[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
                                   or
         Committee address: http://resourcescommittee.house.gov


                                 ______

88-532              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001

                         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:]

    [GRAPHIC] [TIFF OMITTED] T8532.012
    
    [GRAPHIC] [TIFF OMITTED] T8532.013
    
    [GRAPHIC] [TIFF OMITTED] T8532.011
    

    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.

[GRAPHIC] [TIFF OMITTED] T8532.005

[GRAPHIC] [TIFF OMITTED] T8532.006

[GRAPHIC] [TIFF OMITTED] T8532.007

[GRAPHIC] [TIFF OMITTED] T8532.008

[GRAPHIC] [TIFF OMITTED] T8532.009

[GRAPHIC] [TIFF OMITTED] T8532.010


    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: [email protected]

                             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

    [GRAPHIC] [TIFF OMITTED] T8532.003
    
    [GRAPHIC] [TIFF OMITTED] T8532.004
    
