in current inventories is being constrained by the low level
of funding for state and tribal AML programs. Since the mid-1980's,
funding for state and tribal AML grants has been declining. For
instance, in the FY 2006 budget, OSM proposed a decrease for the second
year in a row for state and tribal AML grants. These grants are
separate from moneys allocated to the states for the Appalachian Clean
Streams Initiative (ACSI) and for state-administered emergency
programs. The non-ACSI, non-emergency state and tribal AML grants are
the lifeblood of state and tribal AML programs and represent the
primary source of funding for the majority of priority 1 and 2 AML work
that is undertaken each year. Over the past two fiscal years, and now
again this year, we have seen a disturbing downward trend in these
critical baseline grants: $142 million in FY 2004; $136 million in FY
2005; and now a proposed amount of $129 million for FY 2006. These
numbers are based on an detailed analysis of information contained in
OSM's budget justification document.
We are losing ground, Mr. Chairman, in the battle to address high
priority AML sites that threaten our citizens. It is essential that
this trend be reversed immediately if we are to accomplish the goals
and objectives of the AML program. We therefore request that, as a part
of AML reauthorization, the Committee address the matter of increasing
baseline state and tribal AML grants to a level that will support
vibrant and effective programs. We believe this can best be achieved by
taking the AML appropriation off-budget. We also urge the Committee to
provide for the expeditious return of unappropriated state and tribal
share balances so that additional moneys can be directed to high
priority AML hazards and problems.
The future of the AML Fund and its potential impacts on the
economy, public safety, the land, our Nation's waters and the
environment will depend upon how we manage the Fund and how we adjust
the current provisions of SMCRA concerning the Fund. As we draw closer
to the newest expiration date of June 30, 2006, we are again beginning
to see various legislative proposals for how the Fund should be handled
and how SMCRA should be amended. The states and tribes, through IMCC,
the National Association of Abandoned Mine Land Programs and the
Western Governors Associations have over the past several years
advanced proposed amendments to SMCRA that are few in number and scope
and that reflect a minimalist approach to adjusting the existing
language in SMCRA and to incorporate only those changes necessary to
accomplish several key objectives. They are as follows:
To extend fee collection authority to at least 2020 to allow
enough time to collect sufficient money to address the
significant AML problems that remain.
To significantly increase annual allocations to states and
tribes to address AML problems. This has been one of the
greatest inhibitions to progress under Title IV of SMCRA in
recent years and must be addressed if we are to enhance the
ability of the states and tribes to get more work done on the
ground within the program's extended time frame.
To confirm recent Congressional intent to eliminate the
Rural Abandoned Mine Program (RAMP) under Title IV and to
reallocate those moneys to the historic coal production share.
While these moneys would be used primarily to address high
priority coal related sites, the states and tribes may
coordinate their efforts with the Natural Resources
Conservation Service and the local soil and water conservation
districts in an attempt to address their concerns as well.
To assure adequate funding for minimum program (under-
funded) states who have consistently received less than their
promised share of funding over the past several years, thereby
undermining the effectiveness of their AML programs.
To address a few other select provisions of Title IV that
will enhance the overall effectiveness of the AML program,
including remining incentives, state set-aside programs,
handling of liens, and enhancing the ability of states to
undertake water line projects.
Finally, to address how the accumulated, unappropriated
state and tribal share balances in the Fund will be handled
(assuming that the interest in the Fund is no longer needed to
address shortfalls in the UMW Combined Benefit Fund), while at
the same time assuring that an adequate state share continues
for the balance of the program to insure that all states and
tribes are well-positioned and funded to address existing AML
problems.
The two bills that are the subject of today's hearing address
several of these concerns and, to that extent, are an excellent
starting point toward AML reauthorization. In particular, S. 1701
introduced by Senator Thomas amends Title IV by extending fee
collection until 2016; provides for a phased reduction of fees over
that same period of time; eliminates RAMP and moves those allocated
moneys to historic coal production; provides for a guaranteed annual
minimum program allocation of $2 million; increases the acid mind
drainage set-aside from 10 to 20 percent; insures repayment of
unappropriated state and tribal share balances and does so off-budget;
eliminates the problematic lien provision in Section 408; removes the
30 percent cap on water restoration projects; and provides for various
remining incentives. The bill also provides a unique opportunity for
states and tribes to collect AML fees on their own, returning to the
federal government its 50 percent share, and requires all amendments to
the AML inventory to be approved by the Secretary. Finally the bill
adjusts the priority scheme under section 403 by eliminating the
``general welfare'' clause and allowing priority 3 projects concerning
environmental impacts to be addressed only in conjunction with a
priority 1 or 2 project.
S. 961, introduced by Senator Rockefeller, addresses some of these
same provisions in Title IV, but extends fee collection to 2019;
maintains the AMD set aside at 10 percent; eliminates priorities 4 and
5 in section 403; allows the Secretary to initiate certification under
Section 411 on his/her own volition; and provides for a scrub of the
AML inventory to eliminate general welfare sites that were added after
1998. Both bills address the Combined Benefit Fund (CBF) for retired
mine workers, including making the full amount of interest generated on
the AML Fund available for CBF purposes and freeing up stranded
interest in the AML Fund for purposes of CBF. S. 961 would also make
the unappropriated RAMP share balance available for the CBF.
In general, Mr. Chairman, we can support most of the provisions in
both of these bills. As a bottom line, we believe it is essential that
expedited action be taken by Congress to preserve and ideally enhance
this vital program. In this regard, if there are opportunities to amend
these bills, we have a few suggestions. First, we do not believe it is
necessary to adjust the current priority scheme in section 403 to
eliminate the ``general welfare'' provision or priorities 4 and 5. To
our knowledge, there is no evidence of abuse or inappropriate action by
the states or tribes regarding our selection of worthy AML projects
over the past 27 years of the program. OSM, who is responsible for
conducting annual oversight of our programs, has reviewed our project
selection and has consistently lauded us for the effective and
efficient use of our AML funds and for the legitimacy and value of the
projects we choose to undertake. However, to the extent that Congress
believes that the priority system must be adjusted in some way, we
believe it would then be appropriate to increase the acid mine drainage
(AMD) set-aside program from10 percent to ideally 30 percent.
Second, in terms of reducing AML fees as proposed in S. 1701, we do
not believe such a reduction is necessary, particularly in light of the
fact that there have never been any adjustments in the fee for
inflation over the past 27 years. However, if Congress believes that a
reduction in the fee is necessary, it is critical to extend fee
collection to at least 2020 to allow enough time to collect sufficient
money to address the significant AML problems that remain in the
inventory.
Finally, we trust that any moneys diverted for use by the Combined
Benefit Fund (CBF) will be limited to interest on the AML Trust Fund
only, and not to the principal. We believe it is essential that the
principal in the Fund be maintained for its intended purposes. To do
otherwise would be to subvert the entire premise of Title IV and to
undermine the original intentions of SMCRA's framers.
Mr. Chairman, it is obvious from an assessment of the current
inventory of priority 1 and 2 sites that there will not be enough money
in the AML Trust Fund to address all of these sites before fee
collection is set to expire in June of 2006. It is even more obvious
that, regardless of what the unappropriated balance in the Fund is
(currently $1.8 billion) and what future fee collections will add to
that balance over the next year, current Congressional appropriations
for state and tribal AML program grants are woefully inadequate and are
not keeping pace with our ability and desire to address the backlog of
old as well as continually developing high priority AML problems. We
are therefore faced with a significant challenge over the next few
months--and that is to reconcile all of the various interests and
concerns attending the administration of the AML program under Title IV
of SMCRA in a way that assures the continuing integrity, credibility
and effectiveness of this successful and meaningful program under
SMCRA.
The states, through their associations, welcome the opportunity to
work with your Committee, Mr. Chairman, and other affected parties to
address the myriad issues that attend the future ability of the AML
Fund to address the needs of coalfield citizens Our overriding concerns
can be summarized as follows:
Adequate, equitable, and stable long-term funding must be
provided to the states and tribes on an annual basis that will
allow the states and tribes to address the AML problems their
citizens are experiencing and to implement their respective AML
programs to provide the services intended by SMCRA.
The unexpended state share balance in the AML Trust Fund
should be distributed to all the states and tribes as
expeditiously as possible so states and tribes can address
existing AML problems before inflationary impacts result in
more costly reclamation and thus less reclamation.
Funding for the ``minimum program'' states must be restored
to the statutorily authorized amount of not less than $2
million annually.
Any adjustment to the AML program should not inhibit or
impair remining opportunities or incentives.
Any adjustments to the existing system of priorities under
Title IV must consider the impacts to existing state set-aide
programs and to current state efforts to remediate acid mine
drainage.
Any adjustments to the current certification process should
not inhibit the ability of the states and tribes to address
high priority noncoal projects.
Any review or adjustments to the current AML inventory
should account for past discrepancies and provide for the
inclusion of legitimate new sites.
Any adjustments to Title IV of SMCRA must be presented and
considered in a judicious and productive environment that
allows for all affected parties' concerns to be heard and
addressed, including coalfield residents who are directly
affected by AML dangers. The restoration of these citizens'
communities is also being impacted by delays in returning the
unappropriated state and tribal share balances. In this regard,
it should be kept in mind that any legislative adjustments
which have the result of significantly undermining state AML
funding or the efficacy of state AML programs could lead state
legislatures to seriously reconsider SMCRA primacy entirely--
both Title IV and Title V. This very scenario was contemplated
by the framers of SMCRA who structured the Act so that the
Title IV AML program would serve as an incentive for states to
adopt and implement Title V regulatory programs. Should the AML
``carrot'' be chopped up, the desire to maintain Title V
primacy could be seriously re-thought by some state
legislatures, particularly during difficult budget times, thus
placing OSM in the undesirable position of having to run these
programs at a significantly increased cost to the federal
government. Hence the importance of assuring that the current
state share provisions in SMCRA are held harmless in any
proposed restructuring of the current allocation formula.
We appreciate the opportunity to present this testimony today, Mr.
Chairman, and look forward to working with you in the future. I would
be happy to answer any questions you may have or to provide follow up
answers at a later time.
Senator Thomas. Well, thank you, sir. And thank all of you
for being here. We'll take a minute or two for some questions,
and go around for the various Senators to do that.
Mr. Shope, if I may begin with you. First of all, share
with Jeff our appreciation for his work at OSM, please. He's
done a good job.
I just have one question. S. 1701 contains a provision that
allows the States and tribes to collect the fee, retain their
shares, and submit the balance. What is the administration's
position on that?
Mr. Shope. Well, thank you, Senator. I will pass on to
Director Jarrett your comments.
With respect to that provision, we are enthused by the
novel approaches that are coming out of this committee,
including that particular provision. We do have some particular
concerns, however, with it. Those concerns basically fall into
three categories: logistics and the costs of that effort, the
equity of such an effort, and perhaps the legality of it.
First, with respect to logistics, OSM is very proud of its
99.9 percent collection rate for AML fees. We have an expertise
and an infrastructure that is already well established and in
place. We have a very efficient and effective program in order
to collect those fees. The concept of potentially expanding
that program to have as many as 26 different agencies
collecting the same fee, as well as maintaining the Federal
Government, OSM's, responsibility to collect, audit and oversee
those fee collections, does raise some concerns, as far as the
cost and the logistics, as well as potential confusion for the
regulated community as to what the fee rate is, and who it is
they're paying it to.
As far as the equity is concerned, there would be a concern
for smaller programs that may not be able to take advantage of
that opportunity; whereas, larger programs that would have
sufficient resources could, in fact, take advantage of it.
And, finally, there are some outstanding questions that
have been raised, concerning the legality or constitutionality
of allowing a State to collect a federally imposed AML fee.
Again, that's just an outstanding question.
So, again, we applaud the novel approach. We think there
needs to be some further discussion and analysis of that.
Senator Thomas. Thank you very much. Obviously, the reason
for it being there is so that the States would be able to
maintain the money that they say is their share.
Mr. Shirley, thank you for your observations. Even though
you're certified, you still have needs that you think AML funds
could be used for. Could you elaborate on those?
Mr. Shirley. Well, some of the needs are, basically, the
Public Facility Infrastructure Program, you know, where some of
the mining that has been impacted by--some of the communities
that have been impacted by the mining. We have road needs, we
have water--need for water distribution, power lines, just any
number of things that makes a community viable and functioning.
Senator Thomas. That are related to mining.
Mr. Shirley. That are related to mining, yes. And these are
communities impacted by mining.
Senator Thomas. Thank you.
Mr. Green, you didn't comment on how long you think the fee
should be extended. Do you have a position on that?
Mr. Green. We would accept the provision in your bill,
Senator Thomas.
Senator Thomas. You mentioned the State partnering with
Federal agencies to eliminate mine-related hazards on Federal
land. How would these be financed?
Mr. Green. Senator, we currently have an outstanding
agreement with the Bureau of Land Management. The BLM's AML
program has contributed over a million and a half dollars to
supplement those funds available through the OSM funding to the
State of Wyoming, primarily for cleaning up priority-three
hazards, environmental impact on BLM land. This is in addition
to the funds that the State of Wyoming's AML program would
normally spend on public lands.
We have also entered into cooperative funding agreements
with the National Park Service and with the Western Federal
Highways Division for certain reclamation projects.
Senator Thomas. Okay, fine. Thank you, sir.
Mr. Hohmann, I've heard views opposing re-mining. Our
proposal includes language that would allow this activity to
take place. You expressed support for re-mining. Could you
elaborate on that, please?
Mr. Hohmann. Yes, sir. Re-mining is a very good way to save
the AML fund precious dollars in the long run by having
existing mining companies in--as part of their mining and
reclamation efforts, go in and reclaim some of these abandoned
mine hazards.
In my State, in Kentucky, we take advantage of the AML
enhancement rule, which is a form of re-mining incentive, which
has allowed us to clean up several coal refuse piles at no cost
to the State, to our AML fund, by working and partnering with
coal companies who are mining in the area, and getting them to
mine through these gob piles and reclaiming.
Senator Thomas. Thank you, sir.
Senator Bingaman.
Senator Bingaman. Thank you very much, Mr. Chairman.
Mr. Shope, let me ask, first, on the administration's
position. As I understand it, the bill that the administration
proposed in the last Congress called for reducing the Abandoned
Mine Reclamation fee. Is that still your position? You believe
that fee ought to be reduced?
Mr. Shope. Senator, we believe that the fee, standing
alone, in and of itself, can't be viewed in a vacuum. It needs
to be part of the formulae--a larger formula, which is: the
amount of the fee, the length that the fee is assessed, and
then what happens to that fee once it is assessed. There are
different proposals, different ways of making that formula
equate to completing the high-priority reclamation that is out
there. Under S. 1701, there is a fee-cut in there. Under S.
961, there is no fee-cut. Neither one of those proposals--
taking into account the length of time, the amount of money
that's collected, and where it's being appropriated--gets the
high-priority job done. Under our bill that we introduced last
year, we also had a fee-cut in it. However, because we made
adjustments to the allocation, there was sufficient money.
So, in and of itself, a fee-cut cannot be analyzed in a
vacuum. It needs to be taken into consideration with the entire
package that's out there.
Senator Bingaman. So, your position is that you do not
support a fee-cut unless it would allow for sufficient funds to
do all of the reclamation--the high-priority reclamation work
that you believe is in the inventory?
Mr. Shope. That's correct.
Senator Bingaman. Okay. You also--well, I don't know what
position you've taken. I guess, let me ask the administration's
position on the tribal primacy. As I understand President
Shirley's testimony, his suggestion is that tribes be allowed
to seek primacy for the title 5 regulatory program under the
same standards that States currently can do that. Do you favor
that, or oppose that?
Mr. Shope. Senator, the current law does not permit tribes
to apply for primacy. We do support the ability of a tribe to
apply for primacy of the regulatory program. Of course, the
particulars of such legislation would have to be reviewed, but
we do support that. We've been working with the tribes in that
effort. And, in fact, we have been funding the tribes to gear
up toward that effort by providing them funding for training of
inspectors and other regulatory matters.
Senator Bingaman. Thank you very much for that answer--one
of the features of the administration's proposal last Congress
was to change the formula so that more money would be directed
to States with the greatest need. The practical effect of that
would be to shift funding from the West to the East. You
indicate that continues to be the position of the
administration.
I guess, one issue there that occurs is: Do you believe
that the 50-percent State-share should be eliminated in the
future? Modified? Maintained? What's your view on that?
Mr. Shope. Well, again, Senator, last year--we've been
working at this for some time now--the proposal that we put
forth last year did recognize removal of the State-share, going
forward. Of course, it did follow our principals, which were,
first and foremost, to provide more funding to high-priority
coal-reclamation needs, and to get the expedited payment of
unappropriated State-share balances that currently remain, but
to do so within the confines of the budget restrictions which
we have. Again, that gets back to my earlier answer to your
question. It's--one element of that formula, in and of itself,
can't be viewed alone. You need to look at the entire package.
So, the proposal that we put forth last year, as I
mentioned, did have a fee-cut in it, but it did collect
sufficient funds and, by shifting the allocation formula toward
high-priority coal sites, was able to accomplish the job. There
may be other proposals that are out there. That's why the
administration, this year, did not put in specific legislation.
However, we did provide funding, or proposed funding, in the
President's budget to make legislation that comports with those
principles.
Senator Bingaman. Well, in one part of your testimony that,
I guess, leaves me somewhat confused, you state these various
principles that should guide this AML legislation. And,
included in that, you say that States that have certified
completion of their coal reclamation work should be given
expedited payment of the unappropriated State-share balances. I
understand that. Does it make more sense to pay uncertified
States--or doesn't it make more sense to pay uncertified States
their unappropriated balances so that they can go ahead and do
the work to get certified?
Mr. Shope. We certainly agree with that, Senator. In fact,
our proposal from last year would have done just that. The $58
million that we requested in the 2006 budget, or the $53
million in the 2005 budget, would have gone not just to
certified States, it would have increased the grants to
certified States, as well as the grants to non-certified
States. In fact, out of $58 million that was requested in the
President's 2006 budget, approximately $21 million would have
been an increase to certified States, while $37 million would
have gone toward non-certified States.
Senator Bingaman. My time's up, Mr. Chairman. Thank you.
Senator Thomas. Thank you, sir.
Senator Allen.
STATEMENT OF HON. GEORGE ALLEN, U.S. SENATOR
FROM VIRGINIA
Senator Allen. Thank you, Mr. Chairman. And thank our
witnesses. And, most importantly, thank you for having this
hearing.
I'm going to make a statement and give you, as a leader of
this, my perspective.
First and foremost, coal is so important for our economy.
We've gone through the energy bill. It is clear, for
electricity generation in the future, we ought to be using
clean coal technology. After all, we are the Saudi Arabia of
the world in coal and, I think, advanced nuclear.
Part of the ability for us to have viable companies and
production of coal revolves around this issue, the reclamation
issue, as well as the health-benefits issue for miners. We, in
Virginia, understand, as do people in the Commonwealth of
Kentucky and Wyoming and elsewhere, the importance of
protecting our environment, where coal production originated,
and those surrounding communities. These abandoned mines do
pose a danger in those communities. We're faced here, Mr.
Chairman, with a problem that requires, in my view, a
comprehensive solution. Listening to Mr. Hohmann, from the
Commonwealth of Kentucky, a lot of his views are very similar
to the situation and sensibilities and views of, I think, the
Commonwealth of Virginia. And I know Senator Talent and Senator
Bunning and I seem to have a similar approach to this.
We need to address the deficiencies in the Abandoned Mine
Reclamation Program. It ought to be a plan that is developed
equitably and expeditiously, providing needed funds for each of
the affected States, including my Commonwealth of Virginia that
has 106 unfunded sites.
I may not think that either of these two bills that have
been proposed in the Senate are ideal, at least they may be a
framework where we can bring all the various companies and
people who are concerned about this together to get a
comprehensive solution, to address the long-term viability of
the Abandoned Mine Land Reclamation Program, as well as the
Coal Industry Retiree Health Benefit Act.
I'm pleased to see that many of what once seemed like an
intractable issues in all of those concerning the combined
benefit fund are being resolved, hopefully resolved, especially
ones that are important to some Virginia-based enterprises.
So, I hope that, Mr. Chairman, the leadership here, and
also on the House side, will work in this committee, with all
the parties who are involved here, to adopt an affordable,
equitable bill, in light of the existing very tight and taut
budget environment.
I'm looking forward to some very positive solutions to
reform the Abandoned Mine Reclamation Program and the Combined
Benefit Fund, and will be hearing different views on that
through this panel. And I hope that we'll agree that we've got
to find a workable solution, a solution so that we do have the
proper utilization of clean coal. It's important for jobs, it's
important for our national security and the competitiveness of
our country. But is important that both abandoned-mine lands,
as well as the health-benefits issue, get resolved.
And I look forward to working with you, Mr. Chairman, and
my colleagues Senator Bunning and Senator Talent, and all the
different interested parties, and hopefully getting this done.
It's important for those involved in it, and important for the
future of our country. And I thank you for your very brave and
courageous leadership in undertaking this. And maybe from this
cauldron--I am hopeful and prayerful that we'll come up with a
solution that everyone can agree with.
Senator Thomas. Thank you.
Senator Allen. Thank you, Mr. Chairman.
Senator Thomas. You mean everyone doesn't agree with it?
[Laughter.]
Senator Allen. They're just slight disagreements. We'll all
get on the same--maybe we'll all get on the same----
Senator Thomas. I'm sure we will. Thank you very much, sir.
Senator Allen. Thank you, Mr. Chairman.
Senator Salazar.
STATEMENT OF HON. KEN SALAZAR, U.S. SENATOR
FROM COLORADO
Senator Salazar. Thank you very much, Mr. Chairman.
In the interest of time, I will submit my opening statement
for the record.
Senator Thomas. It will be in the record, sir.
[The prepared statement of Senator Salazar follows:]
Prepared Statement of Hon. Ken Salazar, U.S. Senator From Colorado
Good morning. Thank you, Mr. Chairman. I want to thank you, Senator
Bingaman and Senator Thomas for holding this important hearing.
A legacy of Colorado's mining heritage is abandoned mines and mine
sites with no identifiable owner or operator, who may be responsible
for site clean-up and reclamation. As a result, public funds are
necessary to address health, safety and environmental issues at these
sites. Unfortunately, the uncertainty of the availability of federal
funds for this purpose affects Colorado's ability to address the
remaining AML problems in the state.
Currently in Colorado, there are more than 17,000 abandoned mine
sites that require safeguarding, 33 underground coal mine fires, and
150 sites that require environmental cleanup. The state estimates that
it will take at least $200 million to address these long-standing
problems. In addition, there are some 50,000 acres of land along
Colorado's Front Range that are at risk of subsidence as a result of
abandoned coal mines.
There are several principles that I will keep in mind as I evaluate
alternative legislative proposals for reauthorizing the AML reclamation
fund. They include:
Any reduction in the amount of the fees paid by industry
should be accompanied by a reasonable extension of the life of
the program. I note that all of the bills before us would
extend authority to collect the fee by at least 10 years to
compensate for the proposed reduction in fees.
Any changes in the amount of fees collected should be
revenue neutral to Colorado. Given the size of the problem in
Colorado, a shift of funds to eastern AML sites would be
inappropriate and place an unfair burden on Colorado taxpayers.
Current legislation allows for the reclamation of non-coal
sites (Section 409 of SMCRA). This allows Colorado and other
western states the greatest flexibility to deal with all
abandoned mine problems.
Some of the legislative proposal have included new language,
which would authorize the Secretary of the Interior, ``on the
Secretary's own volition,'' to certify that a state has
completed its coal-related abandoned mine problems. This seems
both unnecessary and unwise. I look forward to hearing more
about the reasons for this proposal.
Colorado's current unappropriated balance is approximately $24
million, a fraction of what is owed to Wyoming. But like the gentleman
from Wyoming, I believe any repayment scenario must provide Colorado
and other western states with the flexibility to complete remaining
abandoned mine land reclamation. Further, access to the balance should
not be contingent upon certification, as Colorado may never certify--
because of the coal mine fires that need to be addressed in perpetuity.
Action is also critical because fees collected for the AML program
fund medical benefits to several thousand mine workers. Through the
United Mine Workers of America, coal miners living in 45 states who
worked for companies that no longer exist are provided access to health
care. While Colorado represents a small number of mine workers covered
by this program as compared to states like Pennsylvania and West
Virginia, my commitment to the promise made to these workers remains
the same.
Unfortunately, with the increasing number of steel and coal company
bankruptcies and the rise in health care costs, the burden is falling
on fewer companies who are already struggling to thrive. It is my hope
that today's witnesses will offer their insights on this issue so that
we can develop a solution that is both fair and true to the intent of
the law.
Thank you, Mr. Chairman. I look forward to working with you and
with Senator Thomas on this important issue affecting both of our great
states.
Senator Salazar. And let me just state, Mr. Chairman, that
I think it is very important that you do hold this hearing, and
I applaud for your efforts in holding this hearing.
I was noting, in reading some of the materials from our
staff, that, when we project out to the year 2018, that 65
percent of all of the funds going into the AML are coming from
the State of Wyoming. So, I understand the importance of this
issue to your State, and also to our country, in terms of how
we deal with the abandoned mine-land issues that we're facing.
I have a question for you, Mr. Shope. Frankly, I don't
understand how you end up with the administration's position
that what we ought to do is to cut the fees for AML. When you
look at your own projections, it seems that, even when you
limit the dollars that are needed for the priority-one and -two
sites, you come up with the needed amount of somewhere in the
neighborhood of $6.3 billion. And I think when someone looks at
the question of whether or not we have enough money to take
care of the AML issues that we're facing around the country,
that you have to conclude that we simply have a revenue problem
here. The need is much greater than the amount of money that we
actually have.
And so, I don't understand why it is that OSM and the
administration would be taking the position that would reduce
the revenue stream coming in, when we have these huge needs
that are being unmet. Can you respond to that question?
Mr. Shope. Certainly, Senator. And, again, let me clarify
that the administration's position is that--the guiding
principle is, there needs to be sufficient funds collected to
reclaim those high-priority health and safety sites. There's
not--we are not wed to a fee cut. It depends on--as I explained
before, a formula of the amount of fee that's to be assessed,
length of time, and then what you do with it when you collect
that fee. Under the administration's bill from the last
Congress, that provision did have a fee-cut in it, but there
was also sufficient money that was being brought in and
reallocated. By eliminating State-share, we did have sufficient
funds collected to address all those high-priority sites.
Senator Salazar. So you would arrive at the conclusion that
there would be sufficient funds to take care of the needs by
taking the money away from the State-share?
Mr. Shope. Under the administration's proposal from last
year, that is correct. That's correct. Now, coming forward into
this Congress, we recognized that that didn't work last year.
Our proposal, like all of the other proposals, was not
successful. That's why we put forth our principles and have
been working with the committee, standing ready to look at
different ideas and see: Based upon those three factors, are
sufficient funds being collected? If they are, then that is a
bill that would meet our principle of reclaiming the highest-
priority sites.
Senator Salazar. I don't have a position on this. What we
have done with AML is, we've imposed fees on current operations
for coal mining around the country, but especially how it
affects the surface mines in places like Wyoming and other
places around the country that operate through surface mines.
Now, when you look at the whole legacy of coal mining, which is
multi-generational and multi-century, do you believe that it's
fair for the current coal operations in place to essentially
bear the burden of paying for those costs of reclamation for
those legacy effects on our environment?
Mr. Shope. Senator, that decision was made long before I
began my Federal service. Do I think it's an important program
and is yielding important results? Do I have a personal
opinion? I don't know if it's appropriate for me to offer my
personal opinion as to whether that is, in fact, the most
appropriate way. That's for this committee to decide.
Senator Salazar. If you were king for the day, okay, and
somebody were to come to you, and say, ``Here are the huge
needs that we have from Kentucky, West Virginia, Wyoming, and
all over this country with respect to AML, and we only have a
very small portion of the money that we need in order to take
care of these needs that have been built up over more than two
centuries in America, how would you propose that we fund those
needs?''
Mr. Shope. Well, if I were king for a day, I guess I'd have
to be elected Senator to make those kinds of important
decisions, Senator.
[Laughter.]
Mr. Shope. Again, it's my responsibility to use the money
that is provided under that scheme. Whether--the equity, I
leave to this committee.
Senator Salazar. Okay. Let me ask you just one other
question. I applaud Senator Thomas and his legislation with
respect to the authority of the States and the Governors of the
States--to do the certification of completion of the program at
the State level. I understand that the administration's
position would essentially provide that authority to the
Secretary of the Interior to create that certification. Can you
clarify for me, on the record, whether you are supportive of
the approach that Senator Thomas has taken on his bill, which
is essentially to leave the program, as it is, in place today,
and allow the Governor to make the certification? Or does the
administration still want the Secretary of the Interior to make
that decision?
Mr. Shope. We would be supportive of Senator Thomas's
proposal. The reason that that was in our legislation last year
was because it was dependent upon the particular package that
we had put together, which was--it was more--the certification
provision was entered into the bill because--as an
administrative clarification. Under our proposal, sufficient
funds would be given to a particular State, based upon their
high-priority needs. Once they received all those funds, there
would be no impetus to certify; and so, we needed to have some
provision within the statute to allow us to go ahead and
administratively certify that State and proceed forward.
Senator Salazar. Thank you, Mr. Shope.
And, again, Chairman Thomas, thank you for taking on this
issue and holding this hearing today.
Senator Thomas. Thank you, sir.
Senator Bunning.
STATEMENT OF HON. JIM BUNNING, U.S. SENATOR
FROM KENTUCKY
Senator Bunning. Thank you, Mr. Chairman.
I have an opening statement. I would like to include it in
the record.
Senator Thomas. It will be in the record, sir.
Senator Bunning. Thank you.
[The prepared statement of Senator Bunning follows:]
Prepared Statement of Hon. Jim Bunning, U.S. Senator From Kentucky
Thank you, Mr. Chairman.
I am glad that we are again examining the issues involving the
Abandoned Mine Reclamation Fund.
This is a particularly significant issue for the citizens of
Kentucky. This program helps to eliminate health and safety dangers
associated with past mining. It also ensures that abandoned mine land
is reclaimed to provide a better environment.
This Committee has worked on this issue for a couple of years now.
A consensus regarding how to reauthorize the AML program has been
difficult to achieve because not only are there varying mining
reclamation issues among almost 26 states and tribes, but also there
are shortages in healthcare funding issues that we must grapple with
due to AML interest being used to pay for the Combined Benefit Health
Fund.
I have worked hard during my time in the Senate to ensure that the
AML program continues. Every year I ask appropriators to give increased
funding to it. Over $1.2 billion, however, is currently sitting in the
fund unappropriated. I believe that the money should be going directly
to the states to reclaim mines in a more timely and efficient manner
instead of being used by the federal government for other purposes.
Kentucky's unappropriated state share balance is about $125
million.
And Kentucky is third in the nation for having the worst
reclamation problems with over $330 million worth of high priority
abandoned mine land areas that still need to be reclaimed. So, giving
back the state share balance would go a long way in helping it finish
its reclamation.
The longer we wait to return the funding to the states, the more it
will cost and the longer it will take to reclaim the mines. After 25
years of this program and over $7.5 billion contributed to the Fund by
the coal companies, more mining sites should have been reclaimed.
I know many people are trying to develop a consensus to solve the
issues surrounding the AML Fund. I am hopeful a consensus can be
achieved so that we can move this program forward instead of continuing
to reauthorize it on short-term timeframes.
I look forward to hearing about the legislation that has been
proposed or introduced in the Senate.
I also am pleased to have testifying here today Mr. Steve Hohmann,
who is Director of the Kentucky Division of Abandoned Mine Lands. Mr.
Hohmann has worked tirelessly on this issue to help Kentucky reclaim
its mines in an efficient and productive manner. I look forward to
hearing his testimony.
Thank you Mr. Chairman.
Senator Bunning. Mr. Hohmann, there are several AML
proposals, as you well know, out there right now. What are the
specific AML reclamation needs of Kentucky that I need to make
sure are met with a final bill?
Mr. Hohmann. Senator, I think, in a nutshell, what Kentucky
needs is more time and more money.
[Laughter.]
Mr. Hohmann. We have a----
Senator Bunning. Well, that's familiar with everyone.
Mr. Hohmann. Without those two things, we won't be able to
meet, in the foreseeable future, the reclamation need in
Kentucky, which is, right now, approaching--over, excuse me,
$330 million worth of high-priority abandoned mine-land sites.
So, looking into the future, certainly increased funding and
more time to accomplish the reclamation is what we need. The
reclamation I'm speaking of doesn't really--that I just spoke
of--doesn't include the waterline need in our rural coalfields,
where the groundwater has been contaminated by past mining, and
people can't drink it. We have waterline projects lined up like
boxcars, waiting on funding. And so, what we need, actually, is
just some more time and increased funding.
Senator Bunning. Kentucky has an awful lot of priority-one
and -two sites to finish. How long do you expect it to take for
Kentucky to clean up those sites? Under the current proposals,
will additional funding and the payback of the owned State
Kentucky share of approximately $125 million shorten the
expected timeframe of finishing Kentucky's worst reclamation
sites?
Mr. Hohmann. Yes, sir. If we were to receive our $125
million State-share balance, that would certainly boost our
ability to reclaim these unfunded sites that we have out there.
Currently, I don't have an estimate, at the funding level we're
getting, on how much--how long it would take to reclaim all of
the sites. But if you do some math, a $330 million unfunded
obligation, at the rate of $15 million a year, which is about
what we receive now, you're looking at a long time into the
future, since we also add more sites each year.
Senator Bunning. In 1991, a GAO report found that
approximately 28 percent of the AML funds spent went to
administrative expenses, including both State and Federal
expenses. Do you believe that this statistic is still accurate?
And, if so, is this figure high compared to other programs? Is
there any tracking information available to show how the AML
funds are spent?
Mr. Hohmann. Yes, sir, the tracking mechanism is maintained
by OSM, I believe, on what portion of a grant is----
Senator Bunning. OSM?
Mr. Hohmann [continuing]. Yes--is expenses on
administrative, versus on-the-ground reclamation costs. And I
do believe the 28 percent is high, because it depends on how
you identify, or how you define, ``administrative costs.''
Depending on that, you can go very high--28 percent--or you
can--if you include other costs, it can be low. And I think
that the States, in the past few years, have looked--and OSM
has looked--at this issue and found that it's more like a 12
percent cost that is associated with the administrative expense
of the AML program, not 28 percent.
Senator Bunning. Twelve percent, now.
Mr. Hohmann. Yes, sir.
Senator Bunning. We'll check that out. Last, over $3
billion worth of high-priority coal inventory nationwide
remains to be reclaimed. This is about three times the
inventory reported in 1986. Why does the inventory continue to
increase, instead of shrink?
Mr. Hohmann. Well, there are several reasons for that,
Senator. First of all, the appropriation, the funding, for AML
has decreased in years--over the years, and there has not been
as much on-the-ground reclamation accomplished. Second, I
believe that, because these sites are unattended, or
unaddressed, they tend to get worse over time. And the cost of
addressing them goes up.
And, finally, you have population movements into areas that
were once remote. And the abandoned mines that were there posed
no hazards to people, but as populations in the Virginia, West
Virginia, Pennsylvania, Kentucky coalfields expands into
formerly rural areas, and people live closer to abandoned mine
sites, those mines now become problems, and they're added to
the inventory.
Senator Bunning. Are you telling me that people are moving
closer--in eastern Kentucky--to the abandoned mine sites? Is
there more population, or what are you telling me?
Mr. Hohmann. That is exactly the case, Senator. There are
abandoned mines that people inadvertently, or for whatever
reason, move closer to and have children, and those children
are playing out in what were once very remote areas, and now
they're playing in subdivisions that have been created near
abandoned mines. And those mines pose hazards to those
children, where, once--before that, they were very remote, and
no one got around them. They weren't even on the inventory.
Senator Bunning. I want to ask Mr. Shope one more question.
Do you know how much Kentucky will receive in AML funding
and how--over how long, under the Thomas and Rockefeller
proposed legislation?
Mr. Shope. Senator, we do not have specific figures
calculated out, for a very good reason. One is that there are a
number of variables and assumptions that would have to be made
to make those determinations, particularly under S. 1701, with
the provision of the States collecting their own State-share.
The number of States that would take advantage of that
provision, and the program size of the States that take
advantage of that provision, would dramatically alter the
amount of income that comes into the fund; and, thereby, it's
safe to assume the appropriation levels that we would get would
be significantly altered.
Senator Bunning. Thank you, Mr. Chairman.
Senator Thomas. Okay, thank you, gentlemen. Thank you very
much. We appreciate your being here. We certainly all agree
there's a problem to be resolved here, and we need to find a
way to do it.
So, we'd like to now invite the second panel to come up,
please.
We're very pleased to have our second panel here, made up
of Mr. Andrew McElwaine, president and CEO of Pennsylvania
Environmental Council; Mr. Charles Gauvin, president and CEO,
Trout Unlimited; Mr. Daniel Kane, secretary-treasurer, United
Mine Workers; Ms. Lorraine Lewis, executive director, the
United Mine Workers Health and Retirement Fund; and Mr. Dave
Finkenbinder, vice president, Congressional Affairs, National
Mining Association.
Thank all of you for being here. We look forward to your
testimony. As we mentioned before, if you can limit it to 5
minutes, we'd appreciate it. And your total statement will be
put in the record.
So, Mr. McElwaine.
STATEMENT OF ANDREW McELWAINE, PRESIDENT AND CEO,
PENNSYLVANIA ENVIRONMENTAL COUNCIL, HARRISBURG, PA
Mr. McElwaine. Thank you very much, Chairman Thomas, for
this opportunity.
Let me also, just as an example of the Pennsylvania/Wyoming
connection, bring you greetings from my maternal uncle, Thomas
F. Strook, of Natrona County. And we also have a Wyoming--
Wyoming County, Pennsylvania, and the entire Wyoming Valley of
Pennsylvania, which is in the heart of our coal country.
Senator Thomas. Good.
Mr. McElwaine. Mr. Chairman, Pennsylvania Environmental
Council is a 35-year-old organization. We were created as a
coalition of industry, environmental organizations, and public
citizens, and we continue that to this day. So, we are a
nontraditional environmental organization, to say the least.
The position I'm about to present has been approved by all
of our members, corporate as well as environmental.
Mr. Chairman, the work is not done, as we have already
heard, with title 4 of SMCRA. And I want to emphasize the
remaining threat.
According to the U.S. Department of the Interior's Office
of Surface Mining, since 1999 more than 40 people have drowned
in mining pits and quarries. At least 15 deaths, and many more
injuries, have occurred during the same time period in falls
and ATV rollovers at quarries and pits. In just this year,
Pennsylvania saw five more fatalities related to AML sites.
Abandoned mine sites have left extensive dangerous high walls,
open pits, coal-refuse spoil piles, open mines, and more than
3,000 miles of streams polluted by abandoned-mine drainage.
Past coal-mining practices have led to erosion, landslides,
polluted water supplies, destruction of fish and wildlife
habitat, and an overall reduction in the natural beauty of the
Eastern United States.
OSM reports that over 3.6 million Americans live within one
mile of priority-one and -two AML sites. More than half, just
over 1.6 million, of those listed live in the State of
Pennsylvania.
With that in mind, Mr. Chairman, I'm here today not only on
behalf of my organization, but more than 200 coalfield
communities, conservation and watershed groups, and we have
coordinated with similar groups from Chattanooga, Tennessee, to
Scranton, Pennsylvania. We've all agreed, as Mr. Shope did, on
a set of principles, and--rather than trying to lay out
specific legislation.
Our principles are as follows:
We support continued funding from the AML fund for water-
quality cleanup. It is absolutely critical that abandoned-mine
drainage, which contaminated so much drinking and surface
water, continue to be eligible for funding from title 4.
We also advocate keeping the current priorities--one, two,
and three. These current priorities should be maintained,
including the ability to fund water-related projects under
priority two and three.
We support full appropriation to the States of future fees.
And future collections to the fund should be fully spent for
their intended purpose of cleaning up abandoned-mine problems.
We also encourage the redevelopment of abandoned mine lands
for economic use. And we are beginning to see this happen,
particularly in our Wyoming Valley. States should be able to
use title 4 funds in ways that promote reclamation, leverage
private investment, and, where it is appropriate, encourage
redevelopment and reuse of these sites.
We also support provisions in last year's administration
proposal to change some of the allocation. Particularly, we
believe the allocation formula should be 60 percent historic
and 40 percent current production in order to move forward on
the billions needed for priority-one and -two reclamation.
We support proposals that would take the program off
budget. We also support increasing the minimum program funding
to $4 million. And, also, we believe that non-primacy States
should get a guaranteed minimum.
We also support continued transfer of the interest, but not
the principal, of the Combined Benefit Fund to our friends and
neighbors, former mine workers.
We also support a lengthy extension of the program to 2025,
Mr. Chairman.
With those principles, we regret that we cannot, at this
time, support S. 1701 or S. 961, as we believe they would take
the program in a different direction from supporting damaged
coalfield communities. However, we do support H.R. 2721,
introduced on the House side by Congressman Peterson of
Pennsylvania. However, with that, I want to emphasize, I've
heard a very positive set of statements from members of the
committee, as well as from witnesses, about working together
and trying to resolve our differences. I welcome Senator
Allen's comments, earlier, to that point. And I want to
emphasize that coalfield communities are very anxious for the
future of this program and, based on that anxiety, very willing
to work with you, Mr. Chairman, and the staff in the future.
[The prepared statement of Mr. McElwaine follows:]
Prepared Statement of Andrew McElwaine, President and CEO, Pennsylvania
Environmental Council
INTRODUCTION
Mr. Chairman and members of the Committee, thank you for inviting
me to participate in today's hearing. My name is Andrew McElwaine and I
am President and CEO of the Pennsylvania Environmental Council, a
statewide non-profit group that has offices throughout the state. I am
testifying on behalf of the Pennsylvania Abandoned Mine Land Campaign,
a coalition of over 200 Pennsylvania conservation groups, including 150
watershed organizations from all Commonwealth coalfield counties. Over
the last two years, we have also worked with community leaders from ten
states in an effort to formulate recommendations that have the broadest
base of support.
I want to reiterate our profound appreciation for your interest in
working for an effective AML reauthorization. To be successful, the
AMLF reauthorization must combine necessary, predictable, mandatory
funding without compromising existing environmental laws. It is
essential to our state and others that the federal government extend
and reform the abandoned mine land reclamation program as I will
describe in my testimony. And of course an AMLF program that works to
protect communities and restore environments also produces jobs and
creates economic opportunities. We hope that our expressions of support
and caution, aimed at helping you arrive at an agreement that truly
works for communities in Pennsylvania and the other coal producing
states, can help you resolve outstanding issues within the next few
days.
HISTORY
Pennsylvania has the most abandoned mine land sites in the nation
and has been a leader in improving the quality of its environment after
many years of mismanagement. In 1968, Pennsylvania passed the Land and
Water Conservation and Reclamation Act, a major initiative to address
abandoned mine reclamation. This act spurred Operation Scarlift, which
was instituted to clean up the damage caused by abandoned mines. It
used a total of $141,000,000 to complete 500 stream pollution abatement
projects, extinguish 75 fires, remove 150 areas of subsidence, and
prevent air pollution at 30 sites of burning refuse banks.
Since that time, Pennsylvania has initiated several other programs
that have provided state funding for abandoned mine reclamation. Most
recently, under Governor Ridge in 1999, the state created its Growing
Greener program which made available a substantial portion of $500
million for reclamation and stream clean ups. In July of this year,
Governor Rendell signed into law Growing Greener II, which provides
$625 million for stream clean ups and other environmental improvements.
At least $60 million will be available specifically for AML related
impacts.
Pennsylvania has also pursued an aggressive remining program, where
the state has formed partnerships with the private operators and
citizen groups to maximize the use of AML funds. DEP estimates that
$950 million in federal and state money has been spent in Pennsylvania
to deal with abandoned mine problems. As indicated earlier, a
substantial portion of that funding came from state sources. We have
adopted a strategic approach that identifies those sites that are most
dangerous or having the greatest environmental impact and target our
resources accordingly.
REMAINING ENVIRONMENTAL PROBLEMS
Despite our successes, significant environmental problems related
to past mining practices remain. The National Abandoned Mine Land
Inventory lists for Pennsylvania over $1 billion of Priority 1 and 2
sites. These numbers were calculated in the early 1980's, nearly a
quarter century ago, and have not been adjusted for inflation.
These estimates reflect real problems. According to the US
Department of Interior's Office of Surface Mining (OSM), since 1999,
more than 40 people have drowned in mining pits and quarries. At least
15 deaths, and many more injuries, have occurred during the same time
period in falls and ATV rollovers at quarries and pits. In the last
year Pennsylvania saw five more fatalities related to AML sites.
Abandoned mine sites have left extensive dangerous highwalls, open
pits, coal refuse spoil piles, old mine openings, and more than 3,000
miles of streams polluted by abandoned mine drainage. Past coal mining
practices have led to erosion, landslides, polluted water supplies,
destruction of fish and wildlife habitat, and an overall reduction in
natural beauty.
The OSM reports that over 3.6 million people in the United States
live within one mile of Priority 1 & 2 Sites. More than half, just over
1.6 million of those listed, live in Pennsylvania. (See Appendix A,
which is taken from a white paper prepared on this topic by OSM in
2003). People continue to die, local economies are stymied, and ongoing
environmental degradation is obvious to even casual observers. As is
reflected in Appendix B, over 184,000 acres in our state still need to
be reclaimed. And, Pennsylvania is not alone; other states face similar
ongoing problems.
OVERVIEW OF WHAT WE SEEK:
Provided below are provisions that were crafted over a two year
period in a collaboration of coalfield community leaders from ten
states (Alabama, Illinois, Indiana, North Carolina, Ohio, Pennsylvania,
Tennessee, Virginia, West Virginia, and Virginia):
Funding for water (Abandoned Mine Drainage): Abandoned mines
leak acidic, alkaline, and metal-contaminated water, polluting
public water supplies, destroying fish and wildlife habitat,
depressing local economies, and threatening human health and
safety. Pennsylvania is representative of eastern coal states
with abandoned mine drainage (AMD) problems, and abandoned mine
drainage is the largest contributor to water quality impairment
in the Commonwealth. Over 3,000 miles of Pennsylvania's streams
are impaired by AMD. It is critical that abandoned mine
drainage problems continue to be eligible for funding.
Keep priorities 1, 2, and 3: Three priority areas are
eligible for funding to correct adverse effects of coal mining
practices under Title IV. Priority 1 provides for the
protection of public health, safety, general welfare, and
property from extreme danger. Priority 2 provides for the
protection of public health, safety, and general welfare.
Priority 3 provides for the restoration of degraded land and
water resources and the environment. States need to retain the
discretion to use their allocations from the Fund for projects
falling into any of the three priorities. The current
priorities should be maintained, including the ability to fund
water-related projects under Priorities 2 and 3.
Full allocation to states of future fees: As of June 30,
2005, the Fund has an unappropriated balance of over $1.7
billion. The state share of this balance is approximately $1.1
billion. (Pennsylvania maintains the fourth highest balance at
$58.4 million.) Future collections to the Fund should be fully
allocated for their intended purpose of cleaning up abandoned
mine problems.
Encourage redevelopment of abandoned mine lands: As
abandoned mine lands are reclaimed, they offer potential
locations for economic development projects. By developing and
marketing abandoned mine lands that would normally struggle to
attract new investment, these ``grayfields'' can be turned into
regional benefits by creating economic opportunities,
preventing sprawl, and conserving open space and natural
resources. For example, government facilities could be
encouraged to locate on these sites rather than on previously
undeveloped green spaces. States should be able to use Title IV
funds in ways that promote reclamation, leverage private
investment, and, where it is appropriate, encourage
redevelopment.
Reformulation: Many states that fueled the coal boom in the
early and middle part of the last century currently have low
coal production, yet they have the largest legacy of adverse
mining impacts from before 1977. Currently, the federal share
of collected monies is allocated based on 40% for current
production, 40% on historic production, and 20% to the Rural
Abandoned Mine Land Program (RAMP). It has been damaging to
coalfield communities that RAMP has not been funded in the last
eight fiscal years. If RAMP is retained, then it should be
funded through same off-budget structure as the rest of the AML
program. This will allow states with the most pre-1977 problems
to correct them much more quickly. The allocation formula
should be changed to 60% historic and 40% current production.
Take the program off-budget: Each fiscal year, the President
and Congress must appropriate monies from the fund as part of
the federal budget process As a result, the Fund is subject to
political pressures and fiscal pressures from other federal
programs. The fees collected to the fund should be returned to
states and tribes without the need for appropriation each year,
thus ensuring that the funds will be used for their intended
purposes. This would enable states to better plan strategic
multi-year AML reclamation projects.
Increase the minimum program funding to $4 million: States
which have significant AML problems, but which have small AML
programs, are supposed to be guaranteed minimum funding of
their programs by statutory mandate. Since 1990, this funding
has been set at $2 million. In many years, minimum program
states have received significantly less. Increasing this amount
would help make up for past under-funding and ensure that
states with significant AML problems but low production would
be able to continue running effective programs. This
potentially effects eleven states. Annual funding for minimum
program states should be raised to $4 million.
Non-primacy states should get a guaranteed minimum: States
which do not have their own coal regulatory programs are not
eligible for a 50% share of funds collected in the state or
funding based on historic production. Federally managed (non-
primacy states) programs should be guaranteed minimum program
funding if they demonstrate the ability to operate an effective
abandoned mine reclamation program. This would enable a state
like Tennessee to mitigate the damage in one decade instead of
four.
Maintain transfer of interest to the Combined Benefit Fund:
Interest generated on the Abandoned Mine Reclamation Fund is
currently transferred to the Combined Benefit Fund to defray
health care costs for retired miners and their dependents whose
companies have gone bankrupt or are no longer in business. The
CBF pays for health care expenses remaining after Medicare and
Medicaid reimbursement and pays for prescription drugs. The
transfer of interest to the Combined Benefit Fund should
continue with no fee reduction.
Extend the end date: The scope of the abandoned mine problem
continues to outpace available resources. Based on current
funding levels, projected future production, and estimated
costs of cleaning up inventoried sites, it will at least 15
years, potentially more than 20 years to address abandoned mine
problems. Extending the program 20 years would honor the
intentions of the original law to unburden communities plagued
by unreclaimed coal mines. The program should be extended until
at least 2025.
ESSENTIAL PROVISIONS:
There are a number of provisions that my organization and the
Pennsylvania coalition believe are essential for AML reauthorization to
protect coalfield communities and restore damaged natural resources.
First and foremost, we need to remember that this program was
originally created to address the significant environmental problems
facing Pennsylvania and other states. We should not lose sight of this,
so we believe that reauthorization legislation should do the following:
1. Off-budget mandatory assured funding of AML programs in historic
production states.
2. The environmental provisions included in H.R. 2721 should be
incorporated within any AML reauthorization legislation:
a. Minimum program states should receive $4million/year for
the length of the program;
b. Mandatory payments to states should be made within 30 days
of collection, and no less frequently than semi-annually;
c. Allow full state discretion in utilization of state set-
aside funds, with state set-aside funds increased from the
current 10% to 30%;
d. Preserve Priorities 1, 2 and 3--essential for water
quality restoration;
e. Remining: PEC supports remining because there have been
many successful projects, though we understand that it remains
controversial within some coalfield communities. In appendix C,
we outline some of the conditions that the coalition with which
we are involved believes should accompany a remining program.
3. Keep AML reclamation fees at current levels with the current
structure. In 1977, no inflation factor was built into the fee, so
while the costs of AML reclamation have gone up significantly over the
past 28 years, the fees have remained unchanged, and now represent a
much small fraction of both the cost of coal and the cost of
reclamation. Even with the fee unchanged, the program is not likely to
collect enough money to complete AML restoration within 15 years.
4. AML Reauthorization period should be no less than 15 years, 20
is needed, because in past years so little AML money has been made
available, so the restoration intended by Congress has not actually
been funded.
5. AML reauthorization legislation should specify that the source
of funding for AML programs should be AML reclamation fees
CONCLUSION
The legacy of past mining practices is still evident on the
landscape and in the waters of Pennsylvania and other states. It
adversely impacts our safety, environmental quality, economic
viability, and overall quality of life. We have made progress, but our
work is not done. It is essential to our state and others that the
federal government extend and reform the abandoned mine land
reclamation program. Our coalition believes strongly that the final
legislation should include the provisions that I have listed above. Our
communities and environmental quality depend on your action.
Again, thank you inviting me to testify. I am available to answer
questions.
______
APPENDIX A
FROM US DOI OSM MAY 28, 2003 WHITE PAPER
``PEOPLE POTENTIALLY AT RISK FROM PRIORITY 1 & 2 AML HAZARDS''
APPROXIMATE NUMBER OF PEOPLE AT RISK
From a \1/2\ mile radius of each priority 1 & 2 AML site in the
continental United States, the national total number of people at risk
is estimated at over 1.2 million. The individual State and Tribal range
of people potentially at risk from priority 1 & 2 AML hazards is from 0
to 527,120 in the coal producing entities. At the 1 mile radius of each
priority 1 & 2 AML site in the continental United States, the national
total number of people potentially at risk rises to over 3.6 million
people. This coincides with an individual State and Tribal range of
people potentially at risk from 0 to 1,649,959 in entities that have
produced coal. At both intervals, the Eastern part of the United States
incurred the most people potentially at risk from priority 1 & 2 AML
hazards.
------------------------------------------------------------------------
People People
State Potentially at Potentially at
Risk 1/2 Mile Risk 1 Mile
------------------------------------------------------------------------
Alabama........................... 27,469 100,383
Alaska............................ 148 596
Arkansas.......................... 4,490 17,782
Colorado.......................... 24,185 32,196
Illinois.......................... 49,331 101,348
Indiana........................... 9,410 24,432
Iowa.............................. 3,440 11,602
Kansas............................ 15,157 57,023
Kentucky.......................... 114,228 402,001
Louisiana......................... 0 0
Maryland.......................... 9,161 30,969
Missouri.......................... 14,958 36,127
Montana........................... 1,157 4,591
New Mexico........................ 987 3,964
North Dakota...................... 594 2,368
Ohio.............................. 56,626 169,198
Oklahoma.......................... 18,455 55,611
Pennsylvania...................... 527,120 1,649,959
Tennessee......................... 13,694 42,505
Texas............................. 875 2,867
Utah.............................. 324 1,297
Virginia.......................... 47,932 140,577
Washington........................ 9,280 16,255
West Virginia..................... 265,758 693,161
Wyoming........................... 2,387 9,716
Cheyenne River.................... 3 11
Crow Tribe........................ 5 18
Hopi Tribe........................ 0 0
Navajo Nation..................... 42 166
Windriver......................... 4 19
-------------------------------------
Total/Average................. 1,217,220 3,606,742
------------------------------------------------------------------------
APPENDIX B
Documented Unreclaimed Abandoned Mine Land (AML) Sites, Features, and
Acres in Pennsylvania, by County
------------------------------------------------------------------------
Number of
County Name Number of Unreclaimed Acres
AML Sites AML Features
------------------------------------------------------------------------
Allegheny..................... 263 763 4,514
Armstrong..................... 313 1,548 17,772
Beaver........................ 72 323 2,810
Bedford....................... 39 167 1,128
Blair......................... 12 72 766
Bradford...................... 2 3 0
Butler........................ 275 1,401 8,724
Cambria....................... 265 1,374 4,973
Cameron....................... 9 40 361
Carbon........................ 30 270 2,827
Centre........................ 121 709 5,866
Chester....................... 1 2 0
Clarion....................... 393 2,135 15,227
Clearfield.................... 588 3,374 23,715
Clinton....................... 49 233 1,441
Columbia...................... 20 244 2,158
Crawford...................... 1 5 28
Dauphin....................... 10 86 410
Elk........................... 101 619 4,053
Fayette....................... 226 1,058 5,482
Fulton........................ 5 14 244
Greene........................ 34 130 511
Huntingdon.................... 32 143 1,169
Indiana....................... 278 1,555 8,400
Jefferson..................... 319 1,817 10,441
Lackawanna.................... 143 732 5,481
Lawrence...................... 101 418 4,996
Lebanon....................... 3 9 0
Luzerne....................... 211 1,169 10,466
Lycoming...................... 9 65 239
McKean........................ 27 93 862
Mercer........................ 74 284 2,237
Northumberland................ 97 951 6,331
Schuylkill.................... 316 2,639 16,355
Somerset...................... 185 923 3,152
Sullivan...................... 8 32 52
Susquehanna................... 3 17 73
Tioga......................... 46 209 925
Venango 67.................... 279 1,956
Warren........................ 2 3 16
Washington.................... 184 547 3,315
Wayne......................... 8 30 94
Westmoreland.................. 228 887 4,862
Wyoming....................... 2 4 0
-----------------------------------------
Total..................... 5,172 27,376 184,431
------------------------------------------------------------------------
Source: Pennsylvania Department of Environmental Protection; March 20,
2002
______
APPENDIX C
COALFIELD COMMUNITY REMINING RECOMMENDATIONS FOR AMLF REAUTHORIZATION
FROM THE PA COALITION
Background: Despite many positive and successful remining
activities, particularly in PA, there remain many serious issues with
remining in PA and other historical production states. Among the most
damaging remining activities are those conducted on steep slopes where,
instead of cleaning up abandoned mine sites, strip miners are expanding
mine operations in ways that make existing environmental problems even
worse.
To qualify as an AMLF activity, remining should meet these minimum
standards:
Should only be subsidized with AML money if the primary
purpose and goal is reclamation
Must demonstrate the reclamation required by SMCRA is
feasible, and this must still be a condition of permitting of
the activity
There will be no reduction of environmental standards for
that operation
If a mining project that includes ``remining'' takes in
additional acreage outside of the original AML site then AML
funds should not be used to subsidize the mining outside of the
AML area
Removal of the financial risk to companies of bond
forfeiture by use of AML money for performance bonds reduces
the incentive to reclaim the site
No waivers of reclamation fees
Incentives and rebates will be given AFTER reclamation takes
place, not prior to reclamation
Senator Thomas. Okay. Thank you very much, sir.
Mr. Gauvin.
STATEMENT OF CHARLES GAUVIN, PRESIDENT AND CEO, TROUT
UNLIMITED, ARLINGTON, VA
Mr. Gauvin. Thank you, Mr. Chairman. I'm delighted to be
here today. And, I must say, we were here about a year ago, as
this process that you initiated was beginning, and I'm
delighted to see that bridges are being built and we're coming
closer to consensus on some of these important issues.
Trout Unlimited's a bit of a niche player in the AML
equation. But the niche that we occupy is a very important one.
Within the Eastern United States--in particular, in the more
historical range of coal mining, surface mining--you have a
host of problems involving water quality and ecological damage
that are huge priorities for my organization--and, indeed, our
national water-quality problems--that must be addressed.
I'll also mention, separately at the end, some issues in
the West that we could productively address, as well.
But we're here not really to represent the effete fly
fishing/trout-fishing community that wants to see streams
reclaimed in their own right, and restored in their own right,
but really to emphasize that trout, and the aquatic food web
that supports them is very, very important to the ecological
integrity of the Appalachian region and that trout are the
keystone predators; by dealing with the water-quality problems
that have so ravaged trout populations in mining country, you
are doing a huge ecological service and, I might also add,
doing a great deal for public water supplies and for a number
of the environmental and public-safety and -health values that
we all cherish and that Congress sought to conquer, to restore,
and to address in SMCRA.
We, at Trout Unlimited, are the only national organization
that's working on the ground to implement the OSM's Clean
Streams Initiative and to work with States and some of their
allocated money toward stream and watershed cleanup. We've
developed some tremendous partnerships in that process. Most
profoundly and recently in the State of Pennsylvania, working
in the Kettle Creek Watershed, which is a key component, one of
the five major tributaries, the west branch of the Susquehanna,
which, as some of you may know, has a 14-mile dead zone. It's
devoid of life--and that is a serious problem for the
Chesapeake Bay and other downstream basins--simply because of
acid mine drainage in five key tributaries. We have worked very
hard to develop technologies--passive treatment technologies
that don't require a lot of energy, that have a long life, and
essentially involve wetland restoration and other techniques to
make this a practical approach, economically, environmentally,
and from an engineering standpoint.
We are doing some of the same work in Kentucky on streams
in the Daniel Boone National Forest. We've done work in the
similar manner in other streams in Pennsylvania.
The OSM's Clean Streams Initiative is critical to that
effort, as I mentioned, as well, the decisions by individual
States to allocate some of the funding they receive through AML
to cleanup programs.
I'd like to mention a few principles and recommendations
that we would like to bring to the table, as I said, as a
highly interested niche player in this process.
The first is that we retain the existing laws' priorities
and the flexibility that's inherent in them.
The second is that we pick an authorization period that is
at least a reasonable stab at what's needed to get the job
done, and that would be, in our estimation, 25 years. And, you
know, you look at the priority lists and you look at OSM's
inventory, and that inventory gets larger on all the priorities
as you delve more deeply. The estimates on our end are that,
basically, to do a good job on watershed restoration and our
pressing water-quality problems, you're looking at about $15
billion.
We support, therefore, maintaining the existing fee levels,
and we would like to see mandatory funding and an increase in
available funding for the Clean Streams Initiative. This has
been a tremendous boon, something that we've been able to tap
that's been created administratively.
And then, finally, I'm sure, of interest to you, Mr.
Chairman, we would like to see a similar effort developed, and
a similar program developed, to start reclaiming hard-rock-
mine-damaged streams in the West. Forty percent of the western
headwater streams are impaired by hard-rock-mine damage, and we
think that SMCRA has provided a tremendous example that could
be implemented on the ground to address that.
Thank you for the opportunity to present our remarks.
[The prepared statement of Mr. Gauvin follows:]
Prepared Statement of Charles Gauvin, President and CEO,
Trout Unlimited
Mr. Chairman, Members of the Committee, I appreciate the
opportunity to appear today to discuss two bills currently before the
Committee, S. 1701 and S. 961, both of which would reauthorize and
amend the Abandoned Mine Reclamation Fund (AML Fund) created by the
Surface Mining Control and Reclamation Act (SMCRA). TU commends you for
holding the hearing in order to move forward on reauthorizing this
important program, which is set to expire in 2006.
TU is a national fisheries conservation group dedicated to the
protection and restoration of our nation's trout and salmon resources,
and the watersheds that sustain those resources. TU has over 144,000
members in more than 400 chapters in 35 states. TU members generally
are trout and salmon anglers who voluntarily contribute substantial
amounts of their personal time and resources to aquatic habitat
protection and restoration efforts. TU chapters invested over 460,000
hours of volunteer time into trout and salmon conservation in 2004.
Over the past several years, TU volunteers and staff have worked
with a wide variety of federal, state, and local partners to restore
watersheds degraded by abandoned mines and other past management
practices. These efforts have taken place in many states including New
York, Pennsylvania, Idaho, Montana, New Mexico, and Vermont. Given our
experience, one point is. crystal clear: long term reauthorization of,
and increased funding for the AML fund will provide necessary
additional money and resources for watershed restoration. Funding these
efforts will have a positive impact on public health and safety as well
as the environment.
Enacted into law in 1977, SMCRA gives the Office of Surface Mining
(OSM) authority to regulate coal mining and to collect fees from coal
companies to create the AML Fund. The funds are used by the states and
OSM to reclaim coal mining sites. The law protects our Nation's people
and resources by improving the health of watersheds that are affected
by current and past mining practices. Completed reclamation projects
conducted as a result of the law have improved the quality of tens of
thousands of people's lives, restored water quality, and improved
fishing and hunting.
Reauthorization of the AML Fund is about fulfilling a promise made
to protect Americans living in the coal fields from serious safety and
environmental hazards. After implementing the program for 27 years, an
estimated 7,000 mine sites remain unreclaimed. According to OSM, about
3.5 million people live less than one mile from abandoned coal mines.
Addressing the public safety risks posed by unreclaimed high walls,
burning slag piles, and gaping holes in the ground has been, and should
remain, the highest priority of the program.
In addressing reclamation of abandoned coal mines, ecological
restoration should not be pitted against public health. They are
largely overlapping. Both improve the quality of life and both improve
the health of public watersheds. TU and its members know about water
and watersheds, and we are here today because too many of the nation's
streams run orange because of pollution from abandoned mines. The
states and OSM estimate that thousands of miles of Appalachian mountain
streams are damaged by acid mine drainage from abandoned coal mines. It
is one of the nation's largest remaining water quality problems.
The work we are doing benefits more than just trout streams.
Because trout are the keystone predator in ecosystems, they are a
critical barometer of water quality and overall ecological health.
Bottom line, if the water is clean enough for trout, the water is clean
enough for people.
The good news is that, although the problem is vast, practical
solutions exist to fix it. TU, OSM and states are working together to
address acid mine drainage problems. But the job is far from finished.
We urge the Committee to move expeditiously to enact the
reauthorization including increased funds for restoration of watersheds
damaged by pollution from abandoned coal mines.
Acid drainage flowing from abandoned coal mines has left some
streams devoid of any life. EPA has singled out drainage from abandoned
coal mines as the number one water quality problem in the Appalachian
mountain region. Much of the problem originated years ago from coal
production that helped build America and fueled our war efforts during
World Wars I and II.
Acid drainage is water containing acidity, iron, manganese,
aluminum, and other metals. It is caused by exposing coal and bedrock
high in pyrite (iron-sulfide) to oxygen and moisture as a result of
surface or underground mining operations. If produced in sufficient
quantity, iron hydroxide and sulfuric acid may contaminate surface and
groundwater.
In an effort to demonstrate how practical solutions could be
applied to an otherwise daunting task, TU, OSM, Pennsylvania, and
private funders have spent more than $2 million to date cleaning up
acid mine drainage pollution in the lower part of the Kettle Creek
watershed in north-central Pennsylvania. We estimate that an additional
$8 million will be needed to complete the acid mine drainage cleanup on
Kettle Creek.
TU and others are now looking to replicate our success in the
larger watershed into which Kettle Creek flows, the West Branch of the
Susquehanna River, possibly the most polluted large river in America.
Approximately 150 miles of the mainstream and more than 500 miles of
coldwater tributaries have been rendered essentially lifeless due to
toxic concentrations of metals and acidity from acid mine drainage.
Overall, 72 percent of the 7,000 square-mile West Branch basin is
affected by acid mine drainage--the source for 96 percent of the
pollution in the West Branch watershed.
The West Branch restoration work is modeled on the methods that TU
and its partners have developed on the Kettle Creek watershed and the
benefits of eliminating acid mine drainage in the area are numerous.
For example, the potential for fishery restoration on all of the
degraded streams is phenomenal because most of them are potential trout
streams.
Other benefits from abandoned mine restoration include increased
property values and quality of life for those living in the area,
improved hunting opportunities, and job creation. Pennsylvania
estimates that for every million dollars spent on abandoned mine land
restoration construction contracts, about 27 people are employed
directly or indirectly. Similarly, in testimony submitted to the
Committee last year, the State of New Mexico noted that AML projects
are a source of jobs for New Mexicans and stated that, ``all
construction work is performed by private. contractors, almost all of
whom are based in New Mexico.''
In sum, on the West Branch, as in many other places, the technology
to fix the problem is available. States, communities, and conservation
groups have the will. All that is needed is a stable source of funding
to contribute towards the overall cost.
The AML Fund currently provides some limited but extremely useful
funds for cleaning up polluted water. More and stable funding is
needed. TU is.familiar with two ways in which the AML Fund provides
resources for cleanups:
GSM's Clean Streams Initiative, currently funded at $10
million annually, derived from the federal share of the AML
Fund, and
Decisions made by individual states to allocate some of the
funding they receive through the AML Fund to cleanup programs.
Started in 1994, the Clean Streams Initiative focuses on
eliminating abandoned coal mine drainage and aspires to be a true
citizen-government-industry partnership bringing together a unique
combination of manpower, funding, and expertise. The initiative has so
far funded 77 projects in 10 states, combining the skills of university
researchers, coal industry figures, citizen groups, the business
community, conservationists, and local, state, and federal
representatives. The initiative has proven to be a particularly
effective method of empowering volunteer-led restoration work.
The science and effectiveness of the cleanups paid for, in part, by
the AML Fund, are improving every year. Methods of water treatment used
to eliminate acid drainage from abandoned underground mines can be
grouped into two types. The most common method is chemical treatment.
Called active treatment because it requires constant maintenance, this
method usually involves neutralizing acid-polluted water with hydrated
lime or crushed limestone. This treatment reduces acidity and
significantly decreases iron and other metals. However, it is expensive
to construct and operate and is considered a temporary measure because
the acid drainage problem has not been permanently eliminated.
The second treatment method is called biological, or passive
control. This technology involves the construction of a treatment
system that is permanent and requires little or no maintenance. Passive
control measures involve the use of anoxic drains, limestone rock
channels, alkaline recharge of ground water, and diversion of drainage
through man-made wetlands or other settling structures. Passive
treatment systems are relatively inexpensive to construct and have been
very successful on small discharges of acid drainage, such as those on
the Kettle Creek watershed.
TU has worked with state agencies and OSM on cleanup projects in a
number of eastern states. Highlights include the following:
KETTLE CREEK, PENNSYLVANIA
The AML Fund has provided several hundred thousand dollars to
restore Kettle Creek. TU and its partners have made significant
progress during the past five years in efforts to abate acid mine
drainage in the lower Kettle Creek watershed. Our Lower Kettle Creek
Restoration Plan provides the overall blueprint that guides the
assessment and remediation activities, and this plan is being
supplemented with data from airborne remote sensing surveys conducted
by the U.S. Department of Energy National Energy Technology Laboratory.
These surveys used thermal infrared and helicopter-mounted
electromagnetic technologies to identify the acid mine drainage
problems and to target key areas for remediation work.
Two on-the-ground projects have already been completed as a direct
result of the Lower Kettle Creek Restoration Plan and several more are
currently underway. The ultimate goal of our project work is to reclaim
17 miles of trout stream. The completed projects will restore native
brook trout populations, create a new recreational fishery, expand the
local economy that depends on outdoor recreation and tourism, improve
water quality in local communities, and contribute to the overall
restoration of the West Branch of the Susquehanna as it flows
downstream to the Chesapeake Bay.
COAL CREEK, TENNESSEE
In east Tennessee, TU's Clinch River chapter is working closely
with the community of Briceville to clean up acid mine drainage in Coal
Creek, a tributary of the Clinch River. After addressing chronic
flooding and stream bank erosion problems that plagued the community
for decades, the chapter is turning its attention toward the creation
of four new wetlands near abandoned mine sites. The wetlands will
filter out the majority of pollutants, including acid and heavy metals,
such as iron, which currently pollute Coal Creek. But in order to
initiate construction, our local volunteers are depending upon funding
from the Clean Streams Initiative.
ROCK CREEK, KENTUCKY
In Kentucky, TU is working with OSM, state water and fisheries
agencies, and the U.S. Forest Service to restore Rock Creek in the
Daniel Boone National Forest. Although parts of the creek are healthy
and provide fine trout fishing, some stretches are badly damaged by
acid mine drainage from abandoned coal mines. TU and its partner
agencies are removing coal mine refuse from the banks of one stretch of
the creek, and are implementing passive liming and treatment of other
acid-impaired stretches, in a large-scale effort to restore this key
tributary of the Cumberland River.
As you consider the two bills, we recommend the following:
Retain flexibility in existing law's priorities. S. 961 eliminates
the ``general welfare'' provision of both priories 1 and 2. TU has no
intention of advocating any changes, in the public health and safety
priorities of the existing law. However, the large need for cleaning up
water pollution caused by abandoned coal mines, and the great benefits
to communities and states derived there from, leads TU to be a strong
advocate of retaining the current priorities.
Although S. 1701 also eliminates the ``general welfare'' provision
of priorities 1 and 2, it does allow land, water and environmental
restoration on land that is adjacent to a priority 1 site to be treated
as priority 1. Moreover, we recognize and appreciate the fact that S.
1701 increases the allowable percentage, from 10% to 20%, of funds that
states can set aside for acid mine drainage. While this language
definitely helps, we prefer to retain the ``general welfare''
provisions in priorities 1 and 2 so that states can retain the full
range of existing options in determining how to best prioritize the
needs of communities.
S. 961 requires the Secretary to review all amendments to the AML
inventory made after 1998 and remove sites that rely upon the general
welfare standard. We disagree with this provision and, as mentioned
above, recommend that general welfare projects in priority 1 and
priority 2 continue to be funded.
Extend the authorization to 25 years. Everyone agrees that we need
to ``finish the job'' of making communities safer and cleaner. S. 1701
would only ensure the viability of the AML Fund for 10 years and S. 961
extends the authority for 13 years. Most experts agree that given the
complicated nature of the remaining challenges, a horizon of 25 years
is more likely needed to complete the tasks before us. Reauthorization
legislation should extend the life of the fund for the same time frame.
Maintain existing fee levels. S. 1701 reduces the existing fee
levels which we feel is inappropriate given the overarching objective
of putting money on the ground to complete projects. We recognize and
appreciate that S. 1701 contains fee reductions that are less than
those contained in the bill introduced by Senator Thomas during the
108th Congress. However, we respectfully request that the Committee
retain the current fee structure as S. 961 does.
Provide mandatory funding and increase available funding for the
Clean Streams Initiative. S. 1701 requires that OSM provide the
existing balance of the state-share and tribal-share allocations to the
states and tribes through mandatory payments not subject to the
appropriations process. We agree with the concept of making AML funding
mandatory because if our goal is to ``finish the job,'' we should get
on with it. Currently, more than $6 billion is needed to fix high
priority public health hazards associated with abandoned coal mines. To
clean up water and watersheds, a total of $15 billion is needed.
Despite this need, more than $1.5 billion that has been collected
remains unspent. Therefore, TU encourages the Committee to make the
entire AML Fund off-budget and not subject to the annual appropriations
process.
Moreover, we recommend that you dedicate $25 million annually from
the off-budget Reclamation Fund to the Clean Streams Initiative.
Specifically, we urge you to gradually increase funding for the Clean
Streams Initiative from its current $10 million level up to $25 million
annually over the 25 year authorization.
Consider authorizing a similar reclamation fund for cleaning up
abandoned hardrock mine pollution in the western United States.
Although a few western states, such as Wyoming, use some of their AML
Fund allocations for non-coal mine abandoned hardrock sites, the need
for restoration of these sites far outstrips available resources. In
the West, it is not a matter of finishing the job of cleaning up
abandoned hardrock mining sites, it is imperative to get started.
It is estimated that more than 500,000 abandoned hardrock mine
sites litter the western landscape. According to EPA, abandoned mines
affect the health of 40% of western headwater streams. This pollution
threatens coldwater fisheries, contaminates drinking water for millions
living downstream, and jeopardizes local economies. We recommend that
the Committee take a serious look at the problem and start developing a
legislative solution to establish a fund for cleaning up abandoned
hardrock mines.
As a first step, we recommend you authorize and fund a west-wide
inventory of abandoned hardrock mines. Upon completion of such an
inventory, interested parties will be better able to assess and
prioritize cleanup projects.
To conclude, thank you for your leadership and commitment to
reaching consensus on a long-term reauthorization of the AML Fund. TU
pledges to work with the Committee to help craft appropriate amendments
and move a bill to the Senate floor expeditiously.
Senator Thomas. Thank you, sir.
Mr. Kane.
STATEMENT OF DANIEL J. KANE, INTERNATIONAL
SECRETARY-TREASURER, UNITED MINE WORKERS OF
AMERICA, FAIRFAX, VA
Mr. Kane. Good morning, Mr. Chairman and members of the
committee. My name is Daniel Kane. I'm the secretary-treasurer
of the United Mine Workers of America.
The UMWA is a labor union that represents the interests of
coalminers and other workers in the coalfields across the
United States and Canada for 115 years. And we appreciate the
opportunity to speak before the committee to discuss the AML
Reclamation Fund and its vital relationship to the UMWA health
and retirement funds.
Representing people who live and work in the Nation's
coalfields, the UMWA has a strong interest in both the
reclamation of abandoned mine lands and the preservation of
healthcare for UMWA retirees who worked hard all their lives to
provide the Nation with energy. We strongly support the
extension of the AML program in a way that accomplishes both of
these goals.
The AML program, financed by production fees levied on the
coal industry, was designed to provide the means to reclaim
lands that had been mined in previous years and abandoned
before reclamation had been done. The law was amended, in 1991,
to permit the investment of moneys held in the AML fund to earn
interest. In 1992, the Energy Policy Act extended the AML fees
t0 2004 and authorized the use of AML interest to pay for the
cost benefits for certain eligible retirees under the Coal Act.
Congress has further extended the authority of OSM to collect
AML fees through June 2006.
We believe that when Congress authorized the use of AML
interest to finance the cost of healthcare for retired
coalminers, it was a logical extension of the original intent
of Congress when the AML fund was established. Congress joined
these two programs together for a specific reason: they both
represented legacy costs of the coal industry and compelled a
national response.
Unfortunately, since Congress expressed that intent some
years ago, bankruptcies in the coal and steel industry, rapidly
rising healthcare costs, and a number of adverse conditions--
court decisions--have eroded the funding status of the Combined
Benefit Fund and placed it in jeopardy several times.
Now, Congress has intervened three times since 1999 to
shore up the financial condition of the fund through emergency
appropriations, but a long-term solution for the financial
problems of the UMWA Health and Retirement Funds coincides with
the need to authorize the AML fund. We believe that the
reauthorization of the effort can, and should, meet several
broad-based policy objectives. It should provide sufficient
duration and level of tax to fund the reclamation needs. It
should focus on priority-one and -two public health and safety
projects. It should resolve the longstanding dispute between
States and the OSM. And it should provide long-term financial
solvency for the Health and Retirement Funds.
Mr. Chairman, opponents periodically allege that the
benefits provided by the Health and Retirement Funds are a
little generous and should be cut. While the costs to the
beneficiary tend to be lower than some plans, I want to stress
that these benefit plans and this retirement package represents
a long-time labor package, between the UMWA and the industry,
which began in 1946 in the White House. Coalminers and their
widows gave up wages, they gave up numerous other contractual
benefits, in return for their health benefits. Any cuts and in
the loss of these benefits would severely hamper the living
conditions in coalfield communities. Many of these retirees
live on wages--the 1974 fund, for example, the pension benefits
are less than $500 a month. For 1950 pensioners, it's less than
$300 a month.
This was part of the deal. We can't go back and offer these
retirees the money that they gave up in wages. We can't go back
over decades and pay the other benefits that they sacrificed to
get their retiree healthcare. We think that the retiree
healthcare benefits have to be continued, because they
represent a promise made at the highest levels of our
government.
The debate is long since over. As a result of the Coal
Commission, chaired by then-Secretary of Labor Elizabeth Dole
after the Pittston dispute, the commission found that UMWA
retirees have a legitimate expectation of the healthcare that
was promised to them over the decades.
The Congress has already decided how that should be
financed, and now we're talking about long-term solvency for
that fund.
We appreciate the opportunity to appear here today and
remind you that we have a broad coalition of various
stakeholders who agree with the Cubin-Peterson-Rahall
compromise, and we strongly support that compromise. And we
thank you for the opportunity to appear here today and give our
position.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Kane follows:]
Prepared Statement of Daniel J. Kane, International Secretary-
Treasurer, United Mine Workers of America
Mr. Chairman, members of the Committee, I am Daniel J. Kane,
International Secretary-Treasurer of the United Mine Workers of America
(UMWA). The UMWA is a labor union that has represented the interests of
coal miners and other workers in the United States and Canada for more
than 115 years. We appreciate the opportunity to appear before the
Committee to discuss the Abandoned Mine Land Reclamation Fund (AML
Fund) and its vital relationship to the UMWA Health Funds. Representing
people who live and work in the nation's coal fields, the UMWA has a
strong interest in both the reclamation of abandoned mine lands and the
preservation of health care for UMWA retirees who worked hard all their
lives to provide the nation with energy. We strongly support the
extension of the AML program in a way that accomplishes both these
goals.
The UMWA supports the goals of the Surface Mining Act and the
Abandoned Mine Lands program. When enacting the Surface Mining Control
and Reclamation Act of 1977 (SMCRA), Congress found that ``surface and
underground coal mining operations affect interstate commerce,
contribute to the economic well-being, security, and general welfare of
the Nation and should be conducted in an environmentally sound
manner.'' That statement is as true today as it was in 1977. Coal
mining contributes significantly to our national economy by providing
the fuel for over half of our nation's electricity generation. Coal
miners are proud to play their part in supplying our nation with
domestically-produced, cost-effective, reliable energy. We also live in
the communities most affected by coal mining and support the intent of
Congress that coal mining must be conducted in an environmentally sound
manner.
The AML program, financed by production fees levied on the coal
industry, was designed to provide the means to reclaim lands that had
been mined in previous years and abandoned before reclamation had been
done. The law was amended in 1991 to permit the investment of monies
held in the AML Fund to earn interest. In 1992, the Energy Policy Act
extended the AML fees until 2004 and authorized the use of AML interest
to pay for the cost of benefits for certain eligible retirees under the
Coal Act. Congress has further extended the authority of OSM to collect
AML fees through June 2006.
The UMWA believes that when Congress authorized the use of AML
interest to finance the cost of health care for retired coal miner, it
was a logical extension of the original intent of Congress when the AML
Fund was established. Congress joined these two programs together for a
specific reason--they both represent legacy costs of the coal industry
that compelled a national response. When Congress created the AML Fund
in 1977, it found that abandoned mine lands imposed ``social and
economic costs on residents in nearby and adjoining areas.'' When
Congress enacted the Coal Act in 1992, it also was attempting to avoid
unacceptable social and economic costs associated with the loss of
health benefits for retired coal miners and widows.
The UMWA Combined Benefit Fund (CBF) was created by Congress to
provide health benefits to retired coal miners and their widows. Today,
the Combined Benefit Fund provides health benefits to nearly 37,000
elderly beneficiaries who reside in nearly every state in the nation.
The average age of the CBF beneficiary population is about 80 years,
about two-thirds of them are widows and their total estimated annual
health cost is about $360 million. Congress intended for the financial
mechanisms it put in place to provide self-sustaining financing of the
cost of those benefits. However, rapidly rising health costs, a series
of adverse court decisions, bankruptcies of major contributing
employers (particularly in the steel industry), and low interest
earnings at the AML Fund have eroded those financing mechanisms and
placed the CBF in financial jeopardy.
Bankruptcies in the coal and steel industries have also added
thousands of new orphan retirees to the UMWA 1992 Benefit Fund and the
UMWA 1993 Benefit Fund, placing serious strains on the financial
operations of those two plans. For example, the bankruptcy of Bethlehem
Steel in 2003 added nearly 4,000 new beneficiaries to the 1992 and 1993
Funds. Last year's bankruptcy of Horizon Natural Resources added about
1,500 new beneficiaries to the UMWA 1992 Fund and about 2,200 new
beneficiaries to the UMWA 1993 Fund. These two bankruptcies alone added
about 7,000 beneficiaries to the 1992 and 1993 Funds, more than 35% of
the total population of the two funds. These continuing financial
difficulties highlight the need for Congress to enact Coal Act reforms
as part of its AML re-authorization.
Congress has intervened three times since 1999 to shore up the
financial condition of the CBF through emergency appropriations of
interest money from the AML Fund. In December 1999, Congress provided
$68 million to cover shortfalls in CBF premiums. In October 2000,
Congress appropriated up to $96.8 million to cover deficits in the
CBF's net assets through August 31, 2001. And most recently, in January
2003, Congress appropriated $34 million from the AML interest account
to the Combined Benefit Fund. In addition, the UMWA Funds and the
Center for Medicare and Medicaid Services (CMS) expanded their existing
nationwide, risk-sharing Medicare Demonstration project in January 2001
to include a new prescription drug component. That project was
scheduled to run until mid-2004, and to reimburse the Funds for 27% of
its Medicare prescription drug expenditures. It is a pilot project
designed to demonstrate the efficacy of providing prescription drugs
under Medicare, a timely project that we believe will prove useful to
CMS and Congress as prescription drug coverage expands to the Medicare
population.
With bipartisan support from members of Congress, CMS announced an
extension of the prescription drug demonstration program in early 2004
that extended the program until September 30, 2005. I am pleased to
report that Secretary Michael Leavitt recently announced a further
extension of the prescription drug demonstration until September 30,
2007. This demonstration extension is certainly welcome news; however,
is does not alter the fact that there is a pressing need for a long-
term solution to the financial problems of the UMWA health care funds.
The need for a long-term solution for the financial problems of the
UMWA health care funds coincides with the need to re-authorize the AML
Fund. We believe the re-authorization effort can, and should, meet four
broad policy objectives:
Provide sufficient duration and level of tax to fund the
reclamation needs;
Focus on Priority 1 and 2 public health and safety projects;
Resolve the long-standing dispute between states and OSM
over the state share of collections; and,
Provide long-term financial solvency for the UMWA health
care funds.
Mr. Chairman, opponents periodically allege that the benefits
provided by the UMWA Funds are too generous and should be cut. While
the costs to the beneficiary tend to be lower than some plans, the
benefits are not substantially more generous than other plans in
comparable industries. The GAO compared the UMWA Funds benefits to
retiree plans in manufacturing covering union and salaried retirees in
2002 and found that ``many features of the Fund's health plans are
similar to those offered in the comparison plans. In particular, the
Funds' coverage for hospital and physician services, which account for
the majority of health care spending, is comparable to the coverage
provided by the other plans.''
Everyone should keep in mind that these retirees have made
significant financial contributions to their health care, to the tune
of $210 million that was transferred from their pension plan pursuant
to the Coal Act. In addition over the years, miners traded lower wages
and lower pensions for the promise of retiree health care. The average
pension for a 1950 pensioner is $375 per month and their widows receive
$155 per month in pension benefits. For the 1974 Plan retirees, the
average pension is $532 per month while the average surviving spouse
benefit is $373 per month. Thus, they do not have the financial ability
to bear the kinds of co-payments that some retirees pay. To renege on
the historic bargain they made over many decades to accept lower wages
and pensions for this health care package would be a cruel and crushing
economic blow.
In addition, this is an aged, fragile population that is sicker
than the average Medicare population. A study performed by Mercer Human
Resources Consulting found this population to have a 35% greater burden
of illness compared to the Medicare population. Cutting the level of
benefits for a population such as this would be a cruel response to the
continuing financial crisis.
Two bills have been introduced in the Senate dealing with AML
reauthorization--S. 961 by Senator Rockefeller and S. 1701 by Senator
Thomas. Both bills would extend the AML fee collection (through 2019
and 2016, respectively) and provide continued AML interest transfers to
the Combined Benefit Fund. Recognizing the growing orphan problem, S.
961 would also permit transfers to support orphan retirees in the 1992
and 1993 plans. While we appreciate both these efforts, we must
recognize that they do not represent the long term financial solution
that many have called for. In order to come up with a long term
solution, the UMWA has been working with a coalition of Coal Act/AML
stakeholders to devise legislation that is a modified version of S. 961
that would satisfy the needs of all parties, including the
``reachback'' companies and the ``final judgment'' companies.
Representatives Cubin and Rahall made an effort to attach the
legislation to the Energy bill during the House-Senate Energy
Conference, but the effort failed partly because of confusion about the
AML provisions of the bill. Since that time, many of those who opposed
that effort are now supporting the coalition effort. The proposed
legislation, known as the Cubin-Peterson-Rahall compromise, would:
1) Extend the AML program for 15 years and reduce the fees from
35 cents to 28 cents per ton for surface mined coal, from 15 cents to
12 cents for underground coal and from 10 cents to 8 cents per ton for
lignite. States will automatically receive their share of AML funding
on an ongoing basis.
2) Provide that the unallocated federal share of moneys that are
paid to the U. S. Treasury under the Mineral Leasing Act after date of
enactment shall be used to make payments to states and tribes of their
unappropriated balance of state share collections.
3) Amend SMCRA to provide for annual transfers of AML Fund interest
(including stranded interest and unappropriated RAMP funds) each year
to the CBF, 1992, and 1993 Funds to pay health benefits of orphan
beneficiaries and cover any deficits.
4) Provide that transfers to the 1993 Plan are limited to the cost
of providing benefits to orphan beneficiaries as of December 31, 2005.
5) Beginning in January 1, 2006 sufficient federal on-shore mineral
leasing and royalty revenues will be used as needed to pay for:
a. Health care costs of orphan retirees in CBF, 1992 and 1993
Funds.
b. Health care costs of CBF retirees attributable to the
``reachback'' companies.
c. Payment to ``Final Judgment'' companies equal to
unreimbursed premiums (plus interest) paid to the Combined
Benefit Fund.
To the extent such proceeds are insufficient, ongoing orphan
obligations will be met from general funds as a mandatory
appropriation.
6) Modify SMCRA allocation formulas to provide that states with
higher reclamation obligations such as Pennsylvania, Kentucky and West
Virginia, receive higher allocations.
7) Provide that ``minimum program'' states will receive $3.0
million per year.
This legislation has garnered support from the various stakeholders
in the AML/retiree health care debate. It is a carefully crafted
compromise and we believe it is worthy of support from this committee.
GAO STUDY
In 2002, the U.S. Government Accountability Office (GAO) issued a
report on the Coal Act entitled ``Retired Coal Miners' Health Benefit
Funds: Financial Challenges Continue.'' While the report was issued
three years ago, its conclusions are still pertinent today. Among the
findings of the GAO were that:
the Combined Benefit Fund faces continuing financial
challenges which have been exacerbated by various adverse court
decisions that have reduced the per beneficiary premiums paid
to the CBF and relieved some companies of responsibility for
paying for their beneficiaries;
CBF beneficiaries traded lower pensions over the years for
the promise of their health benefits and have engaged in
considerable cost sharing by contributing $210 million of their
pension assets to help finance the CBF;
the benefits provided to Coal Act beneficiaries are
generally comparable to coverage provided by major
manufacturing companies and companies with unionized work
forces;
CBF beneficiaries tend to be sicker, and therefore use more
health care, than the average Medicare population; and
the CBF trustees have adopted numerous managed care
initiatives and have a history of achieving savings against
their Medicare targets in demonstration projects, thus saving
money not only for the Funds but for Medicare and the U.S.
Treasury.
The GAO report clearly supports the positions the UMWA has
advocated before Congress and the need for additional legislation. A
promise made in the White House in 1946 was subsequently reaffirmed in
1992. Congress intended the Coal Act to be self-sustaining and self-
financing, but various court decisions have eroded that financing.
There is no question that this is an elderly, frail population that is
sicker than the general Medicare population and deserves the benefits
they were promised. There is also no question that the Funds have
aggressively managed the benefit plans and instituted state-of-the-art
managed care programs that aim to improve the quality of care and
reduce costs. Unfortunately, there is also no question that the
nation's promise to retired coal miners will be violated if we do not
enact a long-term financial solution to the coal industry retiree
health care funding crisis.
This is a unique population and a unique situation. We are unaware
of any other instance in which a major industry-wide health and welfare
plan in the private sector was created in a contract between the
federal government and the workers. All three branches of our
government have played substantial roles in creating, shaping and
determining the fate of the UMWA Funds. The Government Accountability
Office clearly laid out the financial difficulties facing the Funds and
more recent actuarial projections show that Congress must act in order
to shore up the financial structure. Again, we encourage members of
Congress to enact legislation modeled on the coalition bill crafted by
Representatives Cubin, Rahall and Peterson.
THE UMWA HEALTH AND RETIREMENT FUNDS AND THE U.S. GOVERNMENT
The UMWA Health and Retirement Funds (the Funds) was created in
1946 in a contract between the United Mine Workers of America and the
federal government during a time of government seizure of the mines.
The contract was signed in the White House with President Harry Truman
witnessing the historic occasion.
The UMWA first began proposing a health and welfare fund for coal
miners in the late-1930s but met strident opposition from the coal
industry. During World War II, the federal government urged the union
to postpone its demands to ensure coal production for the war effort.
When the National Bituminous Wage Conference convened in early 1946,
immediately following the end of the war, a health and welfare fund for
miners was the union's top priority. The operators rejected the
proposal and miners walked off the job on April 1, 1946. Negotiations
under the auspices of the U.S. Department of Labor continued
sporadically through April. On May 10, 1946, President Truman summoned
John L. Lewis and the operators to the White House. The stalemate
appeared to break when the White House announced an agreement in
principle on a health and welfare fund.
Despite the White House announcement, the coal operators still
refused to agree to the creation of a medical fund. Another conference
at the White House failed to forge an agreement and the negotiations
again collapsed. Faced with the prospect of a long strike that could
hamper post-war economic recovery, President Truman issued an Executive
Order directing the Secretary of the Interior to take possession of all
bituminous coal mines in the United States and to negotiate with the
union ``appropriate changes in the terms and conditions of
employment.'' Secretary of the Interior Julius Krug seized the mines
the next day. Negotiations between representatives of the UMWA and the
federal government continued, first at the Interior Department and then
at the White House, with President Truman participating in several
conferences.
After a week of negotiations, the historic Krug-Lewis agreement was
announced and the strike ended. It created a welfare and retirement
fund to make payments to miners and their dependents and survivors in
cases of sickness, permanent disability, death or retirement, and other
welfare purposes determined by the trustees. The fund was to be managed
by three trustees, one to be appointed by the federal government, one
by the UMWA and the third to be chosen by the other two. Financing for
the new fund was to be derived from a royalty of 5 cents per ton of
coal produced.
The Krug-Lewis agreement also created a separate medical and
hospital fund to be managed by trustees appointed by the UMWA. The
purpose of the fund was to provide for medical, hospital, and related
services for the miners and their dependents. The Krug-Lewis agreement
also committed the federal government to undertake ``a comprehensive
survey and study of the hospital and medical facilities, medical
treatment, sanitary and housing conditions in coal mining areas.'' The
expressed purpose was to determine what improvements were necessary to
bring coal field communities in conformity with ``recognized American
standards.''
To conduct the study, the Secretary chose Rear Admiral Joel T.
Boone of the U.S. Navy Medical Corps. Government medical specialists
spent nearly a year exploring the existing medical care system in the
nation's coal fields. Their report, ``A Medical Survey of the
Bituminous Coal Industry,'' found that in coal field communities,
``provisions range from excellent, on a par with America's most
progressive communities, to very poor, their tolerance a disgrace to a
nation to which the world looks for pattern and guidance.'' The survey
team discovered that ``three-fourths of the hospitals are inadequate
with regard to one or more of the following: surgical rooms, delivery
rooms, labor rooms, nurseries and x-ray facilities.'' The study
concluded that ``the present practice of medicine in the coal fields on
a contract basis cannot be supported. They are synonymous with many
abuses. They are undesirable and in many instances deplorable.''
Thus the Boone report not only confirmed earlier reports of
conditions in the coal mining communities, but also established a
strong federal government interest in correcting long-standing
inadequacies in medical care delivery. Perhaps most important, it
provided a road map for the newly created UMWA Fund to begin the
process of reform.
The Funds established ten regional offices throughout the coal
fields with the direction to make arrangements with local doctors and
hospitals for the provision of ``the highest standard of medical
service at the lowest possible cost.'' One of the first programs
initiated by the Funds was a rehabilitation program for severely
disabled miners. Under this program, more than 1,200 severely disabled
miners were rehabilitated. The Funds searched the coal fields to locate
disabled miners and sent them to the finest rehabilitation centers in
the United States. At those centers, they received the best treatment
that modern medicine and surgery had to offer, including artificial
limbs and extensive physical therapy to teach them how to walk again.
After a period of physical restoration, the miners received
occupational therapy so they could provide for their families.
The Funds also made great strides in improving overall medical care
in coal mining communities, especially in Appalachia where the greatest
inadequacies existed. Recognizing the need for modern hospital and
clinic facilities, the Funds constructed ten hospitals in Kentucky,
Virginia and West Virginia. The hospitals, known as Miners Memorial
Hospitals, provided intern and residency programs and training-for
professional and practical nurses. Thus, because of the Funds, young
doctors were drawn to areas of the country that were sorely lacking in
medical professionals. A 1978 Presidential Coal Commission found that
medical care in the coal field communities had greatly improved, not
only for miners but for the entire community, as a result of the UMWA
Funds. ``Conditions since the Boone Report have changed dramatically,
largely because of the miners and their Union--but also because of the
Federal Government, State, and coal companies.'' The Commission
concluded that ``both union and non-union miners have gained better
health care from the systems developed for the UMWA.''
THE COAL COMMISSION
In the 1980s, medical benefits for retired miners became a sorely
disputed issue between labor and management, as companies sought to
avoid their obligations to retirees and dump those obligations onto the
UMWA Funds, thereby shifting their costs to other signatory employers.
Courts had issued conflicting decisions in the 1980s, holding that
retiree health benefits were indeed benefits for life, but allowing
individual employers to evade the obligation to fund those benefits.
The issue came to a critical impasse in 1989 during the UMWA-Pittston
Company negotiations. Pittston had refused to continue participation in
the UMWA Funds, while the union insisted that Pittston had an
obligation to the retirees.
Once again the government intervened in a coal industry dispute
over health benefits for miners. Secretary of Labor Elizabeth Dole
appointed a special ``super-mediator,'' Bill Usery, also a former
Secretary of Labor. Ultimately the parties, with the assistance of
Usery and Secretary Dole, came to an agreement. As part of that
agreement, Secretary Dole announced the formation of an Advisory
Commission on United Mine Workers of America Retiree Health Benefits,
which became known as the ``Coal Commission.'' The commission,
including representatives from the coal industry, coal labor, the
health insurance industry, the medical profession, academia, and the
government, made recommendations in 1990 to the Secretary and the
Congress for a comprehensive resolution of the crisis facing the UMWA
Funds. The recommendation was based on a simple, yet powerful, finding
of the commission:
``Retired miners have legitimate expectations of health care
benefits for life; that was the promise they received during
their working lives, and that is how they planned their
retirement years. That commitment should be honored.''
The underlying Coal Commission recommendation was that every
company should pay for its own retirees. The Commission recommended
that Congress enact federal legislation that would place a statutory
obligation on current and former signatories to the National Bituminous
Coal Wage Agreement (NBCWA) to pay for the health care of their former
employees. The
Commission recommended that mechanisms be enacted that would
prevent employers from ``dumping'' their retiree health care
obligations on the UMWA Funds. Finally, the Commission urged Congress
to provide an alternative means of financing the cost of ``orphan
retirees'' whose companies no longer existed.
THE COAL ACT
Recognizing the crisis that was unfolding in the nation's coal
fields, Congress acted on the Coal Commission's recommendations. The
original bill introduced by Senator Rockefeller sought to impose a
statutory obligation on current and former signatories to pay for the
cost of their retirees in the UMWA Funds, require them to maintain
their individual employer plans for retired miners, and levy a small
tax on all coal production to pay for the cost of orphan retirees.
Although the bill was passed by both houses of Congress, it was vetoed
as part of the Tax Fairness and Economic Growth Act of 1992.
In the legislative debate that followed, much of the underlying
structure of the Coal Commission's recommendations was maintained, but
there was strong opposition to a general coal tax to finance orphan
retirees. A compromise was developed that would finance orphans through
the use of interest on monies held in the Abandoned Mine Lands (AML)
fund. In addition, the Union accepted a legislative compromise that
included the transfer of $210 million of pension assets from the UMWA
1950 Pension Plan. With these compromises in place, the legislation was
passed by Congress and signed into law by President Bush as part of the
Energy Policy Act.
Under the Coal Act, two new statutory funds were created--the UMWA
Combined Benefit Fund (CBF) and the UMWA 1992 Benefit Fund. The former
UMWA 1950 and 1974 Benefit Funds were merged into the Combined Fund,
which was charged with providing health care and death benefits to
retirees who were receiving benefits from the UMWA 1950 and 1974
Benefit Plans on or before July 20, 1992. The CBF was essentially
closed to new beneficiaries. The Coal Act also mandated that employers
who were maintaining employer benefit plans under UMWA contracts at the
time of passage would be required to continue those plans under Section
9711 of the Coal Act. Section 9711 was enacted to prevent future
``dumping'' of retiree health care obligations by companies that remain
in business. To provide for future orphans not eligible for benefits
from the CBF, Congress established the UMWA 1992 Benefit Fund to
provide health care to miners who retired prior to October 1, 1994 and
whose employers are no longer providing benefits under their 9711
plans.
The CBF is financed by per-beneficiary premiums paid by employers
with retirees in the fund. The premium is set by the Social Security
Administration and is escalated each year by the medical component of
the Consumer Price Index. Interest earned by the AML Fund is made
available to finance the cost of orphan retirees. The remainder of CBF
income derives from Medicare capitation and risk sharing arrangements,
DOL Black Lung payments, investment income and miscellaneous court
settlements. The benefits for orphans covered by the UMWA 1992 Fund are
financed solely by operators that were signatory to the NBCWA of 1988.
In passing the Coal Act, Congress recognized the legitimacy of the
Coal Commission's finding that ``retired miners are entitled to the
health care benefits that were promised and guaranteed them.'' Congress
specifically had three policy purposes in mind in passing the Coal Act:
``(1) to remedy problems with the provision and funding of
health care benefits with respect to the beneficiaries of
multiemployer benefit plans that provide health care benefits
to retirees in the coal industry;
(2) to allow for sufficient operating assets for such plans;
and
(3) to provide for the continuation of a privately financed
self-sufficient program for the delivery of health care
benefits to the beneficiaries of such plans.''
Without question, Congress intended that the Coal Act should
provide ``sufficient operating assets'' to ensure the continuation of
health care to retired coal miners. However, the financial mechanisms
have been eroded and have placed the Coal Act in continuing financial
crises.
RECENT COURT DECISIONS
The 2002 GAO study found that a number of court decisions have
eroded the financial condition of the Combined Fund--and the legal
onslaught on the Coal Act continues. While Congress clearly intended
that the Coal Act be financially self-sustaining, various court
decisions have undercut Congressional intent. A 1995 decision by a
federal court in Alabama in NCA v. Chater overturned the premium
determination by the Social Security Administration (SSA) and reduced
the premium paid by employers by about 10%. Over time, the effect of
this decision was to remove hundreds of millions of dollars from the
financing structure of the Coal Act. A 1999 decision by the same court
ordered the CBF to return about $40 million in contributions to the
employers, representing the difference between the original SSA premium
rate actually paid and the rate established in NCA. The trustees of the
CBF filed suit against the Social Security Administration in the
District of Columbia in an attempt to set aside the NCA decision. In
late-2002, the D.C. Court struck down the Social Security
Administration's nationwide application of the NCA decision and ordered
SSA to report to the Court what premium rate should apply to companies
not covered by the NCA decision. In June 2003, SSA notified the Court
it would apply a higher premium to companies not covered by the earlier
decision. However, while most companies were paying the higher rate
under protest, over 200 companies filed suit seeking to overturn the
higher rate. In August 2005, the United States District Court for the
District of Maryland issued a ruling in favor of the companies and
enjoining the CBF from applying the higher rate. If the CBF ultimately
loses the premium rate case, it will have to reimburse the operators
for about $72 million in higher premiums that were collected prior to
the court ruling.
In 1998, the Supreme Court rendered a decision in Eastern
Enterprises that struck down the obligation to contribute to the CBF
for companies that were signatory to earlier NBCWAs but did not sign
the 1974 or later contracts. Those employers were relieved of their
contribution obligations in the future and the Combined Fund returned
millions of dollars in prior contributions. Most of these retirees are
now part of the unassigned beneficiary pool whose benefits are funded
from other sources. Since that time, a number of other companies who
signed the 1974 or later NBCWAs have also attempted to convince the
courts that they, too, should be relieved of their responsibility. Most
of these cases have now completed their appeals process, with the
courts holding that the companies cannot walk away from their Coal Act
obligations.
The cumulative effect of these court decisions threatened a
repetition of the problems and re-creation of the crisis of the 1980s
that led to the creation of the Coal Act, meaning employers have been
relieved of liability for their retirees and revenues have been
significantly reduced from the employers that remain obligated.
Compounding the revenue loss stemming from these court decisions is the
fact that the escalator used to adjust the premium for inflation (the
medical component of the Consumer Price Index) is inadequate to measure
the health care cost increases in a closed group of aging beneficiaries
who experience annual increases in utilization. The combination of
escalating medical costs, loss of income, an increasing orphan
population and an inadequate escalator have led to a continuing
financial crisis for Coal Act beneficiaries.
I mentioned earlier the bankruptcies of a number of steel companies
that had retirees covered by the Coal Act. Recent bankruptcies at LTV,
Bethlehem Steel and other steel companies have further reduced the
premiums paid to the CBF, increased orphan costs for the AML fund, and
added thousands of 9711 plan beneficiaries to the 1992 Plan. The
Horizon bankruptcy in 2004 greatly increased the populations of the
1992 and 1993 Benefit Funds. The growth in the orphan population has
forced a dwindling number of employers to fund a growing burden of
health care expenses for retirees who did not work for them. The
magnitude of these bankruptcies, which we believe that Congress did not
anticipate when it passed the Coal Act, has exacerbated the problems of
the UMWA Funds and reinforce the call for a long-term solution.
NOW IS THE TIME FOR A LONG-TERM SOLUTION
Mr. Chairman, there is a growing bipartisan consensus that Congress
needs to forge a long-term solution to the coal industry retiree health
care financial crisis. Over their working lives, these retirees traded
lower wages and pensions for the promise of retiree health care that
began in the White House in 1946. In 1992, they willingly contributed
$210 million of their pension money to ensure that the promise would be
kept. Everything that this nation has asked of them--in war and in
peace--they have done. They are part of what has come to be called the
``Greatest Generation'' and deservedly so. They have certainly kept
their end of the bargain that was struck with President Truman. But now
they find that the promise they worked for and depended on is in
jeopardy of being broken. We must stand up and say that this promise
will be kept.
Mr. Chairman, we thank you for the opportunity to add our support
to the effort to re-authorize the AML program and to provide a long-
term solution to the financial problems of the UMWA Funds. I would be
happy to answer any questions you may have.
Senator Thomas. Thank you very much.
Ms. Lewis.
STATEMENT OF LORRAINE LEWIS, EXECUTIVE DIRECTOR,
UMWA HEALTH AND RETIREMENT FUNDS
Ms. Lewis. Mr. Chairman, members of the committee, I'm
Lorraine Lewis, executive director of the Funds. On behalf of
the trustees, I am pleased to accept the committee's invitation
to testify.
Through a combination of collective bargaining and
government mandate, retiree health benefit plans have been part
of the fund since 1946. During this time, mine workers accepted
more modest pensions, for example, in exchange for those health
benefits. The 1990 Coal Commission report noted this fact.
The facts that follow here in my presentation relate to all
three of the health benefit plans that we administer, including
the Combined Benefit Fund, which is the fund that receives the
annual transfer from the AML fund.
The coal industry and Mine Workers Union have made
important agreements during the past 59 years to require multi-
employer contributions to the Health Benefit Funds.
Unfortunately, as the actuarial projections show, the current
funding arrangements will yield either increasing negative
balances, in the case of the CBF, the Combined Benefit Fund, or
the--excuse me--and the 1993 benefit plan, or increasingly
burdensome premiums paid by operators, in the case of our 1992
benefit plan.
The CBF has 37,000 beneficiaries. The median age is 81. A
full three-quarters of the population are elderly widows and
spouses. Operators pay statutory premiums based on assigned
beneficiaries. At the start, the beneficiaries themselves
contributed $200 million from their pension plan to startup the
fund. The CBF receives annual transfers from the AML fund to
cover unassigned beneficiary costs. Growing deficits and cash-
flow shortages pose the risk of reducing benefits in the summer
of 2007.
Our 1992 and 1993 plans are orphan plans, with
approximately 11,000 and 7,000 beneficiaries, respectively.
Most beneficiaries in the 1992 plan, and all in the 1993 plan,
have no employer in business to pay for their benefits. Both
plans have had unexpected population increases due to steel-
industry bankruptcies and the recent Horizon bankruptcy.
Deficits and cash-flow shortages pose a risk of reductions in
benefits in the 1993 plan in early 2006.
There is a special need for these health benefits. The
beneficiaries in this population are typically female, elderly,
and chronically ill. A recent study found that they bear a
burden of illness 35 percent greater than the average for the
general Medicare population.
The beneficiaries, the funds, and the Federal Government
all reap advantages from the funds' aggressive managed-care
cost-containment programs. These programs are designed to
preserve beneficiary health status, prevent or minimize the
effects of catastrophic illness, and avert the need for costly
emergency services. The funds' managed-care strategies include
an array of innovated coordination-of-care programs and
disease-management programs.
Other programs contain initiatives to ensure the cost-
effective use of available resources. Examples include
contracts with hospitals and providers to pay Medicare levels
for Medicare and non-Medicare beneficiaries, a cost-effective
network of durable medical-equipment providers, co-pay
incentives to promote use of mail-order drugs, and requirements
for use of generic drugs.
The study I noted a moment ago found that expenditures by
the funds in Medicare for the care of our beneficiaries are
about 7 percent lower than would be expected for a population
with their burden of illness. Since 1990, we have been involved
in a risk-sharing demonstration program with Medicare, covering
services provided under Parts A and B. We calculate that,
between 1997 and 2004, the Government's share of the
demonstration savings exceeded a total of $130 million. In
2001, the demonstration was expanded to include support for the
fund's prescription-drug benefit. Under its terms, the funds
are developing a program designed to help physicians improve
the quality and cost-effectiveness of drug therapies for
chronically ill elderly Medicare beneficiaries. The addition of
the drug component has enhanced the fund's value to Medicare as
a laboratory for such innovations, especially relevant today as
Medicare prepares to launch the new Part D prescription-drug
program.
The funds are ERISA plans, with equal numbers of management
and labor appointed trustees. They submit audited financial
statements and other annual reports to the Departments of
Labor, HHS, and Interior. GAO, the Interior Department's
Inspector General, and the Center for Medicare Services have
all reviewed the funds' programs and operations in the past few
years.
And I'd be very happy to answer any questions you may have.
[The prepared statement of Ms. Lewis follows:]
Prepared Statement of Lorraine Lewis, Executive Director, UMWA Health
and Retirement Funds
I am Lorraine Lewis, Executive Director of the UMWA Health and
Retirement Funds. On behalf of the Trustees of the UMWA Combined
Benefit Fund, the UMWA 1992 Benefit Plan and the UMWA 1993 Benefit
Plan, I am pleased to accept the Committee's invitation to testify
today.
THE PLANS AND THE POPULATIONS THEY SERVE
The three plans are continuations of the health benefit plans that
were first provided to coal miner retirees and their families pursuant
to an agreement between the Mine Workers Union and the Federal
government in 1946 when President Truman seized the nations' coal mines
to resolve a nationwide strike. Retiree health care was continued
through collective bargaining in the industry from that time until
passage of the Coal Act in 1992 and beyond. Historically, the Mine
Workers have accepted lower wages and more modest pensions in exchange
for more complete health care coverage. See Coal Commission Report (The
Secretary of Labor's Advisory Commission on United Mine Workers of
America Retiree Health Benefits, November 1990) pages 32-41, 48-50. The
beneficiaries of the plans reside primarily in the coal fields of
Appalachia and are generally at the lower end of the economic ladder.
For example, a coal miner's widow typical of the beneficiaries of the
Combined Benefit Fund receives a pension from the UMWA 1950 Pension
Plan of $155 per month.
According to the results of a 2004 study conducted by Mercer Human
Resources Consulting, the beneficiary population served by the UMWA
Funds bears a burden of illness 35% percent greater than the average
for the general Medicare population. On a series of biannual surveys
conducted by the UMWA Funds, over 50% percent of the responding
beneficiaries reported their health as ``fair'' or ``poor'' as
distinguished from the other available categories of ``excellent,''
``very good,'' or ``good.'' The GAO Report, ``Retired Coal Miners
Health Benefit Funds Financial Challenges Continue'' of April 2002
(page 18) reached a similar conclusion.
MANAGED CARE AND COST CONTAINMENT PROGRAMS
Over a number of years, the plans have developed aggressive,
successful managed care and cost containment programs. The Mercer study
reported that the cost of health care for the plans was significantly
less, by seven percent, than the level to be expected for the burden of
illness found in the population.
These programs include contracts with hospitals and other providers
to pay at Medicare levels for the plans' Medicare and non-Medicare
eligible beneficiaries and the establishment of a network of durable
medical equipment providers with bargained lower costs. Costs in the
plans' prescription drug benefit programs are managed by use of co-pay
incentives to promote use of mail-order drugs, requirements for use of
generics when available in the absence of medical necessity for brand
name drugs, and a preferred product program encouraging use of less
expensive therapeutic equivalents in important drug classes. The plans
also employ expert medical management teams to ensure the most
effective courses of treatment, especially for beneficiaries with a
high burden of chronic illness, and these services help to reduce
hospital admissions and save costs over the long term. A more complete
description of the UMWA Funds managed care and cost containment
programs is found in Appendix A.*
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* Appendixes A and B have been retained in committee files.
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ERISA GOVERNED HEALTH CARE PLANS
All three of these health plans are employee welfare benefit plans
within the meaning of the Employee Retirement Income Security Act of
1974 (``ERISA''). As ERISA fiduciaries, the Trustees do not advocate
any particular legislative proposal. Since Congress first considered
the Coal Industry Retiree Health Benefit Act of 1992, however, the
Trustees have recognized all efforts by members of Congress to resolve
the problems of continuing the promised health care for retired coal
miners and their dependents as constructive, and, in the interest of
the plans' participants and beneficiaries, they have made staff
available to respond to requests for information that might be relevant
to these considerations.
Each of the plans is a separate employee benefit plan under ERISA,
each with its own population of beneficiaries, separate funding
mechanism and plan of benefits, and each with its own board of
trustees. The Coal Act requires the Combined Fund Trustees, to the
maximum extent feasible using available plan resources, to maintain the
level of benefits provided by the predecessor plans in 1992, and the
Act requires the 1992 Benefit Plan to guarantee this same level of
benefits.
Pursuant to the Taft-Hartley Act, an equal number of trustees are
appointed by the UMWA and by employers who support the plans. While
some individual trustees serve on more than one of the plans, the board
of each plan is required by ERISA to use that plan's assets in
accordance with the written plan documents and exclusively for the
plan's beneficiaries. Consistent with these requirements, however,
these plans derive certain advantages from receiving joint
administrative services pursuant to agreements with the UMWA 1974
Pension Trust for shared office space and staff services.
CONTRACTS WITH SERVICE PROVIDERS, DEPARTMENT OF LABOR AND MEDICARE
The three plans also pool their bargaining power to jointly enter
into contracts with a medical claims processor, a pharmacy benefit
manager, a medical management vendor, and a network of cooperating
health care providers. Significantly, the three plans also jointly
contract with the Medicare program and with the Department of Labor's
Black Lung program to provide federally funded benefits to their
beneficiaries.
Since 1990, the Funds' health care plans' contract with the
Medicare program has taken the form of a demonstration project under
which the Funds have received capitation payments in exchange for
providing Medicare Part B benefits to Medicare eligible beneficiaries.
Since 1997, the demonstration contract has included a risk sharing
arrangement covering services delivered to eligible beneficiaries under
Medicare Part A. Beginning in 2001, as part of the continuing
demonstration project under contract with the Medicare program, the
Funds have conducted a prescription drug demonstration under which the
UMWA Funds three health plans operate a pilot program designed to help
physicians improve the quality and effectiveness of prescription drug
therapy provided to elderly chronically ill beneficiaries who receive
their care under fee-for-service arrangements. In exchange, the Centers
for Medicare and Medicaid Services (``CMS'') pays a portion of the cost
of providing prescription drugs to Medicare eligible beneficiaries
under the UMWA Funds' plans of benefits. The plans have applied for
renewal of the demonstration project and on September 20, 2005, CMS
announced that the demonstration would be extended to September 30,
2007. While some terms remain to be worked out with CMS, the figures in
Appendix B take this renewal of the prescription drug demonstration
into account.
THE COMBINED BENEFIT FUND
The Coal Act directed the merger of two existing collectively
bargained health benefit plans, the UMWA 1950 and 1974 Benefit Plans,
to form the UMWA Combined Benefit Fund to cover only those
beneficiaries already covered by those two plans on July 20, 1992. This
closed the Combined Fund population to new retirees. This population
was then approximately 108,000. Reduced by mortality, this population
is now approximately 37,000, composed of approximately 8,500 retired
mine workers and 28,500 dependents, of whom approximately 22,000 are
widows of mine workers. Combined Fund beneficiaries are elderly, their
median age is 81. Their median household income, based on a survey done
in 2000, was $17,076. Approximately 94% of this population is Medicare-
eligible.
The Coal Act requires the Combined Fund to have seven trustees. Two
are appointed by the UMWA. There are two management-appointed trustees,
one appointed by the Bituminous Coal Operators Association (``BCOA''),
and the other appointed by the three operators who, among those that
did not sign the 1988 National Bituminous Coal Wage Agreement, have the
largest number of beneficiaries assigned to them. The three remaining
``neutral'' trustees are appointed by the other four.
Under the Coal Act, the Social Security Administration (``SSA'')
assigns Combined Fund beneficiaries to coal industry operators who
signed Coal Wage Agreements with the UMWA and employed the retired
miners who were, or whose widows were, primary beneficiaries of the
1950 or 1974 Benefit Plan at the time of the Coal Act's enactment.
Assigned operators are required to pay premiums for each assigned
beneficiary in accordance with a premium rate set by the SSA pursuant
to a formula set out in the Act. They also pay a proportionate share of
death benefit premiums and of premiums for unassigned beneficiaries.
Unassigned beneficiaries.
Unassigned beneficiaries are those whose employers have gone out of
business. There has been a steady shift within the Combined Fund's
population from assigned beneficiaries to unassigned beneficiaries as
operators have ceased business activity, with this shift increasing due
to recent steel industry bankruptcies and the Horizon Natural Resources
bankruptcy. In 2005 the average unassigned population has been
approximately 16,700.
To avoid as much as possible the requirement that operators pay for
expenses of beneficiaries who did not work for them, the Coal Act
required that the beneficiaries themselves contribute $210 million from
the UMWA 1950 Pension Plan, the plan that provided most of their
pensions, primarily to cover unassigned beneficiaries' expenses during
the first three plan years of the Combined Fund's operations. Beginning
October 1, 1995, the Coal Act and the corresponding 1992 amendments to
the Surface Mining Control and Reclamation Act (``SMCRA'') provide for
an annual transfer to the CBF of the interest earned by the Abandoned
Mine Lands Reclamation Fund (``the AML Fund'') to cover unassigned
expenses. Transfers occur in years when fees are required to be paid to
the AML Fund. This requirement, set by the 1992 amendments to expire on
September 30, 2004, has been extended, most recently to June 30, 2006
by this year's Interior Department Appropriation Act. The SMCRA also
provides the Secretary of the Interior with rulemaking authority to
establish additional fee requirements beyond the expiration date
sufficient to continue the program of annual transfers to the Combined
Benefit Fund.
Financial difficulty and the risk of reducing benefits.
Since 1999, for two primary reasons, the Combined Fund has faced
the prospect of deficits and the risk of reducing benefits. First, the
premium rate increases prescribed by the Coal Act have not kept pace
with the increases in health care costs, especially the costs of
prescription drugs and the increase in utilization of health care as
the population ages toward the end of life. Second, a long-running
litigation between operators and the Social Security Administration and
the Combined Fund Trustees regarding the Coal Act's premium rate
formula has reduced or threatened to reduce the premiums paid by
assigned operators by ten percent. To avoid the need for reducing
benefits, Congress has on three occasions enacted special
appropriations from interest earned by the AML Fund to be transferred
to the Combined Fund. The amounts of these appropriations were: in
1999, $68 million; in 2001, $53 million; and in 2003, $34 million.
Most recently, on August 12, 2005, the U.S. District Court for
Maryland ruled in favor of the operators in a phase of the ongoing
premium rate litigation, requiring the Social Security Administration
to re-establish lower rates for all operators. The Trustees of the
Combined Fund have appealed this decision to the Fourth Circuit.
Through July 31, 2005, the Combined Fund had received from assigned
operators and related persons $72,544,000 in payment of premium
differential assessments at rates set by the Social Security
Commissioner pursuant to the Commissioner's June 10, 2003, Premium
Decision that has now been set aside by the Maryland District Court.
Based upon cash flow projections, the Funds' Comptroller has calculated
that, assuming return of this differential premium amount in the form
of credits against the monthly premium obligations of assigned
operators who made premium differential payments, and assuming an
extension of the Combined Fund's Medicare Prescription Drug
Demonstration Project that has recently been announced, at an estimated
funding level of $73,391,417 for plan year 2006 and $65,643,862 for
plan year 2007, disbursements for medical benefits, death benefits and
administrative costs will exceed cash on hand and receipts from income
in the month of August 2007. At that point, the Combined Fund will be
in a ``cash negative'' position. The Combined Fund Trustees have
decided that, if such a cash negative position is reached, they must
reduce benefits and they would be required to advise beneficiaries of
such reductions some number of months in advance of such action.
Appendix B sets out projected total population and unassigned
population, as well as projected year ending fund balances and annual
deficits in the Combined Fund.
THE 1992 BENEFIT PLAN
The Coal Act requires that all coal industry operators who were
providing single employer health plans pursuant to a Coal Wage
Agreement with the UMWA at the time of the enactment must continue
those plans in effect for retirees who retired before October 1, 1994.
The Coal Act also required the UMWA and BCOA to create the UMWA 1992
Benefit Plan. The population covered by this plan includes: 1) those
who would have been covered by the 1950 or 1974 Benefit Plan but were
not covered by the Combined Fund because their eligibility was
established after the cut-off date in 1992; and 2) those who were
entitled under the Coal Act to continue receiving health benefits under
a single employer health plan, but do not receive those benefits
because of the employer's failure to provide them. Usually this is
because the employer has gone out of business.
The median age of the 1992 Plans' beneficiary population is 72.
This population's median household income, based on a 2000 survey, was
$19,800, and approximately 80% of the population is eligible for
Medicare.
Orphan retirees and their health care costs.
The 1992 Plan is a continuation, mandated by statute, of the
industry's undertaking to provide health benefits to retirees known as
``orphans,'' those whose industry employers have gone out of business
leaving the retiree and dependent family members without an employer to
sponsor their benefits. They correspond to the unassigned beneficiaries
in the Combined Fund.
Funding of 1992 Plan is through ``per-beneficiary premiums''
required to be paid by last signatory employers to whom retiree and
beneficiaries may be attributed and by ``prefunding premiums'' paid by
1988 Agreement operators. Because most of the Plan's population cannot
be attributed to any employer that is still in business, most of the
Plan's expenses are paid by the operators who pay prefunding premiums.
The prefunding premium cost is therefore equivalent to the cost of
orphan retirees and beneficiaries in the 1992 Plan, and this is a cost
paid by operators who did not employ any of the orphan miners in
question. The amount of prefunding premium paid by each 1988 Agreement
operator is determined by the number of retiree beneficiaries the
operator has covered by its single employer health plan mandated to be
continued by section 9711 of the Coal Act. (Hence the term ``9711
plan.'') In addition, operators who provide single employer 9711 plans
must post security with the 1992 Plan to pay for three years of
benefits in case the 1992 Plan must take over their obligation to
provide benefits.
The 1992 Plan's population was expected to grow as normal attrition
of some industry employers occurred. Unfortunately the orphan
population of the 1992 Plan has jumped up dramatically since 2002,
because of the major steel industry bankruptcies and the Horizon
Natural Resources bankruptcy. For 2002, the 1992 Plan's average
population over the year was 6,432; for 2005 the Plan's average
population is 11,392. If there are no more substantial shifts of
retiree populations to the 1992 Plan from failing operators, the
population is expected to gradually decline through mortality. The
prefunding premium cost, the cost of orphan retiree health care,
however, is expected to climb sharply because the security bond posted
by a substantial failing steel industry operator will have been
exhausted and because of the persistent rise in health care costs,
especially the costs of prescription drugs. Thus the orphan retiree
health cost of the 1992 Plan is expected to rise from around $16
million this year to $26 million next year, reach approximately $60
million in the last three years of this decade and continue to rise
thereafter.
Appendix B sets out the current and projected population and the
current and projected costs of providing benefits to orphan in the 1992
Plan.
THE 1993 BENEFIT PLAN
Through collective bargaining the UMWA and BCOA have created the
UMWA 1993 Benefit Plan to continue the industry's undertaking to
provide health care to orphan retirees, covering those who retired
after the September 30, 1994 cut-off date for coverage under the 1992
Benefit Plan. The plan has strict rules requiring that, before retirees
and their dependents are eligible, their last signatory employer must
have had an obligation to contribute to the 1993 Plan and actually have
contributed. Funding for the 1993 Plan has come from employers'
contributions based on hours worked in the mines, currently $0.50 per
hour, and also from annual $2000 premiums, and in 2005 a separate one
time $3000 premium.
The 1993 Plan's population has a median age of 59 and had a median
household income of $19,056, based on a survey in 2000. Approximately
38% of this population is Medicare eligible.
Escalating population and costs; the risk of reducing benefits.
Like the 1992 Plan, a moderate rate of growth in the population of
the 1993 Plan was expected, and like the 1992 Plan, this expectation
has been upset by recent bankruptcies in the steel industry and
especially by the Horizon Natural Resources bankruptcy, causing the
population to double, from less than 3,500 to approximately 7,000 in
the last two years.
Because of this increased population and the increased health care
costs, the 1993 Plan faces the risk of reducing benefits. The Plan's
governing documents provide that, if at specified periodic valuations
the value of the Plan's net assets available for plan benefits fall
below $2 million, the Trustees are required to reduce benefits
sufficiently to achieve solvency by the end of the current Coal Wage
Agreement, December 31, 2006. Current actuarial projections indicate
that this threshold may be reached in early 2006.
Appendix B sets out the projected population and the projected year
ending balances and annual deficits for the 1993 Plan.
OVERSIGHT
As ERISA plans, all three of the plans must be administered by
boards of trustees who must comply with the fiduciary requirements of
ERISA, including avoiding prohibited transactions, prudent asset
management and administration for the exclusive benefit of participants
and beneficiaries. Trustees may be held personally liable for any
breaches of these duties. Each plan must submit an annual report to the
Secretary of Labor (Form 5500), that must include the report of an
independent auditor on the annual financial statement of the plan.
In addition to the requirement of an annual audited financial
report, the three plans must submit an annual cost report to the
Medicare program under the Medicare contract, and this report is also
subject to an annual audit.
The Combined Fund is subject to an annual review by its independent
auditors of its transactions with the Office of Surface Mining
regarding transfers from the AML Fund, and this transfer program has
also been audited by the Department of Interior's Inspector General.
Finally, because of continuing interest by the Congress, the
Government Accountability Office has conducted reviews on several
occasions, most recently in 2002.
I would be pleased to respond to any questions the members may
have.
Senator Thomas. Okay. Thank you very much.
Mr. Finkenbinder.
STATEMENT OF DAVID FINKENBINDER, VICE PRESIDENT, CONGRESSIONAL
AFFAIRS, NATIONAL MINING ASSOCIATION
Mr. Finkenbinder. Thank you, Mr. Chairman, members of the
committee. On behalf of the National Mining Association, I want
to express our appreciation for this opportunity to comment on
the administration and performance of the AML program
established under the Surface Mining Act.
The AML program was established with the principal
objective to restore unreclaimed lands mined prior to August 3,
1977, that pose threats to public health and safety. AML, which
is paid by on each ton of coal produced and sold to fund the
program, was originally authorized until 1992, but has been
extended several times, as we have heard.
The current reauthorization expires on June 30, and I'm
sure many viewpoints expressed here today about the remaining
requirements and the need to extend the fee to support those
requirements have been, and will be, presented.
While various interests of NMA's membership have dictated
that NMA have no position on the specific related to AML
reauthorization or the coal-miner benefits, NMA will provide
observations about the history of the program and various
public-policy considerations regarding the future of the
program.
Since 1978, the coal industry has contributed more than
$7.5 billion to the AML fund. OSM reports that, as of 2002,
about $1.62 billion of high-priority abandoned-mine inventory
has been reclaimed. Another $320 million has been used to
reclaim priority-three sites, and $285 million have been used
for non-coal projects. The appropriations from the AML fund for
this period total $5.7 billion. In other words, less than 40
percent of the money appropriated is finding its way to on-the-
ground reclamation of inventory of coal and non-coal projects.
Placed in the context of high-priority coal sites, the
principal mission of the project--of the program, less than 30
cents on every dollar appropriated from AML reaches its
objective.
As we have stated in our written testimony, based on
National Academy of Sciences and OSM reports that have been
issued over the years, the inventory of priority sites has
grown, along with the number of reclaimed sites, the fees
collected, and the appropriations from the fund. For example,
in 1986, NAS prepared a midcourse review for the program. At
that time, NAS found that most States expressed confidence that
they would complete their reclamation of priority-one and -two
sites by 1992. By 1992, the total revenue of the program had
reached $3.2 billion, and $870 million worth of high-priority
coal inventory had been reclaimed, and the remaining inventory
was now $2.6 billion. Now the high-priority coal inventory is
almost $3 billion. And after $5.7 billion in appropriations
from the AML fund, only $1.8 billion in high-priority sites
have been reclaimed. It looks like we're going backward.
We hear the job is not finished. By June 2006, the coal
industry will have paid $8 billion into the fund. How much will
this take? We don't know.
In our written testimony, we have set out several questions
facing--faced in dealing with the current program structure and
requirements. Not surprisingly, each constituency will have
different answers and different preferences.
The first question is: Do we need, can we afford, multiple
delivery mechanisms and subprograms that divert funds away from
high-priority projects? For example, the RAMP program and
another one where States can set-aside funds in anticipation of
the fee expiring. The question would be begged: Why set aside
fees for a future use and then ask the industry to keep paying
fees because the job is not finished?
Should the current allocation and distribution formula be
replaced with a different system that takes into account the
changes in the coal mining and the--excuse me--in coal mining
since passage of the--of SMCRA?
What good are priorities if there are so many of them and
there is no overarching requirement to abide by them?
Fourth, why does the high-priority coal inventory serve
as--does the high-priority coal inventory serve as an accurate
benchmark for success? Each time the goal gets closer, it is
moved back.
So far as administrative costs are concerned, how much do
we need to spend to learn how to spend?
In light of the foregoing, what level should the fee be?
And how much more should the coal industry pay into the AML
fund? The job is not finished. The lack of AML fees is not the
reason.
Mr. Chairman, thank you, again, for the opportunity to
present NMA's observations.
[The prepared statement of Mr. Finkenbinder follows:]
Prepared Statement of David Finkenbinder, Vice President, Congressional
Affairs, National Mining Association
Mr. Chairman, members of the Committee, on behalf of the National
Mining Association, I want to express our appreciation for this
opportunity to comment on the administration and performance of the
Abandoned Mined Land (AML) Program established under the Surface Mining
Control and Reclamation Act of 1977.
The AML Program was established with the principal objective to
restore unreclaimed lands mined for coal prior to August 3, 1977 that
pose threats to the public health and safety. The AML fee paid on each
ton of coal produced and sold to fund the program was authorized
initially until 1992, but has been extended twice. With the current
authorization scheduled to expire on June 30, 2006, there will
undoubtedly be many viewpoints expressed today about the remaining
requirements and the need to extend the fee to support those
requirements. In this regard, Mr. Chairman, NMA has no position on the
Coal Act or issues surrounding the reauthorization of the AML, but
offers some observations about the history of the program, and presents
various considerations to assist you and your colleagues in making
public policy decisions about the program's future.
REVENUES AND EXPENDITURES
Since 1978, the coal industry has contributed more than $7.5
billion to the AML Fund. The Office of Surface Mining (OSM) reports
that as of September 30, 2002 about $1.62 billion of the high priority
(Priority 1 & 2) abandoned coal mined lands inventory has been
reclaimed. Another $320 million has been used to reclaim priority 3
coal sites, and $285 million for non-coal projects. Appropriations from
the AML Fund for this period totaled about $5.7 billion. In other
words, less than forty per cent of all the money appropriated is
finding its way to on-the-ground reclamation of the inventory of coal
and non-coal projects. Placed in the context of the high priority coal
inventory--the principal mission of the program--less than thirty cents
of every dollar appropriated from the AML Fund reaches that objective.
PROGRESS AND EXPECTATIONS
In 1986, the National Academy of Sciences (NAS) performed a mid-
term review of the AML program. See National Academy of Sciences,
Abandoned Mined Lands: A Mid-Course Review of the National Reclamation
Program for Coal (1986). At that time, the NAS projected that by the
expiration of the AML fee in 1992, total revenue for the program would
reach about $3.3 billion. As it turns out, the projection was close to
the mark with actual receipts reaching slightly more than $3.2 billion.
NAS also found at that time that most States expressed confidence that
they would complete reclamation of their priority 1 and 2 inventory of
projects by 1992. Id. at 65. It was this confidence that resulted in
the States' view that in the meantime they should reclaim lower
priorities even before they complete the two top priorities. Id. This
approach apparently had some merit since as NAS projected all the
states, except six, would have enough funds from their state share
alone to reclaim priority 1 and 2 projects with an estimated cost of
about $811 million. Moreover, the total state share alone appeared to
be adequate to reclaim all priorities at an estimated cost of about
$1.7 billion. Id. at 154-55. In short, at the time of the mid-term
review of the program more than ample funds appeared to be available to
address not only the high priority coal inventory, but the other
priorities as well.
By 1992, $870 million of the high priority coal inventory had been
reclaimed. But now the target had moved, and OSM reported that the
remaining high priority coal inventory was $2.6 billion--almost three
times the inventory reported in 1986. Since then, it appears that
things have actually regressed. Since 1998, it appears that for each
dollar of high priority inventory reclaimed, two dollars are added as
unfunded high priorities. Now the high priority coal inventory is
almost $3 billion. And, after $5.7 billion in appropriations from the
AML Fund, only $1.62 billion of the high priority coal inventory has
been reclaimed. Continuing business as usual would mean that it will
require at least $9 billion to reclaim the current $3 billion high
priority coal inventory.
STRUCTURAL IMPEDIMENTS TO SUCCESS
Twenty-five years, two AML fee extensions, and almost $6 billion
later, you will hear that the ``job is not finished.'' You will also
hear various viewpoints on why that is the case. We believe the answer
largely lies with structural impediments in the current law related to
grant formulas, competing program demands that all conspire to thwart
cost-effective achievement of the program's principal purpose, and
revenue allocation.
The AML Program has been called upon to serve many different
demands. It has also been designed to serve those demands through
multiple delivery mechanisms. We have Federal programs and State
programs. And, within each of those we have special programs, such as
the Rural Abandoned Mine Program, Emergency Programs, Appalachian Clean
Streams Initiatives, various State Set-Aside Programs, and Technology
Development and Transfer Programs. All of these programs compete for
funds under various priorities and funding formulas. The first two
priorities which comprise the program's core objective relate to
restoring abandoned coal mined lands that pose dangers to the public
health and safety. There is no overarching requirement that funds be
directed toward the high priority coal inventory. Indeed, it appears
that these other programs operate as exit ramps to divert funds away
from the high priority inventory. And, all of these programs carry with
them extensive federal and state administrative costs.
According to the OSM white paper, ``The Job's Not Finished'',
around 1989 the demographics of coal production changed and an
imbalance developed between fund availability and needs. As a result,
the statutory allocation formula for AML revenue precludes the use of a
substantial portion of the industry's AML fees for the high priority
coal inventory. Half of all fees paid on coal production in a state are
earmarked for AML use in that state regardless of the remaining high
priority coal AML needs. During the early years of the program, this
allocation structure posed little consequence for assuring that AML
fees were available for high priority coal inventory. As coal
production increased in the West with a relatively smaller coal AML
inventory, a larger proportion of AML fee revenue became unavailable
for high priority coal projects in other regions with a larger share of
the high priority needs. OSM's recent white paper explains the
consequences of this imbalance. For the first 15 years of the program,
95% of all state grants were used for high priority coal projects.
However, over the past 10 years, only 64% have been used for the
program's core objective. And, this percentage will continue to decline
absent changes to the law.
CONSIDERATIONS GOING FORWARD
By the time the current fee authorization expires next year, the
coal industry will have paid $8 billion in AML fees. Simple math tells
us that this sum should have been sufficient to complete both the
already reclaimed and current high priority coal inventory with $3
billion to spare. Will it require $9 billion--perhaps more--to complete
the current high priority coal inventory? The answer will depend upon
choices made about whether and how the program is reauthorized. We set
forth below several of the questions faced in dealing with the current
program structure and requirements. Not surprisingly, each constituency
will have different answers and preferences.
1. Multiple Delivery Mechanisms and Programs
Do we need--can we afford--the multiple delivery mechanisms and
subprograms that divert funds away from the high priority coal
inventory? RAMP is a prime example of this diversion. The program
competes with state needs and has not been funded since 1996.
Nonetheless, 10% of all AML fees paid annually are still allocated to
RAMP which as of last year had accumulated $331 million which cannot be
used for other purposes unless expressly reprogrammed by Congress.
Emergency Programs also present a duplicative system with some states
assuming the responsibility, while 9 states--two of which have the most
emergencies--declining to assume that responsibility as part of their
approved AML programs. States still use a provision of the law added in
1990 that allows funds to be set-aside in anticipation of the fee
expiring in 1995. There is something wrong with the concept of setting
aside industry AML fees for future use, and then calling for the
industry to keep paying because the job is not yet finished.
2. Fund Allocation and Distribution
Should the current allocation and distribution formula be replaced
with a system that directs AML fee revenues to areas with the greatest
need in terms of remaining high priority coal inventory? OSM's white
paper indicates that the historic production (pre-1977) is a close
surrogate for where the high priority coal inventory sites are located.
If such a change is made, what happens to the current allocations?
States that have completed their high priority coal inventory may feel
that they should receive some portion or all of the unexpended balances
in their accounts. Distribution of those amounts will affect funding
requirements. For example, the unexpended state share for the certified
states comprises 30% of the unappropriated AML balance. The allocation
and distribution issues present the most fundamental question: Does
coal AML remain a national problem that still requires of a national
solution? If so, should the solution be administered in a manner more
fitting and efficient for a national problem?
3. Adhering to Priorities
What good are priorities if there are so many and there is not an
overarching requirement to abide by them? Presently, the law sets out
no less than five priorities ranging from the protection of the public
health and safety from extreme dangers posed by abandoned coal mined
lands to the development of land. There is no requirement that AML fees
be used first for the top priority before moving on to lower
priorities. In at least two states, the amount of AML fees used to
reclaim priority 3 areas either approximate or exceed the amounts spent
to reclaim priority 1 and 2 areas. In each case, the amounts spent in
these states for priority 3 projects would have been more than enough
to finish their current unreclaimed priority 1 and 2 inventories.
4. The Inventory
Does the high priority coal inventory serve as a benchmark for
measuring progress and success? Each time it appears the goal becomes
closer, the goal line is moved further away. In 1998, the remaining
high priority coal inventory was less than $2.5 billion. In 1999, the
inventory swelled by an additional $3 billion as a result of a state--
which already accounted for one-third of the inventory--moving up lower
priorities to the priority 1 and 2 inventory. But even when that
inexplicable swelling is removed, the inventory appears to grow by
about $2 for every $1 dollar of high priority coal reclamation. To
some, the inventory has transformed itself from a management tool to a
funding gimmick in order to establish the AML program as a permanent
fixture. Some suggest that the inventory should be frozen to avoid this
temptation and provide focus and discipline for future expenditures.
5. Administrative Costs
How much do we need to spend in order to spend? A General
Accounting Office (GAO) report found that between 1985-1990 $360
million, or 28%, of the $1.3 billion spent during that period was used
for Federal and State administrative expenses. General Accounting
Office, Surface Mining: Management of the Abandoned Mine Land Fund
(July 1991). But even this amount may understate the percentage of
funds used for administration since, as GAO noted, some States
incorporate administrative expenses into their, construction grants
that are counted as reclamation project costs. As for Federal expenses,
GAO reported that during that period OSM spent $137 million for
administration while using about $100 million for reclamation projects.
We are not aware of any single source of information tracking the
amount of AML fees used for administration. But piecing together
various sources related to AML program performance suggests that over
$1 billion has been spent to administer the program.
6. The AML Fee
What should the levels of the fee be and how much more can or
should the coal industry pay into the AML fund? The job may not be
finished, but the lack of AML fees is not the reason.
Mr. Chairman, thank you again for the opportunity to present NMA's
observations on the history of the AML program. We hope the various
considerations will assist you and your Subcommittee as you address the
public policy decisions regarding the coal AML program.
Senator Thomas. Okay. Thank you very much, sir. We
appreciate it.
Mr. McElwaine, support for the bill introduced by Mr.
Peterson--as you know, the bill paid through revenues primarily
generated in the West. Do you have any suggestion on how we
generate additional revenues from the Eastern part of the
country? Or do you suggest transferring all the money from the
West to the East?
Mr. McElwaine. Well, Mr. Chairman, the industry has
benefited significantly from the existence of the AML fund.
Since it was created, in 1977, Congress has, on the basis of
the existence of the AML fund, exempted coal mining from the
provisions of the 1980 and 1987 Superfund statutes, as well as
the 1984 RCRA, subtitle C, statute. And so, Mr. Chairman, if
we're going to give relief to the industry, on the one hand, in
terms of paying for the Abandoned Mine Land Fund, I think
Congress needs to go back in to Superfund and RCRA and look at
those exemptions. I mean, there clearly was justification for
those exemptions, because the--you could say, ``Well, the
industry is covered by AML, therefore that should take care of
the Superfund liability and RCRA.'' But now, if we're going to
say, ``Well, let's not cover them with AML anymore,'' then I
think we need to go back into Superfund, and we need to go back
into RCRA, and say, ``Gee, maybe we need to put some of these
burdens and these obligations on the industry, instead.''
Senator Thomas. I see. My question, of course, was on the
allocation, or the fund it comes from, and where you spend it,
but I understand.
Mr. Gauvin, does Trout Unlimited have any reactions,
particularly, to the re-mining proposition?
Mr. Gauvin. We believe that re-mining is a legitimate
technique of achieving some of the water-quality objectives
that we would like to achieve. And there are some places in
coal country where re-mining is the best approach to dealing
with acid mine drainage. So, properly done, we're fine with it.
Senator Thomas. Sometimes, I suppose a reclamation project
doesn't really have anything to do with water quality.
Mr. Gauvin. There are certainly some parts of the country
where reclamation often has little to do with water quality.
Senator Thomas. Little to do with it.
Mr. Gauvin. But there are places, entire regions of the
country, where reclamation issues are largely about water
quality.
Senator Thomas. Mr. Kane, you indicated that the healthcare
were paid by interest on the trust fund balances.
Mr. Kane. That's right.
Senator Thomas. And, of course, the reason there's interest
is because the money hasn't been paid out of the fund that's
prescribed under the law. How would you resolve that?
Mr. Kane. Well, one of the things that I would recognize is
the fact that Congress has already made a decision on this
issue, back in the early 1990's, when they determined how the
funding would be established. And it was their intent, we
believe that these funds would have an ongoing and stable basis
of funding to provide the healthcare benefits.
One of the things that we think has to be balanced out is
the mine reclamation--the reclamation of abandoned mine lands--
and also the healthcare costs of retired miners. Both of these
are legacy costs of the industry.
The AML fund is an ongoing fund, and we have strongly
supported, along with numerous other of the stakeholders, its
reauthorization. We think that's extremely important.
Senator Thomas. But my question was--under the original
bill, moneys were supposed to go to the States. But they didn't
go to the States, and, therefore, created a fund, and,
therefore, there's interest to pay what you're talking about.
Mr. Kane. That's right, and----
Senator Thomas. If you went by the law and distributed the
fund, there wouldn't be that much interest.
Mr. Kane. Well, we're certainly not against the ongoing
distribution of funds for mine reclamation. That is something
that we think has to be ongoing. As I said earlier, we do
support the cleaning up of these abandoned mine lands. However,
every time funds are collected, they're going to be invested
somehow, and Congress decided to invest those funds to earn
interest. And there was something that had to be done with that
interest. It could either stay in the fund--they felt that it
was the logical thing to do to use those for retiree healthcare
costs. So, we're not against--we're not against the use of
funds for the cleanup of abandoned mine lands, but we also
think that there's going to be interest, always--there's going
to be funds available, and this represents a logical way to use
those funds.
And I want to restate, this is a debate that was held back
in the early 1990's----
Senator Thomas. I know, but my question is--the funds are
there, because the funds haven't been distributed. Isn't that
true?
Mr. Kane. Well, one of the reasons that we came here today
was to address that issue. And we think that the compromise
reached by Representatives Cubin, Rahall, and Peterson
addresses that.
Senator Thomas. To take the money from somewhere else.
Ms. Lewis, you mentioned the age of these folks is
generally pretty old.
Ms. Lewis. Yes, sir.
Senator Thomas. So, they're eligible for Medicare, is that
true?
Ms. Lewis. In our population, currently of about 50,000
beneficiaries, the Medicare eligibility funds all--across all
three funds is about 68 percent. The highest--excuse me, it's
84 percent--the highest eligibility is in the CBF, which is at
94 percent. The 1992 plan is 80 percent. And then the 1993 plan
is 38 percent.
Senator Thomas. I see. I can't remember the details, but
there's been discussion about different groups coming in. When
did the original beneficiaries begin to be recognized?
Ms. Lewis. Well, the funds were established in the 1940's,
60 years ago, under--there was originally a--or 1950----
Senator Thomas. No, but I mean, when the funds to----
Ms. Lewis [continuing]. Under the----
Senator Thomas [continuing]. Offset the----
Ms. Lewis. Under the Coal Act of 1992, the statute required
the establishment of the Combined Benefit Fund, which combined
two funds, a 1950 fund and a 1974 benefit fund. They became the
Combined Benefit Fund. The population was about 108,000
beneficiaries, and it was a closed population.
Senator Thomas. What, generally, do you see in the future?
When these people reach older age, are they going to be
replaced by others, or what--how do you----
Ms. Lewis. Not in the Combined Benefit Fund. The mortality
rate, ultimately, it's right about 9 percent a year right now,
and there will just continue to be mortality and deaths, and,
ultimately, the fund will no longer be populated.
The other fund that was established in 1992 was the 1992
benefit fund.
Senator Thomas. Yes.
Ms. Lewis. And its population, essentially an orphan
population, because the contributing--the paying employers are
out of business. That fund probably, at this point, based on
our information, has reached--it's at the high end, at 11,000.
It will--it's pretty much stabilized, based on our projections
about what we think is coming down the road, and it will
ultimately drop off, as well. And our Attachment B to our
longer testimony shows those numbers in the----
Senator Thomas. When, generally, would these benefits
expire? Would that no longer be necessary? Or is there a time
things end?
Ms. Lewis. Let me just check. I'll have to provide that for
the record, Senator.
Senator Thomas. If you would, please.
Mr. Finkenbinder, how do you respond to the idea that there
will be an increase in priority sites due to an increase in
population density? Is that a concern to you?
Mr. Finkenbinder. It certainly appears to be the case. I'm
not sure where it's going to occur. There's a good possibility
that it can occur. It has in some of the more populated
regions--Evansville, Indiana, for instance. However, Evansville
also, I thought, has a zoning prohibition on coal mining, and
most of the mines have closed down there. So, it's the older
mines, I think, that are coming into contact with more
populated areas. And I think the newer mines, as folks that
have been out to our mines have seen, are located in more
remote areas.
Senator Thomas. I see.
Mr. Finkenbinder. Specifically, I don't have any statistics
to support or deny that.
Senator Thomas. Okay. Thank you.
Senator Bunning.
Senator Bunning. Thank you, Mr. Chairman.
Mr. Finkenbinder?
Mr. Finkenbinder. Yes, sir.
Senator Bunning. I understand that the National Mining
Association has coal companies on both sides of the AML issue,
with only some having healthcare issues. What do you see as the
biggest issue affecting the different coal companies'
constituencies?
Mr. Finkenbinder. That's a good question. I think that the
questions that I have laid out here are the ones that are the
concerns from the AML perspective. So far as the benefits
perspective is concerned, I am not privy to conversations for
the last--since essentially 1992, the National Mining
Association has stood down on these because of the various
positions taken by our membership.
Senator Bunning. I would like to go back to a question that
the chairman asked both the two gentlemen sitting on the far
left. Neither answered the question. It related to East and
West. Most of the money, as the chairman says, is coming out of
the West, and he asked if you think that should be continued,
and neither of you answered it.
Mr. McElwaine. I believe it should, Senator.
Senator Bunning. You believe the Western coalfields should
pay the largest portion?
Mr. McElwaine. Sir, I believe that the legacy issues
involved should be paid for by the industry, wherever it may be
located.
Senator Bunning. The legacy costs should be paid by the
Western coalfields?
Mr. McElwaine. We still mine a fair amount of coal in my
State, too, Senator.
Senator Bunning. Well, we still mine about--we have 550 in
Kentucky, still, sir, to be mined. So you think the West should
pay more?
Mr. McElwaine. I didn't--Senator, with respect, I didn't
say ``pay more.'' I just said that the funding should come from
industry, wherever it may be located, that the program--the
cleanup of legacy sites should not be held hostage to wherever
the industry----
Senator Bunning. Well, don't you think there are more
legacy sites East than West?
Mr. McElwaine. Yes, sir, because mining is historically in
our part of the country. Yes, sir.
Senator Bunning. Okay.
Both the UMWA folks, Ms. Lewis and Mr. Kane, I've have
heard for several years that the CBF and the 1992 funds will go
bankrupt very shortly, yet this has not happened. Why have the
expected bankruptcies not occurred? What is the latest
projection of funding shortfalls for these funds?
Mr. Kane. Would you like to take that?
Ms. Lewis. Senator, the cash analysis for the Combined
Benefit Fund, at this point, shows that it will be short in
August 2007. That is a defined contribution plan, and the
payments are made--essentially, premiums from the coal
operators and, of course, the Medicare demonstration money that
comes in from--revenue from Medicare and also the AML transfer,
annual AML transfer. The 1992 plan is a defined-benefit plan.
The statute requires that the benefits are guaranteed; and,
therefore, the expenses and the needs to pay the health
benefits are to be paid by the existing operators, and they are
assessed both--either a per-beneficiary premium every year or a
unfunded premium--pre-funding premium. And then they're also
required to post a bond in the event that they go out of
business.
So, that fund will always see the benefits paid, but the
projections show that the amount of the annual premiums
assessed on the operators is rising dramatically and will
continue to rise because of the increase in the population.
Senator Bunning. Mr. Kane, I want to go back to something
that you said the Congress just assumed in the relationship
with the funding of 1992 and the CBF. Do you know that there
was never a hearing held in the Ways and Means Committee in the
Congress on that issue? I happened to be on the Ways and the
Means Committee at the time, in the House.
Mr. Kane. I'm not aware of that fact, Senator.
Senator Bunning. That bill came directly from the Senate to
the floor of House of Representatives, and there was very
little discussion on the floor. There was some, but very
little. And the fact that the Ways and Means Committee members
didn't have any input, but it was added on in the Senate and
came to the House as a fact that the Finance Committee had done
or that Senator Rockefeller had added on the floor of the
Senate.
Mr. Kane. I certainly can't dispute that fact, Senator. The
fact remains, though, that this entire program came about as a
result of the Coal Commission, which was chaired by, then-
Secretary of Labor Elizabeth Dole, and it was done with the--
with input--there were representatives of government, labor,
industry, the healthcare industry, academia. The entire issue
was debated widely, on a national level. And this came about as
a result or a recommendation from that commission and was acted
on by Congress.
We believe that when Congress enacted that bill, that they
intended it to be an ongoing program and for the Coal Act to be
funded for as long as it needed.
Senator Bunning. Well, there's some of us that will dispute
that, but I'm not going to get into a hassle over it right now,
for the simple reason that, as a member of the Ways and Means
Committee at the time, it was never brought before our
committee for a discussion.
I yield back.
Senator Thomas. Thank you very much.
Senator Talent.
Senator Talent. Thanks, Mr. Chairman.
I have had other hearings. I haven't been able to be here
for a lot of this. I know this is a difficult issue, because
it's just difficult. I mean, if Senator Craig were here, I
would say we're trying to pour ten pounds of potatoes into a
five-pound sack. Maybe, in his honor, I'll say it anyway.
We've been trying to take care of reclamation, return money
to the States, and also take care of orphan miners, and there's
just not enough money, the way I look at it. I do think that
there may be a clue in how to square the circle if we remember
that at the time these funds were established, I think they
estimated $800 million in top priority reclamation projects,
and we've now collected $8 billion in fees. So, maybe we can
try and seek some kind of finality in that.
I have a letter, which I received from a broad coalition of
coal workers and companies, and chief among which was the UMWA.
And maybe all I'll do, Mr. Chairman, because I know a lot of
the other issues have been covered, is to ask Mr. Kane,
specifically, if he could ascribe the effort that led to this
letter and the compromise proposal that's attached to it, and
why you believe it's something that we ought to consider. And
then I'd ask if I could put the letter in the record, Mr.
Chairman.*
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* The letter can be found in the appendix.
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Mr. Kane. Certainly, I'd be glad to. Thank you, Senator.
The coalition consists of a majority of stakeholders who
are interested in both the long-term viability of the AML
program and the coal industry Retiree Health Benefit Act. The
UMWA is working closely with companies representing the
interests of the BCOA, the reachbacks, the final-judgment
companies, and others on this effort. In the House,
Representatives Cubin of Wyoming, Peterson of Pennsylvania, and
Rahall of West Virginia have taken a leadership role in this
comprehensive reform proposal.
The compromise represents a major breakthrough in resolving
both the reclamation and the orphan retiree healthcare issues
after years of trying to resolve a variety of very complex
issues.
Under the proposal, the concerns raised by other witnesses
today are addressed. All States receive substantially higher
amounts, going forward, to complete their reclamation needs.
And all States, like Wyoming, Kentucky, and the Navajo Nation,
receive their unappropriated State-share balances. At the same
time, proposal provides the long-term solution for the
healthcare needs of the orphan retirees and the UMWA healthcare
funds.
We recommend that the committee consider the comprehensive
proposal being considered in the House under the leadership of
Representatives Cubin, Peterson, and Rahall as the
comprehensive solution to the issues raised in the hearing
today. It is the belief of the coalition that all of the issues
discussed in the hearing today are interrelated and need to be
addressed by Congress in a comprehensive solution. Absent a
comprehensive solution, it is unlikely that any of the issues
can be resolved.
Senator Talent. I thank you, Mr. Kane. I think the proposal
is certainly a good start. It's expensive. I don't know that
we're going to be able to resolve this in any way without
finding some more funds someplace. So, I think it's worth
looking at, and I appreciate your explaining it.
Thank you, Mr. Chairman.
Senator Thomas. Okay, thank you.
Well, thank you. Just one final comment. Mr. McElwaine, you
talked about the East and the West coal. When the Eastern coal
is worth about $50 and the Western coal is worth about $10,
what would you think about changing the fee?
Mr. McElwaine. Senator Thomas, I want to make clear that
the coalitions I work with have not drawn any lines in the
sand.
Senator Thomas. Okay. I'm just making a point.
Mr. McElwaine. Yeah.
Senator Thomas. Senator Alexander regrets that he's unable
to attend, but he has a statement for the record, and we will
include it.
[The prepared statement of Senator Alexander follows:]
Prepared Statement of Hon. Lamar Alexander, U.S. Senator From Tennessee
Abandoned mining lands can pose a serious health and environmental
threat. These lands can contribute to contamination of our waters, make
land unusable, and impact economic development in many rural
communities.
In Tennessee, we have concerns with job loss in our rural
communities. Cleaning up these abandoned mining lands not only corrects
health and environmental hazards, but it also provides jobs in
economically depressed areas. In Tennessee, it is estimated that it
will cost $33 million to clean up the high priority sites and those
sites that impact the general welfare of our rural communities.
Tennessee has the most serious problem with priority 1 and 2 sites of
the non-program states. Tennessee's problems are on par with those of
Arkansas and Maryland which are minimum program states. Senator
Thomas's proposal will permit Tennessee to receive baseline program
funding and clean up our problems sooner.
There is another AML issue that is particularly important to many
Tennesseans. The 1992 Coal Act required certain coal companies to pay
health care benefits to retired union members. This Act impacted
companies that did not promise these benefits. In 1998, the Supreme
Court declared the law unconstitutional for the pre-1974 signatory
companies, including Blue Diamond Coal Company (which is in Tennessee),
and other companies in Pennsylvania, Indiana, Ohio, Virginia, and
Texas.
These so-called ``Super Reach Back'' companies are the only ones
not to be repaid what is justifiably owed to them. Companies who broke
the law and did not pay were not penalized. Others who paid but did not
litigate received a full refund. This issue has come up before the
Congress on numerous occasions, and now is the time to correct this
issue. The ``Super Reach Backs'' should be refunded their payments and
interest like other coal companies.
I am hoping that this hearing will advise the Committee relative to
the appropriate reclamation fee on coal and the appropriate period for
the collection of the fee. I am also hopeful that we can get a better
understanding of the level of effort needed to clean up our nation's
abandoned mining lands. We really need to have a clearer understanding
of the cost associated with our AML problems to determine the
reclamation fee, how long the fee should be imposed, and the minimum
program funding needed to address the high priority problems.
Senator Thomas. I would like unanimous consent, also, to
include in the record statements from Joanna Prukop, Secretary,
Energy, Minerals, and Natural Resource Department of New
Mexico.*
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* The statement can be found in the appendix.
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So, thank you very much for being here. There are some
questions, Ms. Lewis, as to when this time expires and when we
have to do something else to pay for the healthcare and those
kinds of things.
Ms. Lewis. Yes, sir.
Senator Thomas. So, in any event, it's an issue. I think
we're all committed to finding a solution, and we appreciate
very much your being here and for assisting in finding that
solution.
With that, the committee is adjourned.
[Whereupon, at 11:50 a.m., the hearing was adjourned.]
APPENDIXES
----------
Appendix I
Responses to Additional Questions
----------
National Association of Abandoned Mine Land Programs,
Frankfort, KY, October 5, 2005.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate,
Washington, DC.
Dear Senator Domenici: Thank you for providing the Interstate
Mining Compact Commission and the National Association of Abandoned
Mine Land Programs the opportunity to testify before your Committee on
September 27. We appreciate the time before the Committee to comment on
Senate bills 1701 and 961.
Please find below the responses to the follow-up questions from the
committee.
Thank you again for the opportunity to testify and to address these
important questions. Please do not hesitate to contact me if you need
further information.
Sincerely,
Steve Hohmann,
Director, State of Kentucky.
[Enclosure.]
Question 1. You state that ``any adjustment to the current
certification process should not inhibit the ability of states and
tribes to address high priority non-coal projects. Exactly what are you
concerned about, and what should we do or not do?
Answer. In the past, there have been suggestions to change the
provisions of Section 409 of SMCRA by disallowing noncoal work in
states that are not certified and that have high priority coal related
work remaining. We do not believe any changes to Sections 409 are
necessary. States and Tribes should have the option, as is allowed
under current SMCRA guidelines, to reclaim those non-coal sites that
pose an extreme hazard to either residents of the area, or visitors to
the site. If new legislation eliminates this option, states and Tribes
could be forced to reclaim lower priority coal sites while leaving high
priority non-coal hazards in place. Most states do not have programs or
funding in place for reclamation of non-coal hazards, so SMCRA funding
is the only option available to provide protection to the public from
these dangers. New legislation should continue to allow states, those
closest to the problem, an appropriate level of flexibility to
prioritize extreme hazards posed by non-coal sites.
The other concern is with regard to certification under Section
411. Some legislative approaches (including S. 961) would allow the
Secretary (or others) to initiate the certification process on his/her
own volition, rather than on application by the state or tribe. We
believe that this could result in undue pressures on a state or tribe,
thereby throwing its AML program into unnecessary and unproductive
turmoil. Pursuant to the primacy principles of SMCRA, the states and
tribes are in the best position to know whether certification is
appropriate and in the best interests of the state or tribe. OSM
appears to agree with us on this matter, as the agency stated its
intent at the hearing not to pursue Secretarial certification.
Question 2. There seems to be some disagreement about the scope and
priority of abandoned mine problems in each state and nationwide. How
do the States and OSM update their inventories, and how do we make sure
that problems are prioritized consistently from state to state?
Answer. We begin by noting that the alleged ``disagreement'' about
the ``scope and priority of abandoned mine problems'' does not reside
with OSM or the states. Rather, detractors of the AML program and
opponents of reauthorization legislation have used it as a smokescreen.
They have little knowledge of how the inventory operates or how the
states and tribes prioritize the limited funding they receive each
year. The allegation also demonstrates complete unfamiliarity with or
lack of comprehension about the nature of the AML inventory envisioned
by Congress. The inventory has always been a planning tool that would
by its nature evolve to reflect new problems and priorities. OSM's own
guidance on how to define priority problems does not require or even
anticipate similar results from state to state, given the fact that
diversity is inherent in the concept of state primacy under SMCRA.
State, tribes, and OSM update the AML inventory (AMLIS) when new
problems are reported and as reclamation abates an AML problem. Section
403 of SMCRA and OSM directives governing the AML inventory provide a
framework for states and tribes to consistently prioritize AML
problems. However, states and tribes exercise individual discretion in
prioritizing AML problems and must have flexibility because of varying
land uses and population densities occurring in different regions of
the country. An AML problem categorized as priority I or II in the
western U.S. may not necessarily receive the same priority in the east.
We believe Congress intentionally allowed this flexibility pursuant to
the primacy scheme set forth in SMCRA and subsequent amendments. It has
also been reaffirmed by OSM in its policy directives, which provide for
AML programs to be adaptable to different regions of the country,
thereby extending program safeguards to as many citizens as possible.
Question 3. In Mr. Finkenbinder's testimony, he complained about
how the ``goal line'' keeps moving with respect to the inventory of
priority sites. Do you agree with the assertion that less serious sites
are being added to the list as more problematic sites are addressed?
What do you say in response to testimony we have before us today that
one reason for the increase in priority sites is due to an increase in
population density in and around old coal mining sites?
Answer. Mr. Finkenbinder, in delivering testimony for the National
Mining Association (NMA), complained of many things, one of them being
the moving ``goal line'', but he failed to comment on the legislation
that was the subject of the hearing and offered no constructive
proposal to deal with the failings he cited.
The ``goal line'' is a euphemism concocted and perpetuated by
interests whose only ``goal line'' is to end the AML program. While we
understand that the AML program was not intended to last forever, we do
believe it was intended to remain in place as long as there are
nationwide AML problem to address. (We agree with the statement made by
Mr. Tom Shope of OSM in his testimony when he stated that, ``The
Administration believes the AML problem is a national problem that
calls for a national solution.'') Therefore, the ``goal line'' cannot
be expressed in terms of an immutable number of AML problems in an
inventory. The ``goal line'' must be expressed as a mission. The
mission of the program is defined not by the inventory, but rather by
the framework outlined by Congress in Title IV, its subsequent
amendments, and OSM interpretations. The mission is to eliminate coal
and noncoal AML problems (not AML mine sites) in a scheme that
generally requires reclamation based on a priority system until we are
no longer faced with a national problem requiring a national solution.
The NMA wishes to limit the scope, or goals, of the AML program by
discarding OSM policies and Congressional intent embodied in amendments
to Title IV since SMCRA was adopted in 1978. In doing so, NMA is
dismissing the flexibility needed by individual states and tribes to
work on AML problems that are most important to each of them. This
enables NMA to misrepresent the goal of the AML program as a single
purpose and then mistakenly claim that the goal has not been met.
There are several reasons why the AML inventory continues to grow.
The most important are matters of funding reality. First, an AML site
can produce many AML problems. Often, the state reclamation authority
cannot reclaim the mine itself; it can only reclaim the AML problem the
site caused. Because of this reality, the site can cause many problems
that take years to manifest. For instance, a large AML contour mine can
cause a landslide in the year 2005. The AML program will undertake a
project to reclaim the landslide, but cannot possibly afford to reclaim
the entire contour mine. So the mine remains in its unreclaimed state
and can cause another landslide or other AML problems in the future.
Hence, it becomes apparent that because the mission of the program is
to focus on AML problems, and its financial limitations preclude
enormous reclamation projects, the ``goal line'' mentality that defines
the AML problem within a finite universe is unreasonable.
Second, the NMA states that less than 40% of the funds collected
for the AML program have found their way to on-ground reclamation of
high priority, coal-related problems. NMA's statement insinuates this
is due to watered down priorities, abuse of priorities by the states,
and excessive administrative costs. However, the real culprit
accounting for the low percentage of funds for reclamation is the
unappropriated balance. In fact, in 2001 OSM reported that only 54% of
the fees collected have been allocated to the states over the life of
the AML program. The balance, which now stands at $1.6 billion, is the
single most important factor limiting the amount of money available for
on-ground AML reclamation. Year after year of dwindling appropriations
for AML programs have seriously compromised states' and tribes' ability
to address the AML problems on the inventory. Inflated construction
costs compound the problem by shrinking the buying power of the few AML
dollars that reach the AML programs. Without a doubt, the ``moving goal
line'' scenario would be minimized, if not eliminated, had state and
tribal AML programs been given full funding, vis-a-vis collections,
over the past 27 years. In this context, and using the ``goal line''
analogy here for the sake of argument, it is obvious that the goal line
has not been moved. Rather, the state and tribal AML programs have been
repeatedly penalized and set further back from the goal line.
Third, new AML problems emerge all the time. The states and tribes
stand by our statement made in testimony that one reason for the
increase in the number of priority AML problems (mistakenly interpreted
as ``moving the goal line'') is the movement of populations into areas
where abandoned mines exist that were formerly rural and consequently
had little or no human intrusion. Once subdivisions and neighborhoods
expand into these areas, AML sites that once posed no threat because of
their remoteness now become dangerous to people who live near them. We
have no quantitative statistics to depict the number of AML problems
that have appeared because of population migration. However, this is a
general trend our AML programs have observed in the past few years and
it continues to occur.
We also take issue with another observation made in the NMA
statement. NMA quotes a GAO report that states that, between 1985 and
1990, the states and tribes spent 28% of their AML grant funds on
administrative costs to operate the AML program. NMA goes on to say
that this percentage is probably low since AML programs bury
administrative costs in their construction projects to avoid detection.
First, Title IV of SMCRA allows states and tribes to pay
administrative costs from their AML grants. Most states would not have
an AML program if not allowed to fund program administration from the
AML grant.
Second, the percentage of administrative costs borne by the AML
program is determined by the definition of administrative costs. For
example, while NMA may believe that AML project inspection is an
administrative cost, OSM has determined (as do many other federal
agencies with similar construction-based programs) that project
inspection is a legitimate construction cost. Certainly, if the AML
agency were to contract the design and construction to an outside
consultant, all design and inspection costs would be included in the
construction account, not the administrative account. So the same
should hold true when the agency decides to assume the duty of design
and inspection. In fact, it is often the case that the agency can
assume these duties for less expense than if done by a third party,
thus saving overall AML funds regardless of whether it is an
administrative or construction cost.
Third, in January 2001 the states and tribes of the NAAMLP
conducted their own survey of the administrative costs associated with
the AML program. We found that percentages varied widely from state to
state (mainly because of how states define administrative costs) but
the average was 14%. This percentage was determined based upon the
definition of administrative costs found in the OSM Federal Assistance
Manual in Chapter 5-10(A).
To further support our position on administrative costs, we point
to the OSM 2004 Annual Report. In Table 3 on page 16 in the Abandoned
Mine Land section of that report, OSM itemizes administrative costs for
the grant year. Table 3 indicates that states and tribes spent
$24,094,797 on administrative costs out of a total grant of
$200,905,691. In other words, according to OSM states and tribes spent
12% of the grant on administrative costs. This correlates very closely
with the percentage from the 2001 NAAMLP survey. We believe the
percentages we have presented to the committee represent a more
accurate picture of ``how much we need to spend in order to spend''
than the numbers quoted by NMA.
______
State of Wyoming,
Department of Environmental Quality,
Cheyenne, WY, October 5, 2005.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate,
Washington, DC.
Dear Senator Domenici: Thank you for giving the State of Wyoming
the opportunity to testify before your committee on Senate Bills 1701
and 961. Wyoming is pleased to provide the following written response
for the record to the questions enclosed with your letter of September
29, 2005.
Sincerely,
Evan J. Green,
AML Administrator.
[Enclosure.]
Question 1. There seems to be some disagreement about the scope and
priority of abandoned mine problems in each state and nationwide. How
do the States and OSM update their inventories and how do we make sure
that problems are prioritized consistently from state to state?
Answer. The Office of Surface Mining (OSM), through the Casper
Wyoming Field Office, reviews the State's Abandoned Mine Land Inventory
System (AMLIS) entries for accuracy and appropriate priority
designation.
Broad guidelines for the States and Tribes to use in prioritizing
hazardous sites are contained in the Surface Mining Control and
Reclamation Act (SMCRA). These guidelines are further defined by the
criteria that OSM directs the States to use when entering hazardous
sites into AMLIS. Wyoming believes that individual states should retain
the flexibility to prioritize sites and budget sites for reclamation
based on the state's assessment of the hazards to public health and
safety. Abandoned mine sites may pose different problems in densely
populated states like Pennsylvania or West Virginia than in a sparsely
populated state. Wyoming relies on the integrity and experience of its
mine reclamation professionals in the assessment of hazards to citizens
and visitors
Wyoming has just completed a comprehensive statewide inventory
process designed to gather technical and cost data relative to
remaining coal and non-coal hazards. Wyoming has a high level of
confidence in the accuracy of this process. Over 10,000 sites were
identified from original sources and databases, including the Bureau of
Mines, USGS, the Wyoming Geological Survey, local museums, and company
records. These sites were then screened to eliminate duplicates and
verify production records. About 1,200 sites were singled out for field
verification. Based on site visits by qualified mining and reclamation
engineers, cost data is now being developed for 393 priority 1 and
priority 2 coal sites, and for 650 hazardous non-coal sites. These
sites will be placed on the Abandoned Mine Land Inventory System
(AMLIS) as funds are available to budget these sites for reclamation.
Question 2. In Mr. Finkenbinder's testimony, he complained about
how the ``goal line'' keeps moving with respect to the inventory of
priority sites. Do you agree with the assertion that less serious sites
are being added to the list as more problematic sites are addressed?
What do you say in response to testimony we have before us today that
one reason for the increase in priority sites is due to an increase in
population density in and around old coal mining sites?
Answer. Wyoming's inventory and budgeting process considers only
Priority 1 and Priority 2 hazards. Priority 3 sites (primarily
environmental issues) are reclaimed only in conjunction with P1 and P2
sites. For example, coal slack in a drainage would be reclaimed only if
the material could be used economically as backfill to close a P1 or
P2. Wyoming has a sufficient inventory of high priority sites and does
not add less serious sites to our inventory. We do retain an internal
inventory of ``less serious'' sites. Responsible AML program management
would dictate that those responsible for protecting the public from AML
hazards maintain an accurate inventory of sites that may become
Priority 1 in the future due to opening of subsidence features, mine
roof failures, or erosion into open workings. Note that these ``less
serious'' sites are not entered into AMLIS.
The number and cost of remaining sites has been increasing for a
number of reasons. Historical coal fields are notoriously unstable. As
mine timbers decay and old closures deteriorate, new priority 1 sites
open up exposing all the dangers associated with public access to
underground workings. Costs of reclamation have increased dramatically
over normal inflation due to rising costs of fuel and construction
materials. The longer reclamation is delayed, the more it will cost.
Wyoming agrees that one reason for an increase in high priority
sites is the encroachment of subdivisions into historical mine fields.
Also, as more and more people utilize recreational opportunities in the
West, visitation to remote but easily accessible sites on public land
increases the possibility of a catastrophe. People in Western states
have died driving into mine shafts or air vents, overturning vehicles
in closed but unreclaimed subsidence features, riding off-road vehicles
over highwalls, and exploring open mine shafts and adits. Individual
states are in the best position to prioritize hazards to public health
and safety within the guidelines provided by SMCRA.
______
United Mine Workers of America,
Fairfax, VA, October 14, 2005.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate,
Washington, DC.
Dear Mr. Chairman: I want to thank you for the opportunity to
testify at the September 27, 2005 hearing on reauthorization of AML
program and reform of the Coal Act. We appreciate the committee's
continued interest in the UMWA Funds and its programs to keep the
promise of lifetime health care to retired coal miners.
Attached are answers to the questions you submitted for the record.
Please let me know if I can be of further service as the committee
finalizes its work to reauthorize the AM1 program.
Sincerely,
Daniel J. Kane
International Secretary-Treasurer.
[Enclosure.]
UMWA Responses to Questions From Chairman Domenici
Question 1. In your testimony, you describe proposed legislation
that you refer to as the ``Cubin-Peterson-Rahall'' compromise. This so-
called ``compromise'' does seem to provide something for everyone, but
it's unclear at this point exactly how much it would cost. Your
testimony indicates that, in addition to lowering the AML fee and
paying back the state share balances, the ``compromise'' would provide
for the transfer of AML Fund interest and unappropriated funds to the
``CBF, 1992 and 1993 Funds to pay health benefits for orphans and cover
any deficits.'' In addition, you describe the use of additional
revenues from mineral leasing and royalty revenue ``as needed'' to
cover ``health care costs of orphan retirees in the CBF, 1992 and 1993
Funds.'' Exactly what portion of the costs of these funds would the
legislation cover? In particular, since the 1992 Fund is completely
paid for by specified companies, and as such, will not run a
``deficit,'' how would this legislation determine the level of payments
to be made for that Fund? What is the total amount of government
liability for these Funds under this proposal?
Answer. The Cubin-Peterson-Rahall compromise would provide support
for unassigned CBF beneficiaries and would permit the use of AML
interest to cure deficits in the CBF, much as Congress has done on
three separate occasions with emergency appropriations of AML interest.
It also would permit transfers to help pay for orphan beneficiaries in
the 1992 and 1993 Plans. For the 1993 Plan, the compromise would limit
transfers only to orphan retirees who were in the 1993 Plan as of
December 31, 2005.
The compromise legislation would also substitute mineral leasing
revenues for premiums currently paid by so-called ``reachback''
operators and would reimburse contributions made by the ``final
judgment'' companies\1\ to the CBF prior to the Eastern Enterprises
Supreme Court decision.
---------------------------------------------------------------------------
\1\ ``Final judgment'' companies are companies that had received a
final adverse judgment on their court challenge to the Coal Act prior
to the Supreme Court ruling in Eastern Enterprises. These companies
were relieved of prospective liabilities to the CBF as a result of the
Eastern ruling, but did not receive reimbursement of previously paid
premiums because their cases had gone to final judgment and the courts
upheld the CBF's position regarding reimbursement.
---------------------------------------------------------------------------
The Coal Act provides that the trustees of the 1992 Plan should set
the premium rates paid by coal operators at a level sufficient to cover
the costs of running the plan. Consequently, the 1988 Agreement
operators are billed whatever premium amounts are needed to pay the
health costs of the plan and are required by law to pay such premiums.
Therefore, your observation is correct that there is no projected
deficit in the 1992 Plan. The problem is that the orphan population has
grown significantly in recent years due to bankruptcies of several
large companies, including Bethlehem Steel in 2003 and Horizon Natural
Resources in 2004. These two companies alone added about 7,000
beneficiaries to the 1992 and 1993 Plans. As the population grows and
medical costs escalate, an ever-increasing burden is placed on the
companies contributing to the plan. For example, the pre-funding
premium for the 1992 Plan has increased from $82 per beneficiary in
1993 to nearly $650 per beneficiary in 2006.\2\ The pre-funding premium
is projected to increase to $3,470 per beneficiary in 2017.
---------------------------------------------------------------------------
\2\ Rates for 2006 have not been finalized. The 1992 Plan is funded
through ``per beneficiary premiums'' required to be paid by last
signatory employers to whom retirees may be attributed and by ``pre-
funding premiums'' paid by 1988 Agreement operators. Because most of
the Plan's population cannot be attributed to any employer that remains
in business, most of the Plan's expenses are paid by the operators who
pay pre-funding premiums. The pre-funding premium cost is therefore
equivalent to the cost of orphan retirees and beneficiaries in the 1992
Plan, and this cost is paid by operators who did not employ the orphan
miners. The amount of pre-funding premium paid by each 1988 Agreement
operator is determined by the number of retiree the operator has in its
single employer health plan mandated to be maintained by section 9711
of the Coal Act. (Hence the term ``9711 plan.'') In addition, operators
who provide 9711 plans must post security with the 1992 Plan to pay for
three years of benefits in case the 1992 Plan must assume the
obligation to provide benefits.
---------------------------------------------------------------------------
In addition, if the reachback and final judgment companies are to
receive relief under the compromise, it only seems fair to also provide
some orphan retiree relief to the remaining companies that will
continue to finance the UMWA Funds. Under current law, the final
judgment companies have no ongoing liability and the reachback
companies only pay for the costs of their retirees in the CBF. They
have no Section 9711 retiree obligations, nor do they contribute to the
1992 or 1993 Plans. In contrast, the 1988 Agreement employers pay for
their retirees in the CBF, over 40,000 beneficiaries in their Section
9711 plans under the Coal Act, as well as the orphan costs of about
18,000 beneficiaries in the 1992 and 1993 plans. Under the compromise,
the remaining contributing operators will continue to pay for their own
retirees, but will receive help with the orphan retirees from federal
sources.
The total expenditures under the compromise bill for health care
benefits are projected at $2.3 billion over ten years, about $1.4
billion more than under current law.\3\ The projection for the CBF is
$1.1 billion, $640 million for the 1992 Plan and $560 million for the
1993 Plan. We understand that the Congressional Budget Office (CBO)
scored the bill in July 2005 as increasing spending for health benefits
about $1.5 billion and increasing revenues about $0.7 billion, for a
net increase of $0.8 billion. We also understand that the Senate Budget
Committee and the House Resources Committee have asked CBO to provide
an analysis on the compromise.
---------------------------------------------------------------------------
\3\ Under current law, the CBF is entitled to interest earned each
year on the AML Fund up to the amount need to pay for unassigned
beneficiary costs. OSM maintains there is a cap of $70 million on the
annual transfers. The UMWA disagrees with OSM about the $70 million
cap. Even conceding for argument's sake that OSM is correct, this would
imply a transfer of $700 million over ten years.
---------------------------------------------------------------------------
Question 2. We now have a long history of transfers of money from
the federal government to keep the CBF solvent. I understand your
desire to ensure the solvency of the 1992 and 1993 Funds as well.
However, please summarize your case for why the American taxpayer
should assume the liability for the 1992 and 1993 Funds. According to
Ms. Lewis' testimony, the costs of the 1992 Fund are required to be
covered by industry operators and will not run a deficit. Why should
Congress assume responsibility for the 1993 Fund, which is entirely the
product of a collective bargaining agreement between the UMWA and coal
operators?
Answer. The underlying premise of the Coal Commission
recommendations and the Coal Act was that each coal operator would pay
for its own retirees and mechanisms would be put in place to prevent
dumping of retiree health obligations onto other operators and the UMWA
Funds. If that premise had in fact been fulfilled, there likely would
not be a need to seek relief for the 1992 and 1993 Plans. However, the
bankruptcy laws have been used by companies to shed their retiree
obligations-both contractual and Coal Act--while the underlying assets
of the companies remain in business, competing with the companies that
shoulder the burden for their retirees. The steel plants and coal mines
owned by LTV, Bethlehem Steel and Horizon Natural Resources continue to
operate today, generating revenues for their owners that are enhanced
because the bankruptcy laws allowed them to dump their retiree health
liabilities onto the UMWA Funds. The remaining contributing employers--
who continue to pay for their own retirees--have shouldered an
additional orphan burden because the bankruptcy laws have been used as
a laundromat by some employers to wash away their Coal Act and
contractual retiree health care obligations. This is precisely the sort
of retiree dumping that the Coal Act was intended to prevent. Because
the law has failed to prevent the dumping of retirees onto the UMWA
Funds, however, we are in danger of returning to the situation the Coal
Act sought to address--a small number of employers burdened with the
retiree costs of companies that have avoided their obligations, often
companies that are in direct competition with the remaining
contributing employers.
All three plans--the CBF, 1992 and 1993 Funds--are successors to
the original UMWA Welfare Fund that was negotiated in the White House
in 1946 between the UMWA and the Federal Government during a period of
government seizure of the nation's bituminous coal mines. Since that
time, every branch of the federal government has had a role in shaping
the UMWA Funds. When the Coal Commission examined the coal industry
retiree health problem in detail in 1990, it concluded that:
``Retired miners have legitimate expectations of health care
benefits for life; that was the promise they received during
their working lives, and that is how they planned their
retirement years. That commitment should be honored.''
All of the retirees, regardless of the plan they receive their
health benefits from, worked in the same mines, under the same
contracts, facing the same dangerous conditions to produce energy for
America. They all have legitimate expectations of health benefits for
life. They all received the same promise. The only difference is the
date of their retirement. Every retiree who is covered by the
compromise was retired or working in the industry at the time the
lifetime promise was made. We believe that orphan retirees, those whose
companies have gone out of business, have the same legitimate
expectations as those whose employers remain in business. The problem
is how to fund those benefits. The situation that is developing now is
the same issue that led to passage of the Coal Act; a dwindling number
of employers bearing a heavy burden for retirees who did not work for
them.
The financing mechanism contemplated by the Cubin-Peterson-Rahall
compromise would first use interest money from the AML Fund, then
revenues from on-shore mineral leasing, then would look to general
revenues only if those sources of financing proved insufficient.
Question 3. What is the status of the 1993 Fund? We understand that
it is the product of a collective bargaining agreement. When does that
collective bargaining agreement expire, and what is the status of
negotiations regarding a new agreement?
Answer. As of September 30, 2005 there were 7,117 total
beneficiaries in the UMWA 1993 Benefit Plan, up from 3,887 at the same
point in 2004. The 1993 Plan had net assets available for future
benefits of $11.2 million as of August 31, 2005. The current projection
is that the 1993 Plan, absent additional funding, will exhaust its cash
sometime in the first half of 2006. The National Bituminous Coal Wage
Agreement of 2002 (NBCWA) is scheduled to expire December 31, 2006.
Negotiations for a successor agreement have not yet begun.
UMWA Responses to Questions From Senator Bingaman
Question 1. Please provide a state-by-state breakdown of the number
of UMWA health plan beneficiaries.
Answer. A list of beneficiaries by state and health plan is
attached.
Question 2. How many so-called ``orphaned'' or ``unassigned''
beneficiaries are in each Fund?
Answer. Attached is a population projection for the three plans
that was prepared by the UMWA Funds based on actuarial projections by
the Funds health actuary, King Associates. In 2005, the average
population of the CBF was 38,518 beneficiaries, of which 16,721 were
unassigned beneficiaries. For the 1992 Plan, the average population in
2005 was 11,392 beneficiaries, the great majority of whom are orphan
beneficiaries. When companies go out of business, the 1992 Plan
collects the bond or other security that is required by the Coal Act
and any other money that may be due the Plan from the company or its
estate. These monies are then used to pay for those beneficiaries for
as long as the money lasts, at which time they would be considered
orphans. For the 1993 Plan, all of the beneficiaries are considered
orphans because, by definition, their employers are no longer in
business. As of September 30, 2005, there were 7,117 total
beneficiaries in the 1993 Plan.
UMWA Responses to Questions From Senator Salazar
Question 1. Which of these legislative proposals does the UMW
prefer? Could you explain why you favor a certain proposal over others?
Answer. The UMWA is supporting the Cubin-Peterson-Rahall compromise
legislation, which has not yet been introduced in the U.S. Senate. Of
the two bills pending in the Senate (S. 961 by Senator Rockefeller and
S. 1701 by Senator Thomas), we believe S. 961 is a better bill because
it recognizes the need for assistance with orphans in the 1992 and 1993
plans. However, the Cubin-Peterson-Rahall compromise offers better
financial mechanisms to ensure that the promise of lifetime health care
to coal industry retirees is fulfilled. In addition, the compromise
deals comprehensively with Coal Act issues raised by all interested
parties, including the retirees, contributing employers, the
``reachback'' companies and the ``final judgment'' companies.
Question 2. It appears that you are working hard to reduce
healthcare costs by using a number of measures--given the rising cost
of healthcare, your efforts are noteworthy. Have you worked with other
healthcare systems, like the Veterans Affairs system, to develop
policies? Are their certain cost-saving measures that you are precluded
from implementing?
Answer. The UMWA Funds has been the site of a Medicare
demonstration program since 1990, which has made the Funds a test bed
for developing, evaluating and disseminating new programs for the care
of chronically-ill, frail, elderly beneficiaries. The central thrust of
the Funds managed care activities is to ensure that beneficiaries
receive medically necessary care at the appropriate level in a manner
that is consistent with standards of high quality and cost
effectiveness.
According to the results of a 2004 study conducted by Mercer Human
Resources Consulting, the beneficiary population served by the UMWA
Funds has a 35% percent greater burden of illness compared to the
general Medicare population. On a series of biannual surveys conducted
by the UMWA Funds, over 50% percent of the responding beneficiaries
reported their health as ``fair'' or ``poor'' as distinguished from the
other available categories of ``excellent,'' ``very good,'' or
``good.'' The Mercer study further reported that the cost of health
care for the plans was significantly less--by seven percent--than the
level to be expected for the burden of illness found in the population.
We believe this result lower than expected costs in a population with
greater than average health burdens--is a direct result of the UMWA
Funds managed care programs.
These programs include contracts with hospitals and other providers
to pay at Medicare levels for the plans' Medicare and non-Medicare
eligible beneficiaries and the establishment of a network of durable
medical equipment providers with bargained lower costs. Costs in the
plans' prescription drug benefit programs are managed by use of co-pay
incentives for use of mail-order drugs, requirements for use of
generics when available in the absence of medical necessity for brand
name drugs, and a preferred product program encouraging use of less
expensive therapeutic equivalents in important drug classes. The plans
also employ expert medical management teams to ensure the most
effective courses of treatment, especially for beneficiaries with a
high burden of chronic illness, and these services help to reduce
hospital admissions and save costs over the long term. A full report on
the UMWA Funds managed care programs was submitted for the hearing
record as an attachment to the Funds testimony.
The UMWA believes these efforts have proven effective and we
consistently encourage the trustees and staff of the UMWA Funds to
develop innovative programs that will improve the quality and cost of
care given to our retirees. We do not share the philosophy that seems
prevalent in many corporate plans that the way to ``control'' costs is
to ``shift'' them to the beneficiary. While these efforts may
temporarily lower the cost to the corporate sponsor (at the expense of
the beneficiary), they do nothing to tackle the underlying problem of
escalating health costs.
UMWA HEALTH AND RETIREMENT FUNDS DISTRIBUTION OF BENEFICIARIES BY STATE
AND PLAN
[Data Current as of 08/31/2005]
------------------------------------------------------------------------
CBF 1992 BP 1993 BP Total
------------------------------------------------------------------------
AK.......................... 12 2 3 17
AL.......................... 1,343 216 138 1,697
AR.......................... 163 7 1 171
AZ.......................... 89 13 0 102
CA.......................... 159 6 2 167
CO.......................... 382 130 12 524
CT.......................... 15 1 0 16
DC.......................... 11 0 0 11
DE.......................... 27 5 0 32
FL.......................... 777 130 39 946
GA.......................... 127 24 5 156
HI.......................... 0 1 0 1
IA.......................... 15 2 0 17
ID.......................... 12 0 0 12
IL.......................... 974 1,019 868 2,861
IN.......................... 530 387 528 1,445
KS.......................... 45 63 57 165
KY.......................... 4,661 1,282 636 6,579
IA.......................... 12 0 0 12
MA.......................... 9 1 0 10
MD.......................... 209 20 2 231
ME.......................... 1 1 0 2
MI.......................... 228 6 2 236
MN.......................... 10 1 2 13
MO.......................... 71 14 25 110
MS.......................... 15 1 1 17
MT.......................... 40 3 0 43
NC.......................... 394 82 35 511
ND.......................... 3 0 0 3
NE.......................... 6 0 0 6
NH.......................... 6 0 0 6
NJ.......................... 73 4 0 77
NM.......................... 75 19 2 96
NV.......................... 21 4 2 27
NY.......................... 124 2 2 128
OH.......................... 2,457 236 159 2,852
OK.......................... 138 15 6 159
OR.......................... 18 0 0 18
PA.......................... 7,119 3,089 1,185 11,393
PR.......................... 0 2 0 2
RI.......................... 2 0 0 2
SC.......................... 141 34 8 183
SD.......................... 1 2 3
TN.......................... 1,014 105 46 1,165
TX.......................... 88 24 4 116
UT.......................... 413 74 61 548
VA.......................... 3,326 540 365 4,231
VT.......................... 2 0 0 2
WA.......................... 100 2 2 104
WI.......................... 16 4 0 20
WV.......................... 11,423 3,722 2,889 18,034
WY.......................... 97 2 4 103
Other....................... 3 1 0 4
-------------------------------------------
Total....................... 36,997 11,296 7,093 55,386
------------------------------------------------------------------------
UMWA HEALTH & RETIREMENT FUNDS KING ASSOCIATES ACTUARIAL PROJECTIONS THROUGH 2017
[Updated to Most Current Available Information--September 22, 2005]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Plan Year 2002 2003 2004 2005 2006 2007 2008 2009 2010
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Combined Benefit Fund
Ending Fund Balance (000's).............................. ($10,822) ($29,419) ($24,735) ($28,202) ($64,016) ($64,399) ($135,744) ($196,370) ($253,614)
Annual Deficit (000's)................................... ($18,597) $4,684 ($3,487) ($35,814) ($383) ($71,345) ($60,626) ($57,244)
Average Beneficiary Population........................... 52,034 47,298 42,856 38,518 34,714 31,186 27,933 24,953 22,233
Avg. Unassigned Beneficiary Pop.......................... 15,614 16,597 17,302 16,721 15,533 14,370 13,244 12,165 11,138
1992 Benefit Plan
Prefunding Premiums Collected (000's).................... $21,195 $23,768 $20,819 $15,875 $26,059 $44,732 $59,190 $61,028 $62,869
Average Beneficiary Population........................... 6,432 8,126 10,618 11,392 10,917 10,430 9,931 9,432 8,936
1993 Benefit Plan
Ending Fund Balance (000's).............................. ($261) ($309) ($192) $1,292 ($19,769) ($49,614) ($90,598) ($139,183) ($195,128)
Annual Deficit (000's)................................... ($48) $117 $1,484 ($21,061) ($29,745) ($41,084) ($48,565) ($55,985)
Average Beneficiary Population........................... 2,948 3,357 3,902 5,530 7,535 8,248 8,780 9,142 9,374
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Figures reflect the Funds' estimates of CMS prescription drug funding, including Medicare demonstration funding through September 30, 2007 and Retiree Drug Subsidy beginning January 1, 2006.
Figures also reflect a preliminary estimate of a Part A risk contract payment to CMS during fall 2006, based on the latest available data.
______
UMWA HEALTH & RETIREMENT FUNDS KING ASSOCIATES ACTUARIAL PROJECTIONS THROUGH 2017
[Updated to Most Current Available Information--September 22, 2005]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Plan Year 2011 2012 2013 2014 2015 2016 2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
Combined Benefit Fund
Ending Fund Balance (000's).................... ($307,041) ($354,218) ($399,897) ($443,876) ($486,037) ($526,143) ($564,107)
Annual Deficit (000's)......................... ($53,427) ($47,177) ($45,679) ($43,979) ($42,161) ($40,106) ($37,964)
Average Beneficiary Population................. 19,759 17,518 15,500 13,636 11,972 10,545 9,289
Avg. Unassigned Beneficiary Pop. 10,186........ 9,252 8,400 7,579 6,824 6,164 5,568
1992 Benefit Plan
Prefunding Premiums Collected (000's).......... $64,687 $66,239 $87,854 $69,292 $71,076 $73,295 $75,449
Average Beneficiary Population (000's)......... 8,444 7,938 7,417 8,901 6,436 6,029 5,637
1993 Benefit Plan
Ending Fund Balance (000's).................... ($258,640) ($329,797) ($408,669) ($495,584) ($591,162) ($698,410) ($812,250)
Annual Deficit (000's)......................... ($63,512) ($71,157) ($78,872) ($86,895) ($96,598) ($105,248) ($115,840)
Average Beneficiary Population................. 9,522 9,591 9,585 9,541 9,482 9,425 9,372
--------------------------------------------------------------------------------------------------------------------------------------------------------
Figures reflect the Funds' estimates of CMS prescription drug funding, Including Medicare demonstration funding through September 30, 2007 and Retiree
Drug Subsidy beginning January 1,2006.
Figures also reflect a preliminary estimate of a Part A risk contract payment to CMS during fall 2006, based on the latest available data
______
National Mining Association,
Washington, DC, October 14, 2005.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate,
Washington, DC.
Dear Chairman Domenici: The National Mining Association (NMA)
appreciates the opportunity to testify before the Senate Committee on
Energy and Natural Resources on September 27, 2005, to give testimony
regarding S. 1701 and S. 961.
The following are NMA's responses to questions in writing received
by NMA on September 29, 2005, from Chairman Domenici and October 11,
2005, from Ranking Member Bingaman.
Sincerely yours,
David O. Finkenbinder,
Vice President, Government Affairs.
[Enclosure.]
Responses of David Finkenbinder to Questions From Senator Domenici
Question 1. In your testimony, you complained about how the ``goal
line'' keeps moving with respect to the inventory of priority sites. Do
you have any data to support the assertion that less serious sites are
being added to the list as more problematic sites are being addressed?
What do you say in response to testimony we have before us today that
one reason for the increase in priority sites is due to the increase in
population density in and around old mining sites?
Answer. The point made in NMA's testimony is that the high priority
inventory has continued to expand while there appears to be only
relatively modest progress made in on-the-ground reclamation of that
inventory. In our testimony we noted that when the National Academy of
Sciences (NAS) reviewed the performance of the AML program half way
through the original authorization period (1986), NAS reported that
almost all states indicated they would complete reclamation of their
priority 1 & 2 inventory by the time fee authorization expired in 1992.
The efficacy of the AML inventory, in terms of its lack of consistent
criteria and the application of the criteria, has been the subject of
controversy over the years. In addition to the NAS study we cited in
our testimony, GAO (``Surface Mining--Information on the Updated AML
Inventory,'' 88-196BR) and OSM (``Assessment, Evaluation, and Analysis
of the Fee Collection Provisions and the AML Program of SMCRA,'' August
1990) have also documented this concern. We have attached a table from
the OSM report that shows the extraordinary increase in the inventory
between 1983 and 1989 as well as the results of the inventory review
mandated under the FY1989 Interior Appropriations Bill. You will also
note the dramatic change in various states' share of the inventory as
the inventory was expanded and revised in a relatively short period of
six years. As the OSM report notes, some states were generous in adding
sites and the attendant cost estimates due to the linkage between the
inventory share and funding levels.
Our other point about the inventory and priorities was that several
states expended considerable sums on Priority 3 sites while substantial
amounts of unreclaimed Priority 1 and 2 sites remained in their states.
The data contained on OSM's website indicates that Indiana and
Illinois, for example, have actually expended more AML money on
priority 3 sites than the Priority 1 & 2 sites in their states.
We have no reason to doubt that the increase in the Priority 1 & 2
inventory is in part a result of the increase in population density
around certain AMLs. However, to our knowledge no one claims that
population density is the sole or even perhaps the principal reason for
change in the Priority 1 & 2 inventory.
Question 2. In his testimony, Mr. Kane describes a proposal he
refers to as the ``Cubin-Peterson-Rahall compromise.'' What is the
position of the National Mining Association on this proposal?
Answer. The NMA has no position on the ``Cubin-Peterson-Rahall
compromise.''
Responses of David Finkenbinder to Questions From Senator Bingaman
Question 1. Does the NMA support the extension of the AML fee? If
so at what rate?
Answer. The NMA has no position on the extension of the AML fee.
Question 2. Do you support the modification of the allocation of
funds under the Surface Mining Control and Reclamation Act to ensure
that funds are directed to the States with the highest needs?
Answer. The NMA has no position on the allocation AML funds.
Question 3. Do you support the payment of unappropriated AML state
share balances to the states, even where states have certified
completion of their AML coal work?
Answer. The NMA has no position on the payment of AML state share
balances to the states, even where states have certified completion of
their AML coal work.
Question 4. Do you support the use of Mineral Leasing Act receipts
to defray expenses of the UMWA coal miner retiree health benefits
funds?
Answer. The NMA has no position on the use of Mineral Leasing Act
receipts to defray expenses of the UMWA coal miner retiree health
benefits funds.
______
ASSESSMENT, EVALUATION, AND ANALYSIS OF THE FEE COLLECTION PROVISIONS
AND THE ABANDONED MINE LAND RECLAMATION PROGRAM OF THE SURFACE MINING
CONTROL AND RECLAMATION ACT OF 1977
division of abandoned mine land reclamation office of surface mining
reclamation and enforcement
august 1990
AML INVENTORY OF PRIORITY ONE AND TWO PROBLEM AREAS IN PROGRAM STATES AS OF 05/1/90
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Historical Coal Prod. AML Inventory 1986 AML Inventory 1987
Tonnage Base Upon EIS AML Inventory 1983 \1\ (As of 12/04/86) \1\ (As of 11/30/87) AML Inventory 1989 AML Inventory 1989
State Name \1\ (86/87/88/89 \1\ (84/85/86 (1987 Allocation) (1988 Allocation) \1\ \2\ (Existing) (Scrub) \3\
Allocations) Allocations)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ALABAMA............................................... 2.86% 2.11% 0.19% 0.59% 0.68% 1.25%
ALASKA................................................ 0.03% 0.00% 0.00% 0.01% 0.00% 0.01%
ARKANSAS.............................................. 0.24% 0.17% 0.11% 0.37% 0.37% 0.44%
COLORADO.............................................. 1.39% 0.02% 0.69% 0.37% 0.41% 0.75%
ILLINOIS.............................................. 10.60% 4.01% 1.26% 0.81% 0.82% 1.54%
INDIANA............................................... 3.45% 1.36% 2.77% 1.17% 1.31% 2.85%
IOWA.................................................. 0.84% 0.96% 0.57% 0.49% 0.51% 0.78%
KANSAS................................................ 0.68% 0.57% 2.85% 2.06% 2.07% 2.36%
KENTUCKY.............................................. 10.39% 0.00% 24.35% 10.79% 9.27% 12.71%
LOUISIANA............................................. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
MARYLAND.............................................. 0.67% 0.15% 0.00% 0.53% 0.52% 0.24%
MISSOURI.............................................. 0.82% 2.35% 5.70% 2.34% 2.37% 2.64%
MONTANA............................................... 0.68% 0.08% 0.49% 0.33% 0.30% 0.69%
NEW MEXICO............................................ 0.50% 0.17% 0.08% 0.09% 0.08% 0.18%
NORTH DAKOTA.......................................... 0.43% 0.19% 0.19% 0.21% 0.20% 0.47%
OHIO.................................................. 6.50% 12.16% 5.26% 3.57% 3.43% 6.33%
OKLAHOMA.............................................. 0.49% 1.73% 2.24% 2.41% 2.44% 1.28%
PENNSYLVANIA.......................................... 34.26% 64.09% 42.30% 28.17% 29.54% 37.99%
TEXAS................................................. 0.14% 0.00% 0.49% 0.18% 0.18% 0.32%
UTAH.................................................. 0.81% 0.00% 0.08% 0.25% 0.25% 0.56%
VIRGINIA.............................................. 3.19% 0.82% 5.16% 4.02% 3.74% 5.00%
WEST VIRGINIA......................................... 19.69% 6.71% 3.69% 40.60% 40.86% 20.36%
WYOMING............................................... 1.36% 2.21% 1.49% 0.56% 0.56% 1.08%
CROW TRIBE............................................ 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
HOPI TRIBE............................................ 0.00% 0.00% 0.03% 0.04% 0.04% 0.08%
NAVAJO TRIBE.......................................... 0.00% 0.07% 0.00% 0.04% 0.05% 0.08%
-----------------------------------------------------------------------------------------------------------------------------------------
PROGRAM STATES ONLY............................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
-----------------------------------------------------------------------------------------------------------------------------------------
TOTAL TONS 1000......................... 43,851,643 \4\ \4\ \4\ \4\ \4\
TOTAL DOLLARS..................................... \4\ $651,473,289 $2,128,290,793 $5,787,716,527 $5,691,365,196 $2,885,957,935
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ INVENTORY AND HISTORICAL COAL DATA EXTRACTED FROM ALLOCATION RECORDS
\2\ CURRENT INVENTORY HAS RAMP ACCOMPLISHMENTS/PROJECT AREAS SEPARATED AND NOT INCLUDED
\3\ DATA AS OF 07/13/90.
\4\ NOT APPLICABLE.
______
Abandoned Mine Land Program
RECLAIMED PUBLIC HEALTH AND SAFETY COAL RELATED PROBLEMS BY STATE/INDIAN
TRIBE
[Priority 1 & 2]
------------------------------------------------------------------------
State/Indian Tribe (000$) % of Total
------------------------------------------------------------------------
Alaska...................................... 10,526 0.6
Alabama..................................... 32,620 2.0
Arkansas.................................... 18,646 1.1
California.................................. 1,340 0.1
Cheyenne River.............................. 2,647 0.2
Colorado.................................... 9,600 0.6
Crow........................................ 3,093 0.2
Northern Cheyenne........................... 339 0.0
Fort Berthold............................... 52 0.0
Fort Peck................................... 134 0.0
Georgia..................................... 3,651 0.2
Hopi........................................ 1,226 0.1
Iowa........................................ 25,087 1.5
Idaho....................................... 0 0.0
llinois..................................... 58,210 3.6
Indiana..................................... 43,944 2.7
Jicarilla Apache............................ 21 0.0
Kansas...................................... 16,678 1.0
Kentucky.................................... 263,071 16.2
Maryland.................................... 18,618 1.1
Michigan.................................... 2,342 0.1
Missouri.................................... 42,163 2.6
Montana..................................... 17,897 1.1
Navajo...................................... 1,544 0.1
North Carolina.............................. 163 0.0
North Dakota................................ 27,538 1.7
New Mexico.................................. 6,325 0.4
Ohio........................................ 85,603 5.3
Oklahoma.................................... 21,114 1.3
Oregon...................................... 36 0.0
Pennsylvania................................ 345,564 21.3
Rocky Boys.................................. 52 0.0
Rhode Island................................ 554 0.0
South Dakota................................ 37 0.0
Southern Ute................................ 90 0.0
Tennessee................................... 15,305 0.9
Texas....................................... 6,788 0.4
Uintah And Ouray............................ 102 0.0
Ute Mountain Ute............................ 14 0.0
Utah........................................ 8,069 0.5
Virginia.................................... 73,465 4.5
Washington.................................. 1,945 0.1
Wind River.................................. 55 0.0
West Virginia............................... 341,726 21.0
Wyoming..................................... 116,601 7.2
---------------------------
Total................................... 1,624,597
------------------------------------------------------------------------
Source: Abandoned Mine Land Inventory. (Quarter ending SEPO4), Programs:
Acid Mine Drainage Plan, Coal Interim Site Funding, Coal Insolvent
Surety Site Funding, Clean Streams Initiative, Enhanced AML Rule
Projects, FRP, State Emergency Program, Pre-SMCRA Coal State/Indian
Tribe Grant Funding, State Set Aside & Watershed Cooperative
Agreements
______
Response of Charles Gauvin to Question From Senator Domenici
Question 1. Mr. McElwaine's testimony supports providing incentives
for mining companies to mine old abandoned mine sites, With the
understanding that they will reclaim the site. What is Trout
Unlimited's position on remining?
Answer. Trout Unlimited supports remining as long as it meets the
minimum standards set forth in Mr. McElwaine's testimony as follows:
Should only be subsidized with AML money if the primary
purpose and goal is reclamation;
Must demonstrate the reclamation required by SMCRA is
feasible, and this must still be a condition of permitting of
the activity;
There will be no reduction of environmental standards for
that operation;
If a mining project that includes ``remining'' takes in
additional acreage outside of the original AML site then AML
funds should not be used to subsidize the mining outside of the
AML area;
Removal of the financial risk to companies of bond
forfeiture by use of AML money for performance bonds reduces
the incentive to reclaim the site;
No waivers of reclamation fees; and
Incentives and rebates will be given AFTER reclamation takes
place, not prior to reclamation.
______
Responses of Andrew McElwaine to Questions From Senator Domenici
Question 1. Both S. 1701 and S. 961 propose to eliminate the
``general welfare'' language from the AML priority 2 definition. Would
this change prevent the reclamation of acid mine drainage sites in
Pennsylvania and elsewhere? What portion of the sites on the
Pennsylvania priority list would be affected, if any?
Answer. The ``general welfare'' language has been a part of SMCRA
since the law was first passed in 1977 and is included in the
definitions of both Priority 1 and Priority 2 categories. In January
1995, OSM updated its Policy Directive on the Abandoned Mine Land
Inventory System to provide specific guidance on the Priority 2
eligibility of problem areas based on ``general welfare'' criteria.
Although Pennsylvania has properly applied OSM guidelines with
regard to inventory management, we have continued to use ``health and
safety'' criteria in selecting Priority 1 and 2 projects for
expenditures. An acid mine drainage project without a ``health and
safety'' component would likely be classified as a Priority 3 problem
and would qualify for funding using funds from the 10% setaside program
or OSM's Appalachian Clean Streams Initiative (ACSI).
In summary, elimination of the ``general welfare'' language would
reduce Pennsylvania's inventory, but it does not reduce the number of
actual sites affected by AMD. This problem remains. Nor does it
eliminate sites that have contaminated water in the middle of
communities that do not have a physical component like a highwall or
shaft. Pennsylvania coalfield communities have been identified as
having certain health problems in higher quantities than other areas.
Eliminating the general welfare language would narrow the eligibility
of sites in Pennsylvania, and it could severely impair our ability to
be as strategic and cost effective as possible in developing a
response. It would be even more harmful to other historical production
states that do not yet benefit from strong AML programs, as does
Pennsylvania.
At this time we are not able to quantify the large number of sites
that would be impacted by eliminating this language, but we will seek
that information for the Committee.
Question 2. Mr. Finkenbinder's testimony states that the
``inventory has transformed itself into a funding gimmick in order to
establish the AML program as a ``permanent fixture.'' Do you agree with
this statement, and how do you reply to those who criticize decisions
made by the State of Pennsylvania with respect to sites included in its
inventory of priority 1 and 2 sites?
Answer. We absolutely do not agree with Mr. Finkenbinder's
statement. Given the extent of abandoned mine lands in Pennsylvania
relative to the rate at which resources have been applied to the
problem, the AML Program could indeed be required for generations if we
continue with business as usual. But that is precisely why Pennsylvania
has called for a reauthorization plan that will deliver sufficient
resources to address the highest priority problems and to ensure that
the job is completed in as quickly as possible.
With regard to Mr. Finkenbinder's testimony, we are confident that
Pennsylvania's additions to the inventory are in full compliance with
``AML-1'' of OSM's Directives System, which provides guidelines on
maintenance of the Abandoned Mine Land Inventory System. Further, OSM
has not notified Pennsylvania that it has any concerns about the way
``AML-1'' has been implemented.
We agree with the Kentucky Department for Natural Resources, the
National Association of Abandoned Mine Land Programs, and the
Interstate Mining Compact Commission testimony on September 27, 2005
that, ``there is no evidence of abuse of inappropriate action by the
states or tribes regarding our selection of worthy AML projects over
the past 27 years of the program.''
Pennsylvania has been working diligently to clean up these sites as
soon as possible for the environmental and economic health of our coal
communities. As I pointed out in my testimony the state taxpayers and
private groups have made significant investments of their own dollars
to help clean up AML sites. And, the Pennsylvania AML Campaign is
supporting a 15 year reauthorization, because citizens and the
Commonwealth want to get the job done as soon as possible. Any support
for a reduced AML reclamation fee makes it harder for Pennsylvania to
complete the job in the 15 year timeframe. Ironically, support for a
reduction in the current AML reclamation fee is likely to make the AML
program the ``permanent fixture'' that Mr. Finkenbinder opposes.
Finally, in Pennsylvania there are still 185,000 acres of abandoned
mine lands, and over 3,000 miles of polluted streams. Nationally, 3.6
million persons live within one mile of dangerous priority 1 and 2
sites. In Pennsylvania, 1.6 million persons live within one mile of
these sites. This is no ``gimmick,'' but represents real and urgent
problems. When these AML sites are fully reclaimed, then there will be
no need for further funding. Until that time, we must ensure that there
are sufficient funds to tackle the problems that residents in the
coalfield communities must see, hear, and smell.
Question 3. You state in your testimony that you support programs
that give incentives for mining companies to mine old abandoned mine
sites, with the understanding that those sites will be reclaimed in the
process. This is commonly called ``remining,'' and you admit that it is
controversial in some quarters. Others believe it is a win-win
situation that provides a cost-effective means to get old mine sites
reclaimed. What has your experience in Pennsylvania been with remining?
Answer. Overall, Pennsylvania's experience with remining has been
quite positive. Going back to 1997 when the regulatory program started
systematically monitoring remining activity, Pennsylvania's coal
industry has been issued more than 460 permits for mining activities
that include remining. These operations were projected to eliminate 130
miles of highwall, reclaim nearly 20,000 acres and improve more than
140 miles of stream at an estimated value of more than $110 million.
Remining is very similar to other kinds of mining, but has the
added benefit of reclaiming abandoned mine lands that would otherwise
remain dangerous and unusable, and have to be paid for with AML funds.
Many coalfield communities want the assurance that remining operations
are subject to the same environmental laws and regulations and are held
to the same standards. They are concerned that some proposals would
weaken these standards by offering lower bonds or bonds paid for by
entities other than the company, removing financial incentives to mine
carefully. Further, there is a concern that the standards may not
protect coalfield communities from blasting damage, new discharges,
dewatered streams, and polluted/lost private drinking water supplies.
With 1.6 million Pennsylvanians living near these sites, AML
reauthorization must maintain the same standards for remining as for
mining.
Operators have conducted remining operations because it makes
economic sense. With increased demand for coal, remining is expected to
expand. Incentives would enable more remining operations to be
implemented, and would help maintain the benefit of reclamation of
abandoned mine lands at no cost to the AML program or the Commonwealth.
One current positive example of the importance of remining is
provided by Mile Lake, an abandoned mine land site in Pennsylvania's
anthracite region, in Northumberland County. Secretary of Interior Gale
Norton had the opportunity frilly over this site in February 2004. This
abandoned mine land site is particularly dangerous as it has been
associated with four reported deaths. PA's DEP has recently issued a
permit for this site to be remined. The remining will enable the
hazardous water-filled pit and dangerous highwall to be eliminated,
while saving the AML Fund at least $1.3 million--the estimated cost to
reclaim these features through a stand alone AML reclamation project.
______
Department of the Interior,
Office of Congressional and Legislative Affairs,
Washington, DC, December 30, 2005.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate,
Washington, DC.
Dear Mr. Chairman: Enclosed are responses prepared by the Office of
Surface Mining Reclamation and Enforcement to questions submitted
following the September 27, 2005, hearing on ``Abandoned Mine
Reclamation.''
Thank you for the opportunity to provide this material to the
Committee.
Sincerely,
Jane M. Lyder,
Legislative Counsel.
[Enclosures.]
Responses of Thomas D. Shope to Questions From Senator Domenici
Question 1. SMCRA directed the Secretary to conduct a study on how
to best enable Indian tribes to assume primacy with respect to the
regulation of surface mining on Indian lands. In the 28 years since the
enactment of SMCRA, the Secretary and the Navajo Nation have worked
together to prepare for the grant of primacy to the Navajo Nation, but,
without legislation, the Secretary does not have authority to consider
an application for primacy. The Navajo Nation has requested an
amendment to SMCRA that would allow the Navajo Nation to apply for
primacy. Does the department support such an amendment?
Answer. Section 710 of SMCRA directed the Secretary to study the
regulation of surface coal mining operations on Indian lands and
develop legislation designed to allow Tribes to assume full regulatory
authority over the administration and enforcement of surface coal
mining on Indian lands. In 1984, the Secretary completed and submitted
the required report to Congress. The report contained draft legislation
and recommendations on 12 issues related to Tribal primacy. The
recommendations reflected the Secretary's views at that time as to how
those issues should be resolved.
In 1987, Congress granted authority to the Navajo Nation and the
Hopi and Crow tribes to obtain approval of AML reclamation plans.
However, Congress did not authorize Tribal primacy for regulatory
programs.
Subsequently, the Energy Policy Act of 1992 required that OSM make
grants to the Navajo Nation and the Hopi, Crow, and Northern Cheyenne
tribes to assist the tribes in developing regulatory programs.
In 1995, OSM initiated an effort with the Tribes to develop a
legislative proposal. While that effort resulted in the development of
several draft legislative proposals, the Tribes have not been able to
achieve consensus. As a result, no proposal has been forwarded to
Congress.
We would be pleased to assist Congress in developing legislation to
address this issue.
Question 2. In 1992, Congress ordered you to transfer the interest
from the AML fund to the UMW's Combined Benefit Fund, to cover health
care premiums for miners whose employers have gone out of business. If
the interest is insufficient to make up the CBF's shortfall, the
Secretary of Interior is ordered to make up the difference, up to $70
million. The law is unclear regarding how the amount due the CBF is to
be determined and paid, other than that the Trustees of the CBF will
``estimate'' how much is to ``be debited against the unassigned
beneficiaries premium account.'' Exactly how does this work? How do you
determine how much to send to the CBF? Do you have the authority to
independently evaluate the amount that the CBF estimates should be
transferred?
Answer. The October 12, 2000, Memorandum of Understanding with the
CBF, requires the CBF to provide an estimate of the per-beneficiary
expenses for unassigned beneficiaries for the plan year, which
coincides with the Federal fiscal year. This is based on an actuarial
study commissioned by the CBF. The CBF also provides a list of the
unassigned beneficiaries as of September 1St each year.
The CBF list is determined by first taking a list of unassigned
beneficiaries as maintained by the Social Security Administration (SSA)
and deleting beneficiaries based upon known deaths not recorded by the
SSA. The list is then refined by making adjustments based upon court
cases and companies that are no longer in business. An audit firm
reviews these changes based on procedures agreed upon by OSM and the
CBF. The audit firm provides OSM a report of its review findings, if
any.
The CBF then multiples the number of unassigned beneficiaries by
the estimated actuarial costs to arrive at its estimate. Concurrently,
OSM estimates the amount of interest it expects to earn on investment
of the AML fund. OSM then transfers the lesser of the CBF estimate of
expenses or the OSM-estimated interest, not to exceed $70 million.
The Memorandum of Understanding also provides for adjustments to
actual costs and earnings by both CBF and OSM after the end of the plan
year. In its billing, the CBF makes these actual cost adjustments and
other prior-period adjustments based on court rulings or new bankruptcy
information, subject to the guidelines listed above. Typically, an
annual CBF billing covers both positive and negative adjustments for a
number of prior plan years.
The Memorandum of Understanding also provides that the Federal
Government reserves the right to audit any and all records involving
the determination of eligible beneficiaries, the estimate of
expenditures, the receipt and use of Federal funds, the determination
of actual costs, including administrative costs within the context of
reasonable and sound accounting practices, and the computation of
subsequent adjustments.
Question 3. Does the Administration/OSM feel it is necessary for
the Secretary to have the authority to unilaterally certify states/
tribes as having completed their coal priorities? Under what
circumstances would the Secretary deem it necessary to certify a state?
What has taken place to necessitate a change from the current language
regarding certification?
Answer. We see no reason for the Secretary to have unilateral
authority to certify a State or Indian Tribe. Current law and each of
the proposed bills tie allocation of the historic coal production funds
to the number of Priority 1 and Priority 2 (high priority) coal
problems a State or Tribe has. Under current law, certification allows
States and tribes more discretion in the use of State-share funds. As a
result, there is an incentive for States and Tribes to certify. That
does not change in any of the proposed legislation.
Certification has not been an issue to date.
Question 4. Is there a requirement and a mechanism for the return
of the State Share balances to the states/tribes if the AML fee is not
reauthorized?
Answer. Under current law, 50 percent of the funds collected in a
State or Tribe must be allocated to that State or Indian Tribe for
grants. These allocated funds are either distributed in grants through
the appropriations process or are credited to a State or Tribes account
to be distributed in grants in future years through the appropriations
process. This remains true if the authority to collect the fee is not
extended.
Question 5. There seems to be some disagreement about the scope and
priority of abandoned mine problems in each state and nationwide. How
do the States and OSM update their inventories, and how do we make sure
that problems are prioritized consistently from state to state?
Answer. States, Tribes, and the OSM routinely update the Abandoned
Mine Land Inventory System (AMLIS) when new problems are reported or
when reclamation abates an existing AML problem. This is an ongoing
process that happens throughout the year. Section 403 of SMCRA and OSM
directives governing the AML inventory provide a framework for States
and Tribes to consistently prioritize AML problems. However, States and
Tribes exercise individual discretion in prioritizing AML problems and
must have continuing flexibility in prioritization due to varying land
use needs and population increases that are occurring in various parts
of the country. We believe it was Congress' intent to permit this
flexibility under the primacy scheme set forth in SMCRA and subsequent
amendments. It has also been reaffirmed by OSM in its policy
directives, which provide for AML programs to be adaptable to different
regions of the country, thereby extending program safeguards to as many
citizens as possible.
Responses of Thomas D. Shope to Questions From Senator Bingaman
Question 1. I have attached a copy of draft legislation that I
understand is being discussed by some members of the House (hereinafter
referred to as the 9/8/05 Draft). Do you interpret S. 961, S. 1701, or
the 9/8/05 Draft to affect the ability of a State or tribe to use AML
funds for noncoal reclamation work?
Answer. Neither of the two bills nor the draft legislation would
alter the non-coal reclamation provisions found in sections 409 and 411
of SMCRA. Under all three bills, paragraphs (b) and (c) of section 409
would continue to authorize non-certified states and Indian tribes to
receive grants for non-coal reclamation from their state/tribal share
allocation or their historical production allocation, provided the non-
coal project meets the extreme danger priority in section 403(a)(1).
In addition, S. 961 and S. 1701 would continue to authorize
certified states and tribes to receive grants from their state/tribal
share allocation. Under section 411 of SMCRA, those grants may be used
for non-coal reclamation. However, S. 1701 would add a new section
402(i) that would allow states to collect the reclamation fees and
retain half of those fees. The bill provides that if a state elects to
exercise this option, it would no longer be eligible to receive grants
from its state share allocation. Moreover, the portion of the fees that
a state collects and retains would have to be used for the purposes of
section 403, which would appear to preclude their use for non-coal
reclamation.
Under the 9/08/05 Draft, certified states and tribes would no
longer receive grants from their state/tribal share, but they would
receive equivalent payments, either from Mineral Leasing Act revenues
or directly from the Treasury, in place of those grants. States and
tribes could use those payments for any purpose approved by the state
legislature or the tribal council, with priority given to addressing
the impacts of mineral development, including non-coal reclamation
projects.
Finally, it appears that all three bills would extend minimum
program grant guarantees to both certified and non-certified states and
tribes, rather than limiting them to non-certified states and tribes
with Priority 1 and 2 (high priority) coal problems, as the current law
does. Thus, all three bills have the potential of expanding the pool of
grant monies available for non-coal reclamation.
Question 2. What is the scope and extent of abandoned hardrock mine
sites nationwide? Please provide estimates on a state-by-state basis.
Please also provide such information with respect to the reservation
lands of tribes that have AML programs.
Has a comprehensive inventory of abandoned hardrock mine sites been
undertaken?
Answer. Under SMCRA, the OSM is only required to inventory Priority
1 and 2 problems related to past coal mining. States and Tribes can
reclaim non-coal problems if they are deemed to present a greater
threat to human health and safety than remaining coal related problems
or if they have certified that they have addressed all coal related
problems. While non-coal problems do not have to be entered into OSM's
Abandoned Mine Land Inventory System (AMLIS) until a non-coal
reclamation project is funded in a grant, some States and Tribes have
entered unfunded non-coal problems into AMLIS. However, this is not a
complete inventory.
The costs of non-coal Priority 1 and 2 problems reported in AMLIS
are shown by State and Indian tribe in the table below as of September
30, 2005.
----------------------------------------------------------------------------------------------------------------
State/Tribe Name Unfunded Funded Completed Total
----------------------------------------------------------------------------------------------------------------
ALASKA.................................. 1,735,000 100,00 691,019 2,526,019
ALABAMA................................. 0 0 94,942 94,942
ARKANSAS................................ 270,000 0 0 270,000
COLORADO................................ 47,971,578 1,522,303 35,497,741 84,985,622
CROW.................................... 0 0 1,169,047 1,169,047
ILLINOIS................................ 65,000 0 1,507,432 1,572,432
KANSAS.................................. 660,000 0 250,081 910,081
LOUISIANA............................... 6,870,638 0 0 6,870,638
MISSOURI................................ 9,480,800 0 385,201 9,866,001
MONTANA................................. 93,625,000 1,766,400 22,940,640 118,332,040
NAVAJO.................................. 10,221 46,945 23,901,488 23,958,654
NEW MEXICO.............................. 2,102,700 272,000 3,421,275 5,795,975
OHIO.................................... 1,323,200 0 182,048 1,505,248
TEXAS................................... 19,984,045 506,739 21,283,444 41,774,228
UTAH.................................... 2,663,500 85,000 6,815,883 219,121,090
WYOMING................................. 35,824,056 3,611,367 179,685,667 219,121,090
-----------------------------------------------------------------------
Report Total........................ 222,585,738 7,910,754 297,825,908 528,316,400
----------------------------------------------------------------------------------------------------------------
Question 3. The Navajo Nation relies on AML funding to undertake
important public facilities work pursuant to the Surface Mining Control
and Reclamation Act. Do you read S. 961, S. 1701, or the 9/8/05 Draft
as restricting the use of funds for this purpose?
Answer. Since the Navajo have certified that they have completed
all known coal problems, they may spend their tribal share on public
facilities projects. Neither S. 961, S. 1702, nor the 9/8/05 Draft, if
enacted as currently drafted, would affect this.
Question 4. What is the Department's position on Tribes assuming
primacy for the regulation of coal mining activities on their lands?
Answer. Section 710 of SMCRA directed the Secretary to study the
regulation of surface coal mining operations on Indian lands and
develop legislation designed to allow Tribes to assume full regulatory
authority over the administration and enforcement of surface coal
mining on Indian lands. In 1984, the Secretary completed and submitted
the required report to Congress. The report contained draft legislation
and recommendations on 12 issues related to Tribal primacy. The
recommendations reflected the Secretary's views at that time as to how
those issues should be resolved.
In 1987, Congress granted authority to the Navajo Nation and the
Hopi and Crow tribes to obtain approval of AML reclamation plans.
However, Congress did not authorize Tribal primacy for regulatory
programs.
Subsequently, the Energy Policy Act of 1992 required that OSM make
grants to the Navajo Nation and the Hopi, Crow, and Northern Cheyenne
tribes to assist the tribes in developing regulatory programs.
In 1995, OSM initiated an effort with the Tribes to develop a
legislative proposal. While that effort resulted in the development of
several draft legislative proposals, the Tribes have not been able to
achieve consensus. As a result, no proposal has been forwarded to
Congress.
Question 4a. Would the Administration support legislation to do so?
We would be happy to review any legislation developed to address
this issue.
Question 4b. Will you work with me to craft a provision to
accomplish this result?
Yes. We would be pleased to assist you in the development of
legislation to address this issue.
Question 5. Could you please provide an analysis of the differences
in how S. 961, S. 1701, the 9/8/05 Draft, and current law address the
issue of coal miner retiree health benefits?
What are the estimates of the funds that would be made available
for this purpose on an annual basis under (1) S. 961; (2) S. 1701; (3)
the 9/8/05 Draft; (4) current law (assuming extension of the current
fee collection authority through 2020; and (5) current law (assuming
the fee collection authority expires June 30, 2006)? Please provide a
table showing projections for the periods covered by the authorization
in each bill.
Answer. Current law requires the use of an amount equal to the
interest earned from the AML fund to help pay for health benefit
premiums for unassigned beneficiaries under the United Mine Workers of
America's (UMWA's) Combined Benefit Fund (CBF). At the beginning of
each fiscal year, OSM transfers an amount equal to the amount that the
trustees of the CBF estimate they will spend on healthcare benefits for
unassigned beneficiaries during that fiscal year. The amount of the
transfer is capped at either the amount of interest earned or the CBF's
actual expenditures to provide those benefits or $70 million, whichever
is less.
S. 961 would eliminate the $70 million cap and greatly expand the
scope of the transfers. Instead of being limited to health benefits for
unassigned beneficiaries in the CBF, transfers under S. 961 would be
used to cover total net deficits of the CBF as well as any difference
between revenues and expenditures for two other UMWA retiree health
benefit plans, the 1992 Benefit Plan, and the multiemployer plan of
July 20, 1992, which is known as the 1993 Benefit Plan. In the event
funds available for transfer are insufficient to cover the revenue
shortfalls of all three plans, the bill specifies that funds must be
directed first to the CBF, then to the 1992 Plan, and finally to the
1993 Plan. All prior interest credited to the AML fund but not
previously transferred to the CBF, known as ``stranded interest,''
would be available for transfer to the CBF, beginning with FY 2004, to
reduce any deficit in the net assets of the CBF. The bill also
specifies that the unappropriated balance of the Rural Abandoned Mine
Program (RAMP) allocation would be available for those transfers,
beginning with FY 2004. It should be noted, however, that Title I of
P.L. 109-54, which contains the FY 2006 appropriations for the
Department of the Interior, transferred those funds to the Federal
operations allocation on October 1, 2005, to meet anticipated needs in
that area. While P.L. 109-54 does not conflict with the language of S.
961, the amount of money to be transferred would be limited to new
contributions to the RAMP allocation from October 1, 2005, forward.
Those contributions are unlikely to be very significant because S. 961
also terminates contributions to the RAMP allocation from fees
collected for coal produced after the date of enactment.
S. 1701 is very similar to the current law. There are only two
changes. First, the bill appears to provide that, beginning with fiscal
year 2007, the annual cap on transfers to the CBF will change from the
amount of interest estimated to be earned from the AML fund during the
current fiscal year to the amount of interest actually earned during
the prior fiscal year. However, because the bill makes no changes to
section 402(h)(2) of SMCRA, which continues to calculate transfer
amounts in terms of estimated interest earnings during the current
fiscal year, the meaning of the changes to section 402(h)(1) remains
uncertain. Second, the bill makes all prior interest credited to the
AML fund (stranded interest) available for transfer to the CBF,
beginning with fiscal year 2006.
The 9/8/05 Draft resembles S. 961 in that it eliminates the $70
million cap and expands the allowable uses of the of the transfers from
the AML fund by authorizing use of transferred funds to cover revenue
shortfalls for any of the three UMWA retiree health benefit plans. It
also would make stranded interest and the unappropriated balance of the
RAMP allocation available for transfer (although, as previously noted,
P.L. 109-54 has already transferred the RAMP balance to a different
account). Most significantly, the 9/8/04 Draft provides that, once AML-
related funding sources are exhausted, revenue shortfalls in the UMWA
plans would be addressed as follows: first, through the transfer of
undesignated Mineral Leasing Act revenues; second, through the transfer
of up to $320,000,000 in excess receipts under the Mineral Leasing Act;
and third, by direct transfers from the General Fund of the Treasury,
if necessary. Using the same funding sources, the bill also authorizes
CBF premium refunds with interest for certain operators, up to an
aggregate maximum of $36,000,000. The bill's provisions would take
effect in fiscal year 2006.
ESTIMATED ANNUAL TRANSFERS TO UMWA CBF FROM AML FUND
[Thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Current Law
(current Current Law
rates (current
Fiscal Year S. 961 S. 1701 9/8/05 Draft extended rates
through expire 6/30/
2020) 06)
----------------------------------------------------------------------------------------------------------------
2006............................ 105,106 Not Avail. \1\..... Not Avail......... 70,000 70,000
2007............................ 87,838 Not Avail.......... Not Avail......... 70,000 70,000
2008............................ 95,703 Not Avail.......... Not Avail......... 70,000 70,000
2009............................ 103,738 Not Avail.......... Not Avail......... 70,000 70,000
2010............................ 110,717 Not Avail.......... Not Avail......... 70,000 70,000
2011............................ 118,036 Not Avail.......... Not Avail......... 70,000 70,000
2012............................ 126,061 Not Avail.......... Not Avail......... 70,000 70,000
2013............................ 132,768 Not Avail.......... Not Avail......... 70,000 67,745
2014............................ 139,177 Not Avail.......... Not Avail......... 70,000 64,768
2015............................ 145,651 Not Avail.......... Not Avail......... 70,000 64,111
2016............................ 131,348 Not Avail.......... Not Avail......... 70,000 61,182
2017............................ 107,964 Not Avail.......... Not Avail......... 70,000 58,147
2018............................ 137,036 Not Avail.......... Not Avail......... 70,000 55,081
2019............................ 178,254 Not Avail.......... Not Avail......... 70,000 51,986
2020............................ 186,952 Not Avail.......... Not Avail......... 70,000 48,864
-------------------------------------------------------------------------------
Total....................... 1,906,349 Not Avail.......... Not Avail......... 1,050,000 961,884
----------------------------------------------------------------------------------------------------------------
\1\ Note: We have not provided estimates of the funds that would be made available for coal miner retiree health
benefits either under S. 1701 or the 9/8/05 Draft because of the significant variables involved in those
bills. Of particular concern in S. 1701 is the question of which States would choose to take over the
collection of AML fees and which States would have OSM continue to handle fee collection. OSM cannot project
the amount of funds that would be made available under this legislation without guidance on the appropriate
assumptions to use. However, we would be pleased to provide tables if further parameters are given.
Question 6. Please provide a table showing the amounts transferred
historically to the Combined Benefit Fund (CBF) from the AML Fund by
year.
Answer. The following table presents the requested data to the
nearest dollar:
------------------------------------------------------------------------
Amount
Fiscal Year Transferred to
CBF during FY
------------------------------------------------------------------------
1996................................................... 47,183,764
1997................................................... 31,373,799
1998................................................... 32,561,520
1999................................................... 81,766,325
2000................................................... 40,959,942
2000--P.L. 106-113 \1\................................. 68,000,000
2001................................................... 102,943,411
2001--P.L. 106-291 \1\................................. 78,901,537
2002................................................... 113,606,257
2002--P.L. 106-291 \2\................................. (23,253,457)
2003................................................... 56,079,283
2003--P.L. 108-7 \3\................................... 33,779,000
2004................................................... 14,966,929
2005................................................... 66,533,254
----------------
Totals............................................. 745,401,565
------------------------------------------------------------------------
\1\ Supplemental transfer from reserve pool to address deficits in CBF.
Monies came from the reserve pool of interest earned between 1993 and
1995.
\2\ Rescissions and refunds made by the CBF to OSM as a result of over-
estimates.
\3\ Supplemental transfer from reserve pool to address deficits in CBF.
Monies came from the reserve pool of interest earned between 1993 and
1995.
Question 7. What is the projected interest for the next 20 years
generated by the AML fund under: (1) S. 961; (2) S. 1701; (3) the 9/8/
05 Draft; (4) current law (assuming extension of the current provisions
and fee collection authority through 2020); (5) current law (assuming
fee collection authority expires on June 30, 2006)?
Answer. Estimates are shown in the table below.
ESTIMATED INTEREST EARNED
[Dollars in 1,000s]
----------------------------------------------------------------------------------------------------------------
Current
9/8/05 Law-- Current
Fiscal Year S. 961 S. 1701 Draft Extended to Law-- June
2020 30, 2006
----------------------------------------------------------------------------------------------------------------
2006................................ 87,838 Not Avail. \1\........ 86,739 87,838 87,838
2007................................ 95,703 Not Avail............. 93,852 97,023 92,098
2008................................ 103,738 Not Avail............. 96,716 105,908 90,673
2009................................ 110,717 Not Avail............. 95,235 114,085 87,586
2010................................ 118,036 Not Avail............. 93,906 123,045 84,175
2011................................ 126,061 Not Avail............. 94,015 133,187 80,537
2012................................ 132,768 Not Avail............. 93,296 142,322 76,331
2013................................ 139,177 Not Avail............. 92,372 151,578 72,336
2014................................ 145,651 Not Avail............. 91,488 161,314 68,224
2015................................ 154,305 Not Avail............. 92,696 173,650 66,133
2016................................ 161,092 Not Avail............. 91,266 184,560 61,894
2017................................ 168,915 Not Avail............. 89,633 196,065 57,504
2018................................ 178,254 Not Avail............. 88,760 208,230 52,997
2019................................ 186,952 Not Avail............. 87,951 221,138 48,371
2020................................ 186,122 Not Avail............. 87,181 234,846 44,891
---------------------------------------------------------------------------
Total........................... 2,095,329 Not Avail............. 1,375,106 2,334,789 1,071,588
----------------------------------------------------------------------------------------------------------------
\1\ Note: We have not provided estimates of the interest that would be made available under S. 1701 because of
the significant variables involved in that legislation. Of particular concern in S. 1701 is the question of
which States would choose to take over the collection of AML fees and which States would have OSM continue to
handle fee collection. OSM cannot project the amount of interest that would be made available under this
legislation without guidance on the appropriate assumptions to use. OSM will be happy to provide tables if
further parameters are given.
Interest computations are made quarterly, on the last day of the
month following the quarter. This is because operators have 30 days to
remit the fee collections to OSM. Thus, funds due on June 30, 2006,
will be paid to OSM on July 31, 2006, and interest will be calculated
at that point. This interest will be credited to FY 2006 as it was
earned in that year. Even if the fee collection authority is extended,
the next collection would be due on October 31, 2006, and interest will
be calculated at that point. This interest would be considered interest
collected in FY 2007, as it will have been earned at that point.
Question 8. What is your position on whether the Secretary should
have authority unilaterally to certify completion of coal reclamation
in a State? Has certification been a problem?
Answer. We see no reason for the Secretary to have unilateral
authority to certify a State or Indian Tribe. We see no problems with
certification under the current law, or any of the proposed bills under
consideration. Current law and each of the proposed bills tie
allocation of the historic coal production funds to the number of
Priority 1 and Priority 2 coal problems a State or Tribe has. Under
current law, certification allows States and tribes more discretion in
the use of State-share funds, so there is incentive to certify. That
does not change in any of the proposed legislation.
Certification has not been an issue to date.
Question 9. Do you support elimination of the general welfare
criterion in prioritizing sites for reclamation? What effect would such
a change have in the program? How many sites would be eliminated from
the inventory due to this change?
Answer. We think the general welfare criterion is valid in
determining whether a site should be eligible for reclamation. We do
not think it should be eliminated entirely. However, we believe that it
should be moved to a Priority 3 (environmental) classification. In this
way, States could address such problems, if necessary, but at a lower
priority. However, we note that whenever the level of high priority
problems remaining to be addressed is discussed, these types of sites
are not included. In all our discussion of the magnitude of the problem
remaining, we considered only Priority 1 and Priority 2 Health and
Safety Problems. Such a change would have minimal effect on the
program. We have no records indicating that any money from AML
construction grants have been spent on such sites. According to the
Abandoned Mine Land Inventory System, approximately $3.6 billion would
be removed from the inventory.
Question 9a. How much less would be expended under the program if
this criteria were eliminated?
Answer. We anticipate that there would be little change in the
program expenditures as no money is now being spent on general welfare
problems.
Question 9b. How would this affect environmental remediation under
the program?
Answer. If the criterion were eliminated, the most likely result
would be that the sites currently classified as Priority 2 would
qualify as Priority 3, or environmental problems and most would remain
eligible for reclamation.
Question 9c. How would this affect the remediation of water
pollution under the program?
Answer. All of the problems classified as Priority 2 by using
solely the general welfare criteria are related to water pollution or
degradation. As mentioned above, if these sites were reclassified as
Priority 3 sites, they would remain eligible for reclamation.
Question 10. What is your estimate of the cost of reclaiming
priority 3 sites?
Answer. Under SMCRA, OSM is only required to systematically
inventory Priority 1 and 2 (high priority) problems related to past
coal mining. Priority 3 problems do not have to be entered into AMLIS
until Priority 3 reclamation is funded. While States and Tribes do
enter some unfunded Priority 3 problems, we do not possess a complete
inventory. As of September 30, 2005, unfunded Priority 3 problems
reflected in the AMLIS totaled $1.9 billion.
We note that an early study of abandoned mine lands disturbed by
coal mining nationwide was prepared in 1979 by Wilton Johnson and
George Miller of the U.S. Bureau of Mines. The study is
entitled,''Abandoned Coal-Mined Lands: Nature, Extent, and Cost of
Reclamation'' It estimated the total cost to reclaim all known
abandoned mine lands was $31.6 billion in 1978 dollars. By comparison,
we now estimate that it would cost $3 billion to reclaim the remaining
Priority 1 and Priority 2 lands.
Question 11. Please describe the Clean Streams Program. What
impact, if any, would the provisions of S. 961, S. 1701, and the 9/8/05
Draft have on this program?
Answer. The Clean Streams Program began as the Appalachian Clean
Streams Initiative, a broad-based program to eliminate acid drainage
from abandoned coal mines. Today, the program continues to focus on
cleaning up acid mine drainage problems using a combination of private
and government resources. The Program utilizes a partnership approach
to one of the major environmental problems facing the regional
ecosystems of the coalfields.
The mission of the Clean Streams Program is to coordinate and
facilitate the exchange of information and eliminate duplicative
efforts among citizen groups, university researchers, the coal
industry, corporations, the environmental community, and local, state,
and Federal agencies that are involved in cleaning up streams polluted
by acid drainage. Watershed associations, community groups, and
recreation associations work together using funding from government and
private sources, including matching funds and in-kind services. This
cooperative approach results in improved efficiency and better leverage
in the use of public funds, and encourages local community involvement.
Funding for the Clean Streams Program currently comes from the
Federal Operations allocation under section 402(g) (3) of SMCRA. None
of the bills currently under consideration would change this Program.
Question 12. Has OSM explored opportunities to earn a higher rate
of return on the AML Fund? Please describe the opportunities and
constraints. Can you suggest any legislation that would be of
assistance in increasing the rate of return on the Fund?
Answer. Section 401(e) of SMCRA requires that the AML fund be
invested in public debt securities with maturities suitable for the
needs of the fund. The AML fund has been invested in U.S. Treasury
securities since 1992. Until recently, our investment strategy was to
maximize liquidity by investing in securities with maturities of 180
days or less. The interest rate on the funds investments averaged 4.46
percent between 1992 and 2001. This strategy more than met the needs
identified by the CBF for unassigned beneficiaries during those years.
However, short-term interest rates began dropping at the end of 2001,
declining to a low of under 1 percent in September 2003. While they
began to climb after that, the rate was still so low that we could not
transfer sufficient funds to the CBF.
In October 2003, after internal reviews and discussions with
stakeholders, we revised our investment strategy to improve yields by
purchasing 10-year Treasury notes, which were earning 4.25 percent
interest at that time. We planned to spread purchases of these notes
over the course of Fiscal Year 2004 in order to take advantage of
anticipated interest rate increases. However, when the 10-year interest
rate dropped in February 2004, we accelerated our purchases.
Approximately $1.3 billion of the fund is now invested in long-term
Treasury securities with a weighted average interest rate of 4.17
percent. The current strategy is to hold all long-term notes until
maturity, which will occur in 2013 and 2014. The remaining amount
(approximately $750 million) is invested at the one-day Federal Funds
rate, which is our minimum liquidity need. The interest rate on these
Federal funds averaged 2.65 percent in FY 2005. This strategy provided
over $75 million in interest earnings in FY 2005. If the short-term
rate exceeds the coupon rate on the long term notes in the future, then
OSM will have to analyze the costs and benefits associated with moving
all investments into short-term instruments.
One possibility would be to authorize OSM to invest in Par Value
Specials. That is, investments with a specific rate of return set by
law. The coupon rate is stable, but not as high as it is on OSM's 10-
year notes, but OSM would not have to worry about early redemption
penalties, as these instruments are redeemable at par.
Question 12a. What has been the rate of return on the AML Fund for
each of the last 10 years?
Answer.
------------------------------------------------------------------------
Rate of Return
Year (percent)
------------------------------------------------------------------------
1996.................................................... 5.07
1997.................................................... 5.03
1998.................................................... 5.00
1999.................................................... 4.48
2000.................................................... 5.15
2001.................................................... 4.82
2002.................................................... 1.86
2003.................................................... 1.23
2004.................................................... 2.76
2005.................................................... 3.61
------------------------------------------------------------------------
Note: These rates are the OSM rate of return, which include both short
term and long-term investments. For instance, in 2005, OSM had $1.3
billion invested in long-term securities at a rate of 4.17 percent and
$.75 billion invested in Federal Funds at 2.65 percent, which gave us
an average earning rate for the year of 3.61 percent.
Question 13. Please provide for the record your projections of
annual payments to each State and tribe under: (1) S. 961; (2) S. 1701;
(3) the 9/8/05 Draft; (4) current law (assuming extension of the
current provisions and fee collection authority through 2020); and (5)
current law (assuming authority to collect the fee expires on June 30,
2006). Please include all payments (including payments of
unappropriated State Share balance and annual payments).
Please also provide for each bill an estimate of excess funding
over reclamation need (as defined by the priorities set forth in SMCRA)
and unfunded need by state.
Please provide a table setting forth for each bill the required
annual payment of unappropriated balances by State and Tribe.
Answer. Tables with payment projections for (1), (3), (4), and (5)
are attached.* We have not projected payments for S. 1701 because of
the significant variables involved in that legislation. Of particular
concern is the question of which States would choose to take over the
collection of AML fees and which States would have OSM continue to
handle fee collection. The resulting partial distributions of State
share funds become quite complex. OSM cannot project distributions
without guidance on the appropriate assumptions. However, we would be
pleased to provide tables if further parameters are given.
---------------------------------------------------------------------------
* Retained in committee files.
---------------------------------------------------------------------------
Question 14. Please provide for the record your projections of
annual AML fee collections under (1) S. 961; (2) S. 1701; (3) the 9/8/
05 Draft; and (4) current law (assuming extension of current provisions
and fee collection authority through 2020).
Answer. Projected Collections are shown below.
[Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
Current Law--
Fiscal Year S. 961 S. 1701 9/8/05 Extended to
Draft 2020
----------------------------------------------------------------------------------------------------------------
2006...................................................... 303,778 296,941 243,391 303,778
2007...................................................... 311,803 290,711 249,810 311,803
2008...................................................... 317,659 296,092 254,495 317,659
2009...................................................... 322,328 272,894 258,230 322,328
2010...................................................... 322,971 273,452 258,745 322,971
2011...................................................... 325,628 275,783 260,871 325,628
2012...................................................... 328,298 278,062 263,006 328,298
2013...................................................... 329,885 264,277 264,277 329,885
2014...................................................... 331,874 265,868 268,867 331,874
2015...................................................... 334,569 268,023 268,023 334,569
2016...................................................... 337,091 270,041 253,279 337,091
2017...................................................... 340,115 0 255,547 340,115
2018...................................................... 344,416 0 258,772 344,416
2019...................................................... 349,912 0 262,894 349,912
2020...................................................... 0 0 267,053 355,457
-----------------------------------------------------
Total................................................. 4,600,327 3,052,144 3,887,260 4,955,784
----------------------------------------------------------------------------------------------------------------
Question 15. How many deaths have occurred at unreclaimed mine
sites since 1977? Please provide the data by year and location (State
or Tribe), if available.
Answer. There is no systematic national accounting of how many
people have been hurt or killed at abandoned coal mine sites. As a
result, we must rely on anecdotal information. However, we are aware of
at least 45 deaths and 19 injuries at abandoned mine sites in the
anthracite region of Pennsylvania in the past 30 years alone. In
addition, the State of Oklahoma has reported 11 deaths in the pastl0
years.
Question 16. What constraints do you think should be placed on the
use of AML funds distributed to certified States and Tribes? Is it the
Administration's position that these funds should be available for non-
mining related purposes? If so, what is the policy rationale?
Answer. Certified States and Tribes should first use AML funds
distributed to them to address any newly discovered coal reclamation
problems within their boundaries. Beyond that, we believe that
certified States and Tribes should be able to use distributions from
the unappropriated balances of their State-share accounts for whatever
purposes they deem appropriate.
Question 17. What procedures are in place to govern the transfer of
AML interest to the CBF? Are these procedures set forth in a memorandum
of understanding or similar document? If so, please provide a copy.
Does OSM receive reports on the use of AML funds transferred to the
CBF?
Answer. The procedures governing the transfer of AML interest to
the CBF are set forth in a Memorandum of Understanding that was signed
on October 12, 2000. A copy of the Memorandum of Understanding follows
this response.*
---------------------------------------------------------------------------
* The memorandum has been retained in committee files.
---------------------------------------------------------------------------
OSM does not receive reports on the use of AML funds transferred to
CBF.
Question 18. What are the current balances of the so-called
``stranded'' AML Interest and the Rural Abandoned Mine Land Program
(RAMP)?
Answer. As of September 30, 2005, the ``stranded interest'' balance
was $105,105,947.72. This represents the amounts earned in excess of
eligible CBF transfers in any given year. Public Law 109-54, the
Interior Appropriations Act for FY 2006, provides that the balance of
the RAMP funds (section 402(g)(2) of the Surface Mining Control and
Reclamation Act of 1977) on September 30, 2005 are to reallocated to
the allocation established in section 402(g)(3) of the Surface Mining
Control and Reclamation Act of 1977 (the Federal operations
allocation). As a result, the RAMP balance on October 1 2005 became
zero. A total of $361,118,412.68 was transferred to the Federal Expense
Pool which is section 402(g)(3).
Question 19. Please provide an analysis of the remining provisions
included in S. 1701 and the 9/8/05 Draft. What is the appropriate level
of incentive for industry to undertake such a project? Please explain.
Answer. Both bills would reinstate the remining incentives in
section 510(e) of SMCRA that expired September 30, 2004. One of the
expired remining incentives reduced the revegetation responsibility
period from 5 years to 2 years in the East and Midwest and from 10
years to 5 years in the West. The other incentive granted operators an
exemption from the permit block sanction in section 510(c) if the
violations that would have otherwise resulted in application of that
sanction were caused by unanticipated events or conditions encountered
during remining operations. (Section 510(c) prohibits issuance of a
permit to any operator responsible for an unabated violation unless the
violation is in the process of being corrected.) Under S. 1701, the
reinstated incentives would expire September 30, 2015, while the 9/8/05
Draft provides that those incentives would expire September 30, 2020
Both bills also would add a new section 415 to SMCRA to allow the
Secretary to adopt regulations authorizing remining incentives that
would leverage the use of AML funds by facilitating remining operations
that would achieve more reclamation of eligible abandoned mine lands
than could be achieved without the incentives. The bills list two
examples of acceptable incentives: a waiver of reclamation fees and the
use of AML funds to underwrite performance bonds for the remining
operation. Both bills also limit use of the first incentive (rebate or
waiver of reclamation fees) to the removal or reprocessing of abandoned
coal mine waste or to remining operations on lands that have Priority 1
or 2 (high priority) AML problems. In addition, the amount of the fee
rebate or waiver may not exceed the estimated cost of reclaiming the
land under the AML reclamation program.
Both bills also require that, in each instance in which an
incentive is to be used, the Secretary of the Interior determine, with
the concurrence of the State regulatory authority, that the eligible
land would not likely be remined and reclaimed without the incentives.
By referencing the State regulatory authority, rather than the more
generally applicable ``regulatory authority,'' the bills may foreclose
the possibility of applying those incentives to remining operations on
lands for which OSM is the regulatory authority. Furthermore, requiring
individual concurrence by the Secretary in each instance in which an
incentive is to be applied may conflict with one of the basic
principles of SMCRA, which is that States should have the primary
regulatory authority for surface coal mining and reclamation operations
within their boundaries. Therefore, it would be more appropriate for
the legislation to require that the determination be made by the agency
in charge of administering the AML reclamation plan, with the
concurrence of the regulatory authority.
The appropriate level of incentive necessary to persuade industry
to undertake a remining operation would be highly case-specific,
depending on the amount and type of coal that may be recovered, the
extent of the reclamation required, the potential environmental and
other problems that may be encountered, the price of coal, and the
availability and cost of surety bonds or other types of bonds.
In a highly competitive coal market or for a site with marginal
profitability, waiving or reducing the reclamation fee could make the
difference between a profitable mine and a decision not to mine at all.
When surety bonds are scarce, expensive, or both, as they have been in
recent years, the use of AML funds to underwrite performance bonds
could provide a powerful incentive to achieve reclamation of AML sites
without the government having to expend any funds. Using state funds,
the Commonwealth of Pennsylvania has already established a very
successful revolving bond fund for remining operations.
Responses of Thomas D. Shope to Questions From Senator Cantwell
Qustion 1. What is the level of fees that have been collected in
relations to mining activities within the State of Washington since the
authorization of the fee on coal production under SMCRA? Please provide
a total amount and a listing of collections related to coal produced in
the State of Washington by fiscal year.
Answer. Figures in the table below include fees and late payment
interest and penalties collected. Figures are rounded to the nearest
dollar.
------------------------------------------------------------------------
State of
Fiscal Year Washington Fees
------------------------------------------------------------------------
1978................................................. $1,703,363
1979................................................. 1,720,936
1980................................................. 1,783,743
1981................................................. 1,621,216
1982................................................. 1,537,156
1983................................................. 1,398,349
1984................................................. 1,397,822
1985................................................. 1,492,521
1986................................................. 1,601,531
1987................................................. 1,550,133
1988................................................. 1,342,007
1989................................................. 1,714,634
1990................................................. 1,661,425
1991................................................. 1,653,846
1992................................................. 1,868,522
1993................................................. 1,623,218
1994................................................. 1,685,667
1995................................................. 1,517,541
1996................................................. 1,617,617
1997................................................. 1,409,330
1998................................................. 1,747,629
1999................................................. 1,518,208
2000................................................. 1,337,407
2001................................................. 1,702,271
2002................................................. 1,529,929
2003................................................. 2,321,286
2004................................................. 2,123,418
2005................................................. 1,906,147
------------------
Washington Historical Total...................... 46,086,872
------------------------------------------------------------------------
Question 2. What has been the federal expenditure allocated towards
addressing AML hazards in the State of Washington under the provisions
of SMCRA? Please provide a breakdown by AML priority, total federal
appropriations to AML projects, a breakdown of projects by fiscal year,
a characterization of the AML hazard addressed, and disclose any
emergency expenditure.
Answer. Federal expenditures on completed AML reclamation in the
State of Washington total $4.8 million. Emergency reclamation accounted
for 35 percent of these expenditures. The primary problems reclaimed
were vertical openings, subsidence, and portals.
The Federal expenditures on completed AML reclamation in the State
of Washington are shown in the table below.
------------------------------------------------------------------------
County Project Type Amount
------------------------------------------------------------------------
Cowlitz........................... Other............... 3,994
Garfield.......................... Emergency........... 15,033
King.............................. Other............... 1,796,891
Emergency........... 1,543,036
3,339,927
Kittitas.......................... Other............... 367,288
Lewis............................. Other............... 71,744
Emergency........... 10,225
81,969
Pierce............................ Other............... 694,294
Emergency........... 106,609
800,903
Skagit............................ Other............... 27,638
Thurston.......................... Other............... 48,018
Whatcom........................... Other............... 76,481
Emergency........... 19,225
95,706
---------------
Total......................... Other............... 3,086,348
Emergency........... 1,694,128
4,780,475
------------------------------------------------------------------------
Question 3. How many priority 1 and 2 projects remain to be
addressed within the State of Washington? What counties are those
projects located in? As you respond, please identify the specific
location of remaining Priority 1 and 2 sites, and if remaining Priority
1 and 2 sites are located within incorporated cities and identify the
city if applicable.
Answer. Forty four Priority 1 and 2 Problem Areas remain to be
addressed in the State of Washington. A Problem Area is a unique
geographic area containing one or more abandoned mine land problems.
These 44 problem areas are shown by county in the table below. The
estimated cost of reclaiming these problem areas is also shown by
county. This information is in OSM's Abandoned Mine Land Inventory.
This database does not indicate if a Problem Area is in an incorporated
city, and we do not have that information.
------------------------------------------------------------------------
Number of
County Problem Unfunded Costs
Areas
------------------------------------------------------------------------
King...................................... 18 1,598,600
Kittitas.................................. 9 522,000
Lewis..................................... 2 24,000
Pierce.................................... 9 2,337,500
Skagit.................................... 1 10,000
Thurston.................................. 1 15,000
Whatcom................................... 4 52,500
-----------------------------
Washington............................ 44 4,559,600
------------------------------------------------------------------------
The county in which each of the 44 problem areas is located is
shown in the table below along with the estimated cost of reclaiming
the problem area and its longitude and latitude.
----------------------------------------------------------------------------------------------------------------
AMLIS--KEY County Unfunded Costs Longitude Latitude
----------------------------------------------------------------------------------------------------------------
WA000009FRA........................... King..................... 850,000 -121.983333 47.341667
WA000011FRA........................... King..................... 182,000 -122.145833 47.520833
WA000030FRA........................... King..................... 10,000 -121.983333 47.316667
WA000056FRA........................... King..................... 10,000 -121.887500 47.334722
WA000064FRA........................... King..................... 50,000 -121.925000 47.268333
WA000066FRA........................... King..................... 100,000 -121.958333 47.286667
WA000067FRA........................... King..................... 6,000 -121.875000 47.250000
WA000072FRA........................... King..................... 27,000 -122.000000 47.551944
WA000078FRA........................... King..................... 5,000 -121.941667 47.525000
WA000079FRA........................... King..................... 11,250 -121.918889 47.473611
WA000082FRA........................... King..................... 20,000 -122.111111 47.451389
WA000086FRA........................... King..................... 130,000 -121.918056 47.272222
WA000087FRA........................... King..................... 57,500 -121.950000 47.325000
WA000088FRA........................... King..................... 16,850 -121.906667 47.297778
WA000089FRA........................... King..................... 6,000 -122.020833 47.275000
WA000122FRA........................... King..................... 100,000 -122.039444 47.525000
WA000132FRA........................... King..................... 12,000 -122.058333 47.516667
WA000154FRA........................... King..................... 5,000 -122.206944 47.447778
WA000001FRA........................... Kittitas................. 5,000 -120.926111 47.200833
WA000005FRA........................... Kittitas................. 40,000 -121.125000 47.125000
WA000117FRA........................... Kittitas................. 5,000 -120.875000 47.125000
WA000221FRA........................... Kittitas................. 5,000 -121.125000 47.125000
WA000224FRA........................... Kittitas................. 182,000 -121.125000 47.250000
WA000225FRA........................... Kittitas................. 5,000 -121.125000 47.125000
WA000226FRA........................... Kittitas................. 5,000 -120.925000 47.173611
WA000229FRA........................... Kittitas................. 102,000 -121.125000 47.250000
WA000230FRA........................... Kittitas................. 173,000 -120.958333 47.233333
WA000031FRA........................... Lewis.................... 8,000 -122.875000 46.625000
WA000039FRA........................... Lewis.................... 16,000 -122.875000 46.625000
WA000010FRA........................... Pierce................... 202,500 -122.036667 47.101667
WA000040FRA........................... Pierce................... 345,000 -122.041667 47.069444
WA000071FRA........................... Pierce................... 50,000 -122.000000 47.000000
WA000100FRA........................... Pierce................... 210,000 -122.010000 47.023611
WA000101FRA........................... Pierce................... 35,000 -122.040278 47.041667
WA000102FRA........................... Pierce................... 150,000 -122.000000 47.000000
WA000103FRA........................... Pierce................... 1,240,000 -122.025000 47.086111
WA000104FRA........................... Pierce................... 55,000 -122.016667 47.122222
WA000111FRA........................... Pierce................... 50,000 -122.050000 47.055556
WA000076FRA........................... Skagit................... 10,000 -122.166667 48.418889
WA000043FRA........................... Thurston................. 15,000 -122.768333 46.816667
WA000069FRA........................... Whatcom.................. 10,000 -121.920833 48.833333
WA000073FRA........................... Whatcom.................. 18,500 -122.233333 48.791667
WA000146FRA........................... Whatcom.................. 12,000 -122.495833 48.775000
WA000147FRA........................... Whatcom.................. 12,000 -122.480556 48.745833
-------------------------------------------------------------------------
Total............................. ....................... 14,559,600
----------------------------------------------------------------------------------------------------------------
Question 4. What is the estimated total cost of addressing unfunded
priority 1 and 2 sites within the State of Washington?
Answer. As of September 30, 2005, the total cost of addressing
unfunded Priority 1 and 2 sites within the State of Washington is
estimated to be $4.6 million.
Question 5. Is it still possible for the State of Washington to
create an approved State Reclamation Program? If so, what factors does
OSM consider when approving or disapproving a State reclamation
program?
Answer. Yes, the State of Washington can still submit and receive
approval of a State AML reclamation plan. The requirements and
procedures for plan submission and approval are set forth in the
regulations at 30 CFR Part 884. Specifically, as provided in 30 CFR
884.14, before approving a State AML reclamation plan, the Director of
OSM must----
(1) Hold a public hearing on the plan within the State or find that
the State provided adequate notice and opportunity for public comment;
(2) Solicit and consider the views of other Federal agencies;
(3) Determine that the State has the legal authority, policies, and
administrative structure necessary to carry out the proposed plan;
(4) Determine that the plan meets all the requirements of
Subchapter R of 30 CFR Chapter VII;
(5) Determine that the State has an approved State regulatory
program under section 503 of SMCRA; and
(6) Determine that the proposed plan is in compliance with all
applicable State and Federal laws and regulations.
One of the most time-consuming and resource-intensive of those
requirements is likely to be submitting and obtaining approval of a
State regulatory program for coal exploration and surface coal mining
and reclamation operations on non-Federal, non-Indian lands within the
State. The requirements for submitting a proposed State regulatory
program are found in 30 CFR 731.14, while the criteria and procedures
for review and approval of a proposed regulatory program are located in
30 CFR Part 732. Among other things, the State of Washington will need
to adopt laws and regulations consistent with SMCRA and its
implementing regulations; designate a State regulatory authority; and
demonstrate that it has sufficient legal, technical, and administrative
personnel and sufficient funding to implement the provisions of the
regulatory program and other applicable State and Federal laws.
Responses of Thomas D. Shope to Questions From Senator Salazar
Question 1. Why would it be desirable for the Secretary of Interior
to certify that a state has completed its coal-related abandoned mine
reclamation activities, rather than a Governor, who is more familiar
with a state's AML problems? (I am referring to language in the Cubin/
Rahall/Peterson bill, which is not in the Thomas bill).
Answer. We see no reason for the Secretary to have unilateral
authority to certify a State or Indian Tribe. Current law and each of
the proposed bills tie allocation of the historic coal production funds
to the number of Priority 1 and Priority 2 coal problems a State or
Tribe has. Under current law, certification allows States and tribes
more discretion in the use of State-share funds, so there is incentive
to certify. That does not change in any of the proposed legislations.
Question 2. Would such a provision authorize the Secretary to
divert funds collected in one state to solve AML problems in another
state?
Answer. No. All States and Indian tribes are entitled to receive in
grants one half of the AML fee collected within their boundaries,
irrespective of whether they are certified.
Certification means that a State or Indian Tribe can no longer
receive supplemental grants based upon historic coal production, but
can use their grants for purposes other than coal reclamation. However,
since supplemental grants can be given only to States or Indian tribes
if they have Priority 1 or Priority 2 coal problems in their inventory,
these grants are curtailed without the need to force a State or Indian
Tribe to certify.
Question 3. Is this a ``state's rights'' issue, inasmuch as the
authority to initiate certification is currently vested in the Governor
of the affected state?
Answer. We believe the decision to certify under any other the
proposed legislation should remain with the States and Tribes.
[Responses to the following questions were not received at
the time this hearing went to press:]
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC, September 29, 2005.
Mr. Joe Shirley, Jr.,
President, The Navajo Nation,
Dear President Shirley: I would like to take this opportunity to
thank you for appearing before the Senate Committee on Energy and
Natural Resources on Tuesday, September 27, 2005, to give testimony
regarding S. 1701, a bill to amend the Surface Mining Control and
Reclamation Act of 1977 to improve the reclamation of abandoned mines;
and S. 961, a bill to amend the Surface Mining Control and Reclamation
Act of 1977 to reauthorize and reform the Abandoned Mine Reclamation
Program, and for other purposes.
Enclosed herewith please find a list of questions which have been
submitted for the record. If possible, I would like to have your
response to these questions by Thursday, October 14, 2005.
Thank you in advance for your prompt consideration.
Sincerely,
Pete V. Domenici,
Chairman.
[Enclosure.]
Questions From Senator Bingaman
Question 1. What is the greatest need for AML funds on reservation
lands?
Question 2. What is the extent of noncoal reclamation work to be
done?
Question 3. What is the nature of the public facilities projects
you are undertaking?
Question 4. Please describe some of the public health and safety
issues you are confronting with respect to abandoned and unreclaimed
mine sites.
Question 5. I understand that you support allowing Tribes to
maintain approved regulatory programs under SMCRA. Who currently
regulates coal mines on tribal lands?
Question 5a. Does the Navajo Nation administer all permits for
mines (e.g., Clean Air Act, etc.) with the exception of those
administered by OSM?
______
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC, September 29, 2005.
Ms. Lorraine Lewis,
Executive Director, UMWA Health and Retirement Funds,
Dear Ms. Lewis: I would like to take this opportunity to thank you
for appearing before the Senate Committee on Energy and Natural
Resources on Tuesday, September 27, 2005, to give testimony regarding
S. 1701, a bill to amend the Surface Mining Control and Reclamation Act
of 1977 to improve the reclamation of abandoned mines; and S. 961, a
bill to amend the Surface Mining Control and Reclamation Act of 1977 to
reauthorize and reform the Abandoned Mine Reclamation Program, and for
other purposes.
Enclosed herewith please find a list of questions which have been
submitted for the record. If possible, I would like to have your
response to these questions by Thursday, October 14, 2005.
Thank you in advance for your prompt consideration.
Sincerely,
Pete V. Domenici,
Chairman.
[Enclosure.]
Questions From Senator Domenici
Question 1. What is the total amount of additional funding needed
to keep the CBF, and 1993 Fund solvent for the next ten years?
Question 2. By law, the costs of the 1992 Fund is covered by
certain coal-producing companies. However, how much is the cost of the
1992 Fund expected to increase over 2005 levels over the next ten
years?
Question 3. S. 961 would dedicate all of the accumulated and future
interest from the AML fund to offset costs of the CBF, and the 1992 and
1993 Funds. Even if the current balance in the fund is not reduced by
increased reclamation funding and/or repayment of state share balances,
would enough interest be generated by the AML fund to keep these Funds
solvent?
Question 4. If additional funds are not provided by Congress, when,
if ever, will each of the three funds face a ``cash negative'' position
and be forced to make benefit cuts?
Question 5. Please provide a list of the so-called ``reachback''
companies that are responsible for payment under the Coal Act. What is
the collective responsibility of these companies per year?
Question 6. How many beneficiaries were added to the 1992 Fund by
the Horizon bankruptcy? You stated in your oral testimony that you do
not expect a great number of beneficiaries to be added to the 1992 Fund
in the near future. However, do you have an estimate of the total
possible population that would be eligible for coverage under the 1992
Fund should the company that is currently responsible for their
benefits go bankrupt?
Question 7. What is the current per beneficiary premium paid by the
companies that are signatories to the collective bargaining agreement
that established the 1993 Fund? How much is contributed by each
beneficiary per household? When does the collective bargaining
agreement that established the 1993 Fund expire? Do the projections
regarding the solvency of the 1993 Fund on the chart that accompanied
your testimony assume the continuation of the terms of the existing
collective bargaining agreement with respect to the 1993 Fund?
Questions From Senator Bingaman
Question 1. Please provide for the record a table displaying the
projected deficits of the CBF over the next 12 years.
Question 1a. How would S. 1701 and S. 961 each affect these
deficits? Please provide a table displaying annual projections.
Question 1b. How will these deficits affect the health care
benefits of retired coal miners and their dependents?
Question 1c. How many people will be affected?
Question 2. Please provide for the record a table displaying annual
deficits in the CBF since 1990, the amounts transferred from the AML
Fund, and amounts appropriated to address the deficits.
Question 3. What is the procedure for the transfer of AML interest
to the CBF and for reconciling the estimated expenditures from the CBF
with the actual expenditures?
Question 3a. Is the CBF the subject of any internal or external
audits? If so, how frequently are these undertaken and by whom?
Question 3b. What role, if any, does OSM have with respect to
procedures and oversight of the CBF? What reports are provided to OSM?
Question 3c. You mentioned that GAO has reviewed matters relating
to the CBF. What reviews of the CBF have been undertaken by GAO? What
has been the outcome of these reviews?
Question 4. I understand that there has been a prescription drug
demonstration program that the Funds have participated in that has been
continued through September of 2007. Could you please describe this
program and provide the annual revenue impact of having this program in
place?
Question 5. What is the potential revenue impact of the so-called
``premium litigation'' that is currently pending? Please describe the
key issues in that litigation.
Appendix II
Additional Material Submitted for the Record
----------
Statement of Joanna Prukop, Secretary, Energy, Minerals and Natural
Resources Department, State of New Mexico
Thank you for the opportunity to present a statement on this
important topic.
We appreciate the efforts of this Committee and the bill sponsors
to propose legislation that will extend the abandoned mine land
reclamation fee under Title IV of the Surface Mining Control and
Reclamation Act of 1977 (SMCRA) and therefore continue this valuable
and needed program.
New Mexico's Abandoned Mine Concerns. New Mexico has a long and
distinguished mining history. Native Americans mined coal, turquoise,
lead, and copper hundreds of years before Europeans arrived in North
America. Spanish exploration and mining began in the late 1500s and
expanded across the state. The nineteenth and twentieth centuries
witnessed a number of mining booms across the State driven by the
search for coal, gold, silver, copper and uranium among others. Today,
New Mexico is home to some of the largest active coal and hard rock
mining facilities in the United States.
Centuries of mining have also left another legacy: thousands of
mine openings and other mine hazards that pose serious threats to
public health and safety. Since 1990, we are aware of at least five
fatalities at abandoned mines in New Mexico. Numerous other serious
injuries and costly rescues have occurred at these mines. In addition,
abandoned mines across New Mexico pose significant threats to property
and the environment through pollution, subsidence and underground
fires.
Benefits of New Mexico's AML Program. The Abandoned Mine Land
Program has made significant gains in eliminating abandoned mine land
threats across America. By directing funds to state agencies, the AML
Program allows the states to focus on the greatest threats to public
health and safety.
In New Mexico, a small annual AML grant funds a program that has
completed numerous projects across the state. New Mexico's annual grant
is now near $1,600,000. Despite the small grant, New Mexico's AML
program has received national and regional awards for its reclamation
work. During the history of our program, over 2000 mine openings have
been closed and hundreds of acres of coal mine waste have been
reclaimed in New Mexico.
In addition to protecting public health and safety, the New Mexico
AML program has provided numerous other public benefits. AML projects
are a source of construction contracts and jobs for New Mexicans. While
most project investigation and design work is conducted in-house, all
construction work is awarded by competitive bids to private
contractors, almost all of whom are based in New Mexico.
AML projects have also expanded our knowledge of New Mexico's
mining heritage and created opportunities for public recreation. The
Cerrillos Hills AML Project, completed in 2003 with the closure of 90
mine openings, allowed the expansion of a newly created historic park
that focuses on mining history. The Sugarite Coal Mine Project near
Raton involved the reclamation of coal mine openings and waste piles
located within a popular state park. And the recently completed Lake
Valley AML Project will allow the BLM to expand hiking trails into a
historic mining area.
However, despite these gains, considerable work remains in New
Mexico. We estimate that over 15,000 mine openings at more than 5000
mine sites in New Mexico remain unreclaimed. While significant costly
coal mine projects remain, the majority of the sites are found in large
non-coal mining districts.
In addition, as development and public recreation moves further
into areas once considered remote, the threat from long forgotten mine
workings increases. Newly designated recreational areas increasingly
provide access to old mining districts. An example of development
encroaching on mining areas occurred last year when someone broke into
a closed mine near Santa Fe and fell down a shaft and had to be
rescued. When this abandoned mine was closed 15 years ago, there were
not even 4-wheel drive roads nearby; today, the site is adjacent to a
subdivision.
New Mexico's Position. New Mexico strongly urges Congress to
reauthorize the AML fee in SMCRA. New Mexico has joined with other
states in supporting the efforts of the National Governors'
Association, the Western Governors' Association, the National
Association of Abandoned Mine Land Programs and the Interstate Mining
Compact Commission to push for AML fee reauthorization.
Governor Richardson strongly supports the specific proposals set
forth in the attached Western Governors' Association Resolution 05-26
adopted by the WGA in June. In addition, the New Mexico House of
Representatives unanimously adopted the attached House Memorial 14
earlier this year. Both the WGA Resolution and the House Memorial urge
that the AML fee be extended and that the state share balances be
returned to the States. As a western state with a small AML program, we
wish to highlight the following issues that are of great importance to
New Mexico and are shared by other Western states with smaller programs
such as Utah, Colorado and Montana.
The minimum annual funding for states should be increased
and guaranteed at a level of at least $2 million. The
efficiency of state programs depends on long term planning and
on the ability to maintain a staff that can effectively
investigate and design projects. Having a guaranteed minimum
annual grant is essential to the effective use of the funds.
The minimum funding level should be used for both uncertified
and certified states.
The control over the ``certification'' of state programs
should remain in the hands of the states. AML programs work on
multi-year projects and therefore need to plan the transition
to certification. SMCRA currently allows the states to decide
when certification is appropriate and there is no reason to
change this provision.
Any amendments to SMCRA should not inhibit the ability of
the states and tribes to address high priority non-coal
projects. SMCRA recognizes that high priority non-coal projects
are an appropriate use of the funds. We urge Congress to
consider alternatives for addressing the numerous and costly
non-coal projects not currently covered by SMCRA.
Any changes to the funding mechanisms in SMCRA should treat
tribal AML programs fairly. New Mexico has worked extensively
with the Navajo and Hopi AML programs, both of which are
enormously successful.
As a state with a smaller AML program, we struggle to efficiently
and effectively employ our limited resources in the face of large
problem. As a Western state with abandoned coal mines remaining to be
reclaimed, we seek to balance the need to complete the coal mine AML
projects with the need to safeguard the numerous and dangerous
abandoned non-coal mines. And with other Western states, we share the
concerns that expanding residential development and recreational use
are increasing the exposure to abandoned mine dangers.
We appreciate the opportunity to present this statement, and look
forward to working with the Committee in the future.
______
AML/Coal Act Coalition.
Senator Jim Talent,
Committee on Energy and Natural Resources, U.S. Senate, Washington, DC.
Dear Senator Talent: We represent interested stakeholders who have
been working for many months to develop a compromise proposal to
address the long-term viability of the Abandoned Mine Land reclamation
program and the Coal Industry Retiree Health Benefit Act. We are
pleased to learn that the Senate Energy Committee will be holding a
hearing on September 27th relating to AML reform, and appreciate your
interest in this issue.
We are also grateful for the leadership shown by Representatives
Cubin, Rahall, and Peterson to develop a comprehensive reform proposal
dealing with AML/Coal Act issues. The undersigned organizations support
this important compromise, which represents a breakthrough after many
months of trying to resolve a variety of complex issues. We believe the
attached legislative proposal gives us the best opportunity to achieve
meaningful AML/Coal Act reform.
We respectfully request that you include this letter and the
accompanying language* as part of the hearing record on September 27th.
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* Retained in committee files.
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Berwind Corporation
Bituminous Coal Operators Association of America
Blue Diamond Coal Company of Tennessee, Virginia
and Kentucky
The Brink's Company
Consol Energy
Davon, Inc. of Ohio
Drummond
Foundation Coal Corporation
Harbaugh Diesel Engine Co. of Pennsylvania
Lindsey Coal Mining Co. of Pennsylvania
Lone Star Steel Co. of Texas
The North American Coal Corporation
Orlando Utility Commission, Florida
Peabody Energy
Pennsylvania Electric Co. of Pennsylvania
Princeton Mining Co. of Indiana
Sherwood-Templeton Coal Co. of Indiana
Templeton Coal Co. of Indiana and Iowa
United Mine Workers of America
United States Steel Corporation
Virginia Lee. Co. of Virginia
______
Statement of The Citizens Coal Council
The Citizens Coal Council (CCC) welcomes this opportunity to submit
comments concerning the state of coalfield citizens and the abandoned
lands and waters in the communities in which they live. The following
comments are related to the proposed bills for Abandoned Mine Land
(AML) reauthorization reform for the AML Reclamation Program. The
Citizens Coal Council represents a clear voice for citizens who are
directly impacted by surface and underground coal mining activities. We
recognize the need to reclaim AML sites in the coalfields of our
nation. Member groups of the Citizens Coal Council have been active in
seeking workable plans and achievable objectives relating to SMCRA and
AML reclamation. Current draft legislation and suggestions contain
important pieces to achieve AML reclamation, but still leave an unclear
program to plan, implement, maintain, and manage an integrated AML
program. The Office of Surface Mining Reclamation needs to focus on an
emphasis on reclamation quality, safety, efficiency, and strategies
relative to the complex environmental issues surrounding any proposal.
We urge the Senate Energy Committee and members of Congress to try to
understand what it is like to live in the coalfields where children
draw pictures of the streams colored red, not blue ``because that is
what the creek behind my house looks like.'' We urge the Senate Energy
Committee and members of Congress not to assume that issuing funds to
be used to achieve more reclamation by so-called ``remining'' of these
lands will be the solution. Remining has caused major problems in parts
of Appalachia and is not a universal panacea. We need to create
incentives for alternative reclamation programs in the coalfields of
our nation.
The challenges of such a complex enterprise must embrace the
diversity of all stakeholders, but it must cease to expect the
coalfields of Appalachia to serve as national sacrifice zones. It must
focus on workable reclamation programs and systems that achieve
improvements to the communities already impacted from AML sites. The
unanswered concerns that the concurrence of the regulatory authority
(either federal of state) that the AML site is otherwise not likely to
be reclaimed raises a ``red flag'' as to who is making such decisions.
The wisdom of past congressional actions makes it clear that AML
reclamation must be to maintain and preserve all efforts to reclaim AML
sites for the protection of coalfield citizens. AML reform must not
become a mechanism to funnel subsidies of federal funds into the coal
industry. Real AML reform will take a serious commitment by Congress to
address the goals, objectives and policies of the AML program. Before
approving any new AML reform actions, Congress should require more
detailed evidence of these proposed reform actions. Does the wheel need
to be fixed, or does Congress need better management of current AML
Reclamation Program's goals, objectives and policies?
SUMMARY OF PROPOSED ABANDONED MINE LAND PROGRAM REAUTHORIZATION AND
REFORM LEGISLATION
Background
In 1977, Congress passed the Surface Mining Control and Reclamation
Act (SMCRA). Among other provisions this law created the Abandoned Mine
Land (AML) fund to pay for reclamation and restoration of land and
water resources adversely impacted by pre-1977 coal mining. Coal
operators pay a fee (15 cents per ton of deep mine coal and 35 cents
per ton of surface mine coal) into the AML fund. The 1977 law set up a
formula for distribution of this funding and established criteria and
priorities for what sites could be cleaned up.
Generally, sites eligible for AML funding are lands and waters,
which were affected by coal mining or processing and abandoned before
the enactment of SMCRA. These sites are categorized by 5 priorities.
These are: (1) immediate threats to public health, safety, and general
welfare, (2) threats to public health, safety, and general welfare (3)
threats to land and water resources and the environment (4) public
facilities adversely affected by past mining practices, and (5) public
lands adversely affected by coal mining.
The funds collected from coal operators are supposed to be
distributed to states to fund clean up of abandoned mine sites. Most of
the money goes to states, which have ``approved AML programs.'' In
order to have an ``approved program,'' a state or tribe must have
regulatory primacy for coal mining. Under current law, states with
approved programs or ``program states'' are to receive fifty percent of
the funds collected in that state. The other fifty percent becomes part
of the federal share. Forty percent of the federal share is supposed to
be distributed to states based on how much coal was mined in those
states before 1977 (historic production.) Twenty percent of the federal
share is to be transferred to the Department of Agriculture for the
Rural Abandoned Mine Program (RAMP). Program states are supposed to
receive minimum funding of $2 million. Program states that do not
receive $2 million based on current or historic production (minimum
program states) are to receive money from the federal share to bring
them up to $2 million. The rest of the federal share is to be used to
pay for the administration of the federal Abandoned Mine Land program
and to pay for emergencies in non-program states (states without
regulatory primacy for coal.)
Title IV of SMCRA has been amended multiple times to reauthorize
and change the AML program. Currently, the law allows for a transfer of
interest from the AML fund to the Combined Benefits Fund (CBF) of the
United Mine Workers of America (UMWA). Other provisions have also been
added, such as giving States the option of setting aside ten percent of
their funding for acid mine drainage abatement.
Nationally, less than twenty percent of AML sites have been
reclaimed. The AML program should be reauthorized, so that States can
continue to address the impact pre-1977 mining had on coalfield
communities. Reauthorization provides the opportunity to improve the
program in addition to extending it.
The Citizens Coal Council (CCC) a coalition of many citizens'
organizations has worked to draft language for AML reauthorization.
Members of CCC have worked to include language, which would benefit all
citizens in coalfield communities. The CCC draft represents months of
effort by coalfield residents to come up with a proposal, which will
continue the AML program while improving it so that more funding goes
to the areas where it is needed.
THE CITIZENS COAL COUNCIL PROPOSAL
Extends the collection of the AML fee and the AML program to 2029
At current funding levels the present sunset date would leave the
nation with more than 85% of the inventoried abandoned mine land
problems unreclaimed.
Based on current funding levels, projected future production, and
estimated cost of cleaning up inventoried sites, it will take 25 years
to address AML problems in the country. Extending the program another
25 years would honor the intentions of the program created by the 1977
surface mining law--that communities which provided natural resources
and labor which fueled the nation for many years before federal
regulation of surface mining would not have to forever be burdened by
unreclaimed coal mines. .
Increases the level of funding allocated to areas where pre-1977 mining
occurred
The primary purpose of the AML program is to reclaim land mined
before 1977. It happens that many areas which mined much of the coal
before 1977 currently have low coal production.
By increasing the amount of the federal share of AML money, which
is distributed based on historic production from 40% to 60%, this bill
will facilitate clean up in areas with backlogs of AML problems.
In order to increase the percent, which is distributed based on
historic production the bill, shifts RAMP (Rural Abandoned Mine Land
Program) funding to the General Fund. RAMP has not been funded through
AML for many fiscal years. This will allow RAMP, an Agriculture
Department program, to receive appropriations under the Agriculture
Appropriations bill.
Increases the minimum program funding level from $2 million to $ 4
million annually
States which have significant AML problems but which have small AML
programs are supposed to be guaranteed minimum funding of their
programs by statutory mandate. Since 1990, this minimum program funding
has been set at $2 million. However, most years minimum program states
have received significantly less. These states have demonstrated a
desire to operate meaningful clean-up programs but struggle to do so
with current funding. This increase would both help to make up for past
under-funding and insure that states with significant AML problems but
low production would be able to continue running effective programs.
There are 26 states and tribes with approved Abandoned Mine Land
(AML) Reclamation Programs. Presently ten states are Minimum Program
States (Alaska, Arkansas, Iowa, Kansas, Maryland, Missouri, New Mexico,
North Dakota, Oklahoma and Utah.) Over the years, coal production in
these states declined to the point that there was not sufficient AML
funding to administer an effective AML program. (The AML program is
funded by a fee paid by coal operators on each ton of coal mined. Fifty
percent of the money collected in each state is distributed back to
that state for AML clean-up work.) Congress established the ``minimum
program'' in FY 1988 requiring that each State with an approved AML
program receive no less the $1.5 million.
With $500 to $600 million of high priority AML problems resulting
in deaths each year, Minimum Program States, with broad support,
convinced Congress that the annual minimum program funding should be at
least $2 million. As a result, Congress passed the Abandoned Mine
Reclamation Act of 1990, adding 402(g) 8, which set an annual minimum
funding level of not less than $2 million for all approved programs.
For the next three fiscal years, Minimum Program states received the
annual $2 million. However, since FY 1995 Minimum Program states have
only received $1.5 million.
At least 25% of the high priority AML sites are in Minimum Program
States, but these states receive less than 10% of total AML funding
each year.
An annual appropriation of $1.5 million to Minimum Program States
is simply inadequate to reclaim the number of high priority AML sites
in each State. Why? Because at this level AML staffs are reduced to a
``bare bones'' staff, reclamation contracts must be phased, and less
reclamation is completed.
For Minimum Program States to once again operate an effective,
viable, and efficient AML reclamation program, minimum program funding
should be set at an annual level of $4 million.
Includes non-primacy state programs as minimum programs.
States, which do not have their own coal regulatory programs, are
not eligible for a 50% share of AML money collected in the state or
funding based on historic production. These states do not have the same
minimum program funding guarantee afforded to states with regulatory
primacy. These states are also limited in what types of AML problems
they can receive funding to address. This bill would grant federally
managed (non-primacy state) programs $4 million minimum program funding
if they demonstrate the ability to operate an effective abandoned mine
reclamation program.
Tennessee is a non-primacy state, with hundreds of AML sites that
need to be cleaned up. Giving Tennessee the same guarantee of minimum
program funding as program states (and increasing minimum funding to $4
million), would make it possible to address the abandoned mine land
problem in Tennessee in one decade instead of four.
Other aspects of the existing SMCRA title IV program would remain
unchanged. These include:
Keeping all 5 Priorities of AML sites as outlined in current
law. This will allow States to continue to treat water quality
as high priority and continue to address environmental problems
Allocating 50% of reclamation fees collected from a State or
Indian tribe to that State or Indian tribe subject to
appropriations.
Maintaining the 10% set-aside of annual grants for acid mine
drainage projects.
Allow for a transfer of interest from AML fund the to UMWA
CBF, while affirming that supporting the CBF is not the primary
purpose of interest from the AML fund. Restoration of coalfield
environments is.
Since 1992 interest from the AML fund has been transferred to the
UMWA Combined Benefits Fund (CBF). This bill would simplify the
language to permit an annual transfer of interest to the CBF. It also
adds language, which clarifies that interest payment transfer to the
Combined Benefits Fund is only one of the several priorities the
Secretary must fulfill. Transfer of funds to the CBF was not the
original intent of the organic Act and this amendment reaffirms that
accrued interest funds shall be used to meet other priorities as well.
Keep the general welfare clause. This will allow state agencies to
treat sites that have a negative impact on communities but are not a
threat to safety to be classified as priority 2 sites. This is the same
priority give to sites that are not an immediate safety threat but that
have the potential to impact health or safety.
Why we need The `General Welfare' Provision.
In 403(a) SMCRA sets out the priorities for AML reclamation
projects. According to the law priority (2) sites are those that pose a
threat to public health, safety, and general welfare. While priority
(3) sites are those that impact land and water resources and the
environment. Priority (1) is the category for sites that pose a direct
threat. The `general welfare' clause allows state agencies to classify
sites that are not threaten health or safety but do impact the overall
welfare of a community as a higher priority.
In many cases, toxic mine drainage degrades the welfare of a
community even if it is not a threat to safety. In other cases, there
are sites--an abandoned highwall in the middle of a huge tract of
company land for example--that are potential safety threats but do not
directly impact the welfare of a community. The `general welfare'
clause gives equal priority to a site that oozes toxic mine drainage
into a stream that flows through the heart of a community as a highwall
that is surrounded by acres of undeveloped land.
Without the `general welfare' clause AML sites that cause community
problems but are not dangerous would all have to be classified as
priority (3) sites and would not be able to be addressed until all the
potential safety threats are cleaned up.
The `general welfare' clause should be preserved in SMCRA so that
sites that have a community impact can continue to be treated as a high
priority even if their impact is not defined as related to health or
safety. The communities experiencing these impacts know that the effect
of contaminated water is one of degradation to health, safety, and the
economy.
The AML Fee Should Be Increased
To adjust the AML fee to reflect inflation, it should be raised to
$1.09 for strip-mined coal and $0.47 for deep mined coal. This would
help provide adequate funding for AML and still allow for funding for
the other burdens, such as the UMWA Combined Benefits Fund.
The AML fee (35 cent per ton of strip mined coal and 15 cents per
ton of deep mined coal) has remained the same since 1977. The fee has
never been adjusted upwards to reflect the rising cost of reclamation,
which has risen with inflation. In 2004 and now in 2005, proposals have
been put forward that would reduce the AML fee. Given that only two
thirds of all the abandoned mine land sites have been reclaimed we
cannot afford to reduce the AML fee.
The selling price of coal has recently more than doubled. Instead
of looking at reducing the fee Congress should look at the option of
increasing it.
REMINING: CITIZENS COAL COUNCIL CONCERNS ABOUT THE USE OF AML FUNDING
TO SUBSIDIZE ``REMINING'' OPERATIONS
Background
Many state regulatory agencies are promoting the possibility of
coal companies reclaiming abandoned mine sites in the process of doing
new mining. This approach to address the abandoned mine land issue has
had success in some parts of the country but has caused great concern
among local residents in other areas.
The term ``remining'' gets applied to two very different
activities. One is when a coal operator mines coal on an abandoned mine
site. In this case, because the law now requires reclamation, a
remining operation must also reclaim the area. The second activity that
the term is applied to is the reprocessing of coal refuse piles. In
this situation, the refuse pile is actually mined for remnant coal--
there is no new surface disturbance. Sometimes remining is promoted as
a way to reclaim abandoned mine sites that would otherwise be cleaned
up by the Abandoned Mine Land (AML) program.
There is a difference between remining and reclamation of abandoned
mine sites: the purpose of AML reclamation is to reclaim a site that
was left abandoned; the purpose of ``remining'' is to remove coal.
Under current AML law if the purpose of an operation is to remove coal,
it must be permitted as a coal mine not an AML reclamation job.
In the mining regulations, there are provisions that loosen
requirements on operators that are mining an area that has been
previously mined. (E.g. operators are held to less stringent water
quality standards) There is not language in AML law that links remining
and AML reclamation. The purpose of the AML program and fund is not to
encourage or subsidize new mining but to pay for reclamation of an
area, which was damaged by mining before 1977.
Remining operations are ``mining'' operations
There is a relevant distinction between mining projects where the
goal is to mine coal and reclamation projects where the goal is to
reclaim an area mined before 1977. Any remining operation brings with
it the same potential environmental hazards and community impacts as
any other mining operation. Remining should only be subsidized with AML
money if the primary purpose and goal is reclamation. And, there is
already a provision in Title IV of SMCRA that allows sale of coal,
which is removed in the process of an AML reclamation job to be used to
off set the cost of AML reclamation.
Reprocessing of coal refuse
To the extent that this type of remining (reprocessing refuse coal)
can be done without new surface disturbance it should not be
discouraged. When Congress or federal agencies make decisions about
remining they should clarify which type of remining is the subject of
the decision.
Remining as cover for controversial mining projects
In remining, the motivation for the operation is coal extraction;
the AML reclamation is an incidental benefit. Coalfield residents are
very weary of remining activities being used to justify controversial
mining projects. This is particularly the case in the steep slope areas
of the southern mountains where mountaintop removal has become a
dominant form of surface mining. If Congress ties AML to remining
incentives it should include a provision that prohibits the use of AML
money to subsidize mountaintop removal and cross ridge mining projects.
Use of AML money for performance bonds
Performance bonds are the mechanism in SMCRA that help insure that
if a company does not complete reclamation on a new mining project
there will be money to pay for clean-up of that site. In addition, the
bonds are away of encouraging companies to follow the law and reclaim
the land they disturb, that is, if the company leaves a new mine
without reclaiming it they loose money. Using AML money for performance
bonds is simply irresponsible. It takes away the financial risk to
companies of bond forfeiture thus leaving the company with less
incentive to reclaim the site.
Remining projects expanding outside of the original AML site
There is significant concern that remining activities will take in
acreage outside of the original AML site. If a mining project that
includes ``remining'' takes in additional acreage outside of the
original AML site then AML funds should not be used to subsidize the
mining outside of the AML area.
Using AML money to encourage remining of areas with AMD
Remining AML sites always has the potential to increase the size of
the problem. This is especially the case with AML sites that produce
toxic drainage. While the reclamation associated with a remining job
might help alleviate a toxic mine drainage problem, depending on the
nature of the problem, the surface disturbance that is part of any
mining operation will likely expose more toxic materials to air and
water increasing the problem.
Exempting remining from environmental standards
While the reclamation associated with a remining job might help
alleviate a toxic mine drainage problem, depending on the nature of the
problem, the surface disturbance that is part of any mining operation
will likely expose more toxic materials to air and water increasing the
problem. If AML funds are used as an incentive for a new mining
operation this operation should have to demonstrate that the
reclamation required by SMCRA is feasible and there should be no
reduction of environmental standards for that operation.
CCC urges members of the Senate Energy Committee and Congress to
carefully take a ``hard look'' at any proposed Senate or House bill
that would allow federal funds to be used for ``remining'' activities.
At first it sounds like a great idea and reasonable use of federal
funds, but the potential long-term cost may put an unreasonable burden
upon Congress to fund perpetual treatment of AML ``remining'' sites.
Everyone makes choices in life. To define and allow federal funds for
incentives to conduct ``remining'' surface and underground coal mining
operations must carry the strongest possible assessment and evaluation
procedures within any proposed AML reform bill. The current bills do
not. The full measurement of pre-permitting and post-reclamation of AML
so-called ``reclaimed'' sites is unknown as compared to current
permitting to carry out the present federal and state AML Reclamation
Programs. There are existing alternatives to reclamation of AML sites
as compared to just ``remining'' AML sites. These alternative
reclamation activities could be more cost effective. We ask that the
Senate Energy Committee and members of Congress require a more detailed
AML Reform Reclamation bill that outlines the full ramifications of
allowing ``remining'' of AML sites while other alternatives are
available to the Office of Surface Mining Reclamation and Enforcement.
CONCLUSION
Citizens Coal Council has been a voice for citizens who live in the
coalfields of our nation and charges this committee and Congress to
address our concerns. Congress and this committee are currently on a
mission to expand the production and uses of coal throughout the
nation. Because Congress is actively encouraging this vigorous
expansion of the uses of coal, Congress cannot forget or overlook that
ALL USES OF COAL REQUIRE MINING IN THE COALFIELDS. CLEAN COAL REQUIRES
MINING IN THE COALFIELDS. COAL GASIFICATION REQUIRES MINING IN THE
COALFIELDS. HYDROGEN FROM COAL REQUIRES MINING IN THE COALFIELDS. Given
the current events in our nation, Congress must assume a ``guarding''
role as protectors of our nation's watersheds and community water
supplies. Homeland security starts in the local communities in our
nation. Coalfield citizens are NOT secure. Their children sleep in
their clothes in case flooding occurs from the mountain top removal
site or remined steep slope near their homes. Children are killed while
they sleep in their beds by boulders or by overloaded coal trucks while
they travel on their roads. Their homes and resources are blasted and
broken. Their streams are unfishable. Their water undrinkable. We have
sacrificed our communities in the past for this nation. We continue to
be asked to sacrifice our quality of life. We deserve to have our needs
met, and we ask that the Senate Energy Committee and members of
Congress will put coalfield citizen's concerns first when acting upon
any AML reclamation reform. Thank you for this opportunity to submit
comments. Submitted by the Citizens Coal Council, P.O. Box 1080,
Washington, PA 15301. Contact: Landon Medley at 931 946-2951 or Beverly
Braverman at [email protected] or 724 455-4200.
______
Save Our Cumberland Mountains,
Lake City, TN, October 11, 2005.
Mr. Steve Waskiewicz,
Staff Assistant, Committee on Energy and Natural Resources, U.S.
Senate, Washington, DC.
Dear Mr. Waskiewicz: SOCM would like to submit the following and
the attached documents to the record from the AML Reauthorization
Hearing that was held on September 27th.
Save Our Cumberland Mountains (SOCM) is a grassroots organization
that has worked on environmental justice in the Tennessee coal fields.
SOCM has over 2500 members in Tennessee and is also a member of the
Citizens Coal Council a national coalition of coalfield organizations.
SOCM appreciates this opportunity to submit comments on the Senate
hearing on Reauthorization of the Abandoned Mine Land Program.
SOCM encourages members of Congress to act to reauthorize this
important program. There are still several hundred Abandoned Mine Land
sites in Tennessee that need to be reclaimed and hundreds throughout
the country. However, SOCM is concerned about some of the provisions in
the exiting AML reauthorization proposals. Two of our concerns, which
are outlined in the attached documents, are the elimination of the
general welfare clause and new subsidies for remining operations.
The attached document titled ``Concerns about Cubin-Rahall-Peterson
and General Welfare Funding'' refers to a Cubin-Peterson-Rahall
proposal. This proposal was included in the record by Senator Talent
(and referred to during the hearing) on behalf of the ``AML/Coal Act
Reform Coalition.''
The attached document ``Remining in the Southern Mountains:
Concerns of Coal Field Residents'' was prepared by SOCM and the
Citizens Coal Council. It comments on the remining incentives that are
included in the Thomas bill as well as the continuation of regulatory
incentives that are part of both the Thomas and Rockefeller Bills.*
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* The attachments have been retained in committee files.
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Thank you for the opportunity to submit comments for the record.
Sincerely
Sincerely,
Jonathan Dudley,
Strip Mine Committee, staff.
[Enclosures.]