[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]




 
   H.R. 3796 AND H.R. 3778, TO AMEND THE SURFACE MINING CONTROL AND 
RECLAMATION ACT OF 1977 AND REAUTHORIZE AND REFORM THE ABANDONED MINE 
                          RECLAMATION PROGRAM

=======================================================================

                          LEGISLATIVE HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                        Tuesday, March 30, 2004

                               __________

                           Serial No. 108-88

                               __________

           Printed for the use of the Committee on Resources


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                         COMMITTEE ON RESOURCES



                 RICHARD W. POMBO, California, Chairman
       NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska                    Dale E. Kildee, Michigan
W.J. ``Billy'' Tauzin, Louisiana     Eni F.H. Faleomavaega, American 
Jim Saxton, New Jersey                   Samoa
Elton Gallegly, California           Neil Abercrombie, Hawaii
John J. Duncan, Jr., Tennessee       Solomon P. Ortiz, Texas
Wayne T. Gilchrest, Maryland         Frank Pallone, Jr., New Jersey
Ken Calvert, California              Calvin M. Dooley, California
Scott McInnis, Colorado              Donna M. Christensen, Virgin 
Barbara Cubin, Wyoming                   Islands
George Radanovich, California        Ron Kind, Wisconsin
Walter B. Jones, Jr., North          Jay Inslee, Washington
    Carolina                         Grace F. Napolitano, California
Chris Cannon, Utah                   Tom Udall, New Mexico
John E. Peterson, Pennsylvania       Mark Udall, Colorado
Jim Gibbons, Nevada,                 Anibal Acevedo-Vila, Puerto Rico
  Vice Chairman                      Brad Carson, Oklahoma
Mark E. Souder, Indiana              Raul M. Grijalva, Arizona
Greg Walden, Oregon                  Dennis A. Cardoza, California
Thomas G. Tancredo, Colorado         Madeleine Z. Bordallo, Guam
J.D. Hayworth, Arizona               George Miller, California
Tom Osborne, Nebraska                Edward J. Markey, Massachusetts
Jeff Flake, Arizona                  Ruben Hinojosa, Texas
Dennis R. Rehberg, Montana           Ciro D. Rodriguez, Texas
Rick Renzi, Arizona                  Joe Baca, California
Tom Cole, Oklahoma                   Betty McCollum, Minnesota
Stevan Pearce, New Mexico
Rob Bishop, Utah
Devin Nunes, California
Randy Neugebauer, Texas

                     Steven J. Ding, Chief of Staff
                      Lisa Pittman, Chief Counsel
                 James H. Zoia, Democrat Staff Director
               Jeffrey P. Petrich, Democrat Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                    BARBARA CUBIN, Wyoming, Chairman
              RON KIND, Wisconsin, Ranking Democrat Member

W.J. ``Billy'' Tauzin, Louisiana     Eni F.H. Faleomavaega, American 
Chris Cannon, Utah                       Samoa
Jim Gibbons, Nevada                  Solomon P. Ortiz, Texas
Mark E. Souder, Indiana              Grace F. Napolitano, California
Dennis R. Rehberg, Montana           Tom Udall, New Mexico
Tom Cole, Oklahoma                   Brad Carson, Oklahoma
Stevan Pearce, New Mexico            Edward J. Markey, Massachusetts
Rob Bishop, Utah                     VACANCY
Devin Nunes, California              VACANCY
Randy Neugebauer, Texas              Nick J. Rahall II, West Virginia, 
Richard W. Pombo, California, ex         ex officio
    officio


                                 ------                                
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on Tuesday, March 30, 2004..........................     1

Statement of Members:
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming...........................................     1
        Prepared statement of....................................     4
    Peterson, Hon. John E., a Representative in Congress from the 
      State of Pennsylvania......................................     9
        Prepared statement of....................................    11
    Rahall, Hon. Nick J., II, a Representative in Congress from 
      the State of West Virginia.................................     6
        Prepared statement of....................................     8
    Sessions, Hon. Pete, a Representative in Congress from the 
      State of Texas.............................................    49
        Prepared statement of....................................    51
        Letter submitted for the record..........................    53

Statement of Witnesses:
    Hohmann, Stephen, Director, Division of Abandoned Mine Lands, 
      Kentucky Department for Natural Resources..................    38
        Prepared statement of....................................    40
    Jarrett, Jeff, Director, Office of Surface Mining, U.S. 
      Department of the Interior.................................    12
        Prepared statement of....................................    14
    Masterson, John A., Counsel to the Governor, Wyoming State 
      Capitol....................................................    30
        Prepared statement of....................................    31
        Response to questions submitted for the record...........    36
    Roberts, Cecil E., President, United Mine Workers of America.    58
        Prepared statement of....................................    59
    Roberts, J. Scott, Deputy Secretary, Office of Mineral 
      Resources Management, Pennsylvania Department of 
      Environmental Protection (DEP), Office of Mineral Resources 
      Management.................................................    26
        Prepared statement of....................................    28
    Sharp, William Michael, Assistant Director -- AML Program, 
      Oklahoma Conservation Commission...........................    42
        Prepared statement of....................................    44
    Young, Dave, Bituminous Coal Operators Association...........    55
        Prepared statement of....................................    56

Additional materials supplied:
    Cantor, Hon. Eric, a Representative in Congress from the 
      State of Virginia, Statement submitted for the record......    69
    Citizens Coal Council, Statement submitted for the record....    67


 LEGISLATIVE HEARING ON H.R. 3796 AND H.R. 3778, TO AMEND THE SURFACE 
 MINING CONTROL AND RECLAMATION ACT OF 1977 AND REAUTHORIZE AND REFORM 
                THE ABANDONED MINE RECLAMATION PROGRAM.

                              ----------                              


                        Tuesday, March 30, 2004

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                         Committee on Resources

                             Washington, DC

                              ----------                              

    The Subcommittee met, pursuant to notice, at 10:15 a.m., in 
Room 1324, Longworth House Office Building, Hon. Barbara Cubin 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Cubin, Rehberg, Cole, Pearce, 
Rahall, and Tom Udall.
    Also Present: Representatives Peterson and Sessions.

 STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF WYOMING

    Mrs. Cubin. I now call the Subcommittee on Energy and 
Mineral Resources' legislative hearing to order.
    The Subcommittee is meeting today to hear testimony on H.R. 
3796 and H.R. 3778, to amend the Surface Mining Control and 
Reclamation Act of 1977 and to reauthorize and reform the 
Abandoned Mine Land program.
    Under Committee Rule 4(g), the Chairman and Ranking 
Minority Member can make opening statements, but since we don't 
have a huge crowd here today, we will certainly welcome Mr. 
Peterson and Mr. Rehberg to have statements, and likewise, for 
any other Members who come in.
    The Subcommittee meets today to consider legislation that 
focuses on problems that exist within the Abandoned Mine Land 
program.
    When Congress passed the Surface Mining Control and 
Reclamation Act of 1977, or SMCRA, it recognized the Federal 
Government's 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, Congress 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 dispersed by the Federal 
Government based on historic coal production and other Federal 
priorities. I believe we are aware that, despite the letter of 
the law, this is not how things have worked out.
    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 at 
least an additional $6 billion, and anywhere from 12 to 100 
years will be needed to complete the work on priority one and 
priority two sites, the areas of greatest concern to the health 
and safety of our constituents.
    The House and Senate appropriators have not been applying 
the funds to the States over the years, nor have the projects 
that needed to be funded been funded. In fact, a little over 
half of the funds are being appropriated. Year after year, 
Congress has failed to live up to its promise and States like 
Wyoming are suffering the consequences.
    Wyoming's unappropriated state balance now approaches $425 
million, without interest, and the total unappropriated State 
balance nationwide is as high as $1.1 billion. Yes, that's a 
``b''. This is a huge sum of money that could be put to 
legitimate reclamation needs to save the lives and protect the 
environment.
    As we look to reauthorize this program, we must find a 
solution to the appropriations problem and compel the Congress 
and Administration to live up to their commitments to return 50 
percent of the State share balances to the States where they're 
collected.
    When the AML program was started, the vast majority of coal 
production was done in the East, where most of the reclamation 
work needs to be done. Over the last couple of decades, though, 
coal production has migrated West. Wyoming mined coal currently 
pays for over 40 percent of the AML program. Wyoming money is 
being used to clean up eastern problems. I don't have a problem 
with that, as long as Wyoming is treated fairly, too. The 
future funding of the AML program must ensure that one region 
of the country, and largely one State, 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 to fund 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 Benefit Fund, or CBF, to its limits. I have always 
believed that 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 either the mine workers, a single State, or a 
limited number of States.
    This is a problem that requires a national solution, not 
one supported solely be the AML fund. Some say the art of 
compromise is disappearing, but I believe Ranking Member Nick 
Rahall and I have found a way to adequately fund the health 
care benefits of those retired miners, and I firmly believe 
that H.R. 3796, the Cubin/Rahall bill as I call it--and I hope 
Nick calls it the Rahall/Cubin bill--is a way that we can do 
that.
    I also strongly believe that the Cubin/Rahall proposal best 
achieves the varied needs of all the AML program States, rather 
than focusing on just a small handful of problems. It is 
unconscionable that the Administration's proposal seeks to 
single out western States and tribes who already bear a 
disproportionate load of the fund and asks them to forego all 
future contributions to the AML fund, just for the privilege of 
seeking the appropriation of monies that they are already 
authorized to receive.
    The Bureau of Land Management estimates released in 
February state that coal production in Wyoming's Powder River 
Basin, only one of our four production sites in the State, is 
expected to increase 80 by the year 2020, and rising to 646 
million tons annually.
    Assuming the report is correct, and under the 20 percent 
reduction in the AML fee used in both bills, the State of 
Wyoming would stand to lose upwards of $75 million per year of 
State share revenues currently owed. Over the 14-year 
reauthorization of the Administration's proposal, my 
constituents would be looking at a cut of over one billion 
dollars in State shares for the promise of a continued increase 
in the President's budget and future appropriated dollars of 
monies we can already receive under law.
    There is no difference. Why would we ever think that we 
would get our money. This Administration won't be around 
forever to see that we do, and it's at the whims of the 
appropriators. The President's proposal simply is not a viable 
option.
    Just this week, the House of Representatives will debate 
whether it's possible to pass--I guess it's going to be this 
week now--the reauthorization of the TEA-21 bill. Could you 
imagine if the State of Pennsylvania, for example, was asked to 
donate millions or billions of dollars to the Highway Trust 
Fund and receive zero percent back on their payments? It simply 
doesn't pass the straight face test, and that's the way I feel 
about this.
    The Cubin/Rahall proposal makes great strides toward 
addressing the needs of all 24 States and tribes who 
participate in the program. The Cubin/Rahall bill has already 
garnered wide bipartisan support from many members of States 
such as West Virginia, Kentucky, Ohio, Indiana, and Wyoming. 
The list grows every week as folks become educated on the issue 
and how our bill will affect them. In fact, every single State 
and tribe in the AML program, all 24 of them, will receive a 
boost in funding under the Cubin/Rahall bill. The same cannot 
be said for the Administration's proposal.
    We have before us today representatives of the broad 
stakeholder interests in the AML fund. We will hear many 
different perspectives and priorities about reauthorization of 
SMCRA, how the Cubin/Rahall and Administration proposals 
differ, and in what ways we can move forward in this process. I 
will do my best to address each of these perspectives as we 
move forward.
    Finally, I have nothing but the utmost respect for my 
colleague, Mr. Peterson, and I commit to working with him on 
this issue until we can find an answer. We have worked on 
issues just as tough as this in the past, from ESA reform to 
passing an energy bill, and I have no doubts that we will be 
able to come together for a solution. The AML fund is very 
complex and contentious, but it is an issue so important that 
we owe the American people a rational and common sense solution
    I look forward to working with Mr. Rahall and Mr. Peterson 
and other Members of Congress, as well as with the 
Administration, States and tribes and all the various 
stakeholders to find a solution to this.
    I want to welcome John Masterson, counsel to Governor 
Freudenthal of Wyoming, who will be here. He does a good job 
for the State, both John and the Governor, and I look forward 
to his testimony later on.
    After all of that, I would now like to yield to Mr. Rahall.
    [The prepared statement of Mrs. Cubin follows:]

          Statement of The Honorable Barbara Cubin, Chairman, 
              Subcommittee on Energy & Minerals Resources

    The Subcommittee meets today to consider legislation that focuses 
on problems within the Abandoned Mine Land Program.
    When Congress passed the Surface Mining Control & Reclamation Act 
of 1977, or SMCRA, it recognized the federal government's 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, Congress 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. I believe we are aware that, despite the 
letter of the law, this is not how things have worked out.
    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 at least an additional $6 billion and 
anywhere from 12 to 100 years will be needed to complete work on 
priority one and two sites, the areas of greatest concern to human 
health and safety.
    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, preventing the important dirt work from being done. 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 now approaches $425 million, 
and the total unappropriated state balance nationwide is as high as 
$1.1 Billion. Yes, that is billion with a ``B.'' This is a huge sum of 
money that could be put to legitimate reclamation needs to save lives 
and protect the environment.
    As we look to re-authorize this program, we must find a solution to 
this appropriations problem and compel the Congress and Administration 
to 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, and largely one state, 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, or CBF, to its limits. I have always believed 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.
    This is a national problem that requires a national solution, not 
one supported solely by the AML fund. Some say the art of compromise is 
disappearing, but I believe Ranking Member Rahall and I have found a 
way to adequately fund the health care benefits of these retired mine 
workers, and I firmly believe that H.R. 3796, the Cubin/Rahall 
proposal, is the way to do it.
    I also strongly believe that the Cubin/Rahall proposal best 
achieves the varied needs of all of the AML Program states, rather than 
focusing on just a small handful of the problems. It is unconscionable 
that the Administration's proposal seeks to single out Western states 
and tribes, who already bear a disproportionate load of the AML fee, 
and asks them to forego all future contributions to the AML Fund, just 
for the privilege of seeking the appropriation of monies they are 
already authorized to receive under current law.
    Bureau of Land Management (BLM) estimates released in February 
state that coal production in Wyoming's Powder River Basin, only one of 
our coal production areas in the state, is expected to increase 80 
percent by the year 2020, rising to 646 million tons annually.
    Assuming the report is correct, and under the 20% reduction in the 
AML fee used in both bills, the state of Wyoming would stand to lose 
upwards of $75 million per year of state share revenues currently owed. 
Over the 14 year re-authorization of the Administration's proposal, my 
constituents would be looking at a cut of over $1 Billion in state 
shares, for the promise of continued increase in the President's budget 
and future appropriated dollars of monies we can already receive under 
law. And yes, I again used a ``B'' there. It would be comical if the 
amounts weren't so staggering.
    Just this week the House of Representatives will debate whether it 
is possible to pass a re-authorization of the TEA-21 bill. Could you 
imagine if the state of Pennsylvania, for example, was asked to donate 
millions or billions of dollars to the Highway Trust Fund, and receive 
ZERO percent back upon their payments? It simply does not pass the 
straight face test.
    The Cubin/Rahall proposal makes great strides towards addressing 
the needs of all 24 states and tribes who participate in the program. 
The Cubin/Rahall bill has already garnered wide bipartisan support from 
many members in states such as West Virginia, Kentucky, Ohio, Indiana 
and Wyoming.
    The list grows every week as folks become educated on the issue and 
how our bill will affect them. In fact, every single state and tribe in 
the AML program, all 24 of them, will receive a boost in funding under 
the Cubin/Rahall bill. The same cannot be said of the Administration's 
proposal.
    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, how the Cubin/Rahall and 
Administration proposals differ, and in what ways we can move forward 
in this process. I will do my best to address each of these 
perspectives as we move to further consensus key issues regarding re-
authorization.
    Finally, I have nothing but the utmost respect for my colleague Mr. 
Peterson, and commit to working on this issue with him until we can 
find an answer. We have worked on issues just as tough as this in the 
past from ESA reform to passing an energy bill, and I have no doubts 
we'll find a solution. The AML Fund is a very complex and contentious 
issue, but it is an issue so important that we owe the American people 
a rational and common-sense solution.
    I look forward to working with Mr. Rahall, Mr. Peterson, other 
members of the Congress, the Administration, states, tribes 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.
    I would like to welcome John Masterson, Counsel to Governor 
Freudenthal of Wyoming. He does a good job for our home state, and I 
look forward to his testimony, and the testimony of all the witnesses.
                                 ______
                                 

   STATEMENT OF HON. NICK J. RAHALL, II, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF WEST VIRGINIA

    Mr. Rahall. Thank you, Madam Chair. I appreciate the fact 
that you are holding these hearings today, and I appreciate 
your leadership on this most important issue. I totally agree 
with you. We will call it Cubin/Rahall, or call it whatever you 
want to call it. I would be glad to go to the top of the dome 
and yell it out at any time--once we get it passed and signed 
into law.
    The purpose of this hearing today is to consider a rather 
fundamental proposition, and it is whether we will keep the 
promise or not. It is that simple, a promise made to the coal 
miner.
    In 1946, this was devised by the White House as a direct 
result of the sweat and blood of generations of coal miners, 
whose toil carried this Nation through war and peace, through 
the industrial and technological revolutions. It was a promise 
of cradle to grave health care that manifested itself into the 
1992 Coal Act. It was a promise made to coal field citizens and 
communities. In 1977, again at the White House, it was devised 
as a result of the ravages of past abuses and on the souls of 
the 118 individuals who perished in 1972 at Buffalo Creek in 
Logan County, WV. It was a promise to reclaim their devastated 
landscapes, to return their land to productive uses, and to 
protect their health and safety that is part and parcel of the 
landmark Surface Mining Control and Reclamation Act.
    The Abandoned Mine Reclamation program has been a success. 
Unlike the Superfund, this program has a track record of real, 
on-the-ground progress in restoring lands and eliminating 
health and safety threats to our coal field residents.
    Since 1992, through the transfer of just the interest which 
accrues to the Abandoned Mine Reclamation fund to the Combined 
Benefit Fund, we have provided health care for tens of 
thousands of elderly retired coal miners whose former employers 
can no longer be identified. Many from southern West Virginia 
are in this Committee room today, in the back row.
    The nexus is there. The welfare of abandoned miners and of 
reclaiming abandoned mines, you see, go hand in hand. To date, 
the promise has been kept. Yet, at the end of this year, the 
fees assessed on the coal industry which finances this effort 
expire.
    In this regard, it is no secret that for many years the 
interests of Wyoming, the largest producer of coal, and West 
Virginia, with a large legacy of abandoned coal mines and 
retired coal miners, differed on the issue of reauthorizing the 
Abandoned Mine Reclamation fund.
    But over the course of the past 3 years, the gentlelady 
from Wyoming, Barbara Cubin, and myself have engaged in dialog 
on these issues. We have always respected each other's views. 
We have worked in good faith, we are working in good faith, and 
we have found that on at least this matter common ground can be 
found between the coal fields of the Appalachian basin and 
those of the Powder River Basin.
    I commend the gentlelady from Wyoming. As I say, she has 
truly operated in good faith and truly understands the issue 
and has been successful in brokering what I term an historic 
agreement here.
    The result is H.R. 3796, the Cubin/Rahall bill. This 
legislation keeps the promise to the retired miner, to coal 
field citizens, and to the States and tribes. We have an old 
adage in the Appalachian coal fields--and president Cecil 
Roberts knows it very well--that dates back to 1932 and the 
Harlan County coal wars. And that is, ``which side are you on? 
Which side are you on?''
    I had hoped the Administration would be on our side. Yet, 
it chose to ignore the historic agreement that Representative 
Cubin has brokered and instead has launched a torpedo into a 
ship that already has some rough ocean to navigate.
    I welcome the Administration's interest. I welcome Mr. 
Jarrett's testimony this morning. It's always fascinating when 
the Administration attempts to come forward with a pro-
environment, pro-labor proposal. But in my view, it is a flawed 
proposal. I fear that under the Administration's proposal the 
program's goals will not be achieved, that through loopholes 
there will be a continued hemorrhaging of funds to lower 
priority projects. Cubin/Rahall says protecting human health 
and safety must come first.
    In my view, the Administration's bill does not keep faith 
with the coal States and tribes. It appears to say that 
reclaiming an abandoned coal mine in Oklahoma is less important 
than reclaiming an abandoned coal mine in Pennsylvania. I do 
not accept that notion.
    The fact of the matter is that the States and tribes 
entered into an agreement with the Federal Government premised 
on their receiving at a minimum a 50 percent return on their 
contributions to the program. Cubin/Rahall, as the gentlelady 
from Wyoming has said, maintains the integrity of those 
agreements. The Administration's plan does not.
    Finally, the Administration's bill does not keep faith with 
the retired coal miner. It does not keep the promise. Cubin/
Rahall does. Whether they reside in Salt Rock, WV or Rock 
Springs, WY, our bill keeps the promise to some 50,000 retired 
coal miners that their health care will continue uninterrupted.
    The eyes of coal field communities and coal mining 
families, ladies and gentlemen, are upon us this day. So to 
this gentleman from West Virginia, enacting the principles of 
Cubin/Rahall are a matter of justice, a matter of human dignity 
and respect, and are those which I shall not flag nor fail in 
our efforts to achieve.
    Thank you, Madam Chair.
    [The prepared statement of Mr. Rahall follows:]

   Statement of The Honorable Nick J. Rahall, II, Ranking Democrat, 
                         Committee on Resources

    The purpose of this hearing is to consider a rather fundamental 
proposition. Will we keep the promise or not.
    It is that simple.
    A promise made to the coal miner. In 1946. In the White House. 
Devised as a direct result of the sweat and blood of generations of 
coal miners whose toil carried this Nation through war and peace, 
through the Industrial and the Technological Revolutions.
    A promise of cradle-to-grave health care that manifested itself 
into the 1992 Coal Act.
    And a promise made to coalfield citizens and communities. In 1977. 
Again, at the White House. Devised as a result of the ravages of past 
abuses, and on the souls of the 118 individuals who perished in 1972 at 
Buffalo Creek in Logan County, West Virginia.
    A promise to reclaim their devastated landscapes, to return their 
land to productive uses, and to protect their health and safety that is 
part and parcel of the landmark Surface Mining Control and Reclamation 
Act.
    The Abandoned Mine Reclamation Program has been a success. Unlike 
the Superfund, this program has a track record of real, on-the-ground 
progress in restoring lands and eliminating health and safety threats.
    And since 1992, through the transfer of just the interest which 
accrues to the Abandoned Mine Reclamation Fund to the Combined Benefit 
Fund, we have provided health care for tens of thousands of elderly 
retired coal miners whose former employers can no longer be identified.
    The nexus is there. The welfare of abandoned miners and of 
reclaiming abandoned mines, you see, go hand in hand. To date, the 
promise has been kept.
    Yet, at the end of this year the fees assessed on the coal industry 
which finances this effort expire.
    In this regard, it is no secret that for many years the interests 
of Wyoming, the largest producer of coal, and West Virginia, with a 
large legacy of abandoned coal mines and retired coal miners, differed 
on the issue of re-authorizing the Abandoned Mine Reclamation Fund.
    But over the course of the past three years the gentlelady from 
Wyoming and myself have engaged in a dialogue on these issues. Always 
respectful of each other's views, working in good faith, we have found 
that in at least this matter common ground can be found between the 
coalfields of the Appalachian basin and those of the Powder River 
Basin.
    The result: H.R. 3796, the Cubin-Rahall bill.
    This legislation keeps the promise. To the retired miner, to 
coalfield citizens and to the States and tribes.
    We have an old adage in the Appalachian coalfields, dating back to 
1932 and the Harlan County Coal Wars. Which side are you on? Which side 
are you on?
    I had hoped the Administration would be on our side. Yet, it chose 
to ignore the historic agreement brokered by the gentlelady from 
Wyoming and myself and instead launch a torpedo into a ship that 
already has some rough ocean to navigate.
    I welcome the Administration's interest. It is always fascinating 
when this Administration attempts to come forward with a pro-
environment, pro-labor proposal.
    But in my view it is a flawed proposal.
    I fear that under the Administration's bill the program's goals 
will not be achieved. That through loopholes there will be a continued 
hemorrhaging of funds to lower priority projects. Cubin-Rahall says 
protecting human health and safety must come first.
    In my view, the Administration's bill does not keep faith with the 
coal States and tribes. It appears to say that reclaiming an abandoned 
coal mine in Oklahoma is less important than reclaiming an abandoned 
coal mine in Pennsylvania. I do not accept that notion.
    The fact of the matter is that the States and tribes entered an 
agreement with the federal government premised on their receiving at a 
minimum a 50% return on their contributions to the program. Cubin-
Rahall maintains the integrity of those agreements. The Administration 
does not.
    And finally, the Administration's bill does not keep faith with the 
retired coal miner. It does not keep the promise. Cubin-Rahall does. 
Whether they reside in Salt Rock, West Virginia, or Rock Springs, 
Wyoming, it keeps the promise to some 50,000 retired coal miners that 
their health care will continue uninterrupted.
    The eyes of coalfield communities and coal mining families, ladies 
and gentlemen, are upon us this day.
    To this gentleman from West Virginia, enacting the principles of 
the Cubin-Rahall bill are a matter of justice, a matter of human 
dignity and respect, and are those which I shall not flag nor fail in 
my efforts to achieve.
                                 ______
                                 
    Mrs. Cubin. Thank you, Mr. Rahall.
    Let me ask the gentlemen if they would like to give an 
opening statement. Mr. Peterson?

    STATEMENT OF HON. JOHN E. PETERSON, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF PENNSYLVANIA

    Mr. Peterson. Thank you, Madam Chair. I look forward to 
working with you. We have worked together on many issues and 
have had a good friendship.
    I want to thank you for holding this hearing, and I want to 
thank Ranking Member Rahall for his comments, though I think 
his characterization of my bill as a ``torpedo'' was a little 
bit of a stretch. It's not a torpedo. It's just another point 
of view that I think when we merge them we might come out with 
a perfect bill. But it will take some discussion. But a 
``torpedo'', that's a little explosive, a little overstretching 
of the term, I think.
    I want to thank Scott Roberts, who is also here today from 
Pennsylvania, who we will hear from later, and all of those 
witnesses who have come to help us better understand this 
issue.
    I hope we're all aware of the major role that Pennsylvania 
played in the history of coal. As we will hear in the testimony 
this morning, the Commonwealth of Pennsylvania provided the 
coal that fired the boilers of trans-Atlantic steamships and 
the furnaces of our once great steel mills. It was 
Pennsylvania's coal that helped fuel the Industrial Revolution 
and got this country through two world wars and has made the 
country an industrial leader in the world today.
    A majority of Pennsylvania's coal was mined before Congress 
passed the Surface Mining Control and Reclamation Act in 1977. 
The State still bears the scars of this unregulated historic 
production. I represent a lot of those counties. Seventeen 
counties in the lower half of my district was all coal country.
    More than a billion dollars is still needed to clean up the 
4,600 abandoned sites in Pennsylvania that are considered 
dangerous or environmentally harmful, and more than 1.6 million 
Pennsylvanians live less than a mile from a dangerous mine 
site. Abandoned mine lands encompass more than 189,000 acres in 
44 of Pennsylvania's 67 counties, and more than 3,000 miles of 
stream in Pennsylvania are affected by acid mine drainage from 
them. This flows down the Susquehanna and into the Chesapeake, 
it flows down the Ohio into the Mississippi and into the Gulf, 
so it really adds pollution to the waters that encompass this 
country.
    It is clear that the abandoned mines and acid mine drainage 
are the number one environmental issue facing Pennsylvania, and 
the bill I have introduced, H.R. 3778, addresses those needs 
while maintaining the Federal commitments made to other States 
in SMCRA. I am proud to say that the entire Pennsylvania 
delegation has signed on to my bill.
    Pennsylvania is not asking for special treatment, nor are 
we asking to receive a single dollar more than is necessary to 
fix our abandoned mine problems. However, under the current 
system and other proposals, Pennsylvania will continue to 
receive inadequate resources to address priority sites, while 
States that have certified completion of their abandoned mine 
sites simply see their outstanding share balance grow. H.R. 
3778 will get the job done quicker, and about $3 billion 
cheaper, than other proposals.
    The Commonwealth has taken great steps to reclaim our 
abandoned mines and to clean up our waterways over the past 50 
years. I have served with five Governors, and all of them have 
had initiatives to clean up these sites and have always put the 
money on the table to more than match the Federal money that's 
been given them.
    On top of the $600 million we have received from the 
Federal AML program, Pennsylvania continues to put hundreds of 
millions of dollars of State money on the table to fix these 
problems. Mr. Roberts will share that in his testimony today.
    Clearly, Pennsylvania and its residents continue to do 
their fair share, but they need our help. All citizens of this 
Nation benefited from the cheap and abundant fuel we provided 
at a tremendous expense to Pennsylvania's environment. Our 
legacy of coal mining needs to be addressed so that we can 
properly protect the health, safety and well-being of our 
residents.
    It reminds me of Toby Creek, a creek that runs in my 
district, that when I first became a State Senator was a stream 
that was red and there was no aquatic life in it. Through our 
clean-up work today, it is stocked with trout from the Fish 
Commission, which says that it's a stream now that is stable 
for fish and aquatic life. We have a number of streams like 
that in my district and other parts of the State who have been 
brought back to their normal wholeness through this program.
    The point I would like to make, though, that I hope is not 
missed, is who pays into the fund? Do States pay into the fund, 
or do consumers pay into the fund? I think those who purchase 
the coal--because this fee is added to the price of the coal--
it's really paid for by the users, in my view, that use the 
coal.
    Now, I'm from a production State, a timber State, a coal 
State, and I know whenever we sell timber or coal, we make 
money. You know, our people go to work. We put a lot of people 
to work in natural resources. So the States that are producing 
are winners economically. But the people who really pay are the 
people who use the product when this kind of a tax is imposed. 
So I guess we could argue whose money really is it. Well, I 
think it's the consumers of America's money, and we really 
ought to be cleaning up the worst hazardous sites and bring our 
environment back to where it used to be.
    The Commonwealth of Pennsylvania and this Nation cannot 
afford for the AML program not to be reauthorized before it 
expires. I'm looking forward to working together with Chairman 
Cubin and Representative Rahall and all those who are 
interested to bring about a program that I think serves the 
needs of America, not just Pennsylvania.
    Thank you.
    [The prepared statement of Mr. Peterson follows:]

Statement of The Honorable John Peterson, a Representative in Congress 
                     from the State of Pennsylvania

    Good morning. I would like to thank Chairwoman Cubin for calling 
this hearing, as well as thank Deputy Secretary Scott Roberts from 
Pennsylvania and the rest of our witnesses for coming today to share 
their testimony.
    We are all well aware of the major role Pennsylvania has played in 
the history of coal. As we will hear in testimony this morning, the 
Commonwealth of Pennsylvania provided the coal that fired the boilers 
of transatlantic steamships and the furnaces of our once great steel 
mills. It was Pennsylvania coal that helped fuel the industrial 
revolution, got this country through two world wars and has made this 
country an industrial leader of the world today.
    A majority of Pennsylvania's coal was mined before Congress passed 
Surface Mine Control and Reclamation Act in 1977, and the state still 
bears the scars of this unregulated historic production. Abandoned mine 
lands encompass over 189,000 acres in 44 of Pennsylvania's 67 counties 
and over 3,000 miles of the commonwealth's streams are impaired by Acid 
Mine Drainage.
    It is clear that Abandoned Mines and Acid Mine Drainage are the 
number one environmental issues facing Pennsylvania, and the bill I 
have introduced, H.R. 3778, addresses those needs while maintaining the 
federal commitments made to other states in SMCRA. I am proud to say 
that the entire Pennsylvania delegation, from Melissa Hart in Western 
Pennsylvania to Chaka Fatah in downtown Philadelphia has cosponsored 
H.R. 3778.
    Pennsylvania is not asking for special treatment, nor are we asking 
to receive a single dollar more than is necessary to fix our Abandoned 
Mine problems. However, under the current system and other proposals, 
Pennsylvania will continue to receive inadequate resources to address 
priority sites while states that have certified completion of their 
abandoned mine sites simply see their outstanding share balance grow. 
H.R. 3778 will get the job done quicker and about $3 billion cheaper 
than other proposals.
    The Commonwealth has taken great steps to reclaim our abandoned 
mines and to clean up our waterways over the past 50 years. On top of 
the $600 million we have received from the federal AML program, 
Pennsylvania continues to put hundreds of millions of state money on 
the table to fix this problem, as Mr. Roberts will share with us in his 
testimony.
    Clearly, Pennsylvania and its residents continue to do their fare 
share, but they need our help. All citizens of this nation benefitted 
from the cheap and abundant fuel we provided at a tremendous expense to 
Pennsylvania's environment. Our legacy of coal mining needs to be 
addressed so that we can properly protect the health, safety and well-
being of our residents.
    The Commonwealth of Pennsylvania and this nation cannot afford for 
the AML program to not be reauthorized before it expires. I am looking 
forward to working together with Chairwoman Cubin and Representative 
Rahall to reauthorize this vital program in a way that is fair to all 
parties involved.
    Thank you.
                                 ______
                                 
    Mrs. Cubin. Thank you. I find it interesting, though, that 
your opening statement didn't talk about any of the other 
issues other than Pennsylvania. I think that reflects quite 
well what the Administration's bill takes care of.
    Mr. Cole, did you want to give an opening statement?
    Mr. Cole. No, Madam Chair.
    Mrs. Cubin. OK.
    Now it is my pleasure to introduce the first panel, Mr. 
Jeff Jarrett, the Director of the Office of Surface Mining from 
the U.S. Department of Interior.
    Mr. Jarrett, I think you know the rules here. The timing 
lights will be on the table for a 5-minute oral presentation. 
Your entire statement will be entered into the record. Thank 
you.

 STATEMENT OF JEFFREY D. JARRETT, DIRECTOR, OFFICE OF SURFACE 
  MINING RECLAMATION AND ENFORCEMENT, U.S. DEPARTMENT OF THE 
                            INTERIOR

    Mr. Jarrett. Thank you, Madam Chairperson. It is a 
pleasure, I think, for me to be here today as well, so far 
anyway.
    Distinguished members of the Committee, thank you for the 
opportunity to participate in this hearing and to discuss what 
we all know is a very important issue raised by the approaching 
expiration of the OSM's authority to collect the Abandoned Mine 
Land fee.
    Since it was enacted by Congress in 1977, the AML program 
has reclaimed more than 260,000 acres of abandoned coal mine 
sites, hazards associated with over 2.9 million feet of 
dangerous highwalls, and 27,000 open mine pools and shafts have 
been eliminated. Thousands of citizens who live, work and 
recreate in America's coal fields are now safer because of the 
AML program.
    But the job is not finished. The States and tribes estimate 
it will take an additional $3 billion just for construction to 
abate the highest priority health and safety problems 
associated with these sites, and nearly 3.5 million coal field 
citizens live within a mile of these sites. Too often, that 
proximity results in tragedy. And while there's no systematic 
national accounting of injuries or fatalities of abandoned mine 
sites, we know from anecdotal information provided from some 
States that fatalities do occur.
    Pennsylvania has reported 45 fatalities in the past 30 
years in the anthracite coal region alone. Oklahoma has 
reported 11 fatalities in the past decade. Although a 
comprehensive national accounting of injuries and fatalities 
would be powerful information, it is simply not necessary for 
us to know that it's imperative that we finish the job we set 
out to do nearly 26 years ago.
    We are here today to discuss two bills, the 
Administration's bill introduced by Congressman Peterson, and 
the bill introduced by Congresswoman Cubin and Congressman 
Rahall. You notice that I did use Congresswoman Cubin's name 
first.
    Mrs. Cubin. I'm not fussy about that.
    [Laughter.]
    Mr. Jarrett. I want to express my sincere thanks to 
Congressmen Peterson, Rahall and Congresswoman Cubin, as well 
as several Senators who have introduced legislation on the 
Senate side. I think it speaks a lot on how Congress is viewing 
this pending expiration of the AML fee. I think it speaks a lot 
for those who have been engaged in this debate.
    I think today is a good day for coal field citizens, 
because despite some disagreements that we all know we have on 
how we need to reform the AML program, I think we can at least 
stand here shoulder to shoulder and say that we all care and 
that we're all willing to do our best to do what is right and 
fair.
    I think of the two bills we're here to discuss today, both 
of those bills obviously satisfy our primary objective of 
reauthorizing OSM's authority to collect the needed AML fees. 
Both bills recognize the inherent problem with the current 
formula for allocating AML resources, and both bills focus more 
AML funding on the most dangerous abandoned mine sites.
    For the past 18 months, I and my staff have been consulting 
with a lot of people, Members of Congress, the coal industry, 
the States, looking for their opinions on what we need to 
accomplish with this reauthorization effort. Of course, we 
found significant agreement that the AML fee collection 
authority should be extended and that fundamental changes 
should be made to the structure of the program. But as we know, 
that's about as much as all agree on.
    In the past few weeks, as our stakeholders evaluated the 
various pending proposals, I have had the opportunity to 
revisit several of them. What I have found is varying support 
for each bill. More importantly, what I found is a significant 
misunderstanding about what each bill does. So it is my sincere 
hope that over the next several weeks we can develop a common 
understanding of each proposal so we can move forward together 
and reauthorize the AML program in a way that makes sense and 
is fair to all.
    We understand and respect that each of the stakeholders can 
and should fight for what is in their own best interest. But 
quite frankly, that is not a luxury that I had in developing 
the Administration's proposal. The problem of abandoned mine 
lands is a national problem that requires a national solution. 
We were constrained to devise that national solution in the 
context of the existing AML program, and with significant 
budget constraints.
    Choices had to be made. We chose first and foremost to 
fulfill the promise made to coal field citizens 25 years ago by 
abating abandoned mine land hazards that pose a risk to human 
health and safety. Our solution, simply put, is to put the 
money where the problem is. But at the same time, we did not 
want to ignore the promise made under current law to States and 
tribes who have completed their AML abatement work, that are 
still owed substantial State share money. Likewise, we wanted 
to make sure that no State or tribe with remaining AML problems 
would receive less money under a new allocation formula than 
they currently receive under existing law.
    That is why we worked so hard to include an additional $53 
million in the Administration's 2005 budget request. Fourteen 
million dollars of that additional money will be used to 
supplement grants to certified States to pay off the 
unappropriated balance on an expedited schedule over 10 years. 
Thirty-nine million dollars of that additional money will be 
used to supplement grants to noncertified States to abate the 
most dangerous abandoned mine sites. So we welcome the 
opportunity to clarify what we intended with our proposal and 
to discuss with you the details of both bills today and in the 
weeks to come. It is our sincere hope that the bills now 
pending before this Committee will provide a platform for fair, 
open, and honest debate and resolution of significant issues 
and competing demands for the AML dollars.
    Again, I want to thank this Committee for its leadership 
and its interest in this important issue. I know, Congressman 
Rahall, you have been among us the one I have known the 
longest, and I know that you have followed and worked with this 
program for 26 years now. I appreciate that. I also understand 
that you spent most of the night driving up from West Virginia 
to be here at this hearing today, and I think that speaks 
highly of your interest in this issue. I appreciate that.
    It would be my pleasure to respond to questions any of you 
have.
    [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 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's) authority to collect the 
Abandoned Mine Land (AML) fee.
    In particular, I would like to thank Representative Peterson for 
introducing the Administration's bill, H.R. 3778. The Administration's 
bill seeks to reauthorize OSM's authority to collect the AML fee, set 
to expire on September 30, 2004, and to make positive changes to get 
this important program back on track.
    I would also like to thank you, Madam Chairman, and Representative 
Rahall for introducing your bill, H.R. 3796. We look forward to working 
with the Congress to reach agreement on the important issues 
surrounding the collection and use of the AML fee.
    The Administration believes that the problem of Abandoned Mine 
Lands is a national problem that requires a national solution.
    In the years since it was enacted in 1977, the AML program has been 
responsible for significant reclamation of abandoned coal mine sites 
and for improving and protecting the lives, health and safety of 
Americans living in the coalfields. However, that job is not finished. 
Moreover, an inherent conflict in the way the AML program operates 
makes it unlikely that the current system is even capable of finishing 
the job within the lifetime of anyone living in the coalfields today.
    H.R. 3778, the Administration's legislative proposal, will focus 
more AML funding on the areas most damaged by this nation's reliance on 
coal for industrial development and wartime production, long before the 
establishment of reclamation requirements in the Surface Mining Control 
and Reclamation Act of 1977 (SMCRA).
    Shifting the program's resources based on historic production will 
allow us to spend the money where the problems exist. By distributing 
future fees based on need, the Administration's proposal will provide a 
national solution for reducing the current, ongoing threats to the 
health and safety of millions of citizens living, working and 
recreating in our Nation's coalfields.
    We cannot support the provisions in H.R. 3796 that call for 
additional funding because they are inconsistent with the 
Administration's budget and program priorities. Neither can we support 
the allocation provisions because they do not further the goal of 
expediting cleanup as quickly as those provisions contained in H.R. 
3778. In addition, the Administration cannot support creating new 
mandatory spending programs or allocate funds designated for AML 
cleanup for other purposes.

Background
    The Surface Mining Control and Reclamation Act (SMCRA) was enacted 
by Congress in 1977. Since then, the Abandoned Mine Land program has 
reclaimed thousands of dangerous sites left by abandoned coal mines, 
resulting in increased safety for millions of Americans. Specifically, 
more than 260,000 acres of abandoned coal mine sites have been 
reclaimed through $3.4 billion in grants to States and Tribes under the 
AML program. In addition, hazards associated with more than 27,000 open 
mine portals and shafts, 2.9 million feet of dangerous highwalls, and 
16,000 acres of dangerous piles and embankments have been eliminated 
and the land has been reclaimed. Despite these impressive 
accomplishments, $3 billion worth of high priority health and safety 
problems remain to be reclaimed.
    Even if all collected AML fees and the unappropriated balances of 
$1.5 billion were used, we would still have insufficient funds to 
address the health and safety-related coal mining problems because of 
the fund's current distribution formula. Moreover, under the current 
distribution formula, it would take an average of 47 more years to 
complete reclamation. As a result, dangerous sites would continue to be 
a threat to life and health for almost another half-century. In some 
cases, remediation would take nearly a century.
    The current allocation system makes it impossible to complete the 
job of reclamation in the way that Congress intended. The September 
30th expiration of the current AML fee collection authority is our 
opportunity to reform that authority and the distribution formula, and 
put it on track to finish the job of reclaiming abandoned coal mine 
problems.

SMCRA's Fee Allocation Problem
    SMCRA requires that all money collected from tonnage fees assessed 
against industry on current coal production ($0.35/surface mined ton; 
$0.15/deep mined ton; and $0.10/lignite) be deposited into one of 
several accounts established within the AML fund. Fifty percent (50%) 
of the fee income generated from current coal production in any one 
state is allocated to an account established for that state. Likewise, 
50% of the fee income generated from current coal production on Indian 
lands is allocated to a separate account established for the tribe 
having jurisdiction over such Indian lands. The funds in these state or 
tribal share accounts can only be used to provide AML grant money to 
the state or tribe for which the account is established.
    Twenty percent (20%) of the total fee income is allocated to the 
``Historic Production Account.'' Each state or tribe is entitled to a 
percentage of the annual expenditure from this account in an amount 
equal to its percentage of the nation's total historic coal 
production--that is, coal produced prior to 1977. As is the case with 
state or tribal share money, each state or tribe must follow the 
priorities established in SMCRA in making spending decisions using 
money from the historic production account. However, unlike the 
allocation of state or tribal share money, once the state or tribe 
certifies that all abandoned coal mine 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 reclamation program, the Clean Streams Program, 
the fee compliance program, and overall program administrative costs.
    In the early years of AML program, most of the fees collected went 
directly to cleaning up abandoned coal mine sites. Some states and 
tribes with fewer abandoned coal mine sites finished their reclamation 
work relatively soon. However, under current law, those states and 
tribes are still entitled to receive half of the fees collected from 
coal companies operating in their states. In the early years of the 
program this didn't cause a considerable problem, because the Eastern 
states, where 93% hazardous sites are located, were also the states 
where most of the coal was being mined and were, therefore, receiving 
the majority of the AML fees.
    However, beginning in the 1980s, a shift occurred whereby the 
majority of the coal mined in this country began coming from mines in 
Western states. This shift resulted in the allocation of a large part 
of AML fees to states that have no abandoned coal mine sites left to 
clean up. As a result, each year less and less money is being spent to 
reclaim the hundreds of dangerous, life-threatening sites. Currently, 
only 52% of the money appropriated each year is being used for the 
primary purpose for which is it collected--reclaiming high priority 
abandoned coal mine sites. That percentage will continue to decline 
each year unless the law is reauthorized and amended to correct this 
fundamental problem.
    The Administration has proposed legislation that accomplishes four 
primary objectives:
      Extend the authorization of fee collection authority 
while balancing the interests of all coal states and focusing on the 
need to accelerate the cleanup of dangerous abandoned coal mines by 
directing funds to the highest priority areas so that reclamation can 
occur at a faster rate, thereby removing the risks to those who live, 
work and recreate in the coalfields as soon as possible;
      Honor the commitments made to states and tribes under the 
current law;
      Provide additional funding for the 17,000 unassigned 
beneficiaries of the United Mine Workers of America Combined Benefit 
Fund (CBF) while protecting the integrity of the AML fund; and,
      Provide for enhancements, efficiencies and the effective 
use of funds.
    These objectives recognize the need to strike a balance that 
addresses both the ongoing problems faced by states with high priority 
coal-related health and safety issues while not placing those states 
where the majority of fees are currently generated at a disadvantage.

Bill Analysis

A. Changes to the Allocation Formula
    H.R. 3778 would change the current statutory allocation of fee 
collection which is progressively directing funds away from the most 
serious coal-related problem sites. All future AML fee collections, 
plus the existing unappropriated balance in the RAMP account, will be 
directed into a new single account. Grants to noncertified states or 
tribes (those states and tribes that still have unreclaimed coal 
problems) will be distributed from that single account based upon 
historic production, which is directly related to the magnitude of the 
AML problems. As a result of these modifications, H.R. 3778 completes 
the reclamation of the highest priority work while avoiding $3.2 
billion in collections that would have been necessary under current law 
to achieve the same result. At the same time, H.R. 3778 will remove 
more people at risk from the dangers of health and safety coal sites 
(142,000 per year or an increase of 87%).
    H.R. 3778 provides that no noncertified state or tribe could 
receive an annual allocation that would exceed 25 percent of the total 
amount appropriated for those grants each year. This provision would 
ensure that no one State receives too high a percentage of the grants 
in any one year. Any State whose allocation would otherwise exceed this 
cap would recoup the difference in the program's latter years as other 
States and tribes complete their high-priority coal-related projects 
and are no longer eligible for future grants.
    Existing state and tribal share accounts will not receive any 
additional fees collected after September 30, 2004. The current 
unappropriated balance in the state and tribal share accounts will be 
distributed in one of two ways, depending on certification status: 
Certified states and tribes would receive the current unappropriated 
balances in their accounts on an accelerated basis in payments spread 
over ten years (FY 2005-2014), subject to appropriation. There would be 
no restrictions on how these monies are spent, apart from a requirement 
that they be used to address in a timely fashion any newly discovered 
problems related to abandoned coal mines. Non-certified states and 
tribes will receive their unappropriated balances in annual grants 
based upon historic production. If a noncertified state or tribe 
completes its abandoned coal mine reclamation before exhausting the 
balance in its state share account, it will receive the remaining 
balance of state share funds in equal annual payments through FY 2014. 
Noncertified states and tribes that exhaust their unappropriated state 
share balances before completing their abandoned coal mine reclamation 
will continue to receive annual grants from the newly-created single 
account in amounts determined by their historic coal production.
    In contrast to the Administration's proposal, H.R. 3796 would spend 
approximately $750 million more by continuing to allocate 50% of the 
fees collected to state or tribal share accounts regardless of whether 
the state or tribe has any unreclaimed high priority coal-related AML 
problems. In addition, if a certified state has public domain lands 
available for leasing, H.R. 3796 would amend current law to transfer 
revenues generated by the Mineral Leasing Act that currently go to the 
Treasury, in amount equal to the existing unappropriated balance of 
that state's State-share account. An amount equivalent to the amount 
provided to the state from Mineral Leasing Act revenues would then be 
debited from that state's State-share account and reassigned to the 
historic production. As a result, certified states and tribes with 
leasable public domain lands would receive their current unappropriated 
State-share balance as well as an amount equivalent to their 50% State-
share distribution going forward. These mandatory payments of 
approximately $1 billion over ten years would neither be subject to 
Congressional appropriation nor contribute to our broader objective of 
AML reform.

B. Elimination of AML funding for the RAMP Program
    H.R. 3778 amends SMCRA to remove the existing authorization of 
expenditures from the AML fund for the Rural Abandoned Mine Program 
(RAMP) under the jurisdiction of the Secretary of Agriculture. No funds 
have been appropriated for this program, which reclaimed lower priority 
abandoned mine land (AML) sites, since FY 1995. Elimination of this 
authorization would facilitate the redirection of AML fund expenditures 
to high-priority sites. Accumulated unappropriated balances in the RAMP 
account would be made available for reclamation of high-priority coal-
related sites.
    H.R. 3796 also endorses eliminating future allocations to the RAMP 
fund. However, it would reassign those funds to offsetting any deficit 
in the net assets of the United Mine Workers of America Combined 
Benefit Fund, rather than making those funds available for its intended 
purpose of AML reclamation.

C. AML Reclamation Fee Rates
    H.R. 3778 extends reclamation fee collection for 14 years and 
modifies reclamation fee rates in an effort to closely match 
anticipated appropriations from the AML fund with anticipated revenues 
during that time. The proposed changes would maintain the current fee 
structure while uniformly reducing the fee rates by 15 percent for the 
five years beginning with FY 2005, 20 percent for the next five years, 
and 25 percent for the remaining years through September 30, 2018. 
Those rates are based on an analysis of coal production trends and the 
resultant impacts on reclamation fee receipts. The Administration's 
proposed uniform graduated fee reductions make the program revenue 
neutral and possibly have the added benefit of resulting in lower costs 
to consumers. The new expiration date reflects the time required to 
collect revenues sufficient to reclaim all outstanding currently 
inventoried coal-related health and safety problem sites within 25 
years. Finally, existing language requiring the Secretary to establish 
a new fee rate after September 30, 2004, based on CBF transfer 
requirements would be removed.
    H.R. 3796 proposes to extend the fee collection authority for 15 
years to 2019. H.R. 3796 also proposes to lower the reclamation fee 
rates by 7 cents per ton for surface-mined coal, 3 cents per ton for 
underground-mined coal, and 2 cents per ton for lignite. This is a 
reduction overall of 20 percent. However, since reclamation would take 
significantly longer than under H.R. 3778, fee collection authority 
would need to be reauthorized again to raise sufficient revenue to 
eliminate the AML inventory.

D. United Mine Workers of America Combined Benefit Fund (CBF)
    In the Energy Policy Act of 1992, Congress established the United 
Mine Workers of America Combined Benefit Fund (CBF). The CBF provides 
health care and death benefits to certain retired union coal miners and 
their dependents and survivors. Approximately 40,000 of the CBF's 
beneficiaries have been ``assigned'' to responsible mining companies. 
These companies pay a yearly premium into the CBF on behalf of each of 
their assigned beneficiaries. However, approximately 17,000 additional 
beneficiaries cannot be assigned to any company because neither the 
original employer nor any other responsible company remains in 
existence.
    Under the law creating the CBF, premiums for unassigned 
beneficiaries are to be assessed equally against all of the companies 
participating in the CBF. To reduce the financial burden on the 
industry, however, Congress mandated the transfer of interest earned on 
the AML fund to the CBF to defray the cost of health care benefits for 
these unassigned beneficiaries. Historically, these interest transfers 
have met nearly all of the CBF's unassigned beneficiary premiums. It is 
our understanding that, until recently, no mining companies have had to 
pay unassigned beneficiary premiums since the CBF was created.
    The transfer provision in SMCRA has been interpreted to permit a 
yearly transfer from the AML Fund to the CBF of up to, but not more 
than, $70 million per year. H.R. 3778 amends SMCRA by adding a new 
provision that governs transfers from the fund to the CBF for health 
benefits for unassigned beneficiaries. The Administration's bill would 
replace and improve upon the existing provisions in SMCRA by removing 
the $70 million per year cap, and by making interest credited to the 
account in prior years available. These measures would protect the 
integrity of the AML fund while providing additional monies to meet CBF 
needs for unassigned beneficiaries.
    H.R. 3796 would require transfer of all interest projected to be 
``earned and paid to the Combined Fund'' each fiscal year. We believe 
that the authors meant to refer to interest earned and paid to the AML 
fund, not the Combined Fund. If so, H.R. 3796 would remove the $70 
million cap on annual transfers. It also would expand the allowable 
uses of the transfers to include payment of any deficit in the net 
assets of the CBF, not just expenditures for health care benefits for 
unassigned beneficiaries. Both the stranded interest and the 
unappropriated balance of the Rural Abandoned Mine Program (RAMP) 
allocation (currently approximately $302 million) would be available 
for transfer to the CBF in FY 2004 and future years. This transfer 
language appears to strike the provision in existing law that limits 
transfers to the amount needed to cover specific CBF expenditures. H.R. 
3796 seemingly requires the transfer of all interest and other 
available funds without limitation.

E. Minimum Program Funding
    H.R. 3778 provides that no State or tribe with high-priority 
problem sites would receive an annual allocation of less than $2 
million. This provision would ensure that States and tribes will 
receive an amount conducive to the operation of a viable reclamation 
program.
    H.R. 3796 requires a minimum annual grant of $2 million for all 
states and tribes regardless of their certification status. Any 
shortfalls in appropriations for this purpose are to be made up from 
the Federal share account. It also adds Tennessee as a minimum state, 
without regard to the existing SMCRA requirement for a state to 
maintain an active regulatory (Title V) program before it is entitled 
to receive AML grants.

F. Remining
    Both bills extend the remining incentives existing in current law, 
which provide reduced revegetation responsibility periods for remining 
operations and an exemption from the permit block sanction for 
violations resulting from an unanticipated event or condition on lands 
eligible for remining. H.R. 3778 makes these incentives permanent by 
removing the expiration date while H.R. 3796 extends the expiration 
date to 2019. Additionally, H.R. 3778 authorizes the Secretary to adopt 
other remining incentives through the promulgation of regulations, 
thereby leveraging those funds to achieve more reclamation of abandoned 
mine lands and waters. H.R. 3796 does not provide for the creation of 
additional remining incentives.

G. AML Reclamation Priority
    H.R. 3778 preserves the autonomy of the states and tribes by 
maintaining the current priority structure and requires that 
expenditures from the AML fund on eligible lands and water for coal-
related sites reflect the listed priorities in the order stated. H.R. 
3778 focuses on collecting enough money to provide each state or tribe 
with sufficient funds to complete its highest priority AML sites. The 
Administration's bill will accomplish these objectives by providing 
funds for all States and tribes to finish in less time than under a 
continuation of the current program: on average 22 years sooner, but in 
many cases, decades sooner.
    H.R. 3796 amends the priority system to eliminate the general 
welfare component of priorities 1 and 2, leaving public health and 
safety as the only elements of those priorities. H.R. 3796 also 
requires that Priority 3 work be undertaken only in conjunction with a 
Priority 1 or 2 project; eliminates Priority 4 (public facilities); and 
eliminates Priority 5 (development of publicly owned land). Finally, 
for State- share and historic production grants to noncertified States, 
H.R. 3796 requires strict adherence to the revised priority rankings.
    Both H.R. 3778 and H.R. 3796 remove the existing 30 percent cap on 
the amount of a State's allocation that may be used for replacement of 
water supplies adversely affected by past coal mining practices. This 
change is consistent with our goal of focusing fund expenditures on 
high-priority problems. The lack of potable water is one of the most 
serious problems resulting from past coal mining practices, 
particularly in Appalachia.

H. Emergency Reclamation Program
    H.R. 3778 proposes amending the emergency reclamation program for 
abandoned mine land problems that present a danger too great to delay 
reclamation until funds are available under the standard grant 
application and award process. H.R. 3778 would revise this section by 
authorizing the Secretary to adopt regulations requiring States to 
assume responsibility for the emergency reclamation program. This 
change would promote efficiency and eliminate a redundancy in that 
potential emergencies would be investigated only by the State, not by 
both the OSM and the State, as occurs under the current program.
    H.R. 3796 does not alter the existing emergency reclamation program 
structure.

I. Reclamation Set-Aside Programs
    H.R. 3778 revises future reclamation set-aside program provisions 
to specify that expenditures from funds set aside under this program 
may not begin until the State or tribe is no longer eligible to receive 
an allocation from AML grant appropriations under SMCRA. The revised 
date in the Administration's proposal is more consistent with the 
purpose of this set-aside, which is to provide States and tribes with a 
source of funding to address abandoned mine land problems that remain 
or arise after funds are no longer available under SMCRA.
    H.R. 3796 removes the authorization for this set-aside.
    Both bills provide that states and tribes can set-aside up to 10% 
of their historic production grant funds in an interest-bearing trust 
fund for comprehensive abatement and treatment of acid mine drainage in 
qualified hydrologic units. Both bills provide for simplification and 
streamlining of the requirements for the acid mine drainage treatment 
trust fund set-aside program, including removal of the requirement for 
Secretarial review and approval of individual treatment plans.

J. Completion of Coal Reclamation--Certification
    H.R. 3778 establishes the conditions under which a State or tribe 
may certify that it has completed all coal-related reclamation of 
eligible lands and waters. Under the existing provisions, the State or 
tribe would then be eligible to spend its State share allocation on 
sites impacted by mining for minerals other than coal. The draft bill 
would amend this section by revising SMCRA to clarify that 
certification means that all coal-related high-priority health, safety 
and environment reclamation has been achieved. This subsection 
previously did not specify which priorities must have been met. H.R. 
3778 also allows the Secretary to make the certification for a State or 
tribe in which all coal-related reclamation work has been completed.
    We are aware of recent information regarding the current status of 
coal reclamation in Wyoming. I have asked my office to review this 
information and to report back to me so that we can determine what 
effect, if any, this may have on the reauthorization proposals.
    H.R. 3796 maintains current certification procedures.

K. Black Lung Excise Tax Collection and Auditing
    H.R. 3778 authorizes the expenditures for collection and audit of 
the black lung excise tax. This revision would synchronize collections 
and allow OSM auditors to conduct audits of black lung excise tax 
payments at the same time as they audit payment of reclamation fees 
under SMCRA. It would promote governmental efficiency, eliminate 
redundancies, and reduce the reporting and record keeping burden on 
industry.
    H.R. 3796 does not contain a similar provision.
Conclusion
    The problems posed by mine sites that were either abandoned or 
inadequately reclaimed prior to the enactment of SMCRA do not lend 
themselves to easy, overnight solutions. To the contrary, these long-
standing health and safety problems require legislation that strikes a 
balance by providing States and tribes with the funds needed to 
complete reclamation, while fulfilling the funding commitments made to 
States and tribes under SMCRA. This is the inherent tension that 
currently exists in SMCRA. We look forward to an open and a productive 
debate to amend and reform OSM's fee collection authority to fulfill 
the mandate of SMCRA to address these high-priority healthy and safety 
concerns in a manner that directs the funds to the States and tribes 
where they are needed. As noted earlier, the current fee collection 
authority is scheduled to expire in just over six months, on September 
30, 2004. There is much work to be done to ensure that reforming the 
AML fee collection authority, allocation formula, and other needed 
reforms become a reality. We believe that H.R. 3778 addresses these 
problems in a manner that is fair to all States and supports the 
Administration's budget and program priorities.
    We stand ready to assist the Committee. We thank the Committee for 
this opportunity to present the Administration's views on these 
important legislative proposals and we look forward to working together 
as Congress continues consideration of these important measures.
                                 ______
                                 
    Mrs. Cubin. Thank you, Mr. Jarrett.
    I want to start off by clearing up one thing. The first 
thing I want to bring up is, wasn't it about a year ago, a 
little over a year ago, that you came to my hideaway and we 
went over the white paper that you had written, and I let you 
know that that would in no way be suitable to me or other 
Members?
    Mr. Jarrett. That's correct.
    Mrs. Cubin. You talk about wanting to compromise and get 
something done, but isn't that white paper virtually identical 
to the bill that you have produced for the Administration?
    Mr. Jarrett. With respect to the allocation formula, that 
is correct.
    Mrs. Cubin. So how can you talk to me about compromising 
when you didn't even call me and let me know, or call Mr. 
Rahall, or let anyone know, that that bill was going to be put 
in the President's budget? I mean, that doesn't speak of 
compromise to me. Does it to you?
    Mr. Jarrett. We actually did meet with your staff prior to 
introducing that bill. But quite frankly, the dilemma that we 
had--and we really talked to a lot of people. It was our 
original hope and plan to work with the States, to try to make 
sure all of the States--
    Mrs. Cubin. It was your original hope and plan, but it 
wasn't, in fact, what you did.
    Mr. Jarrett. That's correct.
    Mrs. Cubin. Thank you.
    And then, I have to take exception with another remark you 
made, about how hard you worked to get the $53 million in the 
President's budget. Isn't it true that Senator Thomas and I, 
during the energy bill discussion over on the Senate side, 
extracted an agreement from the Administration in writing, that 
they would pay Wyoming its over $400 million share?
    Mr. Jarrett. I'm not--
    Mrs. Cubin. Let me tell you that it is true.
    Mr. Jarrett. OK.
    Mrs. Cubin. You know, I'm sitting here wondering what kind 
of luck we are going to have. I would really hope that you 
would try to compromise with us more, that you would work with 
us, rather than ``boom, this is my way'', because that's the 
way I see the negotiations that have taken place between you 
and me so far.
    Now, I want to ask you a question, if this statement is 
wrong, that for the privilege of paying over the term of your 
bill--Wyoming has the privilege of paying over a billion 
dollars under your bill, and what we receive for having done 
that is we might or might not be able to collect the $425 
million that we're owed now. Is that wrong?
    Mr. Jarrett. That is not wrong.
    Mrs. Cubin. So what is the rationale then for that 
proposal?
    Mr. Jarrett. The AML program, over the past couple of 
years, I think, based on many discussions that I had, was 
pretty widely criticized as a program that simply is not 
getting the job done. So our proposal came after we evaluated 
what it was about the program that was not allowing us to get 
the job done.
    Again, we focused on what we believe the primary purpose of 
the AML program is, and that is to reclaim abandoned coal mine 
sites on a priority basis.
    Mrs. Cubin. But you didn't take into consideration any of 
the changes that have, in fact, taken place over--if you want 
to call it the demographics--over the last 25 years.
    Your testimony states that the Administration cannot 
support mandatory spending or allocations. So does that mean 
that you don't support our bill's mandatory grants to minimum 
program States?
    Mr. Jarrett. That is what that means.
    Mrs. Cubin. Since you appear to be expanding your mission 
to include taxation, does OSM or the Department of the Interior 
provide any oversight or audits of the Combined Benefits Fund?
    Mr. Jarrett. The Combined Benefits Fund is audited by the 
audit firm of KPMG. Those audits are provided to us. In 
addition, the Office of Inspector General did an audit of the 
CBF some years ago.
    Mrs. Cubin. What interest rate is the AML fund earning?
    Mr. Jarrett. Currently, the fund is earning, I believe, 
about 4.17 percent.
    Mrs. Cubin. Is there any way to increase that interest 
earned on the fund, and what are the investments that you're 
making that produce that interest?
    Mr. Jarrett. The statute requires that investments be made 
in government securities. Over the course of the past year and 
a half, we have worked with the stakeholders, the Department of 
Treasury, as well as the managers of the Combined Benefits 
Fund, to restructure those investments. So of the total balance 
in the fund, about $1.3 billion is now invested in 10-year 
government securities.
    Prior to that, the fund was making less than 1 percent.
    Mrs. Cubin. So how long has it been making 4.5 percent? 
Because that was the figure that I knew, less than 1 percent.
    Mr. Jarrett. Again, we started reinvesting the 
unappropriated fund balance over the course of the past year, 
and we've obviously dollar averaged that a little. So on a 
quarterly basis, as existing investments matured, we reinvested 
those dollars into longer term funds. All of that has happened 
over the course of the past year.
    Mrs. Cubin. My time is up. But I do want to ask of you that 
you deal with the negotiations that need to take place in a 
more and open way than you have in the past. I certainly will 
do the same.
    Mr. Jarrett. We appreciate the opportunity to work with 
you.
    Mrs. Cubin. Mr. Rahall.
    Mr. Rahall. Thank you, Madam Chair.
    I appreciate your testimony, Mr. Jarrett. You know, you 
have a tough job.
    Mr. Jarrett. You say that every time we meet. I'm starting 
to believe it.
    [Laughter.]
    Mr. Rahall. As you mentioned in your testimony, I am 
probably the only member of this Congress that was around in 
1977 and sat on the Conference Committee. The late, great Mo 
Udall appointed me as a freshman Member of Congress at that 
time to serve on the Conference Committee that wrote SMCRA. I 
have seen a lot of OSM Directors come and go and testify before 
this Committee. But you really have a tough job. Let me just 
say that at the beginning.
    One of your predecessors, a gentleman by the name of Bob 
Durham, former OSM Director, advanced a policy which I believe 
corrupted the AML project priority ranking system. You may have 
heard in my opening testimony one of my attacks against the 
Administration's proposal was the loophole that allows some of 
the money to get to lower priority projects, in my opinion. 
Under that corruption, what were formerly Priority 3 projects 
could be deemed to be Priority 2 projects, under the guise of 
protecting the general welfare. Only one State took advantage 
of that loophole.
    My question is, what is your opinion of that policy change 
and do you support it?
    Mr. Jarrett. Congressman, we actually looked at that issue. 
You are correct. The State of Pennsylvania added $3.8 billion 
to the Priority 2 inventory sites that had previously been 
Priority 3 sites.
    I would make a couple of points about that. Number one, 
when we provided some analysis on the Cubin/Rahall proposal, as 
well as the Administration's proposal, we did not take into 
account the Priority 2 general welfare sites that are on the 
inventory. So we discounted those when we looked at how much 
money do we really need to collect to get that job done.
    Furthermore, it is our understanding and belief that no 
money in Pennsylvania has actually been spent on any of those 
Priority 2 general welfare problems. To me, that signals that 
even Pennsylvania recognizes that, whether they call them 
Priority 3's or Priority 2's, they are less important than the 
health and safety Priority 1's and Priority 2's.
    So while I would not think it would be appropriate to 
remove them from the inventory altogether, I don't have any 
problem with downgrading them once again to a Priority 3. I 
don't see any problem--
    Mr. Rahall. You don't consider that as somehow not keeping 
faith with the original intent of SMCRA?
    Mr. Jarrett. I think the original intent of SMCRA was to 
reclaim all of the sites on a priority basis. To me, Priority 1 
and Priority 2 health and safety problems are more important 
than even the most serious environmental problem.
    Mr. Rahall. Let me go to another area that I understand you 
have a great deal of fascination with, and that's the area of 
remining.
    For the record, I think it should be noted that every 
single remining incentive in Federal law today has my name on 
it.
    Mr. Jarrett. I understand that. We always appreciated it 
when I was with the States.
    Mr. Rahall. Well, on every remining provision I have 
sponsored, the EPA even has a section that I understand it 
calls the ``Rahall Remining Permits''.
    Mr. Jarrett. That's correct.
    Mr. Rahall. With that said, I simply cannot understand the 
provision in the Administration's proposal that would have coal 
operators, through the AML fees they pay, finance their 
competition by allowing AML funds to be used to subsidize the 
costs of bonding in a remining operation.
    I would like to ask you if you think it's a good idea, or 
could you explain why you think it's a good idea for Wyoming 
and West Virginia coal producers to not only pay to reclaim 
abandoned coal mines, but also to pay other companies to mine 
coal in remining areas?
    Let me say also, that I understand of the some 328 remining 
permits, Rahall remining permits, over 300 have been done in 
the State of Pennsylvania.
    Mr. Jarrett. That's correct.
    We started looking at a lot of different ideas of how we 
could use AML dollars to leverage reclamation through remining. 
Bonding was one of the ideas that we considered. At the end of 
the day, however, rather than put that provision right in the 
Administration's proposal, we opted to put in the proposal a 
provision that would allow the Secretary to develop regulations 
to develop those types of incentives.
    The reason for that, quite frankly, is we thought we needed 
to work with the States because the bottom line was most of 
those provisions would be financed by the States, through the 
States AML program, that we needed to work with each of those 
States to better evaluate and determine under which 
circumstances AML dollars, for example, could be used to 
support bonding assistance to encourage operators to get 
remining done.
    So I guess the short of what I'm telling you is that we 
don't have all of the answers. That's the reason our proposal 
simply gives us the authority to do some outreach and develop 
regulations to get that job done.
    Overall, we have a lot of great remining incentives, thanks 
to you--I agree with that statement--in place right now that 
are hugely successful in those States who aggressively and 
responsibly pursue those. But we still believe that we have 
some gaps where we could get a lot more AML reclamation 
completed at a much lower cost if we can come up with the 
proper ways to leverage AML dollars.
    I can give you a great example that goes back to my 
Pennsylvania days. We had a site that was several hundred 
acres. It had serious acid mine drainage throughout the site. 
An operator wanted to remine that particular site, but the only 
way under Pennsylvania's regulatory program that could occur is 
through what Pennsylvania at that time called the alkaline 
addition policy. That meant the operator would have to pay to 
bring in, as a best management practice, a lot of alkaline 
material so that the mining operation would not result in more 
acid mine drainage. The cost of bringing that alkaline material 
in simply put the economics beyond the operator's reach.
    What we would like to have been able to do is spend a 
little bit of AML dollars to purchase materials for that site, 
and then let the operator do the remining, do the reclamation, 
and we could have cleaned up a multimillion dollar site for 
literally pennies on the dollar. The problem was we simply 
didn't have the ability to use AML dollars and there were no 
other dollars available. So there are those types of incentives 
that we are looking for to encourage reclamation through 
remining.
    Mr. Rahall. Thank you.
    Thank you, Madam Chair.
    Mrs. Cubin. Where are you from, Mr. Jarrett?
    Mr. Jarrett. I'm from West Virginia.
    Mrs. Cubin. You resided awhile in Pennsylvania?
    Mr. Jarrett. I resided in Pennsylvania from 1987 until 2 
years ago.
    Mrs. Cubin. Thank you.
    Mr. Peterson.
    Mr. Peterson. Thank you, Madam Chairman.
    I guess I still have high hopes. I don't have the history 
on this issue of all that has gone on in the past, so 
hopefully, maybe I can bring a perspective where all things are 
negotiable until we come to a solution, because I don't have 
the scars, I guess, that have been felt about this issue.
    But I would like to ask, Mr. Jarrett, you said 3.5 million 
people live near dangerous sites?
    Mr. Jarrett. Yes.
    Mr. Peterson. And 1.6 million of them are in Pennsylvania. 
Well, I think the gravity of the Pennsylvania problem is that 
that's 46 percent of them. That shows you that Pennsylvania is 
the State with the dangerous sites and the sites that are 
causing great pollution, not only to Pennsylvania but to the 
Mississippi River and the Chesapeake Bay. So the Pennsylvania 
problem is a problem that's a national problem. The Nation 
benefited from our coal.
    The Chairman said that I spoke of Pennsylvania. Well, 
that's what I represent. That's what I understand the most. I'm 
hear to learn about the rest of the States and their issues. 
But I do bring the Pennsylvania perspective because I've worked 
with three or four Governors on this issue. So it's an issue 
that we have not made progress on as quickly as we had hoped. 
Every Governor, from Thornburg to Casey, to Ridge, to Rendell, 
have had this on their agenda, because it's the scars that our 
State is covered with.
    Each Administration I think has tried to put up significant 
State dollars to match the Federal dollars. In fact, most times 
we were kind of always waiting for the Federal dollars because 
Pennsylvania was poised and ready--and I think Scott Roberts 
will tell us that today when he speaks. I'm not speaking for 
him.
    Isn't the greatest scar in the country left from coal 
mining in Pennsylvania?
    Mr. Jarrett. That is correct. We estimate about 34 percent 
of all of the abandoned mine land problems are in Pennsylvania.
    Mr. Peterson. But 46 percent of the people that live near 
Pennsylvania, which is even a larger percentage, both of those 
percentages I think are pretty significant when you think of 
all the States that are involved here.
    I want to thank you for your work. If I were drafting the 
bill, I might have done it a little differently, personally. 
But that's what the process is about. I think that hopefully 
this process can allow us to negotiate in good faith. I just 
hope that's the case. When I disagree with the Administration 
on something, I will be siding with others. But I think there 
has to be room here where we can find a solution, because it's 
so important that we accomplish it. I hope we can get by the 
States, because it's a country problem. It's a U.S. problem. 
And again I say, the consumers pay this tax, who use the coal, 
and they're from all over the country.
    Though I do think States should forever receive some 
benefit, that's one part of the bill I would have written 
differently. I don't think we should have a limit of when 
States could--So I think there's lots of room for compromise, 
but I hope we can get past the history and get on to a 
meaningful compromise. I would hope the Administration would 
come to the table with that approach. Let's somehow get this 
done.
    Mrs. Cubin. Thank you, Mr. Peterson.
    I would like to respond that I would submit that the coal 
that's being produced today is benefiting the whole Nation, 
especially when you consider the price of gas. You know, I 
don't really think it's right to say there was a greater 
contribution later, but I do accept that there are more sites 
in Pennsylvania that need to be taken care of. I just think 
this bill is slanted so far toward Pennsylvania and away from 
the other producers.
    Mr. Peterson. Would the gentlelady yield?
    Mrs. Cubin. Certainly.
    Mr. Peterson. I would like to, at some point in time, if 
our schedule permits, I would like to have you see some of the 
sites, a quick flyover. We could fly up and back real quick. I 
know Secretary Norton, when she was there, she was shocked at 
what she saw, at what is there. The southern part of 
Pennsylvania was decimated. Unfortunately, all those waste coal 
piles and the way it was done, under no laws, no regulations, 
the citizens of Pennsylvania and the country, the waterways of 
the country, are paying the price for it because it goes right 
into the Chesapeake.
    I guess the wonderful part is I have seen in my district 
two major streams, Toby Creek and--I can't think of the other 
one--that have had such a wonderful transformation. It was 
remining, thank you, Congressman Rahall. Remining was part of 
those contracts. But the transformation in the environment and 
the land, cleaning those sites up has been wonderful. They have 
become a part of beautiful wild Pennsylvania in a few years.
    But we have a lot of work yet to do there, and we just hope 
that we can come out with a compromise that everybody does well 
with. We want to work with you toward that end.
    Mrs. Cubin. Thank you very much.
    Thank you,.Mr. Jarrett. The panel may have more questions 
that they will send to you in writing, and the record will be 
held open for 10 days for those responses.
    Mr. Jarrett. Thank you.
    Mrs. Cubin. Thank you.
    Now I would like to call the second panel, J. Scott 
Roberts, the Deputy Secretary of the Office of Mineral 
Resources Management from the Pennsylvania Department of 
Environmental Protection; John Masterson, Counsel to the 
Governor for the State of Wyoming; Steve Hohmann, Director of 
the Division of Abandoned Mine Lands, Kentucky Department for 
National Resources; and William Michael Sharp, Assistant 
Director, AML Programs, Oklahoma Conservation Commission. 
That's it.
    Mr. Rahall. Madam Chair, while the panel is taking its 
seat, I would like to ask permission of the Chair and members 
of the Committee if I might recognize those retired coal miners 
that are with us at this hearing today from across the coal 
fields. I would like to call their names and have them stand up 
to be recognized by my colleagues and all of us in this room 
and all of us in this Nation who have benefited from their hard 
work and toil over so many decades.
    Mr. Robert Wade, Mr. Francis Martin, Mr. Jim Wills, Mr. 
Bobby Hicks, Mr. Paul Deardon, Mr. Charles Petri, Mr. Jimmy 
Austin, Mr. Kenny Lively, Mr. Sam Gregory, Mr. Bill Baily, Mr. 
Jerry Kerns, Mr. Jason Hawk, Mr. Mark March, and Mr. Bryan 
Lacy. Have I missed anybody?
    We salute each of you.
    [Applause.]
    Mrs. Cubin. Thank you, Mr. Rahall. I, too, welcome you 
here. Actually, I'm very gratified that you came. I know you 
had to take the time and probably drive up here. We do 
appreciate that, because this is an issue that affects the 
whole country and it needs to have a solution for the whole 
country. Thank you.
    Now I will start by recognizing J. Scott Roberts, who I 
already introduced as the Deputy Secretary for the Office of 
Mineral Resources Management.

  STATEMENT OF J. SCOTT ROBERTS, DEPUTY SECRETARY FOR MINERAL 
 RESOURCES MANAGEMENT, DEPARTMENT OF ENVIRONMENTAL PROTECTION, 
                  COMMONWEALTH OF PENNSYLVANIA

    Mr. J. Scott Roberts. Thank you very much.
    As you said, my name is J. Scott Roberts, and I am Deputy 
Secretary of Mineral Resource Management for Pennsylvania's 
Department of Environmental Protection.
    I am speaking today on behalf of Governor Edward G. 
Rendell, and the Governor wishes to thank this Committee for 
providing the Commonwealth its opportunity to advocate passage 
of H.R. 3778 and present its views on the reauthorization of 
the Surface Mine Control and Reclamation Act's fee that 
supports abandoned mine reclamation.
    No other State has as much at stake in this debate as 
Pennsylvania. In enacting SMCRA, Congress found that prior to 
1977 coal mining operations ``result in the disturbance of 
surface areas that burden and adversely affect commerce and the 
public welfare by destroying the utility of land for 
commercial, industrial, residential, recreational, agricultural 
and forestry purposes.'' It is in the Commonwealth of 
Pennsylvania where those effects on commerce and public welfare 
are most greatly felt.
    Our motivation to engage in this debate is not greedy 
desire, nor are we before you as beggars. As Congressman 
Peterson mentioned, in Pennsylvania we have a 50-year legacy of 
taking action to deal with our AML problems.
    In 1968, the Commonwealth of Pennsylvania issued a $200 
million bond issue, called Operation Scarlift. In 1999, we 
authorized $500 million of our taxpayers' dollars to be 
applied, in part, to abandoned mine reclamation through the 
Growing Greener program. Today, Governor Rendell is pushing for 
another bond issue, called Growing Greener II, to be placed on 
the ballot in our November elections. If the voters agree, that 
will put another $180 million of our money toward AML 
reclamation in the State.
    With these funds, and the nearly $600 million the State has 
received under grants from SMCRA, funded with the AML fees, 
much has been accomplished. But much remains to be done. The 
job is simply not finished.
    The National Abandoned Mine Land Inventory lists for 
Pennsylvania over one billion of Priority 1 and 2 nongeneral 
welfare work. These dollar figures are for construction alone. 
The do not account for administrative nor design-development 
expenses, and to the best of my knowledge, were not adjusted 
for inflation. Using that one billion dollar inventory amount 
and present State grant levels, simple arithmetic suggests it 
will take 40 years to do that Priority 1 and 2 nongeneral 
welfare work.
    There are several bills before this Committee and several 
bills before the Senate. Governor Rendell and Pennsylvania are 
solidly supporting H.R. 3778, introduced by Congressman 
Peterson, and cosponsored by our congressional delegation. It 
is a companion bill to S. 2049, introduced in the Senate by 
Senator Specter and cosponsored by Pennsylvania Senator 
Santorum. This bill has the support of the Bush Administration 
and was presented earlier today by OSM Director Jarrett.
    I would direct your attention to the fact that Governor 
Rendell, a Democrat, stood shoulder-to-shoulder with Interior 
Secretary Gale Norton when Congressman Peterson announced this 
bill as testimony to the bipartisan support the bill has in 
Pennsylvania.
    The issues surrounding reauthorization are complicated and 
their solutions will be complex. I believe the three toughest 
are distribution of collected fees, transfers to the United 
Mine Workers health care plans, and handling the unappropriated 
State share balances accrued under existing law.
    Pennsylvania prefers a future distribution of collected 
funds that maximizes completion of Priority 1 and 2 AML sites. 
We believe H.R. 3778 accomplishes this by replacing the present 
State share/Federal share system with allocations based upon a 
given State percentage of pre-SMCRA coal production. This 
approach directs the resources most efficiently to the 
problems.
    H.R. 3778 also offers a responsible balance between 
reclaiming abandoned mine lands and fulfilling Federal promises 
made to retired mine workers. But it represents a compromise 
and not a perfect solution. I fully recognize that the proposal 
does not commit to providing for the full cost of the Combined 
Benefits Fund, nor does it include Reach-Back or Super Reach-
Back categories of retirees, nor does it provide relief for 
those coal companies struggling with contractual obligations 
left them by now defunct companies. These are serious issues 
that, if Federal commitments were made, then they are issues 
that America needs to live to and Pennsylvania supports finding 
solutions to those.
    Pennsylvania also strongly believes the Government, 
regardless of its level, needs to meet its other commitments. 
We support the payment of fees collected and allocated to the 
various States under the present law but never appropriated. To 
the extent that those States are certified as having completed 
their AML work, they should have the freedom to choose what to 
do with those monies.
    H.R. 3778 also contains provisions aimed to reduce costs, 
eliminate paperwork, and encourage others to do the reclamation 
work at no or reduce costs. It eliminates the lien requirements 
that carry significant manpower costs but offer little benefit. 
It provides that some of the fees collected can be used to bond 
sites that were previously affected, and it allows the 
promulgation of regulations to create other incentives to 
maximize bang for the buck and create levers.
    Sustainable development is a modern day buzz word for a 
concept that Congress used in 1977 when they passed SMCRA. In a 
mining context, it means that mined land is reclaimed to allow 
other resource potentials, and that communities are left with 
the ability to transition to other economies. To its credit--
and this point is ignored by critics--America's coal mining 
industry has embraced this concept. However, for Pennsylvania, 
the bait before us today is ever giving our coal communities a 
level playing field as they compete for economic opportunities 
in a world after coal. AML does adversely effect our commerce 
and public welfare. Our citizens have invested their own timer 
and money. They have reaped benefits of the present program. 
And while the job is completed in some States, close to being 
completed in others, under the current allocation--
    Mrs. Cubin. Are you just about finished?
    Mr. J. Scott Roberts. I'm sorry.
    Mrs. Cubin. That's OK. Go ahead and conclude.
    Mr. J. Scott Roberts. In closing, by passing H.R. 3778, 
Congress can help get the job done in years, not generations.
    Thank you. I'm sorry for going over.
    [The prepared statement of J. Scott Roberts follows:]

 Statement of J. Scott Roberts, Deputy Secretary for Mineral Resources 
  Management, Department of Environmental Protection, Commonwealth of 
                              Pennsylvania

    My name is Jay Scott Roberts and I am Deputy Secretary of Mineral 
Resource Management for Pennsylvania's Department of Environmental 
Protection. I am speaking today on behalf of Pennsylvania Governor 
Edward G. Rendell. The Governor wishes to thank the Committee for 
providing the Commonwealth the opportunity to present its views on the 
reauthorization of the Surface Mine Control and Reclamations Act's 
(SMCRA) fee that supports abandoned mine land (AML) reclamation.
    Sustainable Development is a modern day buzzword for a concept that 
Congress used in passing SMCRA in 1977. In a mining context, 
Sustainable Development can mean that mine land is reclaimed to allow 
other resource potentials of the area. It also means that communities, 
which prospered while supporting the mineral economy, are left with the 
ability to transition to other economies.
    Before 1977 Sustainable Development was a foreign concept to the 
nation's mining industry. That fact is reflected in Congress' finding 
that the surface mine operations of the time, and presumably before, 
``result in disturbance of surface areas that burden and adversely 
affect commerce and the public welfare by destroying the utility of 
land for commercial, industrial, residential, recreational, 
agricultural, and forestry purposes'' [30 U.S.C. 1201, Sec 101(c)] and 
``coal mining operations affect interstate commerce'' [30 U.S.C. 1201, 
Sec 101(j)].
    To its credit, and this is a point ignored by critics, America's 
coal mining industry has embraced the concept of sustainable 
development. When a modern mine is completed the land is ready for new 
uses and the community has the opportunity to transition into new 
economies.
    But pre-1977 miners had no such forward vision. Congress also 
recognized this by finding, again in 1977, that ``there are a 
substantial number of acres of land throughout major regions of the 
United States disturbed by surface and underground coal on which little 
or no reclamation was conducted, and the impacts from these unreclaimed 
lands impose social and economic costs on residents in nearby and 
adjoining areas as well as continuing to impair environmental quality'' 
[30 U.S.C. 1201, Sec 101(h)].
    Pennsylvania was blessed with abundant natural wealth--endless 
forests, good soils, plenty of clean water, and minerals. Chief among 
those minerals was coal. Although having only the 9th largest original 
reserves of any state in the nation (but Pennsylvania accounted for 95% 
of the world's known anthracite reserves), Pennsylvania's coal was the 
basis for much of the nation's historic production. Pennsylvania 
anthracite fired the boilers of transatlantic steamships and 
Pennsylvania bituminous fired the blast furnaces of Carnegie's steel 
mills. The production of Pennsylvania's mines was staggering. In 1917 
the production of Anthracite coal, found in only 5 of our 67 counties, 
peaked at 117,000,000 tons. The same year production of Bituminous coal 
was 171,000,000 tons; a combined total that year of 288,000,000 tons of 
coal. Pennsylvania miners produced nearly 16 billion tons of coal 
before Congress made it's finding that uncontrolled mining ``burden and 
adversely affect commerce and the public welfare.''
    Although downplayed because of the general good times created by a 
booming coal economy, the price of that production was high. In 1910, 
the U.S. Army Corps of Engineers concluded that the rapid corrosion on 
the Monongahela River of steel river locks and barge hulls was the 
result of acid from abandoned mines. By the 1920's the river intakes of 
the water supplies for population centers like McKeesport, Greensburg, 
Latrobe, Johnstown, and Altoona were lost to mine drainage and were 
being replaced with water piped from reservoirs built high in the 
mountains. Sediment loading at the Philadelphia's Schuylkill River 
water works that, in 1948, the legislature authorized the construction 
of a series of desilting basins on the river. Today, those basins 
continue to function and the state continues to operate the dredges 
necessary to maintain their capacity.
    Certainly Pennsylvania benefitted from all that coal being mined 
but, like most Appalachian states, the coal royalties went to the 
private coal owners. The communities' costs of hosting the industry 
were paid from the wealth created in the community. But, in a society 
that did not plan for a sustainable future, when the coal runs out, the 
mines close, the jobs and the wealth disappear, and all that's left are 
highwalls, spoil piles, pits full of water, mountains of waste coal, 
open shafts, orange streams, destroyed water supplies, inferno-like 
mine fires, and the clear and present danger that without warning homes 
and businesses will collapse from mine subsidence. Unable to effective 
compete for new economic opportunities, its young people move way, and 
the community slowly declines.
    Today Pennsylvania is here to engage in the debate on re-
authorization of the fees collected under SMCRA to reclaim abandoned 
mine lands. No other state has as much at stake as Pennsylvania. It is 
the Commonwealth's whose ``commerce and public welfare'' is most 
greatly compromised by abandoned mine lands. Our motivation to engage 
this debate is not greedy desire nor are we before you as beggars. The 
Commonwealth has a more than 50-year legacy of action in dealing with 
our AML problems. Our citizens stepped to the plate in 1968 with the 
$200 Million ``Operation Scarlift'' bond issue. They again put their 
money where their mouth is with 1999's $500 million Growing Greener 
program. Presently, Governor Rendell is pushing that another bond 
issue, called Growing Greener II, be placed on the ballot in November. 
If the voters agree, then they will put another $180 million towards 
AML reclamation in our state. With these funds, and the nearly $600 
million the state has received under state grants from SMCRA's funded 
with the AML fee, much has been accomplished. But much remains yet to 
do. The job is simply not finished.
    The National Abandoned Mine Land Inventory lists for Pennsylvania 
over $1 Billion of Priority 1 and Priority 2 non-general welfare work. 
These dollar figures are for construction alone. They do not account 
for administrative nor design/development expenses and, since they were 
generated in the 1980's, were never adjusted for inflation. Using the 
$1 Billion inventory amount and present state-grant levels simple 
arithmetic suggests it will take 40 years for just the P1/P2 non-
general welfare work.
    The state recognizes the burden the fee places on mine operators 
around the nation and tries to be a good steward of the funds we 
receive from them. To that end, we have developed programs designed to 
encourage reclamation by the modern industry as it seeks to recover 
resources left by past practices. This is known as remining. We also 
partner with our business communities, local governments, property 
owners, and civic organizations to find ways to reduce costs or 
leverage AML funds to the greatest extent possible. In the Commonwealth 
our citizens are choosing to be proud of their industrial heritage, not 
to be victims of it. Across the state they are rolling up their sleeves 
and getting to work. But they need help. Pennsylvania's Congressional 
delegation has stepped to the plate. They know SMCRA needs reauthorized 
and they are working hard to make sure that the political realities 
driving the reauthorization start with abandoned mine reclamation.
    There are several bills before this Committee and several bills 
before the Senate. Governor Rendell and Pennsylvania are solidly 
supporting H.R. 3778 primarily introduced by Congressmen Peterson and 
co-sponsored by all 16 members of our Congressional Delegation. It is a 
companion bill to S. 2049 introduced in the Senate by Senator Specter 
and co-sponsored by Senator Santorum. This bill has the support of the 
Bush Administration and was presented earlier today by OSM Director 
Jarrett. I would direct your attention to the fact that Governor 
Rendell, a Democrat, stood shoulder-to-shoulder with Interior Secretary 
Gale Norton when Congressmen Peterson announced this bill as testimony 
to the bipartisan support the bill has in Pennsylvania.
    The issues surrounding re-authorization are complicated and their 
solutions will likely be complex. I believe the three toughest are:
      Distribution of collected fees;
      Transfers to the United Mine Workers of America's health 
care plans; and
      Handling the unappropriated state share balances accrued 
under the existing law.
    Pennsylvania prefers a future distribution of collected fees that 
maximizes completion of Priority 1 and Priority 2 AML sites. H.R. 3778 
accomplishes this by replacing the present state-share/federal-share 
system with allocations based upon a given state's percentage of pre-
SMCRA coal production. This approach directs the resources most 
efficiently to the problems while setting future distributions upon a 
solid foundation. Systems using a state-share system leave future 
distributions at risk of production declines from resource depletion or 
market completion.
    H.R. 3778 also offers a responsible balance between reclaiming 
abandoned mine lands and fulfilling Federal promises made to retired 
mine workers. It is a compromise and is not a perfect solution. I fully 
recognize that H.R. 3778 does not commit to providing the full costs of 
the Combined Benefits Fund, nor does it include either the Reach-Back 
or Super Reach-Back categories of retirees, nor does it provide relief 
for certain coal companies struggling with contractual obligations left 
them by now defunct companies. These are serious issues that, if 
Federal commitments were made, then they are that America needs to live 
up to.
    Pennsylvania believes strongly that government, regardless of 
whether it is a township, state, or the federal government, needs to 
meet its commitments. We support the payment of fees collected and 
allocated to the various states under the present law but never 
appropriated for payment. To the extent that those states have 
completed their P1 and P2 inventories and the states have certified 
under the provisions of SMCRA they should have the freedom to choose 
what to do with the monies. This provides those states with an 
opportunity to reclaim their abandoned non-coal mines that affect their 
communities and economies the same as coal AML does in Pennsylvania. 
That is an opportunity that states with large inventories and long 
paths to reach certified status will not enjoy.
    H.R. 3778 also contains provisions aimed to reduce costs, eliminate 
paperwork, and encourage others to do the reclamation work at no or 
reduced costs to the fee payers. It eliminates the lien requirements 
that carry significant manpower costs but offer little benefit. It also 
provides that fees collected can be used to cover the bond costs for 
the previously abandoned portions of remining sites. In a time when 
bonds are difficult to purchase this promises to significantly reduce 
the modern industries costs for reclaiming the past. Finally, and 
perhaps most importantly, it gives the Secretary of the Interior the 
flexibility, through the promulgation of regulations, to create other 
incentives to maximize bang for the buck and create levers to bring 
other resources to bear on the problem.
    For Pennsylvania this debate is over giving our coal communities a 
level playing filed as they compete for economic opportunities with 
communities across the nation, and indeed, around the world. AML does 
adversely affect our commerce and our public welfare. Our citizens have 
invested their own time and money in this effort. They have also reaped 
the benefits of SMCRA's fees collected for AML reclamation. But while 
the job is completed in some states, and close to being completed in 
others, under the current allocation formula it will be decades before 
it is done in the Commonwealth. By passing H.R. 3778 Congress can help 
us to get the job done in years, not generations.
    Thank you.
                                 ______
                                 
    Mrs. Cubin. That's OK. We would like the oral statements to 
stay within 5 minutes.
    Mr. Masterson, you are recognized for 5 minutes.

   STATEMENT OF JOHN A. MASTERSON, COUNSEL TO HON. DAVID D. 
         FREUDENTHAL, GOVERNOR OF THE STATE OF WYOMING

    Mr. Masterson. Thank you, Madam Chairwoman. My name is John 
Masterson. I am appearing today at your invitation with our 
thanks on behalf of Governor David Freudenthal of Wyoming.
    I want to first of all point out that 5 minutes seems like 
a long period right now, but in 15 minutes, I'll bet it doesn't 
seem like that long of a period.
    It seems to the State of Wyoming that this is fundamentally 
a simply concept. We need to honor promises. We promised the 
State of Wyoming and the other States that are contributing to 
the AML fund that we would pay them and return to them half of 
the tax. We promised by way of the Combined Benefits Fund that 
we would take care of coal miners. It seems to me that's what 
we really need to be doing.
    For a variety of reasons, the State of Wyoming cannot 
support the Administration's bill. It cannot support the 
administration of Pennsylvania's bill, including it takes too 
long to repay that money. There is no interest on those monies 
being returned. There is no participation in future 
collections.
    We do support the Rahall/Cubin bill. We are in support of 
that. It seems to us that there's four essential items that 
Cubin/Rahall covers that are important to the State of Wyoming, 
and I will just highlight those very quickly.
    First of all, obviously, is the return of money owed to the 
States and the tribes. There are tribes and States out there 
that are owed hundreds of millions of dollars. Wyoming is at 
the forefront of those, and we feel those need to be repaid.
    Reaffirming the commitment to work with States in the 
future on an ongoing basis is the second item that Wyoming 
feels is important. With all due respect to my colleagues from 
Pennsylvania, we don't think that their solution offers that on 
a continuing, ongoing basis.
    Cutting the rate of tax is the third element that we feel 
is important. We think that that should happen. Finally, 
commitments made to the miners and their families need to be 
honored, and they need to be honored on a forward basis.
    Those are the important things to the State of Wyoming, 
Madam Chairwoman. I will defer for any questions that you have. 
I want to thank you and the staff, and the staff of the 
Committee, for helping us, for working with us.
    I need to tell you that the State of Wyoming feels somewhat 
excluded from the process that the Office of Surface Mining was 
involved in. My recollection is we have had about one meeting 
with Director Jarrett, and we were not involved in the crafting 
of the proposal that they had. We would like to be involved in 
those going forward, and we would like to participate in those. 
Your staff has been kind enough to include us in a lot of these 
conversations and a lot of these discussions, and whenever you 
want to meet with us, wherever, we will try to be there.
    Thank you.
    [The prepared statement of Mr. Masterson follows:]

   Statement of John A. Masterson, Counsel to The Honorable David D. 
                Freudenthal, Governor, State of Wyoming

    Good Morning Mr. Chairman. 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 Abandoned Mine Land Reclamation fee, and changes to 
the Surface Mining Control and Reclamation Act of 1977 as proposed by 
H.R. 3796 and H.R. 3778.
    I speak from the perspective of 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 the 
Congress in addressing the shortcomings of SMCRA and the need for a 
fair and equitable distribution of past collections and future revenues 
from the AML fee.
    I wish to thank Chairwoman Cubin and the members of the 
Subcommittee on Energy and Mineral Resources of the House Committee on 
Resources for inviting the State of Wyoming to testify at this hearing 
today.

SUMMARY OF WYOMING'S POSITION
    I wish to begin by saying that Wyoming supports many of the AML fee 
reauthorization concepts contained in H.R. 3796 sponsored by 
Congresswoman Cubin and Congressman Rahall of West Virginia. This 
approach addresses both the serious reclamation needs facing our state 
and provides relief for our mining industry. To be specific, we request 
that this Committee support H.R. 3778 on the following items:
      A prompt release of Wyoming's share from the AML Trust 
Fund.
      Providing a fair share of future AML revenues to complete 
the reclamation of abandoned mine sites in Wyoming. This requires that 
we continue to receive a fair share of fees paid by coal producers in 
our state. Like Pennsylvania, Ohio, and West Virginia, Wyoming has 
learned a lot since 1977 about the ongoing problems created by historic 
coal mining, and we have high hazard reclamation work remaining that 
exceeds our state share of the AML trust fund;
      A reduced fee structure that lowers the tax burden on 
Wyoming coal producers.
    Wyoming strongly objects to the Administration's reauthorization 
proposal as contained in the H.R. 3778 on several counts:
      Wyoming's coal producers would pay $1.5 billion in 
reclamation fees. No portion of these collections would be returned to 
Wyoming;
      Wyoming's trust fund of $400 million would be returned 
over a prolonged period with no interest added, further depreciating 
the real value of the fund;
      The Administration's proposal is still dependent on the 
annual budget process and requires a substantial increase in yearly 
appropriations by Congress. There is no guarantee that Wyoming will 
receive our trust fund valance, and we are left out of any share of 
future collections.
    Wyoming recognizes the need to address Priority 1 and Priority 2 
hazards in historic coal fields. We also recognize the commitment this 
body has made to the Combined Benefits Fund and believe it should be 
honored. The Cubin/Rahall Bill, and the bill sponsored by Senator 
Thomas, addresses these needs while providing all those entities with a 
stake the reauthorization issue with a fair and equitable allocation of 
available funds.

HISTORY
    Since the middle of the 19th Century, Wyoming has been a major 
source of energy to fuel America's industrial revolution and to support 
subsequent development. The transcontinental railroad project in the 
1860's created both the demand for coal to operate locomotives, and the 
transportation artery for coal delivery to areas of demand. Wyoming 
sites along the transcontinental route, now Carbon, Sweetwater, Lincoln 
and Uinta Counties, were mined extensively.
    As the network of rail lines expanded to serve more and more areas, 
so also expanded the market for Wyoming coal. Mines opened in Sheridan 
and Campbell Counties to supply demands nationwide for cheap, clean 
coal. Coal has been mined on some scale in nearly every one of 
Wyoming's 23 counties, and Wyoming citizens continue to live with that 
legacy. As I will discuss below, continuing inventory efforts have 
shown a much more extensive amount of reclamation than is currently 
recognized by the OSM. Further, small towns no longer supported by 
these historic mines are saddled with deteriorating infrastructure that 
requires attention. These needs can be adequately met only through a 
fair and balanced reauthorization bill.
    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 2003, Wyoming 
producers paid in $129,934,233, yet Wyoming's AML program received only 
$29,305,188 in distributions. That's only 22.5% of money Wyoming 
contributed, while other states have received 40%, 50% and even over 
100% of their contributions.
    Appropriations from Congress to address AML problems in Wyoming and 
other coal states are constrained by budget ceilings established by 
Office of Management and Budget. Annual AML distributions to states and 
tribes have never reached the 50% of AML fee collections mandated by 
Congress in SMCRA. As a result, the AML Trust Fund now contains almost 
$1.5 billion, of which $972 million is the states' share balance, 
which, by law, should have been distributed to AML states and tribes.
    Through Fiscal 2003, Wyoming coal companies have paid over $1.894 
billion into the fund. Only about 26% of these collections have 
returned to the State. Wyoming has received only $493,756,000 in annual 
allocations. Over $400,000,000 million of Wyoming's state share resides 
in the AML fund. This money--now idle in this federal account--could be 
put to productive use reclaiming hazardous mine sites and mitigating 
the deleterious effects of mining and mineral processing activities in 
Wyoming communities.
    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.

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 
healthcare 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.

ACCOMPLISHMENTS OF THE WYOMING AML PROGRAM
    Since implementation of the Surface Mining Control and Reclamation 
Act of 1977, Wyoming coal producers have paid almost $2 billion in 
reclamation fees into the AML Trust Fund. In return, Wyoming has 
received about $520 million, or about 29% of total collections. Wyoming 
consistently maintains an obligation rate in excess of 95% of funds 
received, and spends less than 3% on administrative costs. Over the 
past five years, Wyoming has spent or budgeted 25% to 30% of each 
year's consolidated grant for the reclamation of Priority 1and Priority 
2 Coal sites, as such sites are identified. The balance of available 
funds has gone to Priority 1 and Priority 2 non-coal sites, and to 
public infrastructure projects in communities impacted by past and 
present mining activities.
    Since the inception of the AML program, Wyoming has closed 1,300 
hazardous mine openings, reclaimed over 30,000 acres of disturbed land, 
and abated or controlled 22 mine fires. Thirty-five miles of hazardous 
highwalls have been reduced to safer slopes, and over $75 million has 
been spent to mitigate and prevent coal mine subsidence in residential 
and commercial areas of several Wyoming communities. Wyoming has also 
partnered with the BLM, the Forest Service, and the National Park 
Service to eliminate mine-related hazards on federal lands. In 
addition, Wyoming has invested $83 million in infrastructure projects, 
such as public water systems, flood control projects, health clinics, 
schools, roads and other projects to abate public safety problems in 
communities impacted by mining.
    Today, Wyoming is the largest producer of coal in the nation, with 
production expanding at a rate at about 6% a year. Unfortunately, 
Wyoming has not enjoyed economic diversification and remains largely 
dependent on mineral extraction--primarily coal. While Wyoming has 
certainly benefitted from our abundance of natural resources, the State 
has suffered, and continues to suffer, from the effects of an 
inequitable distribution of AML funds. Wyoming has been, and expects to 
continue to be, the single largest contributor to the AML reclamation 
fund. This contribution has enabled some states to receive more money 
than they have contributed to the program, while Wyoming has never 
received our fair share of the money we sent to Washington.
    In essence, Wyoming has not only provided the bulk of funding for 
AML reclamation in other states, but has handled revenues returned to 
the state in an effective and efficient program to protect our citizens 
from mine-related hazards, and to mitigate the impact of mining 
activities on Wyoming Communities.

HAZARDS REMAINING TO BE RECLAIMED IN WYOMING
    The impacts associated with historic mining include 30,000 acres of 
land undermined by coal production in Sweetwater County alone. Sheridan 
County and Lincoln County each have over 5,000 acres undermined by 
historic coal mining. While a portion of these areas at risk are rural, 
some are in immediate proximity to cities, towns or recreation areas on 
public land. Each season, Wyoming AML identifies new subsidence 
features, failed shaft closures, mine openings, erosion into mine 
workings and other Priority 1 hazards. Incidentally, Wyoming sets the 
standard for mitigation of potential subsidence through our vast 
experience in Rock Springs, Hanna and Glenrock. Since the cost of 
mitigating subsidence-prone areas is extremely high, Wyoming AML 
mitigates large scale subsidence in only those areas that have been 
developed for residential or commercial use. Priority 1 hazards in 
rural areas are evaluated and addressed under either the AML state 
emergency program, or under the normal AML project priority system.
    Wyoming AML is currently involved in a major statewide inventory 
process to identify both existing hazards and areas where deteriorating 
conditions (rotting support timbers, subsidence, failed closures, etc.) 
will create hazards in the future. Inventories conducted in the early 
days of the Wyoming AML program were based on aerial photography and 
USGS mapping, techniques that only scratched the surface of remaining 
work. Today's inventory effort includes a wealth of resources 
integrated for the first time into a comprehensive overview of 
potential AML projects. Inventory personnel reviewed historic mine maps 
from Bureau of Mines records, from company files, from museum records, 
and archives of the Wyoming Geologic Service. Files and records from 
the Department of Energy (uranium), from Federal Land Management 
Agencies, and from the U.S. Geologic Survey were reviewed in detail for 
information on the location of mines and mining districts.
    The results of this intensive research will be validated by site 
inspections in the field during the coming (2004) season. Obviously, 
construction costs to remediate these sites cannot be accurately 
established until site inspections are complete. However, preliminary 
results from the research portion of the inventory project indicate 
that there may be 1,739 additional coal sites and 4,050 non-coal sites, 
which will be verified by field inspections in 2004. These numbers 
compare to the 1,419 total sites now recorded for Wyoming on the AMLIS 
data base.
    The cost for remaining work in Wyoming will greatly exceed the 
funds delivered under the Administration's proposal and will likely 
exceed hundreds of millions of dollars. Mine fires and ongoing 
subsidence work will add to that total.

WYOMING'S POSITION ON REAUTHORIZATION OF THE RECLAMATION FEE
    Because Wyoming has been a responsible custodian of the funds 
entrusted to our AML program, your Committee can have confidence in 
taking the following actions:
1.  Return of Trust Fund
           Wyoming has never received the 50% return of collections 
        promised in SMCRA. Wyoming wants a prompt return of the money 
        now held in the AML Trust Fund from previous contributions by 
        the State's coal producers.
           Because annual AML appropriations to states and tribes have 
        lagged behind AML fee collections, the AML fund has a current 
        balance of $1.4 billion. Every year that these funds are not 
        returned to the states and tribes of origin, the real value of 
        these funds declines because of inflation and the rising cost 
        of reclamation construction. Wyoming's state share balance in 
        this account is estimated to exceed $420 million by September 
        30, 2004. These funds, now idle in a federal account, should be 
        put to productive use reclaiming hazardous mine sites and 
        mitigating the deleterious effects of mining activities on 
        Wyoming communities. This requires that the funds be returned 
        without preconditions so the certified states are able to use 
        the funds as they deem appropriate.

2.  A Fair Share of Future Revenues
           Wyoming wants a fair share of future fee collections 
        returned to the State to address remaining hazardous coal and 
        non-coal mine sites.
           Under the reauthorization proposals recently introduced into 
        the House and Senate, Wyoming coal producers will pay $1 to 
        $1.5 billion into the AML Trust Fund in the next 10 to 15 
        years. The Administration's proposal would distribute those 
        collections to Eastern States, and no money would be returned 
        to Wyoming. While Wyoming recognizes that the problems in these 
        Eastern States must be addressed, it is patently unfair for the 
        State making the largest financial contribution to the AML 
        program to be excluded from future distributions. Wyoming 
        citizens remain at risk from the hazards of abandoned mines. 
        Visitors to our vast public lands and magnificent recreation 
        areas encounter unexpected dangerous conditions that could 
        claim an innocent life. Wyoming communities are impacted by the 
        boom and bust cycles of mineral extraction.
           Future revenues are needed to respond to the remaining 
        hazards identified through Wyoming's aggressive pursuit and 
        identification of remaining coal and non-coal mining hazards. 
        Much work remains to be done to protect our citizens and 
        visitors to our state from such hazards. Money from future 
        revenues is required to give our state the capacity to respond 
        to on-going conditions that will exist in perpetuity. 
        Unfortunately, Wyoming's current ongoing inventory work is not 
        yet reflected in the Abandoned Mine Land Information System 
        (AMLIS) upon which the Administration has based much of its 
        proposal for future funding. Wyoming, like Pennsylvania, West 
        Virginia, Ohio, and other eastern states has learned a great 
        deal since the early 1980's, when initial inventories were 
        prepared and certification decisions made.
           The Abandoned Mine Land Reclamation program in Wyoming has 
        been an outstanding example of Federal-State cooperation in the 
        remediation of hazards to public health and safety resulting 
        from past mining practices. We ask the opportunity to continue 
        that relationship with sufficient funds to complete the work 
        envisioned by the original drafters of SMCRA

3.  Reduction of Reclamation Fees
           Wyoming wants the burden of reclamation fees on Wyoming coal 
        producers reduced.
           Coal production in Wyoming continues to increase at about 6% 
        a year. This increase in production will offset a portion of 
        the fee reduction and will generate funds for additional 
        reclamation work nationwide. All coal producers as well as 
        energy consumers would benefit from a reduction in reclamation 
        fees. The Cubin/Rahall bill and the Thomas bill divert 
        currently unappropriated RAMP funds (20% of current 
        collections) and an additional 20% of fund revenues after state 
        share allocations to historic coal allocations. Given these 
        allocations, we can finish the job in all coal-impacted states 
        and still be fair to all states and Tribes participating in the 
        AML Program.

4.  Objections to Administration's Proposal
           As discussed above, Wyoming has strong concerns with the 
        Administration's proposal as contained in House Resolution 3778 
        and in Senate Bill 2049.
           Wyoming strongly objects to any proposal that would continue 
        to tax Wyoming coal producers and return no part of those 
        collections to the State. The Administration's proposal 
        provides that some states are big winners in fund allocations, 
        some states are held relatively harmless, while Wyoming is a 
        big loser. We believe that the bills sponsored by Congresswoman 
        Cubin and Congressman Rahall and by Senator Thomas are fair to 
        all states and tribes with AML programs. Wyoming also notes 
        that the Administration's proposal is still dependent on yearly 
        budgets and Congressional appropriations. The reluctance of 
        successive Administrations to recommend full funding of the AML 
        program, and the reluctance of Congress to appropriate 
        additional funding will not be resolved by the Administration's 
        proposal.

CONCLUSION
    All of the States and Tribes have continuing needs under the 
legitimate purposes of SMCRA. As Congress debates reauthorization of 
the AML fee, the discussion should begin with the premise that the 
Federal Government will honor its commitment to the states and the 
tribes to return their share of the AML trust fund, and that all 
participating states and tribes should be fairly treated by 
reauthorization legislation.
    Wyoming respectfully requests that we continue to be consulted and 
included in future discussions. We are proud of our role in supporting 
the nation's economy, industry, and environment. We cannot forget that 
the ultimate resolution of this issue will affect the health and safety 
of our citizens, the quality of our environment, and the well-being of 
our communities.
    In conclusion, Wyoming wishes to thank the House Subcommittee on 
Energy and Mineral Resources for the opportunity to be heard on these 
important issues.
                                 ______
                                 
    [Mr. Masterson's response to questions submitted for the 
record follows:]

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    Mrs. Cubin. Thank you, Mr. Masterson.
    Now I recognize Steven Hohmann for 5 minutes.

 STATEMENT OF STEVEN HOHMANN, DIRECTOR, DIVISION OF ABANDONED 
     MINE LANDS, KENTUCKY DEPARTMENT FOR NATURAL RESOURCES

    Mr. Hohmann. Good morning, Madam Chairman, and members of 
the Subcommittee. My name is Steve Hohmann and I'm Director of 
the Division of Abandoned Mine Lands within the Kentucky 
Department for Natural Resources. I am also president of the 
National Association of Abandoned Mine Land Programs. I am 
pulling triple duty here today because I'm representing the 
NAAMLP, the Interstate Mining Compact Commission, and the 
Commonwealth of Kentucky. Initially, my remarks will be on 
behalf of the NAAMLP and the IMCC.
    The future of the AML fund and its potential impacts on the 
economy, public safety and the environment will depend upon how 
we manage the fund and how we adjust the current provisions of 
SMCRA. We are aware in particular, Madam Chairman, of the bill 
you and Congressman Rahall have introduced, H.R. 3796, and the 
bill introduced by Congressman Peterson of Pennsylvania, H.R. 
3778, reflecting the Administration's position.
    However, given the diversity of opinions among our members, 
and the unique circumstances facing each State and tribe, we 
have been unable to agree upon a consensus position on either 
of these bills. Nonetheless, the States and tribes through IMCC 
and the NAAMLP and western Governors have over the past several 
years advanced proposed amendments to SMCRA that reflect a 
minimalist approach to adjusting the law. They are as follows:
    To extend fee collection authority for at least 12 years; 
to adjust the procedure by which States and tribes receive 
their annual allocation of funds to address AML problems; to 
eliminate RAMP, the Rural Abandoned Mine Program; to assure 
adequate funding for minimum program under-funded States; to 
address a few other select provisions, including remining 
incentives, State set aside programs, handling of liens, and 
enhancing the ability of States to undertake water line 
projects; and finally, to address how the accumulated 
unappropriated State and tribal share balances in the fund will 
be handled, while at the same time assuring that an adequate 
State share continues for the balance of the program.
    The States and tribes welcome the opportunity to work with 
your Committee, Madam Chairman, and other affected parties, to 
address the myriad issues that attend the future ability of the 
fund to address the needs of our coal field citizens. Our 
overriding concerns can be summarized as follows:
    Adequate, equitable and stable funding must be provided to 
the States and tribes on an annual basis. The unexpended State 
share balance in the trust fund should be distributed to all 
the States and tribes as expeditiously as possible. Funding for 
minimum program States should be restored to the statutorily 
authorized amount of not less than $2 million annually. Any 
adjustment to the AML program should not inhibit or impair 
remining opportunities or incentives, and any adjustments to 
the existing system of priorities must consider the impacts to 
existing State set aside programs in the current State efforts 
to remedy acid mine draining. Any adjustments to the current 
certification process should not inhibit the ability of States 
and tribes to address high priority noncoal projects. Any 
review or adjustments to the current inventory should account 
for past discrepancies and provide for the inclusion of 
legitimate new sites. Finally, any changes must be considered 
in a judicious environment that allows for all affected 
parties' concerns to be addressed, including the coal field 
residents.
    Keep in mind, please, that any legislative adjustments that 
significantly reduce State AML funding or the efficacy of State 
programs could lead State legislatures, facing difficult budget 
times, to seriously reconsider SMCRA primacy entirely, both 
Title IV and Title V. Hence, the importance of ensuring that 
the current State share provisions in SMCRA are held harmless.
    The NAAMLP and the IMCC appreciate the opportunity to 
present this testimony today, Madam Chairman, and look forward 
to working with you in the future.
    Now, the remainder of my comments will be on behalf of the 
Commonwealth of Kentucky.
    Kentucky endorses and its entire House delegation is 
cosponsoring H.R. 3796, the legislation introduced by you and 
Representative Rahall. In addition to the singularly important 
issue of guaranteeing solvency for the Combined Benefits Fund, 
Kentucky supports H.R. 3796 for the following major reasons:
    It provides immediate and long-term significant funding 
increases to all States and tribes. The bill maintains the 
State's share into the future. It eliminates the 30 percent cap 
on water line expenditures. The bill maintains the status quo 
concerning the administration of the AML Emergency Reclamation 
Program. And it extends the fee collection authority to 2019.
    Madam Chairman, these are the major provisions that 
Kentucky desires and supports in an equitable AML 
reauthorization bill, and we feel that these provisions and 
others as presented in H.R. 3796 will ensure that no State or 
tribe is forgotten in the future of the AML reclamation 
program.
    Kentucky is keenly aware that there are other approaches to 
attaining the same goals. With that understanding and a true 
need to continue our reclamation efforts, Kentucky remains 
willing to work with Congress, States and tribes, OSM, industry 
and citizen groups, to forge a new future for the AML program. 
Kentucky staunchly supports reauthorization of the fee and 
believes the approach embodied in H.R. 3796 is the preferable 
option.
    I thank you for the opportunity to make this statement 
today.
    [The prepared statement of Mr. Hohmann follows:]

 Statement of Steve Hohmann, Director, Kentucky Division of Abandoned 
         Mine Lands, Kentucky Department for Natural Resources

    Madam Chairman, members of the Committee, thank you for inviting me 
to testify. I am present on behalf of the Commonwealth of Kentucky to 
remark on pending legislation to reauthorize the Abandoned Mine Land 
(AML) fee and revamp the national AML Program. Kentucky is very 
encouraged by the recent activity aimed at AML reauthorization. With 
the AML fee expiration looming in September, now is the time to address 
the critical issue of reauthorization and to direct the future course 
of the AML program.
    Currently, there are several different versions of an AML 
reauthorization proposal in Congress. The two proposals in the House 
are H.R.3778, the Peterson bill, and H.R. 3796, the Cubin/Rahall bill. 
Both of them extend the period for fee collection, increase funding to 
states with historic coal problems, and reduce the financial burden on 
the western states. There exist significant differences and some 
similarities in the methods each bill employs to attain the same goal.
    Kentucky endorses, and its House delegation is cosponsoring H.R. 
3796, the legislation introduced by Reps. Cubin and Rahall. H.R. 3796 
contains the following items that Kentucky supports:
      Provides immediate and long-term, significant funding 
increases to all states and tribes;
      Targets funding at historic coal problems by redefining 
the priorities for expenditure. Kentucky prefers this approach to one 
that changes the method of funding distribution to target historic coal 
problems;
      Maintains the state share into the future and ultimately 
returns these funds based on the state share balance, or some 
equivalent method, keeping the state share promise. Kentucky has the 
third largest state share balance, and it is critical to return those 
funds to the state to meet our reclamation needs. Kentucky has always 
used all its historic coal and state share funding to address high 
priority coal problems;
      Eliminates the 30% cap on waterline expenditures. Coupled 
with increased funding, this would allow Kentucky more discretion and 
ability to address the vital task of providing clean drinking water to 
the citizens in our coalfields. Provides immediate and long-term, 
significant funding increases to all states and tribes;
      Maintains the status quo concerning the administration of 
the AML emergency reclamation program. OSM already has the procurement 
guidelines in place, alternative environmental review procedures, and 
better access to critical funding to operate the emergency program. 
Kentucky believes that assumption of emergency reclamation would over 
burden Kentucky's already cash-strapped, normal reclamation program;
      Provides Remining incentives into the future;
      Reduces AML fees to operators in a manner that does not 
adversely affect state grants. Kentucky coal operators are struggling 
to compete in today's energy market and any financial relief received 
by a reduction in the AML fee would aid the Kentucky industry. A 
healthy coal industry is vital to our Commonwealth's economic 
prosperity;
      Returns state share balances to certain certified states 
with non-AML funds, and redistributes the replaced state share balances 
to the historic coal share;
      Addresses the financial solvency of the UMWA Combined 
Benefit Fund;
      Retains the AML Enhancement Rule; and
      Extends the AML program to 2019.
    Madam Chairman, these are the provisions that Kentucky supports in 
an equitable AML reauthorization bill. We feel that inclusion of these 
provisions in AML legislation will ensure that no state or tribe is 
forgotten in the future of the Abandoned Mine Land Reclamation Program. 
Kentucky is keenly aware that there are other approaches to attaining 
the same goals. With that understanding, and a true need to continue 
our reclamation efforts, Kentucky remains willing to work with 
Congress, states and tribes, OSM, industry, and citizen groups to forge 
a new future for the AML program.
    The AML program is vital to the citizens residing in Kentucky's 
coalfields. It is the only program that offers relief to our citizens 
from the health and safety dangers created by past coal mining. The 
federal Office of Surface Mining estimates that over 400,000 
Kentuckians are at risk because they live within one mile of an 
abandoned coal mine hazard. Kentucky currently has over $330 million in 
unfunded high priority reclamation problems listed in the National AML 
Inventory. This figure includes, 32,000 feet of unreclaimed highwall, 
1,500 acres of landslides, 1,500 open mine portals, and 9,000 acres 
subject to flooding from streams choked with sediment and mine refuse. 
These problems remain even though the Kentucky AML program has 
eliminated thousands of mine hazards throughout the Commonwealth. And 
the unfunded problems list grows longer each year.
    Last year alone the Kentucky Division of Abandoned Mine Lands 
received 831 complaints from coalfield residents and their elected 
officials reporting hazardous conditions from abandoned mines. There 
has been a marked increase in the number of complaints reported to the 
state from the previous year. All of these are new complaints, and 
based on experience we expect that roughly half are actually 
attributable to abandoned mining. This significant increase in 
complaints is due in part to greater than average precipitation in 
Kentucky over the past couple of years and increasing urban development 
into previously remote areas of the coalfields. Kentucky's ability to 
perform the reclamation necessary to resolve the problems cited in 
these complaints is solely dependent on the amount of AML funding 
Kentucky receives. Static or inadequate funding results in long delays 
from the time the complaint is received, to the time a reclamation 
project can be initiated to address the problem. Only significant, 
immediate increases in AML funding can remedy this difficulty.
    Since its inception, the Kentucky AML program has completed 745 
reclamation projects reclaiming over 1800 open mine portals, 2000 acres 
of dangerous landslides, 43 miles of polluted streams, 33,000 feet of 
unstable highwall, 300 acres of mine fires, and many other hazards 
created by old mines. Over the same period, the OSM federal reclamation 
program has conducted more than 1200 emergency projects at a cost of 
$130 million in Kentucky.
    Recent statistics prepared by the Kentucky AML program highlight 
the benefit of AML hazard reclamation to coalfield citizens. From July 
1 to December 31, 2003, the Kentucky AML program abated 82 abandoned 
mine hazards including 9 dangerous landslides, 3 unstable highwalls, 41 
open portals, and 6 hazardous impoundments. Abatement of these hazards 
directly eliminated the risk to 476 citizens and indirectly benefitted 
another 851. During that same time period Kentucky AML restored 4 miles 
of streams and completed 6 waterline projects providing water to 704 
households and businesses.
    The AML waterline program is a shining example of AML success in 
Kentucky. The Kentucky AML program expends 30% of each annual grant 
(the current limit allowed by law) to fund waterlines into areas where 
past mining has adversely impacted groundwater resources, rendering it 
unfit for consumption. Approximately one-quarter-million coalfield 
residents rely on groundwater as their primary drinking water source. 
To date Kentucky has completed 77 waterline projects providing clean, 
potable water to 9300 Kentucky households and businesses. The people 
served by these waterlines are generally in remote, rural areas that 
local water districts cannot afford to serve. The AML waterline program 
has been the only hope for those residents to receive a source of 
potable water. Fresh drinking water, free from contamination caused by 
mining, is a basic necessity that all citizens have a right to expect. 
Currently, Kentucky has a $15 million backlog of waterline projects 
waiting for construction funding.
    Over the life of the AML program, Kentucky coal operators have paid 
more than $875 million into the AML Trust Fund. Fifty percent of that 
amount, $437.6 million, is assigned to Kentucky's state share. To date, 
Kentucky has received $317 million from its state share through annual 
grants, leaving a balance in Kentucky's state share account of over 
$120 million. This unappropriated balance is part of the larger AML 
Trust Fund balance of $1.5 billion. Implicit in SMCRA is the promise 
that states would receive at least a 50% return on the amount of 
reclamation fees collected from within their borders. Without question, 
many more AML sites in Kentucky would have been reclaimed had Kentucky 
received its full return of state share money. It is important to note 
that any additional funding Kentucky receives, regardless of its origin 
as state or federal share, will be expended on high priority, coal-
related hazard abatement and waterline projects.
    Although the demands on Kentucky's AML program are increasing, our 
AML grant has remained essentially static over the last eight to ten 
years hovering around $16 to 17 million. However, each year the amount 
of funding devoted to reclamation is slightly reduced because of the 
unavoidable increase in the cost of reclamation construction and 
materials. Based on a random sample of project costs since 1996, 
Kentucky has seen prices for earthwork double, prices for gabion 
retaining walls increase 35%, and prices for rock channel lining 
increase 13%. The higher prices translate into less on-ground 
reclamation and a resultant increase in risk to the citizens of our 
Commonwealth from abandoned mine hazards. The only solution to this 
dilemma is an immediate, significant increase in AML funding to 
Kentucky.
    The AML program has had many successes in Kentucky and throughout 
the nation, but as OSM has stated, ``The job is not yet finished.'' In 
order to protect the present and future safety of our coalfield 
residents, Kentucky staunchly supports reauthorization of the AML fee 
and believes the approach embodied in H.R. 3796 is the preferred 
option.
                                 ______
                                 
    Mrs. Cubin. Thank you, Mr. Hohmann.
    William Michael Sharp, Assistant Director of the AML 
program for Oklahoma Conservation Commission. Welcome, Mr. 
Sharp.

    STATEMENT OF WILLIAM MICHAEL SHARP, ASSISTANT DIRECTOR, 
    DIVISION OF ABANDONED MINE LAND, OKLAHOMA CONSERVATION 
                           COMMISSION

    Mr. Sharp. Good morning, Madam Chairman, and members of the 
Subcommittee. My name is William Michael Sharp, Assistant 
Director of the Abandoned Mine Land reclamation program in 
Oklahoma. I appreciate the opportunity to appear before you to 
present testimony for the State of Oklahoma on the 
reauthorization of the Abandoned Mine Land reclamation fee and 
changes to the Surface Mining Control and Reclamation Act of 
1977, often referred to as Public Law 95-87.
    Of the 26 States and tribes with an approved AML 
reclamation program, eight States--Alaska, Arkansas, Iowa, 
Kansas, Maryland, Missouri, North Dakota and Oklahoma--are 
considered as minimum program States. Webster's defines 
``minimum'' as ``least attainable''. So, to many, the word 
could mean low lever, which in terms of AML problems, might be 
misinterpreted as not having very many AML problems.
    Nothing could be farther from the truth. Even though 
Congress has established in law that minimum program States 
should receive annually not less than $2 million, the fact 
remains that for the past ten fiscal years they have received 
an annual appropriation of just $1.5 million.
    This level of funding is simply inadequate to reclaim the 
number of high-hazard Priority 1 and 2 AML sites that exist in 
the minimum program States. AML programs in these critically 
underfunded States are forced to face projects over several 
years. Project inspection is cut back, and less on-the-ground 
reclamation is completed.
    AML problems in minimum program States continue to take 
human lives and property, as well as degrade water quality. For 
example, subsidence continues to plague buildings and 
structures in North Dakota and Kansas. Acid mine drainage from 
underground coal mines in Maryland continues to degrade the 
water quality of the Potomac River, and deaths and injuries 
associated with dangerous high walls in Oklahoma persist.
    Madam Chairman, in an effort to make the public more aware 
of the dangers associated with abandoned mines, the NAAMLP, in 
cooperation with several Federal and State agencies, has 
sponsored the production of an educational video on abandoned 
mine safety. It is titled ``Stay out and stay alive.'' I would 
like to request that this video be placed into the record of 
this hearing.
    Mrs. Cubin. Without objection.
    Mr. Sharp. Thank you, ma'am.
    [The video has been retained in the Committee's official 
files.]
    Mr. Sharp. In Public Law 95-87, the Natural Resource 
Conservation Service also has AML trust fund monies set aside 
for reclamation purposes under the Rural Abandoned Mine 
Program. Since Fiscal Year 1996, Congress has not appropriated 
any RAMP funds to States, thereby creating a balance of over 
$300 million in the AML trust fund earmarked for RAMP. The 
proposed legislation before us today is to eliminate RAMP under 
Title IV and reallocate the accumulated RAMP balance to States 
and tribes using the historic coal production formula in H.R. 
3778, or to transfer it to the Combined Benefit Fund, H.R. 
3796.
    With either proposal, minimum program States will see no 
additional source of funding to address their Priority 1 and 2 
AML problems. If one of the goals of reauthorizing SMCRA is to 
eliminate Priority 1 and 2 AML problems, then how can that be 
accomplished with funding minimum program States annually at $2 
million? We would like the Congress to address this critical 
issue with regard to the minimum program States.
    One suggestion we ask to be considered is to earmark a 
portion of the RAMP balance in the AML trust fund such that 
minimum program States could apply to OSM for supplemental 
grants above their annual $2 million grant. If the State is 
capable of obligating these funds in a timely manner, they 
could continue to apply these funds in future years.
    Approximately $90 million in high priority AML problem 
areas in Oklahoma continue to threaten death or injury to the 
public. In many cases, coal companies would mine through 100 
feet of overburden to obtain 18-24 inches of coal. As a result, 
many sites are abandoned, leaving 100 foot dangerous high walls 
and water-filled strip pits. This is the reason so many deaths 
and injuries have occurred and will continue to occur in 
Oklahoma's 16-county AML area.
    These AML hazards are located in heavily populated areas of 
the State, near major cities such as Tulsa, and two of the 
fastest growing areas of the State, Claremore and Broken Arrow. 
Near the town of Foyil, north of Claremore, seven known deaths 
have occurred in a radius of two miles. Open mine shafts/
portals and subsidence related to underground coal mines also 
have the potential for death and injury.
    In summary, since deaths and injuries related to AML 
problems continue, we support Congress in their effort to amend 
the Surface Mining Control and Reclamation Act of 1977 by 
reauthorization and reform of the Abandoned Mine Reclamation 
program, especially as outlined in H.R. 3796, the Cubin/Rahall 
bill.
    We support present legislation that provides minimum 
program States no less than $2 million per year, since minimum 
program States have many AML problem areas that pose a health 
and safety threat to the public. Oklahoma has approximately $90 
million of high priority AML problem areas.
    Congress should require all States and tribes to reclaim 
Priority 1 and 2 AML problems before addressing lower priority 
problems. Minimum program States should be given the 
opportunity to apply for supplemental grants based on their 
ability to timely obligate those funds toward reclaiming high 
hazard Priority 1 and 2 AML problems.
    We wish to thank the House Subcommittee on Energy and 
Mineral Resources for the opportunity to give this testimony, 
and I would be glad to answer any questions you may have.
    [The prepared statement of Mr. Sharp follows:]

        Statement of William Michael Sharp, Assistant Director, 
   Division of Abandoned Mine Land, Oklahoma Conservation Commission

    Good morning, Madam Chairman. My name is William Michael Sharp, 
assistant director of the Abandoned Mine Land (AML) Reclamation Program 
for Oklahoma. I appreciate the opportunity to appear before you to 
present testimony for the state of Oklahoma on the reauthorization of 
the Abandoned Mine Land Reclamation fee and changes to the Surface 
Mining Control and Reclamation Act of 1977 (PL 95-87).

Minimum Program States
    Of the 26 states and tribes with an approved AML Reclamation 
Program, eight states (Alaska, Arkansas, Iowa, Kansas, Maryland, 
Missouri, North Dakota, and Oklahoma) are considered as ``Minimum'' 
Program states. Webster's defines ``minimum'' as ``least attainable.'' 
So, to many the word could mean low level, which in terms of AML 
problems might be misinterpreted as not having very many AML problems. 
Over the years, coal production in these states declined to the point 
that there was not sufficient coal tax revenue to administer an AML 
Reclamation Program as mandated by PL 95-87, even though these states 
had multiple AML problem areas posing a threat to the health and safety 
of the public. As a result, the ``Minimum Program'' was established by 
Congress in FY 1988 requiring that each State and Tribe receive no less 
than $1.5 million annually. In FY 1989 actual funding fell to $1 
million, but in FY 1990 and 1991 it returned to $1.5 million.
    With $500 to $600 million of high hazard Priority 1 and 2 AML 
problems resulting in many mine-related deaths and injuries each year, 
these eight ``Critically Underfunded States,'' with broad-based 
support, convinced Congress that their annual program funding should be 
at least $2 million. As a result, Congress passed the Abandoned Mine 
Reclamation Act of 1990 amending PL 95-87 (adding Section 402(g)(8)), 
which set an annual funding level of not less than $2 million for each 
state and tribe having an eligible AML Reclamation Program. For the 
next three fiscal years (FY 1992 thru FY 1994), the Minimum Program 
States received the annual $2 million. However, for the last 10 fiscal 
years (FY 1995 thru FY 2004) these States received an annual 
appropriation of only $1.5 million (excluding a small amount of funding 
for AML emergencies and Clean Streams Initiative projects).
    There are several billion dollars of Priority 1 and 2 AML problems 
yet to be reclaimed nationwide. At least 25 percent of these problems 
are in the eight Minimum Program States, but these eight states receive 
only 10 percent of the funding each year.
    An annual appropriation of $1.5 million is simply inadequate to 
reclaim the number of high- hazard Priority 1 and 2 AML sites in each 
respective state. Why? Because at this level, AML staffs are reduced to 
a ``bare bones'' staff, reclamation contracts must be phased over 
several years (which results in not reclaiming the total AML hazard), 
project inspection is cutback (which is critical to quality control), 
and less on-the-ground reclamation is completed.
    In the last few years, there seems to be a misconception that 
Minimum Program States have reclaimed all of their high priority areas, 
therefore, they need less funding. In fact, the opposite is true. AML 
problems in Minimum Program States continue to take human lives and 
property, as well as degrade water quality. For example, subsidence 
continues to plague buildings and structures in North Dakota and 
Kansas. Acid mine drainage from underground coal mines in Maryland 
continues to degrade the water quality of the Potomac River, and deaths 
and injuries associated with dangerous highwalls in Oklahoma persist.
    The lack of funding at the annual $2 million level the last ten 
years has resulted in a total loss of over $40 million to the eight 
Minimum Program States. For these States to again operate a more 
effective, viable, and efficient AML reclamation program, we were very 
encouraged to see that recent House and Senate bills concerning AML 
reauthorization contained language that Minimum Program States will 
receive not less than $2 million annually.

Reallocation of Rural Abandoned Mine Land Program (RAMP) Funds
    In PL95-87 the Natural Resources Conservation Service (formerly 
SCS) also has AML Trust Fund monies set aside for reclamation purposes 
under RAMP. Since the passage of PL95-87, RAMP averaged approximately 
$4-9 million per year for projects nationwide. Several Minimum Program 
States were very active in RAMP, including Arkansas and Oklahoma, 
receiving $500,000 to $600,000 each year. Since FY 1996 Congress has 
not appropriated any RAMP funds to States. So, in addition to the ten-
year $5 million loss due to Minimum Program underfunding, Oklahoma has 
also lost between $4.5 and $5.4 million in RAMP funds in the last nine 
years. Furthermore, since funds dedicated to RAMP have not been 
appropriated by Congress, there exists a balance of over $ 300 million 
in the AML Trust Fund earmarked for RAMP. The proposed legislation 
before us today is to eliminate RAMP under Title IV and reallocate the 
accumulated RAMP balance to States and Tribes using the historic coal 
production formula (H.R. 3778) or to transfer it to the Combined 
Benefit Fund (H.R. 3796). With either proposal, Minimum Program States 
will see no increased funding to address their Priority 1 and 2 AML 
problems.
    If one of the goals of reauthorizing SMCRA is to eliminate Priority 
1 and 2 AML problems, then how can that be accomplished with funding 
Minimum Program States annually at $2 million? We would like the 
Congress to address this critical issue with regard to the Minimum 
Program States. One suggestion we ask to be considered is to earmark a 
portion of the RAMP balance in the AML Trust Fund such that Minimum 
Program States could apply to OSM for supplemental grants from these 
earmarked funds above their annual $2 million grant. If the state is 
capable of obligating these funds in a timely manner, they could 
continue to apply for these funds in future years. Once Minimum Program 
States have exhausted their existing inventory of Priority 1 and 2 AML 
hazards, they could no longer apply for these funds.

Oklahoma AML Inventory
    Approximately $90 million in high priority AML problem areas in 
Oklahoma continue to threaten death or injury to the public. In our 
state over 30,000 acres were surfaced mined for coal and over 40,000 
acres were mined underground for coal. In many cases, coal companies 
would mine through 100 feet of overburden to obtain 18 to 24 inches of 
coal. As a result, many sites are abandoned leaving 100-foot dangerous 
highwalls and water-filled strip pits. This is the reason so many 
deaths and injuries have occurred and will continue to occur in 
Oklahoma's 16-county AML area. These AML hazards are located in heavily 
populated areas near major cities such as Tulsa (population 367,302) 
and two of the fastest-growing areas of the state, Claremore (29 miles 
northeast of Tulsa) and Broken Arrow (a suburb of Tulsa). Both of these 
cities have numerous high priority AML hazards. Near the town of Foyil, 
north of Claremore, 7 known deaths have occurred in a radius of two 
miles. Just recently, we received a call from a landowner north of 
Claremore that witnessed a young boy who had tied a garden hose to a 
tree and was repelling down an 80-foot highwall. Open mine shafts/
portals and subsidence related to underground coal mines also have the 
potential for death or injury.

Conclusion
    In summary:
      Since deaths and injuries related to AML problems 
continue, we support Congress in their effort to amend the Surface 
Mining Control and Reclamation Act of 1977 (PL95-87) by reauthorization 
and reform of the Abandoned Mine Reclamation Program, especially H.R. 
3796;
      We support present legislation that provides Minimum 
Program States no less than $2 million per year since Minimum Program 
States have many AML problem areas that pose a health and safety threat 
to the public. Oklahoma has approximately $90 million of high priority 
AML problem areas;
      Congress should require all states and tribes to reclaim 
Priority 1 and 2 AML problems before addressing lower priority 
problems; and
      Minimum Program states should be given the opportunity to 
apply for supplemental grants based on their ability to timely obligate 
those funds toward reclaiming high hazard Priority 1 and 2 AML 
problems.
    We wish to thank the House Subcommittee on Energy and Mineral 
Resources for this opportunity to present this testimony today. I would 
be glad to answer any questions you may have.
                                 ______
                                 
    Mrs. Cubin. Thank you.
    As you can tell by the bells, we have been called for a 
vote. But I would like to get some of the questioning in before 
we are called to leave. I will start with you, Mr. Masterson.
    You have indicated that Wyoming's ongoing inventory efforts 
have not been reflected in the AML Information System, which 
the Administration uses to make its prediction for future 
funding needs. Could you describe briefly the differences that 
you have seen? What sort of communications have taken place and 
so on?
    Mr. Masterson. Madam Chairwoman, my understanding of the 
information system is that sites are allowed to be put into the 
information system after they are evaluated, after we have all 
the specifics, descriptions, and cost estimates of what items 
can be added and included on that formal system.
    That is to be contrasted with the situation where we're 
going around and taking a statewide inventory and kicking tires 
and finding all these other sites, trying to identify those. We 
cannot put them on that information system, at least that's my 
understanding, until we have a better description and 
particulars as to all those cost estimates and exactly what 
it's going to take to clean them up. So the inventory, as I 
understand it, is going to be larger than what ends up on the 
information system at the end of the day. I think that the 
actual State physical inventory that's happening in the State 
of Wyoming will happen this summer.
    Mrs. Cubin. But the State has discovered sites that will 
qualify or should qualify for Priority 1 and Priority 2 clean 
up?
    Mr. Masterson. Yes, ma'am.
    Mrs. Cubin. Actually, can you give me an idea of so far how 
extensive those inventories have been?
    Mr. Masterson. I do not have the numbers, Madam Chairwoman. 
I would be happy to supplement that and I will have Mr. Green 
fax that answer to your staff. We should be able to get it to 
you within 24 hours.
    Mrs. Cubin. That's fine. Thank you.
    Oklahoma's situation sounded a lot like Wyoming's. We do 
have sites developing, so I think that really exposes the need 
for the program to be able to continue funding sites that 
occur.
    With that, I would like to yield to Mr. Rahall.
    Mr. Rahall. Thank you.
    Let me begin by publicly thanking the Oklahoma Conservation 
Commission for all the assistance you have provided me and my 
staff over the years on this issue. Without failure, when I 
went to the States in the late eighties and early nineties to 
solicit their views on reauthorization, as I did again in 2000 
and 2001, Oklahoma always provided the most detailed, 
constructive, and thoughtful comments. So I want to publicly 
thank you again for that.
    Mr. Sharp. Thank you.
    Mr. Rahall. I also appreciate the other three testimonies, 
and to the panel in general, but to Pennsylvania specifically, 
I have heard your concerns over watershed funding, and I have 
heard this concern from certain other groups as well. Yet, the 
priority ranking system for projects in the law is that human 
health and safety must come first. Under Cubin/Rahall, we mean 
to strictly enforce that priority. As I have said over and 
over, that is maintaining the integrity of the original 
legislation.
    At the same time, we first continue the acid mine drainage 
set aside; second, we allow the Appalachian Clean Streams 
Program to continue; third, we allow lower priority P-3 
projects to be done prior to the completion of P-1's and P-2's, 
if done in conjunction with those types of projects; and 
fourthly, we provide for the State share balances to be used 
entirely for Priority 3 projects, once the Priority 1 and 2 
human health and safety threats are addressed.
    I guess I would just ask a general question, because it 
appears to some that that's not good enough. My response to 
that is, could we please leave some money to address the open 
pitfalls that swallow our teenagers, to mitigate the landslide 
that threatens grandma's home, and to combat the subsidence 
that may engulf an entire community?
    Your comments. I mean, is that asking too much?
    Mr. J. Scott Roberts. No, sir, that's not asking too much. 
I think in Pennsylvania we certainly agree and support that the 
first and foremost priority of any of our abandoned mine land 
programs within the Commonwealth is health and safety. That 
absolutely needs to come first.
    You asked Director Jarrett earlier this morning about 
inventory items that Pennsylvania did put on the inventory, as 
provided for by the 1992 amendments, that are watershed basin 
type projects. I will tell you right now that we have not, 
through any of these negotiations over the past year, said that 
we continue to advocate that they be given Priority 1 or 2 
status. We do believe it's a problem and we do believe it needs 
addressing. We are trying to address it as best we can, but we 
do recognize that health and safety needs to be first.
    Mr. Rahall. Thank you.
    Thank you, Madam Chair.
    Mrs. Cubin. Mr. Pearce?
    Mr. Pearce. No questions.
    Mrs. Cubin. Mr. Peterson.
    Mr. Peterson. Thank you.
    What is the difference between a Priority 1 and a Priority 
2? Maybe some of you can probably answer that.
    Mr. J. Scott Roberts. Priority 1 are sites that are 
classified as extreme danger. Priority 2 are health and safety. 
The rule of thumb might be if there was an injury or a fatality 
on a site, it would generally be a Priority 1. If there was a 
danger of that, it would be a Priority 2.
    Mr. Peterson. It would be interesting to know, in the 
history of the fund, what percentage of the money that's going 
out annually is going to Priority 1 sites, because it would 
seem like that should be the first priority--I mean, if it's 
prioritized.
    Does anybody have that data?
    Mr. Hohmann. No, but I think OSM could probably provide 
that. I do think, just from general knowledge, that most of the 
money that the States and tribes do expend is on Priority 1, 
the difference being the extreme danger is Priority 1 and 
Priority 2 is classified mostly as adverse effects of past coal 
mining.
    Mr. Peterson. OK.
    Mr. Rahall. Would the gentleman from Pennsylvania yield, 
very quickly?
    Mr. Peterson. Absolutely.
    Mr. Rahall. Just to quote directly from the law, Priority 1 
is an ``imminent'' threat to health and safety. Priority 2 is a 
threat ``nonimminent'' to health and safety.
    Mr. Peterson. I guess it would be interesting to know if 
nationally we are putting the bulk of the funding toward 
Priority 1 sites. I don't know.
    Mr. Rahall. It's supposed to be, yes.
    Mr. Peterson. Currently, I think last year Pennsylvania got 
17 percent of the money. We have 35 percent of the sites, and 
we have 46 percent of the people that live within a mile of a 
dangerous site. I think it shows that we're certainly not being 
overcompensated if you're looking at the historic problem. I 
don't think we're asking for 46 percent of the money or 35 
percent of the money, but it seems like, if we really are going 
after the priority sites, we need to deal effectively with 
where they are and in some fair ration down the road. Is that 
an unfair statement? Anybody can answer that. Is that an unfair 
request?
    Mr. Sharp. From Oklahoma's perspective, we certainly don't 
think so, because we're having a heck of a time trying to 
address Priority 1 and 2 sites in Oklahoma with just $1.5 
million right now.
    Mr. Peterson. It would seem to me that we ought to solve 
all of the Priority 1 sites before we spend a lot of money on 
Priority 2 sites. Is that commonly happening?
    Mr. Sharp. I would say, in Oklahoma's case, we have 
eliminated most of our Priority 1 sites, and we are working on 
the high Priority 2's now.
    Mr. J. Scott Roberts. In Pennsylvania, I believe we have 
$42 million worth of Priority 1's remaining on the books. The 
bulk of the one billion then would be Priority 2 sites.
    Mr. Peterson. OK.
    Mr. Hohmann. In Kentucky, we have about $330 million in 
both Priority 1 and 2 sites on the books, and we currently 
spend the vast majority of our grant money on the Priority 1 
sites.
    Mr. Peterson. Do all States have to match this with some--
Is there a formula? You don't have to match this but you can 
just use it?
    Mr. Hohmann. That's correct. There is no match.
    Mr. Peterson. No match. So States are not required. 
Pennsylvania, in all the projects I have been involved in, have 
been a combination of Federal and State funding, I think.
    Mr. J. Scott Roberts. I think we have been fortunate in 
that our taxpayers have stepped up to the plate and given us 
their monies to spend on these problems, also.
    Mr. Peterson. Yes, because of the severity of 
Pennsylvania's problems. But that's not common in all States. 
OK.
    Mrs. Cubin. I would like to thank the panel and remind them 
that we may have questions we will submit in writing, and that 
the record will remain open for 10 days to receive those. Thank 
you.
    We're going to run and vote. We will be right back for the 
last panel.
    [Recess.]
    Mrs. Cubin. I would like to resume the hearing.
    At this point I would like to ask unanimous consent to 
allow Mr. Sessions from Texas to sit at the dais and offer a 
statement for the record. Hearing no objection, so ordered.
    I ask unanimous consent that Mr. Sessions be allowed to 
give his statement now and then we'll take the testimony of the 
two witnesses.

 STATEMENT OF HON. PETE SESSIONS, A REPRESENTATIVE IN CONGRESS 
                    FROM THE STATE OF TEXAS

    Mr. Sessions. I thank the young Chairwoman for her help in 
this matter, and I appreciate her holding this hearing today.
    Mrs. Cubin. I heard that ``young''.
    [Laughter.]
    Mr. Sessions. I also thank the members of the Subcommittee, 
including your Ranking Member, for his appearance today and the 
opportunity to talk about the reauthorization of the Abandoned 
Mine Land program, AML.
    Continuing this worthwhile program to finance the 
reclamation of abandoned mines is critical to address the 
safety and health issues that are faced by citizens living near 
these sites. While the legislation being discussed today is 
important in providing abandoned mine cleanup, remedying State 
imbalances and providing for continued solvency of the Combined 
Benefit Fund is also important. It continues a pattern by the 
Congress to apply a piecemeal remedy to the serious flaws in 
the Coal Act of 1992.
    Dating back to the 105th Congress, a number of my 
colleagues and I have worked tirelessly on a piece of 
legislation to resolve the deficiencies of the Coal Act in a 
comprehensive, bipartisan fashion. If the Congress is going to 
remedy the Combined Benefit Fund solvency issue created by the 
1992 Coal Act, I believe we also must remedy the business 
issues which are equally, if not more, damaging.
    I am speaking of addressing the reachback tax, providing a 
refund of improperly collected premiums from the super 
reachback companies and eliminating the joint and several 
liability provisions for related entities of those companies 
who choose to prefund coal miner retiree health obligations.
    These issues are fundamentally tied to the reauthorization 
of AML, but not addressed in the bill being examined today. To 
finally fix this problem in a fair and responsible manner for 
all parties involved, I believe three things must be included. 
For more than a decade, a large number of companies, now 
commonly referred to as reachback companies, have been burdened 
with an inequitable tax burden imposed on them by the Coal Act 
of 1992.
    In that legislation, Congress scrapped a long history of 
dealing with the issue of health care benefits for retired coal 
miners through the collective bargaining process and, instead, 
mandated that the reachback companies, most of which had been 
out of the bituminous coal mining business for quite some time, 
step in and subsidize the financing of such benefits. These 
companies had never promised lifetime health care benefits to 
their employees. This financial burden being placed on the 
reachback companies has driven many into bankruptcy and put 
others on the brink of financial ruin, threatening the jobs of 
thousands of Americans.
    In all of our history, Congress has never imposed such a 
retroactive burden on any industry. It is time now for Congress 
to correct this injustice. Congress must provide prospective 
relief for the reachback companies from this insidious tax. 
Prospective relief from this tax will allow reachback companies 
to spend money on internal growth, research, development, job 
creation, and economic security.
    The second issue is the joint and several liability 
provision of the Coal Act. A logical and fair mechanism for 
funding is to permit a company to prepay its retiree health 
benefit liabilities in an actuarially sound fashion. With such 
prepayment, the company or the business would remain liable for 
any shortage in the actuarial-determined prefund premium and 
other units of the company would be relieved of their joint and 
several liability for the premiums. This approach would ensure 
that the industry's obligation to the Combined Benefit Fund 
will be fully met, while no longer penalizing the companies, 
many of whom were never before in the coal mining business.
    Let me be clear. These companies are not seeking to avoid 
their obligation to the Combined Benefit Fund but simply to 
prefund this obligation, and to do it wholly. This prefunding 
option will remove any concern by the retired miners and their 
dependents that their future health care benefits might be 
threatened and will allow the companies who choose this option 
to remove the unfair burden of the financial uncertainty 
imposed by the provisions of the Coal Act of 1992.
    Finally, it is critically important that any legislation in 
this area refund the improperly collected premiums from the 
super reachback companies. The Supreme Court concluded that 
these and other similarly situated companies should never have 
been assessed premiums to finance the Combined Benefit Fund in 
the first place.
    Including these three issues in the AML reauthorization 
legislation will serve the dual purpose of assuring the funding 
of retiree health benefits and ending the unfair burden placed 
on business entities, some of whom never employed a coal miner 
and never participated in the coal mining business. It is a 
comprehensive solution that will provide stability and fairness 
in meeting our commitments to the coal industry and to those 
retired miners, their families, and the remaining reachback 
companies that have been so unjustly saddled with this tax.
    I want to thank the Chairwoman, the young Chairwoman, for 
allowing me to be here today. I would also like to ask 
unanimous consent to place two additional pieces of 
correspondence in the record.
    Mrs. Cubin. Without objection.
    [The prepared statement of Mr. Sessions and additional 
correspondence follows:]

Statement of The Honorable Pete Sessions, a Representative in Congress 
                        from the State of Texas

    I commend the Chairwoman for holding this hearing and thank the 
Members of the Subcommittee and the full Committee for allowing me the 
opportunity to address the reauthorization of the Abandoned Mine Lands 
(AML) program. Continuing this worthwhile program to finance the 
reclamation of abandoned mines is critical to address the safety and 
health hazards faced by citizens living in and near such sites.
    While the legislation being discussed today is important in 
providing abandoned mine cleanup, remedying state share imbalances and 
providing for continued solvency of the Combined Benefit Fund, it 
continues a pattern by the Congress to apply a piecemeal remedy to the 
serious flaws in the Coal Act of 1992. Dating back to the 105th 
Congress, a number of my colleagues and I have worked tirelessly on 
legislation to resolve the deficiencies of the Coal Act in a 
comprehensive, bipartisan fashion. If the Congress is going to remedy 
the Combined Benefit Fund solvency issue created by the 1992 Coal Act, 
we must also remedy the business issues which are equally, if not more, 
damaging.
    I am speaking of addressing the Reachback tax, providing a refund 
of improperly collected premiums from the ``Super Reachback'' 
companies, and eliminating the joint and several liability provisions 
for the related entities of those companies who choose to pre-fund coal 
miner retiree health obligations. These issues are fundamentally tied 
to the reauthorization of the AML, but not addressed in the bills being 
examined today. To finally fix this problem in a fair and responsible 
manner for all parties involved, these three issues must be included.
    For more than a decade a large number of companies, now commonly 
referred to as Reachback companies, have been burdened with an 
inequitable tax imposed on them by the Coal Act of 1992. In that 
legislation, Congress scrapped a long history of dealing with the issue 
of health care benefits for retired coal miners through the collective 
bargaining process, and instead mandated that the Reachback companies, 
most of which had been out of the bituminous coal mining business for 
quite some time, step in and subsidize the financing of such benefits. 
These companies had never promised lifetime health care benefits to 
their employees. This financial burden being placed on the Reachback 
companies has driven many into bankruptcy and put others on the brink 
of financial ruin, threatening the jobs of thousands of Americans.
    In all of our history, Congress has never imposed such a 
retroactive burden on any other industry. It is time now for Congress 
to correct this grave injustice. Congress must provide prospective 
relief for the Reachback companies from this insidious tax. Prospective 
relief from this tax will allow Reachback companies to spend money on 
internal growth, research and development, job creation and economic 
security.
    The second issue is the joint and several liability provision of 
the Coal Act. A logical and fair mechanism for funding is to permit a 
company to prepay its retiree health benefit liabilities in an 
actuarially sound fashion. With such prepayment, the parent company of 
the business would remain liable for any shortage in the actuarially 
determined prepaid premium and other units of the company would be 
relieved of their joint and several liability for the premiums. This 
approach would ensure that industry's obligations to the Combined 
Benefit Fund are met, while no longer penalizing companies--many of 
which were never in the coal mining business.
    Let me be clear, these companies are not seeking to avoid their 
obligations to the Combined Benefit Fund but simply to pre-fund this 
obligation. This pre-funding option will remove any concern by retired 
miners and their dependents that their future health care benefits 
might be threatened, and will allow the companies who choose this 
option to remove the unfair burden of financial uncertainty imposed by 
provisions of the Coal Act of 1992.
    Finally, it is critically important that any legislation in this 
area refund the improperly collected premiums from the ``Super 
Reachback'' companies. The Supreme Court concluded that these, and 
similarly situated companies, should never have been assessed premiums 
to finance the Combined Benefit Fund in the first place.
    Including these three issues in AML reauthorization legislation 
will serve the dual purpose of assuring the funding of retiree health 
benefits and ending the unfair burden placed on business entities--some 
of whom never employed a coal miner and never participated in the coal 
mining business. It is a comprehensive solution that will provide 
stability and fairness in meeting our commitments to these retired coal 
miners, their families and the remaining Reachback companies that have 
been so unjustly saddled with this tax.
                                 ______
                                 

    [The letter submitted for the record by Mr. Sessions 
follows:]

[GRAPHIC] [TIFF OMITTED] T2803.001

[GRAPHIC] [TIFF OMITTED] T2803.002


    Mrs. Cubin. Mr. Rahall.
    Mr. Rahall. Thank you, Madam Chair.
    I didn't expect this testimony today, but I think it's very 
important that the other side of this story be put on the 
record at this point. There is another side to this issue, as 
everybody in attendance today knows, and I think it's very 
important that it be raised, I guess at this point, although as 
I said, it's not the subject of today's hearing, nor did I 
expect this. But the bottom line is, these so-called 
``reachbacks'' signed contractual agreements with the UMWA that 
contained what is known as the Evergreen clause. They signed 
these contractual agreements, promising health care.
    Now they want out of the agreements, for whatever reason 
we'll not get into, but they want to walk away from these 
contractual obligations. So I think that clearly must be put on 
the record, that there is another side to this story.
    Mrs. Cubin. Thank you, Mr. Rahall.
    Mr. Sessions, I do appreciate your testimony. As Mr. Rahall 
said, there are two sides to this story. I don't see the 
relationship between AML funding and the reachback companies, 
but I would recommend that you present this same testimony at a 
Ways and Means hearing because I truly see it in the 
jurisdiction of Ways and Means. But we are appreciative that 
you're here and appreciate your testimony.
    Thank you, and thank you for calling me ``young'' twice.
    Now I would like to recognize the third panel, Dave Young 
of the Bituminous Coal Operators Association, and Cecil 
Roberts, President of the United Mine Workers of America. We 
have had Cecil before this Committee many times and appreciate 
your appearance here again today.
    With that, I recognize Mr. Young for 5 minutes of 
testimony.

            STATEMENT OF DAVID M. YOUNG, PRESIDENT, 
             BITUMINOUS COAL OPERATORS' ASSOCIATION

    Mr. Young. Good afternoon, Madam Chairman. I am President 
of the Bituminous Coal Operators' Association, and I would like 
to express my appreciation to the Committee for conducting this 
hearing. It gives the BCOA and other interested parties the 
opportunity to comment and make recommendations on the 
reauthorization of the Abandoned Mine Land program, or AML, 
within the context of H.R. 3796, as introduced by yourself and 
Congressman Rahall.
    Our member companies have a keen interest in the operation 
of the program, and we believe that H.R. 3796, Cubin/Rahall, 
puts forth necessary reforms for the program to ensure that 
needed reclamation can be completed in this country.
    We also urge the Committee to include provisions extending 
to coal ``orphan'' retirees in the '92 and '93 plans the same 
protection the legislation provides for ``orphan'' 
beneficiaries in the Combined Benefit Fund. With this addition, 
we will support the legislation.
    The Coal Act set forth the principle that existing, in-
business companies would pay for the retiree health expenses of 
their former employees, and the Government, by the use of 
interest from the coal industry funded AML program, would cover 
the cost of those retirees whose former employers were no 
longer in business, ``orphans.''
    Coal industry retirees who become orphans receive benefits 
from three separate plans today based solely on their date of 
retirement. The Combined Benefit Fund provides benefits to 
miners who retired before July 20, 1992, based on premiums 
charged to employers and the use of AML interest to cover the 
orphan retirees.
    In the case of a complete bankruptcy, that company's 
retirees in the Combined Benefit Fund are transferred to orphan 
status. The Coal Act also required companies to pay for the 
benefits of the retirees who were on their company plans and 
active employees who retired by September 30 of 1994. In this 
instance, the Act created the 1992 plan to provide for retiree 
health benefits for these company plan orphans. Finally, 
eligible miners who retired after September 30th of '94, who 
become orphans, are enrolled in the '93 fund.
    Since the passage of the Coal Act, the distribution of coal 
industry orphans retirees has changed dramatically, and in ways 
that could not have been foreseen in 1992. When the Combined 
Benefit Fund was established in February of 1993, more than 95 
percent of the orphans were in the combined fund. At the end of 
2003, however, less than 60 percent of the orphans today are in 
the combined fund. This percentage shift is a trend that will 
continue in the coming years.
    Unlike the combined fund, the 1992 and 1993 orphan plans 
rely exclusively on private companies to provide health 
benefits. At the time of the legislative compromise that 
created the Coal Act, it was not anticipated that by adopting 
the 1992 orphan plan funding mechanism Congress was creating a 
``last employer standing'' club, which like its predecessor 
plans, would prove to be unsustainable. This is dramatically 
demonstrated by the recent bankruptcies in the steel industry 
that could not have been foreseen and projected in 1992.
    For example, LTV, Bethlehem Steel, and National Steel have 
each filed for Chapter 7 bankruptcy, adding approximately 5,000 
of their former coal miners to the orphan beneficiaries already 
in the 1992 plan, and another 5,000 steel industry mining 
retirees were transferred to orphan status in the combined 
fund. One other major contributor with over 5,000 beneficiaries 
is in Chapter 11, and the outcome of that bankruptcy proceeding 
is very uncertain at this time.
    The Medicare drug demonstration program has helped to 
address orphan plan needs for this calendar year. Special 
appropriations of prior year AML interest have averted the 
Combined Benefit Fund cuts in the earlier years. However, these 
stopgap measures are not a long-term solution to the orphan 
financing problem. Benefit cuts could occur as early as next 
year, 2005, unless the orphan financing mechanisms of the Coal 
Act are revised to meet the Act's goal of providing health care 
benefits to orphan retirees.
    The steel industry bankruptcies have created inequitable 
and unsustainable burdens and, therefore, a fresh approach is 
required if the Coal Act's goals are to be maintained. Congress 
was correct to make AML interest an integral part of the 
original solution to the coal industry retiree health care 
problem. Reauthorization of the AML program provides the 
opportunity to complete the job begun in 1992 by financing the 
costs of all coal orphan retirees. Failure to use this 
opportunity to address the orphan financing issue clearly 
threatens the long-term viability of these funds.
    We appreciate this opportunity to provide our views on H.R. 
3796 and look forward to working with the Committee as the 
legislative process unfolds.
    Thank you.
    [The prepared statement of Mr. Young follows:]

                Statement of David M. Young, President, 
                 Bituminous Coal Operators' Association

    Good morning, 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 settler of various multi-employer Funds including 
those established by the Coal Industry Retiree Health Benefit Act of 
1992 (``Coal Act''). BCOA also represents its members before Congress 
and the Executive Branch on retiree health and pension 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 and make recommendations on the reauthorization 
of the Abandoned Mine Land (``AML'') Program within the context of H.R. 
3796 as introduced by Representatives Cubin and Rahall. Our member 
companies have a keen interest in the operation of the Program, and we 
believe H.R. 3796 (Cubin/Rahall) puts forth necessary reforms for the 
program to insure that needed reclamation can be completed. We also 
urge the Committee to include provisions extending to coal ``orphan'' 
retirees in the 1992 and 1993 Plans the same protection the legislation 
provides for ``orphan'' beneficiaries in the Combined Benefit Fund 
(CBF). With this addition we will support the legislation.
    The Coal Act set forth the principle that existing, in-business, 
companies would pay for the retiree health expenses of their former 
employees, and the government, by use of interest from the coal 
industry funded AML program, would cover the cost of those retirees 
whose former employers were no longer in business (``orphans'').
    Coal industry retirees who become ``orphans'' receive benefits from 
three separate Plans based solely on their date of retirement. The CBF 
provides benefits to miners who retired before July 20, 1992, based on 
premiums charged to employers and the use of AML interest to cover the 
``orphan'' retirees. In the case of a complete bankruptcy, where the 
company is no longer in business, that company's retirees in the CBF 
are transferred to ``orphan'' status. The Coal Act also required coal 
companies to pay for the benefits of the retirees who were on their 
company plans and active employees who retired by September 30, 1994. 
In this instance, the Act created the 1992 Plan to provide for retiree 
health benefits for these company plan ``orphans.'' Finally, eligible 
miners who retired after September 30, 1994, who become orphans are 
enrolled in the 1993 Fund.
    Since the passage of the Coal Act, the distribution of Coal 
Industry orphan retirees has changed dramatically and in ways that 
could not have been completely foreseen in 1992. When the CBF was 
established in February of 1993 more than 95% of the 28,400 ``orphans'' 
were in the CBF. At the end of 2003, however, less than 60% of the 
29,100 ``orphans'' are in the CBF. This percentage shift is a trend 
that will continue in the coming years.
    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. 
Reauthorization of the Program is an important part of maintaining the 
necessary funding base to provide for interest transfers to the CBF to 
pay for ``orphan'' retiree health benefits.
    Unlike the CBF, the 1992 and 1993 Orphan Plans rely exclusively on 
private companies to provide health benefits. At the time of the 
legislative compromise that created the Coal Act, it was not 
anticipated that by adopting the 1992 Orphan Plan funding mechanism, 
Congress was creating a ``last employer standing'' club that, like its 
predecessor plans, would prove to be unsustainable. This is 
dramatically demonstrated by the recent bankruptcies in the steel 
industry that could not have been projected when the Act was passed in 
1992. For example, LTV, Bethlehem Steel and National Steel have each 
filed for Chapter 7 bankruptcy adding a total of approximately 5,000 of 
their former coal miners to the ``orphan'' beneficiaries already in the 
1992 Plan and another 5,000 steel industry mining retirees were 
transferred to ``orphan'' status in the CBF. One other major 
contributor with over 5,000 retired beneficiaries is in Chapter 11 and 
the outcome of that bankruptcy proceeding is uncertain at this time.
    The Medicare drug demonstration program has helped to address 
orphan plan needs for this calendar year. Special appropriations of 
prior year AML interest have averted CBF benefit cuts in earlier years. 
However, these stopgap measures are not a long-term solution to the 
orphan-financing problem. Benefit cuts could occur as early as 2005 
unless the orphan financing mechanisms of the Coal Act are revised to 
meet the Act's goal of providing health care benefits to orphan 
retirees.
    The steel industry bankruptcies have created inequitable and 
unsustainable burdens and, therefore, a fresh approach is required if 
Coal Act's goals are to be maintained. Congress was correct to make AML 
interest an integral part of the original solution to the coal industry 
retiree health care problem. Reauthorization of the AML Program 
provides the opportunity to complete the job begun in 1992 by financing 
the costs of all coal ``orphan'' retirees. Failure to use this 
opportunity to address the orphan financing issue clearly threatens the 
long-term viability of these Funds.
    We appreciate this opportunity to provide our views on H.R. 3796 
and look forward to working with the Committee as the legislative 
process unfolds.
                                 ______
                                 
    Mrs. Cubin. Thank you, Mr. Young.
    I would now like to recognize Mr. Roberts for 5 minutes.

            STATEMENT OF CECIL ROBERTS, PRESIDENT, 
                 UNITED MINE WORKERS OF AMERICA

    Mr. Cecil Roberts. Madam Chairman, there has been a lot 
said about keeping promises here today. I want to take a moment 
and thank you for keeping one.
    I first appeared before your Subcommittee 4 years ago, 
after a rally here in Washington of 12,000 UMWA retirees who 
were fighting to keep their health care. On that day, after the 
rally, I had the pleasure of testifying before your 
Subcommittee, and you promised that day that you would work 
with Congressman Rahall to try to find a solution and to help 
coal miners keep their health care. You have kept that promise. 
On behalf of all these beneficiaries, I want to thank you.
    I would also like to thank and put on the record our thanks 
to the Governor's office in Wyoming, who has been very 
supportive as we have tried to find a solution to meet 
Wyoming's needs and West Virginia's needs, and all the coal 
field communities' needs, that we also do not leave behind 
these retirees. We want to thank his office and him, and if you 
would pass that on, I would certainly appreciate it.
    Of course, I always state publicly the appreciation that I 
have and the friendship that I have, as well as all our 
members, for the work of Congressman Rahall. It is our belief 
that coal miners don't have a better friend in the House of 
Representatives, or have we ever had a better friend in the 
House of Representatives, than Congressman Rahall. He knows 
these issues and he has fought hard for them over many, many 
years. We thank him publicly today for that.
    Much has been said today and I don't desire to restate some 
of the facts that are on the record already. But I just want to 
remind everyone of the Government's heavy involvement in the 
protection of coal miners and the promise that was made. 
Congressman Rahall, in his opening statement, mentioned the 
fact that the President of the United States, the highest 
official in our land, initially made this promise in 1946 to 
John L. Lewis, who was the president of the United Mine Workers 
of America at that time. I think we should go back to the 
thirties for just a moment, if I might.
    Leading up to the war and during the war, World War II, 
John L. Lewis and the United Mine Workers desired to have 
pension protection for coal miners and health care for coal 
miners, but they stayed on the job at the President's urging so 
that we could win that war. Then in 1946 we had the historic 
agreement.
    But after we had the historic agreement in 1946, the 
Government set up a commission known as the Boone Commission 
that went out and looked at the health care and the living 
standards of coal miners throughout the United States of 
America, every State in the Union where coal was being mined. 
That report is on record that indicates the need for health 
care in coal field communities and pensions in the coal field 
communities. So the Government was involved before 1946, the 
Government was involved in 1946, and the Government was 
involved right after 1946. I believe the final report of the 
Boone Commission either came out in 1947 or 1948.
    Then in 1990, during the historic Pittston strike over the 
cutting off of 1,600 pensioners' health care, the U.S. 
Government once again became involved in this dispute through 
the Secretary of Labor's office, Elizabeth Dole, and 
establishing a mediator that she appointed, and also William 
Usery and other Secretaries of Labor. I would point out that 
both of these Secretaries of Labor that I just mentioned were 
Republicans and were appointed by Republican Presidents, so it 
has been a bipartisan effort to deal with this particular 
effort.
    Of course, we had the passage in 1992 of the historic Coal 
Act, introduced in the Senate by Jay Rockefeller and in the 
House by Nick Rahall. Of course, down through the years Senator 
Byrd has had to step forward and help provide funding for this 
program. Here recently, this current Administration helped 
provide additional funding to carry this program forward until 
October of next year.
    Everyone involved in this, Republican and Democrat, this 
White House, all the leadership in this country, says this is a 
program that needs to be protected and we need to find a long 
term, permanent solution to this problem. I support the efforts 
that you, Congressman Rahall, are making on behalf of this 
Nation's 46,000 coal miners.
    I just want to mention one thing, if I might. Last Thursday 
I was in southwestern Pennsylvania, and I met with 1,000 
beneficiaries of this program. They lined up after that 
meeting, and I spoke to widows whose husbands has just passed 
away, and they were crying and saying, if it was not for this 
particular fund, they would be bankrupt. They would not have 
been able to survive.
    This one particular lady that had just lost her husband, 
she has cancer herself. She said, ``I don't know what I would 
do without the United Mine Workers, this Combined Benefit Fund, 
and our friends in Congress.'' That's the message I will leave 
with the two of you today.
    Thank you.
    [The prepared statement of Mr. Cecil Roberts follows:]

 Statement of Cecil Roberts, President, United Mine Workers of America

    Madam Chairman, members of the Subcommittee, I am Cecil 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 in the United States and Canada for more than 114 years. We 
appreciate the opportunity to appear before the Subcommittee to discuss 
the Abandoned Mine Land Reclamation Fund (AML Fund) and its vital 
relationship to the Coal Act. Representing people who live and work in 
the nation's coal fields, the UMWA has a strong interest in both the 
reclamation of abandoned mine lands and the preservation of health care 
for UMWA retirees who worked hard all their lives to provide the nation 
with energy. We strongly support the extension of the AML program in a 
way that accomplishes both these goals.
    The UMWA supports the goals of the Surface Mining Act and the 
Abandoned Mine Lands program. When enacting the Surface Mining Control 
and Reclamation Act of 1977 (SMCRA), Congress found that ``surface and 
underground coal mining operations affect interstate commerce, 
contribute to the economic well-being, security, and general welfare of 
the Nation and should be conducted in an environmentally sound 
manner.'' That statement is as true today as it was in 1977. Coal 
mining contributes significantly to our national economy by providing 
the fuel for over half of our nation's electricity generation. Coal 
miners are proud to play their part in supplying our nation with 
domestically-produced, cost-effective, reliable energy. We also live in 
the communities most impacted by mining and support the intent of 
Congress that coal mining must be conducted in an environmentally sound 
manner.
    The AML program, financed by production fees levied on the coal 
industry, was designed to provide the means to reclaim lands that had 
been mined in previous years and abandoned before reclamation had been 
done. The law was amended in 1991 to permit the investment of monies 
held in the AML Fund to earn interest. In 1992, the Energy Policy Act 
extended the AML fees until 2004 and authorized the use of AML interest 
to pay for the cost of benefits for certain eligible retirees under the 
Coal Act.
    The UMWA believes that when Congress authorized the use of AML 
interest to finance the cost of health care for retired coal miners 
under the Coal Act, it was a logical extension of the original intent 
of Congress when the AML Fund was established. Congress joined these 
two programs together for a specific reason--they both represent legacy 
costs of the coal industry that compelled a national response. When 
Congress created the AML Fund in 1977, it found that abandoned mine 
lands imposed ``social and economic costs on residents in nearby and 
adjoining areas.'' When Congress enacted the Coal Act in 1992, it also 
had in mind how to avoid unacceptable social and economic costs 
associated with the loss of health benefits for retired coal miners and 
widows.
    The UMWA Combined Benefit Fund (CBF) was created by Congress to 
provide health benefits to retired coal miners and their widows. Today, 
the Combined Benefit Fund provides health benefits to nearly 50,000 
elderly beneficiaries who reside in nearly every state in the nation. 
The average age of the CBF beneficiary population is about 80 years, 
about two-thirds of them are widows and their total estimated annual 
health cost is about $360 million. Congress intended for the financial 
mechanisms it put in place to provide self-sustaining financing of the 
cost of those benefits. However, rapidly rising health costs, a series 
of adverse court decisions, bankruptcies of major contributing 
employers (particularly in the steel industry), and recent low interest 
earnings at the AML Fund have eroded those financing mechanisms and 
placed the CBF in financial jeopardy. The bankruptcies have also added 
thousands of new orphan retirees to the UMWA 1992 Benefit Fund and the 
UMWA 1993 Benefit Fund, placing serious strains on the financial 
operations of those two plans. These continuing financial difficulties 
highlight the need to include Coal Act reforms in the AML re-
authorization.
    Congress has intervened three times in the past five 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 deficits in 
the CBF's net assets through August 31, 2001. And most recently, in 
January 2003, Congress appropriated $34 million from the AML interest 
account to the Combined Benefit Fund. In addition, the UMWA Funds and 
the Center for Medicare and Medicaid Services (CMS) expanded their 
existing nationwide, risk-sharing Medicare Demonstration project in 
January 2001 to include a new prescription drug component. That project 
was scheduled to run three years, until mid-2004, and to reimburse the 
Funds for 27% of its Medicare prescription drug expenditures. It is a 
pilot project designed to demonstrate the efficacy of providing 
prescription drugs under Medicare, a timely project that we believe 
will prove useful to CMS and Congress as we expand prescription drug 
coverage to the Medicare population.
    I am pleased to report that the Administration, with bipartisan 
support from members of Congress, recently announced an extension of 
the prescription drug demonstration program that will increase the 
percentage reimbursement and extend the program until September 30, 
2005. This infusion of additional cash is certainly welcome news, as it 
will prevent what otherwise would have been a disastrous benefit cut. 
This, however, is only a temporary reprieve. There is a clear and 
growing bipartisan consensus that there must be a long-term solution to 
the financial problems of the Coal Act.
    The need for a long-term solution for the Coal Act coincides with 
the need to re-authorize the AML Fund. We believe the re-authorization 
effort can, and should, meet four broad policy objectives:
      Provide sufficient duration and level of tax to fund the 
reclamation needs;
      Focus on Priority 1 and 2 public health and safety 
projects;
      Resolve the long-standing dispute between states and OSM 
over the state share of collections; and,
      Provide long-term financial security for the Coal Act 
benefit plans.
    Two primary AML re-authorization bills have been introduced in the 
House of Representatives. The Administration proposal (H.R. 3778) has 
been introduced by Representatives John Peterson and Don Sherwood of 
Pennsylvania. In addition, a comprehensive AML reform bill (H.R. 3796, 
the Abandoned Mine Lands Reclamation Reform Act of 2004) has been 
introduced by Representatives Barbara Cubin of Wyoming and Nick Rahall 
of West Virginia. Both AML proposals extend the authority of the AML to 
collect the reclamation fees at a lower rate than current law mandates. 
Both bills appear to raise about the same amount in cumulative revenue, 
although there are slight differences in fee amounts and duration. 
However, H.R. 3778 does not provide for a long-term financial solution 
for the continued provision of benefits under the Coal Act. Only H.R. 
3796 accomplishes that goal.
    The UMWA strongly urges Congress to enact a re-authorization bill 
modeled on H.R. 3796, a proposal with broad bipartisan support in the 
coal states. Wyoming, West Virginia and Kentucky are the nation's top 
three coal-producing states, producing about 60% of the nation's coal 
output. Almost every member of the House of Representatives from these 
three essential coal-producing states have co-sponsored H.R. 3796. If 
enacted, the Abandoned Mine Lands Reclamation Reform Act of 2004 would 
extend OSM fees for 15 years, lower the rate paid by coal producers, 
target greater resources to high priority reclamation sites that 
threaten human health and safety, resolve the long-standing dispute 
between the states and OSM about the state share of fee collections and 
provide for the long-term financial stability of the Coal Act benefit 
plans.
    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, and the 
reforms embodied in H.R. 3796 will accomplish that. We are not alone in 
urging Congress to act. Over the past few years, 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 vitally necessary the health benefits 
are to the retirees and their families.
    Given the need to re-authorize the Abandoned Mine lands program, 
and the growing bipartisan consensus that we need a long-term fix to 
the problems of the Coal Act, now is the time to act.

GAO Study
    In 2002, the U.S. General Accounting Office (GAO) issued its most 
recent report on the Coal Act, entitled ``Retired Coal Miners' Health 
Benefit Funds: Financial Challenges Continue.'' Among the findings of 
the GAO were that:
      the Combined Benefit Fund (CBF) faces continuing 
financial challenges which have been exacerbated by various adverse 
court decisions that have reduced the per beneficiary premiums paid to 
the CBF and relieved some companies of responsibility for paying for 
their beneficiaries;
      CBF beneficiaries traded lower pensions over the years 
for the promise of their health benefits and have engaged in 
considerable cost sharing by contributing $210 million of their pension 
assets to help finance the CBF;
      the benefits provided to Coal Act beneficiaries are 
generally comparable to coverage provided by major manufacturing 
companies and companies with unionized work forces;
      CBF beneficiaries tend to be sicker, and therefore use 
more health care, than the average Medicare population; and
      the CBF trustees have adopted numerous managed care 
initiatives and have a history of achieving savings against their 
Medicare targets in demonstration projects, thus saving money not only 
for the Funds but for Medicare and the U.S. Treasury.
    The most recent GAO report clearly supports the positions we have 
taken before Congress and the need for additional legislation. 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. Unfortunately, there is also no question that the 
nation's promise to retired coal miners will be violated if we do not 
enact a long-term financial solution to the Coal Act funding crisis.
    This is a unique population and a unique situation. We are 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 legislation modeled on H.R. 3796, the Abandoned Mine 
Lands Reclamation Reform Act of 2004.

The UMWA Health and Retirement Funds and the U.S. Government
    The UMWA Health and Retirement Funds (the Funds) was created in 
1946 in a contract between the United Mine Workers of America and the 
federal government during a time of government seizure of the mines. 
The contract was signed in the White House with President Harry Truman 
witnessing the historic occasion.
    The UMWA first began proposing a health and welfare fund for coal 
miners in the late-1930s but met strident opposition from the coal 
industry. During World War II, the federal government urged the union 
to postpone its demands to ensure coal production for the war effort. 
When the National Bituminous Wage Conference convened in early 1946, 
immediately following the end of the war, a health and welfare fund for 
miners was the union's top priority. The operators rejected the 
proposal and miners walked off the job on April 1, 1946. Negotiations 
under the auspices of the U.S. Department of Labor continued 
sporadically through April. On May 10, 1946, President Truman summoned 
John L. Lewis and the operators to the White House. The stalemate 
appeared to break when the White House announced an agreement in 
principle on a health and welfare fund.
    Despite the White House announcement, the coal operators still 
refused to agree to the creation of a medical fund. Another conference 
at the White House failed to forge an agreement and the negotiations 
again collapsed. Faced with the prospect of a long strike that could 
hamper post-war economic recovery, President Truman issued an Executive 
Order directing the Secretary of the Interior to take possession of all 
bituminous coal mines in the United States and to negotiate with the 
union ``appropriate changes in the terms and conditions of 
employment.'' Secretary of the Interior Julius Krug seized the mines 
the next day. Negotiations between representatives of the UMWA and the 
federal government continued, first at the Interior Department and then 
at the White House, with President Truman participating in several 
conferences.
    After a week of negotiations, the historic Krug-Lewis agreement was 
announced and the strike ended. It created a welfare and retirement 
fund to make payments to miners and their dependents and survivors in 
cases of sickness, permanent disability, death or retirement, and other 
welfare purposes determined by the trustees. The fund was to be managed 
by three trustees, one to be appointed by the federal government, one 
by the UMWA and the third to be chosen by the other two. Financing for 
the new fund was to be derived from a royalty of 5 cents per ton of 
coal produced.
    The Krug-Lewis agreement also created a separate medical and 
hospital fund to be managed by trustees appointed by the UMWA. The 
purpose of the fund was to provide for medical, hospital, and related 
services for the miners and their dependents. The Krug-Lewis agreement 
also committed the federal government to undertake ``a comprehensive 
survey and study of the hospital and medical facilities, medical 
treatment, sanitary and housing conditions in coal mining areas.'' The 
expressed purpose was to determine what improvements were necessary to 
bring coal field communities in conformity with ``recognized American 
standards.''
    To conduct the study, the Secretary chose Rear Admiral Joel T. 
Boone of the U.S. Navy Medical Corps. Government medical specialists 
spent nearly a year exploring the existing medical care system in the 
nation's coal fields. Their report, ``A Medical Survey of the 
Bituminous Coal Industry,'' found that in coal field communities, 
``provisions range from excellent, on a par with America's most 
progressive communities, to very poor, their tolerance a disgrace to a 
nation to which the world looks for pattern and guidance.'' The survey 
team discovered that ``three-fourths of the hospitals are inadequate 
with regard to one or more of the following: surgical rooms, delivery 
rooms, labor rooms, nurseries and x-ray facilities.'' The study 
concluded that ``the present practice of medicine in the coal fields on 
a contract basis cannot be supported. They are synonymous with many 
abuses. They are undesirable and in many instances deplorable.''
    Thus the Boone report not only confirmed earlier reports of 
conditions in the coal mining communities, but also established a 
strong federal government interest in correcting long-standing 
inadequacies in medical care delivery. Perhaps most important, it 
provided a road map for the newly created UMWA Fund to begin the 
process of reform.
    The Funds established ten regional offices throughout the coal 
fields with the direction to make arrangements with local doctors and 
hospitals for the provision of ``the highest standard of medical 
service at the lowest possible cost.'' One of the first programs 
initiated by the Funds was a rehabilitation program for severely 
disabled miners. Under this program, more than 1,200 severely disabled 
miners were rehabilitated. The Funds searched the coal fields to locate 
disabled miners and sent them to the finest rehabilitation centers in 
the United States. At those centers, they received the best treatment 
that modern medicine and surgery had to offer, including artificial 
limbs and extensive physical therapy to teach them how to walk again. 
After a period of physical restoration, the miners received 
occupational therapy so they could provide for their families.
    The Funds also made great strides in improving overall medical care 
in coal mining communities, especially in Appalachia where the greatest 
inadequacies existed. Recognizing the need for modern hospital and 
clinic facilities, the Funds constructed ten hospitals in Kentucky, 
Virginia and West Virginia. The hospitals, known as Miners Memorial 
Hospitals, provided intern and residency programs and training for 
professional and practical nurses. Thus, because of the Funds, young 
doctors were drawn to areas of the country that were sorely lacking in 
medical professionals. A 1978 Presidential Coal Commission found that 
medical care in the coal field communities had greatly improved, not 
only for miners but for the entire community, as a result of the UMWA 
Funds. ``Conditions since the Boone Report have changed dramatically, 
largely because of the miners and their Union--but also because of the 
Federal Government, State, and coal companies.'' The Commission 
concluded that ``both union and non-union miners have gained better 
health care from the systems developed for the UMWA.''

The Coal Commission
    In the 1980s, medical benefits for retired miners became a sorely 
disputed issue between labor and management, as companies sought to 
avoid their obligations to retirees and dump those obligations onto the 
UMWA Funds, thereby shifting their costs to other signatory employers. 
Courts had issued conflicting decisions in the 1980s, holding that 
retiree health benefits were indeed benefits for life, but allowing 
individual employers to evade the obligation to fund those benefits. 
The issue came to a critical impasse in 1989 during the UMWA-Pittston 
Company negotiations. Pittston had refused to continue participation in 
the UMWA Funds, while the union insisted that Pittston had an 
obligation to the retirees.
    Once again the government intervened in a coal industry dispute 
over health benefits for miners. Secretary of Labor Elizabeth Dole 
appointed a special ``super-mediator,'' Bill Usery, also a former 
Secretary of Labor. Ultimately the parties, with the assistance of 
Usery and Secretary Dole, came to an agreement. As part of that 
agreement, Secretary Dole announced the formation of an Advisory 
Commission on United Mine Workers of America Retiree Health Benefits, 
which became known as the ``Coal Commission.'' The commission, 
including representatives from the coal industry, coal labor, the 
health insurance industry, the medical profession, academia, and the 
government, made recommendations to the Secretary and the Congress for 
a comprehensive resolution of the crisis facing the UMWA Funds. The 
recommendation was based on a simple, yet powerful, finding of the 
commission:
        ``Retired miners have legitimate expectations of health care 
        benefits for life; that was the promise they received during 
        their working lives, and that is how they planned their 
        retirement years. That commitment should be honored.''
    The underlying Coal Commission recommendation was that every 
company should pay for its own retirees. The Commission recommended 
that Congress enact federal legislation that would place a statutory 
obligation on current and former signatories to the National Bituminous 
Coal Wage Agreement (NBCWA) to pay for the health care of their former 
employees. The Commission recommended that mechanisms be enacted that 
would prevent employers from ``dumping'' their retiree health care 
obligations on the UMWA Funds. Finally, the Commission urged Congress 
to provide an alternative means of financing the cost of ``orphan 
retirees'' whose companies no longer existed.

The Coal Act
    Recognizing the crisis that was unfolding in the nation's coal 
fields, Congress acted on the Coal Commission's recommendations. The 
original bill introduced by Senator Rockefeller sought to impose a 
statutory obligation on current and former signatories to pay for the 
cost of their retirees in the UMWA Funds, require them to maintain 
their individual employer plans for retired miners, and levy a small 
tax on all coal production to pay for the cost of orphan retirees. 
Although the bill was passed by both houses of Congress, it was vetoed 
as part of the Tax Fairness and Economic Growth Act of 1992.
    In the legislative debate that followed, much of the underlying 
structure of the Coal Commission's recommendations was maintained, but 
there was strong opposition to a general coal tax to finance the 
benefits of orphan retirees. A compromise was developed that would 
finance orphans through the use of interest on monies held in the AML 
Fund. In addition, the Union accepted a legislative compromise that 
included the transfer of $210 million of pension assets from the UMWA 
1950 Pension Plan. With these compromises in place, the legislation was 
passed by Congress and signed into law by President Bush as part of the 
Energy Policy Act.
    Under the Coal Act, two new statutory funds were created--the UMWA 
Combined Benefit Fund (CBF) and the UMWA 1992 Benefit Fund. The former 
UMWA 1950 and 1974 Benefit Funds were merged into the CBF, which was 
charged with providing health care and death benefits to retirees who 
were receiving benefits from the UMWA 1950 and 1974 Benefit Plans on or 
before July 20, 1992. The CBF was essentially closed to new 
beneficiaries. The Coal Act also mandated that employers who were 
maintaining employer benefit plans under UMWA contracts at the time of 
passage would be required to continue those plans under Section 9711 of 
the Coal Act. Section 9711 was enacted to prevent future ``dumping'' of 
retiree health care obligations by companies that remain in business. 
To provide for future orphans not eligible for benefits from the CBF, 
Congress established the UMWA 1992 Benefit Fund to provide health care 
to miners who retired prior to October 1, 1994, and whose employers are 
no longer providing benefits under their 9711 plans.
    The CBF is financed by per-beneficiary premiums paid by employers 
with retirees in the fund. The premium is set by the Social Security 
Administration and is escalated each year by the medical component of 
the Consumer Price Index. Interest earned by the AML Fund is made 
available to finance the cost of orphan retirees. The remainder of CBF 
income derives from Medicare capitation and risk sharing arrangements, 
DOL Black Lung payments, investment income and miscellaneous court 
settlements. The benefits for orphans covered by the UMWA 1992 Fund are 
financed solely by operators that were signatory to the NBCWA of 1988.
    In passing the Coal Act, Congress recognized the legitimacy of the 
Coal Commission's finding that ``retired miners are entitled to the 
health care benefits that were promised and guaranteed them.'' Congress 
specifically had three policy purposes in mind in passing the Coal Act:
          ``(1) to remedy problems with the provision and funding of 
        health care benefits with respect to the beneficiaries of 
        multi-employer benefit plans that provide health care benefits 
        to retirees in the coal industry;
          (2) to allow for sufficient operating assets for such plans; 
        and
          (3) to provide for the continuation of a privately financed 
        self-sufficient program for the delivery of health care 
        benefits to the beneficiaries of such plans.''
    Without question, Congress intended that the Coal Act should 
provide ``sufficient operating assets'' to ensure the continuation of 
health care to retired coal miners. However, the financial mechanisms 
have been eroded and have placed the Coal Act in continuing financial 
crises.

Recent Court Decisions
    The 2002 GAO study found that a number of court decisions have 
eroded the financial condition of the Combined Fund--and the legal 
onslaught on the Coal Act continues. While Congress clearly intended 
that the Coal Act be financially self-sustaining, various court 
decisions have undercut Congressional intent. A 1995 decision by a 
federal court in Alabama in NCA v. Chater overturned the premium 
determination by the Social Security Administration (SSA) and reduced 
the premium paid by employers by about 10%. Over time, the effect of 
this decision was to remove hundreds of millions of dollars from the 
financing structure of the Coal Act. A 1999 decision by the same court 
ordered the CBF to return about $40 million in contributions to the 
employers, representing the difference between the original SSA premium 
rate actually paid and the rate established in NCA. The trustees of the 
CBF filed suit against the Social Security Administration in the 
District of Columbia in an attempt to set aside the NCA decision. In 
late-2002, the D.C. Court struck down the Social Security 
Administration's nationwide application of the NCA decision and ordered 
SSA to report to the Court what premium rate should apply to companies 
not covered by the NCA decision. In June 2003, SSA notified the Court 
it would apply a higher premium to companies not covered by the earlier 
decision. However, 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 CBF 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.
    The cumulative effect of these court decisions threatened a 
repetition of the problems and re-creation of the crisis of the 1980s 
that led to the creation of the Coal Act, meaning employers have been 
relieved of liability for their retirees and revenues have been 
significantly reduced from the employers that remain obligated. 
Compounding the revenue loss stemming from these court decisions is the 
fact that the escalator used to adjust the premium for inflation (the 
medical component of the Consumer Price Index) is inadequate to measure 
the health care cost increases in a closed group of aging beneficiaries 
who experience annual increases in utilization. The combination of loss 
of income, an increasing orphan population and an inadequate escalator 
have led to an imminent financial crisis for Coal Act beneficiaries.
    I mentioned earlier the bankruptcies of a number of steel companies 
that had retirees covered by the Coal Act. Recent bankruptcies at LTV, 
Bethlehem Steel and other integrated steel companies that operated coal 
mines under UMWA contracts have further reduced the premiums paid to 
the CBF, increased orphan costs for the AML Fund, and added thousands 
of 9711 plan beneficiaries to the 1992 Plan. The growth in the orphan 
population has forced a dwindling number of employers to fund a growing 
burden of health care expenses for retirees who did not work for them. 
The magnitude of these bankruptcies, which we believe that Congress did 
not anticipate when it passed the Coal Act, has exacerbated the 
problems of the Coal Act and reinforce the call for a long-term 
solution.

Now is the Time For a Long-Term Solution
    Madam Chairman, there is a growing bipartisan consensus that 
Congress must forge a long-term solution to the financial problems of 
the Coal Act. We believe that the re-authorization of the AML Fund 
provides the best opportunity to do so. Over their working lives, these 
retirees traded lower wages and pensions for the promise of retiree 
health care that began in the White House in 1946. In 1992, they 
willingly contributed $210 million of their pension money to ensure 
that the promise would be kept. Everything that this nation has asked 
of them--in war and in peace--they have done. They are part of what has 
come to be called the ``Greatest Generation'' and deservedly so. They 
have certainly kept their end of the bargain that was struck with 
President Truman. But now they find that the promise they worked for 
and depended on is in jeopardy of being broken. We must stand up and 
say that this promise will be kept. We can do so by enacting H.R. 3796.
    Madam Chairman, we thank you and the Subcommittee for the 
opportunity to add our support to the effort to re-authorize the AML 
program and to provide a long-term solution to the financial problems 
of the Coal Act. I would be happy to answer any questions you may have.
                                 ______
                                 
    Mrs. Cubin. Thank you. I appreciate your testimony.
    I want to start with Mr. Young. Could you respond to 
Director Jarrett's statement that the AML fund currently earns 
4.1 percent?
    Mr. Young. I think, Madam Chairman, that Mr. Jarrett was 
correct on the $1.3 billion, which he spoke to under the trust 
fund. I think about 60 percent of the money is invested over 4 
percent. That process was started in October, with about half 
of the 1.3, and then again the remaining half in January--
    Mrs. Cubin. In October of 2003?
    Mr. Young. Yes.
    Mrs. Cubin. So it hasn't even been a full year.
    Mr. Young. It's been less than 6 months. And the remainder, 
the $700 million, to my understanding, is on an overnight 
basis, with about, I think, less than a 1-percent interest 
return at the moment.
    Mrs. Cubin. Thank you.
    Your testimony calls for the Committee to extend the orphan 
provisions of the CBF to the orphan retirees in 1992 and 1993. 
What would likely be the ballpark cost of an addition over the 
15 authorization of this bill, using CBO figures if you have 
them.
    Mr. Young. I do not have CBO figures, but I have some 
figures that I will share with you from the health funds, and 
their actuary is fairly accurate and I think the CBO uses his 
numbers as a whole.
    The expense is limited basically by the interest that is 
returned to the AML fund. If you use an estimate of 4 percent 
interest, as we're getting at the moment--I would like to see 
that be higher, but 4 percent--that would be limited. The '92 
fund would be approximately $149 million over the next 10 
years, and the '93 fund would be slightly less at $132 million 
over the 10 year period.
    Mrs. Cubin. Thank you.
    You called for a fresh approach to maintaining the Coal 
Act's goals in light of the steel industry's bankruptcies. 
Could you elaborate on what you view as a ``fresh approach''?
    Mr. Young. A fresh approach is not the ``last man 
standing'', where we have fewer coal companies as we get 
smaller and smaller, paying more and more expenses for more 
people. I think the funding mechanism needs to be replaced by 
the interest approach of AML and working in that scenario.
    On the reclamation side, we support the Cubin/Rahall 
approach. That's our thinking, I think, Madam Chairman.
    Mrs. Cubin. Thank you.
    Mr. Rahall?
    Mr. Rahall. Thank you, Madam Chair.
    Gentlemen, thank you very much for your testimony today. I 
don't have any specific questions, other than to make a couple 
of comments.
    It has been said often back home, especially at this time 
of year, as we enter the political season--charges have been 
leveled against me that I'm a Congressman from the UMWA, 
charges I say, or that I'm a representative of special 
interests in Washington. I can only respond to those charges, 
President Roberts, by saying if fighting for equality, justice 
and human rights and trying to keep promises made to our coal 
miners is fighting for special interests, then I plead guilty. 
I plead guilty, guilty, guilty as charged.
    Anyway, Dave, I appreciate your comments about the '92 and 
'93 plans as well. They certainly need to be addressed. It 
appears here that we're creating a whole new class of orphans, 
those that are being primarily orphaned as a result of the 
steel industry bankruptcies that we're seeing today. I'm afraid 
we may soon see ourselves back in the situation we had in the 
late eighties and early nineties, which gave rise to the Dole 
Commission, to which you referred, and subsequently the Coal 
Act of 1992.
    It is a matter of equity that we address these two plans, 
the '92 and '93, as well as the CBF. It doesn't matter to a 
retired person one iota, who faces health care cuts, which box 
they fit into, the CBF or any of the other plans. They just 
know they're going to have some rough times in their elderly 
years.
    I conclude by again thanking both of you for your help to 
our staffs and this Committee in drafting this legislation, 
your understanding of the complexities involved, your 
understanding of the realities of the legislative process, and 
what is doable and what is not doable here in the halls of 
Congress. You both represent your memberships superbly and I 
salute you for that.
    President Roberts, you, for one, have never forgotten the 
place from whence you come, from West Virginia. Your parents 
live in Cabin Creek. Your membership that is here today with 
you knows full well your daily and dedicated efforts on their 
behalf, whether it's here in Washington or whether it's the 
hills and hollows of West Virginia, Pennsylvania, or whatever 
part of this Nation. As I said, you have never forgotten the 
place from whence you come. We appreciate your leadership here 
in the Congress.
    Mr. Cecil Roberts. Thank you very much.
    Mr. Rahall. Thank you, Madam Chair.
    Mrs. Cubin. Thank you very much.
    I would like to remind the witnesses that there may be 
further questions we would like to submit in writing.
    I want to thank you for your testimony and thank all of you 
for being here today.
    Mr. Rahall. Madam Chair, before we conclude, may I ask 
unanimous consent that a statement of the Citizens Coal Council 
be made a part of the record today, their testimony?
    Mrs. Cubin. Without objection, so ordered.
    [The prepared statement of the Citizens Coal Council 
follows:]

  Statement of Citizens Coal Council, 110 Maryland Avenue N.E. #408, 
           Washington, D.C. 20002, on H.R.3796 and H.R. 3778

    Madame Chairwoman and Members of the Committee:
    This statement is submitted on behalf of Citizens Coal Council to 
the House Resources Committee on the issue of the reauthorization of 
the Abandoned Mine Lands program. CCC appreciates the opportunity to 
present its views and respectfully requests that this statement be 
included as part of the hearing record.

Identity and Interest
    Citizens Coal Council (CCC) is a federation of 47 coalfields 
citizens groups in 20 states. Our members live near abandoned mine 
sites and have been deeply involved in the struggle to clean them up. 
They restore watersheds from mine drainage, work to identify AML 
hazards, and get funding for their cleanup, cleanup abandoned mines 
themselves, and work to protect their communities from drinking water 
contamination from abandoned mines by working for AML-sponsored 
waterlines.
    CCC and its members care deeply about this program--it makes a 
direct impact on our families' health and safety and the well-being of 
our communities. We have worked for several years both in Washington 
and in the coalfields to bring attention to its importance and the need 
for reauthorization.

CCC's Position on the AML program
    Abandoned mines are not just one state or another's problem. Our 
entire country has benefitted from these old mines--they fueled our 
country's industry for over a hundred years, making possible cross-
country railroads and cities of steel. Every coal company, regardless 
of where they are located, has benefitted from the utilities' longtime 
dependence on coal, and thus has a responsibility to pay for the 
cleanup of these old mines.
    Now, having waited 25 years to get these hazards cleaned up and 
with more than 3.6 million people living within one mile of abandoned 
mines, we urge the Committee to realize that this is a critical health 
and safety matter and to come together to write a reauthorization bill 
to solve this issue once and for all.
    We ask that the Committee focus on one simple question--How can we 
structure this reauthorization to clean up as many mines and protect as 
many people as possible?
    With that question in mind, Citizens Coal Council has not endorsed 
any of the bills currently proposed in their entirety. Our members from 
across the coalfields have established that certain things should be in 
an AML reauthorization bill if it is truly going to cleanup these 
hazards. In addition to the following, we support continued funding of 
the UMWA Combined Benefits Fund through AML interest.

1. Extend the collection of the AML fee and the AML program long enough 
        to finish the job: 25 years.
    At current levels of reclamation, 16 states will not be done the 15 
years called for in H.R. 3796, including Alaska, Alabama, Colorado, 
Iowa, Kansas, Kentucky, Missouri, North Dakota, Ohio, Oklahoma, 
Pennsylvania, Tennessee, Utah, Virginia, and West Virginia.
    Based on current funding levels, projected future production, and 
estimated cost of cleaning up inventoried sites, it will take 25 years 
to address AML problems in the country. Extending the program another 
25 years would honor the intentions of the program created by the 1977 
surface mining law--that communities which provided natural resources 
and labor which fueled the nation for many years before federal 
regulation of surface mining would not have to forever be burdened by 
unreclaimed coal mines.

2. Increase the level of funding allocated to areas where pre-1977 
        mining occurred.
    The primary purpose of the AML program is to reclaim land mined 
before 1977. Though many of the areas that mined coal before 1977 
currently have low coal production, these areas are the ones in most 
desperate need and are the states that fueled the nation prior to 
enactment of surface mining laws. Funding should be directed there.

3. Don't undermine the financial basis of the AML program by cutting 
        the fee.
    The 20% fee cut called for in both bills is a waste of money that 
could be spent cleaning up dangerous hazards. It is also irresponsible 
in this time of deficits. Savings from the fee cut are not economically 
significant and will not be passed on to the consumer--but it will cost 
the AML fund $50 million a year. This is money that the AML fund 
desperately needs.

4. Do not use AML moneys to subsidize coal company reclamation bonds
    H.R. 3778 calls for the federal government to develop regulations 
to use AML money for ``financial assurance for remining operations in 
lieu of all or part of the performance bond required under Section 509 
of this Act.'' This is a misappropriation of AML funds, which should be 
spent on threats to our health and safety. Our communities live daily 
with orange streams, subsidence, and safety hazards because there is 
not enough AML money to go around. In contrast, remining usually does 
not address the most hazardous sites.
    Subsidizing mining bonds encourages irresponsibility. One of the 
key reforms of the 1977 Surface Mining Act was to make coal companies 
put up the money beforehand to reclaim their mine. If a company decides 
not to reclaim, it forfeits its bond and loses that money. Without a 
financial stake in the reclamation bonds, a company has no incentive 
not to forfeit the bond--or not to mine recklessly before it forfeits.
    In addition, remining AML sites always has the potential to 
increase the size and scope of the problem, causing slides from 
unstable high walls, new acid mine drainage, new subsidence, or 
underground flooding. This is not something the federal government 
should become financially responsible for. Remining is already 
encouraged with exceptions from water quality standards.

5. Continue to recognize clean water as a health priority.
    H.R. 3796 removes ``general welfare'' as a category for Priority 2 
funding, meaning many stream restoration and water projects will no 
longer be funded. Polluted water is a health threat and cleaning it up 
should be funded that way. Restoring headwater streams, a ``general 
welfare'' activity, has a direct impact on the availability of clean 
drinking water and the health of the rivers downstream.
    Retaining this provision does not deprive any other states of their 
share of funding. It provides states with more flexibility to address 
the most important hazards as they perceive them. Living with the 
problems provides them with the insight to choose where this funding 
should be spent to address health and safety issues.

6. Increase minimum program funding level from $2 million to $4 million 
        annually.
    States which have significant AML problems but which have small AML 
programs are supposed to be guaranteed minimum funding of their 
programs by statutory mandate. Since 1977, this minimum program funding 
has been set at $2 million. 25 years later, that is not enough money, 
even if it was fully funded, to address the serious problems in these 
states.

7. Include non-primacy state programs as minimum programs.
    States which do not have their own coal regulatory programs are not 
eligible for a 50% share of AML money collected in the state or funding 
based on historic production. These states do not have the same minimum 
program funding guarantee afforded to states with regulatory primacy. 
These states are also limited in what types of AML problems they can 
receive funding to address. If a state demonstrates the ability to 
operate an effective abandoned mine reclamation program and funds it 
accordingly, like Tennessee, it should be granted federally managed 
(non-primacy state) minimum program funding.

Conclusion
    Madame Chairwoman and Members of the Committee, CCC respectfully 
encourages you to consider the above issues and to remember that the 
purpose of the AML program is to clean up America's abandoned coal mine 
hazards. Please pass out of committee a bill that will do that, once 
and for all. We appreciate this opportunity to present our views.
                                 ______
                                 
    [A statement submitted for the record by Congressman Cantor 
follows:]

 Statement of The Honorable Eric Cantor, a Representative in Congress 
                       from the State of Virginia

    I commend the Committee for considering important legislation to 
reauthorize the Abandoned Mine Lands (AML) program. Reclamation of 
abandoned mine lands should remain a priority to help ensure that 
health and safety issues are properly addressed.
    As the Committee considers AML reauthorization legislation, 
however, it is vital that the critical problems relating to the Coal 
Industry Retiree Health Benefit Act of 1992 (the ``Coal Act'') be 
addressed in a comprehensive manner to ensure that beneficiaries of the 
Combined Benefit Fund (CBF) as well as companies paying into the Fund 
are not seriously jeopardized by unintended consequences of the Coal 
Act provisions.
    As this Committee is aware, the Coal Act allows the transfer of up 
to $70 million in interest earned by the AML Fund to the Combined 
Benefit Fund (``CBF'') to cover the health care expenses of coal miner 
retiree ``unassigned beneficiaries''. The pool of these unassigned 
beneficiaries is growing as several of the assigned operators, 
including some major steel companies, have gone bankrupt. Combine this 
with increased health costs and low interest earnings of the AML fund 
and the result is a financing shortfall for the CBF. These factors 
demonstrate the need for a comprehensive reform of the Coal Act as part 
of the AML reauthorization.
    On several occasions, the Congress has relied on ad hoc 
appropriations or other measures to provide short-term fixes to the 
funding problems of the CBF rather than enact comprehensive and 
bipartisan solutions to the Coal Act. Now is the time for a long-term 
solution to ensure that the beneficiaries receive the benefits due to 
them and that companies subject to the Coal Act are able to meet their 
financial obligations.
    I, along with eleven of my House colleagues, have introduced H.R. 
3586, the Coal Industry Retiree Health Benefit Stability and Fairness 
Act, to comprehensively address and provide a long-term solution to the 
problems of the Coal Act. It would address two primary issues: 1) the 
ability of companies to pre-fund their coal miner retiree health 
obligations while eliminating the joint and several liabilities on the 
related entities (not the parent company) of companies subject to the 
Coal Act; and 2) the reachback tax, which imposes a retroactive burden 
on companies that have been out of the coal mining business.
    Problems stemming from the Coal Act threaten the ability of sound 
companies to meet their obligations. In particular, the joint and 
several liabilities created by the Coal Act severely impair the ability 
of companies to engage in value maximizing asset sales and to 
efficiently access the capital markets necessary for growing their 
businesses. Such liabilities unfairly extend to every subsidiary and 
related company in the corporate family, whether they were ever in the 
coal mining business or not.
    In addition, for more than a decade a group of companies--referred 
to as reachback companies--have been burdened with an inequitable tax 
imposed on them by the Coal Act of 1992. In that legislation, Congress 
mandated that the reachback companies, most of which had been out of 
the coal mining business for decades, step in and subsidize the 
financing of such benefits. This financial burden being placed on the 
reachback companies has driven many into bankruptcy and put others on 
the brink of financial ruin.
    H.R. 3586 proposes a fair solution to these problems by allowing 
companies to prepay the actuarial value of the total premium 
liabilities if certain conditions are met, and providing prospective 
relief to reachback companies saddled with this insidious tax. The 
legislation would release related companies from the joint and several 
nature of the liabilities; however, it would hold the parent company 
jointly and severally liable for the premiums.
    Importantly, these provisions would allow a related company to 
engage in value-added asset sales without the Coal Act liability being 
attached to the asset. Instead, the liability would remain with the 
parent company. This would allow the subsidiaries and related entities 
to expand their businesses and create additional jobs, while also 
ensuring that the obligations to the CBF are met.
    It is vital that the issues relating to the Coal Act be addressed 
to provide for a comprehensive and long-term solution. I appreciate the 
Committee's attention to these very important matters. I look forward 
to working with the Committee to resolve the critical problems faced by 
both the CBF beneficiaries and the companies caught up in the 
unintended consequences of the Coal Act.
                                 ______
                                 
    Mrs. Cubin. Having no more business before the Committee, 
the Subcommittee is adjourned.
    [Whereupon, at 12:30 p.m., the Subcommittee adjourned.]

                                 
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