[Federal Register Volume 75, Number 153 (Tuesday, August 10, 2010)]
[Rules and Regulations]
[Pages 48526-48547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19276]
[[Page 48525]]
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Part IV
Department of the Interior
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Office of Surface Mining Reclamation and Enforcement
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30 CFR Part 938
Pennsylvania Regulatory Program; Final Rule
Federal Register / Vol. 75, No. 153 / Tuesday, August 10, 2010 /
Rules and Regulations
[[Page 48526]]
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DEPARTMENT OF THE INTERIOR
Office of Surface Mining Reclamation and Enforcement
30 CFR Part 938
[PA-153; Docket ID OSM-2008-0021]
Pennsylvania Regulatory Program
AGENCY: Office of Surface Mining Reclamation and Enforcement (OSM),
Interior.
ACTION: Final rule; partial approval of amendment.
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SUMMARY: OSM is announcing its partial approval of a program amendment
submitted by the Commonwealth of Pennsylvania for the purpose of
addressing the need for financial guarantees to cover the costs of
treatment of post-mining pollutional discharges and land reclamation
for those surface coal mining sites that were originally bonded under
the Commonwealth's now defunct alternative bonding system (ABS). OSM is
requiring that Pennsylvania ensure that its program provides suitable,
enforceable funding mechanisms sufficient to guarantee coverage of land
reclamation at all original ABS sites.
DATES: Effective Date: August 10, 2010.
FOR FURTHER INFORMATION CONTACT: George Rieger, Director, Pittsburgh
Field Division, Telephone: (717) 782-4036, e-mail: [email protected].
SUPPLEMENTARY INFORMATION:
I. Background on the Pennsylvania Program
II. Description of the Amendment
III. OSM Findings
IV. Summary and Disposition of Comments
V. OSM's Decision
VI. Procedural Determinations
I. Background on the Pennsylvania Program
Section 503(a) of the Act permits a State to assume primacy for the
regulation of surface coal mining and reclamation operations on non-
Federal and non-Indian lands within its borders by demonstrating that
its State program includes, among other things, ``* * * a State law
which provides for the regulation of surface coal mining and
reclamation operations in accordance with the requirements of the Act
``* * *; and rules and regulations consistent with regulations issued
by the Secretary pursuant to the Act.'' See 30 U.S.C. 1253(a)(1) and
(7). On the basis of these criteria, the Secretary of the Interior
conditionally approved the Pennsylvania program on July 30, 1982.
You can find additional background information on the Pennsylvania
program, including the Secretary's findings, the disposition of
comments, and conditions of approval in the July 30, 1982, Federal
Register, 47 FR 33050. You can also find later actions concerning
Pennsylvania's program and program amendments at 30 CFR 938.11, 938.12,
938.13, 938.15 and 938.16.
General Discussion--Bonding Regulations
SMCRA's implementing regulations at 30 CFR Part 800 specify the
minimum requirements for filing and maintaining bonds and insurance for
surface coal mining and reclamation operations under regulatory
programs. This Part includes (but is not limited to) a description of
the regulatory authority's responsibilities and definitions, the
requirement to file a bond, the form of the performance bond, the
period of liability, the determination of bond amount and adjustment of
the amount, and the general terms and conditions of a bond.
Coal operators are required to file a bond for reclamation of
disturbed land in accordance with permit requirements. The bond should
cover the entire permit area and the amount may be determined
incrementally as reclamation phases are completed. Independent
increments should be of sufficient size and configuration to provide
for efficient reclamation operations should reclamation by the
regulatory authority become necessary. The applicant can file a bond or
another financial instrument to cover the bond amount.
These bonding methods include a bond for the entire permit area, a
cumulative bond schedule and bond for the initial area, an incremental
bond schedule and bond for the first increment, or an alternative
bonding system if it achieves the objectives and purposes of the
bonding program. As set forth at 30 CFR 800.11(e), the objectives of
the bonding program are: (1) To assure that the regulatory authority
will have available sufficient money to complete the reclamation plan
for any areas which may be in default at any time; and, (2) to provide
a substantial economic incentive for the permittee to comply with all
reclamation provisions.
In addition to prescribing, by regulation, the terms and conditions
for performance bonds, the regulatory authority is also responsible for
determining the amount of the bond, including any adjustments to such
amount. The determination of the bond amount should depend upon the
requirements of the approved permit and reclamation plan and reflect
the probable difficulty of reclamation. The amount of the bond should
be sufficient to assure the completion of the reclamation plan if the
work has to be completed by the regulatory authority.
The amount of the bond shall be adjusted by the regulatory
authority from time to time as the area requiring bond coverage is
increased or decreased or where the cost of future reclamation changes.
The regulatory authority may require periodic times or set a schedule
for reevaluating and adjusting the bond amount to fulfill this
requirement.
The regulatory authority may release liability under a bond when
reclamation activities are completed and may require forfeiture of such
bonds if the terms of the permit or bond are not met. The liability
period shall extend until all reclamation, restoration, and abatement
work under the permit has been completed.
Throughout the U.S., State regulatory programs have employed a
variety of bonding programs, some electing to employ a conventional
bonding program (full-cost bonding program that requires site-specific
bonds as the only means of assuring reclamation following completion of
mining) and others electing to employ an ABS as provided for in Sec.
800.11(e).
Background on Pennsylvania's Bonding Program
For almost 60 years Pennsylvania law has regulated surface mining
and has required some degree of land reclamation. For most of the same
period it has also required bonds, in changing amounts and formats, to
ensure the required land reclamation. The current requirements for both
land reclamation and bonding are found in the Surface Mining
Conservation and Reclamation Act (PASMCRA) (52 p.s. SS 1396.1-1396.31),
the Coal Refuse Disposal Control Act (CRDCA) (52, P.S. SS 30.51-30.66)
and the Clean Streams Law (CSL) (35 p.s. SS 691.1-691.1001). These
provisions require a bond to be filed prior to commencement of mining,
and to be conditioned ``that the permittee shall faithfully perform all
of the requirements'' of PASMCRA, the CSL, and other applicable
statutes.
The conventional bonding system is based on the mine operator's
description of the maximum amount of reclamation needed during the term
of the permit. The proposed dimensions of the mining activity are
combined with bond rate guidelines to calculate the total bond. The
PADEP developed bond rate guidelines using actual bid costs submitted
for abandoned mine lands and forfeited mine sites reclamation contracts
and other appropriate sources. Revised guidelines are published in the
Pennsylvania Bulletin annually.
[[Page 48527]]
Pennsylvania's mining laws provide the basis for conventional
bonding. The conventional bonding system incorporates the bonding
obligations of those acts and the regulations and considers the
following criteria.
The bond amount is the cost to the Commonwealth for hiring a
contractor to complete the permitted reclamation plan to regulatory
standards. It reflects the Commonwealth's maximum responsibilities
under the approved operation and reclamation plan for land reclamation.
The operation and reclamation plans in the coal mining permit
application describe how the operator will mine and reclaim the site.
The PADEP relies upon the operator's plan, plus site-specific special
conditions, when calculating the total bond.
Permit approval requires a finding that there is no presumptive
evidence of pollution to the waters of the Commonwealth. Consequently,
post-mining pollutional discharges of mine drainage are not anticipated
in the reclamation plan. The calculation of the initial bond amount for
a coal mining permit does not include costs for the treatment of mine
drainage or anything not anticipated in the approved permit and
reclamation plan.
Many factors contribute to the design of a mine site, and therefore
effect the rate of bond required for full reclamation. If the methods
of mining or operation change, standards of reclamation change, or the
cost of reclamation, restoration or abatement work increases, the PADEP
will require the permittee to recalculate the bond.
From 1982 until 2001, Pennsylvania's approved program included
operation of an ABS for surface coal mines, coal refuse reprocessing
operations and coal preparation plants. Under the ABS, in the event of
bond forfeiture, the amount of bond posted by the operator for the
forfeited site was supplemented by other funds (the Surface Mining
Conservation and Reclamation Fund, or SMCR Fund). This fund (referred
to as a bond pool) was funded in part by a per-acre reclamation fee
paid by operators of permitted sites and was used to supplement site-
specific bonds posted by those operators for each mine site, in the
event of bond forfeiture.
In 1991, OSM's oversight activities determined that Pennsylvania's
ABS included unfunded reclamation liabilities for backfilling, grading,
and revegetating mined land and OSM determined that the ABS was
financially incapable of abating or treating unanticipated pollutional
discharges from bond forfeiture sites under its jurisdiction.
In May 1991, OSM codified a required regulatory program amendment
at 30 CFR 938.16(h), directing Pennsylvania to submit information by
November 1991 which demonstrated that Pennsylvania's ABS was solvent.
The program amendment required Pennsylvania to submit information
demonstrating that the revenues generated by the collection of the
reclamation fee, as amended in 25 Pa. Code 86.17(e) will assure that
Pennsylvania's ABS can be operated in a manner that will meet the
requirements of 30 CFR Part 800.11(e). See 56 FR 24687 (May 31, 1991).
Additionally, in October 1991, OSM notified Pennsylvania that in
order for Pennsylvania to maintain jurisdiction of the regulatory
program under the Federal Surface Mining Control and Reclamation Act of
1977, 30 U.S.C. 1201 et seq. Pennsylvania had to address program
deficiencies related to administration of the ABS. This document is
commonly referred to as a ``732 letter,'' because it was issued
pursuant to the Federal regulations, at 30 CFR 732.17.
These OSM actions identified a deficiency in the ABS concerning the
system's ability to generate sufficient funds to complete the
reclamation of all primacy ABS bond forfeiture sites, including the
costs to treat pollutional discharges on these sites. Since 1991,
Pennsylvania had undertaken actions and made changes to its bonding
program in an effort to address the deficiencies identified. In the
late 1990s, Pennsylvania concluded the ABS could not be amended to meet
the Federal requirements, and in 2001, Pennsylvania terminated the ABS
and converted the active permits covered by the ABS to a ``full-cost''
bonding program (conventional bonding program). This program requires a
permittee to post a site-specific bond in an amount sufficient to cover
the estimated costs to complete reclamation in the event of bond
forfeiture.
Following termination of the ABS, Pennsylvania and OSM developed a
programmatic solution for addressing all of the discharges on the
forfeited ABS sites, which was memorialized in a document titled
``Pennsylvania Bonding System Enhancements.'' By letter dated June 12,
2003, OSM notified the PADEP that the conversion to a full-cost bonding
program, as well as other additional measures taken by the State, were
sufficient to remedy the deficiencies cited in the 732 letter, which it
declared to be terminated, and agreed with Pennsylvania that the only
ABS obligation remaining was to expend remaining ABS monies for
reclamation of forfeited sites.
On October 7, 2003, OSM published a final rule removing the
required amendment at 30 CFR 938.16(h) on the basis that the conversion
from an ABS to a full-cost bonding program rendered the requirement to
comply with 30 CFR 800.11(e) moot. See 68 FR 57805. Subsequent to these
OSM actions, a lawsuit was filed in the U.S. District Court for the
Middle District Court of Pennsylvania by several citizens groups in
December 2003 challenging OSM's termination of the 1991 Part 732 Notice
and its removal of the required program amendment in 30 CFR 938.16(h).
(Pennsylvania Federation of Sportsmen's Clubs Inc. et al. v. Norton,
No. 1:03-CV-2220). In 2006, the U.S. District Court granted a motion
requesting dismissal of the case. The district court affirmed OSM's
decision in a Memorandum Opinion and Order dated February 1, 2006. Id.
The plaintiffs appealed the District Court's decision to the U.S. Court
of Appeals for the Third Circuit.
Court Decision
On August 2, 2007, the United States Court of Appeals for the Third
Circuit reversed the district court's decision and set aside OSM's
decision to remove the required amendment and the 732 letter.
Pennsylvania Federation of Sportsmen's Clubs v. Kempthorne, 497 F.3d
337 (3rd Cir. 2007) (Kempthorne). At issue, relevant to this notice,
was whether OSM properly terminated the requirement that Pennsylvania
demonstrate that its SMCR Fund was in compliance with 30 CFR 800.11(e).
The ruling by the Third Circuit reinstated 938.16(h) and the 1991 Part
732 Notice and remanded the decision to OSM.
The court ruled that the primacy ABS forfeited sites, plus any
additional sites permitted under the ABS whose reclamation costs are
not fully covered by a conventional bond, remain subject to the
requirements of 30 CFR Part 800.11(e)(1). The Third Circuit concluded:
``While it is true that the `ABS Fund' continues to exist in name, it
no longer operates as an ABS, that is, as a bond pool, to provide
liability coverage for new and existing mining sites.'' 497 F.3d at
349. However, the Court went on to ``conclude that 800.11(e) continues
to apply to sites forfeited prior to the CBS [conventional bonding
system] conversion.'' Id. at 353. In commenting further on 30 CFR
800.11(e), the Court stated that ``[t]he plain language of this
provision requires that Pennsylvania demonstrate adequate funding for
mine discharge abatement
[[Page 48528]]
and treatment at all ABS forfeiture sites.'' Id. at 354.
Finally, the court also concluded that ``a plain reading of the
words `any areas which may be in default at any time' indicates that
the obligations prescribed by Sec. 800.11(e) are not restricted to the
immediate circumstances surrounding the approval of an ABS, but are
instead ongoing in nature and apply at any time, so long as those
mining areas originally bonded under the ABS, and not yet converted to
CBS bonds, still exist.'' Id. at 352. As such, Pennsylvania shall
provide for the complete reclamation and treatment of these sites and
their pollutional discharges by assuring Pennsylvania has available
sufficient money to complete reclamation for these sites at any time.
State Response
Pennsylvania submitted the program amendment in an attempt to
satisfy two mandates placed on the State's approved surface coal mining
operations regulatory program in 1991. The mandates, in the form of a
required amendment published in the Code of Federal Regulations, and a
letter from OSM, required Pennsylvania to eliminate funding
deficiencies in its bonding program.
Two categories of surface coal mining sites requiring treatment of
post-mining pollutional discharges and land reclamation are the subject
of this notice: (1) Those sites that already had their bonds forfeited
at the time of the dissolution of ABS; and (2) those that were
permitted and had bonds that were not forfeited at the time of the
dissolution of the ABS, but had existing reclamation liabilities, for
which available financial guarantees were not sufficient to cover the
entire cost of treatment or reclamation during the conversion to the
Commonwealth's conventional bonding system. These sites, if forfeited,
would be considered liabilities of the ABS.
II. Submission of the Amendment
By letter dated August 1, 2008 (Administrative Record Number PA
802.43), Pennsylvania sent OSM a proposed program amendment that is
intended to satisfy a required amendment that was imposed by OSM in a
final rule published in the Federal Register on May 31, 1991, 56 FR
24687, and codified in the Federal Regulations at 30 CFR 938.16(h).
This proposed program amendment is also intended to satisfy the 732
letter dated October 1, 1991. Both the required amendment and the 732
letter are discussed in more detail in Section I.
OSM announced receipt of the proposed amendment in the January 14,
2009, Federal Register (74 FR 2005-2015) (Administrative Record No. PA
802.49) and in the same document invited public comment and provided an
opportunity for a public meeting on the adequacy of the proposed
amendment. The public comment period closed on February 13, 2009. We
received comments from four entities; The Pennsylvania Coal Association
comment dated February 11, 2009 (Administrative Record No. PA 802.59);
PennFuture letter dated February 27, 2009, representing Pennsylvania
Federation of Sportsmen's Clubs, Inc., the Sierra Club, Pennsylvania
Council of Trout Unlimited, Citizens for Coal Field Justice, Mountain
Watershed Association, Inc., and Citizen's for Pennsylvania's Future
(Administrative Record No. PA 802.60); the United States Environmental
Protection Agency memorandum dated February 13, 2009 (Administrative
Record No. PA 802.58); and the Mining and Reclamation Advisory Board
letter dated February 12, 2009 (Administrative Record No. PA 802.56).
Two other Federal agencies responded with no comment (U.S. Fish and
Wildlife Services' note dated January 22, 2009 (Administrative Record
No. PA 802.52), and the U.S. Department of Labor memorandum received
February 5, 2009 (Administrative Record No. PA 802.54).
Treatment of Post-Mining Discharges (Parts A, C & E of the
Amendment Submission): To address the treatment of post-mining
discharges, Pennsylvania proposed regulatory provisions; provided a
demonstration of sufficient funding; and proposed the use of treatment
trusts.
Land Reclamation (Parts B & D of the Amendment Submission): To
address land reclamation liabilities for sites originally permitted
under the ABS, Pennsylvania submitted a statutory provision and
demonstration of sufficient funding.
This program amendment consists of five parts: (A) Regulatory
Changes to Establish Legally Enforceable Means of Funding the O&M and
Recapitalization Costs for the ABS Legacy Sites; (B) The Conversion
Assistance Program; (C) Trust Funds as an Alternative System and Other
Equivalent Guarantee: Rationale for Approval; (D) Demonstration of
Sufficient Funding for Outstanding Land Reclamation at Primacy ABS
Forfeiture Sites; and, (E) Demonstration of Sufficient Funding for
Construction of all Necessary Discharge Treatment Facilities at the
Primacy ABS Forfeiture Sites.
Regulatory Changes (Part A): Pennsylvania explains that the
regulatory changes submitted with this amendment provide a ``legally
enforceable mechanism'' for paying the costs of treating the discharges
at the ABS legacy sites in perpetuity. In summary, these changes
restructure the reclamation fee and dedicate other sources of funding
for performing reclamation of the ABS sites. The PADEP recognizes the
reclamation fee as a flexible source of funding for the operation and
maintenance costs associated with treating discharges at the ABS legacy
sites.
Conversion Assistance Program and Treatment Trusts (Parts B and C):
The conversion process included several changes to the active bonding
program. Section 4(d.2) of the PASMCRA, 52 P.S. 1396.4(d.2), authorized
PADEP to establish alternative financial assurance mechanisms that meet
the purposes and objectives of the bonding program (i.e., Conversion
Assistance Program and Treatment Trusts).
Demonstrations of Sufficient Funding (Parts D and E): Pennsylvania
submitted documentation to demonstrate that it has available sufficient
funds to complete the outstanding land reclamation and sufficient funds
to construct the necessary discharge-treatment facilities for all the
ABS legacy sites at any time, as required by the Third Circuit's
decision.
Pennsylvania explains that the regulatory changes described in Part
A, along with the remaining portions of this State program amendment,
described in Parts B through E below, while they do not consist of
changes to Pennsylvania regulations, are financial mechanisms PADEP has
established that will work in concert with the regulatory changes
described above to bring Pennsylvania into compliance with the required
amendment at 30 CFR 938.16(h), the 1991 732 letter, and, consequently,
with the ABS standard of sufficiency set forth in 30 CFR 800.11(e).
Pennsylvania is seeking approval of this program amendment submission
in its entirety in accordance with 30 CFR 732.17(h) and the Part 732
Notices.
III. OSM Findings
Part A. Regulatory Changes To Establish Legally Enforceable Means of
Funding the O&M and Recapitalization Costs for the ABS Legacy Sites
The following is a description of the changes to Pennsylvania's
Code that are being proposed:
[[Page 48529]]
Summary of Regulatory Changes--Section 86.1, Definitions
1. Subchapter A. General Provisions, Section 86.1: Definitions
The terms, ABS legacy sites, operational area, operation and
maintenance costs, primacy alternate bonding system, and
recapitalization costs were added to Pennsylvania's list of definitions
to clarify and define these terms when discussing and addressing sites
that were permitted under the alternative bonding system.
Finding: We are approving Pennsylvania's changes to its definitions
that define the following terms: ABS legacy sites, operational area,
operation and maintenance costs, primacy alternate bonding system, and
recapitalization costs. There are no Federal counterparts to these
definitions; however, they are not inconsistent with SMCRA and its
implementing regulations.
Summary of Regulatory Changes--Section 86.17, Permit and Reclamation
Fees
2. Subchapter B. Permits, General Requirements for Permits and Permit
Applications, Section 86.17 Permit and Reclamation Fees
a. Section 86.17(e) Reclamation Fees:
This provision revises the text of Section 86.17(e) to clarify the
application of this subsection in the context of the CBS. The revisions
provide that the reclamation fee is assessed for each acre of the
approved operational area of the permit. The proposed revisions also
clarify the manner in which the reclamation fee is assessed. Finally,
minor editorial changes were made by adding references to Section
86.143 (relating to the requirement to file a bond) and to the
exception for remining areas provided in Section 86.283(c).
b. Section 86.17(e)(1) (deposit and use of reclamation fees)
This provision, in conjunction with Section 86.187(a)(1),
establishes a separate subaccount within the SMCR Fund called the
Reclamation Fee O&M (operation and maintenance) Trust Account (RFO&M
Account), and requires the PADEP to deposit all reclamation fees it
collects into the RFO&M Account. The funds included in the account are
held in trust by the Commonwealth to treat post-mining pollutional
discharges at ABS legacy sites. This subsection also requires that the
PADEP use the reclamation fees only for the purpose of paying the costs
associated with treating such discharges. The reclamation fee is an
adjustable source of revenue that PADEP will review annually to
determine if adjustment of the fee is needed. In addition, this
provision requires that all interest earned on the monies in the RFO&M
Account be deposited into the account and be used only to pay the costs
associated with treating post-mining pollutional discharges at ABS
legacy sites.
c. Section 86.17(e)(2) (preparation of fiscal-year report on RFO&M
Account)
This provision requires the PADEP to prepare a report at the end of
each fiscal year, which will include a financial analysis and
projections of the revenues and expenditures of the RFO&M Account. The
report must be made available for review by the Pennsylvania Mining and
Reclamation Advisory Board (MRAB) and the general public. This
provision establishes a process by which the MRAB and the general
public can examine the PADEP's expenditure of funds from the RFO&M
Account for the treatment of discharges at the ABS legacy sites, the
amount of revenue deposited into the account during the prior fiscal
year from the various dedicated revenue sources, the projected
expenditures and projected revenue. Pennsylvania believes that this
provision will assist OSM, the MRAB, affected persons in the industry,
and interested members of the public, with their oversight of the
PADEP's compliance with the requirements of 30 CFR 800.11(e) as applied
to the ABS legacy sites, the Court ruling in Kempthorne, and the
required program amendment at 30 CFR 938.16(h).
d. Section 86.17(e)(3) (amount of the reclamation fee)
The amount of the reclamation fee is currently set at $100 per
acre. Section 86.17(e)(3) requires the fee amount to be maintained at
$100 per acre until December 31, 2009. After this initial period at
$100 per acre, the reclamation fee will be adjusted annually based on
criteria specified in Section 86.17(e)(3) and (4). This section also
includes provisions concerning the potential for a permanent
alternative source of funding to be used in lieu of the reclamation
fee--if that alternative funding source meets the conditions in Section
86.17(e)(3)(i) and (ii). Section 86.17(e)(3) provides that the PADEP
was to begin annually adjusting the amount of the reclamation fee as of
January 1, 2010, and will continue to do so, until either a permanent
alternative funding source is established or the ABS Legacy Account
becomes actuarially sound. Section 86.17(e)(3)(i) reiterates the
commitment for annual adjustment of the reclamation fee until the ABS
Legacy Account is actuarially sound, unless a permanent alternative
funding source in place of the reclamation fee is used to fund the
RFO&M Account. Section 86.17(e)(3)(ii) establishes the conditions that
a permanent alternative funding source must meet before the reclamation
fee could be discontinued and the permanent alternative source used
instead. The State indicates that such an alternative funding source
must be permanent; must provide sufficient revenues to maintain a
balance in the RFO&M Account of at least $3,000,000; and must provide
sufficient revenue to pay the annual operation and maintenance costs
for all the ABS legacy sites.
e. Section 86.17(e)(4) (amount of the reclamation fee)
The PADEP expected that the adjusted amount of the reclamation fee
would become effective as of January 1, 2010, and will be similarly
made effective on that date each year thereafter. Section 86.17(e)(3)
sets the basic parameters for annually adjusting the amount of the
reclamation fee, and Section 86.17(e)(4) lists the specific factors to
be used in the PADEP's calculation of the adjusted amount. Section
86.17(e)(3) requires that the reclamation fee be annually adjusted to
ensure that there are sufficient revenues to maintain a balance of at
least $3,000,000 in the RFO&M Account. Following the close of the
Commonwealth's 2008-09 fiscal year (in June 2009), the PADEP must
prepare its year-end financial analysis of the RFO&M Account pursuant
to Section 86.17(e)(2). The 2008-09 fiscal-year report must include the
PADEP's calculation of the amount of the reclamation fee for the
calendar year commencing on January 1, 2010. Section 86.17(e)(4)
prescribes the factors to be used for making the calculation--
essentially an analysis of the revenues and expenditures for the past
year and projected revenues and expenditures for the current fiscal
year.
Section 86.17(e)(3) and (4) establish a mechanism for annually
adjusting the amount of the reclamation fee. Pennsylvania indicates
that the adjustment procedure is necessary to accommodate the
fluctuations in the operation and maintenance costs for treating
pollutional discharges at the ABS legacy sites that will occur over
time. The PADEP believes that the adjustment procedure is also
necessary in order to maintain a sufficient cushion in the RFO&M
Account to prevent pollution and assure that the PADEP has
[[Page 48530]]
sufficient funds at any one time to treat the discharges at the ABS
legacy sites, including any sites with discharges that were originally
permitted under the ABS, and for which the bonds are subsequently
forfeited before the posting of a full cost, conventional bond or other
financial mechanism that is sufficient to cover the costs of discharge
treatment, in accordance with 30 CFR 800.11(e).
f. Section 86.17(e)(5) (publishing amount of the adjusted reclamation
fee; calculation appealable)
Section 86.17(e)(5) is added to prescribe a procedure for the PADEP
to publish the amount of the adjusted reclamation fee. The PADEP must
review its calculation of the adjusted reclamation fee amount at a
public meeting of the MRAB (most likely in October of each year), where
the members of the MRAB, affected persons in the industry, and the
general public will have an opportunity to comment on the PADEP's
financial report and its calculation of the adjusted amount of the fee.
The PADEP will subsequently publish the adjusted amount of the
reclamation fee in the Pennsylvania Bulletin, with the adjusted amount
becoming effective upon publication. This provision also establishes
that PADEP's calculation of the adjusted reclamation fee is a final
action appealable to the Environmental Hearing Board. According to
Pennsylvania, section 86.17(e)(5) balances the PADEP's need for a
flexible mechanism to assure funding to treat discharges at the ABS
legacy sites with the interests of the industry and the public in
reviewing, commenting on, and challenging, before an independent forum,
the PADEP's administration of the RFO&M Account and the calculation of
the new reclamation fee.
g. Section 86.17(e)(6) (conditions for ceasing collection of
reclamation fee)
Section 86.17(e)(6) requires the PADEP to cease assessment and
collection of the reclamation fee when the ABS Legacy Account,
established pursuant to section 86.187(a)(2)(i), is actuarially sound.
The conditions which must be met for the ABS Legacy Account to become
actuarially sound are prescribed here and in section 86.187(a)(2)(ii).
The PADEP's current estimate of the annual operation and maintenance
costs for treating the discharges at the ABS legacy sites is
approximately $1,400,000. However, the ultimate annual amount needed
for operation and maintenance costs will vary depending upon the number
of additional underfunded sites which go into default and other
relevant factors. When financial guarantees sufficient to cover
reclamation costs have been approved for all mine sites permitted under
the primacy ABS, no additional sites will need to be added to the class
of ABS legacy sites. Once the PADEP completes construction of all
necessary discharge treatment systems for all of the ABS legacy sites,
the PADEP will determine the amount of annual operation and maintenance
costs, including recapitalization costs, which will be necessary to
treat the discharges at all of the ABS legacy sites. This provision
allows the PADEP to cease collection of the reclamation fee when the
ABS Legacy Account contains funds which generate interest at a rate
sufficient to pay the annual operation and maintenance costs for
treating post-mining pollutional discharges at all the ABS legacy
sites. At that point, the State believes that the PADEP will always
have sufficient funds on hand in the ABS Legacy Account to cover the
costs of treating the discharges at all the ABS legacy sites, and that
Pennsylvania will have met the requirements of 30 CFR 800.11(e) without
the need for additional revenue from the reclamation fee.
Findings: See findings in the section below.
Summary of Regulatory Changes--Section 86.187, Use of Money
a. Section 86.187(a)(1) (deposit of reclamation fee into RFO&M Account)
Section 86.187 (relating to use of money) specifies the purposes
for which the PADEP must use monies from fees, fines, penalties, bond
forfeitures and other monies received under the PASMCRA, as well as
interest earned on these monies. Pennsylvania believes that the
enforceable regulatory mechanism created by these revisions will enable
its bonding program to meet the requirements of 30 CFR 800.11(e).
This provision, in conjunction with section 86.17(e)(1), has been
revised to establish a separate subaccount within the SMCR Fund called
the RFO&M Account, and to require that the reclamation fees collected
by the PADEP pursuant to section 86.17(e) must be deposited into the
RFO&M Account. The provision also directs that the interest accrued on
collected reclamation fees must be deposited into the RFO&M Account.
b. Section 86.187(a)(1)(i) (deposit of civil penalties into RFO&M
Account)
Under section 18(a) of PASMCRA, civil penalties may be used by the
PADEP for reclamation of surface coal mine sites, restoration of water
supplies affected by surface coal mining, or for any other conservation
purposes provided by the PASMCRA 52 P.S. Section 1396.18(a). The PADEP
is thus authorized to use civil penalty monies, as a supplement to
forfeited bonds, for purposes of reclaiming the ABS legacy sites
including treatment of post-mining pollutional discharges at these
sites. New section 86.187(a)(1)(i) will require the PADEP to deposit
into the RFO&M Account a portion of the monies collected from civil
penalties assessed pursuant to PASMCRA, and to use those monies
deposited into the account to pay the costs associated with treating
discharges at the ABS legacy sites. PADEP believes that, in order to
comply with the Court's ruling in Kempthorne, it must identify and
dedicate specified sources of revenue that will generate enough money
to cover the costs for treating discharges at all the ABS legacy sites.
This subsection identifies a source of revenue--civil penalties
collected pursuant to PASMCRA--and requires the PADEP to use this
source of revenue to fund the discharge-treatment costs of the ABS
legacy sites.
This provision recognizes that a percentage of the civil penalties
collected must be allotted to the Environmental Education Fund by law.
(See 35 P.S. Section 7528.) Section 86.187(a)(1)(i) also caps the
amount of civil penalties that must be deposited into the Reclamation
Fee O&M Account during a single fiscal year at $500,000. If the PADEP
collects more than $500,000 in civil penalties during a fiscal year,
section 86.187(a)(1)(i) gives the PADEP discretion to deposit the
excess amount into the SMCR Fund where it may be used for the purposes
described in section 86.187(a)(3).
This provision provides an additional source of revenue for the
RFO&M Account which is restricted to the same uses as all other funds
deposited into the account. This additional revenue will further
enhance the financial solvency of the account, in addition to the
adjustable reclamation fee, and will provide PADEP with even more
dedicated revenue for water treatment at ABS legacy sites.
c. Section 86.187(a)(1)(ii) (deposit of interest earned on other monies
in the SMCR Fund into the RFO&M Account)
Similar to the deposit of civil penalties required by section
86.187(a)(1)(i), this section is being added to authorize the PADEP to
deposit into the RFO&M Account a portion of the interest that is earned
on other monies in the SMCR Fund. The SMCR Fund includes monies from
[[Page 48531]]
released bonds, license fees, and other sources; these funds earn
interest that may be used by the PADEP for the purposes specified by
section 18(a) of PASMCRA. See 52 P.S. section 1396.18(a); 25 Pa. Code
section 86.187(a). This provision gives the PADEP discretion as to the
amount of interest earned on other monies in the SMCR Fund which will
be deposited into the RFO&M Account during any given fiscal year.
d. Section 86.187(a)(1)(iii) (deposit of other monies into the RFO&M
Account)
Section 86.187(a)(1)(iii) will give the PADEP authority to deposit
other monies from sources such as legislative appropriations or
donations into the RFO&M Account. In addition, in the event a change in
the applicable law provides for it, this provision will give the PADEP
authority to deposit into the RFO&M Account the fees that will be
collected for ``sum-certain financial guarantees needed to facilitate
full-cost bonding.'' (These devices are also known as ``conversion
assistance financial guarantees'' or ``conversion assistance bonds'',
and are described below in Section B.)
e. Section 86.187(a)(1)(iv) (restriction on use of monies in the RFO&M
Account)
Section 86.187(a)(1)(iv) specifies that all monies deposited into
the RFO&M Account must be used to pay the costs associated with
treating the post-mining pollutional discharges at the ABS legacy
sites. This provision establishes that the funds held in the RFO&M
Account are being held by the State in trust for the benefit of all the
people of the State in order to protect their rights under Article I,
Section 27 of the Pennsylvania Constitution. Pennsylvania believes that
an actuarially sound account will satisfy the requirements of 30 CFR
800.11(e).
f. Section 86.187(a)(2) (use of monies received from forfeiture of
bonds)
A minor editorial change is being made to this provision to clarify
that funds received from the PADEP's forfeiture of bonds on ABS legacy
sites will be used to reclaim the land and restore water supplies
affected by the surface mining operations upon which liability was
charged on the bond, and, more specifically, in accordance with the
provisions in section 86.187(a)(2)(i) and (ii), which are being added
as part of this final rulemaking.
g. Section 86.187(a)(2)(i) (deposit of monies from bonds forfeited on
ABS Legacy Sites into separate subaccount)
Section 86.187(a)(2)(i) establishes a separate subaccount within
the SMCR Fund called the ABS Legacy Account. The funds received from
the bonds forfeited on ABS legacy sites, and all interest accrued on
such monies, must be deposited into the ABS Legacy Account according to
new section 86.187(a)(2)(i). Section 86.187(a)(2)(i) will also provide
regulatory authorization for the PADEP to deposit monies from other
sources, such as appropriations, donations, or interest earned on other
monies in the SMCR Fund, into this account. Finally, section
86.187(a)(2)(i) authorizes the PADEP to transfer ``excess'' monies from
the RFO&M Account into the ABS Legacy Account. This provision requires
the PADEP to seek the MRAB's review and recommendation prior to
transferring any ``excess'' funds. Pennsylvania indicates that section
86.187(a)(2)(i) responds to the court ruling in the Kempthorne case
regarding the obligation of the PADEP to meet the requirements of 30
CFR 800.11(e).
Section 86.187(a)(2)(i) will establish a type of savings account
for monies ultimately to be used to pay the annual operation and
maintenance costs associated with all of the ABS legacy sites. The
PADEP currently has approximately $4.8 million in forfeited bonds held
for primacy ABS forfeited discharge sites; these funds will constitute
the initial principal in the ABS Legacy Account. Section
86.187(a)(2)(iii), discussed below, prohibits the PADEP from making any
disbursements from the ABS Legacy Account until the account becomes
actuarially sound. The RFO&M Account will be used to pay the ongoing
operation and maintenance costs on a pay-as-you-go basis, while funds
in the ABS Legacy Account accumulate from earned interest and other
potential income sources. Pennsylvania believes that the amendments to
section 86.17(e) will enable the PADEP to annually replenish and
maintain funds in the RFO&M Account sufficient to cover the annual
operation and maintenance costs for treating discharges at the ABS
legacy sites. Pennsylvania indicates that the ABS Legacy Account will
grow to the point that the interest earned on that account will be
enough to cover all the annual operation and maintenance costs for the
ABS legacy sites, without the need to generate any additional revenue
from other sources such as the reclamation fee.
h. Section 86.187(a)(2)(ii) (restriction on use of monies in ABS Legacy
Account)
This provision requires that all monies deposited into the ABS
Legacy Account be used only to pay the operation and maintenance costs
for treating discharges at the ABS legacy sites. As in section
86.187(a)(1)(iv), the PADEP is declaring that it is establishing the
ABS Legacy Sites Trust as an account in the SMCR Fund. The PADEP has
included language in section 86.187(a)(2)(ii) that specifically
establishes the trust called the ABS Legacy Account. This regulation
states that all monies deposited in the ABS Legacy Account are held by
the State in trust for the benefit of the people of the State to
protect their rights under Article 1, Section 27 of the Pennsylvania
Constitution.
i. Section 86.187(a)(2)(iii), (A), (B), (C) (restrictions on ABS Legacy
Account)
Section 86.187(a)(2)(iii) prohibits the PADEP from making any
disbursements from the ABS Legacy Account until the account becomes
actuarially sound. The conditions that must be met for the ABS Legacy
Account to become actuarially sound are prescribed here. First,
financial guarantees sufficient to cover all reclamation costs must
have been approved by the PADEP for all mine sites permitted under the
primacy ABS. Second, the PADEP must have completed construction of all
necessary discharge treatment systems for all of the ABS legacy sites.
Once the entire class of ABS legacy sites is known, and all necessary
discharge treatment systems have been constructed for these sites, the
PADEP will be able to establish the amount of annual operation and
maintenance costs, including recapitalization costs, which will be
necessary to treat all the discharges at all of the ABS legacy sites.
Once this figure is known, the third condition precedent may be
satisfied, i.e., the ABS Legacy Account and Reclamation O&M Trust
Account must contain funds that generate interest at a rate and amount
sufficient to pay the annual operation and maintenance costs for
treating all post-mining pollutional discharges at all the ABS legacy
sites. Pennsylvania believes that once the ABS Legacy Account becomes
actuarially sound, the PADEP will always have sufficient funds on hand
in the Account to cover the costs of treating the discharges at all the
ABS legacy sites, and therefore, Pennsylvania's bonding program will
meet the requirements of 30 CFR 800.11(e) without the need for any
revenue from the reclamation fee or the other revenue sources dedicated
to the RFO&M Account.
[[Page 48532]]
j. Section 86.187(a)(2)(iv) (transfer of remaining funds in RFO&M
Account to ABS Legacy Account)
Section 86.187(a)(2)(iv) provides for termination of the RFO&M
Account when the ABS Legacy Account becomes actuarially sound. This
provision authorizes the PADEP to transfer the remaining funds in the
RFO&M Account into the ABS Legacy Account when the latter account
becomes actuarially sound. At that point, the RFO&M Account will no
longer be necessary and will terminate. In addition, the reclamation
fee (or an alternative permanent funding source established in lieu of
the reclamation fee) will no longer be needed and will cease to be
collected, and the deposit of civil penalty monies into the RFO&M
Account pursuant to section 86.186(a)(1)(i) will also cease.
Findings: Sections 86.17(e), Reclamation Fees and 86.187, Use of
Money
By creating the RFO&M Account that is funded in large part by an
adjustable reclamation fee dedicated to the treatment of AMD discharges
on bond forfeiture sites that were originally covered by the ABS,
Pennsylvania has created an alternative system of financial guarantees
consistent with 30 CFR 800.11(e). Our finding recognizes that
Pennsylvania has provided an alternative system that provides
sufficient funding to treat AMD pollution originating from a defined
set of bond forfeiture sites (ABS legacy sites), that the system can be
adjusted to accommodate increases and decreases in treatment
obligations, that implementation is supported by an enforceable
commitment by Pennsylvania to provide the funding needed to construct
treatment facilities, and that Pennsylvania has considered and
accounted for foreseeable risks to its operation. Our finding also
recognizes that even though this system is restricted to the treatment
of mine drainage on ABS legacy sites, the system provides a substantial
economic incentive to active mine operators because treatment costs are
tied to reclamation fees assessed on each active operation. These
reclamation fees may be raised due to operators' failures to provide
for fully funded treatment guarantees on active sites that are
subsequently forfeited. Indeed, any increases in ABS legacy site
treatment costs potentially raise reclamation fee assessments on active
mine sites.
There are no specific Federal counterparts to the changes to 25 Pa.
Code 86.17(e), 86.187(a)(1) and 86.187(a)(2). However, for the reasons
set forth above, we find that these changes are consistent with the
Federal regulation at 30 CFR 800.11(e), which contains the criteria for
approval of an ABS, and we are therefore approving the changes.
Nevertheless, some of the revisions warrant more detailed explanation,
which follows.
ABS Legacy Account: We find that the specific conditions at section
86.17(e)(6)(i)(iii) for determining when the ABS Legacy Account is
financially capable of covering the annual operation and maintenance
costs for treating post-mining pollutional discharges at the ABS legacy
sites are sufficient and observe that OSM will have oversight
responsibilities at the time that any such transition to the use of the
ABS Legacy Account is being proposed and acted upon. OSM's finding is
limited to the creation of, or an alternative source of funding to, the
RFO&M Account. When the State notifies OSM that it has determined that
the ABS Legacy Account is deemed to be actuarially sound in accordance
with the provisions of section 86.17(e)(6), OSM will review the basis
for such a determination and approve or disapprove any termination of
the reclamation fee or alternative permanent funding source.
Alternative Permanent Funding Source: We are hereby approving these
regulations at sections 86.17(e)(3), (e)(3)(i), (e)(3(ii), and
86.187(a)(2)(iv), which refer to a possible ``alternative permanent
funding source'' that could be created to substitute for the
reclamation fee. The creation of any alternative permanent funding
source, however, must first be proposed to us as a State program
amendment, and could not be used to replace the reclamation fee to pay
for treatment costs on ABS legacy sites until we approve such an
amendment.
Other Sources of Funding: Sections 86.17(e)(4)(ii), (e)(4)(v),
86.187(a(1)(iii), and (a)(2)(iv) refer to ``other sources'' of money,
including appropriations, donations, and fees paid by operators who
receive conversion assistance guarantees. The regulations provide that
these funds from ``other sources'' may be deposited into the RFO&M
Account and, except for fees for conversion assistance guarantees, into
the ABS Legacy Account. 86.187(a)(1)(iii), (a)(2)(i). The transfer of
fees from conversion assistance guarantees into the Reclamation Fee O&M
Account must be authorized by State law. Therefore, no such transfers
may take place until Pennsylvania enacts the necessary statutory
revision, and then obtains our approval of the revision as a program
amendment. Any use of ``other sources'' of money cannot be made until
we either approve the proposed sources through the State program
amendment process or decide that the proposed sources do not constitute
program amendments requiring our approval.
Part B. The Conversion Assistance Program
When implementing the revised full-cost bonding program and
converting the ABS permits to full-cost bonding, Pennsylvania had
concerns regarding the financial ability of existing permittees to post
significantly-increased bond amounts. Operators contemplating a new
mining operation after August 2001 would be able to factor the revised
bond guidelines into their decision making process, but existing ABS
operators had already made financial and operational commitments based
on their existing bonds and the ABS. Surety providers had made
decisions to provide existing ABS bonds based on the risk they were
willing to take at the time of permit issuance. As a result, many
operators were unlikely to be able to comply with the mandatory bond
adjustment. Those operators would be faced with the uncertainty of a
negotiated settlement with the Department regarding bonding and
reclamation liability or risk being forced out of business. The choice
for the surety industry would likewise be difficult. They could either
provide more bonds than their risk assessment dictated or be subject to
forfeiture of the existing bond. There was a risk to Pennsylvania that
forfeiture of existing inadequate bonds would further increase the
deficit of the ABS.
To address these risks, in 2001-2002, the PADEP developed and
implemented a conversion assistance program in which Pennsylvania
essentially operates as a surety and provides part of the bonding for
sites converting to full-cost bonding, thus easing the transition for
active operators to full-cost bonding and thereby preventing
bankruptcies and/or abandonment of sites. Funded with an initial
general-revenue appropriation of $7 million in June 2001 and
supplemented by annual premiums paid by the industry, the Department
issued a ``land reclamation financial guarantee'' in a sum-certain
amount to individual ABS permittees required to convert to a full-cost
bond for land reclamation on an existing permit. See Act of June 22,
2001 (P.L. 979, No. 6A) known as the General Appropriation Act of
2001,'' at 213. The Land Reclamation Financial Guarantees (LRFG) were
issued only to ABS permittees that were converting to full-cost
bonding; permit applicants
[[Page 48533]]
who submitted applications after termination of the ABS are not
eligible for the conversion assistance program.
The PADEP indicates that as of November 30, 1999, the forfeiture
rate for primacy ABS permits was 10.4%. The PADEP concluded that, based
on this historic rate, the $7 million principal would cover up to $70
million in bond exposure. The PADEP determined that the $7 million,
when combined with existing site bonds, would be sufficient to pay for
all forfeitures that may occur. Additionally, premiums collected for
the LRFGs would provide additional funds to complete reclamation.
As part of this submission, Pennsylvania requests that OSM approve
the Conversion Assistance Program and its use of the LRFG as a
financial guarantee equivalent to a conventional bond. Section 4(d.2)
of PASMCRA is submitted as part of this program amendment as the
authority for employing LRFGs under the Conversion Assistance Program.
Finding: Pennsylvania's use of LRFGs is consistent with the use of
other conventional bonding mechanisms that provide sum-certain amounts
payable to the regulatory authority to provide for reclamation in the
event of operator default. In this case, the form of performance
guarantee is provided by the Commonwealth of Pennsylvania as conversion
assistance in an amount necessary to supplement the original site-
specific bond, such that the total amount of bond coverage provided is
equivalent to the amount required under a CBS. In effect, for a limited
number of permits that were in the ABS, and that are transitioning to
full-cost bonding, the State is acting as a surety to guarantee part of
the reclamation costs. However, SMCRA Section 509 (b) provides that a
surety executing a bond must be ``* * * a corporate surety licensed to
do business in the State * * *'' Given that restriction, OSM cannot
approve the conversion assistance program as a conventional bond as
requested by PADEP. Rather, OSM finds that the conversion assistance
program is an alternative system that will achieve the objectives and
purposes of a bonding program in accordance with Section 509(c) of
SMCRA, and that the conversion assistance program meets the objectives
of an ABS pursuant to 30 CFR 800.11(e). OSM is approving the conversion
assistance program as a one-time alternative bonding mechanism
implemented solely for the conversion process from the ABS to
conventional bonding.
Other Sites Not Fully Converted to Full Cost Bonding
PADEP stated that at the end of the conversion process (i.e.,
active ABS permits converting to conventional bonding) two permitted
sites remain insufficiently bonded. These two anthracite operations are
permitted by Lehigh Coal & Navigation (LCN) and Coal Contractors Inc.
(CCI). The State contends it has made provisions for fully funding the
outstanding reclamation obligations for these two sites through
reclamation and payment schedules. PADEP stated in its submission that
the land reclamation on the LCN site ``does not present a potential
liability to Pennsylvania at this time because it is being adequately
addressed through the Consent Order and Agreement (CO&A) process and,
in any event, will most likely be addressed through permit transfer or
remining operations.'' PADEP indicated the bond deficiency as of June
2, 2008, amounted to $8.96 million, which was being addressed through
quarterly payments ending in December 2011. In addition, LCN is
required under a CO&A to complete backfilling at a rate of 1.7 million
cubic yards annually to meet the bond obligation.
We disagree with the State's assertion that the LCN site land
reclamation is not a potential liability; neither bond deficiency
payments nor land reclamation schedules pursuant to a CO&A, potential
permit transfers, nor potential remining operations are equivalent
substitutes for a full cost bond. None of these instruments constitutes
the guarantee of sufficient funding to pay for the land reclamation
required to be performed under the approved State program.
For the CCI site, Pennsylvania contends it has sufficient monies
available in the SMCR Fund to complete land reclamation in the event of
forfeiture. The State estimates the CCI land reclamation liability in
excess of the available bond amount to be about $170,000.
Pennsylvania's contention that it has sufficient funds falls short of
the type of ``guarantee'' ensured by the posting of an adequate bond,
because it is not enforceable.
Finding: Pennsylvania has not provided guaranteed funding to cover
the cost of the outstanding land reclamation liabilities at the LCN and
CCI sites in the event the bonds for these sites are forfeited.
Therefore, OSM is revising the required amendment at 30 CFR 938.16(h)
to require the PADEP to ensure that its program provides suitable,
enforceable funding mechanisms that are sufficient to guarantee
coverage of the full cost of land reclamation at all sites originally
permitted and bonded under the ABS.
Part C. Trust Funds as an Alternative System and Other Equivalent
Guarantee
Beginning in the early 1990s, Pennsylvania developed and
implemented treatment trust funds to guarantee the treatment of
unanticipated post-mining pollutional discharges in perpetuity.
Permittees unable or unwilling to provide a surety or collateral bond
to cover the costs of a post-mining discharge can establish a site-
specific trust fund managed by a third-party trustee. The purpose of
the trust is to generate sufficient income to cover all costs
associated with treating these discharges in perpetuity. Trust funds
have been established to cover discharge-treatment costs at ABS sites,
although the Department's implementation of trust funds is not limited
to sites formerly covered by the ABS. Pennsylvania had received
approval from OSM to add annuities and trust funds to the list of
acceptable collateral bonds on May 13, 2005. 70 FR 25472, amended at 70
FR 52916.
Pennsylvania is submitting the provision in Section 4(d.2) of
PASMCRA for the additional purpose of providing the authority for the
establishment of site-specific trust funds to be used to pay the costs
of treating unanticipated post-mining pollutional discharges in
perpetuity. Pennsylvania is requesting approval of site-specific trusts
as an alternative financial assurance mechanism (not a collateral bond)
consistent with Section 509(c) of SMCRA and other applicable provisions
of SMCRA. Pennsylvania states that its site-specific trust fund program
is an alternative financial system to a bonding program that achieves
the objectives and purposes of a conventional bonding program, and
provides equivalent guarantees no less effective than a performance
bond and 30 CFR subchapter J.
In support of its request for approval of site-specific trusts as
an alternative financial assurance mechanism consistent with Section
509(c) of SMCRA and other applicable provisions of SMCRA, PADEP
provided descriptions of its authority to enter into trust agreements,
trust development and management process, and some of the
administrative and financial components. More specifically, PADEP has
provided the following: Discussions of its authority, under Section
4(d.2) of PASMCRA, to establish alternative financial assurance
mechanisms; the use of the CO&A and a companion Trust Agreement;
factors currently used to
[[Page 48534]]
determine the amount of a site-specific trust fund; and the use of
AMDTreat for treatment cost estimation. PADEP's proposed amendment also
discusses rates of return, inflation rates, and volatility rates used
on previous trust agreements as well as how operation and maintenance
and recapitalization costs are addressed. Finally, the amendment
submission describes trust disbursement procedures and flexibility to
allow the permittee a reasonable period of time to fully fund a
treatment trust. (Administrative Record No. PA 802.44, Attachments 5
and 7).
Site-specific trusts are established by forms prescribed and
furnished by the PADEP. The trust covers the area of land within the
permit area necessary for the operator to operate and maintain the
treatment facility. The amount of the trust is calculated based on all
the costs of treating the post-mining discharge in perpetuity, and the
trust generates sufficient money to cover the costs of treating the
discharge even if the operator defaults on its obligation. Moreover,
unlike a performance bond--a sum-certain instrument which does not
increase in value--trust funds can keep pace with inflation, making
them more suitable for guaranteeing long-term treatment obligations.
Liability under the trust is for the duration of the reclamation. The
CO&A is executed by the operator and the PADEP, and the declaration of
trust will be executed by a trustee who must be registered to do
business in Pennsylvania and meet criteria for reliability similar to a
surety company. Finally, the trust amount is adjusted by the PADEP in
the event the cost of reclamation changes, in accordance with Section
509(e) of SMCRA. Thus, Pennsylvania asserts the trust funds program
assures that the State will have available sufficient money to complete
the reclamation plan for sites covered by site-specific trusts.
Pennsylvania states that site-specific trusts also provide a
substantial economic incentive for the permittee to comply with all
reclamation provisions because the permittee must fund the necessary
trust principal. Moreover, the CO&A for the treatment trust contains
stipulated civil penalties which are invoked if the operator fails to
comply with the terms of the CO&A or the Trust Agreement. A failure to
comply would also effectively put the operator out of business due to
the permit block and permit revocations that would result. Thus,
Pennsylvania concludes, all of these aspects of the trust fund program
render it no less stringent than Section 509 of SMCRA.
Finding: When we approved Pennsylvania's use of treatment trusts
and annuities as collateral bonds in 2005, we noted that Section 4(d.2)
of PASMCRA expressly provides for the establishment of alternative
financial assurance mechanisms including site-specific trust funds for
the perpetual treatment of unanticipated post-mining discharges. We
noted that the Federal rules do not expressly include site-specific
trust funds or annuities in the Federal collateral bonding regulations
at 30 CFR 800.21. However, with the safeguards that were included in
the State's provision, it appeared that trust funds and annuities
presented no greater risks than those inherent in those forms of
collateral bonding expressly named in 30 CFR 800.21. Therefore, we
concluded that the addition of Subsection (f) of Pennsylvania's
regulations would not render the Pennsylvania program less effective
than 30 CFR 800.21 in meeting the bonding requirements of Section 509
of SMCRA. 70 FR at 25474.
While we have approved Pennsylvania's allowance of trust funds as a
form of collateral bond, the Federal regulations at 30 CFR 800.11(e)
provide another option for approving trust funds and annuities. Those
regulations implement the provision in section 509(c) of SMCRA, 30
U.S.C. 1259(c), authorizing OSM and the States to establish an
``alternative system that will achieve the objectives and purposes of
the bonding program pursuant to this section.'' The regulations at 30
CFR 800.11(e) require that those alternative systems ``(1) * * * assure
that the regulatory authority will have available sufficient money to
complete the reclamation plan for any areas which may be in default at
any time;'' and ``(2) * * * provide a substantial economic incentive
for the permittee to comply with all reclamation provisions.'' As we
noted in our decision approving trust funds as a form of an ABS in
Tennessee, a fully-funded trust or annuity would satisfy the first
criterion, while the permittee's obligation to provide the monies
needed to establish a trust fund or annuity and the express terms of
the trust would satisfy the second criterion. 72 FR 9616, 9618-9 (March
2, 2007).
We find that trust funds may serve as alternative funding
mechanisms intended to assure long-term treatment of pollutional
discharges. A fully-funded trust, i.e., one that generates sufficient
interest to pay for the costs of establishing a treatment facility, as
well as the costs of treating pollutional discharges in perpetuity, is
consistent with, and therefore no less effective than, the Federal
regulations at 30 CFR 800.11(e). Section 4(d.2) of PASMCRA, and the use
of site-specific trust funds as alternative bonding financial
mechanisms, are hereby approved. We find, however, that specific
approval of the underlying financial components Pennsylvania has used
or is currently using to develop treatment trusts is not necessary.
That is, we make no findings with respect to explicit portfolio
mixtures, volatility rates, inflation rates, the 11.1% expected rate of
return, or other financial parameters Pennsylvania now considers, such
as specific recapitalization schedules, site maintenance costs, or the
use of the AMDTreat program.
We have concluded that the implementation of treatment trusts
allows program managers to have a degree of flexibility that may not be
afforded if specific percentages, rates, or schedules are formally
incorporated into the approved State program. Those flexibilities
require ongoing analyses and adjustments to reclamation cost parameters
such as those for fuel, materials, supplies, equipment rates, and
dozens of other cost components. The State has provided a mechanism, in
the form of annual evaluations of the trust funds, for determining when
any such adjustments must be made. (See the program amendment,
Attachment 7, ``Postmining Treatment Trust Consent Order and
Agreement'', paragraph 8.) (Administrative Record No. PA 802.43)
We have accorded similar flexibility to Pennsylvania with respect
to setting and adjusting site-specific bond rates where conventional
types of bonding instruments, such as surety bonds, are used. The PADEP
uses bond rate guidelines to set the appropriate amounts of these site-
specific bonds. We have not required these guidelines, nor any changes
thereto, to be submitted as amendments to the State program.
Our approach to both treatment trust fund calculations and bond
rate guidelines is consistent with the Federal regulations at 30 CFR
800.14 (determination of bond amount) and 800.15 (adjustment of
amount). Neither of these provisions spells out the precise parameters
for calculation of the original bond amount or for periodic adjustments
of the bond amount. Rather, those decisions are to be made by the
regulatory authority.
We are approving treatment trust funds as alternative bonding
mechanisms. However, until PADEP makes a complete formal finding that
sites originally permitted under the former ABS are now adequately
bonded by a fully-funded trust, monies from the RFO&M Account must
remain available for the costs of discharge treatment at those sites in
the event of bond forfeiture. We will continue to monitor,
[[Page 48535]]
on an annual basis, the reclamation fee adjustment scheme approved in
Part A, above, and its ability to provide revenues for existing and
potential ABS legacy sites.
Finally, we maintain oversight over the use of treatment trusts
under the approved Pennsylvania program. Should the State improperly
find a trust to be fully funded, and, as a result, declare the site to
no longer be covered by the RFO&M Account in case of forfeiture, we
have the ability to require the State to take appropriate action.
Part D. Demonstration of Sufficient Funding for Outstanding Land
Reclamation at Primacy ABS Forfeiture Sites
An analysis by the PADEP of the existing land reclamation at ABS
forfeiture sites was initially prepared in a February 2000 report
titled Assessment of Pennsylvania's Bonding Program for Primacy Coal
Mining Permits. Based on the report's conclusions, the PADEP requested
that the Pennsylvania legislature appropriate general revenue funds to
provide the additional money needed to complete the land reclamation of
ABS forfeiture sites. In 2001, the General Assembly appropriated
$5,500,000 to be used solely for the costs of land reclamation at ABS
forfeiture sites (the ``ABS Closeout Funds''). See Act of June 22, 2001
(P.L. 979, No. 6A), known as the ``General Appropriation Act of 2001,''
at Section 213. PADEP indicates that it has used the ABS Closeout Funds
to complete land reclamation for some of the ABS forfeiture sites. At
the time of submission of this amendment, there was $4,431,088
remaining in ABS Close-Out Funds. In 2007-08, the PADEP prepared an
updated list of primacy ABS bond forfeiture sites with outstanding land
reclamation. It also prepared a detailed analysis of the current costs
to complete all outstanding land reclamation at these sites and
provided an estimated total cost to complete the land reclamation for
all primacy ABS bond forfeiture sites of $7,946,890.
The PADEP indicates that, in addition to the $4,431,088 remaining
from the $5.5 million legislative appropriation, it has sufficient
other funds on hand to cover all land reclamation costs on ABS
forfeiture sites. The Released Bond Account monies must be used for
such reclamation; also, there is a Restricted Bond Account, from which
monies can be made available and placed into the Released Bond Account.
The Released Bond Account is composed of monies from forfeited bonds
that have been ``released'' for use on sites other than the ones for
which the monies were originally dedicated. Once released, the funds
may be used to reclaim any primacy bond forfeiture site, and are thus
available for land reclamation at these forfeited sites. As of the date
of submission of this amendment, there was $2,800,000 in the Released
Bond Account.
The Restricted Bond Account is composed of monies from bonds that
were forfeited. This money must be used to reclaim the site for which
the bond is posted, unless the PADEP determines that those monies are
no longer needed to reclaim that site, in which case, those monies may
be transferred from the Restricted Bond Account to the Released Bond
Account. (See the ABS Bond Forfeiture Sites Land Reclamation Status
Report, July 2008, p. 15, included as part of Attachment 8 to the State
program amendment.) As of the date of submission of this amendment,
there was $1,716,974 in the Restricted Bond Account. In addition, there
was $68,319 in forfeited, but not yet collected, bond money for one
site.
Finally, $20,844 was used from another account, called the General
Operations Account, to accomplish land reclamation. This expenditure
lowered the land reclamation liability total from $7,946,890 to
$7,926,046. To cover this land reclamation liability, Pennsylvania has
available a total of $9,016,381 in funds that it is authorized and
required to expend for reclamation. (As noted below, not all of the
$2,800,000 in the Released Bond Account will be needed for land
reclamation. The remainder, approximately $1,100,000, will be available
and used for the construction of treatment facilities at ABS legacy
sites.) There are also funds available in several other accounts in the
SMCR Fund. Where funds are not legally restricted solely for use in
reclaiming ABS forfeiture sites, the PADEP has identified monies which
it is authorized by law to spend for this purpose. (See ABS Financial
Summary, July 2008, included as part of Attachment 10 to the State
program amendment.) For these reasons, the PADEP submits that it has
sufficient funds available to complete the outstanding land reclamation
for the ABS forfeiture sites at any time, as required by the Third
Circuit's decision interpreting 30 CFR 800.11(e)(1).
Finding: We find that PADEP has demonstrated the availability of
sufficient funds to address the outstanding land reclamation costs, as
determined by PADEP, at ABS forfeiture sites as of the date of
submission of this amendment. The ABS Closeout Funds were specifically
appropriated to be used for land reclamation on primacy forfeiture
sites. Funds in the Restricted Bond Account and the Released Bond
Account identified for use in addressing the outstanding land
reclamation are required to be used for reclamation under the State
program at 25 Pa. Code 86.187 and 86.190. OSM finds that collectively,
these funds represent the legally enforceable commitment envisioned by
the court in order to demonstrate the availability of sufficient
funding for the completion of the land reclamation at ABS forfeiture
sites. In addition, we note that the General Operations Account within
the SMCR Fund can be used for land reclamation as provided at 52 P.S.
Section 1396.18. PADEP has indicated that this account has an
unreserved balance of approximately $14.4 million. If additional funds
should be required to address land reclamation needs, this account
within the SMCR contains funding that could be committed to meet those
needs. As such, Pennsylvania has adequate funding to complete land
reclamation on all forfeited sites that were originally permitted and
bonded under its ABS.
Therefore, OSM is approving the demonstration of sufficient funding
regarding reclamation of all outstanding land reclamation at the
primacy ABS forfeiture sites.
Part E. Demonstration of Sufficient Funding for Construction of All
Necessary Discharge Treatment Facilities at the Primacy ABS Forfeiture
Sites
Pennsylvania submitted information to demonstrate that it has
sufficient funding to complete any initial treatment facility
construction at primacy ABS forfeiture sites. An evaluation of all the
primacy ABS forfeited discharge sites was completed by PADEP to project
the costs of treating the discharges. Post-mining treatment costs were
evaluated in three categories: (i) Initial facility construction costs;
(ii) the annual operation and maintenance cost; and (iii)
recapitalization costs. Initial facility construction costs cover all
of the costs to get a treatment system up and running, such as facility
design costs and construction.
The PADEP calculated that, as of July 2008, the total capital cost
to construct all necessary discharge-treatment facilities for the
primacy ABS forfeiture discharge sites is $2,073,104. The PADEP
indicates that it has taken a conservative approach to this cost
calculation.
To address this aspect of the ABS legacy, the PADEP must assure
that it has the funds to meet this obligation. The PADEP indicates that
it currently
[[Page 48536]]
has funds on hand that are available to cover the approximately
$2,100,000 total capital cost to construct the necessary treatment
facilities for the primacy ABS forfeiture discharge sites. In this
submission, Pennsylvania has committed to using the approximately $1.1
million of the funds in the Released Bond Account to address the
reclamation liability for the ABS legacy sites. (The $1.1 million
represents the remainder of the total of $2.8 million in the Released
Bond Account, after approximately $1.7 million from this account is
used to complete land reclamation at ABS forfeiture sites.) As noted,
the PADEP has indicated that there is $14.4 million in its SMCR Fund,
General Operations Account. These monies may be used for reclamation
purposes as well as general administrative costs. See 52 P.S. Section
1396.18. (See ABS Financial Summary, July 2008, included as part of
Attachment 10 to the State program amendment, Administrative Record No.
PA 802.43) As indicated, PADEP has committed to using money from the
General Operations Account to cover the additional $1 million needed
for treatment facility construction costs. Thus, PADEP submits that it
has available, at any time, sufficient money to construct the necessary
discharge-treatment facilities for all the ABS legacy sites, as
required by 30 CFR Section 800.11(e)(1).
Finding: We find that PADEP has demonstrated the availability of
sufficient funds to address the capital costs, as determined by PADEP,
of constructing all known discharge treatment facilities at ABS legacy
sites as of the date of submission of this amendment. Specifically, the
Released Bond Account funds identified for use in the SMCR Fund are
required to be used for reclamation (including construction of
treatment facilities) by the approved State program at 25 Pa. Code
86.187 and 86.190, thereby providing the legally enforceable commitment
required by Kempthorne.
Further, the General Operations Account within the SMCR Fund can be
used for reclamation (including construction of treatment facilities)
as provided at 52 P.S. Section 1396.18. These additional funds should
be sufficient to cover the remaining costs for the construction of
treatment facilities, and Pennsylvania's submission indicates that
these monies will be used for that purpose.
Therefore, because the PADEP will use the monies from the Released
Bond Account and the General Operations Account, when needed, to pay
the costs of construction of discharge-treatment facilities, OSM is
approving the demonstration of sufficient funding regarding
construction of all necessary discharge-treatment facilities at the
primacy ABS forfeiture sites.
Summary of OSM's Findings on Pennsylvania's Program Amendment
Submission
With regard to the treatment of post-mining discharges, we are
approving the following parts and provisions of the submission in
accordance with the requirements of 30 CFR 800.11(e):
(1) Those regulations that provide an adjustable source of revenue
dedicated to treatment and that can ensure adequate funds to treat
discharges at the ABS legacy sites (those forfeited ABS sites requiring
treatment of post-mining pollutional discharges that did not have
sufficient bond or a fully funded treatment trust to cover costs of
treating the discharge) and provide for the establishment of an
alternative permanent funding source to treat post-mining pollutional
discharges that is based on specific criteria and approved by OSM;
(2) Pennsylvania's demonstration of sufficient funding for the
construction of all necessary discharge treatment facilities at ABS
forfeiture sites; and
(3) Pennsylvania's use of treatment trusts as an alternative
bonding system, intended to make available sufficient funds to complete
the treatment of post-mining pollutional discharges.
With regard to the land reclamation at sites that were originally
permitted under the ABS, we are approving the following parts/
provisions of the submission in accordance with the requirements of 30
CFR 800.11(e):
(1) Pennsylvania's use of the Conversion Assistance Program, which
provided financial guarantees for land reclamation to qualified
permittees that converted to the conventional bonding system, thereby
avoiding bond forfeiture; and
(2) Pennsylvania's demonstration of sufficient funding for the
sites that were originally bonded under the ABS, but forfeited at the
time of dissolution.
However, we find that Pennsylvania has not demonstrated sufficient
funding for sites that were bonded under the former ABS and not
forfeited, but have the potential to be liabilities under the ABS
because the operators may not be able to obtain full-cost, site-
specific bonds that are adequate to cover all reclamation costs on
those sites. Several sites were actively permitted at the time of the
ABS dissolution, but were not adequately covered by conventional bond
or other funding mechanism subsequent to the conversion. Two such sites
remain. PADEP has not identified a source of money that can be used to
reclaim these two sites in the event of bond forfeiture.
We acknowledge the significant progress that Pennsylvania has made
in addressing the reclamation liabilities of those sites originally
covered under the ABS. However, because Pennsylvania's program
amendment submission does not assure, with respect to these two
currently permitted sites, that sufficient money is available to
complete reclamation plans in the event of forfeiture, OSM cannot
approve that aspect of Pennsylvania's program amendment.
Required Amendment: As a result of Pennsylvania's failure to assure
that outstanding land reclamation liabilities at these two sites are
fully funded, OSM is revising the required amendment at 30 CFR
938.16(h) to require Pennsylvania to ensure that its program provides
suitable, enforceable funding mechanisms that are sufficient to
guarantee coverage of the full cost of land reclamation at all sites
originally permitted and bonded under the ABS.
IV. Summary and Disposition of Comments
We received comments from four entities: The Mining and Reclamation
Advisory Board (Administrative Record No. PA 802.56), the United States
Environmental Protection Agency (Administrative Record No. PA 802.58),
the Pennsylvania Coal Association (Administrative Record No. PA
802.59), and PennFuture (Administrative Record No. PA 802.60). Two
other Federal agencies responded with no comment (U.S. Fish and
Wildlife Services, Administrative Record No. PA 802.52, and the U.S.
Department of Labor, Administrative Record No. PA 802.54). Since
PennFuture submitted the majority of the comments received, we will
address those comments first and the other entities' comments
following.
PennFuture submitted ten general comments with numerous specific
comments that support its general comments. We will address these
specific comments where we determine that the topic had not already
been addressed in our response to one of the general comments.
Generally, PennFuture contends that the program amendment does not
guarantee the reclamation of all existing and potential ``ABS legacy
sites.'' PennFuture has indicated that the mechanisms presented in the
ABS program amendment have moved or will move Pennsylvania's regulatory
program closer to the objective, but they do not fully satisfy the
outstanding
[[Page 48537]]
requirements of the Part 732 Notice and 30 CFR 800.11(e) and 938.16(h),
as interpreted in Kempthorne. For the reasons set forth in our findings
above, and in our responses to comments below, we disagree with this
assertion in large part, though we are revising the required amendment
at 30 CFR 938.16(h) to require Pennsylvania to ensure that its program
provides suitable, enforceable funding mechanisms, that are sufficient
to guarantee coverage of the full cost of land reclamation at all sites
originally permitted and bonded under the ABS
The comments and our responses to them follow.
1. The ABS Program Amendment correctly recognizes that the
reclamation of all existing and potential ``ABS Legacy Sites'' must be
guaranteed.
Response: We agree, and have found that the State program amendment
satisfies this obligation.
2. OSM has the discretion to approve parts of the ABS Program
Amendment while disapproving others, and has the authority to place
conditions on any approval or partial approval of the ABS Program
Amendment.
Pennsylvania is seeking approval of this program amendment
submission as a complete package, in accordance with 30 CFR 732.17(h)
and the part 732 Notices. PennFuture states that nothing in the phrase
``shall approve or disapprove the amendment request'' in 30 CFR
732.17(h)(7) prevents OSM from approving certain provisions in a
program amendment package while disapproving others. PennFuture
indicates that OSM has the discretion to approve parts of the ABS
Program Amendment while disapproving others, and has the authority to
place conditions on any approval or partial approval of the ABS Program
Amendment.
Response: We agree that there is nothing in 30 CFR 732.17(h) that
prevents OSM from approving certain provisions in a program amendment,
while disapproving others. We also agree that we have the authority to
qualify our approval or partial approval of any program amendment, or
to require additional amendments to the State program.
3. In taking action on the ABS Program Amendment, OSM may consider
only the ABS Program Amendment and its attachments, along with any
comments and supporting information submitted in response to the
proposed amendment.
PennFuture notes that the ABS Program Amendment purports to
incorporate by reference the entire, 82-page Program Enhancements
Document (PED) that was transmitted to OSM on June 5, 2003. PennFuture
further states that the PED is five years old, is inconsistent with the
ABS Program Amendment, and that the program amendment does not appear
to cite or to rely on any specific data, guidance documents, or
passages of the PED. Finally, PennFuture states that OSM may consider
only the ABS Program Amendment and its attachments, along with any
comments and supporting information submitted in response to the
proposed amendment. It further stated that if Pennsylvania is allowed
to incorporate the PED by reference, it would incorporate its July 2003
comments by reference.
PennFuture also noted that Pennsylvania submitted to OSM a report
on the progress recently made on the ABS primacy bond forfeitures,
including a January 2009 update of the July 2008 version of the Trust
Fund/Bond Agreement Summary Report, but that the State made it clear
that the updated submission is neither a program amendment nor a
revision to the program amendment. Therefore, according to PennFuture,
the January 15, 2009, submission should not be considered by OSM in
deciding on the ABS Program Amendment, nor should it be included in the
administrative record in this proceeding. If, however, OSM intends to
consider that new information or to include it in the administrative
record of this proceeding, PennFuture contends that it must give it and
the public an opportunity to comment on any such submission.
Response: We agree that the program amendment does not appear to
cite or to rely on any specific data, guidance documents, or passages
of the Program Enhancement Document submission. Neither the Program
Enhancement Document nor the updates to the Trust Fund/Bond Agreement
Summary Report were considered during this review.
4. There is no distinction between an ``alternative bonding
system'' approved under Section 509(c) of SMCRA and an ``alternative
system'' approved under Section 509(c) of SMCRA.
As noted in the program amendment submission, Pennsylvania seeks
approval of its use of Conversion Assistance Guarantees and mine
drainage treatment trust funds as ``alternative systems'' under Section
509(c) of SMCRA. Pennsylvania contends that there is a significant
distinction between an alternative bonding system and ``alternative
system'' under section 509(c).
In its submission, Pennsylvania cites 30 CFR 732.15(b)(6), which
provides that the Secretary of the Interior may not approve a State
regulatory program unless he finds that the provisions of the State
program ``implement, administer, and enforce a system of performance
bonds and liability insurance, or other equivalent guarantees,
consistent with the requirements of subchapter J of this chapter.''
Pennsylvania asserts that the Conversion Assistance Program and mine
drainage treatment trust funds are equivalent to or better than
conventional bonds and may be approved under Sec. 732.15(b) as an
``alternative system or other equivalent guarantee.''
PennFuture commented that there is no distinction between an
``alternative bonding system'' approved under Section 509(c) of SMCRA
and an ``alternative system'' approved under Section 509(c) of SMCRA.
The authorization of an ``alternative system'' in Section 509(c) of
SMCRA is implemented through OSM's regulation governing ``alternative
bonding systems'' at 30 CFR 800.11(e). It cited OSM's ``authoritative
interpretation, originally codified through notice and comment
rulemaking at 30 CFR 806.11(c) and currently codified through notice
and comment rulemaking at 30 CFR 800.11(e), [that] an `alternative
system that will achieve the objectives and purposes of the bonding
program' within the meaning of section 509(c) of SMCRA, 30 U.S.C.
1259(c), is an alternative bonding system.' '' It further cited
rulemaking language that it believes supports its position that OSM
sees no distinction between an alternative system and alternative
bonding system.
The last clause of Sec. 732.15(b)(6) limits OSM's discretion by
tethering it to the substantive standards in 30 CFR Chapter VII,
subchapter J, which today consists entirely of Part 800. The only
provisions of 30 CFR part 800 implementing section 509(c)'s
authorization to approve an ``alternative system that will achieve the
objectives of the bonding program under this section'' 30 U.S.C.
1259(c) is the regulation authorizing the approval of ``alternative
bonding systems,'' 30 CFR 800.11(e).
The criteria for approval or disapproval of State programs in 30
CFR 732.15(b)(6) do not make 30 CFR 800.11(e) inapplicable to an
alternative reclamation guarantee proposed for approval under section
509(c) of SMCRA. To the contrary, in order to be consistent with the
requirements of subchapter J of this chapter, 30 CFR 732.15(b)(6), any
reclamation guarantee proposed for approval as an ``alternative
system'' under section 509(c) of SMCRA
[[Page 48538]]
must satisfy the requirements for ``alternative bonding systems''
codified in subchapter J at 30 CFR 800.11(e).
Response: We agree that the authorization of an ``alternative
system'' in section 509(c) of SMCRA is implemented through OSM's
regulation governing ``alternative bonding systems'' at 30 CFR
800.11(e). Therefore, we regard both the Conversion Assistance Program
and mine drainage treatment trust funds as alternative bonding systems.
5. OSM should approve Pennsylvania's Conversion Assistance Program
as an alternative bonding system under section 509(c) of SMCRA and 30
CFR 800.11(e).
Response: OSM agrees, and is approving the Conversion Assistance
Program as an alternative bonding system under section 509(c) of SMCRA
and 30 CFR 800.11(e).
6. OSM should partially disapprove and partially approve, with
conditions, Pennsylvania's use of mine drainage treatment trusts as an
alternative bonding system under section 509(c) of SMCRA and 30 CFR
800.11(e).
We received extensive comments from PennFuture expressing concerns
relative to the treatment trust approach proposed by Pennsylvania.
PennFuture commented, generally, that OSM's evaluation of
Pennsylvania's request for approval of trust funds as an alternate
system and our determination of whether the Part 732 Notice and the
required amendment at 30 CFR 938.16(h) have been satisfied, must be
based upon a realistic scenario in which there is no financially
responsible party available to bear higher than expected treatment
costs or to supplement the trust corpus in order to restore it to a
perpetually sustainable level. PennFuture's comments promote the
importance of establishing a sustainable primary target valuation for
each trust that will provide a revenue stream sufficient to provide the
necessary AMD treatment.
In support of its comment, PennFuture sets forth the following
deficiencies it alleges exist with respect to treatment trust amount
calculations. According to PennFuture, each of these deficiencies, by
itself, precludes OSM from determining that either the 1991 732 Letter
or the required amendment codified at 30 CFR 938.16(h) can be removed.
First, PennFuture asserted that the assumed investment portfolios
for many existing trust funds are more aggressive than the actual
investment portfolios, which tend to be more conservative. Because of
this discrepancy, operators are allowed to fund the trusts with less
money than will be needed for full funding, since the assumed
aggressive investment strategies do not match the actual, more
conservative investment mixes. PennFuture demanded that OSM codify a
required amendment requiring Pennsylvania:
(1) To assume a rate of return corresponding to the most
conservative investment portfolio the trustee reasonably may be
expected to hold when calculating the initial amount of mine
drainage treatment trust funds;
(2) To review the investment portfolio of existing treatment
trusts, and, for those trusts for which the actual investment
portfolio allocation deviates materially from the portfolio assumed
when calculating the initial amount of the trust, to recalculate the
amount of the trust using the expected rate of return for the actual
investment portfolio; and
(3) Where the recalculated amount is higher than the original
calculation, to either: (a) Require the mine operator to make up any
deficiency in the trust amount; or (b) where the deficiency cannot
be eliminated because no viable responsible party remains available,
provide an enforceable, supplemental mechanism that, together with
the site-specific trust, firmly guarantees that sufficient funding
will be available to treat the discharge in perpetuity.
We note that PennFuture does not define what it means by a
``material'' deviation between the assumed and actual investment
portfolio.
Second, PennFuture contended that mine drainage treatment trust
funds have low tolerance for risk, primarily because it provides the
only source of funding for its intended service, i.e., the payment of
treatment costs at specific sites, often in perpetuity. According to
PennFuture, Pennsylvania's decision to authorize trust investment mixes
of 80% stocks and 20% bonds is entirely too aggressive to accommodate
the extremely low risk tolerances inherent in these funding mechanisms.
Instead, Pennsylvania should authorize only low risk investment mixes
that do not exceed the 5.25% expected annual rate of return on
investment bonds. Of course, limiting the investments to those with
more conservative expected rates of return will require the operator to
invest more money into the trust at the outset. PennFuture demanded
that OSM codify a required amendment requiring Pennsylvania:
(1) To assume a rate of return on the trust's investment
portfolio no greater than 5.25% in calculating the amount of any
mine drainage treatment trust fund; and (2) to recalculate, using a
gross rate of return no greater than 5.25%, the amount of any
existing treatment trust for which the gross rate of return on the
investment portfolio assumed in the calculation of the initial trust
amount exceeded 5.25%, and to either (a) require the operator to
make up any deficiency in the trust amount; or (b) where a
deficiency cannot be eliminated because no viable responsible party
remains available, provide an enforceable, supplemental mechanism
that, together with the site-specific trust, firmly guarantees that
sufficient funding will be available to treat the discharge in
perpetuity.
Third, PennFuture commented that the assumed 11.1% rate of return
on the equities portion of its authorized mine drainage treatment trust
fund investment mixes is excessively optimistic, and results in
unacceptably low initial trust fund investments. PennFuture illustrated
what it believes to be the significance of the rate of return
assumption by showing the significant difference between the initial
trust investment for an assumed 11.1% rate of return on equities vs.
lower assumed rates of return. PennFuture's expert, Dr. Small,
recommended an assumed rate of return of no greater than 6% on
equities. PennFuture claimed that Pennsylvania's mine drainage
treatment trusts are ``doomed to insolvency from the outset by the
unrealistic [assumed] rate of return.'' Finally, PennFuture asserted
that Pennsylvania's volatility multiplier of 1.16% does not adequately
account for the trust fund portfolio's market risk. Therefore,
PennFuture demanded that OSM expressly disapprove the portion of the
amendment that would allow the State to assume a gross rate of return
of 11.1% on equity investments, and that it codify a required amendment
requiring Pennsylvania:
(1) To assume a gross rate of return on equities no higher than
6% in calculating the amount of any mine drainage treatment trust
fund; and (2) to recalculate, using a gross rate of return on
equities no greater than 6%, the amount of any existing treatment
trust for which the gross rate of return on equities assumed in the
calculation of the initial trust amount exceeded 6% and to either:
(a) Require the operator to make up any deficiency in the trust
amount; or (b) where the deficiency cannot be eliminated because no
viable responsible party remains available, provide an enforceable,
supplemental mechanism that, together with the site-specific trust,
firmly guarantees that sufficient funding will be available to treat
the discharge in perpetuity.
Fourth, PennFuture argued that limiting the period used for
calculating recapitalization costs for treatment facilities to 75 years
``is unwarranted, unsupported by any information in the ABS Program
Amendment submission, and results in trust fund amounts below the
amount needed to provide a full cost guarantee of perpetual
treatment.'' Rather, PennFuture maintained that the only way to capture
the full present
[[Page 48539]]
value of all recapitalization costs is to use a calculation period of
infinite duration. Therefore, PennFuture demanded that OSM ``expressly
disapprove the portion of the ABS Program Amendment that would allow
Pennsylvania to limit the calculation of the present value of the
recapitalization costs to 75 years'', and to codify a required
amendment requiring Pennsylvania:
(1) To use a calculation period of infinite duration that
captures the full present value of all recapitalization costs when
calculating the amount of a mine drainage treatment trust fund; and
(2) to recalculate the amount of existing treatment trusts using a
calculation period of infinite duration that captures the full
present value of all recapitalization costs and to either: (a)
Require the operator to make up any deficiency in the trust amount;
or (b) where the deficiency cannot be eliminated because no viable
responsible party remains available, provide an enforceable,
supplemental mechanism that, together with the site-specific trust,
firmly guarantees that sufficient funding will be available to treat
the discharge in perpetuity.
Fifth, PennFuture contended that mine drainage treatment trust
funds fail to account for the risk of premature system failure.
Therefore, according to PennFuture, the trust funds are not full-cost,
perpetual guarantees. Accounting for this risk would require that
additional, up front monies be invested by the operators into the trust
funds. Therefore, PennFuture demanded that OSM codify a required
amendment requiring Pennsylvania:
(1) To fully account for the risk of premature failure of the
treatment system or its components when calculating the amount of
mine drainage treatment trust funds; [and] (2) to recalculate the
amount of any existing treatment trust where a material risk of
premature failure of the treatment system or its components exists,
and to either: (a) Require the operator to make up any deficiency in
the trust amount; or (b) where the deficiency cannot be eliminated
because no viable responsible party remains available, provide an
enforceable, supplemental mechanism that, together with the site-
specific trust, firmly guarantees that sufficient funding will be
available to treat the discharge in perpetuity.
We note that PennFuture does not define what it means by a
``material risk of premature failure.''
Sixth, PennFuture maintained that the mine drainage treatment
trusts do not account for costs of complying with the National
Pollutant Discharge Elimination System (NPDES) program; as such,
PennFuture contended the trusts ``are not full-cost, perpetual
treatment guarantees.'' Of course, initial trust investment amounts may
need to be higher in order to account for NPDES requirements.
Therefore, PennFuture demanded that OSM codify a required amendment
requiring Pennsylvania:
(1) To fully account for all costs of complying with the NPDES
requirements when calculating the amount of mine drainage treatment
trust funds; and (2) to recalculate the amount of any existing
treatment trust where compliance with the NPDES requirements would
materially increase the costs that must be covered by the trust, and
to either: (a) Require the operator to make up any deficiency in the
trust amount; or (b) where the deficiency cannot be eliminated
because no viable responsible party remains available, provide an
enforceable, supplemental mechanism that, together with the site-
specific trust, firmly guarantees that sufficient funding will be
available to treat the discharge in perpetuity.
We note that PennFuture does not define the phrase ``materially
increase the costs that must be covered by the trust.''
Response: For the reasons discussed below, we decline to impose any
of the above-referenced demanded required amendments. Likewise, we
decline to disapprove the provisions for which PennFuture demanded
disapproval.
When we conducted our programmatic reviews in the late 1980s and
began identifying shortcomings in the Pennsylvania bonding system,
there existed no site-specific financial vehicle able to provide a
revenue stream for long-term reclamation needs like a pollutional
discharge. Pennsylvania's treatment trust efforts since the passage of
Pennsylvania Act 173 in 1992 were creative and relied on flexibility
within the developmental environment. Ultimately, their efforts
provided both the vehicle and structure of a financial mechanism that
can serve as an alternate to traditional conventional bonds or a State-
wide bond pool. The treatment trust approach of making revenues
available on an ongoing basis through interest payments on investments
is an important leap forward in the search for a stable and self-
sustaining source of funds for long-term reclamation costs. Our
implementation of treatment trusts in the Federal program in Tennessee
relied heavily on the techniques and experiences of Pennsylvania
program officials. Our decision to approve treatment trusts as part of
the Tennessee Federal program reflects our conclusion that it is
important to maintain flexibility in the program so that the treatment
trusts approach can undergo necessary refinements and respond to
changing economic conditions.
As discussed under our findings, we are approving treatment trusts
as an alternative bonding system under SMCRA section 509(c) and 30 CFR
800.11(e). Our approval confers on Pennsylvania the authority to
implement enforceable trust agreements for long-term treatment of acid
mine drainage in lieu of a conventional bond. In addition, and as
discussed in our findings, we are not providing specific approval of
the underlying financial components Pennsylvania has used or is
currently using to develop treatment trusts. Similarly, we are not
requiring that Pennsylvania incorporate into mine drainage treatment
trust funds any explicit portfolio mixtures, volatility rates, specific
cushions against premature failure, rates of return, recapitalization
calculations, or inflation rates. Furthermore, we are not approving or
disapproving other financial parameters Pennsylvania now considers,
such as site maintenance costs, or the use of the AMDTreat program. We
have concluded that the implementation of treatment trusts requires
program managers to have a degree of flexibility that may not be
afforded when specific percentages, rates, or schedules are imposed
through a formal amendment structure of 30 CFR Part 732. As a parallel,
State regulatory programs are responsible for managing bond rate
guidelines for surface mine reclamation on an annual basis. Those
responsibilities require ongoing analyses and revisions to reclamation
cost parameters such as those for fuel, materials, supplies, equipment
rates, and dozens of other cost components. We believe that treatment
trusts will also need routine periodic revisions that will be hindered
if revisions are subject to the formal program amendment process.
PennFuture's assertion that existing and future trust portfolios
are not being managed or may not be performing consistent with the
projections used to set the primary target valuation is an important
comment and potential cause for concern. However, the potential for
disparity between trust target assumptions and actual trust performance
further convinces us not to impose rigid financial parameters such as
rates of return. Rather, we are even more convinced of the importance
of preserving programmatic flexibility so that Pennsylvania can revisit
trusts on a periodic basis to revise and refine trust parameters,
including the financial components and the primary target valuation,
within the authority of its approved program. Pennsylvania could have
adopted investment strategies in line with PennFuture's demands; had it
done so, we almost certainly would have approved the use of trust
funds, just as we are approving them in this
[[Page 48540]]
rulemaking. However, we believe the mechanics of trust fund structures
are best left to the PADEP, which has an incentive to ensure that the
funds do not fail. The annual evaluations, which may result in
adjustments to the mine drainage treatment trust fund target amounts,
are one such assurance against failure. (See Attachment 7, ``Postmining
Treatment Trust Consent Order and Agreement'', paragraph 8.)
The PennFuture comments also highlight the importance of
maintaining clarity in our decision consistent with the decision in
Kempthorne. In our findings section, we approved the use of treatment
trusts as an alternative bonding system under SMCRA section 509(c) and
30 CFR 800.11(e).
Nonetheless, and as provided for under our finding, unless and
until Pennsylvania demonstrates the financial adequacy of a trust
supporting a qualifying ABS discharge, that discharge will still be
subject to the requirements imposed on an ABS legacy site. Our
clarification is consistent with the holding in Kempthorne that
conversion from the old ABS only takes effect when the complete
reclamation costs are fully covered by the CBS bonds (or in this case,
a treatment trust). Under our decision, Pennsylvania must successfully
demonstrate adequate coverage by a treatment trust for any ABS
discharge it wishes to remove from coverage under the definition of ABS
legacy sites in Chapter 86.
Our decision also reflects our implementation of the Kempthorne
court's direction that OSM supervision be present until full guarantees
of reclamation are in place. Moreover, and as discussed in our finding
above, we conclude that the regulatory revisions to Chapter 86 put into
place a revenue source that accommodates changes in ABS legacy sites
treatment costs through annual reviews and adjustments to the
reclamation fee. PADEP also provided information indicating that the
proposed annual revenues could be adjusted as necessary to cover all
ABS discharge costs, including those with partially funded trusts (see
amendment submission: Evaluation of Potential Primacy ABS Discharge
Sites).
Other Permit Costs: PennFuture asserts the following: Pennsylvania
fails to account for the additional costs of complying with the NPDES
requirements at ABS legacy sites. PADEP generally does not require its
Bureau of Abandoned Mine Reclamation (BAMR) to get NPDES permits for
bond forfeiture discharge sites where BAMR takes over operation and
maintenance of the treatment systems. Likewise, where the mine operator
has wound up affairs or otherwise is not in control of the mine site,
PADEP generally does not require either the trustee or the trustee's
contractor to hold NPDES permits for treatment trust discharge sites.
PennFuture suggests that OSM should direct PADEP to provide the number
of the current NPDES permit and its expiration date for each treatment
trust sites. But, PennFuture contends, largely because Pennsylvania has
improperly assumed away the NPDES requirements for most treatment
trusts and bond forfeiture sites, the amendment fails to address any
added costs those requirements might impose. Pennsylvania's failure to
account in the calculation of the initial amount of a site-specific
mine drainage treatment trust for any additional costs associated with
compliance with the NPDES requirements produces a trust that does not
fully guarantee the treatment of the covered charges in perpetuity, and
therefore fails ``to assure the completion of the reclamation plan if
the work had to be performed by the regulatory authority in the event
of a forfeiture,'' 30 U.S.C. 1259(a), and to assure that the regulatory
authority will have available sufficient money to complete.
Next, PennFuture asserts that section 509(c) and 30 CFR 800.11(e)
prohibits OSM from approving the use of treatment trusts unless these
additional costs are properly taken into account in all of the
scenarios in which Pennsylvania uses trust funds. Moreover, unless the
treatment trust fully accounts for and guarantees the coverage of these
additional costs, Pennsylvania's implementation of them does not
satisfy the requirements of the Part 732 Notice and 30 CFR 938.16(h),
because trust fund sites that were bonded under the ABS will continue
to lack the full and firm reclamation guarantees demanded by
Kempthorne.
Response: With regard to NPDES permit costs, approval of this
alternative system does not alter existing responsibilities of
permittees to address any other Federal or State agency requirements
relating to treatment of post-mining pollutional discharges. In the
event the party responsible for abating or treating a discharge is
required to obtain an NPDES permit pursuant to the CWA in order to
operate and maintain treatment facilities at ABS legacy sites, then the
costs associated with obtaining such permits and treating to the
required effluent limits must be absorbed by the treatment trust. These
costs, if and when they are required, should be incorporated into any
calculations regarding the amount of funds needed to fully fund a
trust.
Pennsylvania states that once a trust has been established and
fully funded, the reclamation bonds for the site may be released. In
addition, after the trust is fully funded, the permittee can, at the
discretion of the Department, be reimbursed at the end of each year,
based on the calculated costs of treatment for that year's costs.
PennFuture states that OSM must make clear that any mine for which
a treatment trust is established continues to be regulated under Title
V of SMCRA and the approved State regulatory program. In partially
approving Pennsylvania's use of trust funds, OSM should make clear that
until PADEP has granted final release of the section 509(c) trust fund,
the mine remains a permitted mining operation within the jurisdiction
of the State regulatory authority and the oversight jurisdiction of OSM
under Title V of SMCRA. OSM should do so by disapproving the amendment
to the extent it would allow full and final bond release for the entire
mine site upon the funding of a mine drainage treatment trust fund, and
by conditioning partial approval of Pennsylvania's use of trust funds
under section 509(c) on Pennsylvania's retaining regulatory
jurisdiction under the approved State program so long as mine drainage
treatment operations continue at a trust fund site.
Response: PennFuture raised this concern during the rulemaking that
resulted in our approval of Pennsylvania's use of treatment trust funds
and annuities as collateral bonds. 70 FR 25472, 25487 (May 13, 2005).
PennFuture was concerned that use of a financial guarantee (such as a
trust fund established to treat acid mine drainage) would lead to bond
release and therefore termination of the regulatory authority's
jurisdiction over a mine site. PennFuture commented that the Federal
regulations allow release of a bond upon its replacement with another
bond that provides equivalent coverage, but this substitution does not
constitute a bond release. PennFuture also noted that an existing bond
could be released upon establishment of a trust fund or other adequate
financial guarantee of perpetual treatment, but that the substitute
guarantee must be treated as the equivalent of a performance bond under
section 509 of SMCRA. Section 509 does not allow bond release and the
termination of jurisdiction over a site where mine drainage treatment
operations are occurring.
The Federal regulations do not allow full bond release until all
requirements of the State program and the permit have been met.
Additionally, Pennsylvania's regulations at 25 Pa.
[[Page 48541]]
Code 86.151(j) provides that release of bonds does not alleviate the
operator's responsibility to treat discharge of mine drainage emanating
from, or hydrologically connected to, the site to the standards in the
permit, PASMCRA, the Clean Stream Law, the Federal Water Pollution
Control Act (or Clean Water Act) and the rules and regulations
thereunder. We construe the references to ``release of bonds'' in
section 86.151(j) to mean the replacement of the original bond by
another bond, whether it be a trust fund or other financial instrument
used as a collateral bond, that will cover the area and cost of
treatment facilities.
When a trust fund or annuity is in place and fully funded, the
regulatory authority may approve release under 30 CFR 800.40(c)(3) of
conventional bonds posted for a permit or permit increment, provided
that, apart from the pollutional discharge and associated treatment
facilities, the area fully meets all applicable reclamation
requirements and the trust fund or annuity is sufficient for treatment
of pollutional discharges and reclamation of all areas involved in such
treatment. The portion of the permit required for post-mining water
treatment must remain bonded. The trust fund or annuity may serve as
that bond. In addition, Pennsylvania may not terminate its regulatory
jurisdiction over any bonded area, including a water treatment facility
bonded by a trust fund or another financial mechanism. We do not expect
any issues to arise pertaining to termination of jurisdiction, however,
since Pennsylvania's program lacks a provision allowing termination of
jurisdiction under any circumstances.
7. OSM must codify enforceable conditions requiring the completion
of land reclamation at primacy ABS bond forfeiture sites and the
construction of mine drainage treatment systems at ABS Legacy Sites by
specified deadlines.
Pennsylvania stated in its submission that it is committed to
completing the arrangements for land reclamation at the ABS sites
within the next couple of years and the PADEP has the funds available
to perform the work.
PennFuture contends that OSM must codify enforceable conditions
requiring the completion of land reclamation at primacy ABS bond
forfeiture sites and the construction of mine drainage treatment
systems at ABS legacy sites by specified deadlines. PennFuture contends
that the Department's commitment is not enforceable. As a result, OSM
must supply the enforceability by codifying enforceable obligations at
30 CFR 938.16 for Pennsylvania to complete the outstanding land
reclamation and mine drainage treatment system construction work at
primacy ABS bond forfeiture sites. PennFuture agrees with Pennsylvania
that a site-by-site schedule with individual completion deadlines for
each mine is unnecessary. Given the extraordinary, decades-long delays
in reclamation or mine drainage treatment at some PA ABS bond
forfeiture sites, however, PennFuture asserts that definitive and
enforceable overall deadlines for the completion of the land
reclamation and treatment system construction works are essential.
PennFuture recommends that OSM codify conditions at 30 CFR 938.16
requiring Pennsylvania to complete the construction of mine drainage
treatment systems at all ABS legacy sites and the land reclamation at
all primacy ABS bond forfeiture sites within one year following the
effective date of OSM's final rule, subject to an exception for sites
where Pennsylvania is unable to complete the necessary work by the
deadline because of forces beyond Pennsylvania's control.
Response: It would be ideal if necessary land reclamation and water
treatment projects at bond forfeiture sites could be completed by the
deadline recommended by PennFuture. However, logistical and contractual
limitations mean that it would be extremely difficult, if not
impossible, to reclaim all the land that needs to be reclaimed and
treat all the water that needs to be treated within one year of the
effective date of this final rule. To accomplish the necessary land
reclamation and water treatment, the State will need time to develop
specifications, bid and award contracts, secure necessary easements and
permits, and design and construct needed treatment facilities. For
purposes of this rulemaking, we do not believe that it is necessary to
impose deadlines for completion of sites. However, progress on the
completion of sites is a topic that may be reviewed during oversight
activities to assure that the regulatory authority is carrying out its
activities in accordance with the provisions of its approved program.
8. OSM must disapprove the use of a consent order and agreement in
lieu of an approved Section 509 reclamation guarantee, and must
prohibit the proposed redesignation of the existing reclamation fee
account until full-cost land reclamation guarantees are posted for the
two mines covered by consent orders and agreements.
PennFuture contends that OSM must disapprove the use of a consent
order and agreement in lieu of an approved section 509 reclamation
guarantee. PennFuture also states that the amendment does not claim
that Pennsylvania has sufficient money available in the SMCR Fund or
elsewhere to cover the much larger shortfall for the LCN site, which
includes a post-mining discharge that has been included on PA's list of
potential ABS legacy sites. Although the amendment avoids stating the
dollar amount by which the LCN site is underbonded, the $7 million in
reclamation guarantees posted for the LCN site was more than $8.9
million below the estimated liability for land reclamation alone. Thus,
according to PennFuture, the available monies cover only 44% of the
estimated land reclamation liability.
PennFuture notes that Pennsylvania wants OSM to treat a consent
order and agreement as satisfying Section 509 of SMCRA. But, PennFuture
contends, as a matter of law, a consent order and agreement is not a
section 509 performance bond or alternative bonding system. PennFuture
asserts that section 509 of SMCRA can be satisfied only by approved
reclamation guarantees that meet or exceed the amount of outstanding
reclamation liability, not by an agreement to bring it about in the
future.
PennFuture further asserts that OSM may not consider the Part 732
Notice and required amendment at Sec. 938.16(h) to be fully satisfied
until all land reclamation liabilities at the LCN and CCI sites are
guaranteed by financial guarantee mechanisms approved under section 509
of SMCRA.
Finally, PennFuture states that OSM must require that, before PADEP
can limit the use of the reclamation fees to paying the costs
associated with treating post-mining pollutional discharges at ABS
legacy sites, PADEP must guarantee that all land reclamation
liabilities at the LCN and CCI sites are fully funded.
Response: As we note in Part B of the findings, a CO&A does not
constitute the guarantee of sufficient funding to pay for reclamation,
as required under section 509 of SMCRA. Accordingly, we found that
Pennsylvania will not have fully satisfied the requirements of 30 CFR
800.11(e) until all land reclamation liabilities at the LCN and CCI
sites are guaranteed to be fully funded. We are thus revising the
required amendment at 30 CFR 938.16(h) to require Pennsylvania to
ensure that its program provides suitable, enforceable funding
mechanisms that are sufficient to guarantee coverage of the full cost
of land reclamation at all sites originally permitted and bonded under
the ABS. Because we are taking this action, it is not necessary to
prohibit Pennsylvania
[[Page 48542]]
from using its RFO&M Account for water treatment only on ABS legacy
sites.
9. The ABS Program Amendment does not fully satisfy the Part 732
Notice and 30 CFR 938.16(h) because it does not demonstrate that the
two new trust accounts provide the firm guarantee of perpetual
treatment at all existing and potential ABS Legacy Sites required by
Kempthorne.
Pennsylvania stated that the RFO&M Account is designed to go into
operation immediately and to continue to serve as the only funding
mechanism until it is merged into the two accounts which are set up to
operate in series and are part of a system that is intended to cover
the costs of mine drainage treatment at ABS legacy sites after
treatment systems are initially installed using other funds. The Legacy
Account, which, having been found ``actuarially sound'' by PADEP, then
takes over forever as the sole mechanism providing for mine drainage
treatment at the ABS legacy sites. Pennsylvania concluded that it has
established an enforceable regulatory mechanism which will generate
sufficient funds to cover the total annual O&M and recapitalization
costs for the ABS legacy sites (and has also accounted for the
potential ABS legacy sites.
PennFuture contends, however, that the amendment does not fully
satisfy the Part 732 Notice and Sec. 938.16(h) because it does not
demonstrate that the two new trust accounts provide the firm guarantee
of perpetual treatment at all existing and potential ABS legacy sites.
PennFuture adds that information presented in the amendment at most
shows that the system described in Part 5 of the amendment may work for
the very near term. Under Kempthorne, however, the assurance required
to satisfy Sec. 800.11(e) must extend indefinitely beyond the next few
years.
Specifically, PennFuture contends that:
Inventory: The program amendment fails to account for several mines
that appear to be ABS legacy sites or potential ABS legacy sites. In
particular, it provided examples of sites that were in the mine
drainage inventory, but not listed as existing or potential ABS legacy
sites, sites that were reclassified from ``primacy'' to ``pre-
primacy,'' and sites for which removal from the mine drainage inventory
is not justified by the documentation provided by OSM.
Reclamation Fee O&M Account: Because the ABS Program Amendment does
not demonstrate that the Legacy Account will ever be ``actuarially
sound,'' it must demonstrate that the RFO&M Account guarantees the
treatment of all discharges at ABS legacy sites in perpetuity.
The $3.7 million in the SMCR Fund's existing reclamation fee
account remains encumbered and unavailable for the payment of mine
drainage treatment costs at the ABS legacy sites until all land
reclamation obligations at the LCN and CCI sites are fully guaranteed
by financial guarantee mechanisms approved under section 509 of SMCRA.
Only if the $9 million reclamation obligation of the existing
reclamation fee account is covered by full cost bonds or some other
approved financial guarantee mechanism may OSM approve restricting the
$3.7 million to the purpose of paying for mine drainage treatment at
ABS legacy sites through the redesignation of the existing reclamation
fee account as the RFO&M Account.
Only the revenue streams that must be deposited in the RFO&M
Account may be considered in analyzing the capability of the account to
provide the required guarantee of perpetual discharge treatment.
The ABS Program Amendment fails to guarantee that all
recapitalization cost at ABS legacy sites are covered in perpetuity.
PennFuture opposes limiting the calculation period for recapitalization
costs to 75 years, for the same reasons it opposed the 75 year
recapitalization cost calculation period for site-specific mine
drainage treatment trust funds.
The ABS Program Amendment does not address recapitalization costs
at potential ABS legacy sites. These costs must be addressed, and their
present value must be based on a period of infinite duration.
The ABS Program Amendment's use of annualized recapitalization cost
figures in the analysis of the RFO&M Account is improper and
misleading. Because the PADEP does not contain an enforceable
commitment for PADEP to collect and set aside funds to cover
recapitalization costs in future years, the analysis of the RFO&M
Account should not be premised on such a ``set-aside.'' Moreover, PADEP
should not assume that an equivalent amount of recapitalization costs
will be spent each year, when it knows that will not be the case.
Instead, the analysis of the RFO&M Account should be based on the
irregular, discontinuous pattern of recap costs revealed by the
Federation's ``ABS Legacy Recap Cost Pattern (rev 2009).''
The ABS Program Amendment fails to account for the additional costs
of complying with the NPDES requirements at ABS legacy sites.
The ABS Program Amendment fails to demonstrate that the RFO&M
Account and associated mechanisms guarantee the perpetual treatment of
all discharges at the existing ABS legacy sites. Instead, the analysis
of the account is limited and exclusively near-term in scope.
Pennsylvania has failed to demonstrate that potentially dramatic
increases in the reclamation fee will not reduce the number of acres
subject to the fee to the point that revenues will be insufficient to
cover treatment costs. PennFuture insists that the analysis of the
account must project the costs and revenues for the entire period in
which the account may have to remain in operation. PennFuture's
analysis of the condition of the account over a 75-year period show
increasing burdens that the PADEP has failed to demonstrate what the
account can bear.
The ABS Program Amendment fails to demonstrate that the RFO&M
Account and associated mechanisms guarantee the perpetual treatment of
all discharges at the potential ABS legacy sites. While the PADEP
accounts for a ``worst-case scenario'' in which every potential ABS
legacy site forfeits in a single year, it applies its analysis only to
Year 1; in subsequent years, the needed additional revenues would be
higher. In addition, and as noted above, the analysis does not account
for recapitalization costs at these newly forfeited sites, but is
limited to O&M costs.
Next, the amount of existing, site-specific bond money is
overstated, because some of that money is needed for land reclamation
on the LCN site. Finally, the site-specific bond monies would not be
available anyway, because the proposed regulations require that such
monies be deposited into the ABS Legacy Account, where they cannot be
used until that account is declared to be actuarially sound. As with
the ABS legacy sites, the analysis of the impact of future forfeitures
of potential ABS legacy sites is short-sighted, and fails to
demonstrate that the RFO&M Account will withstand the increased burdens
that it may be required to bear.
Therefore, PennFuture demands that OSM condition its approval of
the proposed regulations on Pennsylvania:
(1) Identifying the maximum period the RFO&M Account may be in
operation, and providing information sufficient to demonstrate that
the RFO&M Account and its ancillary mechanisms will assure treatment
of all discharges from the ABS legacy sites for the entire, maximum
period the account may be in operation; and, (2) including in the
information submitted, and accounting for: (a) The recapitalization
costs for the potential ABS legacy sites; b) the full, perpetual
recapitalization costs for both existing and potential ABS legacy
sites by using a calculation period of infinite duration that
captures the full present value of all
[[Page 48543]]
recapitalization costs; and c) any additional treatment costs at the
ABS legacy sites resulting from compliance with the requirements of
the NPDES program.
ABS Legacy Account (Legacy Account): PennFuture demands that OSM
codify a required amendment, requiring that before the Legacy Account
may be found ``actuarially sound,'' all of the conditions identified in
PennFuture's comments pertaining to site-specific trust funds for sites
originally bonded under the ABS must be satisfied. In addition,
PennFuture contends that the ABS Program Amendment fails to demonstrate
that the Legacy Account guarantees the perpetual treatment of all
discharges at the ABS legacy sites. This demonstration is critical,
PennFuture argues, because once the determination of actuarial
soundness is made, it applies for eternity; that is, there is no
provision in the proposed regulations for reviving the reclamation fee,
or tapping another source of revenue, to cover treatment and
recapitalization costs in the event the ABS Legacy Account ceases to be
``actuarially sound.'' PennFuture recommends that the determination of
actuarial soundness be made by an actuary.
For all of these reasons, PennFuture demands that OSM condition its
partial approval of the proposed regulations on Pennsylvania:
(1) Basing the calculation of the initial, ``actuarially sound''
funding level of the Legacy Account on an expected gross rate of
return on the Legacy Account's asset portfolio no greater than
5.25%; (2) basing the calculation of the initial, ``actuarially
sound'' funding level of the Legacy Account on the full present
value of all future recapitalization costs for the ABS legacy sites,
determined by using a calculation period of infinite duration; (3)
accounting for the risk of premature failure of the mine drainage
treatment systems and components of the ABS legacy sites in
determining the initial, ``actuarially sound'' funding level of the
Legacy Account; and, (4) accounting for all costs of complying with
the NPDES requirements at ABS legacy sites in determining the
initial, ``actuarially sound'' funding level of the Legacy Account.
Summary: OSM must impose conditions on its approval that are
necessary to ensure that the new accounts and related mechanisms
provide the firm guarantee of perpetual treatment. Until those
conditions are satisfied, OSM may not grant full approval of Part 5 of
the amendment or terminate the 732 Notice and Sec. 938.16(h) as being
fully satisfied.
Because Pennsylvania can neither guarantee nor predict when the
Legacy Account will become actuarially sound, the worse-case scenario
in this regard is one in which the Legacy Account never attains
actuarial soundness, and the RFO&M Account serves forever as the
repository of funds for covering all treatment expenses at the ABS
legacy sites. As a result, the amendment must demonstrate that the
RFO&M Account and its ancillary mechanisms, even though intended to
serve as only a temporary vehicle for administering the funds for
discharge treatment at ABS legacy sites, nevertheless are capable of
handling a worse-case scenario under which they must administer those
funds permanently.
Given the lack of any proof that the Legacy Account will become
actuarially sound and take over for the RFO&M Account anytime soon (or
ever), the long-term sufficiency of the RFO&M Account, its capability
to provide the firm financial guarantees demanded by Kempthorne must be
proven by presentation and analysis of long-term projections.
Response:
Inventory: PennFuture commented on the inventory of ABS discharge
sites PADEP submitted in support of the program amendment and stated
that the ABS Program Amendment comes up short in its listing of and
accounting for existing and potential ABS legacy sites. To support its
comment, PennFuture discussed eight individual sites it thought should
be included on the inventory list and said that it has questions
concerning the classification of additional sites.
We disagree with PennFuture's implication that OSM is prohibited
from removing the 1991 732 letter and the required amendment at 30 CFR
938.16(h) until there is an undisputed listing of ABS legacy sites and
discharges. We conclude it is unnecessary to delay our consideration of
the proposed modifications to the Pennsylvania program until OSM,
PADEP, and PennFuture agree on a final list. As proposed, the PADEP
amendment would establish an ABS legacy sites definition that clearly
requires treatment of any discharge on a site bonded under the ABS,
regardless of past, current, or future status on the MDI ABS Sites
database. In addition, the proposed amendment would create a revenue
source that, through annual reviews and adjustments to the reclamation
fee, accommodates changes in ABS treatment costs, including changes in
the number of qualifying sites or discharges (see program amendment
submission Appendix 12).
The tracking of the MDI ABS Sites is the responsibility of PADEP
and the current database is cooperatively maintained by OSM and PADEP
to facilitate the reclamation of AMD and other pollutional discharges
on sites that operated under the ABS. As essential as the MDI ABS Sites
database is to OSM and PADEP, it is merely a program management tool
and does not in itself determine whether a particular site is an ``ABS
Legacy Site.'' For this reason, we are not approving or disapproving
the MDI ABS Sites database in this rulemaking. Because the database is
not, per se, a component of the Pennsylvania regulatory program, any
changes to the database do not need to be submitted to OSM as program
amendments. Requiring database changes to be submitted as program
amendments is not only unnecessary, but could also seriously delay or
hinder PADEP efforts to complete required reclamation.
Our view is based upon an acceptance that the information on the
MDI ABS Sites database will change as sites are reviewed and better
information is collected. We believe such an approach is essential.
Information on ABS sites is constantly being collected as treatment
techniques and estimates are being refined. Since its inception in
1999, the database has been modified to include improved water quality
information and to add ABS sites that were thought to qualify. OSM and
PADEP have also had occasion to reclassify sites that no longer appear
to represent an ABS treatment liability. Even with modifications being
made over the last nine to ten years, the number of ABS discharges has
remained relatively constant at approximately 100 discharges. OSM
believes an active database management process is the best tool and
approach for moving forward with reclamation while guaranteeing
treatment of discharges on all qualifying sites.
In closing, we are not modifying our decision based upon
PennFuture's comments concerning eight specific sites and its
indication that it may have questions concerning additional sites. We
conclude that delaying our decision on this program amendment until
there is an undisputed list between OSM, PADEP, and PennFuture is
unnecessary. If a site meets the definition of an ``ABS Legacy Site,''
the old ABS, as modified in this amendment, remains responsible for the
treatment of that site, regardless of whether it is on the MDI ABS
Sites database. We encourage PennFuture and any other interested
parties with important information concerning ABS site eligibility and
treatment to contact PADEP and provide it with sufficient details to
conduct an investigation.
RFO&M Account: Section 86.17 (Reclamation Fee) was significantly
[[Page 48544]]
revised by Pennsylvania. Under the proposed revisions, the reclamation
fee amount must be set to guarantee that sufficient revenue is
generated to both cover the ongoing and projected O&M costs. In
addition, the fee must provide sufficient revenues to maintain, on a
State fiscal year basis, a minimum account balance to protect against
unforeseen cost increases. To accomplish these tasks, section 86.17
relies on the new definitions in section 86.1 (Definitions) and
restrictions on the use of the funds under section 86.187 (Use of
Money). Section 86.17(e) establishes, collects, and deposits an
adjustable reclamation fee (currently $100) into the RFO&M Account.
Through defined procedural steps, Pennsylvania proposed annual
assessments of the account balance, expected revenues, and anticipated
costs. Pennsylvania proposed an adjustable fee sufficient to pay for
the operation and maintenance costs of AMD treatment, including
recapitalization costs and to maintain a $3 million minimum balance in
the O&M Trust Account.
Pennsylvania significantly revised section 86.187 (Use of Money) to
address how funds collected under section 86.17(e) would be dedicated
to AMD treatment on ABS legacy sites. Pennsylvania's submission also
makes available monies collected from civil penalties assessed by the
Department under the Surface Mining Conservation and Reclamation Act.
Under the proposed amendment, Pennsylvania must deposit into the O&M
Trust Account all civil penalty collections up to $500,000 in a fiscal
year, minus a small percentage that are required for deposit into the
Pennsylvania Environmental Education Fund. While section 86.187(a) also
allows, at the discretion of the Department, the deposit interest on
other monies in the SMCR Fund, appropriations, donations, or fees
collected from operators participating in the Conversion Assistance
Program, the reclamation fees and civil penalties represent the only
mandatory sources of funding. To provide a perspective on current
revenues from mandatory and other sources, Pennsylvania submitted a
document titled ABS Financial Summary July 2008. The summary describes
various accounts in the SMCR Fund, available monies, interest, civil
penalty collections, and miscellaneous sources.
Pennsylvania's proposed amendment includes discussions of AMD
treatment costs on sites defined as ABS legacy sites at the time of the
submission to OSM. The Primacy ABS Bond Forfeiture Discharge Sites
Status Report for July 2008 provides the forfeited primacy permits
bonded under the ABS with site-specific costs for treatment facility
construction, annual operation and maintenance costs (O&M),
recapitalization costs (system rehabilitation/replacement), and the
status of the site. The report provides that, as of July 2008, the
annual estimated O&M cost for all sites was approximately $1.35
million. Pennsylvania's proposed approach also considers annualized
recapitalization cost estimates.
Pennsylvania's submission provides recapitalization costs for each
year, continuing up to year 75 and estimates that for the first ten
years recapitalization costs slowly escalate from approximately
$230,000 to $302,000. Because Pennsylvania's submission proposes that
recapitalization costs will be addressed on a ``pay-as-you-go''
approach, the maximum potential treatment outlay for year one is
estimated to be approximately $1,580,000.
ABS legacy site treatment through the new adjustable trust account
is dependent on the expenditure of approximately $2.07 million to
construct treatment facilities. To develop the $2.07 million estimate,
Pennsylvania reviewed existing ABS legacy sites and identified 67
discharges where systems are lacking or in need of substantive
refurbishing. The funding aspects of treatment facility construction
are discussed in several locations in Pennsylvania's submission. In ABS
Program Amendment Part 4 (Section B), Pennsylvania describes ABS legacy
site treatment facility construction, provides the number of sites that
have functioning treatment systems, and provides the $2.07 million
estimate. The narrative also commits to funding the facility
construction effort with $1.1 million from the Released Bond Account
and the remaining amount from the General Operations Account under the
Department's SMCR Fund. In addition to the analysis and commitment of
funding under ABS Program Amendment Part 4, Pennsylvania submitted
further support information under two additional documents; the Primacy
ABS Bond Forfeiture Discharge Sites Status Report for July 2008 and the
ABS Financial Summary for July 2008. These support documents identify
specific site treatment facility construction estimates and confirm
fund amounts under the General Operations Account and the Released Bond
Account.
We acknowledge that the revenues collected from reclamation fees
($190,125) and from civil penalties ($225,400.75) in 2007-2008 are less
than the $1,580,000 maximum potential treatment outlay for year one.
Nonetheless, the actual amount of money needed for treatment during
year one will be significantly lower than the $1.58 million maximum,
because that maximum amount is based on an assumption that all
treatment facilities will have been constructed and be ready to start
treating discharges at the beginning of year one. Actually, though,
Pennsylvania must still complete construction of 67 facilities needed
to treat mine drainage on ABS legacy sites. Disbursements from the O&M
Trust Account cannot occur until the facility is constructed. At this
time, we have no estimate on the degree to which disbursements from the
O&M Trust Account will be postponed; however, we anticipate that it
will be at least several years based upon discussions under ABS Program
Amendment Part 4. In the event that treatment facility construction is
accelerated and occurs sooner than anticipated, the O&M Trust Account
has a balance of $3,699,896.50 to cover additional treatment outlays
until the fee can be adjusted in the following year.
Pennsylvania also submitted information on the financial risk
associated with active coal mine sites that were originally under the
ABS but, at the time of the submission, had no fully funded mechanism
for treatment of AMD. These sites are viewed as a potential financial
burden on the O&M Trust Account because in the event of forfeiture,
their treatment costs must be covered. For the 44 sites that met the
potential risk scenario, Pennsylvania estimated that $1,450,000
represented a conservative AMD treatment estimate. Pennsylvania further
provided that the risk to the O&M Account is minimized because some
sites have bond exceeding the amount necessary for a site specific
treatment trust. We accept Pennsylvania's conclusion that the risk of
increased costs to the O&M Trust Account has been addressed. We agree
that it is unrealistic to assume that all 44 sites would default in the
same year. We also observe that the O&M Trust Account balance of $3.7
million and the adjustable fee process are available to address short-
term and long-term increases in treatment costs.
As previously discussed in our finding at Part A, concerning the
proposed regulatory changes to establish a legally enforceable means of
funding the O&M and recapitalization costs for the ABS legacy sites,
OSM recognizes that Pennsylvania has provided an alternate system that
provides sufficient
[[Page 48545]]
funding to treat AMD pollution originating from a defined set of bond
forfeiture sites (ABS legacy sites). In addition we found that the
reclamation fee can be adjusted to accommodate all increases and
decreases in treatment obligations, and that these provisions
constitute an enforceable commitment by Pennsylvania to provide the
funding needed to construct treatment facilities.
ABS Legacy Account: Pennsylvania also proposed an alternate funding
source under Sec. 86.17(e)(6) called the ABS Legacy Account that, when
actuarially sound, could supersede the RFO&M Account as the source of
funding for AMD treatment on the ABS legacy sites. Pennsylvania
proposed specific conditions at section 86.17(e)(6)(i) through (iii)
for determining when the ABS Legacy Account is financially capable of
covering the annual operation and maintenance costs for treating post-
mining pollutional discharges at the ABS legacy sites.
As previously discussed in our finding at Part A regarding this
account, OSM did not consider this revenue to be a component of the
funding required to meet any of the needs for treatment of the ABS
legacy sites. Our approval of the language establishing this account,
and the transfer of monies into the account is limited in that the ABS
Legacy Account, and monies contained within the account, cannot be used
until certain conditions are met. At that time, OSM can revisit any
issue with regard to the solvency of this fund and the appropriateness
of terminating the reclamation fee (or alternate revenue source).
We decline to impose any of the conditions on our approval of these
two accounts demanded by PennFuture. We believe formal imposition of
these conditions upon the State's approved program is unduly
burdensome; it is also unnecessary, given the plain language of the
regulations, which requires adjustment of the reclamation fee to
account for any increased costs, and a demonstration of actuarial
soundness, a defined term, for the ABS Legacy Account prior to
termination of the reclamation fee. Pennsylvania's willingness, and its
ability, to raise the needed additional monies through reclamation fee
increases will be continually evaluated by OSM through its oversight
authority. In short, the regulations create the mandate to fully fund
discharge treatment costs for all existing and potential ABS legacy
sites in perpetuity. The burden of ensuring the fulfillment of that
mandate falls squarely on the PADEP, and indirectly on OSM, through
oversight. With the commitment already set forth in the regulations,
additional conditions are simply not needed, at this time. Therefore,
we decline to impose them.
10. OSM should defer ruling on the proposal to allow funding of the
RFO&M Account and Legacy Account through ``appropriations'' and funding
sources that are not specifically identified in the ABS Program
Amendment.
PennFuture contends that one of SMCRA's bedrock principles is cost
internalization; that is, the statute in general, and its bonding
requirements in particular, require that the costs of reclaiming
surface mining sites, including the costs of discharge treatment at
those sites, must be borne by the coal industry, and not by the public.
Thus, PennFuture concludes, OSM should not approve proposed regulatory
language that would allow the PADEP to deposit into the RFO&M Account
or Legacy Account: (1) ``appropriations * * *.'' 25 Pa. Code
86.187(a)(1)(iii), 86.187(a)(2)(i); (2) fees for Conversion Assistance
Program guarantees, until a statutory change removing the restriction
on the use of those funds is submitted as a program amendment; (3)
``other monies'' from sources not specifically listed in 25 Pa. Code
86.187(a)(1)(iii) and (a)(2)(i), until the specific sources of funding
are identified and submitted for approval as a program amendment; or
(4) the ``permanent alternative funding sources for the RFO&M Account,
25 Pa. Code 86.17(e)(3), (e)(3)(i), (e)(3(ii), until the specific
alternative source is identified, Pennsylvania submits the source as a
State program amendment and OSM approves the source as a replacement
for the reclamation fee. PennFuture thus asserts OSM should defer
ruling on these provisions in this rulemaking for the substantive
reason that the money purported to be authorized therein, with the
exception of fees for Conversion Assistance Program guarantees, may
come from outside the coal industry, and therefore violate the
principle of cost internalization. PennFuture further asserts that OSM
should also defer its decision on all of the above provisions,
including the use of fees from Conversion Assistance Program
guarantees, for a procedural reason: neither PennFuture nor any other
interested party may provide meaningful comment on the provisions until
they are submitted to OSM through the formal program amendment process.
Moreover, and in the same vein, PennFuture contends that OSM cannot
properly rule on the consistency of these provisions with the
requirements of SMCRA and the Federal implementing regulations until
they are squarely presented to it as State program amendments.
Response: For the reasons set forth above in Part A of our
findings, we are approving the regulatory provisions cited by
PennFuture here. However, any ``alternative permanent funding source''
that would be proposed to substitute for the reclamation fee must first
be submitted to us for review and may not be used to pay treatment
costs on ABS legacy sites until we either approve the amendment, or
decide that the mechanism need not be treated as a program amendment
requiring our approval. Nothing in SMCRA or its implementing
regulations explicitly prohibits the use of ``other sources'' of money,
such as appropriations, to pay for reclamation of forfeited sites. If
any such ``other sources'' are deposited into either the RFO&M Account
or the Legacy Account, we will determine whether a program amendment is
required before PADEP may use those monies. Further, the transfer of
fees from Conversion Assistance guarantees into the RFO&M Account must
be authorized by State law. Therefore, no such transfers may take place
until Pennsylvania enacts the necessary statutory revision, submits it
to us, and we approve it.
Other Comments
The Pennsylvania Coal Association (PCA)
The PCA commented that it supported approval of the program
amendment. In its comments the PCA indicated its agreement to continue
paying the $100 per acre reclamation fee for pollutional discharges for
which its members have no liability. This approval was conditioned on
continuing efforts to find a permanent alternate source of funding to
address such pollution.
The Mining and Reclamation Advisory Board (MRAB)
The MRAB commented generally on the process that resulted in the
regulations recommended by the Board, as submitted in the program
amendment. MRAB commented in support of OSM's approval of the
amendment.
Federal Agency Comments
Mine Safety and Health Administration (MSHA)
MSHA indicated it had no comments or concerns regarding the
proposed amendment.
[[Page 48546]]
U.S. Fish and Wildlife Service
The USFWS indicated it had no comments on the proposed amendment.
U.S. Environmental Protection Agency
The USEPA noted that all discharges of water from areas disturbed
by surface mining shall be made in compliance with all applicable State
and Federal water quality laws and regulations and with the effluent
limitations for coal mining promulgated by USEPA as set forth at 40 CFR
Part 434.
USEPA indicated that implementation of the State's regulations,
including the proposed amendments, must comply with the CWA, the
regulations implementing NPDES, and other relevant environmental
statutes and regulations. EPA further noted that SMCRA and its
implementing regulations, including PADEP's proposed amendments, do not
supersede, modify, amend or repeal the CWA and its implementing
regulations.
In other words, the EPA stated, `` * * * any discharges associated
with ABS legacy surface mining operations must comply with the CWA.''
Response: OSM agrees that approval of this amendment does not alter
the State's or a permittee's responsibility for compliance with any
applicable provisions of the CWA. Specifically, approval of this
amendment does not alter existing or future responsibilities of the
State or a permittee to address any other Federal or State agency
requirements relating to treatment of post-mining pollutional
discharges.
V. OSM's Decision
Based on the above findings, we are partially approving the
Pennsylvania program amendment sent to us on August 1, 2008,
(Administrative Record No. PA 802.43). To implement this decision, we
are amending the Federal regulations at 30 CFR Part 938 which codify
decisions concerning the Pennsylvania program. Pursuant to 5 U.S.C.
553(d)(3), an agency may, upon a showing of good cause, waive the 30
day delay of the effective date of a substantive rule following
publication in the Federal Register, thereby making the final rule
effective immediately.
We find that good causes exist under 5 U.S.C. 553(d)(3) to make
this final rule effective immediately. Because Section 503(a) of SMCRA
requires that the State's program demonstrate that the State has the
capability of carrying out the provisions of the Act and meeting its
purposes, making this regulation effective immediately will expedite
that process.
Specifically, waiving the 30 day period after publication will
allow Pennsylvania to immediately implement these new provisions that
are designed to bring more financial resources to bear toward the
abatement of water pollution on permitted and abandoned mine sites in
the State. Improved water quality will thus inure more quickly to the
benefit of the citizens of the Commonwealth of Pennsylvania. Therefore,
under 5 U.S.C. 553(d)(3), this rule will be effective immediately.
In addition, for the reason set forth in our findings, we are
revising the required amendment at 30 CFR 938.16(h) to require
Pennsylvania, within the time provided therein, to ensure that its
program provides suitable, enforceable funding mechanisms that are
sufficient to guarantee coverage of the full cost of land reclamation
at all sites originally permitted and bonded under the ABS.
Satisfaction of the revised required program amendment at 30 CFR
938.16(h) will likewise constitute satisfaction of the remaining
requirements of the October 1, 1991, 732 letter.
VI. Procedural Determinations
Executive Order 12630--Takings
This rule does not have takings implications. This determination is
based on the analysis performed for the counterpart Federal regulation.
Executive Order 12866--Regulatory Planning and Review
This rule is exempted from review by the Office of Management and
Budget under Executive Order 12866.
Executive Order 12988--Civil Justice Reform
The Department of the Interior has conducted the reviews required
by Section 3 of Executive Order 12988 and has determined that this rule
meets the applicable standards of Subsections (a) and (b) of that
section. However, these standards are not applicable to the actual
language of State regulatory programs and program amendments because
each program is drafted and promulgated by a specific State, not by
OSM. Under Sections 503 and 505 of SMCRA (30 U.S.C. 1253 and 1255) and
the Federal regulations at 30 CFR 730.11, 732.15, and 732.17(h)(10),
decisions on proposed State regulatory programs and program amendments
submitted by the States must be based solely on a determination of
whether the submittal is consistent with SMCRA and its implementing
Federal regulations and whether the other requirements of 30 CFR Parts
730, 731, and 732 have been met.
Executive Order 13132--Federalism
This rule does not have Federalism implications. SMCRA delineates
the roles of the Federal and State governments with regard to the
regulation of surface coal mining and reclamation operations. One of
the purposes of SMCRA is to ``establish a nationwide program to protect
society and the environment from the adverse effects of surface coal
mining operations.'' Section 503(a)(1) of SMCRA requires that State
laws regulating surface coal mining and reclamation operations be ``in
accordance with'' the requirements of SMCRA, and section 503(a)(7)
requires that State programs contain rules and regulations ``consistent
with'' regulations issued by the Secretary pursuant to SMCRA.
Executive Order 13175--Consultation and Coordination With Indian Tribal
Government
In accordance with Executive Order 13175, we have evaluated the
potential effects of this rule on Federally-recognized Indian Tribes
and have determined that the rule does not have substantial direct
effects on one or more Indian Tribes, on the relationship between the
Federal Government and Indian Tribes, or on the distribution of power
and responsibilities between the Federal Government and Indian Tribes.
The basis for this determination is that our decision is on a State
Regulatory program and does not involve a Federal Regulation involving
Indian Lands.
Executive Order 13211--Regulations That Significantly Affect the
Supply, Distribution, or Use of Energy
On May 18, 2001, the President issued Executive Order 13211 which
requires agencies to prepare a Statement of Energy Effects for a rule
that is (1) considered significant under Executive Order 12866, and (2)
likely to have a significant adverse effect on the supply,
distribution, or use of energy. Because this rule is exempt from review
under Executive Order 12866 and is not expected to have a significant
adverse effect on the supply, distribution, or use of energy, a
Statement of Energy Effects is not required.
National Environmental Policy Act
This rule does not require an environmental impact statement
because section 702(d) of SMCRA (30 U.S.C. 1292(d)) provides that
agency decisions on proposed State regulatory program provisions do not
constitute major Federal actions within the meaning of section
102(2)(C) of the National Environmental Policy Act (42 U.S.C.
4332(2)(C)).
[[Page 48547]]
Paperwork Reduction Act
This rule does not contain information collection requirements that
require approval by OMB under the Paperwork Reduction Act (44 U.S.C.
3507 et seq.).
Regulatory Flexibility Act
The Department of the Interior certifies that this rule will not
have a significant economic impact on a substantial number of small
entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
The State submittal, which is the subject of this rule, is based upon
counterpart Federal regulations for which an economic analysis was
prepared and certification made that such regulations would not have a
significant economic effect upon a substantial number of small
entities. In making the determination as to whether this rule would
have a significant economic impact, the Department relied upon data and
assumptions for the counterpart Federal regulations.
Small Business Regulatory Enforcement Fairness Act
This rule is not a major rule under 5 U.S.C. 804(2), the Small
Business Regulatory Enforcement Fairness Act. This rule: (a) Does not
have an annual effect on the economy of $100 million; (b) will not
cause a major increase in costs or prices for consumers, individual
industries, Federal, State, or local government agencies, or geographic
regions; and (c) does not have significant adverse effects on
competition, employment, investment, productivity, innovation, or the
ability of U.S.-based enterprises to compete with foreign-based
enterprises. This determination is based upon the fact that the
Pennsylvania submittal, which is the subject of this rule, is based
upon counterpart Federal regulations for which an analysis was prepared
and a determination made that the Federal regulation was not considered
a major rule.
Unfunded Mandates
This rule will not impose an unfunded mandate on State, local, or
Tribal governments or the private sector of $100 million or more in any
given year. This determination is based upon the fact that the
Pennsylvania submittal, which is the subject of this rule, is based
upon counterpart Federal regulations for which an analysis was prepared
and a determination made that the Federal regulation did not impose an
unfunded mandate.
List of Subjects in 30 CFR Part 938
Intergovernmental relations, Surface mining, Underground mining.
Dated: June 22, 2010.
Thomas D. Shope,
Regional Director, Appalachian Region.
0
For the reasons set out in the preamble, 30 CFR Part 938 is amended as
set forth below:
PART 938--PENNSYLVANIA
0
1. The authority citation for Part 938 continues to read as follows:
Authority: 30 U.S.C. 1201 et seq.
0
2. Section 938.15 is amended by adding a new entry to the table in
chronological order by ``Date of final publication'' to read as
follows:
Sec. 938.15 Approval of Pennsylvania regulatory program amendments.
* * * * *
----------------------------------------------------------------------------------------------------------------
Date of final
Original amendment submission date publication Citation/description
----------------------------------------------------------------------------------------------------------------
* * * * * * *
August 1, 2008....................... August 10, 2010........ 52 P.S. 1396.4(d.2); 25 Pa. Code 86.1, 86.17(e),
86.187(a); The Conversion Assistance Program;
Trust Funds as an Alternative Bonding System
(ABS); Demonstration of Sufficient Funding for
Outstanding Land Reclamation at Primacy ABS
Forfeiture Sites; and, Demonstration of
Sufficient Funding for Construction of All
Necessary Discharge Treatment Facilities at the
ABS Forfeiture Sites.
----------------------------------------------------------------------------------------------------------------
0
3. Section 938.16 is amended by revising paragraph (h) to read as
follows:
Sec. 938.16 Required regulatory program amendments.
* * * * *
(h) No later than October 12, 2010, Pennsylvania must submit either
a proposed amendment or a description of an amendment to be proposed,
together with a timetable for adoption, to ensure that its program
provides suitable, enforceable funding mechanisms, that are sufficient
to guarantee coverage of the full cost of land reclamation at all sites
originally permitted and bonded under the ABS.
* * * * *
[FR Doc. 2010-19276 Filed 8-9-10; 8:45 am]
BILLING CODE 4310-05-P