[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
``THE ABANDONED MINE LANDS PROGRAM''
=======================================================================
OVERSIGHT HEARING
before the
SUBCOMMITTEE ON ENERGY AND
MINERAL RESOURCES
of the
COMMITTEE ON RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
Thursday, July 24, 2003
__________
Serial No. 108-47
__________
Printed for the use of the Committee on Resources
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
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______
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COMMITTEE ON RESOURCES
RICHARD W. POMBO, California, Chairman
NICK J. RAHALL II, West Virginia, Ranking Democrat Member
Don Young, Alaska Dale E. Kildee, Michigan
W.J. ``Billy'' Tauzin, Louisiana Eni F.H. Faleomavaega, American
Jim Saxton, New Jersey Samoa
Elton Gallegly, California Neil Abercrombie, Hawaii
John J. Duncan, Jr., Tennessee Solomon P. Ortiz, Texas
Wayne T. Gilchrest, Maryland Frank Pallone, Jr., New Jersey
Ken Calvert, California Calvin M. Dooley, California
Scott McInnis, Colorado Donna M. Christensen, Virgin
Barbara Cubin, Wyoming Islands
George Radanovich, California Ron Kind, Wisconsin
Walter B. Jones, Jr., North Jay Inslee, Washington
Carolina Grace F. Napolitano, California
Chris Cannon, Utah Tom Udall, New Mexico
John E. Peterson, Pennsylvania Mark Udall, Colorado
Jim Gibbons, Nevada, Anibal Acevedo-Vila, Puerto Rico
Vice Chairman Brad Carson, Oklahoma
Mark E. Souder, Indiana Raul M. Grijalva, Arizona
Greg Walden, Oregon Dennis A. Cardoza, California
Thomas G. Tancredo, Colorado Madeleine Z. Bordallo, Guam
J.D. Hayworth, Arizona George Miller, California
Tom Osborne, Nebraska Edward J. Markey, Massachusetts
Jeff Flake, Arizona Ruben Hinojosa, Texas
Dennis R. Rehberg, Montana Ciro D. Rodriguez, Texas
Rick Renzi, Arizona Joe Baca, California
Tom Cole, Oklahoma Betty McCollum, Minnesota
Stevan Pearce, New Mexico
Rob Bishop, Utah
Devin Nunes, California
Randy Neugebauer, Texas
Steven J. Ding, Chief of Staff
Lisa Pittman, Chief Counsel
James H. Zoia, Democrat Staff Director
Jeffrey P. Petrich, Democrat Chief Counsel
------
SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES
BARBARA CUBIN, Wyoming, Chairman
RON KIND, Wisconsin, Ranking Democrat Member
W.J. ``Billy'' Tauzin, Louisiana Eni F.H. Faleomavaega, American
Chris Cannon, Utah Samoa
Jim Gibbons, Nevada Solomon P. Ortiz, Texas
Mark E. Souder, Indiana Grace F. Napolitano, California
Dennis R. Rehberg, Montana Tom Udall, New Mexico
Tom Cole, Oklahoma Brad Carson, Oklahoma
Stevan Pearce, New Mexico Edward J. Markey, Massachusetts
Rob Bishop, Utah VACANCY
Devin Nunes, California VACANCY
Randy Neugebauer, Texas Nick J. Rahall II, West Virginia,
Richard W. Pombo, California, ex ex officio
officio
------
C O N T E N T S
----------
Page
Hearing held on July 24, 2003.................................... 1
Statement of Members:
Cubin, Hon. Barbara, a Representative in Congress from the
State of Wyoming........................................... 1
Prepared statement of.................................... 3
Holden, Hon. Tim, a Representative in Congress from the State
of Pennsylvania............................................ 6
Prepared statement of.................................... 8
Kanjorski, Hon. Paul, a Representative in Congress from the
State of Pennsylvania...................................... 9
Prepared statement of.................................... 10
Rahall, Nick J., II, a Representative in Congress from the
State of West Virginia..................................... 5
Statement of Witnesses:
Balk, Murray J., Chief, Surface Mining Section, Kansas
Department of Health and Environment....................... 49
Prepared statement of.................................... 51
Finkenbinder, David O., Vice President, Congressional
Affairs, National Mining Association....................... 65
Prepared statement of.................................... 66
Jarrett, Jeffrey D., Director, Office of Surface Mining
Reclamation and Enforcement, U.S. Department of the
Interior................................................... 18
Prepared statement of.................................... 21
Laffere, David L., Kansas City Power and Light Company....... 58
Prepared statement of.................................... 59
Loomis, Marion, Executive Director, Wyoming Mining
Association................................................ 61
Prepared statement of.................................... 62
Masterson, John A., Counsel to The Honorable David D.
Freudenthal, Governor, State of Wyoming.................... 45
Prepared statement of.................................... 46
Roberts, Cecil E., President, United Mine Workers of America. 36
Prepared statement of.................................... 38
Young, David M., President, Bituminous Coal Operators'
Association................................................ 69
Prepared statement of.................................... 71
Additional materials supplied:
Donnelly, Daniel K., Ph.D., Director, Center for
Environmental Research and Education, Duquesne University,
Letter submitted for the record............................ 73
Grote, Thomas F., Director, Kiski Basin Initiatives, Letter
submitted for the record................................... 76
McGinty, Kathleen A., Secretary, Pennsylvania Department of
Environmental Protection, Letter submitted for the record
by The Honorable Paul Kanjorski............................ 13
National Association of Realtors Appraisal Institute, Letter
submitted for the record by The Honorable Paul Kanjorski... 15
Western Coal Traffic League, Statement submitted for the
record..................................................... 78
OVERSIGHT HEARING ON ``THE ABANDONED MINE LANDS PROGRAM''
----------
Thursday, July 24, 2003
U.S. House of Representatives
Subcommittee on Energy and Mineral Resources
Committee on Resources
Washington, DC
----------
The Subcommittee met, pursuant to call, at 2:05 p.m., in
room 1334, Longworth House Office Building, Hon. Barbara Cubin,
[Chairman of the Subcommittee] presiding.
Present: Representatives Cubin, Rahall and Neugebauer.
Mrs. Cubin. The oversight hearing by the Subcommittee on
Energy and Mineral Resources will come to order. This
Subcommittee is meeting today to hear testimony on the
Abandoned Mine Lands Act. Under Committee Rule 4(g) the
Chairman and the Ranking Minority Member can make opening
statements, and then if any other members come, they can have
their statements included in the record.
STATEMENT OF THE HON. BARBARA CUBIN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WYOMING
Mrs. Cubin. The Subcommittee meets today to focus on
problems within the Abandoned Mine Lands Program. When Congress
passed the Surface Mining Control and Reclamation Act of 1977,
or SMCRA, it recognized that the Federal Government had an
obligation to clean up years of lax regulation of coal mining
operations and direct the reclamation of abandoned coal mines
around the Nation.
To fund this reclamation effort it established a fee on
coal production, to be collected by the Office of Surface
Mining, in the amount of 35 cents per ton for surface mined
coal, 15 cents per ton for underground mined coal, and 10 cents
per ton of lignite. In 1977, western coal mines were just
beginning to establish themselves, and western politicians
wanted to ensure that a portion of the AML fees went back to
the states from which they were collected.
A compromise was reached by which 50 percent of the share
would be returned to the state of origin and the other 50
percent would be disbursed by the Federal Government based on
historic coal production and other Federal priorities. Oh, how
I wish that were the case today.
Almost $6 billion has been collected for the program since
its inception, with just about $3.2 billion of that intended
for reclamation projects. The program was initially meant to
take only about 12 years to complete, but despite the enormous
amount of money that has already been collected, it is
estimated that it will take at least an additional $6 billion
and anywhere from 12 to 100 years to complete work on priority
one and priority two sites.
As we look to authorize the AML program, we must ensure
that our cleanup efforts are reasonable and efficient so that
we don't just keep throwing good money after bad.
The largest problem we face is that the money being
collected is not being appropriated back to the states and to
the AML program as it should be. The original 1977 statute made
a commitment that half of the money would be returned to the
states from where they were collected.
The House and Senate appropriators have not been applying
the funds to the states nor to the projects that need to be
funded. In fact, a little over half of the funds are being
appropriated. Year after year Congress has failed to live up to
its promises and states like Wyoming and West Virginia are
suffering the consequences.
Wyoming's unappropriated State balance alone is now $375
million, and the total unappropriated State balance nationwide
is as high as $971 million. This is a huge sum of money that
could be put to legitimate reclamation needs.
As we look to reauthorize this program we need to find a
solution to this appropriations problem, and compel Congress
and the administration to live up to their commitments and
return the 50 percent state share balances to the states where
they were collected.
When the AML fund was first started the vast majority of
coal production was in the east where most of the reclamation
work now needs to be done. Over the past couple of decades
though, coal production has migrated west. Wyoming-mined coal
currently pays for over 40 percent of the entire AML program.
Wyoming money is being used to clean up eastern problems.
Future funding of the AML program must ensure that one region
of the country does not pay for a disproportionate share of the
reclamation work from another region and from a different era.
Further, the law was amended in 1992 to use a portion of
the interest earned by the AML fund to support the combined
benefits fund that pays for unassigned beneficiaries or retired
mine workers whose former companies are no longer in business
and no longer pay for their health care premiums.
Rising prescription drug costs, lower interest rates and an
increasing pool of unassigned beneficiaries are stretching the
combined benefits fund to its limits. We need to address how we
can continue to adequately fund the health care benefits of
these retired mine workers. That is something we must do.
I know many of you here today have a strong interest in
this area, and I believe I speak for the entire Subcommittee
when I say that we are going to do our very best to find a
solution to this portion of the problem.
I believe the CBF obligation and our debt to those workers
who toiled in the mines and mills and helped us power to
victory in World War II and beyond is a national
responsibility, not one that should be heaped upon the
shoulders of Wyoming and a limited number of other coal-
producing states. If it is a national problem, it needs a
national solution, not one that is supported by the AML fund
alone.
I also believe that we can bring additional money into the
system through the issuance of Government backed bonds, as Mr.
Kanjorski has proposed in his bill, which I have signed on as a
cosponsor. Not only do we need to repay the states for the
money that they have paid into the fund, we also ought to
provide them with additional tools to address their health and
environment concerns.
We have before us today representatives of the broad
stakeholder interest in the AML fund. We will hear many
different perspectives and priorities about reauthorization of
SMCRA. I want us to take in each of these perspectives and
begin to build a consensus on some key issued regarding
reauthorization. This is a very complex and often contentious
issue, but it is an issue that is important to all of us, and
we owe the American people a rational and common-sense
solution.
Reauthorization of the AML fund should be about keeping
promises. We need to keep our promises to the retired mine
workers so that their health benefits are secure. We need to
keep our promises to those regions of the country that have
been promised reclamation of their abandoned coal mine sites,
and we need to keep our promise to the states that have paid
into the AML fund.
I look forward to working with Mr. Rahall and other members
of the minority, with the administration, the states, and all
of the various stakeholders to find a solution that is good for
the Nation, good for our environment, and keeps our promises to
the American people.
Finally, I would like to welcome Marion Loomis, who is
President of the Wyoming Mining Association, as well as John
Masterson, counsel to Governor Freudenthal of Wyoming. They
both do a good job for our home State. Mr. Loomis has been
working with me since I was in the State legislature and we
have been friends for a long time. I look forward to hearing
from them on this issue.
I would like to welcome all of our witnesses today, and I
look forward to hearing their testimony.
[The prepared statement of Mrs. Cubin follows:]
Statement of The Honorable Barbara Cubin, Chairman,
Subcommittee on Energy and Mineral Resources
The Subcommittee meets today to focus on problems within the
Abandoned Mine Land Program. When Congress passed the Surface Mining
Control & Reclamation Act of 1977, or SMCRA, it recognized that the
Federal Government had an obligation to clean up years of lax
regulation of coal mining operations and direct the reclamation of
abandoned coal mines around the nation.
To fund this reclamation effort it established a fee on coal
production, to be collected by the Office of Surface Mining, in the
amount of 35 cents for per ton for surface mined coal, 15 cents per ton
for underground mined coal, and 10 cents per ton of lignite. In 1977,
western coal mines were just beginning to establish themselves and
western politicians wanted to ensure that a portion of the AML fees
went back to the states from which they were collected.
A compromise was reached by which 50 percent of the share would be
returned to the state of origin, and the other 50 percent would be
disbursed by the Federal Government based on historic coal production
and other Federal priorities. Oh, how I wish that was the case today.
Almost $6 billion has been collected for the program since its
inception, with about $3.2 billion of that intended for reclamation
projects. The program was initially meant to take only about 12 years
to complete. But, despite the enormous amount of money already
collected, it is estimated that it will take at least an additional $6
billion and anywhere from 12 to 100 years to complete work on priority
one and two sites.
As we look to re-authorize the AML program, we must ensure that our
clean up efforts are reasonable and efficient so that we don't just
keep throwing good money after bad.
The largest problem we face is that the money being collected is
not being appropriated back to the states and to the AML program as it
should be. The original 1977 statute made a commitment that half of the
money would be returned to the states from where they were collected.
The House and Senate Appropriators have not been applying the funds
to the states nor to the projects that need to be funded. In fact,
little over half of the funds are being appropriated. Year after year,
Congress has failed to live up to its promises, and states like Wyoming
are suffering the consequences.
Wyoming's unappropriated state balance alone is now $375 million
dollars and the total unappropriated state balance nationwide is as
high as $971 million. This is a huge sum of money that could be put to
legitimate reclamation needs.
As we look to re-authorize this program, we need to find a solution
to this appropriations problem and compel the Congress and
Administration live up to their commitments to return the 50% state
share balances to the states where they were collected.
When the AML program was started, the vast majority of coal
production was in the East where most of the reclamation work needs to
be done. Over the past couple of decades, though, coal production has
migrated West. Wyoming mined coal currently pays for over 40% of the
AML program. Wyoming money is being used to clean up Eastern problems.
Future funding of the AML program must ensure that one region of the
country does not pay for a disproportionate share of the reclamation
work in another region from a different era.
Further, the law was amended in 1992 to use a portion of the
interest earned by the AML fund to support the Combined Benefits Fund
that pays for unassigned beneficiaries--retired mineworkers whose
former companies are no longer in business and no longer pay for their
health care premiums.
Rising prescription drug costs, lower interest rates and an
increasing pool of unassigned beneficiaries are stretching the Combined
Benefits Fund to its limits. We need to address how we can continue to
adequately fund the health care benefits of these retired mine workers.
I know many of you are here today have a strong interest in this area,
and I believe I speak for the entire Subcommittee when I say that we
are going to do our best to find a solution to this portion of the
problem.
I believe the CBF obligation and our debt to those workers who
toiled in the mines and mills and helped power us to victory in World
War II and beyond is a national responsibility, not one that should be
heaped upon the shoulders of Wyoming and a limited number of other
coal-producing states. If it's a national problem it needs a national
solution, not one supported by the AML fund alone.
I also believe that we can bring additional money into the system
through the issuance of government-backed bonds as Mr. Kanjorski has
proposed in his bill, which I have signed on to as a co-sponsor. Not
only do we need to repay states for the money they paid into the fund,
we also ought to provide them with additional tools to address their
health and environmental concerns.
We have before us today representatives of the broad stakeholder
interests in the AML fund. We will hear many different perspectives and
priorities about re-authorization of SMCRA. I want us to take in each
of these perspectives and begin to build consensus on some key issues
regarding re-authorization. This is a very complex and often
contentious issue, but it is an issue that is important to all of us
and we owe the American people a rational and common-sense solution.
Reauthorization of the AML Fund should be about keeping promises.
We need to keep our promises to the retired mine workers so that their
health benefits are secure. We need to keep our promises to those
regions of the country that have been promised reclamation of their
abandoned coal mine sites. And we need to keep our promise to the
states that have paid into the AML fund.
I look forward to working with Mr. Rahall, with other members of
the minority, with the Administration, the states and all of the
various stakeholders to find a solution that is good for the Nation,
good for our environment and keeps our promises to the American people.
Finally, I would like to welcome Marion Loomis, President of the
Wyoming Mining Association, as well as John Masterson, Counsel to
Governor Freudenthal of Wyoming. They both do a good job for our home
state, and I look forward to working with them on this issue.
I would also like to welcome all our witnesses testimony today, and
look forward to hearing their testimony.
______
Mrs. Cubin. I ask unanimous consent that the gentleman from
Texas, Mr. Neugebauer be allowed to participate in the hearing
today. Is there any objection?
Hearing none, so ordered, and you may be seated at the
dais.
I would like to recognize Mr. Rahall for his opening
comments.
STATEMENT OF THE HON. NICK J. RAHALL, II, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WEST VIRGINIA
Mr. Rahall. Thank you, Madam Chair. I appreciate very much
your having this hearing today.
In regard to your opening comments, there was very little
if anything with which I disagreed, and I found it to be
rewarding to work with you over a number of years, not only on
this issue but a number of issues that have come before our
Resources Committee, and this is a challenge that is before us.
We shall meet this challenge and continue to resolve it, try to
resolve it in an equitable fashion and in a way that you said
so very well, keeps a promise to our coal miners and keeps a
promise to the coal fields of this Nation.
This is an important program, the Abandoned Mine
Reclamation Program. It is one which I played a small role in
devising and in nurturing these long years since 1977. That was
my first year in Congress. This particular legislation was the
first legislation upon which I served on a Conference Committee
in my tenure in this body. It was there that hot August day,
August 4th, 1977 in the Rose Garden of the White House,
standing behind Jimmy Carter when he signed this legislation
into law, with both industry and environmentalists in
attendance for that bill-signing ceremony.
This hearing I am sure will involve discussions involving
statistics, formulas and investment strategies, which is all
fine and appropriate, but I fear we may be missing the real
point.
Many years ago it struck me what the issue is really about,
and that is the courage, the conviction of the people of the
Appalachian region and indeed those in our coal fields
throughout this great Nation. It is about the sacrifices made
by our people and of our land in an effort to produce the coal
which ignited the industrial revolution, made this Nation the
great superpower that it is, and which today fires the
technological revolution by being the fuel which generates over
one half of our electricity.
But make no mistake about it, with that coal production
came a legacy, a legacy of shattered landscapes and shattered
lives. Restitution, I would submit, must be made. The wrongs of
the past have begun to be corrected, but the job is by no means
completed.
Today then, with the same conviction as we embarked upon in
the aftermath of the Buffalo Creek disaster in '72, I join
those who call upon this Congress to fulfill the promise made
in that landmark '77 legislation to reclaim Appalachia, to
restore her lands and waters and to bring them back to
productive uses by reauthorizing the Abandoned Mine Reclamation
program, to reclaim those shattered landscapes, many of which
pose a threat to human health and safety.
Today then, with the same conviction a former generation
showed in places like Blair Mountain in 1921 or more modern
times such as the 1989 labor dispute with Pittston Coal in the
Virginia and West Virginia coal fields, with that same
conviction I join those who call upon this Congress to keep the
promise made by the Federal Government to our Nation's coal
miners by moving upon remedial legislation to salvage the
health care of some 50,000 retired coal miners and their
dependents, to reclaim lives, many of which have been shattered
by Black Lung Disease, now that they are in their hour of need.
This is the restitution about which I speak.
We as a Nation owe it to them to move on legislation to
finish the job of reclaiming all remaining high-priority
abandoned coal mine sites, and we owe it to them not to abandon
the coal miner while engaged in that pursuit. The eyes of the
coal field communities and coal mining families are upon us
this day.
So to this gentleman from West Virginia this is a matter of
justice. It is a matter of human dignity. It is a matter of
respect. It is one which I shall never flag nor fail in efforts
to accomplish.
I appreciate your help in this effort, Madam Chair. Thank
you.
Mrs. Cubin. Thank you, Mr. Rahall. Certainly we share the
same goals in our efforts here.
You heard the buzzers go off. Unfortunately, we have a
series of votes that will last about 2 hours. I really regret
that. The best that we can do I think is just go ahead and
recess now. Mr. Holden and Mr. Kanjorski, do you want to go
ahead and do your 5 minutes testimony or would you rather come
back?
Mr. Kanjorski. I would rather come back.
Mrs. Cubin. All right.
Mr. Holden. Madam Chairwoman, if I could briefly summarize
my testimony, because I have a Conference Committee meeting in
2 hours when you are going to reconvene.
Mrs. Cubin. That would be great. The Chair recognizes Mr.
Holden.
STATEMENT OF HON. TIM HOLDEN, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF PENNSYLVANIA
Mr. Holden. Thank you, Madam Chairwoman and Mr. Rahall.
Thank you for allowing me to participate in this hearing today
and to testify about this problem that we are facing in many
areas across the country, our abandoned mine land reclamation.
Madam Chairwoman, as you mentioned, and Mr. Rahall
mentioned in your opening remarks, this is a problem that needs
to be addressed, that the formula is flawed, that the
appropriators are not using the funds for its intended purposes
and that is true in many areas of the country, but it is
certainly true in the Commonwealth of Pennsylvania.
The Commonwealth of Pennsylvania has a several billion
dollar problem with abandoned mine reclamation and acid mine
drainage that is strangling our ability to clean up our
environment and to attract industry into the coal regions of
Pennsylvania, particularly the anthracite coal regions of
Pennsylvania, where Mr. Kanjorski and I are proud to reside and
to represent the good hard-working descendants of the people
who really worked to fuel the industrial revolution in this
country and to give us the resources to win World War II.
As a result, Madam Chairwoman, as you mentioned in your
opening remarks, in the last several decades the production of
coal in this country, whether you get the resources or whether
the Federal Government gets the resources to address this
problem, has shifted to the west, and as a result of that, our
production is at an all-time low, and based on a formula, that
is not being administered that Congress intended since 1977,
and based on the lower production that has occurred in the
anthracite coal fields, we are faced with a situation where we
have over a billion dollars in problem areas that need to be
cleaned up. The Commonwealth of Pennsylvania received
approximately $25 million a year from the fund. The anthracite
region receives about 25 percent of that. You do not have to be
a graduate of the Wharton School to figure out how long it
would take to clean up the abandoned mine problems that we face
in the anthracite coal region.
I realize that balance needs to be worked out here, that
the west, particularly Wyoming, is doing an awful lot of the
production right now, as you mentioned, Madam Chairwoman, 40
percent. But those of us feel that we paid the price and that
our ancestors paid the price, and we are left with the scars.
So as we move forward on this problem, we hope that you
realize there needs to be balance, and that those of us in
Pennsylvania and West Virginia, Kentucky, and Southern
Illinois, we have problems too that need to be addressed. We
look forward to working with you to try to find a balanced
solution.
My good friend and colleague, Mr. Kanjorski, has a plan
that he has proposed and introduce, which I support, and I will
allow him to elaborate on when you reconvene in a few hours,
that talks about a bonding issue that might be a way to find a
solution to this to be balanced and fair. I know, Madam
Chairwoman, you and Mr. Rahall will take a very close look at
that, and I thank you for doing that.
Finally, as Mr. Rahall said in his opening remarks, we must
not also be concerned with abandoned mine lands. We cannot
abandon our miners. This Committee and this Congress,
particularly through the leadership of Mr. Rahall, has stepped
up to the plate and addressed the health and welfare needs of
miners, particularly in the bituminous fields of this country,
and I applaud their efforts.
But those of us who represent the anthracite fields also
have a concern that we ask you to consider. Our pension funds
for the anthracite regions are all but in default. Our coal
miners have seen their pensions go from $90 a month, which is
nothing, to $30 a month that they receive in their pension
plan. This is something that is underfunded. The production in
the anthracite field is at an all-time low, as I mentioned. A
compromise that could be worked out with industry and with
United Mine Workers seems to be not achievable because of the
low production. So I ask again, as you review not only the
abandoned mine land issue, that when you review what needs to
be done with the health and welfare, you take an opportunity to
look at the serious problem that the anthracite coal miners are
facing, the retirees, when they have their pensions reduced to
$30 a month.
I thank you for the opportunity to present this testimony.
[The prepared statement of Mr. Holden follows:]
Statement of The Honorable Tim Holden, a Representative in Congress
from the State of Pennsylvania
Thank you Ms. Chairman, members of the Committee for holding this
hearing today. I appreciate the opportunity to testify about the
importance of the abandoned mine reclamation fund. This fund is the
major source of Federal funding for mine reclamation, and while it's
important we reauthorize it, we must also correct the imbalanced
distribution of funds back to the states.
Since 1977, the fund has helped improve the quality of life in and
around the coal regions. The Surface Mining Control and Reclamation Act
(SMCRA) created the Abandoned Mine Reclamation Fund and granted the
Office of Surface Mining (OSM) the authority to collect fees. Income to
the fund is generated by today's mine operators on every ton of coal
they mine--ranging from 10 to 35 cents a ton. The program has collected
almost $7 billion over the past 26 years. Pennsylvania receives an
average $25 million each year to address a $4.6 billion problem; over
$1 billion alone is needed for the anthracite region. At that rate, it
will take 200 years to fix the most serious problems.
We have successfully used the fund to clean up toxic mine water,
put out mine fires, and eliminate other abandoned mine hazards, but
much work remains to be done. The primary goal of the program was to
fund projects on a priority basis; however, the current formula holds
us back from doing so. Almost 80% of at risk areas have not been
safeguarded. The main problem is the majority of grants distributed to
states are based on current rather than historic production; those who
produce the most coal are receiving the most money. When the program
began in 1977 that seemed fair to most Eastern states since production
was high enough to guarantee that states would receive enough money to
tackle abandoned mine problems. However, coal production has rapidly
shifted westward leaving approximately 94% of abandoned mine problems
behind.
Pennsylvania has produced more coal than any other state and
consequently, is home to 1,700 abandoned mines. Statewide, these mines
encompass more than 189,000 acres, are distributed in 10 of 19
congressional districts, 44 out of 67 counties, and in 1/5 of our
municipalities. In my district alone, Schuylkill and Dauphin counties
total nearly 25,000 acres. There are 47 coal fires in the state (17 in
the anthracite region) and over 3,100 miles of stream affected by
abandoned mine drainage. To date Pennsylvania has received $587million
of which $275 million has been spent in our anthracite district- we
have some fundamental problems with the way this formula is written.
Reauthorization presents us with an opportunity to get back to the
objective--reduce the health and safety hazards posed by abandoned
mines. We should adjust how the fee is collected and direct resources
to where the problems are. Right now there is unspent funds in the
trust and some of the money allocated to states is being used for
projects other than coal.
Much has changed in past 25 years and the current structure is no
longer capable of moving us in the right direction. Reclaiming our
abandoned mine legacy requires multiple tools. My colleague,
Representative Kanjorski has been working on this issue for some time
and has introduced H.R. 419 to move us forward. Similarly, Pennsylvania
taxpayers have been doing their share to help shoulder the burden of
cleaning up our abandoned mine lands. But we cannot do it alone.
Public health and welfare, restoration of the land, and cleaning of
polluted streams requires modification and reauthorization of the
program. At the same time, we need to ensure that funds can continue to
be used to address the problem of abandoned mine drainage. Failure to
act keeps us from achieving total program success.
______
Mrs. Cubin. Thank you, Congressman Holden. I don't disagree
with you that your ancestors suffered a lot and gave a lot, and
this problem is a national problem, and it requires a national
solution. In saying that, I just feel that one State shouldn't
bear 40 percent of a national solution, and absolutely this
Subcommittee won't pass out any legislation that doesn't take
care of the retired miners and their benefits.
I don't have any questions for Mr. Holden.
Mr. Rahall?
Mr. Rahall. No questions, Madam Chair. I understand Mr.
Kanjorski wants to come back.
Mr. Kanjorski. I could give my statement now.
Mrs. Cubin. That would be great.
STATEMENT OF HON. PAUL KANJORSKI, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF PENNSYLVANIA
Mr. Kanjorski. Madam Chairman and Mr. Rahall, my good
friend, I am not going to go over a lot of what Tim has talked
about.
Pennsylvania has a particular problem. It has 250,000 acres
of mine-scarred land. It has 100 million cubic feet of burning
coal refuse, and it has 3,000 miles of contaminated streams.
The problem in Pennsylvania is represented in 44 of the 67
counties, or two-thirds of the Commonwealth have these
problems.
To date we have had reclamation work, and the abandoned
mine program has helped, but in a State the size with the
proportions and the problems that we have, it is anticipated
that even if all the funds received were paid out on the
proportions they are presently allocated, it would take more
than 200 years to meet the priority one and priority two
problems. I am an optimist, but I do not think we are going to
be around that long, and I am sure we are going to lose the
great assistance of Mr. Rahall sometime during that 200-year
period.
So what I have looked at is that we really cannot authorize
funds that long and provide appropriation that long.
What we should do is step back and look at this as a
national problem. It affects 126 congressional districts in the
United States. It is literally millions of acres of land and
problems and streams that are polluted. Rather than trying to
put this on the back of the existing coal mining industry, a
good portion of which comes from Madam Chairman's State; these
companies had nothing to do with this--they were not even in
business when our problems existed pre to 1977. Then the next
solution could be, should we look at the people in those
locales to do something about it?
The fact of the matter is most of this devastation goes
back generations, and the existing populations of these areas,
one, are used to them; they don't really see the deterioration
and the ravages; two, they have never gained anything from
them; if you will study the population dynamics of the area you
will find that they are generally an elderly population area,
heavily senior citizens, who, the last thing that they need is
a local tax burden to try and solve a problem. So it is not
going to be done on a local level.
On a State level, it is bifurcated insofar as major
population centers such as Philadelphia, Pittsburgh in
Pennsylvania, have very little identity with the coal fields of
Pennsylvania and can put blinders on, and I think that is true
to a lot of coal-mining States.
So what I did is I accepted the proposition that Mr. Holden
made, that this was to fuel the American industrial revolution
and the energy this country needed. That is why we suffer these
ravages which are sins of more than a century. It should take
the entire base of the United States to help pay for the
problem. Now, we are not going to get that in authorization or
appropriated funds, but we can accomplish it if we pass a bill
which authorizes tax credits to be sold on tax credit bonds to
the existing market, that in lieu of paying interest on the
bond issue, the buyer of the bond issue would have the right to
take a tax deduction.
By doing that we could assemble a fund of money over the
next 30 years of more than $20 billion--
Mrs. Cubin. Mr. Kanjorski, would you mind coming back,
because I do have a series of questions that I would like to
ask you about your bonding proposal?
Mr. Kanjorski. Absolutely.
Mrs. Cubin. Have you completed enough testimony that we can
go vote now?
Mr. Kanjorski. We can now.
Mrs. Cubin. Because I really do have some questions.
Mr. Kanjorski. Very good.
[The prepared statement of Mr. Kanjorski follows:]
Statement of The Honorable Paul E. Kanjorski, a Representative in
Congress from the State of Pennsylvania
Ms. Chairwoman, I welcome this opportunity to testify before you on
an issue that has long been of particular concern to me and to the
citizens of Pennsylvania whom I represent: reclamation of abandoned
mine lands.
Pennsylvania has historically been one of the country's largest
coal producing states. Coal mined in Pennsylvania fueled the industrial
revolution and two world wars. However, much of this mining was done
prior to 1977 when the Surface Mining Control and Reclamation Act was
passed. Especially in the anthracite region of eastern Pennsylvania,
most of these coal mines are no longer producing and the companies that
mined the land are long gone.
As a result, Pennsylvania has over 250,000 acres of abandoned mine
lands, 100 million cubic feet of burning coal refuse and 2,500 miles of
contaminated streams and rivers. These problems affect 36 of
Pennsylvania's 67 counties. Pennsylvania's Department of Environmental
Protection (DEP) estimates that it would cost approximately $4.6
billion to reclaim Pennsylvania's Priority 1 and Priority 2 sites.
Priority 1 areas are those that pose an extreme threat to the health
and safety of residents and Priority 2 sites are those which may have
adverse effects on public health, safety and general welfare. In
addition, DEP estimates it would cost $15 billion to clean up all of
Pennsylvania's abandoned mine lands and to clean all of Pennsylvania's
contaminated waterways.
Areas suffering from abandoned mine problems are often economically
depressed. These environmental problems retard development because
companies are hesitant to move into locations where black culm banks
consisting of coal waste litter the area and streams run orange with
the mineral discharge from the abandoned mines. Instead, pristine lands
are developed, often at the expense of conservation efforts or
recreational needs, rather than degraded sites, many of which are often
located in population center with extensive infrastructure likes roads
and sewers in place. The continued presence of devastated land
negatively impacts a community's attractiveness and viability,
decreases nearby property values, and prevents the development of the
community's tax base. Economic development leaders in my district tell
me that often, corporate executives have considered moving into my
district but after seeing the nearby mine lands, they instead choose to
move into areas with fewer environmental problems.
In addition, these former mine lands are safety hazards. Currently,
there are 47 mine fires burning in Pennsylvania. Just last week I
learned of a surface mine fire in my district that was started when a
culm bank caught fire from a burning trash pile. This is most
unfortunate because many of these fires could be prevented if proper
reclamation activities where undertaken.
Beyond the environmental concerns, failure to address this
devastation amounts to a public health problem. For instance, the
Office of Surface Mining (OSM) estimates that in Pennsylvania alone
over 1.6 million people are potentially at risk from mine hazards. OSM
defines a person as being at risk if they reside within one mile of a
Priority 1 or Priority 2 site. Every year dozens of people are either
injured or killed by exploring or playing in abandoned mines. By
reclaiming these abandoned mines, many of these accidents could be
prevented.
Unfortunately, an appropriate amount of funding is not being
allocated for the purpose of reclaiming these mine lands and
contaminated waters. Currently, the Abandoned Mine Land program is the
only source of Federal money available for reclaiming abandoned mine
lands. While the AML Fund provides much-needed resources for
redeveloping devastated coal mining land areas, these funds have proven
inadequate to address the huge amount of health, safety and
environmental problems of abandoned mine land areas.
The AML fund generally only addresses Priority 1 and Priority 2
problems. In addition, the AML fund only cleans the areas to the point
where they are no longer a health and safety threat. The program does
not restore the land to the point where it can be reused for
development purposes.
In 2002, Pennsylvania only received $24.7 million from the
Abandoned Mine Land Fund. With the current rate at which the AML
program is working, it is estimated that it will take over 200 years
for all of the nation's abandoned coal land areas and contaminated
streams and rivers to be reclaimed. Areas affected by mine-scarred
lands cannot afford to wait that long.
That is why I introduced the Abandoned Mine Land Area Redevelopment
Act earlier this year. This bill, H.R. 419, would create special tax
credit bonds for the reclamation of abandoned mine lands. These bonds,
entitled ``Qualified Abandoned Mine Land Area Redevelopment Bonds,''
are similar in structure to the Qualified Zone Academy Bonds enacted in
1997 for school construction.
The tax credit system established by this legislation would enable
regional organizations, non-profit organizations, or state and local
governments to create a comprehensive plan for reclamation and
redevelopment of an abandoned mine land area. The interested party
would then submit the plan to EPA for approval. Upon approval, the
organization would issue a bond to a qualified purchaser who would
receive a tax credit in lieu of interest. A portion of the proceeds of
the sale of the bond would be put into a sinking fund. At the end of
thirty years, the term of the bond would be fulfilled and would be
returned to the purchaser. The remainder of the proceeds from the sale
of the bonds would then be used to implement a comprehensive
reclamation and redevelopment plan.
According to the Joint Committee on Taxation, the estimated cost of
the legislation for the first ten years is $7 billion. This cost
represents the amount in lost revenue to the Federal Government.
Therefore, at a cost of less than $1 billion per year we could reclaim
all of the abandoned mine lands in the country. This proposed system
would allow communities afflicted by abandoned coal lands to design,
undertake and oversee their specific clean up efforts without reliance
on Federal appropriations and direction from government officials
completely removed from the region and the problem.
In my district, a local non-profit organization, the Earth
Conservancy, provides a blueprint for other community organizations
interested in undertaking reclamation projects. The Earth Conservancy
was created for the purpose of purchasing and reclaiming about 17,000
acres of former coal land. The organization hired a world-class planner
to help design their reclamation plan and created a 40-person board
with representatives from the community, including business,
environmental and tourism leaders. The organization held monthly public
meetings for a year to gain insight and input from the community to
determine the best uses for the land. Finally, the Earth Conservancy
completed their plan, which included keeping two-thirds of the land as
green space. To date, the Earth Conservancy has reclaimed over 800
acres of abandoned mine land.
My bill would complement the current AML program by empowering
communities to manage their own reclamation efforts with more flexible
dollars which could be used to reclaim the degraded land and water
which does not meet the stringent requirements of Priority 1 and 2
classification. The assurance of guaranteed long-term funds allows more
comprehensive reclamation so that regions can be remediated
holistically.
This program would spur economic development in America's coal
regions by making more land ready each year for reuse and development.
That is why the National Association of Realtors and the Appraisal
Institute recently sent me a letter in support of this legislation. The
National Association of Realtors (NAR) and the Appraisal Institute
support this bill because the clean up of old mine sites is crucial to
the growth of the nearby communities. In addition, they recognize that
the clean up activities themselves will provide jobs in areas where new
opportunity is needed. As you may know, the National Association of
Realtors has been instrumental in advocating important economic
development legislation and I appreciate their support of this matter.
Therefore, because of this proposal's potential to address problems
of environmental degradation due to mining practices, I urge the
Committee to consider including my legislation in the overall
reauthorization of the Surface Mining Control and Redevelopment Act
(SMCRA). I feel that by including this language, the goal of reclaiming
our Nation's abandoned coal lands and cleaning the resulting
contaminated waterways can be met in this generation. It is important
that these areas be cleaned now so that the future generations are not
affected by this environmental degradation.
In addition, I encourage the Committee to keep the needs of
Pennsylvania in mind when reauthorizing this bill to ensure that the
areas that fueled our Nation's industrial revolution continue to
receive a fair amount of funding from the AML Fund. I also urge the
Committee to consider ways to ensure that a larger portion of the fund
is used for reclamation of these areas and less is lost due to
administrative fees.
Finally, I encourage the Committee to consider the comments from
the Secretary of the Pennsylvania Department of Environmental
Protection. I am submitting into the record her letter that outlines
the needs of Pennsylvania and the steps which should be taken in
reauthorization of the Surface Mining Control and Reclamation Act.
Thank you for the opportunity to testify and I appreciate your
consideration of my remarks.
______
[Letters submitted for the record by Mr. Kanjorski follow:]
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Mrs. Cubin. We will recess until 4 o'clock.
[Recess.]
Mrs. Cubin. The Subcommittee will please come to order. I
would like to thank you for coming back, Congressman Kanjorski,
and I just have a few questions for you.
As you know, I am a cosponsor of your bill, and I like the
notion of bringing additional money in for reclamation, and
especially with the focus on local control. The projects
addressed in your bill would be more detailed than those that
are funded by the AML today. How do you envision AML Area of
Redevelopment Act working in tandem with the priorities of the
AML program?
Mr. Kanjorski. Well, I think it is the very essence of the
difference that we have to strike. First of all, let me say
that I support the refunding and reauthorization of the
abandoned mine land program. However, if you work with that
program and with the administrators of that program, I think
they are all frustrated because it only addresses Priority One
and Priority Two questions. There are limitations of the use of
money of how even the recycled or reclaimed land can be used.
The purpose of my bill is to put a challenge to local
communities, authorities, regional areas, to look at the
holistic approach to land reclamation and water cleanup, and to
know for certain that once they develop a plan or scheme that
will take 20 or 30 years to complete, the funds will be in
place and of a known quantity, so that they can proceed with
great efficiency to accomplish the totality of the problem.
What we have now under the abandoned mine money is that we
run into situations that, one, the money gets diverted for
special purposes, for instance, mine fires, and as a matter of
fact I have a photo to show you here that is very
representative of my area, where just no more than a year ago,
suddenly there is this huge mine fire. As you can see, it is a
coal bank that has probably 10 to 20 million tons of carbonous
material. It was set on fire on the surface because of waste
product being dumped there, and was caused by either
spontaneous combustion or mischievous combustion, we don't
know. That mine fire took probably a year to extinguish at a
cost of several millions of dollars, which were diverted funds
really from these projects that wouldn't go for reclamation.
When we get all done, we still have the same coal bank there,
we still have the same disaster there, and we have no reusable
land. Whereas, if we take two, 3 years in every year to study
in totality the land reclamation--and take the example of
Eastern Pennsylvania that Mr. Holden referred to, the
anthracite region. We conceptualize that we have about 110,000
acres located in some 14 counties. We will do a comprehensive
watershed study, and it falls into several watersheds, the
Susquehanna or Chesapeake and the Delaware. So the entire area
has to be mapped out with a GIS system. We have already started
to implement that sort of thing.
What that means is we will not only clean up the land at a
significantly reduced cost, because on average the Abandoned
Mine Land Program spends about 34 percent on engineering costs.
By the effective use of GIS system design for reclamation we
have some detailed information that suggests that we can drop
that figure by at least half, if not around 12 percent. That is
a significant savings and hundreds of millions of dollars just
in an area like mine. Across the country it represents billions
of dollars in saving.
Two, you will do it in a prioritized way. Because you are
going to clean up the land and the water, rather than starting
where the rivers get polluted to do some reconstruction work,
you are going to start and look at the outlying tributaries
that flow through land that has to be reclaimed an in fact
reclaim that land. Second, when you reclaim that land you are
not going to do it in accordance with the standards today.
First and second priority under the Abandoned Mine Land Program
doesn't allow for compaction, for instance. So that if you have
a huge hole--
Mrs. Cubin. Doesn't allow for what?
Mr. Kanjorski. Compaction of the land. So that if you have
a huge void of 100 million cubic yards, you fill it in at a
tremendous cost, but if while you were filling it in you
compact it at four 6-foot levels, that land immediately becomes
reusable for industrial, commercial or real value. If you just
fill it in and allow nature to compact, it can't be used for 50
or 100 years.
Then when we finally get done and we fill these holes in,
we only require a half inch to an inch of topsoil on top,
enough to grow grass. Well, quite frankly, all of Eastern
United States, particularly Pennsylvania, has a history of one
of the finest hardwood areas of the country. For those purposes
we should study that and try, in the development of our
comprehensive plan, to those areas that can sustain hardwood
forests, make sure there is enough under-soil to facilitate the
regrowth of the natural forest there. We are doing this for all
time immemorial really.
Now, the final real benefit of this type of program,
particularly in the eastern fields of the United States, if you
look at land that was to be reclaimed--can we have that one
site--if you reclaim this land, you will find if you study the
land and the map of the land, most of the mining lands in the
Eastern United States and eastern Pennsylvania are right where
the dense populations live, right where the railroads, highways
and utilities exist. So you take a reclamation area such as
this, you recover it and compact it and make it immediately
recyclable and reusable for, for instance, an industrial park.
That way, when you need a thousand-acre industrial park, you
don't have to go out and get pristine farmland and convert it
to an industrial park and then have the Commonwealth and the
Federal Government pick up all the expense attendant to putting
in highways, utilities and other infrastructure. In fact, you
are right in a site where all of those things exist now,
interstate highways, utilities, all the structures are there,
so that you are recapturing some of the infrastructure money
that we don't get counted in through the cost of land
reclamation and the value of land reclamation. When you get all
done, you have taken and recycled the land for all of its
purposes.
If you do this holistically, comprehensively, you will
reclaim the land and you will, by formula, you will reclaim the
acid mine drains. Let's show the Chairman what a good nice
fishing stream in northeastern Pennsylvania looks like. I hope
you can see it from there. It will have at least a dozen or two
tires, and it has an orange, beautiful orange shade to it, even
though it is water, it is also orange in color range here. We
find that acid mine drainage. All the water that lands on the
surface of this untreated, unclean land, exacerbates the
sulfurs and the irons that are there, drains them into the
creeks, eventually drains them into the major rivers. In our
area it is the Susquehanna River, and then drains that river
down into the Chesapeake Bay about 150 miles south, giving us
the distinct honor, to 20-mile stretch of the Susquehanna River
that is encompassed with a major part of this surface mining
problem is the major polluter, manmade polluter of the
Chesapeake Bay. We are spending hundreds of millions of dollars
to clean up the Chesapeake Bay, and nobody is walking upstream
150 miles and saying, gee, if we spent several hundred millions
of dollars to clean up the land, it would clean up the water,
and therefore we would have a clean amount of water flowing
into the Chesapeake rather than the largest amount of pollution
flowing into the Bay.
So I am asking the Committee to sit back and say, look, let
us recognize authorizing the abandoned mine program or even
expanding it, unless it is done with absolute continuity of
funding--and that we cannot guarantee because it is an
appropriation process--when environmental interests and
pressure groups are hot, the money is there. When we run into
deficit and the monies are needed for other things, they are
traded off for other things. We know that is going to happen.
We are in that process right now of getting little of our money
back.
If we do it through the tax credit bond issue, when we put
our comprehensive program to clean up 110,000 acres of the
anthracite fields, we will have driven a comprehensive program
to clean up all the land, clean up all of the water, put in the
infrastructure necessary for it to develop. With one full swoop
with an expenditure of, in that area, $2 billion over 30 years,
we never have to come back, and we have literally returned the
land to usability as it was prior to mining practices. If we
take that example and apply it across the country, that can
happen in every area. What we have already started in our area
is a organization we started about 10 years ago called the
Earth Conservancy, where we acquired 17,000 acres of mine
lands. Over the last 10 years we have designed, studied the
reclamation of it, and started to reclaim the land ourselves,
and we find out that we make reclamation of land there almost
costing nothing, because what we are able to do is plan the
cost of returning the land and reclaiming it, and also getting
some of the product value out of the materials that are on the
land.
When you work in that multi-faceted way, holistically, it
is cheaper, more efficient, more effective, and the beginning
and the end are both seen.
Mrs. Cubin. Thank you very much.
Do you have any questions, Mr. Rahall?
Mr. Rahall. No questions.
Mrs. Cubin. Thank you very much, Congressman Kanjorski, and
as we move forward we certainly will take all of this into
consideration. Thank you.
Mr. Kanjorski. Thank you, Madam Chairman.
Mrs. Cubin. Now I would like to call the next panel for
their testimony. We just have one person. Jeff Jarrett, the
Director of the Office of Surface Mining.
Mr. Jarrett, it is the policy of the Committee this year to
swear in the witnesses, so if you wouldn't mind to stand and
raise your right hand.
[Witness sworn.]
Mrs. Cubin. Thank you for being with us today. Please
accept my sincere apology for keeping you waiting for 2 hours.
We have important business going on, but we are having trouble
getting there.
So I would like to recognize you for 5 minutes, and look
forward to your testimony.
STATEMENT OF JEFFREY D. JARRETT, DIRECTOR, OFFICE OF SURFACE
MINING RECLAMATION AND ENFORCEMENT, U.S. DEPARTMENT OF THE
INTERIOR
Mr. Jarrett. Thank you, Madam Chairwoman, and distinguished
members of the Subcommittee. Thank you for the opportunity to
participate in this hearing and to discuss the important issue
raised by the approaching expiration of OSM's authority to
collect abandoned mine land fee.
As you know, our fee collection authority is scheduled to
expire in September 2004. Unfortunately, despite the many
accomplishments of this program, the job isn't finished. More
than $3 billion worth of priority one and two, health and
safety coal problems still remain. We have another $3.6 billion
worth of identified priority two coal problems affecting the
general welfare of individuals in the coal fields and numerous
lower priority environmental coal-related problems.
Even if we use all the collections received between now and
September 30th of 2004 when the fee will expire, the
unappropriated balance of $1.5 billion, we will still be left
with about $1.8 billion worth of health and safety-related
problems as well as the other general welfare and environmental
problems.
With today's ever-expanding communities, these sites are
not all in some out-of-the-way corner of the map. A recent
study conducted by OSM estimated that 3-1/2 million Americans
live less than one mile from a priority one or priority two
health and safety hazard created by abandoned coal mines.
In order to finish the job Congress gave us to abate the
health, safety and environmental problems left behind by mining
that occurred before SMCRA was passed, the Bush administration
fully supports the reauthorization of the AML fee collection
authority.
For some time now I have been discussing reauthorization
with a broad range of stakeholders. Those I have talked with
agree that abating AML hazards is a job that needs to be done,
so there is substantial agreement that the AML fee collection
authority should be reauthorized. There is also substantial
demand that fundamental changes be made to the existing
structure of the program. The universe of proposed
modifications differ as much as the stakeholders who support
them. Nevertheless, there are themes that have emerged from our
discussions in which I am confident you will have to grapple
with as you craft legislation to finish the job.
The first and clearest theme to emerge was the call for the
wise, efficient and effective use of AML funds collected. We
took a pretty hard look at how we might be able to accomplish
more reclamation with the funds being allocated, and we devised
several promising program enhancements, such as providing AML
fee credits and bond credits for remaining sites, requiring
State programs to operate their own AML emergency program,
redistributing RAMP funds to the State grant program and
avoiding administrative duplication with respect to accounting
and fee collection activities. All of these enhancements are
aimed at leveraging the dollars available to this program.
When we looked closely at the program we found a
fundamental imbalance or tension between the goals established
by SMCRA and the way funds from the AML program are required to
be allocated by SMCRA itself. I am convinced that the ability
of the AML program to meet its primary objective of abating AML
problems on a priority basis is being hindered by our statutory
allocation formula, which results in a progressive distribution
of resources away from the most serious AML problems.
The reason is quite simple. On a national average and over
the life of the program, money must be allocated to States and
tribes from the State share accounts and the historic
production account at a ratio of 2-1/2 to 1, that is, only 29
percent of the total national grant amount is distributed among
the States based on historic production which has a direct
correlation to the magnitude of the AML problem. The majority
of the grant dollars, 71 percent of the total amount, is
distributed among the States and tribes based on fee income
generated from each, even though there is no relationship
between the State share portion of the grant and the magnitude
of the AML problem.
I would like to direct your attention to the flip chart to
explain why the allocation formula has become even more
counterproductive in recent years.
Based on historic production records, we know that 94
percent of the AML problems are in the eastern United States.
The chart shows how the fee income demographics have changed
over time. The chart reflects the general shift in coal
production from the east to the west, and more significantly, a
shift in the east from surface mine production to deep mine
production, which is assessed at the lower AML fee of 15 cents
per ton.
Over the past 25 years fee income has shifted away from the
areas with high historic production and into areas where there
are fewer or no remaining AML problems. Because 71 percent of
the total grant dollars is based on current production, there
has been a corresponding shift of AML resources away from the
areas with the most significant AML problems.
The statutory schedule for allocation of AML resources,
together with the changing demographics, has some significant
consequences to the program's primary objective of abating AML
problems on a priority basis.
First, as you can see on the next chart, which shows how
many years it will take for each State to complete its high-
priority projects, it results in there being no parity among
the States and tribes in terms of the rate of AML reclamation.
Today some States have completed reclamation on all abandoned
coal mine sites, while others are still decades away from
completing the most critical high-priority sites. It is
distressing that the same law that demand States abate AML
hazards within their borders on a priority basis, also prevents
us from abating AML hazards nationally on a priority basis.
The second consequence of the allocation formula and the
changing demographics is illustrated on the next chart, which
shows the decline in AML grant dollars being spent on priority
abandoned coal mine reclamation. As you can see, from 1977
through '93, about 99 percent of the State grant dollars was
used to reclaim abandoned coal mine sites. 95 percent of that
was directed to high-priority work. From '94 through 2002, only
64 percent was used for high-priority work. This trend will
continue. I want to be clear right now that the States with
remaining high-priority sites still spend the majority of their
money abating those high-priority problems. In order to finish
the job in an efficient and effective manner, we must take
advantage of this opportunity to make some fundamental changes
in the law, to redirect and refocus the AML program toward
health and safety hazards.
The next critical theme that must be addressed has to do
with the current, unappropriated State share balances in the
AML fund. Since the enactment of SMCRA, 50 percent of the funds
collected from a State or tribe have been allocated to that
State or tribe's State share account, as has the balance of the
income been allocated to other appropriate accounts. Because
historically, annual appropriations have been less than fee
income, choices had to be made regarding which accounts to make
distributions from. The result is that the historic production
account has been held at a level unappropriated balance, while
the unappropriated balance in the State share accounts has been
allowed to grow.
As you can see in the next chart, nearly $1 billion in the
State share accounts remains unappropriated and unavailable for
use by the States. About 50 percent of that balance is owed to
States that have certified completion of all abandoned coal
mine sites. As we grapple with the issue of how to allocate fee
income from future collections, we need to address the issue of
the unappropriated State share balance from past collections.
The final theme that is an important part of the
reauthorization equation is OSM's obligation under the law to
transfer the interest from the AML fund to the United Mine
Workers Combined Benefit Fund. I understand that you will be
receiving testimony later today on the needs of the CBF, but in
summary, I will say that the interest earnings from the AML
fund are currently insufficient to meet the needs of the
unassigned beneficiaries. The CBF has reported that the needs
of the unassigned beneficiaries are estimated to peak for next
year at $88 million. Earnings from the AML fund in 2002 were
only $42 million, and earning rates have declined substantially
since that time.
While providing health care benefits is not part of OSM's
mission, providing interest transfers to the Combined Benefit
Fund is an important obligation.
We will continue to work on administrative issues to
increase the interest earnings at the same time as we work to
resolve the issues associated with the allocation formula and
the unappropriated State share balance, we must be mindful of
the potential impact any decision will have on the AML balance,
and thus on the available interest for transfer to the Combined
Benefit Fund.
I greatly appreciate the time and attention that has been
committed to these important issues by members of this
Subcommittee, and while there are no easy answers, I believe
that we can find common ground that will result in an efficient
and effective program that refocuses reclamation toward the
highest priority work, but yet addresses other commitments and
obligations.
I look forward to continuing to work with you to develop
legislation to reauthorize the AML fee and get this job
finished.
[The prepared statement of Mr. Jarrett follows:]
Statement of Jeffrey D. Jarrett, Director, Office of Surface Mining
Reclamation and Enforcement, U.S. Department of the Interior
Madam Chairman and distinguished members of the Subcommittee, thank
you for the opportunity to participate in this hearing and to discuss
the important issues raised by the approaching expiration of the Office
of Surface Mining Reclamation and Enforcement's (OSM) authority to
collect the Abandoned Mine Land fee.
More than 25 years ago Congress passed the Surface Mining Control
and Reclamation Act (SMCRA). At that time, Congress created the OSM to
enforce the Act and authorized it to collect AML fees to finance
reclamation of abandoned mine lands.
The record of accomplishments for this program is impressive. Since
1977, the AML program has been responsible for the reclamation of
thousands of acres of abandoned mine sites and the elimination of
serious threats to public health and safety. Our partners in
reclamation, the primacy states and Indian tribes, have done an
outstanding job of reclaiming lands and waters damaged by past mining
practices. Because Congress enacted SMCRA and has supported the AML
program, living and working in the coalfields is safer and healthier
than ever.
As you know, our fee collection authority is scheduled to expire in
September 2004. Unfortunately, despite the many accomplishments of this
program, the job isn't finished.
More than $3 billion worth of listed health and safety coal
problems still remain. We have another $3.6 billion worth of identified
high priority coal problems affecting the general welfare of
individuals in the coalfields and numerous lower priority environmental
coal-related problems.
Even if we use all collections received between now and September
30, 2004, when the fee will expire, as well as the unappropriated
balance of $1.5 billion, we would still be left with approximately $1.8
billion worth of health and safety related problems as well as other
general welfare and environmental coal-related problems.
These are not merely ``ugly landscapes'' that need to be made more
attractive. These are serious, life threatening, high-priority hazards
that have been around for more than 26 years and haven't yet been
cleaned up.
Here are some examples of the dangers posed by some of these sites:
April 2001--On an abandoned mine property in Harlan
County, Kentucky, two juveniles were riding All-Terrain-Vehicles
(ATV's) down a steep unreclaimed and unstable grade when one lost
control of his ATV, overturned, rolled approximately 40 feet to the
bottom of an inclined area, and died from his injuries.
January 13, 1996--A college student in Colorado was lead
by curiosity into an abandoned coal deep mine where he died from lack
of oxygen.
At Pennsylvania's Muddy Creek East Reclamation project, a
site where mining ended in 1952 leaving dangerous highwalls, hazardous
water bodies and spoil material, 10 recorded deaths occurred at the
site until it was finally reclaimed in 1998.
With today's ever expanding communities, these sites are not all in
some out of the way corner of the map. A recent study conducted by the
OSM estimated that 3.5 million Americans live less than one mile from
health and safety hazards created by abandoned coal mines.
If we are to finish the job Congress gave us to abate the health,
safety and environmental problems left behind by mining that occurred
before SMCRA was passed, it is imperative that we reauthorize the AML
Fee collection authority. The Bush Administration fully supports the
reauthorization of AML Fee collection authority.
For some time now I've been discussing reauthorization of SMCRA
with members of Congress, coal industry representatives, state
reclamation officials, and environmentalists. Those I have talked with
agree that abating AML hazards is a job that needs to be done.
Accordingly, there is substantial agreement that the AML Fee collection
authority should be reauthorized. Many people also agree that
fundamental changes must be made to the existing structure of the
program. The universe of proposed modifications differs as widely as
the stakeholders who support them. Nevertheless, common themes have
emerged from my discussions. These themes present issues that Congress
will confront as it crafts legislation to complete the cleanup and
reclamation work begun under SMCRA.
The Allocation Problem
The clearest and most high priority theme to emerge from my
discussions is the call for the wise, efficient, and effective use of
the AML funds collected. We looked at how we might be able to
accomplish more reclamation with the funds being allocated and we
devised several promising program enhancements, including: AML fee
credits for remining sites; bond credits for remining sites; requiring
state programs to operate their own AML emergency programs; and
avoiding administrative duplication with respect to accounting and fee
collection. Each of these enhancements is aimed at leveraging the
dollars available to this program.
The reasons underlying why we are not accomplishing more with the
funds being allocated are not related to malfeasance, misfeasance, or
abuse of funds. Rather, there is a fundamental imbalance between the
goals established by SMCRA and the way funds from the AML Program are
required to be allocated under the Act. As a result, the ability of the
AML Program to meet its primary objective of abating AML problems on a
priority basis is being hindered by the statutory allocation formula,
which results in a progressive distribution of resources away from the
most serious AML problems.
SMCRA requires that all money collected from tonnage fees assessed
against industry on current coal production ($0.35/surface mined ton
and $0.15/deep mined ton) be deposited into one of several accounts
established within the AML fund. These accounts are discussed more
fully below. Money in each of these accounts can be used only to
accomplish the statutory purpose for which that account was
established. Account funds that are not spent in any one year must
remain in that account. Typically, money in one account cannot be
transferred to another account or be used for any other purpose.
Fifty percent (50%) of the fee income generated from current coal
production in any one state is allocated to an account established for
that state. Likewise, 50% of the fee income generated from current coal
production on Indian lands is allocated to a separate account
established for the tribe having jurisdiction over such Indian lands.
The funds in these state or tribal share accounts can only be used to
provide AML grant money to the state or tribe for which the account is
established.
Twenty percent (20%) of the total fee income is allocated to the
``Historic Production Account.'' Each state or tribe is entitled to a
percentage of the annual expenditure from this account in an amount
equal to its percentage of the nation's total historic coal
production--that is, coal produced prior to 1977. As is the case with
state or tribal share money, each state or tribe must follow the
priorities established in SMCRA in making spending decisions using
money from the historic production account. However, unlike the
allocation of state or tribal share money, once the state or tribe
certifies that all abandoned coalmine sites have been reclaimed, it is
no longer entitled to further allocations from the historic production
account.
Ten percent (10%) of the total fee income is allocated to an
account for use by the Department of Agriculture for administration and
operation of its Rural Abandoned Mine Program (RAMP).
The remaining 20% of the total fee income is allocated to cover
Federal operations, including the Federal Emergency Program, the
Federal High-Priority Program, the Clean Streams Program, the Fee
Compliance Program, and overall program administrative costs.
The annual appropriated AML grants to states and tribes are derived
from money from the state and tribal share accounts and money in the
historic production accounts. On a national average, money is
distributed to states and tribes from the state and tribal share
accounts and the historic production account at a ratio of 2.5 to 1.
That is, 29% of the total national grant amount is distributed among
the states and tribes based on historic production which has a direct
correlation to the magnitude of the AML problem. The majority of the
grant dollars, 71% of the total national grant amount, is distributed
among the states and tribes based on income generated from each by
current production. However, there is no relationship between the
current production state or tribal share portion of the grant and the
magnitude of the AML problem in that state or tribe.
This statutory allocation schedule for AML resources has
significant consequences to the overall program's primary objective of
abating AML problems on a priority basis. Specifically, there is no
parity among the states and tribes in terms of the rate of AML
reclamation. Today, some programs have completed reclamation on all of
the abandoned coalmine sites or are working on low priority sites while
others are still decades away from completing the most critical high-
priority sites.
This situation is dramatically illustrated in the attached chart
which depicts one projection of how many years it will take for each
state and tribe to complete its high-priority projects under the
current allocation formula. It is clear that even though states and
tribes substantially comply with the priority reclamation system
established in SMCRA within their borders, there is no semblance to
adherence to that priority system on a National basis.
To understand the impact of the allocation system on the AML
program, one must also understand the demographics of the AML problems
and the changing demographics of AML fee income. Based on historic
production records, we know that 94% of the AML problems are in the
eastern United States. The attached chart depicting the trends in AML
fee collection shows how the fee income demographics have changed over
time. The chart reflects the general shift in coal production from the
East to the West. More significantly, it reflects a shift in the east
from surface mine production to deep mine production, which is assessed
at the lower AML fee of fifteen cents per ton.
In the early years of the AML program, the fee income was generally
aligned with the magnitude of AML problems--75% of the income was in
the East where 94% of the AML problems existed, and 25% of the income
was in the West where 6% of the AML problems existed. Correspondingly,
the state and tribal share portions of the grants were generally being
distributed in amounts roughly proportional to the AML problem, much
like the historic production portion of the grants is intentionally
distributed. Much was accomplished during those early years of the AML
program. Over the past 25 years, fee income has shifted away from the
areas with high historic production and into the areas where there are
fewer or no remaining AML problems. Because 71% of the total grant
dollars is based on current production, there has been a corresponding
shift of AML resources away from the areas with the most significant
AML problems.
The chart depicting Reclamation Trends gives a clear picture of how
all of these factors come together to impact the AML program's ability
to accomplish its primary objective.
From the program's inception in 1977 through 1993, about 99% of the
state grant dollars was used to reclaim abandoned coalmine sites.
Ninety-five percent (95%) of that money was used for high-priority AML
reclamation. From 1994 through 2002, as current production shifted to
regions with fewer AML problems, only 71% of the state grant dollars
was used to reclaim abandoned coalmine sites, and only 64% was used for
high-priority AML reclamation. This trend will continue into the future
as more states that generate the fee income and are therefore entitled
to higher percentages of the total grant dollars complete their high-
priority AML work, but continue working on low-priority sites and other
authorized projects. In order to finish the job in an efficient and
effective manner, we must take advantage of this opportunity to make
some fundamental changes in the law to redirect the focus of the AML
program toward health and safety hazards.
There are several other critical themes that are interwoven with
the allocation issue that will also need to be addressed.
Commitments made to states and Indian tribes under the current law
Since the enactment of SMCRA, 50% of the funds collected from a
state or tribe has been allocated to that state or tribe's share
account. A substantial portion of these accounts, however, has not been
appropriated for the use of the states or tribes. Through the end of
Fiscal Year 2002, $944,768,493 of state and tribal share accounts
remains unappropriated. About one half of the unappropriated state and
tribal share balances are owed to states and tribes that have certified
completion of their abandoned mine sites. As we grapple with the issue
of how to allocate fee income from future collections, we need to
address how to deal with the unappropriated state and tribal share
balances from past collections.
Transfers to the United Mine Workers Combined Benefit Fund
One final theme that is an important part of the reauthorization
equation is the OSM's obligation under the law to transfer the interest
from the AML Fund to the United Mine Workers Combined Benefit Fund
(CBF). I understand that you will be receiving testimony later today on
the needs of the CBF for unassigned beneficiaries, a long-standing
Federal responsibility. The interest earnings from the AML fund are
currently insufficient to meet the needs of the CBF. For 2004, for
example, the needs of the unassigned beneficiaries of the CBF are
estimated to peak at $88 million. Actual interest earnings from the AML
fund for FY 2002 were only $43 million, and interest rates have
declined since that time.
It is important to note that, should the AML Fee collection
authority not be reauthorized, Sec. 402 (b) of SMCRA obligates the OSM
to establish and collect a fee at a rate sufficient to continue to
provide for interest income transfers to the CBF. While we are hopeful
that the AML fee will be re-authorized, in order to have the necessary
regulations in place should the authority expire, we would have to
start a formal rule-making process later this year. Later this summer,
I anticipate publishing an advance notice of a proposed rule-making to
begin this process and to ensure that we can continue to fulfill our
obligation to the CBF.
This afternoon I have identified three themes that must be included
in any SMCRA reauthorization proposal: addressing the allocation
problem; addressing commitments made to states and tribes; and
fulfilling obligations to the CBF. The difficult task for those who
must develop proposals to address these themes is that all of the
themes, and the stakeholders supporting them, are vying for the same
available dollars.
Conclusion
I greatly appreciate the time and attention that has been committed
to this important issue by members of this Subcommittee. While there
are no easy answers, I believe that we can find common ground that will
result in an efficient and effective program that refocuses reclamation
towards the highest priority work, yet address our commitments and
obligations under SMCRA. I look forward to continuing to work with you
to develop legislation to reauthorize the AML fee and get this job
done. I would be happy to answer any question you might have at this
time.
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Mrs. Cubin. Thank you very much. I will begin questioning.
How do you propose that we address getting the State share
balances returned to the States to which they are owed?
Mr. Jarrett. I think the first thing we have to do is to
quit digging in the hole and address the allocation problem. If
we can adequately address the allocation problem we would then
have to deal with a finite universe of unappropriated State
share balance, which by next September will be a little over $1
million. For the noncertified States, I think the best way to
deal with that is first of all to make future distributions
based on the magnitude of the problems, in other words, tie
them in directly to historic production.
As we make those distributions to the noncertified States,
we need to discount the historic production distributions by an
amount equal to the State share distribution. Currently we make
the distributions based on current production from the State
share accounts and from the historic production account, but
when we make the historic production distribution we are not
allowed to take into consideration the amount of money that a
State already received from the State share account.
So even if there is sufficient money coming from the State
share account, we would still have to give that State its share
of the historic production account, even though it may not be
needed.
Finally, I think we would need to pay the residual State
share balances first. If we do not, we will end up in the
situation in the future where other States certify completion
of their AML problems, and we will be left with unappropriated
State share balances for those States that we will have to deal
with.
I think the certified States are a little bit more
difficult to figure out how to get that money back to them.
Clearly, we need to establish some schedule for payout to those
certified States, and my personal feeling is that we really
need to find some new dollars to meet that obligation;
otherwise, we are going to be competing with the very same
dollars that we think we need to address the high-priority
problems that still remain in other States.
Mrs. Cubin. We all know the money has to be appropriated,
and as you suggested, there are competing needs, and, you know,
the possibility of getting the money appropriated through
Congress depends in large part on the administration and on the
administration's--the extent to which the administration will
bring pressure on the Congress to get it done. Do you think the
administration has the will to support an off-budget solution
to the State share?
Mr. Jarrett. As I am sure you know, generally, we oppose
any mandatory appropriations, so there is a very high bar that
has to be hurdled before--
Mrs. Cubin. I am not necessarily speaking of unappropriated
funds. I personally kind of oppose that, too. But--well, go
ahead.
Mr. Jarrett. Well, I guess what I'd say is that while as a
general matter the administration opposes any mandatory
appropriation, I think we're trying to deal with a very
difficult issue. I think there are cases that could be made to
support putting additional money into resolving this particular
problem. So I guess my commitment would be that any mandatory
appropriation or off-budget proposal, I would give very serious
consideration to that proposal. If that entire package resolved
the issues that we're all trying to grapple with on this
reauthorization package, then I would certainly want to vet
that proposal with senior managers within the Department of
Interior and OMB.
Mrs. Cubin. Does the administration have any suggestions
where the money outside the AML Fund should come from?
Mr. Jarrett. You mean to pay off the certified States or to
pay the unappropriated State share balance?
Mrs. Cubin. Yes, that and continue, for example, the CBF
and the other problems associated with the AML.
Mr. Jarrett. Yes, I mean, this, maybe again, may sound a
little bit crazy, but what we need is cash, not funds. We have
the funds--the money has been credited to the AML Fund. What we
don't have is the actual cash to--
Mrs. Cubin. Then let me restate my question. Does the
administration have any ideas where we can get the cash to take
care of paying the certified States their share and the CBF
problem?
Mr. Jarrett. I do not have any specific ideas. I can tell
you that I have been working very hard within the Department
and with OMB. We have found a little bit of money, but not
enough yet, and we're continuing to look. I'm continuing to
look for more money.
Mrs. Cubin. Does the administration think that the coal
sold in--or considering the certified States, that the coal
sold in those States continue to be assessed at the same fee
when virtually all the reclamation will take place somewhere
else?
Mr. Jarrett. You mean the coal sold or the coal mined?
Mrs. Cubin. The fee.
Mr. Jarrett. The fee's based on production.
Mrs. Cubin. That is right, the fee is based on production.
Should the coal sold in those States continue to be assessed at
the same fee as coal produced in non-certified States?
Mr. Jarrett. Coal produced...
Mrs. Cubin. At the same rate, let me say that.
Mr. Jarrett. Yes, I could craft an argument for or against
such a proposal, but, quite frankly, I'm a little bit troubled
by that proposition. So maybe what we really need to do is take
a step back and put this problem in perspective.
For 200 years this country mined coal, and we know most of
that coal was mined east of the Mississippi River. And that was
very cheap coal, and all Americans benefited from that very
cheap coal. Not just the people who lived in Pennsylvania or
the people who lived in West Virginia, but people across this
country benefited from that coal. That cheap coal was used to
build steel, to build the bridges to get to the West, if you
will. And I know we've had these arguments in the past about
who should pay for it. But because we all benefited, I think
that the price that we're now paying to clean up from the
aftermath of 200 years' worth of mining also needs to be paid
for by all Americans. And the real question that we're
grappling with is: What's the best vehicle to allow all
Americans to pay for--
Mrs. Cubin. So when you say all Americans, it wouldn't mean
that one State pay 40 percent.
Mr. Jarrett. I think we have to take a look at who is
really paying. You're going to hear testimony later today from
a utility. I believe that that utility company will testify
that the 35 cents is embedded, if you will, in the price that
they have to pay for that coal, and that it is further--those
costs are passed on to the consumers.
Mrs. Cubin. But that isn't answering my question. That
isn't answering my question. I agree with you this is a problem
that requires a national solution. But the amount of money that
is paid into the AML, 40 percent of it comes from one State.
That doesn't sound like a national solution to me. That sounds
like the burden is being carried by one State.
Mr. Jarrett. I understand that it looks that way. I guess
what I'm saying, though, is that it is not--and in the case of
Wyoming, it is not the administration in Wyoming who is paying
that fee, or those operators who are mining in Wyoming paying--
Mrs. Cubin. But Wyoming is not getting its share. We don't
need to argue about this.
Mr. Jarrett. Yes. I'm just saying--
Mrs. Cubin. But Wyoming isn't getting its money, and, you
know, if you want to make the point that it is a national
problem and all Americans need to be part of the solution, then
the 490,000 people that live in Wyoming should not be burdened
with the majority or a disproportionate share. Would you agree
with that?
Mr. Jarrett. I believe that I do not want to be in the
business of collecting a fee in Wyoming, the State share
portion, and then turning around and giving that same amount of
money back to the State of Wyoming so that they can use it on
something that has nothing to do with the Abandoned Mine Land
Program. We shouldn't be collecting it in the first place.
But the point I'm trying to make is that I think that same
argument can be made in virtually all of the States, whether
they're certified or not. And I guess I question whether or not
certification is a good criteria to determine what AML fee
rates ought to be.
So I guess, you know, I mean, I think it would be worth
pursuing the idea of eliminating State share contributions
nationwide and then look at the contributions to the Federal
pot of money that gets distributed based on need and adjust
that rate to whatever level it needs to be so that we can get
the job finished in a reasonable period of time.
Mrs. Cubin. Well, I have to suggest that I don't even
necessarily think that the coal industry, whether it is Western
coal or Eastern coal, having agreed on the fact that we think
this is a national problem, that it should necessarily be the
coal industry alone that is responsible for cleaning up a
national problem that is, like you said, 100 or 200 years old.
I don't see the rationale of why the coal industry should be
paying the whole burden for a national problem, Eastern or
Western coal.
Mr. Jarrett. I guess what I'm saying is I would agree with
that. I think the operators in Wyoming are no more or less
responsible for the problems than the operators in West
Virginia are responsible for the problems. And they're no more
or less responsible than anyone else who lives in this country.
Mrs. Cubin. And I think that is our challenge, to try to
come up with something that is fair, that is more equitable
than what we have now. I think we all agree on that.
How do you propose that we provide money to the CBF in the
future?
Mr. Jarrett. Well, I don't know that the interest earnings
from the AML Fund can satisfy all of the needs for the
unassigned beneficiaries--
Mrs. Cubin. It can't. We know it can't.
Mr. Jarrett. --in the Combined Benefit Fund, and that seems
to me that it is a problem. It is a longstanding commitment of
the Federal Government to take care of that need, but the
interest earnings from the AML Fund we know aren't going to be
sufficient to do that. It's a problem that is begging another
solution.
Mrs. Cubin. And do you intend to come up with any
suggestions for that solution?
Mr. Jarrett. We are not working on any solutions outside
the context of the Abandoned Mine Land problem. My obligation
is to do the very best I can in getting--making the interest
transfers to the Combined Benefit Fund, but, you know, that is
not an OSM program. We're not in the business of providing
health care benefits.
Mrs. Cubin. So, to your knowledge, is anyone in the
administration looking for a way--because we know there is not
enough money to fund CBF. Is anyone in the administration
looking for a way to find money to fund that?
Mr. Jarrett. Not to my knowledge.
Mrs. Cubin. OK. Thank you.
The AML Fund is currently receiving interest at a little
over 1 percent. Is there any way to increase the interest that
we earn on that fund? Once again, I realize that that is not
your job to invest those funds.
Mr. Jarrett. Well, it's not--it's the Treasury's job to
invest those funds, but I do have a lot to say about how those
investments are going to work. It's my responsibility to report
to the Secretary of Treasury the amount of monies that I will
need for immediate withdrawal and the amount of monies that can
be invested for the longer term.
When I started in this job, I found that OSM was using some
assumptions about what monies might be needed for immediate
withdrawal that I do not agree with. That was actually pointed
out to me by the United Mine Workers. The bottom line is OSM
was working on some assumptions that said, you know, it might
just be possible that we'll wake up tomorrow morning and find
that some judge or Congress has ordered us to write a check for
the entire $1.5 billion unappropriated in the fund; therefore,
we have to keep those investments very liquid so that we don't
end up being in violation of anti-deficiency laws.
Those assumptions I have changed, and we probably don't
need to get into the new assumptions that we have established,
but we do have new assumptions that we're working on right now.
The two obstacles to actually making those investments are, No.
1, one of market timing. You're correct, we're making about 1.2
percent on our money right now, and I could probably double
that amount by tying that money up in, say, a 4- or 5-year
investment. But we believe, based on OMB projections, that if
we wait until next year, we will be able to make substantially
more than that. And while that's a sacrifice for this year, in
the long run we think we can maximize our investments by not
tying up large blocks of money at 2 percent when, if we wait
just a little bit, we can tie it up at 3.5 or 4.5 percent.
The other obstacle that we have right now is, while it has
been strongly suggested to me that I should assume that the AML
fee collection authority will be reauthorized, I should,
therefore, tell Treasury that I have blocks of money available
for long-term investments that, in fact, I don't have yet
because I'm not willing to assume that we're going to have
reauthorization of this fee collection authority.
So once we get reauthorization behind us, that will free up
some rather substantial blocks of money and make that available
for longer-term investments.
Mrs. Cubin. One last question. What is your position on the
Kanjorski bill that would allow Government-backed bonds to fund
additional reclamation by the States?
Mr. Jarrett. To the best of my knowledge, that bill has not
been vetted with OMB. I have personally read that bill and
analyzed it somewhat. I'm in favor of any program that will
bring additional resources to the problem of Abandoned Mine
Lands. What I particularly like about the Kanjorski bill is--
and he said it when he testified better than I can, but the AML
program has a focus on the Priority 1 and 2 sites. The
Kanjorski proposal would actually bring some money to those
sites, but in some of the lower environmental problems as well,
it takes a more comprehensive approach to resolving the problem
than what we have the ability to do in the AML program. And
what I find particularly attractive about that proposal is that
it doesn't just deal with taking care of the environmental
problems, but it actually promotes some economic development in
some otherwise depressed communities.
Mrs. Cubin. Thank you.
Mr. Rahall?
Mr. Rahall. Thank you, Madam Chair. As we are so late in
this hearing today and I know several have waited a long time,
I am going to be very brief.
First, just a simple statement, Director Jarrett. I have
been here a number of years and seen a number of Directors of
OSM come and go, and I think one fact is pretty simple over
those years: I don't envy your job.
With that, I do have two or three questions, all of which
involve more technical facts and figures, which can just as
easily be answered in writing. And I would ask unanimous
consent that I submit those questions for the record and you
respond to them in writing.
Mrs. Cubin. Without objection.
Thank you very much, Mr. Jarrett. Also, I am sure other
members of the Subcommittee will have some questions that they
will send to you in writing, and the record will be held open
for 10 days.
Thank you very much for your valuable testimony.
Mr. Jarrett. Thank you.
Mrs. Cubin. Now I would like to call the third panel
forward: Cecil E. Roberts, president of the United Mine Workers
of America; John Masterson, Counsel to the Governor of Wyoming;
Murray Balk, Chief, Surface Mining Section of the Kansas
Department of Health and Environment, Interstate Mining Compact
Commission. If you would take your place at the table?
Mr. Rahall. Madam Chair, I would like to have the courtesy
of introducing members from my home State of West Virginia at
this point. I appreciate your giving me that opportunity.
The first person I want to introduce is the first person on
this panel, Mr. Cecil Roberts, who is the president of the
greatest union on the face of the Earth, United Mine Workers of
America. He is a sixth-generation coal miner and hails from my
home State of West Virginia from a community called Cabin
Creek, where he visits quite often and where his parents
currently reside. He embodies the values which have made the
Mine Workers the greatest union on the face of the Earth, and
that is and has been the fact that he is in the forefront of
fighting for the rights of his members, improving their working
conditions, their general welfare, their health care, and their
benefits. And I am proud that Cecil Roberts is a West
Virginian, and I am proud myself to be an honorary member of
the United Mine Workers of America.
The second individual I will introduce is on the next panel
and is still in the audience, but I would just like to
introduce him at this time, and that is Dave Young, with the
BCOA. The Bituminous Coal Operators Association has a long and
storied past, but it essentially comprised of unionized coal
companies for the purpose of negotiating labor agreements with
the mine workers. Dave also hails from my home State of West
Virginia, coming from our State capital, Charleston. And,
frankly, under his leadership, BCOA has in my view put on a
more human face, and it has exhibited a greater degree of
sensitivity under Dave Young's Chairmanship.
The BCOA in the past, for example, would never have asked
to testify at a hearing of this nature, and Dave is not only
here today to testify but has been here all afternoon and
listening to the testimony, and we certainly appreciate him as
well.
Thank you, Madam Chair.
Mrs. Cubin. Thank you. And it is my honor to introduce John
Masterson, who is representing the Governor of Wyoming, Dave
Freudenthal.
Now, if you wouldn't mind to stand to be sworn in.
[Witnesses sworn.]
Mrs. Cubin. I would like to begin by recognizing Mr.
Roberts.
STATEMENT OF CECIL E. ROBERTS, PRESIDENT,
UNITED MINE WORKERS OF AMERICA
Mr. Roberts. Thank you very much, Madam Chair. I want to
first of all thank you for allowing us to be here today and for
holding this hearing. We've had this opportunity to meet on
your Subcommittee the last time, in the year 2000, when 12,000
of us came up to the Capitol grounds and had a very spirited
rally with respect to preserving the health care of--at that
time it was in the neighborhood of 60,000 beneficiaries. Today
I come to speak for 46,000 beneficiaries of the Combined
Benefit Fund, the average age being 80.
I want to thank my dear friend, if I may, Congressman
Rahall, and he is a dear friend of mine, but, more importantly,
he is a dear friend of all coal miners in southern West
Virginia and, indeed, this Nation and all working-class people,
for that matter. He has fought for my health and safety as well
as health care for our members for many, many years, and we
appreciate that very much, Congressman Rahall.
Mrs. Cubin. And, Mr. Roberts, I can tell you that I
absolutely agree, and I admire Mr. Rahall for that commitment.
Mr. Roberts. We also come today--we didn't bring 12,000,
but we did bring about 10 pensioners from northern West
Virginia, who are in the back to my immediate--over my left
shoulder, and from Pennsylvania, who are very much concerned
about preserving these health care benefits.
We have submitted written testimony, but I would take a few
moments to try to summarize this issue, if I might.
The U.S. Government has been involved in providing health
care to coal miners since 1946, when there was a dispute
between the United Mine Workers and the coal operators, and the
Federal Government seized the coal mines in 1946, and the first
contract between the union and anyone providing for pensions
and health care was with the Federal Government, not with the
coal industry. So the Government made a promise back in 1946 to
the people we're talking about today.
The second time that I recall that the Federal Government
made a promise and a commitment and a finding to coal miners
and their beneficiaries was immediately after and during the
1989 lengthy Pittston Coal strike, when then-President Bush
appointed through then-Secretary of Labor Elizabeth Dole, now
Senator Elizabeth Dole from North Carolina, to get involved in
this problem, and she helped resolve that strike. That
continued the health care benefits and the pension benefits for
1,600 Pittston beneficiaries.
She went on to appoint Bill Usery, a former Secretary of
Labor under Richard Nixon, to chair what was known then as a
coal commission in some circles and the Dole Commission in
other circles. It was chaired by former Secretary of Labor
Usery, and on that Committee you had coal operators, you had
union representatives, and you had business people throughout
the United States, particularly from the coal regions. And they
found at that time that indeed the U.S. Government had promised
coal miners back in 1946 and continued that promise up until
1992 at that time lifetime health care. They recommended that
Congress act, and Congress did in 1992, passing what has become
well known as the Coal Act.
In that Coal Act, there was a funding mechanism established
by Congress, and Congress felt at the time that they would
never, ever have to deal with the issue again. However, the
constitutionality of the Coal Act was challenged on over 60
occurrences, and each time the Federal Government prevailed or
the funds prevailed.
This issue has been taken to the United States Supreme
Court about four times, and the Supreme Court has found indeed
that this Act is constitutional.
However, we come with a crisis looming as we gather here
today, and I must urge on Congress today how important it is to
act, and act soon. The Combined Benefit Fund is currently
running a deficit of about $10 million. At the end of the
fiscal year, which will be October 1st, that deficit will be
$40 million. If funding is not appropriated between now and the
1st of next year, a very severe benefit cut will have to take
place, in the neighborhood of 40 percent by some analysis.
These promises were made to these coal miners and their
beneficiaries. Most of these people now are widows of former
miners who made this country, as many have said, the greatest
generation on Earth, which I happen to agree with.
We recommend about three to four things for you to
consider, Madam Chairman.
First of all, we support Congressman Rahall and Congressman
Ney's bipartisan effort to see that these benefits are not cut
with the passage of CARE 21. Two years ago this passed the
House. It did not pass the Senate. Dealing with the issue about
the interest rate, which has created a severe problem,
currently the U.S. Government allows what is known as par value
specials in some of their funds, such as Social Security. The
Congress could authorize the Treasury to place these
investments in par value specials which would triple the
interest rate that is currently being provided, which would go
a long ways to resolving this problem.
Third, we would encourage a debate to begin soon on
reauthorization of the AML fee, and I assume that's somewhat
what we're doing today. But this is a bipartisan approach that
has been proposed by Congressman Rahall and Congressman Ney.
This would allow benefits to continue.
One of the things I would stress, Madam Chairman, is
there's stranded interest money that is there now that cannot
be used to pay these benefits because of a technicality. We
urge Congress to pass CARE 21, which would allow the
utilization of that stranded interest money to pay these
benefits so that these people, average age 80, some as old as
100, would continue to receive their benefits that this
Government, the greatest Government on Earth, the greatest
Nation on Earth, can keep their promises that they made in
1946.
Thank you very much, Madam Chairman.
[The prepared statement of Mr. Roberts follows:]
Statement of Cecil E. Roberts, President,
United Mine Workers of America
Madam Chairman, members of the Subcommittee, I am Cecil E. Roberts,
President of the United Mine Workers of America (UMWA). The UMWA is a
labor union that has represented the interests of coal miners and other
workers and their families in the United States and Canada for over 113
years. We appreciate the opportunity to appear before the Subcommittee
once again to discuss the Abandoned Mine Land Reclamation Fund (AML
Fund) and its relationship to the UMWA Combined Benefit Fund (CBF).
Madam Chairman, I would like to spend my time today talking about
the continuing financial crisis at the UMWA Combined Benefit Fund. The
CBF was created by Congress to provide health benefits to retired coal
miners and their widows. Today, the Combined Benefit Fund provides
health benefits to about 46,000 elderly beneficiaries who reside in
every state in the nation, including significant numbers who are
constituents of members of this Subcommittee. The average age of the
CBF beneficiary population is nearly 80 years, about two-thirds of them
are widows and their total estimated health cost for the current fiscal
year is $362 million. Congress intended for the financial mechanisms it
put in place to provide for self-sufficient financing of the cost of
those benefits. However, rapidly rising health costs and a series of
adverse court decisions have eroded those financing mechanisms and
placed the CBF in financial jeopardy. More recently the bankruptcies of
several major steel companies that had significant numbers of Coal Act
retirees have added to the financial distress of the CBF.
Congress has intervened three times in the past four years to shore
up the financial condition of the CBF through emergency appropriations
of interest money from the AML Fund. In December 1999, Congress
provided $68 million to cover shortfalls in CBF premiums. In October
2000, Congress appropriated up to $96.8 million to cover any deficit in
the CBF's net assets through August 31, 2001. And most recently, in
January 2003, Congress appropriated $34 million from the AML interest
account to the Combined Benefit Fund. In addition, the UMWA Funds and
the Health Care Financing Administration (now the Center for Medicare
and Medicaid Services) expanded their existing nationwide, risk-sharing
Medicare Demonstration project in January 2001 to include a new
prescription drug component. That project runs for three years, until
mid-2004, and reimburses the Funds for 27% of its Medicare prescription
drug expenditures. It is a pilot project designed to demonstrate the
efficacy of providing prescription drugs under Medicare, a timely
project that we believe will prove useful to the government as it seeks
to expand prescription drug coverage to the Medicare population.
But despite these efforts by Congress and the Executive Branch, the
CBF still faces a financial crisis. Net assets have declined since the
last emergency appropriation was enacted; as of May 31, 2003, the CBF
had a net asset deficit of $7.8 million. We expect to end the fiscal
year on September 30, 2003 with a net asset deficit of about $40
million. There is an urgent need for additional revenue to prevent a
disastrous cut in benefits to this fragile population. Indeed, the CBF
estimates that absent additional appropriations from Congress, the CBF
will exhaust its cash early next year.
In order to avoid a catastrophic cut in benefits, the UMWA strongly
urges Congress to:
enact H.R. 313, the Coal Accountability and Retired
Employee Act for the 21st Century (CARE 21);
authorize the AML fund to invest in Treasury par value
specials;
begin serious debate on reauthorization of the AML fee,
currently scheduled to expire September 30, 2004.
The UMWA strongly supports H.R. 313, a bill with broad bi-partisan
support, sponsored by Congressmen Nick Rahall and Bob Ney. As you know,
CARE 21 was passed by the full House of Representatives last fall, but
the Senate did not complete action on the bill. If enacted, CARE 21
would authorize the use of stranded AML interest money to cover future
net asset deficits in the CBF. The Rahall/Ney proposal does not affect
the principal in the AML account.
The UMWA supports this legislative effort because we know that a
promise was made by the Federal Government and by the coal industry
that these retirees would have lifetime health benefits. Today we need
the help of Congress to ensure that the promise is kept. We are not
alone in urging Congress to act. As I advised the Subcommittee three
years ago, a number of state legislatures in coal field states
(Alabama, Illinois, Indiana, Kentucky, Pennsylvania and West Virginia),
along with dozens of county and city governments, have adopted
resolutions urging Congress and the Administration to ensure that
retired miners continue to receive the health benefits they were
promised. These state and local political authorities know how
important the UMWA Funds is to their state's medical infrastructure and
how necessary the health benefits are to the retirees and their
families.
These Coal Act beneficiaries have supported this nation in war and
in peace, and today ask for simple fairness and the keeping of a simple
promise. As you consider legislative amendments dealing with the Office
of Surface Mining and the AML Fund, I ask that you keep the retired
miners and their widows in mind. I can think of no higher purpose for
monies collected from the coal industry than to ensure that America's
retired miners not be abandoned.
A second recommendation is that Congress authorize the AML fund to
invest in par value specials. One problem that has exacerbated the CBF
financial woes is that very low interest rates have significantly
reduced the interest earned on the AML fund. For example, last
September, the CBF billed AML $78.6 million for the current fiscal
year; AML transferred only $56.1 million. This year, interest earned at
AML is expected to be in the range of about $25 million, far short of
CBF needs. The AML funds essentially are invested at overnight interest
rates, rather than in long term government bonds. We have urged OSM
officials to move out further on the yield curve to earn greater
interest. They argue that they must maintain the fund at maximum
liquidity because Congress could appropriate some or all of the AML
principal at any time. One way to remain liquid while earning greater
interest is through the use of Treasury par value specials,
nonmarketable Treasury securities that can be redeemed at any time at
their face, or ``par'' value. They are a preferred investment vehicle,
offered only to certain government trust funds, such as Social
Security, Medicare, the Railroad Retirement fund and the Civil Service
Retirement fund, because they essentially are short term securities
that earn long term rates. We believe that it would be appropriate for
Congress to authorize the use of par value specials at the AML fund.
Our third recommendation is that Congress begin the debate on
reauthorization of the AML fee, currently set to expire September 30,
2004. Congress established the AML Fund as part of the Surface Mining
Control and Reclamation Act of 1977 (SMCRA). The fund, financed by
production fees levied on the coal industry, was designed to provide
the means to reclaim lands that had been mined in previous years and
abandoned before reclamation had been done. The law was amended in 1991
to permit the investment of monies held in the AML Fund to earn
interest. In 1992, the Energy Policy Act extended the AML fees until
2004 and authorized the use of AML interest to pay for the cost of
benefits for certain eligible retirees under the Coal Act.
Madam Chairman, let me state clearly that the UMWA supports the
goals of the Surface Mining Act and the Abandoned Mine Lands program.
In enacting SMCRA, Congress found that ``surface and underground coal
mining operations affect interstate commerce, contribute to the
economic well-being, security, and general welfare of the Nation and
should be conducted in an environmentally sound manner.'' That
statement is as true today as it was in 1977. Coal mining contributes
significantly to our national economy by providing the fuel for over
half of our nation's electricity generation. Coal miners are proud to
play their part in supplying our nation with domestically-produced,
cost-effective, reliable energy. We also live in the communities most
affected by mining and support the intent of Congress that coal mining
must be conducted in an environmentally sound manner.
The UMWA believes that when Congress authorized the use of AML
interest to finance the cost of benefits for retired coal miners under
the Coal Act, that it was a logical extension of the original intention
of Congress when the AML Fund was created. When Congress created the
AML Fund in 1977, it found that un-reclaimed, abandoned mine lands
imposed ``social and economic costs on residents in nearby and
adjoining areas.'' When Congress enacted the Coal Act in 1992, it also
had in mind how to avoid unacceptable social and economic costs
associated with the loss of health benefits for retired coal miners and
widows.
Recent GAO Study
Last year the U.S. General Accounting Office (GAO) issued its most
recent report that supports the CBF's need for financial support. In
August the GAO issued a report on the Coal Act funds entitled ``Retired
Coal Miners' Health Benefit Funds: Financial Challenges Continue.'' The
report was an outgrowth of Senate Finance Committee consideration of
legislation to provide transfers of monies from the U.S. Treasury to
the CBF in 2000.
Among the findings of the GAO were that:
the CBF beneficiaries traded lower pensions over the
years for the promise of their health benefits and have engaged in
considerable cost sharing by contributing $210 million of their pension
assets to help finance the CBF;
the benefits provided to Coal Act beneficiaries are
generally comparable to coverage provided by major manufacturing
companies and companies with unionized work forces;
the Combined Benefit Fund faces continuing financial
challenges which have been exacerbated by various adverse court
decisions that have reduced the per beneficiary premiums paid to the
CBF and relieved some companies of responsibility for paying for their
beneficiaries;
the CBF beneficiaries tend to be sicker, and therefore
use more health care, than the average Medicare population; and
the CBF trustees have adopted numerous managed care
initiatives and have a history of achieving savings against their
Medicare targets in their demonstration projects, thus saving money not
only for the Funds but for Medicare and the U.S. Treasury.
The most recent GAO report, and GAO's earlier reports on the CBF,
clearly supports the positions we have taken before this Subcommittee
and the Congress. A promise made in the White House in 1946 was
reaffirmed in 1992. Congress intended the Coal Act to be self-
sustaining and self-financing, but subsequent court decisions have
eroded that financing. There is no question that this is an elderly,
frail population that is sicker than the general Medicare population
and deserves the benefits they were promised. There is also no question
that the Funds have aggressively managed the benefit plans and
instituted state-of-the-art managed care programs that aim to improve
the quality of care and reduce costs. Indeed, we estimate that the
Funds programs have saved approximately $100 million in the last four
years as a result of its risk-sharing agreements, with about $70
million of the savings returned to Medicare and about $30 million going
to the Funds. Unfortunately, there is also no question that the
nation's commitment to appropriate health care for retired coal miners
will be violated if the CBF does not receive additional funds.
This is a unique population and a unique situation. I am unaware of
any other case in which a major industry-wide health and welfare plan
in the private sector was created in a contract between the Federal
Government and the workers. All three branches of our government have
played substantial roles in creating, shaping and determining the fate
of the UMWA Funds. The General Accounting Office clearly laid out the
financial difficulties facing the Funds and more recent actuarial
projections show that Congress must act in order to shore up the
financial structure. Again, we encourage members of Congress to enact
H.R. 313, or CARE 21 and to authorize the use of par value specials by
the AML fund.
Madam Chairman, I mentioned that the UMWA Funds was a unique
institution with a unique history of government involvement. I would
like to review briefly the highlights of that history.
The UMWA Health and Retirement Funds and the U.S. Government
The UMWA Health and Retirement Funds (the Funds) was created in
1946 in a contract between the United Mine Workers of America and the
Federal Government during a time of government seizure of the mines.
The contract was signed in the White House with President Harry Truman
witnessing the historic occasion.
The UMWA first began proposing a health and welfare fund for coal
miners in the late-1930s but met strident opposition from the coal
industry. During World War II, the Federal Government urged the union
to postpone its demands to ensure coal production for the war effort.
When the National Bituminous Wage Conference convened in early 1946,
immediately following the end of the war, a health and welfare fund for
miners was the union's top priority. The operators rejected the
proposal and miners walked off the job on April 1, 1946. Negotiations
under the auspices of the U.S. Department of Labor continued
sporadically through April. On May 10, 1946, President Truman summoned
John L. Lewis and the operators to the White House. The stalemate
appeared to break when the White House announced an agreement in
principle on a health and welfare fund.
Despite the White House announcement, the coal operators still
refused to agree to the creation of a medical fund. Another conference
at the White House failed to forge an agreement and the negotiations
again collapsed. Faced with the prospect of a long strike that could
hamper post-war economic recovery, President Truman issued an Executive
Order directing the Secretary of the Interior to take possession of all
bituminous coal mines in the United States and to negotiate with the
union ``appropriate changes in the terms and conditions of
employment.'' Secretary of the Interior Julius Krug seized the mines
the next day. Negotiations between representatives of the UMWA and the
Federal Government continued, first at the Interior Department and then
at the White House, with President Truman participating in several
conferences.
After a week of negotiations, the historic Krug-Lewis agreement was
announced and the strike ended. It created a welfare and retirement
fund to make payments to miners and their dependents and survivors in
cases of sickness, permanent disability, death or retirement, and other
welfare purposes determined by the trustees. The fund was to be managed
by three trustees, one to be appointed by the Federal Government, one
by the UMWA and the third to be chosen by the other two. Financing for
the new fund was to be derived from a royalty of 5 cents per ton of
coal produced.
The Krug-Lewis agreement also created a separate medical and
hospital fund to be managed by trustees appointed by the UMWA. The
purpose of the fund was to provide for medical, hospital, and related
services for the miners and their dependents. The Krug-Lewis agreement
also committed the Federal Government to undertake ``a comprehensive
survey and study of the hospital and medical facilities, medical
treatment, sanitary and housing conditions in coal mining areas.'' The
expressed purpose was to determine what improvements were necessary to
bring coal field communities in conformity with ``recognized American
standards.''
To conduct the study, the Secretary chose Rear Admiral Joel T.
Boone of the U.S. Navy Medical Corps. Government medical specialists
spent nearly a year exploring the existing medical care system in the
nation's coal fields. Their report, ``A Medical Survey of the
Bituminous Coal Industry,'' found that in coal field communities,
``provisions range from excellent, on a par with America's most
progressive communities, to very poor, their tolerance a disgrace to a
nation to which the world looks for pattern and guidance.'' The survey
team discovered that ``three-fourths of the hospitals are inadequate
with regard to one or more of the following: surgical rooms, delivery
rooms, labor rooms, nurseries and x-ray facilities.'' The study
concluded that ``the present practice of medicine in the coal fields on
a contract basis cannot be supported. They are synonymous with many
abuses. They are undesirable and in many instances deplorable.''
Thus the Boone report not only confirmed earlier reports of
conditions in the coal mining communities, but also established a
strong Federal Government interest in correcting long-standing
inadequacies in medical care delivery. Perhaps most important, it
provided a road map for the newly created UMWA Fund to begin the
process of reform.
The Funds established ten regional offices throughout the coal
fields with the direction to make arrangements with local doctors and
hospitals for the provision of ``the highest standard of medical
service at the lowest possible cost.'' One of the first programs
initiated by the Funds was a rehabilitation program for severely
disabled miners. Under this program more than 1,200 severely disabled
miners were rehabilitated. The Funds searched the coal fields to locate
disabled miners and sent them to the finest rehabilitation centers in
the United States. At those centers, they received the best treatment
that modern medicine and surgery had to offer, including artificial
limbs and extensive physical therapy to teach them how to walk again.
After a period of physical restoration, the miners received
occupational therapy so they could provide for their families.
The Funds also made great strides in improving overall medical care
in coal mining communities, especially in Appalachia where the greatest
inadequacies existed. Recognizing the need for modern hospital and
clinic facilities, the Funds constructed ten hospitals in Kentucky,
Virginia and West Virginia. The hospitals, known as Miners Memorial
Hospitals, provided intern and residency programs and training for
professional and practical nurses. Thus, because of the Funds, young
doctors were drawn to areas of the country that were sorely lacking in
medical professionals. A 1978 Presidential Coal Commission found that
medical care in the coal field communities had greatly improved, not
only for miners but for the entire community, as a result of the UMWA
Funds. ``Conditions since the Boone Report have changed dramatically,
largely because of the miners and their Union--but also because of the
Federal Government, State, and coal companies.'' The Commission
concluded that ``both union and non-union miners have gained better
health care from the systems developed for the UMWA.''
The Coal Commission
Medical benefits for retired miners became a sorely disputed issue
between labor and management in the 1980s, as companies sought to avoid
their obligations to retirees and dump those obligations onto the UMWA
Funds, thereby shifting their costs to other signatory employers.
Courts had issued conflicting decisions in the 1980s, holding that
retiree health benefits were indeed benefits for life, but allowing
individual employers to evade the obligation to fund those benefits.
The issue came to a critical impasse in 1989 during the UMWA-Pittston
Company negotiations. Pittston had refused to continue participation in
the UMWA Funds, while the union insisted that Pittston had an
obligation to the retirees.
Once again the government intervened in a coal industry dispute
over health benefits for miners. Secretary of Labor Elizabeth Dole
appointed a special ``super-mediator,'' Bill Usery, also a former
Secretary of Labor. Ultimately the parties, with the assistance of
Usery and Secretary Dole, came to an agreement. As part of that
agreement, Secretary Dole announced the formation of an Advisory
Commission on United Mine Workers of America Retiree Health Benefits,
which became known as the ``Coal Commission.'' The commission,
including representatives from the coal industry, coal labor, the
health insurance industry, the medical profession, academia, and the
government, made recommendations to the Secretary and the Congress for
a comprehensive resolution of the crisis facing the UMWA Funds. The
recommendation was based on a simple, yet powerful, finding of the
commission:
``Retired miners have legitimate expectations of health care
benefits for life; that was the promise they received during
their working lives, and that is how they planned their
retirement years. That commitment should be honored.''
The underlying recommendation was that every company should pay for
its own retirees. The Commission recommended that Congress enact
Federal legislation that would place a statutory obligation on current
and former signatories to the National Bituminous Coal Wage Agreement
(NBCWA) to pay for the health care of their former employees. The
Commission recommended that mechanisms be enacted that would prevent
employers from ``dumping'' their retiree health care obligations on the
UMWA Funds. Finally, the Commission urged Congress to provide an
alternative means of financing the cost of ``orphan retirees'' whose
companies no longer existed.
The Coal Act
Recognizing the crisis that was unfolding in the nation's coal
fields, Congress acted on the Coal Commission's recommendations. The
original bill introduced by Senator Rockefeller sought to impose a
statutory obligation on current and former signatories to pay for the
cost of their retirees in the UMWA Funds, required them to maintain
their individual employer plans for retired miners, and imposed a small
tax on all coal production to pay for the cost of orphan retirees.
Although the bill was passed by both houses of Congress, it was vetoed
as part of the Tax Fairness and Economic Growth Act of 1992.
In the legislative debate that followed, much of the underlying
structure of the Coal Commission's recommendations was maintained, but
there was strong opposition to a general coal tax to finance orphan
retirees. A compromise was developed that would finance orphans through
the use of interest on monies held in the Abandoned Mine Lands (AML)
fund. In addition, the Union accepted a legislative compromise that
included the transfer of $210 million of pension assets from the UMWA
1950 Pension Plan. With these compromises in place, the legislation was
passed by the Congress and signed by President Bush as part of the
Energy Policy Act.
Under the Coal Act, two new statutory funds were created--the UMWA
Combined Benefit Fund (CBF) and the UMWA 1992 Benefit Fund. The former
UMWA 1950 and 1974 Benefit Funds were merged into the Combined Fund,
which was charged with providing health care and death benefits to
retirees who were receiving benefits from the UMWA 1950 and 1974
Benefit Plans on or before July 20, 1992. The CBF was essentially
closed to new beneficiaries. The Coal Act also mandated that employers
who were maintaining employer benefit plans under UMWA contracts at the
time of passage would be required to continue those plans under Section
9711 of the Coal Act. Section 9711 was enacted to prevent future
``dumping'' of retiree health care obligations by companies that remain
in business. To provide for future orphans not eligible for benefits
from the CBF, Congress established the UMWA 1992 Benefit Fund to
provide health care to miners who retired prior to October 1, 1994 and
whose employers are no longer providing benefits under their 9711 plans
because they have gone out of business. I mentioned earlier the
bankruptcies of a number of steel companies that had retirees covered
by the Coal Act. Bankruptcies at LTV, Bethlehem Steel, National Steel
and other steel companies have reduced the premiums paid to the CBF,
increased orphan costs for the AML fund, and added thousands of 9711
plan beneficiaries to the 1992 Plan.
The Combined Fund is financed by a per-beneficiary premium paid by
employers with retirees in the fund. The premium is set by the Social
Security Administration and is escalated each year by the medical
component of the Consumer Price Index. Interest earned by the AML Fund
is made available to finance the cost of orphan retirees. The UMWA 1992
Fund is financed solely by operators that were signatory to the NBCWA
of 1988. In the fiscal period 2000-2002, premium income paid by
employers to the CBF averaged $91.8 million per year, or 26.3% of total
income and the AML transfers averaged $108.3 million, or 31.1%. The AML
figure includes annual transfers and emergency Congressional
appropriations. The remainder of CBF income derives from Medicare
capitation and risk sharing arrangements, DOL Black Lung payments,
investment income and miscellaneous court settlements.
In passing the Coal Act, Congress recognized the legitimacy of the
Coal Commission's finding that ``retired miners are entitled to the
health care benefits that were promised and guaranteed them.'' Congress
specifically had three policy purposes in mind in passing the Coal Act:
``(1) to remedy problems with the provision and funding of
health care benefits with respect to the beneficiaries of
multiemployer benefit plans that provide health care benefits
to retirees in the coal industry;
(2) to allow for sufficient operating assets for such plans;
and
(3) to provide for the continuation of a privately financed
self-sufficient program for the delivery of health care
benefits to the beneficiaries of such plans.''
Without question Congress intended that the Coal Act should provide
``sufficient operating assets'' to ensure the continuation of health
care to retired coal miners. So what went wrong? How is it that a
decade after passing the Coal Act we find ourselves in a continuing
financial crisis?
Recent Court Decisions
The 2002 GAO study found that a number of court decisions have
eroded the financial condition of the Combined Fund and the legal
onslaught on the Coal Act continues. While Congress clearly intended
that the Coal Act be financially self-sustaining, various court
decisions have undercut Congressional intent. A 1995 decision by a
Federal court in Alabama in NCA v. Chater overturned the premium
determination by the Social Security Administration (SSA) and reduced
the premium paid by employers by about 10%. Over time, the effect of
this decision is to remove hundreds of millions of dollars from the
financing structure of the Coal Act. A 1999 decision by the same court
ordered the CBF to return about $40 million in contributions to the
employers, representing the difference between the original SSA premium
rate actually paid and the rate established in NCA. The trustees of the
CBF filed suit against the Social Security Administration in the
District of Columbia in an attempt to set aside the NCA decision. In
late-2002 the D.C. Court struck down the Social Security
Administration's nationwide application of the NCA decision and ordered
SSA to report to the Court what premium rate should apply to companies
not covered by the NCA decision. In June, SSA notified the Court that
it would apply a higher premium to companies not covered by the earlier
decision. However, over 200 companies have filed another action in
Alabama asking to avoid paying the higher rate.
In 1998, the Supreme Court rendered a decision in Eastern
Enterprises that struck down the obligation to contribute to the CBF
for companies that were signatory to earlier NBCWAs but did not sign
the 1974 or later contracts. Those employers were relieved of their
contribution obligations in the future and the Combined Fund returned
millions of dollars in prior contributions. Most of these retirees are
now part of the unassigned beneficiary pool whose benefits are funded
from other sources. Since that time, a number of other companies who
signed the 1974 or later NBCWAs have also attempted to convince the
courts that they, too, should be relieved of their responsibility. I am
pleased to report that most of these cases have now completed their
appeals process, with the courts holding that the companies cannot walk
away from their Coal Act obligations.
More recently, a court decision in Dixie Fuels ruled that original
determinations of responsible operator status could not be made by the
Social Security Administration after October 1, 1993. If this ruling
had been applied nationwide, it would have relieved a number of
operators of the responsibility to pay for their retirees and create
more orphans that would have to be financed from the AML Fund. There
was a split in interpretation of this issue between the circuit courts
of appeals, with the 6th Circuit ruling that SSA improperly made
assignments after October 1993 and the 3rd and 4th Circuits ruling that
such assignments were not improper. The Supreme Court granted review in
these cases and ruled in Barnhart v. Peabody that the October 1, 1993
statutory date was intended by Congress to spur SSA to action, but did
not relieve operators of their responsibility if assignments were made
after that date.
The cumulative effect of these court decisions threatened a
repetition of the problems and recreation of the crisis of the 1980s
that led to the creation of the Coal Act--employers are being relieved
of liability for their retirees and revenues are being significantly
reduced from the employers that remain obligated. Compounding the
revenue loss stemming from these court decisions is the fact that the
escalator used to adjust the premium for inflation (the medical
component of the Consumer Price Index) is inadequate to measure the
health care cost increases in a closed group of aging beneficiaries who
experience annual increases in utilization. The combination of loss of
income and an inadequate escalator have led to an imminent financial
crisis for the Combined Fund and its beneficiaries.
The Financial Crisis Must Be Averted
Madame Chairman, Congress must act now to avoid a disastrous loss
of benefits for this fragile population. Over their working lives, they
traded lower wages and pensions for the promise of retiree health care
that began in the White House in 1946. In 1992, they willingly
contributed $210 million of their pension money to ensure that the
promise would be kept. Everything that this nation has asked of them--
in war and in peace--they have done. They are part of what has come to
be called the ``Greatest Generation'' and in that assessment I
wholeheartedly concur. They have certainly kept their end of the
bargain that was struck with President Truman. But now they find that
the promise they worked for and depended on is in jeopardy of being
broken. We must stand up and say that this promise will be kept.
We can do so by enacting the CARE 21 proposal that has been
introduced by Congressmen Rahall and Ney with bipartisan support. We
urge members to co-sponsor H.R. 313 and to actively seek its enactment
in the House of Representatives.
Madam Chairman, I thank you for the opportunity to address the
Subcommittee today. I would be happy to answer any questions you may
have.
______
Mrs. Cubin. Thank you, Mr. Roberts.
I would now like to recognize Mr. Masterson.
STATEMENT OF JOHN A. MASTERSON, COUNSEL TO THE GOVERNOR OF
WYOMING
Mr. Masterson. Thank you, Madam Chair. May it please the
Committee, my name is John Masterson. I'm here today on behalf
of Governor Freudenthal, the Governor of Wyoming. I'm his legal
counsel and also the Federal-State relations coordinator for
the State of Wyoming.
I want to thank the Committee for considering the
perspective of the coal-producing States, and I want to state
that the Governor of Wyoming, from his perspective we are
ready, willing, and able to meet anytime and anywhere to help
resolve these issues, to discuss them, and to try to be of
assistance to this Committee in resolving these issues.
If I may also, Madam Chair, I'd like to thank your staff
and the staff of this Committee for their help as well. They've
been very helpful on short notice to try to give me some
semblance of organization. So I thank them for that.
Madam Chair, as the hour is late, I'll cut to the
proverbial chase. Wyoming's biggest issue is the failure of the
Federal Government to remit 50 percent or the State share of
monies to the State of Wyoming. For example, as we indicate in
our written testimony, the State has received only 29 percent
of its fees collected since the approval of Wyoming's
reclamation plan in 1983. In 2002, for example, Wyoming
producers paid in over $126 million, yet Wyoming's AML program
received only $28 million in distributions. That's
approximately 23 percent of money Wyoming contributed when
under law, and from my reading of the law, we are entitled to
half of that.
In addition, the AML Trust Fund now contains almost $1.5
billion, of which $972 million is the States and tribals share.
By law, that money should be distributed back to the States and
its share, not because we demand it, not because we claim it,
but because it must be distributed under the statutes and the
CFRs.
In sum, through fiscal year 2002, Wyoming coal companies
have paid over $1.63 billion into the fund, and less than 30
percent of those collections have been returned to the State of
Wyoming. That approximates about $468 million, leaving a
balance of over $374 million of Wyoming's State share residing
in the AML Fund.
The State of Wyoming recognizes the obligations to the
Combined Benefit Funds. We recognize that these promises must
be kept, and we encourage this Committee to come up with
solutions to that. And we agree that those funds should be--
could be preserved and should be paid out as the promises were
made.
I would note that Wyoming has seen an increasing number of
hazardous incidents. We do have our own interest in Priority 1
and Priority 2 sites. Our internal inventory has about $50
million in remaining P1 and P2 sites, in coal-based sites, and
there are an additional approximately 1,200 projects that would
involve AML funds and need those funds.
Our proposal, Madam Chair, is set forth, and I'll just
summarize it briefly.
First of all, it would be to make a fact-based
determination of the appropriate level of tax to be charged on
surface, underground, and lignite coal. We believe that these
rates were arbitrarily set 26 years ago when this fund was
established, and substantial changes in technology and the
mining industry lead us to the belief that those fees need to
be reassessed and re-established.
Again, accept that the Combined Benefit Fund commitment
needs to go forward. We would recommend adjusting the
allocation formula to increase allocations to certified States,
such as Wyoming, while diverting all available excess,
including RAMP funds and those associated with belt-tightening
at OSM, to solve historical coal problems.
The final issue that we have is the request that, in
addition, going forward Wyoming again receive its share of AML
monies. There is a substantial amount of funds there that we
believe we are entitled to. We would recommend some other
issues. In our written testimony, we state that our
recommendation would be to eliminate the Rural Abandoned Mine
Program. We have heard anecdotally that approximately 25
percent of OSM's money goes toward administration. If true, we
believe that that's probably in excess of what it should be.
Wyoming's administration costs on AML is approximately 3.5 to
4.5 percent of the amount of money it receives.
We would recommend the creation of an independent funding
source for the CBF shortfall, and we would also recommend that
the AML take its distribution--or its appropriations off-
budget.
Thank you for your time, Madam Chair.
[The prepared statement of Mr. Masterson follows:]
Statement of John A. Masterson, Counsel to
The Honorable David D. Freudenthal, Governor, State of Wyoming
INTRODUCTION
Good morning, Madam Chairwoman. My name is John A. Masterson, and I
am the legal counsel to Governor David D. Freudenthal of the State of
Wyoming. I have been invited here today to speak briefly on the
reauthorization of the Surface Mining Control and Reclamation Act
(SMCRA) and the Abandoned Mineral Lands Fund, from the perspective of
Wyoming, our nation's largest producer of coal and, therefore, the
nation's largest source of AML funds. I commend you for your
willingness to hear from representatives of coal-producing states about
this important issue. We stand ready to work with Congress in
addressing the shortcomings of SMCRA and the need to distribute AML
funds. On behalf of Governor Freudenthal, I wish to thank the members
of the Subcommittee on Energy and Mineral Resources of the House
Committee on Resources and Chairwoman Barbara Cubin for inviting the
State of Wyoming to testify at this hearing today.
HISTORY
When the Surface Mining Control and Reclamation Act was enacted in
1977, it included a fee on coal production. Proceeds from the fee were
placed in the Abandoned Mine Land (AML) fund. By law, one-half of the
fees collected in each state or on tribal lands were to be returned to
the state or tribe of origin. The other half of the collections were to
be spent at the discretion of the Secretary of the Interior to address
reclamation issues of national importance. All AML expenditures,
including state and tribal shares and the OSM's allocation, are subject
to the Federal budgeting process and annual appropriation by Congress.
Despite the bill's intent and the clear mandate of law, Congress
has never appropriated to states and tribes the 50% of fee collections
guaranteed in the law. Wyoming, for example, has received only 29% of
fees collected in our state since the approval of Wyoming's reclamation
plan in 1983. This refusal of the Federal Government to discharge its
obligations to the states is of grave concern to Wyoming.
In addition to the failure to allocate these funds, the
unappropriated pool of money became an irresistible source of
substantial interest income. As a result, SMCRA was amended by the Coal
Act of 1992 to allocate that interest to mitigate deficits in the
United Mine Workers Combined Benefit Fund (CBF). This diversion of
interest deprives the states and tribes of an additional $70 million in
annual revenue that could have been used to remediate the public safety
hazards of unreclaimed mine sites. The potential to add additional
beneficiaries to CBF coverage is another concern to Wyoming, as it
would further reduce the pool of funds available to meet the original
intent of SMCRA.
We are very concerned that Wyoming's coal producers will be asked
to bear the largest burden of AML fee collections without the return of
an equitable portion of those funds to Wyoming. In 2002, Wyoming
producers paid in over $126 million; yet, Wyoming's AML program
received only $28 million in distributions. That's only 23% of the
money Wyoming contributed, while other states have received 40%, 50%
and even over 100% of their contributions.
Appropriations from Congress to address AML problems in Wyoming and
other coal states are constrained by budget ceilings established by
Office of Management and Budget. Annual AML distributions to states and
tribes have never reached the 50% of AML fee collections mandated by
Congress in SMCRA. As a result, the AML Trust Fund now contains almost
$1.5 billion, of which $972 million is the states' share balance, which
by law should have been distributed to AML states and tribes.
Through Fiscal Year 2002, Wyoming coal companies have paid over
$1.637 billion into the fund. Less than 30% of these collections have
returned to the State. Wyoming has received only $468.5 million in
annual allocations. Over $374 million of Wyoming's state share resides
in the AML fund. This money--now idle in the Federal account--could be
put to productive use reclaiming hazardous mine sites and mitigating
the deleterious effects of mining and mineral processing activities in
Wyoming communities.
OBLIGATIONS TO COMBINED BENEFITS FUND
The 1992 Coal Act shifted the AML Trust Fund interest away from
reclamation and towards the social needs of United Mine Workers'
dependents and the desires of the bituminous coal operators by
subsidizing shortfalls in the Combined Benefits Fund (CBF). These
social priorities have steered AML funds away from the needs of states
and tribes, especially those states that produce the lion's share of
the Nation's coal. Wyoming is here today to remind you of the
obligations of law adopted as part of SMCRA in 1977. States and tribes
are to receive one-half of AML fee collections within their borders.
The Federal Government has not lived up to this law, and appears to be
moving even further from its original commitments under pressure from
smaller, perhaps more vocal, constituencies.
Wyoming recognizes the Federal Government's obligations to the
Combined Benefit Fund and accepts that the promises made to the miners
who produced the energy to fuel America's industrial development must
be kept. Wyoming encourages Congress to consider creative alternative
funding mechanisms which would sever CBF dependency from AML revenues
and allow those funds to be applied to the priorities established by
Congress. The United Mine Workers Combined Benefits Fund is a health
care problem that should not be resolved in the context of the AML fund
debate. If the CBF funding remains a part of the AML obligations, then
Wyoming suggests that the unpaid Trust Fund balance due the states be
used to fund the required benefits going forward.
WYOMING PRIORITIES AND REMAINING WORK
Wyoming still has a substantial inventory of Priority 1 and
Priority 2 coal and noncoal sites that must be reclaimed to ensure a
safe environment for Wyoming citizens. The reclamation of highwalls,
pits, mine openings, coal fires, subsidence features and other hazards
must be addressed. Wyoming's history of coal production, first to fuel
the transcontinental railroad and later for power generation, has left
a legacy of underground coal mines and future hazards. Each year,
Wyoming sees an increasing number of hazardous subsidence features in
schoolyards, fairgrounds, public recreation areas, and close by public
roads, railroads and power transmission lines. These features will be a
danger to Wyoming citizens and visitors to our state for years to come.
Funds must be available into the future to address these inevitable
hazards.
While a ``certified'' state, Wyoming has eligible mine-related
hazards awaiting reclamation. Wyoming's internal inventory has about
$50 million in remaining P1 and P2 coal sites and $60 million in
remaining non-coal sites. There are an additional 1,200 projects that
will be added to our inventory as soon as the cost estimates are
completed. Community infrastructure work also remains a significant
problem facing our state.
In addition, Wyoming vast coal reserves are constantly threatened
by mine fires and coal seam fires. One grass fire in 2002 ignited 56
coal seam fires on Federal, state, and private land in one Wyoming
county. The Bureau of Land Management and private landowners have
repeatedly requested assistance from Wyoming AML to suppress in situ
coal seam fires. The prolonged drought in Western states means that
Wyoming will see continued multiple occurrences of mine fires and in
situ seam fires. Wyoming AML is currently monitoring two dozen mine
fires in various areas of the state, including one within a few hundred
yards of a residential and commercial area of the Town of Kemmerer.
While the cost of containment of these fires cannot be accurately
determined, estimates range from $1 million to $10 million per fire.
WYOMING'S PROPOSAL
Wyoming has reviewed the various proposals to amend SMCRA to extend
fee collections and modify program guidelines and conditions. As of
today, none of these alternatives has been introduced in Congress.
Rather than respond to the proposals of other interests, allow us to
candidly state Wyoming's concerns for you.
Frankly, Wyoming's interests would be best be served by termination
of the reclamation fee. The advantages to Wyoming's economy of allowing
the fee to expire outweigh benefits derived from the distribution of
AML funds. This is especially true since Congress has not appropriated
the 50% share promised in SMCRA and shows no inclination to release
Wyoming's share of the AML trust fund. In our view, extending this tax
also amounts to the continuation of a selective tax on a single
industry and the citizens consuming energy from this industry. The
problem this tax is designed to address--abandoned mine lands from
prior generations--is a national legacy and should be remedied by the
expenditure of general revenues rather than a selective tax.
Wyoming recognizes, however, the unfortunate reality that this tax
will be extended in some form. Therefore, we ask you consider the
following as you move forward:
Make a fact-based determination of the appropriate level
of tax to be charged on surface, underground, and lignite coal.
Evaluate the respective rates with a view towards lessening the overall
tax burden, as well the particular tax burden, inflicted upon Wyoming's
coal industry. Rates were arbitrarily set at the time the tax was
established, and in the 26 years since, substantial changes in
production economics, technology and demand require a factual
investigation to equalize the fees.
Accept that the Combined Benefit Fund commitment must be
honored, and develop an alternative funding mechanism that does not
divert future AML funds to this purpose.
Adjust the allocation formula to increase allocations to
certified states (like Wyoming) while diverting all available excess
(including RAMP and some belt tightening at OSM) to historical coal
problems. This concept is further discussed below.
Take AML distributions off budget to avoid the
limitations imposed on AML appropriations by the Federal budgeting
process. This would provide flexibility to shift increasing amounts to
eastern states with the greatest need.
Reduce restrictions on certified states to address non-
coal and infrastructure needs in communities impacted by mining
practices. Certified states should have the ability to budget the
expenditure of AML funds generated in their states based on priorities
established by the State, not the Federal Government.
The monies previously collected and owed to the states
must be paid according to law. Wyoming has been repeatedly advised that
OSM cannot pay the states the money owed under the current tax because
``the money doesn't exist.'' This position is not only contrary to
Federal law requiring the redistribution of the states' shares, but
minimizes the reality that these funds represent reclamation, jobs and
public health and welfare in our state. These taxes were real when they
were collected and are not a simple accounting item.
Similarly, Wyoming must receive its share of AML monies
going forward. These funds must no longer be subject to convenience or
legislative whim. Congress has stated that this problem is significant
enough to justify congressional action and a Federal tax. If the
problem is indeed this serious, and if we are to maintain credibility
in addressing it, then the problem is too serious to allow funds
collected for the states and owed the states to go unallocated.
ADDRESSING HISTORICAL COAL NEEDS
Wyoming recognizes that Eastern states--Pennsylvania, West
Virginia, Kentucky--have substantial remaining historical Priority 1
and 2 coal sites that must be addressed with the proceeds from the
reclamation fee. Wyoming believes that a fair and equitable
distribution of those funds can satisfy reasonable needs for all states
participating in the program established by Title IV of SMCRA. We would
suggest the following steps:
Eliminate the Rural Abandoned Mine Program (RAMP) and
dedicate that 10% of future collections to historical coal sites using
existing distribution formulas. This reallocation would make an
additional $28 million available annually to distribute for historical
coal problems.
Tighten belts at OSM. OSM has proposed to transfer
certain functions such as the Emergency Program to the AML States. A
reduction of the OSM share of collections from 20% to 15% would add
$14.4 million annually to the amount available to historic coal states.
Create an independent funding source for CBF shortfalls.
Reducing CBF demands on AML Trust Fund interest could make $20 million
to 30 million available annually.
Take some portion of AML appropriations off budget. AML
distributions to states and tribes have been limited by Office of
Management and Budget agency budget ceilings. Current appropriations to
all states and tribes have been about $165 million per year, and it
will be difficult to exceed this total amount unless an off-budget
compromise is made.
SUMMARY AND CONCLUSIONS
Wyoming has long suffered the severe impacts of fluctuations in the
State's extractive mineral-based economy. Wyoming's historical role as
a major energy producer for the nation will continue to have negative
effects on Wyoming citizens for generations to come. Coal mine
subsidence, coal fires, highwalls, pits, bogs, and mine openings will
always be a fact of life in Wyoming.
Further, public facilities in mining-impacted Wyoming communities--
schools, transportation, water systems, sewage systems, emergency
service delivery, medical facilities and other community
infrastructure--will continue to suffer from the traditional ``boom and
bust'' economic cycle that is endemic to the natural resource-based
economy found not only in Wyoming but also in the eastern states with
high historical coal production. Any reduction in AML revenue,
especially coupled with the continued burden of the AML tax on the
State's coal producers, is an unacceptable combination that will prove
detrimental to Wyoming's economy and its citizens. Our state needs, in
fact, requires, either relief from the fee or a guarantee that the
State will receive an increased share of future AML revenues.
Wyoming respectfully requests that we be included in future
discussions regarding AML fund extensions. Wyoming is America's largest
coal-producing state and has a long history of coal production to meet
the nation's industrial needs. Since the construction of the
transcontinental railroad in the early 1860's, and into the foreseeable
future, Wyoming will be a vital source of natural resources for our
country. We are proud of our role in the economy, industry and
environment of the United States, but we cannot forget that, in this
issue, our quality of life, safety, environment and health are at
stake.
Wyoming thanks the Subcommittee on Energy and Mineral Resources of
the House Committee on Resources and its Chairwoman, Barbara Cubin, for
the opportunity to present this testimony today.
______
Mrs. Cubin. Thank you very much, Mr. Masterson.
I now recognize Murray Balk.
STATEMENT OF MURRAY J. BALK, CHIEF, SURFACE MINING SECTION,
KANSAS DEPARTMENT OF HEALTH AND ENVIRONMENT, ON BEHALF OF THE
NATIONAL ASSOCIATION OF ABANDONED MINE LAND PROGRAMS AND THE
INTERSTATE MINING COMPACT COMMISSION
Mr. Balk. Good afternoon, Madam Chairwoman. My name is
Murray Balk, and I'm the chief of the Surface Mining Section,
Kansas Department of Health and Environment. I'm appearing
today on behalf of the National Association of Abandoned Mine
Land Programs and the Interstate Mining Compact Commission.
All the States and tribes within the association and all
the States within the IMCC administer AML programs funded and
oversighted by the Office of Surface Mining. I am pleased to
appear before the Subcommittee to discuss the future of the
Abandoned Mine Land Program. In particular, I would like to
address the views of the States regarding the future
collections of AML fees, adequate funding for Abandoned Mine
Land Programs, and related legislative adjustments to Title IV
of SMCRA.
As we draw closer to the September 30, 2004, expiration
date, we are beginning to see more proposals on how SMCRA
should be amended, if at all. The States through the IMCC, the
association, and the Western Governors' Association have
recently advanced several proposed amendments to SMCRA. We are
looking at only those changes necessary to accomplish several
key objectives. These objectives are as follows:
First, to extend fee collection authority for an additional
12 years until September 30, 2016.
To adjust the procedure by which States and tribes receive
their annual allocations of monies to address AML problems.
To confirm recent congressional intention to eliminate the
Rural Abandoned Mine Land Program and to reallocate those
monies to the historic coal production share.
To assure adequate funding for minimum program States.
To address a few other select provisions of Title IV that
will enhance the overall effectiveness of the AML Program,
including re-mining incentives, state set-aside programs,
handling of liens, and enhancing the ability of States to
perform water line projects.
Finally, to address how the accumulated, unappropriated
State and tribal share balances in the fund will be handled
assuming that the interest in the fund is no longer needed to
address shortfalls in the UMW Combined Benefit Fund.
Over the next few months, we must reconcile all the various
interests and concerns attendant to the administration of the
AML Program in a way that assures the continuing integrity,
credibility, and effectiveness of this successful and
meaningful program. The States and tribes through their
associations welcome the opportunity to work with your
Subcommittee and further affected parties to address the issues
that attend the future of the AML Program. Our overriding
concerns can be summarized as follows:
The first concern would be that adequate and stable funding
must be provided to the States and tribes on an annual basis.
Next, the unexpended State share balance in the AML Trust
Fund should be distributed to all the States and tribes.
States and tribes until Title IV of SMCRA should remain the
primary delivery mechanism for AML monies based on their
demonstrated history of effective and efficient program
implementation. The States have over 25 years of experience in
this area and have demonstrated their expertise and efficiency
in running these programs. We, therefore, advocate a continuing
significant and meaningful State and tribal lead with regard to
both SMCRA and other AML-related programs.
Another concern is funding for the ``minimum program''
States. It needs to be restored to the statutorily authorized
amount of not less than $2 million annually.
Any adjustment to the AML Program should not inhibit or
impair re-mining opportunities or incentives.
The sixth concern we have is that any adjustments to the
existing system of priorities under Title IV must consider the
impacts to existing State set-aside programs and to current
State efforts to remediate acid mine drainage.
The seventh concern is that any adjustments to the current
certification process should not inhibit the ability of States
to address high-priority non-coal projects.
The eighth concern is that any review or adjustments to the
current AML inventory should account for past discrepancies and
provide for the inclusion of legitimate new sites.
Finally, any adjustments to Title IV of SMCRA must be
presented and considered in a judicious and productive
environment that allows for all affected parties' concerns to
be heard and addressed. In this regard, it should be kept in
mind that any legislative adjustments which have the result of
significantly undermining State AML funding or the capabilities
of State AML Programs could lead State legislatures to
seriously reconsider SMCRA primacy entirely--both for Title IV
and Title V.
Madam Chairman, at this time I would ask that the briefing
book prepared by the IMCC and the National Association of
Abandoned Mine Land Programs be placed in the record, with your
permission.
Mrs. Cubin. Without objection, so ordered.
[NOTE: The briefing book has been retained in the
Committee's official files.]
Mr. Balk. We appreciate the opportunity to present this
testimony today, Madam Chairwoman, and look forward to working
with you in the future. I would be happy to answer any
questions you have or provide follow-up answers at a later
time.
Thank you.
[The prepared statement of Mr. Balk follows:]
Statement of Murray J. Balk, Chief, Surface Mining Section, Kansas
Department of Health and Environment, on behalf of The National
Association of Abandoned Mine Land Programs and The Interstate Mining
Compact Commission
Good morning, Madam Chairwoman. My name is Murray Balk and I am
Chief of the Surface Mining Section within the Kansas Department of
Health and Environment. I am appearing here today on behalf of the
National Association of Abandoned Mine Land Programs (NAAMLP) and the
Interstate Mining Compact Commission (IMCC). The NAAMLP consists of 30
states and Indian tribes with a history of coal mining and coal mine
related hazards. These states and tribes are responsible for 99.5% of
the Nation's coal production. All of the states and tribes within the
Association administer AML programs funded and oversighted by the
Office of Surface Mining (OSM). I am also representing IMCC, an
organization of 20 states throughout the country that together produce
some 60% of the Nation's coal as well as important noncoal minerals.
Each IMCC member state has active coal mining operations as well as
numerous abandoned mine lands within its borders and is responsible for
regulating those operations and addressing mining-related environmental
issues, including the remediation of abandoned mines. I am pleased to
appear before the Subcommittee to discuss the future of the Abandoned
Mine Reclamation Program, which is established under Title IV of the
Surface Mining Control and Reclamation Act of 1977 (SMCRA). In
particular, I would like to address the views of the states and tribes
under SMCRA regarding the future collection of AML fees from coal
producers, adequate funding for our abandoned mine land programs, and
related legislative adjustments to Title IV of SMCRA.
Last year, Madam Chairwoman, we celebrated the 25th anniversary of
the Surface Mining Control and Reclamation Act. During the past quarter
of a century, significant and remarkable work has been accomplished
pursuant to the abandoned mine lands program under SMCRA. Much of this
work has been documented by the states and tribes and OSM in various
publications, especially during the past few years, including the
twentieth anniversary report of OSM and a corresponding report by the
states and tribes. In addition, OSM's Abandoned Mine Land Inventory
System (AMLIS) provides a fairly accurate accounting of the work
undertaken by most of the states and tribes over the life of the AML
program and an indication of what is left to be done.
My comments today are intended to be representative of where I
believe the states and tribes are coming from when we look to the
future of the AML program. We strongly feel that the future of the AML
program should continue to focus on the underlying principles and
priorities upon which SMCRA was founded--protection of the public
health and safety, environmental restoration, and economic development
in the coalfields of America. Over the past 25 years, tens of thousands
of acres of mined land have been reclaimed, thousands of mine openings
have been closed, and safeguards for people, property and the
environment have been put in place. Based on information maintained by
OSM in its Abandoned Mine Land Inventory System (AMLIS), as of
September 30, 2002, the states and tribes have obligated 94% of all AML
funds received and $1.7 billion worth of priority 1 and 2 coal-related
problems have been reclaimed. Another $319 million worth of priority 3
problems have been funded or completed (many in conjunction with a
priority 1 or 2 project) and $309 million worth of noncoal problems
have been funded or reclaimed.
It should be noted that any monetary figures related to the amount
of AML work accomplished to date are based on OSM calculations used for
purposes of recording funded and completed AML projects in AMLIS. What
they do not reflect, however, is the fact that a significant amount of
money is spent by the states and tribes for related project and
construction costs that do not find their way into the AMLIS figures
based on how those numbers have been traditionally calculated by OSM.
These costs (which amount to hundreds of millions of dollars for all
states and tribes) include engineering, aerial surveys, realty work,
inspections, and equipment--all of which are part of the normal,
routine project/construction costs incurred as part of not only AML
work, but of any construction-related projects. There is no dispute
between OSM and the states and tribes about the legitimacy or nature of
these items being a part of the true cost of AML construction projects.
In fact, OSM's own Federal Assistance Manual for AML Projects
recognizes these costs as ``project and related construction costs''.
As a result, the actual amount of money that has been spent by the
states and tribes for construction or project costs is approximately
$2.8 billion--$2.5 billion of which was for coal projects and $.3
billion for noncoal projects. Also, of the $3.3 billion provided to
states and tribes in Title IV monies over the years, only $500 million
has been spent on true administrative costs, which reflects a modest
average of 15%.
I could provide numerous success stories from around the country
where the states' and tribes' AML programs have saved lives and
significantly improved the environment. In fact, we presented an
overview of several recent AML projects at a Congressional staff
briefing that was held in April of this year, and I would like to
submit a copy of those materials for the record. Suffice it to say that
the AML Trust Fund, and the work of the states and tribes pursuant to
the distribution of moneys from the Fund, have played an important role
in achieving the goals and objectives set forth by Congress when SMCRA
was enacted--including protecting public health and safety, enhancing
the environment, providing employment, and adding to the economies of
communities impacted by past coal mining. OSM will likely provide the
Subcommittee with an update from AMLIS which shows our progress to date
in addressing these problems. When you review the AML progress report,
please remember that the AML program is first and foremost designed to
protect public health and safety. Even though accomplishments in the
inventory are reported in acreage for the sake of consistency, the bulk
of state and tribal AML projects directly correct an AML feature that
threatens someone's personal safety or welfare. While state and tribal
AML programs do complete significant projects that benefit the
environment, the primary focus has been on eliminating health and
safety hazards first and the inventory of completed work reflects this
fact.
What the inventory also reflects, at least to some degree, is the
escalating cost of addressing these problems as they continue to go
unattended due to insufficient appropriations from the Fund for state
and tribal AML programs. Unaddressed sites tend to get worse over time,
thus increasing reclamation costs. Inflation exacerbates these costs.
The longer the reclamation is postponed, the less reclamation will be
accomplished. The inventory is also dynamic, which we believe was
anticipated from the inception of the program. The states and tribes
are finding new high priority problems each year, especially as we see
many of our urban areas grow closer to what were formerly rural
abandoned minesites. New sites also continually manifest themselves due
to time and weather. For instance, new mine subsidence events and
landslides will develop and threaten homes, highways and the health and
safety of coalfield residents. This underscores the need for continual
inventory updates, as well as constant vigilance to protect citizens.
In addition, as several states and tribes certify that their abandoned
coal mine problems have been corrected, they are authorized to address
the myriad health and safety problems that attend abandoned noncoal
mines. In the end, the real cost of addressing priority 1 and 2 AML
coal problems likely approaches $6 billion. The cost of remediating all
coal-related AML problems, including acid mine drainage (priority 3
sites), could be 5 to 10 times this amount and far exceeds available
monies.
A word about the plight of those states that have traditionally
been labeled as ``minimum program'' states due to their minimal coal
production and thus minimal AML fee collection: the evolving inventory
concerns mentioned previously, as well as the increasing cost of
undertaking AML projects, are both exacerbated in these states. Do not
be misled by the term ``minimum'' when we speak of these programs,
since many of these states have not been minimally impacted by pre-
SMCRA mining. For example, Kansas alone has nearly $200 million of
priority 1 and 2 AML problems that remain unreclaimed. The minimum
program states struggle to simply maintain a cost-effective AML program
with their most recent annual $1.5 million allocations, much less
undertake AML projects that can approach one million dollars. Without
the statutorily authorized amount of $2 million mandated by Congress in
the 1990 amendments to Title IV of SMCRA, these states will continue to
be forced to fund or even delay high priority projects over several
years. Not only is this dangerous, it is not cost-effective. As your
Subcommittee considers amendments to Title IV of SMCRA, we urge you to
resolve the dilemma faced by the minimum program states and to provide
meaningful and immediate relief.
When considering the economic impacts of potential AML legislation,
it should also be kept in mind that, since grants were first awarded to
the states and tribes for AML reclamation, over $3 billion has been
infused into the local economies of the coalfields. These are the same
economies that have been at least partially depressed by the same
abandoned mine land problems that the program is designed to correct.
In fact, those dollars spent in economically depressed parts of the
country, such as Appalachia, could be considered part of an investment
in redevelopment of those regions. The AML program translates into
jobs, additional local taxes, and an increase in personal income for
the Nation's economy. For each $1 spent on construction, $1.23 returns
to the Nation's economy. For each $1 million in construction, 48.7 jobs
are created (U.S. Forest Service IMPLAN, 1992 data for non-residential
and oil and gas construction). The AML expenditures over the past 24
years have returned over $4 billion to the economy and have created
some 150,000 jobs. While this is significant, much more growth could
occur if the entire Fund was used for its intended purposes. For
example, it is estimated that $285 million will be collected from AML
receipts in FY 2003. The Administration has proposed to return
approximately half of that to the states. However, if the Federal
Government returned all $285 million to the local economies for
abandoned mine land re-construction, almost 7,000 additional jobs could
be created with an additional $174 million boost to coal region
economies. In this manner, money would be going to work for the
communities who are experiencing the consequences of pre-law mining
practices as intended by SMCRA.
The ability of the states to accomplish the needed reclamation
identified in current inventories is being constrained by the low level
of funding for state AML programs. Since the mid-1980's, funding for
state AML grants has been declining. In recent years, we have seen the
President's budget propose significant reductions for state AML grants,
which Congress has ultimately (and thankfully) restored. This year, we
have seen a continued attempt to decrease the AML funding level once
again--without justification or rational explanation. While we are well
aware of the Administration's efforts to reduce the overall budget in
order to meet other priorities related to Homeland Security and the War
on Terrorism, holding onto AML money that is already statutorily
dedicated to provide local improvements to health, safety, the
environment, local economies and job opportunities seems to be
counterproductive to ``homeland security''.
The future of the AML Fund and its potential impacts on the
economy, public safety, the land, our Nation's waters and the
environment will depend upon how we manage the Fund and how we adjust
the current provisions of SMCRA concerning the Fund. As we draw closer
to the September 30, 2004 expiration date, we are beginning to see more
proposals for how the Fund should be handled and how SMCRA should be
amended, if at all. The states and tribes, through IMCC, the National
Association of Abandoned Mine Land Programs and the Western Governors
Association have recently advanced several proposed amendments to SMCRA
that are few in number and scope and that reflect a minimalist approach
to adjusting the existing language in SMCRA and to incorporate only
those changes necessary to accomplish several key objectives. They are
as follows:
To extend fee collection authority for an additional 12
years until September 30, 2016, which should be sufficient to address
the majority of high priority coal health and safety problems
throughout the country.
To adjust the procedure by which states and tribes
receive their annual allocations of moneys to address AML problems.
This has been one of the greatest inhibitions to progress under Title
IV of SMCRA in recent years and must be addressed if we are to enhance
the ability of the states and tribes to get more work done on the
ground within the extended time frame of 12 years. Accordingly, the
states and tribes recommend taking their portion of the AML allocation
off-budget so that they are able to count on certain, consistent
funding from year to year, thereby allowing them to more effectively
and efficiently plan and deliver their services.
To confirm recent Congressional intent to eliminate the
Rural Abandoned Mine Program (RAMP) under Title IV and to reallocate
those moneys to the historic coal production share. While these moneys
would be used primarily to address high priority coal related sites,
the states and tribes may coordinate their efforts with the Natural
Resources Conservation Service and the local soil and water
conservation districts in an attempt to address their concerns as well.
To assure adequate funding for minimum program (under-
funded) states who have consistently received less than their promised
share of funding over the past several years, thereby undermining the
effectiveness of their AML programs.
To address a few other select provisions of Title IV that
will enhance the overall effectiveness of the AML program, including
remining incentives, state set-aside programs, handling of liens, and
enhancing the ability of states to undertake water line projects.
Finally, to address how the accumulated, unappropriated
state and tribal share balances in the Fund will be handled assuming
that the interest in the Fund is no longer needed to address shortfalls
in the UMW Combined Benefit Fund.
Madam Chairwoman, it is obvious from an assessment of the current
inventory of priority 1 and 2 sites that there will not be enough money
in the AML Trust Fund to address all of these sites before fee
collection is set to expire in 2004. It is even more obvious that,
regardless of what the unappropriated balance in the Fund is (currently
$1.7 billion) and what future fee collections will add to that balance
over the next year, current Congressional appropriations for state and
tribal AML program grants are woefully inadequate and are not keeping
pace with our ability and desire to address the backlog of old as well
as continually developing high priority AML problems. We are therefore
faced with a significant challenge over the next few months--and that
is to reconcile all of the various interests and concerns attending the
administration of the AML program under Title IV of SMCRA in a way that
assures the continuing integrity, credibility and effectiveness of this
successful and meaningful program under SMCRA.
The states, through their associations, welcome the opportunity to
work with your Subcommittee, Madam Chairwoman, and other affected
parties to address the myriad issues that attend the future ability of
the AML Fund to address the needs of coalfield citizens Our overriding
concerns can be summarized as follows:
Adequate and stable funding must be provided to the
states and tribes on an annual basis that will allow the states and
tribes to address the AML problems their citizens are experiencing and
to implement their respective AML programs to provide the services
intended by SMCRA.
The unexpended state share balance in the AML Trust Fund
should be distributed to all the states and tribes as expeditiously as
possible so states and tribes can address existing AML problems before
inflationary impacts result in more costly reclamation and thus less
reclamation.
States and tribes under Title IV of SMCRA should remain
the primary delivery mechanism for AML moneys based on their
demonstrated history of effective and efficient program implementation.
In this regard, the states and tribes have concerns about the
proliferation of several recent programs throughout the Federal
Government (Bureau of Land Management, National Park Service, Forest
Service, Environmental Protection Agency, Bureau of Reclamation, U.S.
Army Corps of Engineers, to name a few) that are aimed at addressing
abandoned mine lands--at both coal and noncoal sites. While we support
additional Federal dollars from all sources that will assist with the
clean up of abandoned mined lands, we want to guard against competing
programs diluting the overall pool of funds available for service
delivery through state and tribal programs. We have worked
cooperatively with many of these Federal agencies in the past on AML
initiatives and we believe it is critical that we continue to achieve
maximum cooperation and coordination, thus assuring efficient use of
limited resources. The states and tribes have over 25 years of
experience in this area and have demonstrated their expertise and
efficiency in running these programs. We therefore advocate a
continuing significant and meaningful state/tribal lead with regard to
both SMCRA and other AML related programs.
Funding for the ``minimum program'' states must be
restored to the statutorily authorized amount of not less than $2
million annually and these states be made whole for past under-
allocations.
Any adjustment to the AML program should not inhibit or
impair remining opportunities or incentives.
Any adjustments to the existing system of priorities
under Title IV must consider the impacts to existing state set-aide
programs and to current state efforts to remediate acid mine drainage.
Any adjustments to the current certification process
should not inhibit the ability of the states and tribes to address high
priority noncoal projects.
Any review or adjustments to the current AML inventory
should account for past discrepancies and provide for the inclusion of
legitimate new sites.
Any adjustments to Title IV of SMCRA must be presented
and considered in a judicious and productive environment that allows
for all affected parties' concerns to be heard and addressed, including
coalfield residents who are directly affected by AML dangers and who
have been adversely impacted by the unappropriated balance that delays
further restoration of their communities. In this regard, it should be
kept in mind that any legislative adjustments which have the result of
significantly undermining state AML funding or the efficacy of state
AML programs could lead state legislatures to seriously reconsider
SMCRA primacy entirely--both Title IV and Title V. This very scenario
was contemplated by the framers of SMCRA who structured the Act so that
the Title IV AML program would serve as an incentive for states to
adopt and implement Title V regulatory programs. Should the AML
``carrot'' be chopped up, the desire to maintain Title V primacy could
be seriously re-thought by some state legislatures, particularly during
difficult budget times, thus placing OSM in the undesirable position of
having to run these programs at a significantly increased cost to the
Federal Government.
We appreciate the opportunity to present this testimony today,
Madam Chairwoman, and look forward to working with you in the future. I
would be happy to answer any questions you may have or to provide
follow up answers at a later time.
______
Mrs. Cubin. Thank you very much.
I will be brief since the hour is late. I wanted to ask Mr.
Masterson a few questions.
Do you have any thoughts on how we can change or does the
Governor on how we can change the fee levels for coal that you
addressed in your testimony? For example, would a Btu-based
assessment be more appropriate, do you think?
Mr. Masterson. The evaluation that we have done to this
point indicates that we would be interested in--yes, we think a
Btu-based tax would be more appropriate. What shape it takes,
what rates they take, is something that, you know, remains to
be seen. But, in principle, yes, we have no problem with the
Btu-based tax.
Mrs. Cubin. Do you have any thoughts or suggestions about
where we can find additional funding for the CBF?
Mr. Masterson. I do not. I'm aware that the proposals to
bond it are out there. I am aware investments similar to the
type of a railroad retirement fund allowing investments to be
made to better--to receive more income and interest off those
accounts are out there. I have, candidly, not had the time to
examine those, and I am not aware of the bottom line or what
significance those would have. I'm sorry.
Mrs. Cubin. Thank you.
You mentioned that Wyoming has about $50 million in
Priority 1 and Priority 2 sites that is still wanting. Are
those new sites?
Mr. Masterson. Their sites are constantly reappearing. I'm
not sure that they're new insofar as when they were created.
I'll give you an example.
Last week, the Department of Environmental Quality received
a report about a sinkhole near the town of Hanna. That was a
brand-new site that we were not aware of. It turned out that
the sinkhole is near a county road underneath a power
transmission line, and it appears to be the result of an
underground mine, probably 75, 80 years old.
So a number of them have been inventoried, and we do have a
list of those sites if you would like me to provide them to
you, but there are constantly--there are new sites being added
as they appear.
Mrs. Cubin. Yes, I would appreciate it if you would supply
that to the Committee.
How quickly do you think, if you had the $50 million
available, that the sites could be cleaned up? Do you have an
estimate?
Mr. Masterson. I am advised, Madam Chair, by John Corra, C-
o-r-r-a, who's the head of the Wyoming Department of
Environmental Quality, that at this time Wyoming is capable of
spending approximately $25 million a year in reclaiming these
sites. It's difficult to give an answer, but if I had to give
one, that's the figure that we can spend in a year. But, you
know, technical problems and the difficulties of reclaiming
those sites may prevent other problems. I would imagine--and
it's simply a guess--5 to 10 years if the funds were available.
Mrs. Cubin. Thank you very much.
Mr. Masterson. Thank you, ma'am.
Mrs. Cubin. Mr. Rahall?
Mr. Rahall. Thank you, Madam Chair. I thank each of the
panelists for their testimony here today, and, Cecil, for your
very compelling testimony.
As you know and you have stated in both your summary
statement and in your detailed submittal for the Committee, we
have been focusing on the financial crisis faced by the CBF,
and the record is clear Congress established the program. There
is a Federal commitment here going back to 1947, as you said.
And we have on several occasions passed emergency funding
measures for it, and obviously we have a commitment to it. The
record is very clear.
So while focusing on the CBF, I kind of, I guess, found
that something else creeped up on me, and that is all the steel
companies that have been going bankrupt, and that has created,
of course, a new class of orphan beneficiaries, some 5,000
strong.
I would appreciate it if you would just relay to the
Subcommittee the distinction between the CBF and the 1992 plan,
whether you believe Congress has a responsibility to it, and
any suggestions you might have for coming up with solutions to
the problems.
Mr. Roberts. Yes, the Coal Act that was passed in 1992
spoke to two different funds. One we just discussed with
respect to the CBF, which has drawn the most attention over the
years because of the age of this population. But Congress also
spoke with the understanding that some of the people who were
made this promise were still working at the time that Congress
acted in 1992. So Congress established a cutoff date of October
1st of 1994, about 2 years after the passage of the act, saying
that if anyone would retire by that date, they would still be
covered by the Coal Act. However, the coal companies had to be
the primary provider of that medical care, with the
understanding that some of these companies may have already
gone out of business or actually could go out of business in
the future. And what has happened with respect to a number of
steel companies, the most recent one Bethlehem Steel--I have a
great interest in that one because my father worked for Beth.
Energy all of his life. Well, all of his life he worked at the
same company that ended up being owned by Bethlehem Steel. They
just recently--there's been something in the headlines--cut off
90,000 beneficiaries' health care to the Steelworkers Union.
What happens if you work for one of these companies and you
retired before October 1st of 1994 and they were providing your
benefits, if the company happens to go out of business, then
you are transferred, if you're a pensioner, over to what is
known as the 1992 Benefit Plan. And that is paid for by
assessing the coal industry that was signatory to a contract in
1988 or later. What this has done is created quite a burden on
those operators, some of which are now in Wyoming, by the way,
like Peabody and Arch in particular. They have had to come up
with--well, they haven't yet, but they will have to come up
with money by about 2005 to help pay for these particular
groups of orphans.
That number will be limited because you have to have
retired by October 1st of 1994, but as Nick--excuse me,
Congressman Rahall has pointed out, there's about 5,000 of
these people that have been--will be seeking coverage and are
getting coverage from the 1992 benefit. My mom and dad, for
example, about 2 months ago they were transferred from
Bethlehem's health care over to the 1992 plan. My dad is a
World War II veteran, was working in the coal mines in 1946,
and before that, his father, who, unfortunately, was killed in
a coal mine.
So there is a long history here, and my dad is 87, for
example, my mother is 84. So they're right in this class of
elderly people, but they fall into the 1992 benefit plan, and
we're going to have a funding crisis with respect to that by
2005.
Mrs. Cubin. I thank the panel for their testimony and for
answering the questions, and once again apologize for delaying
you for so long. Thank you, Mr. Masterson. I hope I have a
chance to visit with you later, but if you have to run, that is
fine.
Mr. Masterson. I'll be available, Madam Chair, if you would
like. Thank you.
Mrs. Cubin. Thank you.
Mrs. Cubin. I would like to call the next panel forward,
please: Marion Loomis, the Executive Director of the Wyoming
Mining Association; David O. Finkenbinder, Vice President of
Congressional Affairs of the National Mining Association; Dave
Young, Bituminous Coal Operators Association; and David Laffere
of Kansas City Power and Light.
Don't sit down. I would like to swear the panel in.
[Witnesses sworn.]
Mrs. Cubin. I understand Mr. Laffere has a plane to catch,
and since we have delayed you long enough, I would like to
recognize you for your testimony first.
STATEMENT OF DAVID L. LAFFERE,
KANSAS CITY POWER AND LIGHT COMPANY
Mr. Laffere. I do, and I appreciate your efforts to work
with me on this.
Good afternoon, Madam Chairwoman and members of the
Subcommittee. My name is David L. Laffere. I'm supervisor for
Fuel Logistics for Kansas City Power and Light Company, where
I'm involved in the planning and purchase of fossil fuels,
including coal, for KCPL's electric generating units. I
appreciate this opportunity to appear before you this afternoon
to discuss the Abandoned Mine Lands Program administered by the
Department of the Interior's Office of Surface Mining,
Reclamation and Enforcement, or the OSM.
Since my full statement will be made part of the record, I
will be brief in my oral remarks and attempt to answer any
questions you may have.
Kansas Power and Light is a wholly owned subsidiary of
Great Plains Energy. We're on the New York Stock Exchange, and
we're headquartered in Kansas City, Missouri. We operate four
baseload generating stations that consume roughly 12 million
tons of low-sulfur coal each year, and we purchase that coal
from your State of Wyoming, Madam Chairwoman.
The reason for KCPL and other utilities that use Powder
River Basin coal that we're interested in the reauthorization
of the AML Program is because AML fees are embedded costs of
each ton of coal that we purchase. The AML fee, therefore, is
an inherent cost of electricity that we provide to our
residential, commercial, and industrial customers. And to the
extent that we can manage our fuel expenses to reduce our
costs, we can pass those savings on to our customers.
The AML fee accounts for roughly 5 to 8 percent of our cost
of coal that we purchase from Wyoming each year. Last year, we
spent roughly $70 million on coal purchases and $4 million of
that went toward AML fees.
Since the inception of the SMCRA, the cost of coal we
purchase for our baseload units has included nearly $80 million
in AML fees. So we care a great deal about the AML program and
whether the AML fee system is reauthorized in its present form.
From a national perspective, the AML fee touches millions
of households because it contributes to the cost of the energy
that we consume. It is an appropriate subject to consider in
the context of a national energy policy.
We appreciate your holding this hearing, Madam Chairwoman,
and hope that it will lead to a thorough examination of the AML
Program and the AML fees that are imposed on Wyoming coal
production. As a utility that takes great pride in its
commitment to the environment and offering low-cost and
reliable electricity service, we believe this hearing offers a
great opportunity for Congress to examine whether the AML fees
can be reduced for consumers of coal, especially on production
in States where all or most outstanding priority reclamation
needs have been addressed, such as in Wyoming. If it can,
millions of energy consumers across the Nation will be the
beneficiaries.
Thank you.
[The prepared statement of Mr. Laffere follows:]
Statement of David L. Laffere, Kansas City Power & Light Company
Good afternoon Madam Chairwoman and Members of the Subcommittee. My
name is David L. Laffere, and I am Supervisor, Fuel Logistics, for the
Kansas City Power & Light Company (KCP&L), where I am involved in the
planning and purchase of fossil fuels, including coal, for KCP&L's
electric generating units. I appreciate the opportunity to appear
before you this afternoon to discuss the Abandoned Mine Lands (AML)
program administered by the Department of the Interior's Office of
Surface Mining, Reclamation and Enforcement, or OSM.
KCP&L is a wholly owned subsidiary of Great Plains Energy, Inc.
(NYSE: GXP), headquartered in Kansas City, Missouri. KCP&L generates
and supplies power to more than a million residents in a 24-county,
4,600 square mile service area in western Missouri and eastern Kansas.
To meet our generation needs, KCP&L relies upon four wholly or partly
owned coal-fired generating facilities, which represent approximately
75 percent of our system generation. Collectively, these four plants
consume approximately 12 million tons of low-sulfur western coal each
year.
The AML program is of considerable interest to KCP&L because
abandoned mine land reclamation fees paid into the program are an
embedded cost of each ton of coal we purchase and consume and, as a
result, inherent in the cost of the electricity we provide to our
residential, commercial and industrial customers. The same is true of
other fees and assessments imposed by states and the Federal
Government, like the black lung fee, a state severance or ad valorem
tax, and the Federal coal production royalty itself. All of these
levies are part of the overall cost structure of KCP&L's fuel, and each
is ultimately borne by our customers.
Of the price we pay for each ton of Powder River Basin coal we
purchase, the AML fee accounts for roughly 5 to 8 percent. In 2002,
KCP&L spent roughly $70 million on coal to supply the requirements of
our four large base load generating stations, and paid roughly $4
million in AML fees on that coal. Historically, the cost of coal for
these stations has included nearly $80 million in AML fees since the
inception of the AML program.
So, for a small- to medium-sized company that has built its
reputation on providing low-cost and reliable electricity service for
the last 120 years, the cost to KCP&L of the AML program is an
important issue. I suspect, Madam Chairwoman, it is an important issue
to virtually every other coal-fired utility, whether large or small, or
whether investor-, cooperatively, or publicly owned.
In addition, the AML program is important from an energy and
environmental standpoint. Since coal accounts for more than half the
electricity generated in this country, public policy affecting coal
consumption for energy generation is an important energy issue that
could affect the lives of everyone. Because of its abundance and
improvements in productivity and emissions control technologies, coal
will play an important role in our overall national energy policy for a
long time to come.
Madam Chairwoman, we appreciate the fact that your Subcommittee is
looking into the AML program, hopefully with an eye toward improving
it. The Surface Mining Control and Reclamation Act, or SMCRA, was
enacted to address historically unreclaimed surface coal mines in
existence in 1977 and to ensure that future surface coal mining
operations would be fully reclaimed to protect the environment and
public safety. In order to fund remediation of past coal mining
activity, the Act imposed a fee of $0.35 per ton of surface mined coal,
$0.15 per ton for underground coal, and $0.10 per ton for lignite.
At the time of SMCRA's enactment, the majority of coal production
and abandoned mine sites were in the east. As a result, AML fees were
proportionately distributed on the basis of production and need. In the
quarter century since enactment of SMCRA, however, there have been a
number of significant achievements in mined land restoration and
remediation. Others better qualified than I can speak to the
accomplishments of OSM in administering the Surface Mining Act.
One thing that occurred that Congress may not have foreseen when it
passed the Act, Madam Chairwoman, and that we did not foresee was an
enormous surge in coal production in the west. There are a number of
reasons for this, but there is one conclusion that is inescapable: the
Clean Air Act's provisions requiring air quality emissions standards
for coal-fired power plants have had a major impact on fuels markets.
Signed into law within a week of SMCRA were the Clean Air Act
Amendments of 1977. Thirteen years later came the Clear Air Act
Amendments of 1990. Together, these two important environmental laws
helped spur a dramatic shift in U.S. coal production.
To illustrate the point from KCP&L's perspective: in 1977, our
coal-fired generating units consumed 3.7 million tons of Midwestern
bituminous coal and only 1.4 million tons of western coal, all surface
mined. In 2002, our coal-fired generating fleet consumed only 398,000
tons of Midwestern bituminous coal and 11.7 million tons of western
coal. KCP&L's shift in fuel purchases was brought about in part by
Federal Clean Air Act rules requiring reductions in emissions of sulfur
dioxide. Since switching to Wyoming coal in the late 1980s, KCP&L has
grown its electricity generation to meet growing demand, reduced its
overall air emissions, and continued to provide low-cost energy for our
customers.
Nationally, the trend in coal production has been significant. In
1977, western coal represented 23.5 percent of total U.S. production
(164 millions west; 533 tons east). In 2002, western coal represented
half of total U.S. production (551 million tons west; 543 million tons
east).
A major part of the surge in western coal production came in
Wyoming, which is now the largest coal producing state in the country
and the source of almost all of our coal. (KCP&L still blends small
amounts of locally produced coal with Powder River Basin coal).
Overall, western states account for almost two-thirds of the AML fees
generated by coal mining, while one-third comes from the east. Wyoming
is the largest source of AML fees, accounting for 44 percent of all
fees collected. Yet a disproportionately large number of AML priorities
remain in the east.
AML fees have helped address the priority coal and non-coal sites
in Wyoming, and current bonding requirements now necessitate
contemporaneous reclamation of coal-mined lands. Notwithstanding the
fact that Wyoming's historic reclamation needs have been addressed and
that current reclamation occurs almost in ``real time,'' KCP&L and all
other Wyoming coal consumers continue to pay the full $0.35 AML fee for
surface-mined subbituminous coal. We urge Congress to examine this
issue because we believe, as do other companies and organizations, that
Wyoming's AML collections are disproportionate to its receipts. We
understand that Wyoming producers have paid more than $360 million in
AML fees that have not been returned to the state. That means consumers
like KCP&L and our electric customers are paying more than we need to
for our energy. It also means that other consumers of Wyoming coal are
paying more for their energy than they should.
More importantly, however, we believe that the AML fee collected on
Wyoming coal has served its purpose. While we appreciate the fact that
there is a valid public purpose to be served by applying AML fees to
priority reclamation needs--wherever found--we maintain that Wyoming
coal consumers like KCP&L and our customers bear a disproportionate
part of the fee. In our view, since Wyoming's coal and non-coal
reclamation needs have been addressed, we believe Congress should
consider whether a reduction in, if not a complete elimination of, the
AML fee on Wyoming production is in order.
Since the Department of Energy's Energy Information Administration
projects more than 25 percent growth in western coal production and a
one-third increase in Powder River Basin production in the coming
decade, while production elsewhere will remain relatively flat, we
believe it is particularly appropriate for Congress to address the
inequities in the AML fee program before the program is reauthorized.
We do not believe the current imbalance of benefits and burdens
associated with AML fees generated in Wyoming should be perpetuated. We
urge the Subcommittee to examine ways to rectify the inequities in the
AML fee collection and distribution systems and to develop a more
equitable way to address the remaining reclamation priorities under
SMCRA.
We would welcome the opportunity to work with the Subcommittee, OSM
and others interested parties to address the AML fee in the
reauthorizing process, and we thank you for the opportunity to express
our views at this hearing. I would be pleased to attempt to answer any
questions you may have.
______
Mrs. Cubin. Thank you. And please feel free whenever you
need to take leave.
Mr. Laffere. I appreciate that.
Mrs. Cubin. Now I would like to recognize Marion Loomis and
welcome you to Washington. Good to see you.
STATEMENT OF MARION LOOMIS, EXECUTIVE DIRECTOR,
WYOMING MINING ASSOCIATION
Mr. Loomis. Thank you, Madam Chairman. It's a pleasure to
be here.
Madam Chairman and members of the Committee, I'm Marion
Loomis. I'm the Executive Director of the Wyoming Mining
Association. As the Nation's largest coal-producing State, I'm
pleased to provide this testimony on the reauthorization of the
Abandoned Mine Land Fund. I think we provide a unique
perspective in that the State of Wyoming has certified that
their priority coal reclamation sites have been completed and
the fact that we pay a disproportionate and, we feel, unfair
share of the AML funds based on volume and percentage of price.
We did hear that there may be some additional sites that have
been identified in Wyoming, but for the most part, most of the
Priority 1 and 2 sites have been addressed.
Since the inception of the Abandoned Mine Land Reclamation
Fund in 1977, Wyoming producers have paid $1.63 billion into
the AML Fund. That has already been discussed. In 2002, the 17
active mines paid over $126 million into the fund but receives
only $28 million. That has also been discussed. It might
interest the Committee to know that Wyoming mines now produce
over 11 tons of coal per second, 24 hours per day, 365 days a
year. And we have the reserves to continue to do that for the
next 100 years. So we hope to be a major part of this Nation's
energy base for many years to come.
In June of this year, the WMA Board of Directors adopted a
Statement of Position on the reauthorization of the AML fee. A
copy of that statement is attached for your information, or at
least I hope it was. It was mailed in to the Committee.
The position states essentially that we strongly oppose
reauthorization of the AML fee unless the following occurs: a
fundamental reform of the AML Program, including significant
reductions and streamlining of the administrative processes; a
significant reduction in the AML fee; and a return of the State
share accrued through September 30, 2004, over some defined
period of time.
In evaluating the AML Program, it is clearly evident that
unless there is a fundamental change in how the program is
administered, this program will be a never-ending bottomless
pit. Since 1977, the AML has generated over $6 billion in fees
to address about a $6 billion program. After 25 years, there
still remains $3.5 billion in reclamation work to be done.
We have talked about the administration fees. We think
that's a major concern and would hope that if it is
reauthorized, that something be done to try to control the
administrative costs.
Based on the past history, if nothing is done to rectify
the problem, the program would require another $10 billion to
fix a $3 billion program. We think that's unacceptable.
The OSM has stated that, ``Based on historic production
records, we know that 94 percent of the AML problems are in the
Eastern United States.'' They also say that 71 percent of those
sites are in Pennsylvania, West Virginia, and Kentucky.
Because most of it is based on current production, we feel
that there is a corresponding shift of resources away from
those States and to Wyoming. OSM has already identified that
and discussed it.
I'm trying to paraphrase here as fast as I can, Madam
Chairman.
But a great deal of the money has come from Wyoming, and we
hope that the AML Program recognizes that the Wyoming coal
industry has provided such a huge increase in influx of
revenues over the past 25 years. And it's unfortunate that more
of the priority coal reclamation projects haven't been
addressed.
In general terms, the original intent of the program was
that 50 percent of the AML fees were to be returned to the
State. That hasn't been done. It's been talked about. But one
of the areas we hope that you would take a look at is the
fairness issue. And if you look at it as a percentage of sale
price, we feel it's patently unfair.
I conducted a survey of our coal membership to quantify the
total payments to governments, and the results are in here, and
they go through the various taxes. But in 2002, the total taxes
paid to Government was $939 million. The average selling price
of coal in 1992 in Wyoming was $5.90. That represents a 42-
percent--those taxes and royalties represent 42 percent of the
sales price of Wyoming coal. That does not include any Federal
income tax. The AML fee is almost 6 percent of the sales price.
If the sales price goes down and is lowered, then it even--it
could get up as high as 10 percent.
So we would encourage, Madam Chairman, that something
fundamental is done to--if the AML Fund is reauthorized, that
there be some fundamental reform, that the price be adjusted.
You've talked about Btu, maybe a percentage of the sales price,
and we would hope that those monies that are owed to the
States, including Wyoming, would be returned.
Thank you, Madam Chairman. You have the full written
report, and I'll be glad to try to answer any questions I can.
[The prepared statement of Mr. Loomis follows:]
Statement of Marion Loomis, Wyoming Mining Association
Madam Chairman and members of the Committee my name is Marion
Loomis and I am the Executive Director of the Wyoming Mining
Association (WMA). As the nation's largest coal-producing state, I am
pleased to provide this testimony on the reauthorization of the
Abandoned Mine Land Fund. We provide a unique perspective in that the
State of Wyoming has certified that their priority coal reclamation
sites have been completed, and the fact that we pay a disproportionate,
and unfair, share of the AML funds based on volume and percentage of
price.
Since the inception of the Abandoned Mine Land Reclamation fund in
1977, Wyoming producers have paid $1.63 billion into the AML fund. In
2002 alone the 17 active mines paid over $126 million into the fund,
but Wyoming only received $28 million from the fund. Since inception of
the fund, Wyoming has received $455.8 million dollars or about 28% of
the total fees collected from Wyoming producers. It might interest the
Committee to know that Wyoming mines now produce over 11 tons of coal
per second, 24 hours per day, and 365 days per year. We have the
reserves to continue at this rate of production for over 130 years.
In June of this year, the WMA Board of Directors adopted a
Statement of Position on the reauthorization of the AML fee. A copy of
that Statement is attached for your information. In summary, the WMA's
position is that we strongly oppose any reauthorization of the AML fee
unless the following occurs:
A fundamental reform of the AML program, including
significant reductions and streamlining of administrative processes.
A significant reduction in the AML fee.
A return of the State Share accrued through September 30,
2004 over a defined period of time.
Need For Program Reform
In evaluating the AML program it is clearly evident that unless
there is a fundamental change in the how the program is administered,
this program will be a never-ending bottomless pit. Since 1977, the AML
has generated over $6 billion in fees to address about a $6 billion AML
problem (Priority 1 and 2 sites). Surprisingly, after more than 25
years, there remains over $3.5 billion in reclamation work left to do.
Only about 36% of the total dollars generated have actually been used
to perform reclamation work. Another 25% has gone to administration.
The remainder of the fees has either gone to non-priority projects or
is being held in trust ($1.4 billion). Based upon past history, if
nothing is done to rectify this problem the program will require
another $10 billion to fix a $3 billion problem. This is simply
unacceptable.
Fees Need To Be Significantly Reduced
OSM has stated that ``Based on historic production records we know
that 94% of the AML problems are in the eastern United States'' [but
there has been a] general shift in coal production from the east to the
west, and more significantly a shift in the east from surface mine
production to deep mine production which is assessed at the lower AML
fee of fifteen cents per ton.'' In fact, OSM notes that nearly 71%
($2.7 billion) of the remaining estimated AML reclamation costs reside
in Pennsylvania, West Virginia and Kentucky. OSM further states, ``Over
the past 25 years, fee income has shifted away from the areas with high
historic production and into the areas where there are fewer or no
remaining AML problems. Because 71% of the total grant dollars is based
on current production, there has been a corresponding shift of AML
resources away from the areas with the most significant AML problems.''
OSM has correctly identified that coal production has shifted to
surface mines in the west, particularly Wyoming, and to underground
mining in the east. This means that based on volume, Wyoming coal
producers bear a much greater burden for the AML program than any other
coal-producing region, while having little to no reclamation liability.
The AML program should be grateful that the Wyoming coal industry has
provided such an influx of revenues over the past 25 years. It is
unfortunate that more priority coal reclamation projects haven't been
addressed.
[GRAPHIC] [TIFF OMITTED] T8532.001
In general terms, the original intent of the program was that 50%
of the AML fees were to be returned to the State of origin to conduct
reclamation work. The remaining 50% was to be distributed according to
high priority areas. OSM has noted the difficulty they have had being
tied to the complex formula that dictates how the remaining (non-state)
50% share is to be distributed. It has also been noted that the 50%
State share has not been distributed as well. It is simply an issue of
fairness that once a State certifies completion of reclamation work,
that the AML fee should be significantly reduced.
Another way to look at the fairness issue is based upon percentage
of sales price. I conducted a survey of our coal membership to quantify
the total payment to governments. The results are summarized in the
following table, and the numbers are simply staggering.
[GRAPHIC] [TIFF OMITTED] T8532.002
The $2.52 paid to the state and Federal Government is a huge
percentage of the sales price of a ton of coal in Wyoming. In 2002, the
average statewide selling price for a ton of coal was $5.90, so 42% of
the sales price was made up of payments to governments. These numbers
do not include any Federal income tax. The AML fee is almost 6% of the
sales price, which is significantly higher than any other coal
producing state. In some years when coal prices are down, the AML fee
can approach 10% of the sales price for some lower Btu PRB coals. In
contrast, AML fees on a surface mined ton of coal selling at $25 per
ton (which is common in the Midwest and eastern United States) is only
1.4% (or less if the sales price is higher). The disparity in volume
and percentage of sales price is simply not fair, and needs to be
rectified. Current law states that the AML fee is $0.35 per ton of
surface mined coal or 10% of sales price. The percentage of sales price
could be adjusted so that all surface mined coals (eastern, Midwestern
and western) are equalized.
State Shares
WMA supports the State of Wyoming's position to return its State
share over a defined period of time. However, we have also heard the
discussions that the State of Wyoming would receive their State share
balance as of September 30, 2004 over a 10-year period. In exchange,
the AML fee would be extended at current rates to some uncertain date
in the future. Again, this is an issue of fairness, and this approach
is patently unfair. An analogy would be that a bank would say that
``we're going to hand out your savings account over the next 10 years;
in exchange, you are going to offset your income over the same period
of time.'' Again, we support the State of Wyoming's position to recoup
their State share over a defined period of time, but this has to be
accompanied by a significant reduction in the AML fee moving into the
future.
Summary
As discussed earlier in my testimony, the WMA's position is that we
strongly oppose any reauthorization of the AML fee unless there is:
A fundamental reform of the AML program, including
significant reductions and streamlining of administrative processes.
A significant reduction in the AML fee.
A return of the State Share accrued through September 30,
2004 over a defined period of time.
Madam Chairman, thank you for the opportunity to present the
Wyoming Mining Association's position on this most important topic.
______
Mrs. Cubin. Thank you, and it will be entered in the
record.
I'm just notified we have 11 votes coming up at about any
time. The last time I think we had seven votes that took 2
hours, or six. So we really--if I cut you short, please
understand. I just want to get all the testimony in, and your
entire testimony will be in the record.
Now I would like to recognize David Finkenbinder with the
National Mining Association.
STATEMENT OF DAVID FINKENBINDER, VICE PRESIDENT, CONGRESSIONAL
AFFAIRS, NATIONAL MINING ASSOCIATION
Mr. Finkenbinder. Thank you, Madam Chairman. I intend to
make a short statement even shorter right now.
I appreciate the opportunity to testify before the
Subcommittee on behalf of the National Mining Association.
Since 1998, the coal industry has contributed $6 million to the
AML Fund. There's been about $2 billion spent for underground
coal and non-coal reclamation. The appropriations to the fund
have been about $4.4 million. Essentially about one-third of
the appropriated dollars from the AML Fund went to the
reclamation of 1 and 2 sites.
In 1986, as a quick history, the National Academy of
Sciences did a mid-term report on the situation of the fund,
and at that time, most States expressed confidence they would
have completed their reclamation of high-priority inventory by
1992 at a cost of $811 million. By 1992, $868 million of high-
priority sites had been reclaimed, and the benchmark had been
moved up to $2.3 billion of remaining inventory. In short,
every time the reclamation's accomplished, the goal is moved
back.
National Mining thinks that there are some issues that need
to be addressed in the course of the reauthorization
discussions, some considerations that need to be taken into
account, I should say.
The questions include: Do we need and can we afford the
multiple delivery mechanism and subprograms such as RAMP, the
emergency program? And do the provisions--and States still use
provisions of law added in 1990 for funds to be set aside in
anticipation of the fee expiring in 1995.
Should the current allocation and distribution formula be
replaced with a system that directs AML fees to areas with the
greatest needs in terms of remaining high-priority? That, of
course, begs the question that has been brought: What do we do
about the allocation and distribution that is already on the
books? Most importantly, it forces us to ask: Does the AML
remain a national problem that still requires a national
solution? If so, should the solution be administered in a
manner more fitting and efficient for a national problem?
Presently, the law sets out no less than five priorities,
and there is no requirement that AML fees be used for top
priorities. What good are priorities if they're not going to be
abided by?
Does the inventory serve as a benchmark for measuring
success? As we said, each time the goal is met, the goal line
is moved back.
Has the inventory become a funding device used to establish
a permanent AML Program rather than a management tool?
And administrative costs, which virtually everyone has
talked about, in 1991, there was a GAO report that found that
between 1985 and 1990, 28 percent of the $1.3 billion spent for
that period was used for Federal and State administrative
expenses.
What should the levels of the fee be? And how much can and
should the coal industry be asked to pay into the AML Fund? The
job may not be finished, but the lack of AML fees is not the
reason. In the 1970's, coal prices were forecasted to be $50 a
ton. In 1982, the average price of coal nationwide, in current
terms, was $27.25. In 2001, the average price of coal was about
$17 a ton. The flat fee--I never should have written that.
Every time the coal prices drop, there is a de facto tax
increase.
Madam Chairman, thank you again for the opportunity to
present NMA's observations on the history of the AML Program.
We hope the various considerations will assist you and your
colleagues as you address the public policy decisions regarding
the coal AML Program.
Thank you very much.
[The prepared statement of Mr. Finkenbinder follows:]
Statement of David Finkenbinder, Vice President Congressional Affairs,
National Mining Association, on behalf of the National Mining
Association
Madam Chairman, members of the Committee, on behalf of the National
Mining Association, I want to express our appreciation for this
opportunity to comment on the administration and performance of the
Abandoned Mined Land (AML) Program established under the Surface Mining
Control and Reclamation Act of 1977.
The AML Program was established with the principal objective to
restore unreclaimed lands mined for coal prior to August 3, 1977 that
pose threats to the public health and safety. The AML fee paid on each
ton of coal produced and sold to fund the program was authorized
initially until 1992, but has been extended twice. With the current
authorization scheduled to expire on September 30, 2004, there will
undoubtedly be many viewpoints expressed today about the remaining
requirements and the need to extend the fee to support those
requirements. In this regard, Madam Chairman, we respond to your
invitation to testify by providing some observations about the history
of the program, and offer various considerations to assist you and your
colleagues in making public policy decisions about the program's
future.
Revenues and Expenditures
Since 1978, the coal industry has contributed almost $6 billion to
the AML Fund. The Office of Surface Mining (OSM) reports that as of
September 30, 2002 about $1.66 billion of the high priority (Priority 1
& 2) abandoned coal mined lands inventory has been reclaimed. Another
$195 million has been used to reclaim priority 3 coal sites, and $238
million for non-coal projects. Appropriations from the AML Fund for
this period totaled about $4.4 billion. In other words, less than half
of all the money appropriated is finding its way to on-the-ground
reclamation of the inventory of coal and non-coal projects. Placed in
the context of the high priority coal inventory--the principal mission
of the program--about one of every three dollars appropriated from the
AML Fund reaches that objective.
Progress and Expectations
In 1986, the National Academy of Sciences (NAS) performed a mid-
term review of the AML program. See National Academy of Sciences,
Abandoned Mined Lands: A Mid-Course Review of the National Reclamation
Program for Coal (1986). At that time, the NAS projected that by the
expiration of the AML fee in 1992, total revenue for the program would
reach about $3.3 billion. As it turns out, the projection was close to
the mark with actual receipts reaching slightly more than $3.2 billion.
NAS also found at that time that most States expressed confidence that
they would complete reclamation of their priority 1 and 2 inventory of
projects by 1992. Id. at 65. It was this confidence that resulted in
the States' view that in the meantime they should reclaim lower
priorities even before they complete the two top priorities. Id. This
approach apparently had some merit since as NAS projected all the
states, except six, would have enough funds from their state share
alone to reclaim priority 1 and 2 projects with an estimated cost of
about $811 million. Moreover, the total state share alone appeared to
be adequate to reclaim all priorities at an estimated cost of about
$1.7 billion. Id. at 154-55. In short, at the time of the mid-term
review of the program more than ample funds appeared to be available to
address not only the high priority coal inventory, but the other
priorities as well.
By 1992, $870 million of the high priority coal inventory had been
reclaimed. But now the target had moved, and OSM reported that the
remaining high priority coal inventory was $2.6 billion--almost three
times the inventory reported in 1986. Since then, it appears that
things have actually regressed. Since 1998, it appears that for each
dollar of high priority inventory reclaimed, two dollars are added as
unfunded high priorities. Now the high priority coal inventory is
almost $3 billion. And, after $4.4 billion in appropriations from the
AML Fund, only $1.66 billion of the high priority coal inventory has
been reclaimed. Continuing business as usual would mean that it will
require at least $9 billion to reclaim the current $3 billion high
priority coal inventory.
Structural Impediments to Success
Twenty five years, two AML fee extensions, and almost $6 billion
later, you will hear that the ``job is not finished.'' You will also
hear various viewpoints on why that is the case. We believe the answer
largely lies with structural impediments in the current law related to
grant formulas, competing program demands that all conspire to thwart
cost-effective achievement of the program's principal purpose, and
revenue allocation.
The AML Program has been called upon to serve many different
demands. It has also been designed to serve those demands through
multiple delivery mechanisms. We have Federal programs and State
programs. And, within each of those we have special programs, such as
the Rural Abandoned Mine Program, Emergency Programs, Appalachian Clean
Streams Initiatives, various State Set-Aside Programs, and Technology
Development and Transfer Programs. All of these programs compete for
funds under various priorities and funding formulas. The first two
priorities which comprise the program's core objective relate to
restoring abandoned coal mined lands that pose dangers to the public
health and safety. There is no overarching requirement that funds be
directed toward the high priority coal inventory. Indeed, it appears
that these other programs operate as exit ramps to divert funds away
from the high priority inventory. And, all of these programs carry with
them extensive Federal and state administrative costs.
According to the OSM white paper, ``The Job's Not Finished'',
around 1989 the demographics of coal production changed and an
imbalance developed between fund availability and needs. As a result,
the statutory allocation formula for AML revenue precludes the use of a
substantial portion of the industry's AML fees for the high priority
coal inventory. Half of all fees paid on coal production in a state are
earmarked for AML use in that state regardless of the remaining high
priority coal AML needs. During the early years of the program, this
allocation structure posed little consequence for assuring that AML
fees were available for high priority coal inventory. As coal
production increased in the West with a relatively smaller coal AML
inventory, a larger proportion of AML fee revenue became unavailable
for high priority coal projects in other regions with a larger share of
the high priority needs. OSM's recent white paper explains the
consequences of this imbalance. For the first 15 years of the program,
95% of all state grants were used for high priority coal projects.
However, over the past 10 years, only 64% have been used for the
program's core objective. And, this percentage will continue to decline
absent changes to the law.
Considerations Going Forward
By the time the current fee authorization expires next year, the
coal industry will have paid $6.5 billion in AML fees. Simple math
tells us that this sum should have been sufficient to complete both the
already reclaimed and current high priority coal inventory with $2
billion to spare. Will it require $9 billion--perhaps more--to complete
the current high priority coal inventory? The answer will depend upon
choices made about whether and how the program is reauthorized. We set
forth below several of the questions faced in dealing with the current
program structure and requirements. Not surprisingly, each constituency
will have different answers and preferences.
1. Multiple Delivery Mechanisms and Programs
Do we need--can we afford--the multiple delivery mechanisms and
subprograms that divert funds away from the high priority coal
inventory? RAMP is a prime example of this diversion. The program
competes with state needs and has not been funded since 1996.
Nonetheless, 10% of all AML fees paid annually are still allocated to
RAMP which now has $274 million allocated to that account which cannot
be used for other purposes. Emergency Programs also present a
duplicative system with some states assuming the responsibility, while
9 states--two of which have the most emergencies--declining to assume
that responsibility as part of their approved AML programs. States
still use a provision of the law added in 1990 that allows funds to be
set-aside in anticipation of the fee expiring in 1995. There is
something wrong with the concept of setting aside industry AML fees for
future use, and then calling for the industry to keep paying because
the job is not yet finished.
2. Fund Allocation and Distribution
Should the current allocation and distribution formula be replaced
with a system that directs AML fee revenues to areas with the greatest
need in terms of remaining high priority coal inventory? OSM's white
paper indicates that the historic production (pre-1977) is a close
surrogate for where the high priority coal inventory sites are located.
If such a change is made, what happens to the current allocations?
States that have completed their high priority coal inventory may feel
that they should receive some portion or all of the unexpended balances
in their accounts. Distribution of those amounts will affect funding
requirements. For example, the unexpended state share for the certified
states comprises 30% of the unappropriated AML balance. The allocation
and distribution issues present the most fundamental question: Does
coal AML remain a national problem that still requires of a national
solution? If so, should the solution be administered in a manner more
fitting and efficient for a national problem?
3. Adhering to Priorities
What good are priorities if there are so many and there is not an
overarching requirement to abide by them? Presently, the law sets out
no less than five priorities ranging from the protection of the public
health and safety from extreme dangers posed by abandoned coal mined
lands to the development of land. There is no requirement that AML fees
be used first for the top priority before moving on to lower
priorities. In at least two states, the amount of AML fees used to
reclaim priority 3 areas either approximate or exceed the amounts spent
to reclaim priority 1 and 2 areas. In each case, the amounts spent in
these states for priority 3 projects would have been more than enough
to finish their current unreclaimed priority 1 and 2 inventories.
4. The Inventory
Does the high priority coal inventory serve as a benchmark for
measuring progress and success? Each time it appears the goal becomes
closer, the goal line is moved further away. In 1998, the remaining
high priority coal inventory was less than $2.5 billion. In 1999, the
inventory swelled by an additional $3 billion as a result of a state--
which already accounted for one-third of the inventory--moving up lower
priorities to the priority 1 and 2 inventory. But even when that
inexplicable swelling is removed, the inventory continues to grow by
about $2 for every $1 dollar of high priority coal reclamation. To
some, the inventory has transformed itself from a management tool to a
funding gimmick to establish the AML program as a permanent fixture.
Some suggest that the inventory should be frozen to avoid this
temptation and provide focus and discipline for future expenditures.
5. Administrative Costs
How much do we need to spend in order to spend? A General
Accounting Office (GAO) report found that between 1985-1990 $360
million, or 28%, of the $1.3 billion spent during that period was used
for Federal and State administrative expenses. General Accounting
Office, Surface Mining: Management of the Abandoned Mine Land Fund
(July 1991). But even this amount may understate the percentage of
funds used for administration since, as GAO noted, some States
incorporate administrative expenses into their construction grants that
are counted as reclamation project costs. As for Federal expenses, GAO
reported that during that period OSM spent $137 million for
administration while using about $100 million for reclamation projects.
We are not aware of any single source of information tracking the
amount of AML fees used for administration. But piecing together
various sources related to AML program performance suggests that over
$1 billion has been spent to administer the program.
6. The AML Fee
What should the levels of the fee be and how much more can or
should the coal industry pay into the AML fund? The job may not be
finished, but the lack of AML fees is not the reason. In the meantime,
the AML fee has become an increasing burden on the industry which has
experienced declining prices in the market. While the amount the coal
industry receives for each ton of coal it sells has declined
precipitously, annual AML fee revenue continues to increases
substantially with the rise in coal production. This is because the AML
fee rates remain constant for each ton of coal. When the AML fee was
being debated in the late 1970s, coal prices were forecasted to exceed
$50/ton, and it was believed that the AML fee would be a nominal tax,
at most. In 1982, the average price of coal nationwide in current terms
was $27.25/ton. In 2001, the average price of coal was about $10 less
per ton.
Madame Chairman, thank you again for the opportunity to present
NMA's observations on the history of the AML program. We hope the
various considerations will assist you and your Subcommittee as you
address the public policy decisions regarding the coal AML program.
______
Mrs. Cubin. Thank you.
And I now hear the buzzers, but we--``buzzards,'' I guess I
should call them. We do have time to recognize Mr. Young for
his testimony.
STATEMENT OF DAVID M. YOUNG, PRESIDENT,
BITUMINOUS COAL OPERATORS' ASSOCIATION
Mr. Young. Thank you, Madam Chairman. Good afternoon. I am
Dave Young, president of the Bituminous Coal Operators
Association. I have submitted my testimony for the record and
will summarize it for you as quickly as possible.
I want to express my appreciation to the Committee for
conducting this hearing. It gives the BCOA and other interested
parties the opportunity to comment on the current operation of
the Abandoned Mine Land Program and to make recommendations
regarding reauthorization of the AML Program.
We believe the program should be refined so that needed
reclamation can be completed and the crucial role of protecting
retiree orphan health benefits is maintained.
Congress enacted the Coal Act in 1992, but the Federal
Government has a long history of involvement with the coal
miners' benefits. When a national coal strike occurred in 1946,
President Truman issued an Executive order seizing all
bituminous coal mines and ordering the Department of Interior
to negotiate appropriate changes in the terms and conditions of
employment of the miners. The Secretary of the Department of
Interior negotiated a settlement, which ended the strike and
created a new benefit fund for coal miners.
One of the congressional findings in enacting the 1992 Coal
Act was that ``...it is necessary to modify the current private
health care benefit plan structure for retirees in the
coal...to stabilize plan funding and allow for the provision of
health care benefits to such retirees.'' In passing the Coal
Act, Congress sought to stabilize plan funding by limiting
benefit eligibility to a specifically identifiable group of
approximately 175,000 beneficiaries. That number has since
declined to about 100,000.
The Combined Benefit Fund was established to provide
benefits to miners who retired before July 20, 1992. Funding
for the Combined Fund was based on premiums charged to
identified former employers and AML interest for orphan miners
whose former employers were no longer in business.
The Coal Act also created the 1992 Fund to provide for
orphan retiree health care benefits for employees who retired
by September 30, 1994, and who are not eligible for the
Combined Benefit Fund. Coal companies are required to pay for
benefits of their own employees who retired during this period.
However, in the case of a complete bankruptcy, where the
company is no longer in business, these retirees become 1992
Fund orphans with no Federally subsidized orphan payment plan.
Thus, the long-term financing for the health care is uncertain.
From 1993 through today, this funding system has generally
been able to provide the retiree health care benefits to every
covered beneficiary, but to do so, Congress has appropriated
funds to cover Combined Benefit Fund deficits in several years
from reserved interest in the AML Trust Fund.
Today, however, both orphan financing mechanisms are in
trouble. This situation has been hastened by the significant
steel industry bankruptcies that have moved 10,000
beneficiaries into the orphan category. The current mismatch in
orphan financing is expected to require a 40-percent benefit
cut in the Combined Benefit Fund and create severe problems in
the 1992 Fund. Both the Combined Benefit Fund and the 1992 Fund
orphan financing mechanisms must be overhauled if the Coal
Act's goal of providing health care benefits to these retirees
is to be maintained.
Until recently, the AML interest had been large enough to
cover the Combined Benefit orphan expenses. It is important to
note that this interest is earned from an almost $2 billion
balance in the AML Fund that was created and is supported
solely by coal industry contributions. Between 1996 and 2002,
Combined Benefit Fund orphan expenses ranged between $47 and
$68 million, and AML interest was generally adequate on an
annual basis to cover these expenses. Indeed, as recently as
fiscal year 2001, the AML Fund's interest return exceeded $100
million annually. However, these returns were not the result of
an explicit long-term investment strategy. In fact, these
returns temporarily masked the lack of any investment strategy
by the Department of Interior that should have taken into
account the annual minimum needs of the Combined Fund. As
interest rates have continued to fall, the Department of
Interior's response has been to seek the lowest possible
overnight rate of return, which has created a needless and
permanent deficit mismatch between the AML interest income and
orphan expenses of $70 million per year.
As the Resource Committee takes up the reauthorization of
the AML Program, the BCOA recommends the adoption of the
following key measures:
First, the AML Program should be reauthorized and the fee
extended in order to complete reclamation work and to
adequately fund all Coal Act obligations.
Two, use of the AML interest generated by the AML Trust
Fund should be made available to cover expenses of all Coal Act
orphan beneficiaries.
Three, Congress should direct the Department of Interior to
achieve an investment return sufficient to cover the Combined
Benefit Fund and the 1992 Fund needs.
And, last, the $115 million in stranded AML interest should
be made available immediately to offset losses to the
Department of Interior's investment policy and to prevent a
Combined Benefit Fund benefit cut.
Thank you for this opportunity.
[The prepared statement of Mr. Young follows:]
Statement of David M. Young, President,
Bituminous Coal Operators' Association
Good afternoon, my name is Dave Young and I am President of the
Bituminous Coal Operators' Association (BCOA). The BCOA represents its
members in collective bargaining with the United Mine Workers of
America. BCOA is a settlor of various multi-employer Funds including
those established by the Coal Industry Retiree Health Benefits Act of
1992 (``Coal Act''). BCOA also represents its members before Congress
and the Executive Branch on retiree health and pensions issues and coal
mine health and safety.
I want to express my appreciation to the Committee for conducting
this hearing. It gives the BCOA and other interested parties the
opportunity to comment on the current operation of the Abandoned Mine
Land (``AML'') Program and to make recommendations regarding
reauthorization of the AML Program. Our member companies have a keen
interest in the operation of the Program. We believe the Program should
be refined so that needed reclamation can be completed and the crucial
role in protecting retiree orphan health benefits is maintained.
Congress enacted the Coal Act in 1992, but the Federal Government
has a long history of involvement in coal miners' benefits. When a
national coal strike occurred in 1946, President Truman issued an
Executive Order seizing all bituminous coal mines and ordering the
Department of Interior to negotiate ``appropriate changes in the terms
and conditions of employment'' of the miners. The Secretary of the
Department of the Interior negotiated a settlement, which ended the
strike and created a new benefit fund for coal miners.
One of the Congressional findings in enacting the 1992 Coal Act was
``...it is necessary to modify the current private health care benefit
plan structure for retirees in the coal industry...to stabilize plan
funding and allow for the provision of health care benefits to such
retirees.'' In passing the Coal Act, Congress sought to stabilize plan
funding by limiting benefit eligibility to a specifically identifiable
group of approximately 175,000 beneficiaries. That number has since
declined to about 100,000.
The Combined Benefit Fund (``CBF'') was established to provide
benefits to miners who retired before July 20, 1992. Funding for the
Combined Benefit Fund was based on premiums charged to identified
former employers and AML interest for ``orphan'' miners whose former
employers were no longer in business.
The Coal Act also created the 1992 Fund to provide for ``orphan''
retiree health care benefits for employees who retired by September 30,
1994 and who are not eligible for the Combined Benefit Fund. Coal
companies are required to pay for benefits of their own employees who
retired during this period. However in the case of a complete
bankruptcy, where the company is no longer in business, these retirees
become 1992 Fund ``orphans'' with no Federally subsidized orphan
payment plan. Thus, the long-term financing for the health care is
uncertain.
From 1993 through today, this funding system has generally been
able to provide the retiree health care benefits to every covered
beneficiary but, to do so, Congress has appropriated funds to cover
Combined Benefit Fund deficits in several years from reserved interest
in the AML Trust Fund.
Today, however, both orphan-financing mechanisms are in trouble.
This situation has been hastened by the significant steel industry
bankruptcies that have moved 10,000 beneficiaries into the orphan
category. The current mismatch in orphan financing is expected to
require a 40% benefit cut in the Combined Benefit Fund and create
severe problems in the 1992 Fund. Both the Combined Fund and 1992 Fund
orphan financing mechanism must be overhauled if the Coal Act's goal of
providing health care benefits to these retirees is to be maintained.
Combined Fund Orphan Expense
Until recently, AML annual interest had been large enough to cover
the Combined Benefit Fund's ``orphan'' expenses. It is important to
note that this interest is earned from an almost $2 billion balance in
the AML Fund that was created and is supported solely by coal industry
contributions. Between 1996 and 2002, Combined Benefit Fund orphan
expense ranged between $47 and $68 million and AML interest was
generally adequate on an annual basis to cover these expenses. Indeed
as recently as FY-2001, the AML Fund's interest return exceeded $100
million annually. However, these returns were not the result of an
explicit long-term investment strategy. In fact, these returns
temporarily masked the lack of any investment strategy by the
Department of the Interior that should have taken into account the
annual minimum needs of the Combined Fund. As interest rates have
continued to fall, the Department of Interior's response has been to
seek the lowest possible overnight rate of return, which has created a
needless and permanent deficit mismatch between AML interest income and
orphan expenses of $70 million per year.
1992 Fund Orphan Expenses
When the Coal Act was debated the funding of the 1992 Fund appeared
to be relatively manageable. However, this circumstance has changed
dramatically with the recent bankruptcies in the steel industry. LTV,
Bethlehem Steel and National Steel each filed for Chapter 7 bankruptcy
adding a total of approximately 5,000 orphan beneficiaries in the 1992
Fund. One other major contributor to this Fund is in Chapter 11 and the
outcome of that bankruptcy proceeding is uncertain at this time.
Collectively these four companies alone account for 8,500
beneficiaries and $43 million per year in added expenses to the 1992
Fund, more than doubling the current population (while simultaneously
reducing the contribution funding base). No one contemplated at the
time of the enactment of the Coal Act that there would be bankruptcies
of this magnitude and the dumping of thousands of ``orphan'' retirees
into the 1992 Fund.
This combination of AML Trust Fund investment policies and steel
industry bankruptcies has resulted in inequitable burdens and,
therefore, requires a fresh approach if Coal Act's goals are to be
maintained. Congress was correct to make AML interest an integral part
of the original solution. Reauthorization of the AML Program provides
the opportunity to complete the job begun in 1992.
As the Resources Committee takes up reauthorization of the AML
Program, the BCOA recommends the adoption of the following key
measures:
1. The AML Program should be reauthorized and the fee extended in
order to complete reclamation work and to adequately fund all Coal Act
obligations.
2. Use of the AML interest generated by the AML Trust Fund should
be made available to cover expenses of all Coal Act orphan
beneficiaries.
3. Congress should direct the Department of Interior to achieve an
investment return sufficient to cover the Combined Benefit Fund and
1992 Fund needs.
4. The $115 million in ``stranded'' AML interest should be made
available immediately to offset losses due to Department of Interior's
investment policy and to prevent a Combined Benefit Fund benefit cut.
This combination of measures addresses the immediate short-term
needs of the Combined Benefit Fund and will provide long-term stability
to the Coal Act Funds consistent with the original intent of the Coal
Act.
Thank you for this opportunity to testify.
______
Mrs. Cubin. Thank you.
I do have questions for members of the panel, but
considering the circumstances that I do need to go over to the
floor, I will submit those in writing.
Oh, wait a second.
More updates. At any rate, I will submit questions in
writing to you. The hearing record will be open for 10 days,
and hopefully you will be able to make those responses in that
time.
I sincerely thank you for spending your whole afternoon
with us, and your testimony has been very valuable. Obviously
this is a big job. There are a lot of considerations and more
needs than dollars. So we will just do the best we can. I know
that we will come out with a product that will meet the
fundamental needs that we have.
So since there is no further business in front of the
Committee, the Subcommittee is now adjourned.
[Whereupon, at 5:40 p.m., the Subcommittee was adjourned.]
[The following information was submitted for the record:]
Donnelly, Daniel K., Ph.D., Director, Center for
Environmental Research and Education, Duquesne University,
Letter submitted for the record
Grote, Thomas F., Director, Kiski Basin
Initiatives, Letter submitted for the record
[A letter submitted for the record by Mr. Donnelly
follows:]
DUQUESNE UNIVERSITY
BAYER SCHOOL OF NATURAL AND ENVIRONMENTAL SCIENCES
332 FISHER HALL
PITTSBURGH, PA 15282
CENTER FOR ENVIRONMENTAL RESEARCH AND EDUCATION
PHONE (412) 396-4367
FAX (412) 396-4092
INTERNET: DONNELLY@DUQ.EDU
July 25, 2003
The Honorable Barbara Cubin
Chair
Subcommittee on Energy and Mineral Resources
1626 Longworth House Office Building
Washington, D.C. 20515
Dear Representative Cubin,
Modification and reauthorization of the Abandoned Mine Reclamation
Fund are important to protect our communities and families from hazards
posed by coalmines abandoned before 1977. Dangerous shafts, mountains
of black waste, polluted waters, and depressed economies afflict one-
half of the citizens of the United States The Abandoned Mine
Reclamation Fund is the primary source of money available to fix these
problems. We have successfully used the fund to clean up toxic mine
water, extinguish mine fires, and eliminate other dangerous abandoned
mine hazards.
Unregulated coalmines abandoned before the Federal Surface Mining
Control and Reclamation Act of 1977 (SMCRA) resulted in a legacy of
environmental damage. Abandoned mines leak acidic, alkaline, and metal-
contaminated water, polluting public water supplies, destroying fish
and wildlife habitat, depressing local economies, and threatening human
health and safety. Statewide, 44 of Pennsylvania's 67 counties are
directly affected by abandoned mines that encompass over 189,000 acres.
Abandoned mine drainage (AMD) is the largest contributor to water
quality impairment in the Commonwealth. According to the Pennsylvania
Department of Environmental Protection, over 3,000 miles of the
Commonwealth's streams are impaired by AMD.
The price tag for cleaning up Pennsylvania's abandoned mine legacy
has been estimated to be as high as $15 billion. Pennsylvania has
committed substantial state and private dollars and countless hours of
professional and volunteer time to addressing the abandoned mine
problems. As you know, Congressman Kanjorski has introduced legislation
to supplement existing reclamation programs and to further help reclaim
our abandoned mine legacy. The Commonwealth receives about $25 million
per year from the Abandoned Mine Reclamation Fund. But the reclamation
job before us is too large for any one program or one level of
government to address on its own. There is much work left to be done.
Finish the Job
The Abandoned Mine Reclamation Fund program is not currently
structured to efficiently and effectively complete the job of
reclaiming coal mine lands abandoned before 1977. The states that
fueled the coal boom in the early and middle part of this century and
helped fight two World Wars currently have low coal production relative
to their western counterparts, yet they have the largest legacy of
adverse mining impacts from before 1977. The majority of grants
distributed to the states are based on current rather than historic
production. When the program began in 1977, production in the eastern
states was high enough to ensure that our states received a proportion
of the funds that roughly aligned with the extent of our problems.
Since then, production has shifted away from the states--including
Pennsylvania--with high historic production and 94% of the abandoned
mine land problems.
OSM Director Jeff Jarrett captured the essence of the problem in a
recent white paper entitled The Job's Not Finished in which he points
out that ``there is a direct correlation between a state or tribe's
historic production and the magnitude of its AML problem...there is no
relationship between the current production state share portion of the
grant and the magnitude of the AML problem in that state or tribe.''
The formula should be changed to direct resources from the fund to
states based upon historic production. This will correct existing
imbalances, direct resources to where the problems are, and allow
states with the most pre-1977 problems to finish the job of reclaiming
our abandoned mine legacy.
Funding for Abandoned Mine Drainage
Abandoned mine drainage pollutes public water supplies, destroys
fish and wildlife habitat, depresses local economies, and threatens
human health and safety. Pennsylvania is representative of eastern coal
states with abandoned mine drainage problems. AMD is our largest source
of water quality impairment.
The Pennsylvania Fish and Boat Commission once estimated that the
Commonwealth suffers almost $70 million per year in lost recreational
and fishing opportunities due to abandoned mine drainage. These waters
are too polluted to allow fishing, boating, and other water-based
recreation.
It is critical that abandoned mine drainage problems continue to be
eligible for funding to protect the health of our citizens and
visitors, improve our economy, and sustain our future.
Keep Priorities 1, 2, and 3
Three priority areas are eligible for funding to correct adverse
effects of coal mining practices under Title IV. Priority 1 provides
for the protection of public health, safety, general welfare, and
property from extreme danger. Priority 2 provides for the protection of
public health, safety, and general welfare. Priority 3 provides for the
restoration of degraded land and water resources and the environment.
States have the discretion to use their allocations from the Fund for
projects falling into any of the three priorities.
The current priorities should be maintained, including the ability
to fund water-related projects under Priorities 2 and 3.
Maintain the Combined Benefit Fund
Interest generated on the Abandoned Mine Reclamation Fund is
currently transferred to the Combined Benefit Fund (CBF) to defray
health care costs for retired miners and their dependents whose
companies have gone bankrupt or are no longer in business. The CBF pays
for health care expenses remaining after Medicare and Medicaid
reimbursement and pays for prescription drugs. There are approximately
60,000 beneficiaries, whose average age is 78 years old. This eases the
burden on mining companies. If the Abandoned Mine Reclamation Fund is
not reauthorized, a new fee will need to be levied to cover these
benefits.
The transfer of interest to the Combined Benefit Fund should
continue. At the same time, the funds should be invested in a way that
maximizes returns whenever possible.
Leverage the Dollars
Currently, most of the resources allocated under this program are
not permitted to be matched with other Federal dollars. This is an
onerous requirement that inhibits the ability of states to efficiently
solve local problems.
Funds allocated under this program should be ``matchable'' with
Federal, state, local, and private dollars to maximize resources and
encourage partnerships.
As abandoned mine lands are reclaimed, they offer potential
locations for economic development projects. According to the
Association of General Contractors, 59 jobs are created for every $1
million spent on construction activities. By developing and marketing
abandoned mine lands that would normally struggle to attract new
investment, these ``grayfields'' can be turned into regional benefits
by creating economic opportunities, preventing sprawl, and conserving
open space and natural resources. For example, government facilities
could be encouraged to locate on these sites rather than on previously
undeveloped green spaces.
States should be able to use the funds in ways that promote
reclamation, leverage private investment, and, where it is appropriate,
encourage redevelopment.
Increase the Minimum Program Funding
States which have significant abandoned mine problems, but which
have small state programs, are supposed to be guaranteed minimum
funding of their programs by statutory mandate. Since 1990, this
funding has been set at $2 million. In many years, minimum program
states have received significantly less. Increasing this amount would
help make up for past under-funding and ensure that states with large
abandoned mine problems but low production would be able to continue
running effective programs. This potentially affects eleven states.
Annual funding for minimum program states should be raised to $4
million to reduce the time needed to finish addressing their abandoned
mine problems.
Full allocation to states of future fees
As of June 30, 2003, the fund has an unappropriated balance of
nearly $1.5 billion. The state share of this balance is almost $972
million. Pennsylvania maintains the third highest balance at over $54.7
million. These funds are not being used for their intended purposes
while our abandoned mine problems persist.
Future collections to the fund should be fully allocated for their
intended purposes of cleaning up abandoned mine problems and reducing
the time necessary to meet the goals of SMCRA.
Extend the End Date
The scope of the abandoned mine problem continues to outpace
available resources. Based on current funding levels, projected future
production, and estimated costs of cleaning up inventoried sites, it
will take at least 25 years to address abandoned mine problems.
Extending the program 25 years would honor the intentions of the
original law to unburden communities plagued by unreclaimed coalmines.
The program should be extended until at least 2029.
Public health and welfare, restoration of the land, and cleaning of
polluted streams requires congressional action. Failure to act
continues a cycle of depressed economies and unemployment while
exposing our communities and families to health and safety hazards.
Please act now to modify and reauthorize the Abandoned Mine Reclamation
Fund to finish the job of reclaiming our abandoned mine legacy.
Respectfully Submitted,
Daniel K. Donnelly, Ph.D., Director
Center for Environmental Research and Education
______
[A letter submitted for the record by Mr. Grote follows:]
THOMAS F. GROTE KISKI BASIN INITIATIVES
DIRECTOR 501 15TH STREET, SUITE B
WINDBER, PA 15963
814-467-0836
July 29, 2003
The Honorable Barbara Cubin
Chair
Subcommittee on Energy and Mineral Resources
1626 Longworth House
Office Building
Washington, D.C. 20515
Dear Representative Cubin:
Modification and reauthorization of the Abandoned Mine Reclamation
Fund are important to protect our communities and families from hazards
posed by coal mines abandoned before 1977. Dangerous shafts, mountains
of black waste, polluted waters, and depressed economies afflict one-
half of the citizens of the United States The Abandoned Mine
Reclamation Fund is the primary source of money available to fix these
problems. We have successfully used the fund to clean up toxic mine
water, extinguish mine fires, and eliminate other dangerous abandoned
mine hazards.
Unregulated coal mines abandoned before the Federal Surface Mining
Control and Reclamation Act of 1977 (SMCRA) resulted in a legacy of
environmental damage. Abandoned mines leak acidic, alkaline, and metal-
contaminated water, polluting public water supplies, destroying fish
and wildlife habitat, depressing local economies, and threatening human
health and safety. Statewide, 44 of Pennsylvania's 67 counties are
directly affected by abandoned mines that encompass over 189,000 acres.
Abandoned mine drainage (AMD) is the largest contributor to water
quality impairment in the Commonwealth. According to the Pennsylvania
Department of Environmental Protection, over 3,000 miles of the
Commonwealth's streams are impaired by AMD.
The price tag for cleaning up Pennsylvania's abandoned mine legacy
has been estimated to be as high as $15 billion. Pennsylvania has
committed substantial state and private dollars and countless hours of
professional and volunteer time to addressing the abandoned mine
problems. As you know, Congressman Kanjorski has introduced legislation
to supplement existing reclamation programs and to further help reclaim
our abandoned mine legacy. The Commonwealth receives about $25 million
per year from the Abandoned Mine Reclamation Fund. But the reclamation
job before us is too large for any one program or one level of
government to address on its own. There is much work left to be done.
Finish the Job
The Abandoned Mine Reclamation Fund program is not currently
structured to efficiently and effectively complete the job of
reclaiming coal mine lands abandoned before 1977. The states that
fueled the coal boom in the early and middle part of this century and
helped fight two World Wars currently have low coal production relative
to their western counterparts, yet they have the largest legacy of
adverse mining impacts from before 1977. The majority of grants
distributed to the states are based on current rather than historic
production. When the program began in 1977, production in the eastern
states was high enough to ensure that our states received a proportion
of the funds that roughly aligned with the extent of our problems.
Since then, production has shifted away from the states--including
Pennsylvania--with high historic production and 94% of the abandoned
mine land problems.
OSM Director Jeff Jarrett captured the essence of the problem in a
recent white paper entitled The Job's Not Finished in which he points
out that ``there is a direct correlation between a state or tribe's
historic production and the magnitude of its AML problem...there is no
relationship between the current production state share portion of the
grant and the magnitude of the AML problem in that state or tribe.''
The formula should be changed to direct resources from the fund to
states based upon historic production. This will correct existing
imbalances, direct resources to where the problems are, and allow
states with the most pre-1977 problems to finish the job of reclaiming
our abandoned mine legacy.
Funding for Abandoned Mine Drainage
Abandoned mine drainage pollutes public water supplies, destroys
fish and wildlife habitat, depresses local economies, and threatens
human health and safety. Pennsylvania is representative of eastern coal
states with abandoned mine drainage problems. AMD is our largest source
of water quality impairment.
The Pennsylvania Fish and Boat Commission once estimated that the
Commonwealth suffers almost $70 million per year in lost recreational
and fishing opportunities due to abandoned mine drainage. These waters
are too polluted to allow fishing, boating, and other water-based
recreation.
It is critical that abandoned mine drainage problems continue to be
eligible for funding to protect the health of our citizens and
visitors, improve our economy, and sustain our future.
Keep Priorities 1, 2, and 3
Three priority areas are eligible for funding to correct adverse
effects of coal mining practices under Title IV. Priority 1 provides
for the protection of public health, safety, general welfare, and
property from extreme danger. Priority 2 provides for the protection of
public health, safety, and general welfare. Priority 3 provides for the
restoration of degraded land and water resources and the environment.
States have the discretion to use their allocations from the Fund for
projects falling into any of the three priorities.
The current priorities should be maintained, including the ability
to fund water-related projects under Priorities 2 and 3.
Maintain the Combined Benefit Fund
Interest generated on the Abandoned Mine Reclamation Fund is
currently transferred to the Combined Benefit Fund (CBF) to defray
health care costs for retired miners and their dependents whose
companies have gone bankrupt or are no longer in business. The CBF pays
for health care expenses remaining after Medicare and Medicaid
reimbursement and pays for prescription drugs. There are approximately
60,000 beneficiaries, whose average age is 78 years old. This eases the
burden on mining companies. If the Abandoned Mine Reclamation Fund is
not reauthorized, a new fee will need to be levied to cover these
benefits.
The transfer of interest to the Combined Benefit Fund should
continue. At the same time, the funds should be invested in a way that
maximizes returns whenever possible.
Leverage the Dollars
Currently, most of the resources allocated under this program are
not permitted to be matched with other Federal dollars. This is an
onerous requirement that inhibits the ability of states to efficiently
solve local problems.
Funds allocated under this program should be ``matchable'' with
Federal, state, local, and private dollars to maximize resources and
encourage partnerships.
As abandoned mine lands are reclaimed, they offer potential
locations for economic development projects. According to the
Association of General Contractors, 59 jobs are created for every $1
million spent on construction activities. By developing and marketing
abandoned mine lands that would normally struggle to attract new
investment, these ``grayfields'' can be turned into regional benefits
by creating economic opportunities, preventing sprawl, and conserving
open space and natural resources. For example, government facilities
could be encouraged to locate on these sites rather than on previously
undeveloped green spaces.
States should be able to use the funds in ways that promote
reclamation, leverage private investment, and, where it is appropriate,
encourage redevelopment.
Increase the Minimum Program Funding
States which have significant abandoned mine problems, but which
have small state programs, are supposed to be guaranteed minimum
funding of their programs by statutory mandate. Since 1990, this
funding has been set at $2 million. In many years, minimum program
states have received significantly less. Increasing this amount would
help make up for past under-funding and ensure that states with large
abandoned mine problems but low production would be able to continue
running effective programs. This potentially affects eleven states.
Annual funding for minimum program states should be raised to $4
million to reduce the time needed to finish addressing their abandoned
mine problems.
Full allocation to states of future fees
As of June 30, 2003, the fund has an unappropriated balance of
nearly $1.5 billion. The state share of this balance is almost $972
million. Pennsylvania maintains the third highest balance at over $54.7
million. These funds are not being used for their intended purposes
while our abandoned mine problems persist.
Future collections to the fund should be fully allocated for their
intended purposes of cleaning up abandoned mine problems and reducing
the time necessary to meet the goals of SMCRA.
Extend the End Date
The scope of the abandoned mine problem continues to outpace
available resources. Based on current funding levels, projected future
production, and estimated costs of cleaning up inventoried sites, it
will take at least 25 years to address abandoned mine problems.
Extending the program 25 years would honor the intentions of the
original law to unburden communities plagued by unreclaimed coal mines.
The program should be extended until at least 2029.
Public health and welfare, restoration of the land, and cleaning of
polluted streams requires congressional action. Failure to act
continues a cycle of depressed economies and unemployment while
exposing our communities and families to health and safety hazards.
Please act now to modify and reauthorize the Abandoned Mine Reclamation
Fund to finish the job of reclaiming our abandoned mine legacy.
Respectfully Submitted,
Thomas F. Grote, Director
Kiski Basin Initiatives
______
A statement submitted for the record by the Western Coal
Traffic League follows:]
Statement of the Western Coal Traffic League
Madam Chairwoman, Members of the Subcommittee:
This statement is submitted on behalf of the Western Coal Traffic
League (``WCTL'') to the Subcommittee on Energy and Mineral Resources
on the issue of the Abandoned Mine Line (``AML'') program. WCTL
respectfully requests that this statement be included as part of the
Subcommittee hearing record.
IDENTITY AND INTEREST
WCTL is an association formed in 1976. Its membership is composed
of electric utilities, located throughout a broad geographic spectrum
in the West and Midwest, that purchase and consume coal mined west of
the Mississippi River. WCTL members collectively consume more than 130
million tons of western coal annually, the vast majority of which is
derived from the enormous, low-sulfur surface mine coal reserves of the
Powder River Basin in northeastern Wyoming. A list of WCTL's current
members is appended as Attachment 1. The locations of the individual
electric utility plants of WCTL's members are displayed and listed on
the map appended as Attachment 2.
The AML program is funded from a fee collected on each ton of coal,
including $0.35 per ton produced by surface mining, $0.15 per ton
produced by underground mining, and $0.10 cents per ton from mined
lignite. This fee is imbedded in the price of every ton of coal
purchased by coal consumers.
The AML program is of considerable interest to WCTL because the
fees paid into the program are passed through by coal suppliers
essentially as an added tax to individual electric utilities (who
purchase the majority of the nation's coal output) and ultimately to
millions of business and residential electric utility customers as part
of their monthly electric bills. Under the AML program, WCTL members
collectively pay over $40 million in AML fees annually.
WCTL'S POSITION ON THE AML PROGRAM
The AML program was enacted over a quarter-of-a-century ago under
the Surface Mining Control & Reclamation Act of 1977 (``SMCRA'') to
address pre-1977 unreclaimed abandoned mine facilities that were no
longer assignable to any person for reclamation purposes. Over those 25
years, over $6.7 billion has been paid into the AML fund that has been
passed-through to individual WCTL members and other coal consumers.
Given the large AML expenditures made, the finite number of
reclamation sites at issue as established by SMCRA, and the length of
time the program has been in effect, one would have hoped that the
program would be at or near its end by now. Unfortunately, that does
not appear to be the case. While substantial clean-up efforts have
occurred under the AML program, by all accounts, significant priority
reclamation projects still remain in certain states.
The AML fees paid by electric utility coal consumers are infused
with public interest considerations as the fee ultimately has a direct
bearing on electricity prices throughout a large portion of the nation.
The active surface mines from which WCTL members purchase coal will
never tap into the AML fund due to the reclamation and bonding
requirements imposed by SMCRA. WCTL members are required to pay the AML
fee, state severance taxes, county ad valorem taxes, and ``Black Lung''
taxes. Well over 30% of the current market mine price of Wyoming Powder
River Basin coal is composed of such pass-through taxes and fees.
WCTL recognizes that there may be a legitimate Federal need to
continue to address remaining priority coal reclamation problems. At
the same time, WCTL and its members have a responsibility to ensure
that the program promptly achieves its intended purpose and does not
continue in perpetuity.
WCTL addresses below several significant issues in relation to the
AML program which it believes the Congress should address as part of
any AML reauthorization program.
A. The AML Surplus
The AML's current surplus is over $1.4 billion, and there is no
expected end in the imbalance in receipts versus disbursements that has
resulted in this growing surplus. For example, the Office of Surface
Mining (``OSM'') expects $380 million in AML receipts and interest
collections for Fiscal Year 2004. The House and Senate Appropriations
Committees each provide in their annual appropriations bills pending
before the Congress less than $195 million in AML program
appropriations for the year--a $185 million variance. The end result is
that almost half of the anticipated fees and interest receipts in the
year will be used for purposes other than mine reclamation activities.
B. Regional Production Issues
In enacting the AML program, Congress recognized that based on
historic coal production, the crux of the AML problems were centered in
the Appalachian region in the eastern United States. As reported by
OSM, in the initial years of the AML program, approximately 75% of the
AML income was derived from eastern states where 94% of AML problem
sites existed, while 25% was from western states where 6% of AML
problem sites existed. Thus, the fee receipts from various coal
producing regions was roughly proportionate to where the abandoned mine
reclamation problems existed.
Congress did not foresee at the time of the enactment of SMCRA the
explosion of coal production experienced in the western United States
since the early 1980s. As a result of this phenomenon, approximately
36% of AML fees are currently collected from eastern states `` where
the majority of the remaining AML priority projects exist--and 64% is
from western states. Wyoming coal consumers alone contributed
approximately 44% of the total AML fees collected in 2002.
In the next decade, the Energy Information Administration expects a
25%+ growth in western coal production (and 34% growth for the Wyoming
Powder River Basin coal region), while it expects eastern coal
production to essentially remain flat. The end result is that if the
AML program continues in its existing form, these regional and state
specific issues will be amplified each year well into the future.
C. AML Fee Levels
Under the AML program, surface-mined coal is being assessed $0.35
per ton--over double and triple that being assessed on underground-
mined coal and mined lignite, respectively. This fee structure may have
made some sense in 1977, when most of the coal mined in the country was
from eastern mines (a large percentage of which was underground mined
coal) as a means of ensuring that the western mines (most of which are
surface mines) were able to contribute a roughly proportionate share
into the AML fund. However, the appropriateness of imposing a much
higher fee on surface mined coal should be reexamined given changes in
regional mine production since the enactment of SMCRA.
D. State Share Issues
Under SMCRA, 50% of funds collected annually from any state (or
Indian land) are directed to go back to that state (the state share).
The remaining fifty percent (the Federal share) is used to complete
priority and other reclamation projects, and to pay collection, audit,
and administrative costs. However, some western states typically
receive AML distributions well-under 30% of the AML fees collected. For
example, in 2002 Wyoming, by-far the largest coal producing state,
received a total distribution (including Federal and state share) of
$28.7 million--only about 23% of total AML fees collected in the state.
The remaining $34 million due Wyoming under its state share was
deposited into the general AML Trust Fund.
In total, almost $1 billion in state share over-collections is
currently deposited in the AML Fund (Wyoming's share alone totals over
$374 million).
E. AML Project Prioritization
Under current law, certain unreclaimed sites may present less
urgent public safety or pollution threats, yet under the existing AML
rules those project may still qualify for expensive reclamation
projects. The program may also unnecessarily promote duplicative
bureaucracies in affected states.
CONCLUSION
Madam Chairwoman, WCTL respectfully submits that the above-issues
should be fully evaluated and addressed by the Subcommittee as part of
the reauthorization process. WCTL desires to continue to work with the
Subcommittee and participate with all interested AML program
stakeholders in the AML reauthorization process. We greatly appreciate
the opportunity to present our views, and we will be pleased to provide
the Subcommittee with any additional information it may desire on any
of the matters discussed in this statement.
ATTACHMENT 1
WESTERN COAL TRAFFIC LEAGUE MEMBERS
Alliant Energy
Arizona Electric Power Cooperative, Inc.
Associated Electric Cooperative, Inc.
Center Point Energy
Central Louisiana Electric Company, Inc.
City of Austin, Texas
City Public Service Board of San Antonio
Kansas City Power & Light Company
Lower Colorado River Authority
MidAmerican Energy Company
Minnesota Power
Nebraska Public Power District
NRG Power Marketing Inc.
Omaha Public Power District
Texas Municipal Power Agency
Westar Energy
Western Farmers Electric Cooperative
Wisconsin Public Service Corporation
Xcel Energy
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