[Senate Hearing 108-533]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 108-533

                       ABANDONED MINE LEGISLATION

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                                   on

                                S. 2049

  TO AMEND THE SURFACE MINING CONTROL AND RECLAMATION ACT OF 1977 TO 
 REAUTHORIZE COLLECTION OF RECLAMATION FEES, REVISE THE ABANDONED MINE 
RECLAMATION PROGRAM, PROMOTE REMINING, AUTHORIZE THE OFFICE OF SURFACE 
  MINING TO COLLECT THE BLACK LUNG EXCISE TAX, AND MAKE SUNDRY OTHER 
                                CHANGES

                                  and

                                S. 2086

  TO AMEND THE SURFACE MINING CONTROL AND RECLAMATION ACT OF 1977 TO 
               IMPROVE THE RECLAMATION OF ABANDONED MINES

                               __________

                             MARCH 11, 2004


                       Printed for the use of the
               Committee on Energy and Natural Resources


                                 ______

                    U.S. GOVERNMENT PRINTING OFFICE
94-893                      WASHINGTON : DC
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001

               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                 PETE V. DOMENICI, New Mexico, Chairman
DON NICKLES, Oklahoma                JEFF BINGAMAN, New Mexico
LARRY E. CRAIG, Idaho                DANIEL K. AKAKA, Hawaii
BEN NIGHTHORSE CAMPBELL, Colorado    BYRON L. DORGAN, North Dakota
CRAIG THOMAS, Wyoming                BOB GRAHAM, Florida
LAMAR ALEXANDER, Tennessee           RON WYDEN, Oregon
LISA MURKOWSKI, Alaska               TIM JOHNSON, South Dakota
JAMES M. TALENT, Missouri            MARY L. LANDRIEU, Louisiana
CONRAD BURNS, Montana                EVAN BAYH, Indiana
GORDON SMITH, Oregon                 DIANNE FEINSTEIN, California
JIM BUNNING, Kentucky                CHARLES E. SCHUMER, New York
JON KYL, Arizona                     MARIA CANTWELL, Washington
                       Alex Flint, Staff Director
                   Judith K. Pensabene, Chief Counsel
               Robert M. Simon, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                  Karen Billips, Deputy Chief Counsel
                Patty Beneke, Democratic Senior Counsel


                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Alexander, Hon. Lamar, U.S. Senator from Tennessee...............    47
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     5
Buckner, Micheal, Research Director, United Mine Workers of 
  America, Fairfax, VA...........................................    38
Bunning, Hon. Jim, U.S. Senator from Kentucky....................    46
Dorgan, Hon. Byron L., U.S. Senator from North Dakota............     3
Gauvin, Charles F., President and CEO of Trout Unlimited.........    32
Green, Evan J., Administrator, Abandoned Mine Land Division, 
  Wyoming Department Environmental Quality.......................    22
Hohmann, Steve, Director, Kentucky Division of Abandoned Mine 
  Lands, Kentucky Department for Natural Resources...............    13
Jarrett, Jeffrey D., Director, Office of Surface Mining 
  Reclamation and Enforcement, Department of the Interior........     6
Santorum, Hon. Rick, U.S. Senator from Pennsylvania..............     4
Shirley, Joe, Jr., President of the Navajo Nation................    27
Thomas, Hon. Craig, U.S. Senator from Wyoming....................     1

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    59

                              Appendix II

Additional material submitted for the record.....................    83

 
                       ABANDONED MINE LEGISLATION

                              ----------                              


                        THURSDAY, MARCH 11, 2004

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:01 a.m., in 
room SD-366, Dirksen Senate Office Building, Hon. Craig Thomas 
presiding.

   OPENING STATEMENT OF HON. CRAIG THOMAS, U.S. SENATOR FROM 
                            WYOMING

    Senator Thomas. We will go ahead and get started on time. I 
am substituting for the chairman this morning. So I welcome all 
of you here.
    We are here, of course, to talk about the Abandoned Mine 
Land Reclamation Program Extension and Reform Act of 2004. I 
think there will be a number of people who have an interest in 
it.
    Let me just make a comment here. Of course, as you know, 
being from Wyoming, I am very much interested in this issue. I 
have a bill that I introduced to extend and reform the 
abandoned mine program. AML was created, as you know, by the 
Surface Mining Control Act in 1977 and funded through a fee 
collection process. That expires the 30th of September of this 
year.
    Cost estimates to reclaim the lands were originally about 
$6 billion. The vast majority of the sites were located in the 
Eastern United States. Today nearly 93 percent of the priority 
problems are still east of the Mississippi.
    Over the years, collection has generated about $6 billion 
in revenue. By law, these funds were allocated to the producing 
State or Indian tribe and the Federal Government in equal 50/50 
shares. How the money is spent is to be defined by the statute.
    We are here today to debate reauthorization. Several 
proposals are circulating and a wide range of issues have to be 
addressed, of course. The issues are somewhat contentious and 
divisive and complicated. They go well beyond the simple 
reauthorization of the AML fee. So we have lots of interest in 
it.
    I remain optimistic and I think it is necessary for us to 
reach some consensus. I think we all agree that reclaiming mine 
sites is a national priority. The public health and safety of 
our citizens who live in the immediate vicinity of these sites 
must be protected. My constituents have stepped up to the plate 
and aided in this effort and will continue to do so.
    But the people and the companies of Wyoming have their 
limits. The burden is disproportionately falling on their 
shoulders. 50 percent of the State and tribal share the Federal 
Government agreed to distribute has not been paid. States and 
tribes and coal companies have honored their commitments; the 
Federal Government has not.
    It is ironic that for 27 years, 27 States and Indian tribes 
have waited for a portion of the AML fund. It did not matter if 
control of Congress or the White House was in the hands of the 
Republicans or the Democrats. Year after year, the Federal 
Government refused to honor its commitment to coal-producing 
States.
    Today the Federal Government holds $1.1 billion of State 
and Indian tribe AML money. This is real money already 
collected and sitting in Treasury bills. It is time for these 
funds to be distributed to the States and tribes as intended in 
the 1977 Act.
    I have heard people say the Federal Government has met its 
obligations. These people are quick to point out the law only 
requires State funds to be allocated and not authorized. Since 
the Government annually allocates funds, the argument goes, the 
commitment is fulfilled. That argument may work inside the 
beltway, but I am here to tell you that outside the beltway, it 
does not pass the straight-face test, not in Wyoming, Montana, 
West Virginia, Pennsylvania, Kentucky, Illinois, Indiana, Ohio, 
New Mexico, Colorado, Alabama, North Dakota, Virginia, Utah, or 
Texas, nor on the tribal lands of the Hopi, the Navajo, or the 
Crow.
    This problem was created in a bipartisan fashion and I 
believe it can be fixed in a bipartisan fashion. I put forth a 
proposal recently that addresses AML obligations and the intent 
of the law.
    My proposal directs more financial resources to historic 
mine sites. Everyone agrees this must be a primary focus of 
reauthorization and is a key element in my bill.
    Second, I guarantee that certified States and Indian tribes 
receive the balance of the money currently owed them and ensure 
they remain eligible to receive money going forward. This 
differs significantly from the administration's proposal in 
that certified States and tribes are not guaranteed payment of 
the current balance. They receive no money going forward.
    Third, fees paid by coal producers are reduced so that the 
amount collected more closely reflects the amount annually 
spent by the Federal Government. For too long, revenues have 
exceeded expenditures, leaving the AML fund with a $1.5 billion 
balance.
    Finally, my proposal authorizes the program for 10 years, 
which is a relatively short period of time. Because of the 
failure of the Federal Government to fulfill its obligations 
over the past 27 years, to extend the program beyond 10 
probably would be irresponsible.
    So differences do exist on the other issues. It will be a 
challenge to work this out before the 30th of September, but 
certainly I am committed to it and committed to fulfilling the 
spirit of the SMCRA of 1977.
    So I look forward to the testimony and would turn to the 
Senator from New Mexico.
    [The prepared statements of Senators Dorgan and Santorum 
follow:]

       Prepared Statement of Hon. Byron L. Dorgan, U.S. Senator 
                           From North Dakota

    I commend the Chairman and my colleagues on the Committee for 
holding this hearing to begin discussions on the reauthorization of the 
Abandoned Mine Lands (AML) program, and I look forward to working with 
the Committee on this important matter.
    However, in reauthorizing this program I believe there are 
additional issues related to the coal mining industry that also merit 
the Committee's attention but are not included in either of the bills 
before us today.
    For many years, I have supported the efforts of Senator Conrad and 
others to shore up the long-term financial condition of the Combined 
Benefit Fund (``Combined Fund''), which pays retired miners' health 
benefits as required by the Coal Act of 1992. This is relevant to 
today's hearing because the Combined Fund is funded by annual payments 
by certain coal companies and through transfers of accrued interest 
from the AML Fund.
    The Combined Fund is expected to run out of money in the near 
future, so we will need to act again to stave off this looming health 
benefit crisis. Providing long-term financial stability for the 
Combined Fund will alleviate Congress of the need to scramble year 
after year to provide temporary financial relief through the 
appropriations process. Retired coal miners and their dependents 
shouldn't have to worry about whether their promised health benefits 
will be available in the future.
    At the same time, I think we must address the inequities in the 
Coal Act of 1992. Let me take a moment to explain.
    The Combined Fund was established by Congress in the Coal Act of 
1992 to ensure that a group of designated coal miner retirees and their 
families would be provided with health benefits they were promised as 
part of their employment. However, since its inception the Combined 
Fund has been the target of controversy because it imposes significant 
funding obligations on many coal companies that have vehemently argued 
that they were no longer contractually obligated to pay for such 
benefits. Frankly, I believe the Coal Act of 1992 overreaches in some 
cases. And that's why I have supported past efforts to provide relief 
in those instances.
    Over the years, we have come very close to addressing this matter 
to the satisfaction of all interested parties. But, a comprehensive and 
long-term solution for stabilizing the Combined Fund and providing some 
equitable relief to ``reachback'' and other impacted coal companies has 
now eluded us for more than a decade.
    Having said this, I believe that reauthorizing the AML program 
provides an opportunity to address the financial woes of the Combined 
Fund and the related ``reachback'' problems.
    We should fix this problem in a manner that will secure coal miner 
retiree health benefits over the long term, while providing some 
measure of deserved relief to those companies which were unfairly 
impacted by the Coal Act of 1992. At this time, I would also like to 
submit for the record a letter signed by five of my Senate colleagues 
expressing their views about addressing the ``reachback'' and other 
issues.
    I understand there is a question about whether the ``reachback'' 
issue comes under the jurisdiction of this Committee. But if we are 
going to reauthorize and reformulate the AML program, I think that the 
Combined Fund solvency and ``reachback'' issues should be addressed at 
the same time. Thank you and I look forward to working with members of 
this Committee to find a just and reasonable resolution to this issue.
                                 ______
                                 
                                               U.S. Senate,
                                    Washington, DC, March 24, 2004.
Hon. Pete Domenici,
Chairman, Energy and Natural Resources Committee, 127 Dirksen Senate 
        Office Building, Washington, DC.
    Dear Chairman Domenici: As the Senate Energy and Natural Resources 
Committee begins its work on the reauthorization and reform of the 
Abandoned Mine Land (AML) program, we want to highlight three related 
issues to the coal mining industry that require the Committee's 
attention this year.
    As you know, for more than a decade a group of companies, now 
commonly referred to as Reachbacks, have been burdened with a heavy and 
inequitable financial 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 
collective bargaining, and instead mandated that the Reachback 
companies assume liability for these health care benefits. Many of the 
Reachback companies had been out of the coal mining business for 
decades and had never contractually agreed to pay for the health care 
costs of former employees. In the ensuing years this abrupt imposition 
of such a new financial burden on the Reachback companies has driven a 
number of them into bankruptcy and put others perpetually on the brink 
of financial ruin. Even those who have survived have paid tens of 
millions of dollars for these health care benefits for those former 
employees.
    The Reachback companies should never have had this burden imposed 
on them in the first place. In all of our history, Congress has never 
imposed such a retroactive burden on any other group of companies. 
Congress must now correct this grave injustice and determine another 
method of paying for health care benefits for retired coal miners. Over 
the years, a number of formal proposals to accomplish this have been 
put forward in the House and Senate. We believe that S. 1756 is a good 
example of what would be an appropriate way of addressing this inequity 
while at the same time preserving health care benefits for retired coal 
miners.
    At the same time, some of the companies who are paying for the 
health care costs of certain former employees under the Coal Act of 
1992 would like the authority to pre-fund their financial obligations 
under the law. Under the Coal Act, these liabilities attach to all 
related entities of a Reachback company, regardless of whether they 
ever engaged in the business of mining coal. The consequences of this 
make it impossible for such related entities to operate in a 
financially sound fashion. The ability to pre-fund these obligations 
would protect both the companies' related entities as well as the 
future health care premiums for the retirees.
    Finally, while the focus of this letter is on the Reachbacks, 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.
    Now is the time to address all of these issues related to the Coal 
Act of 1992. Under existing law and the various proposals to amend 
current AML law, some of the accumulated interest from the AML fund.is 
already being used to pay for the health benefits of certain retired 
coal miners. Thus, the Reachback and AML issues are already 
intertwined, and dealing with Reachback reform in the context of AML 
reform makes even more sense. We appreciate your attention to our 
concerns and hope you will make them a part of your reauthorization 
effort.
            Sincerely,

        George Allen,
        U.S. Senator.
  
        John Warner,
        U.S. Senator.
  
        Kay Bailey Hutchison,
        U.S. Senator.
  
Charles Grassley,
U.S. Senator.
  
Thad Cochran,
U.S. Senator.
  
  
  
  
        Prepared Statement of Hon. Rick Santorum, U.S. Senator 
                           From Pennsylvania

    Mr. Chairman and members of the committee, thank you for the 
opportunity to submit this statement regarding the critical 
environmental issue of abandoned mine reclamation. The Abandoned Mine 
Reclamation Fund was created in 1977 to address environmental hazards 
created by historic coal mining, such as open pits, coal refuse spoil 
piles, old mine openings and polluted streams. These impacts are severe 
and still far too prevalent today. As this committee and the full 
Senate consider Abandoned Mine Land (AML) reauthorization, it is vital 
that the program be crafted to target the most serious problems.
    The vast majority of AML problems are located in states with high 
historic production. Historic production records show that the eastern 
United States accounts for 94 percent of all the AML problems. My 
commonwealth of Pennsylvania is no exception. The flip side of my 
state's proud role in the industrial legacy of our nation is that one-
third of all mining legacy problems are in Pennsylvania. Abandoned coal 
mines have adversely impacted at least 44 of Pennsylvania's 67 
counties, covering 189,000 acres of land and approximately 3,100 miles 
of streams.
    Under the current structure, however, insufficient funding is 
flowing to the states with the greatest need. A much greater percentage 
of grant dollars is allocated to states on the basis of current 
production, even though there is no correlation between the current 
production state share and the extent of the AML problem in that state. 
Conversely, there is a direct relationship between a state's historic 
production and the extent of its AML problem.
    Funding per capita in Pennsylvania is disproportionately lower than 
funding per capita in other states with less-severe damage. In some 
states, the most hazardous AML sites have already been eliminated and 
funds are being spent on low priorities; other states are not scheduled 
to finish their top priorities for decades. As an example, my state 
receives $16 per capita while other states receive $3,000 per capita 
even though there are 1.6 million people potentially at risk in my 
state, compared to 10,000 or fewer people potentially at risk in other 
states.
    In addition to providing for the most devastated areas, it is 
important that AML legislation contain remining provisions that allow 
states to maximize reclamation efforts with limited available funding.
    The very purpose of the program is to assist those states with 
abandoned mine problems, and I believe that the proposals of the Office 
of Surface Mining (OSM) and legislation such as S. 2049 are a positive 
step in restoring the original intent of this program. Accordingly, I 
urge the Chairman and this committee to consider the states with 
legacies of environmental damage and ensure they receive the resources 
necessary to promote public health and safety and restore our fish and 
wildlife habitats.

         STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR 
                        FROM NEW MEXICO

    Senator Bingaman. Well, thank you very much, Mr. Chairman, 
for having the hearing. I think this is a very important issue, 
and I appreciate all the witnesses being here.
    You have recounted much of the history of this.
    The work of this program is far from done. As I understand 
it, the Office of Surface Mining estimates that there are about 
$3 billion worth of priority 1 and 2 problems that still pose a 
threat to public health and safety and about $3.6 billion worth 
of priority 2 general welfare problems that remain unreclaimed.
    In my home State of New Mexico, the AML funding is used to 
remediate not only abandoned coal mines, but also very 
importantly the abandoned hardrock mine sites.
    I understand that non-coal reclamation work is also 
important on several of the Indian reservations, including the 
Navajo reservation. I am very pleased that President Shirley is 
here to speak for the Navajo Nation today, and I look forward 
to his testimony. I want to ensure that funding for this non-
coal work is continued.
    Since 1992, the interest from the AML fund has served as a 
source of revenue to address another crucial issue, that is, 
coal miner retiree health benefits. Providing such benefits is 
obviously a difficult and ongoing issue that needs to be 
addressed. The legislation before the committee today addresses 
the issue. I am interested in ensuring that we do right by 
these retired coal miners, and I look forward to hearing from 
the witness we have from the United Mine Workers of America.
    I also want to just underscore my view that it is essential 
that tribes be treated on parity with the States under this 
important program, and I believe that is the position that 
Governor Shirley will advocate today. I appreciate again his 
being here.
    I do think we also have to also look at the budgetary 
impacts of whatever we enact if we decide to pursue a direct 
spending option. I think that, as I said, the issues are 
extremely important.
    I think it is good that we are having this hearing to get 
these different points of view. Thank you.
    Senator Thomas. Thank you, Senator. Thank you for being 
here.
    We have a great panel this morning. The Honorable Jeffrey 
Jarrett, Director of the Office of Surface Mining, Department 
of the Interior. Mr. Steve Hohmann, director, Division of 
Abandoned Mine Lands, the State of Kentucky, and he is also 
testifying on behalf of the Interstate Mining Compact 
Commission. Mr. Evan Green, administrator of the Abandoned Mine 
Land Division, the State of Wyoming. Mr. Joe Shirley, 
president, Navajo Nation, Washington. Mr. Charles Gauvin, 
president and CEO of Trout Unlimited. And Micheal Buckner, 
research director of the United Mine Workers.
    Gentlemen, thank you. Your full statements will be put into 
the record, and if it is possible to make a summary of them, we 
will have the clock going here at 5-minute intervals. If you 
can do that, we would appreciate it.
    Senator Bingaman. Mr. Chairman, just before the witnesses 
start, I do have a statement by the Secretary of Energy, 
Minerals and Natural Resources from the State of New Mexico 
that she asked me to try to have included in the record, and I 
would appreciate it if that could be done.*
---------------------------------------------------------------------------
    * The statements can be found in the appendix.
---------------------------------------------------------------------------
    Senator Thomas. It will be done, Senator.
    Mr. Jarrett, would you like to begin.

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

    Mr. Jarrett. Thank you, Senator. Mr. Chairman and members 
of the committee, I really appreciate the invitation to be here 
to talk about what we think is one of the most important 
programs that OSM is responsible for.
    Since the AML program was enacted in 1977, we think that 
the States have done a tremendous job and have accomplished a 
lot. Over 260,000 acres of mine lands have been reclaimed. 
Nearly 3 million feet of dangerous high walls have been 
eliminated and the hazards associated with 27,000 open portals 
and shafts have been eliminated.
    But the job is not finished. The State estimate, as you 
pointed out, Senator Bingaman, is $3 billion is needed for 
construction alone on priority 1 and priority 2 health and 
safety problems.
    We have in this country about 3.5 million citizens who live 
within 1 mile of these dangerous sites, and often that 
proximity to these sites results in tragedy. From time to time, 
I get newspaper accounts of some of those tragedies like the 
young man in Oklahoma who dropped his pocketknife into an 
abandoned mine hole and crawled in to retrieve the knife and 
find the knife, where he died from the dreaded black damp, lack 
of oxygen. Or the boy in Pennsylvania who plummeted 450 feet to 
his death at an abandoned anthracite mine, bringing the total 
to three fatalities at that same site.
    Secretary Norton and I were at that site just a few weeks 
ago. It remains unreclaimed, and the reason it is unreclaimed 
is because the State of Pennsylvania had to make spending 
choices. Instead, they spent their money reclaiming another 
site that had claimed 10 lives before it was finally reclaimed 
just a few years ago.
    While there is no national reporting system for accidents 
or fatalities at abandoned mine sites, we know from anecdotal 
information provided by the States that these are not isolated 
cases. We have reports of 45 fatalities in Pennsylvania's 
anthracite region alone over the past 30 years; 11 fatalities 
in Oklahoma in the past decade, enough deaths that we know it 
is time to finish this job.
    We are here today to discuss two bills, the 
administration's bill, S. 2049, which was introduced by Senator 
Specter, and S. 2086, introduced by Senator Thomas. I want to 
personally thank Senator Thomas and Senator Specter for their 
leadership in advancing a resolution to the difficult issues 
that will allow us to move forward and finish the job of making 
coalfield citizens safer.
    Both bills, we believe, satisfy our primary objective of 
reauthorizing our fee collection authority. Both bills 
recognize the inherent problem with the current formula. Both 
bills focus more AML resources on the most dangerous abandoned 
mine land sites. Obviously, if one believes that the primary 
objective of this program is to reclaim abandoned mine land 
sites on a priority basis, we believe that the administration's 
proposal gets us there in the most effective and efficient way.
    For the past 18 months, I and my staff have spent 
considerable time meeting with Governors, with coal industry 
representatives, with members of Congress, with the 
environmental community, with my colleagues in the States to 
try to get a better understanding of what all of those 
stakeholders think we need to accomplish with this 
reauthorization.
    What we found was substantial agreement that we do need to 
reauthorize fee collection authority. There is substantial 
agreement that fundamental changes need to be made to this 
program, but that is about as far as the agreement goes. Even 
over the past few weeks, as the stakeholders have had an 
opportunity to evaluate both of the proposals that we are here 
today to talk about, we have been able to revisit many of them, 
and I will tell you that many of those stakeholders support the 
administration's proposal. Many of those stakeholders propose 
Senator Thomas' proposal. Some of those stakeholders feel left 
out by both.
    I understand that each of the stakeholders can and should 
fight for what is in their own best interest, but that is a 
luxury, quite frankly, that I did not have as I worked to 
develop the administration's proposal. It is a national 
problem. It requires a national solution, and we were 
constrained to devise solutions in the context of the existing 
AML program and in consideration of significant budget 
restrictions. There are a lot of competing demands for limited 
AML dollars, and choices had to be made. We chose first to 
focus on fulfilling a promise to coalfield citizens who are at 
risk from these dangerous sites. Our solution, simply put, is 
we need to put the money where the problem is.
    I see a red light blinking, so I assume my time is about 
up. Thank you very much for being here. We look forward to 
working with this committee to resolve these critical issues.
    [The prepared statement of Mr. Jarrett follows:]

 Prepared Statement of Jeffery D. Jarrett, Director, Office of Surface 
     Mining reclamation and Enforcement, Department of the Interior

    Mister Chairman and members of the Committee, thank you for the 
opportunity to participate in this hearing and to discuss the important 
issues raised by the approaching expiration of the Office of Surface 
Mining Reclamation and Enforcement's (OSM's) authority to collect the 
Abandoned Mine Land (AML) fee. In particular, I would like to thank 
Senator Specter for introducing the Administration's bill, S. 2049. In 
addition, I would like to thank Senator Thomas for introducing his 
bill, S. 2086. Both bills seek to reauthorize OSM's authority to 
collect the AML fee, set to expire on September 30, 2004, and to make 
positive changes to this important program. S. 2049 will solve problems 
with the existing program in a manner that is consistent with the 
Administration's budget and program priorities. We look forward to 
working with the Senate to reach agreement on the important issues 
surrounding the collection and use of the AML fee.
    The Administration believes that the AML problem is a national 
problem that calls for a national solution. The Administration's 
legislative proposal seeks to 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). We believe that shifting the program's focus to historic 
production, which is directly related to the AML problems that 
currently exist in so many states, and distributing future fees based 
on need, offers a national solution for reducing the current, ongoing 
threats to the health and safety of millions of citizens living, 
working and recreating in our Nation's coalfields.
    While the Administration's bill and Senator Thomas's bill are not 
the same in every respect, they have much in common. With an estimated 
3.5 million Americans who live less than one mile from a dangerous, 
high-priority abandoned mine site, both bills share the significant 
goal of protecting the lives, health and safety of people living in the 
coalfields; people who live with--and too often die as a result of the 
hazards of abandoned mine lands.
    We cannot support the provisions in S. 2086 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 S. 2049. 
In addition, the Administration cannot support creating new mandatory 
spending programs.

                               BACKGROUND

    Since the enactment of the Surface Mining Control and Reclamation 
Act (SMCRA) by Congress in 1977, 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 we were to use all of the AML fees collected between now 
and September 30, 2004, the date the fee collection authority is 
scheduled to expire, as well as the unappropriated balance of $1.5 
billion, we would still have insufficient funds to address the health 
and safety-related surface mining problems because of the fund's 
current distribution formula. Moreover, under the current distribution 
formula, it would take non-certified states an average of 47 more years 
to complete reclamation. In some cases, remediation would take nearly a 
century.
    We do not believe the current allocation system will enable us to 
complete the job of reclamation in the way that Congress intended. 
However, we view the September 30th expiration of the current AML fee 
collection authority as an 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 coalmine sites have been reclaimed, it is 
no longer entitled to further allocations from the historic production 
account.
    Ten percent (10%) of the total fee income is allocated to an 
account for use by the Department of Agriculture for administration and 
operation of its Rural Abandoned Mine Program (RAMP).
    The remaining 20% of the total fee income is allocated to cover 
Federal operations, including the Federal Emergency Program, the 
Federal High-Priority Program, the Clean Streams Program, the Fee 
Compliance Program, and overall program administrative costs.
    In the early years of Abandoned Mine Reclamation Program, most of 
the fees collected went directly to cleaning up abandoned coal mine 
sites. Some states and tribes with fewer abandoned coal mine sites 
finished their reclamation work relatively soon. However, under current 
law, those states and tribes are still entitled to receive half of the 
fees collected from coal companies operating in their states. In the 
early years of the program this didn't cause a considerable problem, 
because the Eastern states, where 93% hazardous sites are located, were 
also the states where most of the coal was being mined and were, 
therefore, receiving the majority of the AML fees.
    However, beginning in the 1980s, a shift occurred whereby the 
majority of the coal mined in this country began coming from mines in 
Western states. This shift revealed an inherent tension in the AML 
program which now allocates a large part of AML fees to states that 
have no abandoned coal mine sites left to clean up. By contrast, each 
year less and less money is being spent to reclaim the hundreds of 
dangerous, life-threatening sites. Currently, only 52 percent of the 
money is being used for the primary purpose for which 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 and the fundamental problem is corrected.
    The Administration's legislation accomplishes four primary 
objectives by:

   Extending 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;
   Honoring the commitments made to states and tribes under the 
        current law;
   Providing additional funding for the 17,000 unassigned 
        beneficiaries of the United Mine Worker's Combined Benefit Fund 
        (CBF) while protecting the integrity of the AML fund; and,
   Providing 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. 
The Administration's proposal achieves this balance in a fiscally 
prudent manner.

                             BILL ANALYSIS

A. Changes to the Allocation Formula
    S. 2049 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 non-certified states or 
tribes, those states that still have coal problems remaining, 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, S. 2049 completes the reclamation of the 
highest priority work much faster than would happen under current law, 
while avoiding $3.2 billion in collections that would have been 
necessary under current law. S. 2049 will remove more people at risk 
from the dangers of health and safety coal sites (142,000 per year or 
an increase of 87%).
    S. 2049 provides that no non-certified 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 of 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 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 
dealt with in one of two ways: 1). 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 abandoned coal mines. 2). Non-
certified states and tribes will receive their unappropriated balances 
in annual grants based upon historic production. If a non-certified 
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. Non-certified states and tribes that exhaust their 
unappropriated state share balances before completing their abandoned 
coal mine reclamation will continue to receive annual grants in amounts 
determined by their historic coal production from the newly-created 
single account.
    In contrast to the Administration's proposal, S. 2086 would 
continue to allocate 50% of the fees collected in a state to that state 
or tribal share account, without regard to that state or tribe's coal 
reclamation needs. For certified states and tribes in which public 
domain lands are located and available for leasing, S. 2086 would amend 
current law to transfer from Federal revenues generated by the Mineral 
Leasing Act, on a proportional basis, an amount equal to the sum of the 
aggregate unappropriated amount allocated to the qualified state or 
tribe. Thereafter, an amount equivalent to the amount provided to the 
state or tribe from the Mineral Leasing Act would then be debited from 
that state or tribe's state share account and made available to the 
historic production account for use in reclamation. 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 payments would not be subject to Congressional appropriation, 
would have additional costs of as much as $750 million, and cleanup 
would take longer to complete than under S. 2049.
    S. 2086 also makes provisions to certified states and tribes 
without leasable public domain lands to receive their unappropriated 
balances. Those payments are made from the unappropriated balance of 
the Rural Abandoned Mine Land (RAMP) account. In addition, these states 
and tribes are also guaranteed $2 million per year regardless of their 
coal reclamation needs.

B. Elimination of AML funding for the RAMP Program
    S. 2049 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 abandoned coal mine reclamation.
    S. 2086 also endorses eliminating future allocations to the RAMP 
fund, but makes portions of the accumulated unappropriated balance 
available for distribution to non-public land certified states.

C. AML Reclamation Fee Rates
    S. 2049 modifies reclamation fee rates in an effort to closely 
match anticipated appropriations from the fund with anticipated 
revenues. The proposed changes would maintain the current fee structure 
while uniformly reducing the fee rates by 20% on average (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 have the added benefit of resulting in 
lower costs to consumers who purchase coal-generated electricity. 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. Finally, existing language 
requiring the Secretary to establish a new fee rate after September 30, 
2004, based on CBF transfer requirements would be removed.
    The Administration's legislative proposal extends the fee 
collection authority for 14 years, to 2018. This extension would 
facilitate the collection of sufficient fees to enable all states and 
tribes with high priority mining-related health and safety issues to 
reclaim those sites in 25 years or less.
    S. 2086 proposes to extend the fee collection authority for 10 
years, but given its fee allocation proposal, it would take much longer 
to clean up the remaining high-priority sites, resulting in the need 
for another fee extension. S. 2086 also proposes to lower the 
reclamation fee rates by 10 cents per ton (about 29%) for surface 
mining and 20 percent for lignite and coal mined by underground 
methods.

D. United Mine Workers of America Combined Benefit Fund (CBF)
    S. 2049 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.
    S. 2086 addresses this issue by maintaining the current 
restrictions (the lesser of $70 million, the interest earned in any one 
year, or the needs of the unassigned beneficiaries of the CBF) on 
interest distribution to the CBF until FY 2006 at which time any 
remaining interest from previous years will be made available for 
transfer to the CBF to meet its needs of the unassigned beneficiaries.

E. Minimum Program Funding
    S. 2049 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 with relatively little 
historic production receive an amount conducive to the operation of a 
viable reclamation program.
    S. 2086 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. The Administration is concerned that S. 2086 
also adds Tennessee as a minimum program state regardless of the 
existing SMCRA requirements for a state to maintain an active 
regulatory (Title V) program before it is entitled to receive AML 
grants.

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. S. 2049 makes these incentives permanent by 
removing the expiration date while S. 2086 extends the expiration date 
to 2014. Additionally, S. 2049 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. S. 2086 does not provide for the creation of 
additional remining incentives.

G. AML Reclamation Priority
    S. 2049 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. S. 
2049 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.
    S. 2086 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. S. 2086 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 non-certified States, S. 2086 
requires strict adherence to the revised priority rankings.
    Both S. 2049 and S. 2086 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 the proposed legislations' 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
    S. 2049 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. S. 2049 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.
    S. 2086 does not alter the existing emergency reclamation program 
structure.

I. Reclamation Set-Aside Programs
    S. 2049 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.
    S. 2086 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
    S. 2049 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. S. 2049 also 
allows the Secretary to make the certification for a State or tribe in 
which all coal-related reclamation work has been completed.
    S. 2086 maintains current certification procedures.

K. Black Lung Excise Tax Collection and Auditing
    S. 2049 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.
    S. 2086 does not contain a similar provision.

L. Incidental Coal Extraction
    S. 2086 adds a proviso to Title V of SMCRA which changes the 
interpretation of the term ``government-financed'' to exclude 
expenditures from the AML reclamation fund. This change would have the 
effect of nullifying long-standing practice that has resulted in 
significant environmental improvements and more efficient AML 
operation. This change would also have the effect of nullifying OSM's 
AML enhancement rule, which, as promulgated on February 12, 1999 (at 64 
FR 7483), interprets the term ``government-financed'' to include AML 
reclamation fund expenditures. With this proposed change, any coal 
removed incidental to the reclamation of an AML site would require a 
mining permit. As a result, various AML sites with physically 
recoverable coal would remain unreclaimed because it would not be 
economically viable to undertake the reclamation based on coal receipts 
alone. In the alternative, coal removed during the course of the AML 
reclamation project would be discarded, which is both inefficient and 
potentially damaging to the environment. To date, incidental coal 
extraction has brought about successful reclamation and inventory 
reduction of AML sites without any known problems.
    S. 2049 makes no change to this provision and maintains existing 
provisions contained in SMCRA.

                               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 S. 2049 addresses these 
problems in a manner that is fair to all States and is consistent with 
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.

    Senator Thomas. Fine. Thank you very much, sir. We 
appreciate that.
    Mr. Hohmann.

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

    Mr. Hohmann. Good morning, Mr. Chairman. My name is Steve 
Hohmann. I am director of the Division of Abandoned Mine Lands 
within the Kentucky Department for Natural Resources, and I am 
appearing here today on behalf of the National Association of 
Abandoned Mine Land Programs, the Interstate Mining Compact 
Commission, and the Commonwealth of Kentucky.
    First, on behalf of the NAAMLP and the IMCC, I will address 
the views of the States and tribes regarding the future 
collection of AML fees, adequate funding, and related 
legislative adjustments to title IV of SMCRA.
    The States and tribes, through the IMCC and NAAMLP and the 
Western Governors Association, 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 monies to address AML problems; to eliminate the 
rural abandoned mine program and to reallocate those funds to 
the historic coal production share; to assure adequate funding 
for minimum program States; to address a few other select 
provisions that will enhance the overall effectiveness of the 
AML program, including remining incentives, State set-aside 
programs, handling of liens, and enhancing the ability of 
States to undertake water line projects; 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 future.
    The States, through these associations, welcome the 
opportunity to work with your committee, Mr. Chairman, and 
other affected parties to address the myriad issues that attend 
the future ability of the AML fund to address the needs of our 
coalfield citizens.
    So 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 AML trust fund 
should be distributed to all States and tribes as expeditiously 
as possible.
    State and tribes should remain the primary delivery 
mechanism for AML funds.
    Funding for the minimum program States must be restored to 
the statutorily authorized amount of not less than $2 million 
annually.
    Any adjustments to the AML program should not inhibit or 
impair any remining opportunities or incentives.
    Any adjustments to the existing system of priorities must 
consider the impacts to existing State set-aside programs and 
to current efforts to remediate acid mine drainage.
    Any adjustments to the current certification process should 
not inhibit the ability of the States and tribes to address 
high priority non-coal projects.
    And 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 presented and considered in a 
judicious environment that allows for all affected parties' 
concerns to be addressed, including coalfield residents. In 
this regard, it should be kept in mind that any legislative 
adjustments that significantly reduce State AML funding or 
efficacy of State programs could lead State legislatures, who 
are facing difficult budget times, to seriously reconsider 
SMCRA primacy entirely, both title IV and title V. Hence, the 
importance of assuring that the current State share provisions 
in SMCRA are held harmless in any proposed restructuring of the 
current allocation formula.
    Over the past 25 years, tens of thousands of acres of mine 
land have been reclaimed, thousands of mine openings have been 
closed, and safeguards for people and property and the 
environment have been put in place. Please remember that the 
AML program is first and foremost designed to protect public 
health and safety.
    Since AML grants were first awarded to the States and 
tribes, over $3 billion has been infused into the local 
economies of the coalfields. The AML expenditures over the past 
24 years, have returned over $4 billion to the economy and have 
created some 150,000 jobs.
    The National Association of Abandoned Mine Land programs 
and the IMCC appreciate the opportunity to present this 
testimony today, Mr. Chairman, and look forward to working with 
you in the future.
    Now the remainder of my testimony will be on behalf of 
Senator Bunning's home State, the Commonwealth of Kentucky.
    Currently there are at least three different versions of an 
AML reauthorization proposal in Congress. The two proposals 
under discussion here today are S. 2049 and S. 2086. There 
exists significant differences and some similarities in the 
methods each bill employs to attain the same goal. So with that 
in mind, Kentucky advocates the general approach outlined in S. 
2086 introduced by Senator Thomas, with appropriate 
modifications.
    In its present form, S. 2086 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; maintains the State share into the future; 
eliminates the 30 percent cap on water line expenditures; 
maintains the status quo concerning administration of the AML 
emergency program; provides remining incentives into the 
future; reduces AML fees to operators in a manner that does not 
adversely affect State grants; and returns State share balances 
to certain certified States with non-AML funds and 
redistributes the replaced State share balances to the historic 
coal share.
    Additionally, Kentucky is supportive of several 
modifications to S. 2086, mainly to make the bill reflect 
certain provisions of H.R. 3796, the Cubin-Rahall bill now 
before the House. Those modifications are: extending the 
program to 2019; retain the AML enhancement rule; and ensure 
the solvency of the UMWA Combined Benefit Fund.
    Mr. Chairman, of the bills now before the Senate, S. 2086, 
while needing adjustments, comes closest to satisfying the 
immediate and long-term AML needs of Kentucky.
    The AML program is vital to the citizens residing in 
Kentucky's coalfields. The Federal Office of Surface Mining 
estimates that over 400,000 Kentuckians are at risk because 
they live within 1 mile of an abandoned coal mine hazard.
    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 coal mines. This marked a 57 percent increase from 
the previous year.
    And July 1 to December 31, 2003, the Kentucky AML program 
abated 82 abandoned coal mine hazards. Abatement of these 
hazards directly eliminated the risk to 476 citizens and 
indirectly benefitted another 851. During that same period, 
Kentucky restored 4 miles of streams with the Abandoned Mine 
Land program and completed six water line projects providing 
potable water to 704 households and businesses. And some 
pictures depicting Kentucky's AML reclamation are on the 
posters displayed to my right.
    To date Kentucky has received $317 million from its State 
share though annual grants, leaving a balance in Kentucky's 
State share account of over $120 million. Without question, 
many more AML sites in Kentucky would have been reclaimed had 
Kentucky received its full return of State share money.
    The Kentucky AML grant has remained essentially static over 
the last 8 to 10 years, hovering around $16 million 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.
    Mr. Chairman, the only solution to this dilemma and to 
addressing Kentucky's overwhelming AML need is an immediate, 
significant increase in AML funding to the commonwealth. The 
approach outlined in S. 2086 is more likely to adequately 
address this need for Kentucky than other Senate proposals.
    Thank you for the opportunity to testify here this morning, 
Mr. Chairman.
    [The prepared statements of Mr. Hohmann follow:]

  Prepared Statement of Steve Hohmann, Director, Kentucky Division of 
  Abandoned Mine Lands, Kentucky Department for Natural Resources, on 
                 Behalf of The Commonwealth of Kentucky

    Mr. Chairman, Senator Bunning, members of the Committee, thank you 
for inviting me to testify. I am present on behalf of Senator Bunning's 
home state, 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 at least three different versions of an AML 
reauthorization proposal in Congress. The two proposals in the Senate 
are S. 2049, the Specter Bill, and S. 2086, the Thomas 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.
    With that in mind, Kentucky advocates the general approach outlined 
in S. 2086, introduced by Sen. Thomas of Wyoming, with appropriate 
modifications. In its present form, S. 2086 contains the following 
items that Kentucky supports:

          1. Provides immediate and long-term, significant funding 
        increases to all states and tribes.
          2. 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.
          3. 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.
          4. 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.
          5. 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.
          6. Provides Remining incentives into the future.
          7. 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.
          8. Returns state share balances to certain certified states 
        with non-AML funds, and redistributes the replaced state share 
        balances to the historic coal share.

    Additionally, Kentucky is supportive of several modifications to S. 
2086, mainly to make the bill reflect certain provisions of H.R. 3796, 
the Cubin/Rahall Bill, now before the House. The modifications are:

          1. Extend the program to 2019.
          2. Retain the AML Enhancement Rule.
          3. Ensure the solvency of the UMWA Combined Benefit Fund.

    Mr. Chairman, these are the provisions that Kentucky believes 
should be included 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. Of the bills now before the Senate, S. 2086, while 
needing adjustments, comes closest to satisfying the immediate and 
long-term needs of Kentucky. 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 benefited 
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 the Thomas Bill, with key 
modifications, is the preferred option.

                                 ______
                                 
 Prepared Statement of Steve Hohmann, Director, Division of Abandoned 
Mine Lands, Kentucky Department for Natural Resources, on Behalf of The 
National Association of Abandoned Mine Land Programs and The Interstate 
                       Mining Compact Commission

    Good morning, Mr. Chairman. My name is Steve Hohmann and I am 
Director of the Division of Abandoned Mine Lands within the Kentucky 
Department for Natural Resources. I am appearing here today on behalf 
of the National Association of Abandoned Mine Land Programs (NAAMLP) 
and the Interstate Mining Compact Commission (IMCC). The NAAMLP 
consists of 30 states and Indian tribes with a history of coal mining 
and coal mine related hazards. These states and tribes are responsible 
for 99.5% of the Nation's coal production. All of the states and tribes 
within the Association administer AML programs funded and overseen by 
the Office of Surface Mining (OSM). I am also representing IMCC, an 
organization of 20 states throughout the country that together produce 
some 60% of the Nation's coal as well as important noncoal minerals. 
Each IMCC member state has active coal mining operations as well as 
numerous abandoned mine lands within its borders and is responsible for 
regulating those operations and addressing mining-related environmental 
issues, including the remediation of abandoned mines. I am pleased to 
appear before the Committee to discuss the future of the Abandoned Mine 
Reclamation Program, which is established under Title IV of the Surface 
Mining Control and Reclamation Act of 1977 (SMCRA). In particular, I 
would like to address the views of the states and tribes under SMCRA 
regarding the future collection of AML fees from coal producers, 
adequate funding for our abandoned mine land programs, and related 
legislative adjustments to Title IV of SMCRA.
    Recently, Mr. Chairman, we celebrated the 25th anniversary of the 
Surface Mining Control and Reclamation Act. During the past quarter of 
a century, significant and remarkable work has been accomplished 
pursuant to the abandoned mine lands program under SMCRA. Much of this 
work has been documented by the states and tribes and by OSM in various 
publications, especially during the past few years, including the 
twentieth anniversary report of OSM and a corresponding report by the 
states and tribes. In addition, OSM's Abandoned Mine Land Inventory 
System (AMLIS) provides a fairly accurate accounting of the work 
undertaken by most of the states and tribes over the life of the AML 
program and an indication of what is left to be done.
    My comments today are intended to be representative of where I 
believe the states and tribes are coming from when we look to the 
future of the AML program. We strongly feel that the future of the AML 
program should continue to focus on the underlying principles and 
priorities upon which SMCRA was founded--protection of the public 
health and safety, environmental restoration, and economic development 
in the coalfields of America. Over the past 25 years, tens of thousands 
of acres of mined land have been reclaimed, thousands of mine openings 
have been closed, and safeguards for people, property and the 
environment have been put in place. Based on information maintained by 
OSM in its Abandoned Mine Land Inventory System (AMLIS), as of 
September 30, 2003, the states and tribes have obligated 94% of all AML 
funds received and $1.7 billion worth of priority 1 and 2 coal-related 
problems have been funded and reclaimed. Another $319 million worth of 
priority 3 problems have been funded or completed (many in conjunction 
with a priority 1 or 2 project) and $343 million worth of noncoal 
problems have been funded or reclaimed.
    It should be noted that any monetary figures related to the amount 
of AML work accomplished to date are based on OSM calculations used for 
purposes of recording funded and completed AML projects in AMLIS. What 
they do not reflect, however, is the fact that a significant amount of 
money is spent by the states and tribes for related project and 
construction costs that do not find their way into the AMLIS figures 
based on how those numbers have been traditionally calculated by OSM. 
These costs (which amount to hundreds of millions of dollars for all 
states and tribes) include engineering, aerial surveys, realty work, 
inspections, and equipment--all of which are part of the normal, 
routine project/construction costs incurred as part of not only AML 
work, but of any construction-related projects. There is no dispute 
between OSM and the states and tribes about the legitimacy or nature of 
these items being a part of the true cost of AML construction projects. 
In fact, OSM's own Federal Assistance Manual for AML Projects 
recognizes these costs as ``project and related construction costs''. 
As a result, the actual amount of money that has been spent by the 
states and tribes for construction or project costs is approximately 
$2.9 billion--$2.6 billion of which was for coal projects and $.3 
billion for noncoal projects. Also, of the $3.4 billion provided to 
states and tribes in Title IV monies over the years, only $500 million 
has been spent on true administrative costs, which reflects a modest 
average of 15%.
    I could provide numerous success stories from around the country 
where the states' and tribes' AML programs have saved lives and 
significantly improved the environment. Suffice it to say that the AML 
Trust Fund, and the work of the states and tribes pursuant to the 
distribution of moneys from the Fund, have played an important role in 
achieving the goals and objectives set forth by Congress when SMCRA was 
enacted--including protecting public health and safety, enhancing the 
environment, providing employment, and adding to the economies of 
communities impacted by past coal mining. Please remember that the AML 
program is first and foremost designed to protect public health and 
safety. Even though accomplishments in the inventory are reported in 
acreage for the sake of consistency, the bulk of state and tribal AML 
projects directly correct an AML feature that threatens someone's 
personal safety or welfare. While state and tribal AML programs do 
complete significant projects that benefit the environment, the primary 
focus has been on eliminating health and safety hazards first and the 
inventory of completed work reflects this fact.
    What the inventory also reflects, at least to some degree, is the 
escalating cost of addressing these problems as they continue to go 
unattended due to insufficient appropriations from the Fund for state 
and tribal AML programs. Unaddressed sites tend to get worse over time, 
thus increasing reclamation costs. Inflation exacerbates these costs. 
The longer the reclamation is postponed, the less reclamation will be 
accomplished. The inventory is also dynamic, which we believe was 
anticipated from the inception of the program. The states and tribes 
are finding new high priority problems each year, especially as we see 
many of our urban areas grow closer to what were formerly rural 
abandoned minesites. New sites also continually manifest themselves due 
to time and weather. For instance, new mine subsidence events and 
landslides will develop and threaten homes, highways and the health and 
safety of coalfield residents. This underscores the need for continual 
inventory updates, as well as constant vigilance to protect citizens. 
In addition, as several states and tribes certify that their abandoned 
coal mine problems have been corrected, they are authorized to address 
the myriad health and safety problems that attend abandoned noncoal 
mines. In the end, the real cost of addressing priority 1 and 2 AML 
coal problems likely exceeds $6 billion. The cost of remediating all 
coal-related AML problems, including acid mine drainage (priority 3 
sites), could be 5 to 10 times this amount and far exceeds available 
monies.
    A word about the plight of those states that have traditionally 
been labeled as ``minimum program'' states due to their minimal coal 
production and thus minimal AML fee collection: the evolving inventory 
concerns mentioned previously, as well as the increasing cost of 
undertaking AML projects, are both exacerbated in these states. Do not 
be misled by the term ``minimum'' when we speak of these programs, 
since many of these states have not been minimally impacted by pre-
SMCRA mining. The minimum program states struggle to simply maintain a 
cost-effective AML program with their most recent annual $1.5 million 
allocations, much less undertake AML projects that can approach one 
million dollars. Without the statutorily authorized amount of $2 
million mandated by Congress in the 1990 amendments to Title IV of 
SMCRA, these states will continue to be forced to fund or even delay 
high priority projects over several years. Not only is this dangerous, 
it is not cost-effective. As your Committee considers amendments to 
Title IV of SMCRA, we urge you to resolve the dilemma faced by the 
minimum program states and to provide meaningful and immediate relief.
    When considering the economic impacts of potential AML legislation, 
it should also be kept in mind that, since grants were first awarded to 
the states and tribes for AML reclamation, over $3 billion has been 
infused into the local economies of the coalfields. These are the same 
economies that have been at least partially depressed by the same 
abandoned mine land problems that the program is designed to correct. 
In fact, those dollars spent in economically depressed parts of the 
country, such as Appalachia, could be considered part of an investment 
in redevelopment of those regions. The AML program translates into 
jobs, additional local taxes, and an increase in personal income for 
the Nation's economy. For each $1 spent on construction, $1.23 returns 
to the Nation's economy. For each $1 million in construction, 48.7 jobs 
are created (U.S. Forest Service IMPLAN, 1992 data for non-residential 
and oil and gas construction). The AML expenditures over the past 25 
years have returned over $4 billion to the economy and have created 
some 150,000 jobs. While this is significant, much more growth could 
occur if the entire Fund was used for its intended purposes. For 
example, it is estimated that $280 million will be collected from AML 
receipts in FY 2005 (assuming no fee adjustment). If the federal 
government returned all $280 million to the local economies for 
abandoned mine land re-construction, almost 7,000 additional jobs could 
be created with an additional $174 million boost to coal region 
economies. In this manner, money would be going to work for the 
communities who are experiencing the consequences of pre-law mining 
practices as intended by SMCRA.
    The ability of the states to accomplish the needed reclamation 
identified in current inventories is being constrained by the low level 
of funding for state AML programs. Since the mid-1980's, funding for 
state AML grants has been declining. In recent years, we have seen the 
President's budget propose significant reductions for state AML grants, 
which Congress has ultimately (and thankfully) restored. While we are 
well aware of the Administration's efforts to reduce the overall budget 
in order to meet other priorities related to Homeland Security and the 
War on Terrorism, holding onto AML money that is already statutorily 
dedicated to provide local improvements to health, safety, the 
environment, local economies and job opportunities seems to be 
counterproductive to ``homeland security''.
    We were greatly heartened by the President's proposed budget for FY 
2005, which has proposed an increase of $53 million for state AML grant 
funding above last year's approved level of $149 million. We were also 
encouraged by the Administration's recognition of the vital importance 
of reauthorizing fee collection authority to support the continuation 
of the Title IV program given the amount of work left to be done.
    The future of the AML Fund and its potential impacts on the 
economy, public safety, the land, our Nation's waters and the 
environment will depend upon how we manage the Fund and how we adjust 
the current provisions of SMCRA concerning the Fund. As we draw closer 
to the September 30, 2004 expiration date, we are beginning to see more 
proposals for how the Fund should be handled and how SMCRA should be 
amended, if at all. The states and tribes, through IMCC, the National 
Association of Abandoned Mine Land Programs and the Western Governors 
Association have over the past several years advanced proposed 
amendments to SMCRA that are few in number and scope and that reflect a 
minimalist approach to adjusting the existing language in SMCRA and to 
incorporate only those changes necessary to accomplish several key 
objectives. They are as follows:

   To extend fee collection authority for at least 12 years.
   To significantly increase annual allocations to states and 
        tribes to address AML problems. This has been one of the 
        greatest inhibitions to progress under Title IV of SMCRA in 
        recent years and must be addressed if we are to enhance the 
        ability of the states and tribes to get more work done on the 
        ground within the extended time frame of 12 years or longer.
   To confirm recent Congressional intent to eliminate the 
        Rural Abandoned Mine Program (RAMP) under Title IV and to 
        reallocate those moneys to the historic coal production share. 
        While these moneys would be used primarily to address high 
        priority coal related sites, the states and tribes may 
        coordinate their efforts with the Natural Resources 
        Conservation Service and the local soil and water conservation 
        districts in an attempt to address their concerns as well.
   To assure adequate funding for minimum program (under-
        funded) states who have consistently received less than their 
        promised share of funding over the past several years, thereby 
        undermining the effectiveness of their AML programs.
   To address a few other select provisions of Title IV that 
        will enhance the overall effectiveness of the AML program, 
        including remining incentives, state set-aside programs, 
        handling of liens, and enhancing the ability of states to 
        undertake water line projects.
   Finally, to address how the accumulated, unappropriated 
        state and tribal share balances in the Fund will be handled 
        (assuming that the interest in the Fund is no longer needed to 
        address shortfalls in the UMW Combined Benefit Fund), while at 
        the same time assuring that an adequate state share continues 
        for the balance of the program to insure that all states and 
        tribes are well-positioned and funded to address existing AML 
        problems.

    Mr. Chairman, it is obvious from an assessment of the current 
inventory of priority 1 and 2 sites that there will not be enough money 
in the AML Trust Fund to address all of these sites before fee 
collection is set to expire in September. It is even more obvious that, 
regardless of what the unappropriated balance in the Fund is (currently 
$1.5 billion) and what future fee collections will add to that balance 
over the next year, current Congressional appropriations for state and 
tribal AML program grants are woefully inadequate and are not keeping 
pace with our ability and desire to address the backlog of old as well 
as continually developing high priority AML problems. We are therefore 
faced with a significant challenge over the next few months--and that 
is to reconcile all of the various interests and concerns attending the 
administration of the AML program under Title IV of SMCRA in a way that 
assures the continuing integrity, credibility and effectiveness of this 
successful and meaningful program under SMCRA.
    The states, through their associations, welcome the opportunity to 
work with your Committee, Mr. Chairman, and other affected parties to 
address the myriad issues that attend the future ability of the AML 
Fund to address the needs of coalfield citizens Our overriding concerns 
can be summarized as follows:

   Adequate, equitable, and stable funding must be provided to 
        the states and tribes on an annual basis that will allow the 
        states and tribes to address the AML problems their citizens 
        are experiencing and to implement their respective AML programs 
        to provide the services intended by SMCRA.
   The unexpended state share balance in the AML Trust Fund 
        should be distributed to all the states and tribes as 
        expeditiously as possible so states and tribes can address 
        existing AML problems before inflationary impacts result in 
        more costly reclamation and thus less reclamation.
   States and tribes under Title IV of SMCRA should remain the 
        primary delivery mechanism for AML moneys based on their 
        demonstrated history of effective and efficient program 
        implementation. In this regard, the states and tribes have 
        concerns about the proliferation of several recent programs 
        throughout the federal government (Bureau of Land Management, 
        National Park Service, Forest Service, Environmental Protection 
        Agency, Bureau of Reclamation, U.S. Army Corps of Engineers, to 
        name a few) that are aimed at addressing abandoned mine lands--
        at both coal and noncoal sites. While we support additional 
        federal dollars from all sources that will assist with the 
        clean up of abandoned mined lands, we want to guard against 
        duplicative, competing programs that serve only to dilute the 
        overall pool of funds available for service delivery through 
        state and tribal programs. We have worked cooperatively with 
        many of these federal agencies in the past on AML initiatives 
        and we believe it is critical that we continue to achieve 
        maximum cooperation and coordination, thus assuring efficient 
        use of limited resources. The states and tribes have over 25 
        years of experience in this area and have demonstrated their 
        expertise and efficiency in running these programs. We 
        therefore advocate a continuing significant and meaningful 
        state/tribal lead with regard to both SMCRA and other AML 
        related programs.
   Funding for the ``minimum program'' states must be restored 
        to the statutorily authorized amount of not less than $2 
        million annually.
   Any adjustment to the AML program should not inhibit or 
        impair remining opportunities or incentives.
   Any adjustments to the existing system of priorities under 
        Title IV must consider the impacts to existing state set-aide 
        programs and to current state efforts to remediate acid mine 
        drainage.
   Any adjustments to the current certification process should 
        not inhibit the ability of the states and tribes to address 
        high priority noncoal projects.
   Any review or adjustments to the current AML inventory 
        should account for past discrepancies and provide for the 
        inclusion of legitimate new sites.
   Any adjustments to Title IV of SMCRA must be presented and 
        considered in a judicious and productive environment that 
        allows for all affected parties' concerns to be heard and 
        addressed, including coalfield residents who are directly 
        affected by AML dangers and who have been adversely impacted by 
        the unappropriated balance that delays further restoration of 
        their communities. In this regard, it should be kept in mind 
        that any legislative adjustments which have the result of 
        significantly undermining state AML funding or the efficacy of 
        state AML programs could lead state legislatures to seriously 
        reconsider SMCRA primacy entirely--both Title IV and Title V. 
        This very scenario was contemplated by the framers of SMCRA who 
        structured the Act so that the Title IV AML program would serve 
        as an incentive for states to adopt and implement Title V 
        regulatory programs. Should the AML ``carrot'' be chopped up, 
        the desire to maintain Title V primacy could be seriously re-
        thought by some state legislatures, particularly during 
        difficult budget times, thus placing OSM in the undesirable 
        position of having to run these programs at a significantly 
        increased cost to the federal government. Hence the importance 
        of assuring that the current state share provisions in SMCRA 
        are held harmless in any proposed restructuring of the current 
        allocation formula.

    We appreciate the opportunity to present this testimony today, Mr. 
Chairman, and look forward to working with you in the future. I would 
be happy to answer any questions you may have or to provide follow up 
answers at a later time.

    Senator Thomas. Thank you, sir. I appreciate it.
    Mr. Green from Wyoming. You, I think, Mr. Green, have 
another official with you. Would you care to introduce him?

STATEMENT OF EVAN J. GREEN, ADMINISTRATOR, ABANDONED MINE LAND 
       DIVISION, WYOMING DEPARTMENT ENVIRONMENTAL QUALITY

    Mr. Green. Yes, thank you, Mr. Chairman. I would like to 
introduce John Corra, who is director of the Wyoming Department 
of Environmental Quality and, more to the point, my boss.
    [Laughter.]
    Senator Thomas. Thank you for being here. Go right ahead, 
sir.
    Mr. Green. Thank you. Good morning, Mr. Chairman. My name 
is Evan Green and I am the administrator of the Abandoned Mine 
Land Division for the Wyoming Department of Environmental 
Quality. I am here today to testify on behalf of the State of 
Wyoming on the reauthorization of the abandoned mine land 
reclamation fee. I wish to thank the committee for this 
opportunity to present Wyoming's position.
    Basically Wyoming supports the reauthorization concepts 
outlined in the bill offered by Senator Thomas and in the 
similar bill sponsored by Mrs. Cubin and Mr. Rahall in the 
House. This approach provides funding for the serious 
reclamation needs still facing the State of Wyoming and other 
States in the AML program and provides relief for Wyoming's 
mineral industry through fee reductions.
    We request that this committee agree with Senator Thomas on 
the following items.
    First, a prompt release of Wyoming's share of the AML trust 
fund.
    Second, a fair share of future AML revenues to complete the 
reclamation of hazardous, abandoned mine sites in Wyoming. Like 
Pennsylvania, Ohio, West Virginia, and other States, Wyoming 
has learned a great deal since 1977 about the ongoing problems 
created by historic coal mining. The remaining reclamation work 
in Wyoming exceeds our State share of the AML trust fund.
    And third, we support the 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 bill offered by 
Senator Specter on several counts.
    First, Wyoming's coal producers would pay about $1.5 
billion in reclamation fees over the reauthorization period, 
and no portion of those collections would be returned to 
Wyoming.
    Second, Wyoming's trust fund now in excess of $400 million 
would be returned over a prolonged period with no interest 
added, further depreciating the real value of those funds.
    And third, 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 or other States will receive our trust 
fund balance in future years.
    Wyoming recognizes the need to address priority 1 and 
priority 2 historic coalfield hazards, wherever they occur. We 
also recognize the commitment that this body has made to the 
Combined Benefits Fund and believe that that commitment should 
be honored as well. The Thomas bill and the Cubin-Rahall bill 
in the House address these needs while providing all States 
with a fair and equitable allocation of available funds.
    I would like to spend a moment relaying Wyoming's track 
record in the AML program.
    We have used our funds efficiently. We maintain a 95 
percent obligation rate, and our administrative costs average 
less than 5 percent. Wyoming budgets 20 to 30 percent of 
available funds for priority 1 and priority 2 coal sites.
    Wyoming has closed over 1,300 hazardous mine openings, 
reclaimed over 30,000 acres of disturbed land and abated or 
controlled 22 mine fires. 35 miles of hazardous high walls have 
been reduced to safer slopes and over $75 million has been 
spent to mitigate and prevent coal mine subsidence.
    And we have work remaining. Our continuing inventory of 
historic mining districts has identified 1,700 additional coal 
sites and over 4,000 non-coal sites. These numbers compare to 
the 1,400 total sites now recorded for Wyoming in the AMLIS 
database.
    Mining activities have impacted every one of Wyoming's 23 
counties. Many communities continue to suffer the direct 
effects of mineral extraction and the boom and bust nature of 
the State's economy. All of the States and tribes in the AML 
program have continuing reclamation needs under the legitimate 
and original purposes of SMCRA. Wyoming believes that 
reauthorization should honor the Government's commitment to the 
States and tribes and that all entities with a stake in the 
outcome of this deliberation should be treated fairly by 
reauthorization legislation. I refer you to the written 
testimony submitted by Wyoming.
    And thank you again for the opportunity to present this 
information for your consideration.
    [The prepared statement of Mr. Green follows:]

Prepared Statement of Evan J. Green, Administrator, Abandoned Mine Land 
           Division, Wyoming Department Environmental Quality

    Good Morning Mr. Chairman. My name is Evan Green. I am the 
Administrator of the Abandoned Mine Land Division of the Wyoming 
Department of Environmental Quality. I am here today to present 
testimony on behalf of the State of Wyoming on the reauthorization of 
Abandoned Mine Land Reclamation fee, and changes to the Surface Mining 
Control and Reclamation Act of 1977 proposed by Senator Thomas of 
Wyoming and by Senator Specter of Pennsylvania on behalf of the 
Administration. I wish to thank Chairman Domenici and the members of 
the Senate Energy and Natural Resources Committee for inviting the 
State of Wyoming to testify today.

                     SUMMARY OF WYOMING'S POSITION

    I wish to begin by saying that Wyoming supports many of the AML fee 
reauthorization concepts contained in the Bill offered by Senator 
Thomas. 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 agree with Senator Thomas 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 Bill offered by Senator Specter 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 Thomas Bill, and the Cubin/Rahall Bill in the House, 
addresses these needs while providing all states with a fair and 
equitable allocation of available funds.

                   HISTORY OF WYOMING COAL PRODUCTION

    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.

               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 dollars 
in reclamation fees into the AML Trust Fund. In return, Wyoming has 
received about $520 million dollars, 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 benefited from our abundance of natural resources, the State 
has suffered, and continues to suffer, from the effects of an 
inequitable distribution of AML funds. Wyoming has been, and expects to 
continue to be, the single largest contributor to the AML reclamation 
fund. This contribution has enabled some states to receive more money 
than they have contributed to the program, while Wyoming has never 
received our fair share of the money we sent to Washington.
    In essence, Wyoming has not only provided the bulk of funding for 
AML reclamation in other states, but has handled revenues returned to 
the state in an effective and efficient program to protect our citizens 
from mine related hazards, and to mitigate the impact of mining 
activities on Wyoming Communities.

              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 US 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 
dollars 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 off set 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 Thomas bill and the 
Cubin Rahall bill divert currently un-appropriated 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 Senate Bill 2049 and House 
Resolution 3778.
    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 bill sponsored by 
Sen. Thomas is 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 Senate Energy Committee 
for the opportunity to be heard on these important issues.

    Senator Thomas. Thank you, Mr. Green.
    Mr. Shirley.

 STATEMENT OF JOE SHIRLEY, JR., PRESIDENT OF THE NAVAJO NATION

    Mr. Shirley. Good morning, Senator Thomas, Senator 
Bingaman, committee members. I want to express my appreciation 
on behalf of my people for the invitation to be here to give 
testimony. I am very honored to present this testimony today on 
behalf of my Navajo Nation.
    The issue before us, the reauthorization of SMCRA, the 
Surface Mining Control and Reclamation Act of 1977, is of the 
utmost importance to Navajo people. We appreciate the 
opportunity to express our position to the Senate Energy and 
Natural Resources Committee this morning.
    The Navajo Nation has four objectives concerning SMCRA 
reauthorization. Our four objectives are: number one, increase 
or continue our annual allocation of reclamation fees under 
section 402(g)(1)(B). Objective number two, promptly release 
our unappropriated trust fund balance. Objective number three, 
extend the expiration date to September 30, 2018, and objective 
number four, allow tribes to apply for primacy through an 
amendment to section 710. Now, let me elaborate a little bit on 
each objective.
    Objective number one. We respectfully request that you 
increase or continue the allocation of the reclamation fees 
collected annually to the tribes under section 402(g)(1)(B). 
The Navajo Nation strongly opposes any amendment to section 
402(g)(1)(B) that will deny us our allocation and divert it to 
States that have not yet completed reclamation activities. The 
Navajo Nation's share of the reclamation fees is approximately 
$87 million, of which the Navajo abandoned mine land program 
has expended about $57 million on reclamation efforts.
    The Navajo Nation has been certified under section 411 of 
SMCRA. Because we are certified, we use our annual allocation 
under section 402(g)(1)(B) to fund public facilities projects. 
These projects have built infrastructure, such as roads, waste 
management systems, and water services. These projects may not 
be critical to the States because they already have 
infrastructure in place, but on Navajo where 70 percent of my 
people lack domestic and municipal water for everyday use, 
where 78 percent of the roads are still dirt-based, and where 
60 percent of the people do not have communication services, 
these public facility projects are critical.
    We have complied with the requirements of SMCRA and we have 
properly utilized our share of the reclamation fees in 
accordance with the priorities of SMCRA. We desperately need 
our allocation of the reclamation fees available under section 
402(g)(1)(B) and we urge the committee to raise the tribal 
share of the reclamation fees so we may confront our 
infrastructure problems. At the very least, we recommend that 
tribes continue to receive the allocation currently authorized 
by SMCRA.
    Under objective number two, we request that our 
unappropriated balance of approximately $30 million be promptly 
released. We seek the expeditious return of our trust fund 
balance while remaining an active participant in SMCRA.
    Under objective number three, we request that the 
reclamation fee expiration date be extended to September 30, 
2018. We believe that this will allow the Office of Surface 
Mining enough time to clean up priority sites and meet the 
goals of SMCRA.
    And under our final objective, lastly we request that 
tribes participating in SMCRA be treated on equal footing with 
the States and become eligible to apply for tribal primacy 
under title V of SMCRA. Mr. Chairman, we believe that it was 
the original intent of the authors of SMCRA to treat Indian 
tribes on equal footing with the States in regards to tribal 
primacy. I reference the conference report that is quoted in my 
written testimony and the time line over the last 27 years that 
has brought us to this point.
    Since 1977, 24 coal mining States have obtained primacy 
from the Office of Surface Mining for the authority to 
regulate, inspect, and enforce surface coal mining within those 
States. I submit to you today that the Navajo Nation is ready 
to assume primacy over the regulation and enforcement of coal 
mining on our land. We are requesting that Congress allow 
tribes the opportunity to apply for tribal primacy and become 
eligible to receive 100 percent of the costs associated with 
the approved program.
    The Navajo Nation can respond and oversee the operations of 
Navajo mines quickly and responsibly and we believe that we can 
do it at a lower cost to the Federal Government. We urge the 
committee to adopt our proposed amendment to section 710 of 
SMCRA.
    In 1987, the Office of Surface Mining stated that the 
Navajo Nation was the most qualified tribal entity to assume 
primacy for control of surface coal mine reclamation. Without 
the approval of Congress, Native American nations will never be 
able to apply for primacy and regulate surface coal mining and 
reclamation operations on their lands. We respectfully request 
that this committee approve our proposed amendment.
    In closing, I want to thank the committee for allowing me 
to testify on behalf of my Navajo people. I request that the 
committee continue to keep Native Americans in mind when 
considering the reauthorization of SMCRA.
    My people benefit from SMCRA. The Navajo Nation is roughly 
the size of West Virginia and West Virginia has over 18,000 
miles of paved roads compared to the Navajo Nation's 2,000 
miles of paved roads. Through our share of the allocation we 
receive from SMCRA, we are developing infrastructure that will 
help alleviate these needs.
    We have been a faithful participant in SMCRA and look 
forward to reaching a workable solution concerning the SMCRA 
reauthorization. Thank you.
    [The prepared statement of Mr. Shirley follows:]

 Prepared Statement of Joe Shirley, Jr., President of the Navajo Nation

    Chairman Domenici, Senator Bingaman, and members of the Committee. 
I am honored to present testimony today on behalf of the Navajo Nation. 
The issue before us, the Reauthorization of the Surface Mining Control 
and Reclamation Act of 1977 (SMCRA), is of the utmost importance to the 
Navajo people, and we appreciate the opportunity to express our 
position to the Senate Energy and Natural Resources Committee. The 
Navajo Nation requests that the following written testimony be 
submitted into the record.

                               OBJECTIVES

    (1) Increase and/or continue the allocation of the reclamation fees 
collected annually to the Tribes under Section 402(g)(1)(B);
    (2) Promptly release the unappropriated balance of State and Tribal 
share allocations;
    (3) Extend the reclamation fee expiration date to September 18, 
2018;
    (4) Allow Native Nations participating in SMCRA the opportunity to 
apply for Tribal primacy under Title V of SMCRA, subject to applicable 
SMCRA regulations.

(1) Increase and/or continue the allocation of the reclamation fees 
        collected annually to the Tribes under Section 402(g)(1)(B).
    Many Navajo people live in conditions that the everyday American 
cannot comprehend; our needs are not unique to Native Nations across 
America, but it is important to list these statistics so the committee 
has a better understanding of why funding under Section 402(g)(1)(B) is 
so important to the Navajo Nation.

          (1) 56% of the Navajo population live below the poverty 
        level, and the unemployment rate hovers around 50%;
          (2) 70% of the Navajo people lack domestic and municipal 
        water for everyday use;
          (3) 78% of the public roads are dirt based, with little or no 
        gravel;
          (4) 60% of the Navajo Nation lacks basic communication 
        services;
          (5) 60% of the Navajo Nation lacks electrical power lines.

    I did not come here today to decry the substandard quality of life 
that exists on the Navajo Nation; however, I would like the members of 
this committee to know that through SMCRA the Navajo Nation has a 
vehicle to address these needs, and we have implemented projects in 
accordance with the priorities of SMCRA.
    The Navajo Nation has contributed an estimated $170M into the 
Reclamation Fee Collection Trust pursuant to SMCRA. The Navajo Nation's 
share of the Reclamation Fee is approximately $87M, of which the Navajo 
Abandoned Mine Land Program has expended about $57M on AML reclamation 
efforts. SMCRA was amended in 1990 to include reclamation of abandoned 
mines such as uranium, silver, and limestone, which constitute a hazard 
to the public health and safety. Arguably, the most important section 
for Navajo has been the certification process under Sec. 411. This 
section was added to facilitate land and water projects, and public 
facility projects impacted by mining activities. In order to qualify 
under Sec. 411, the State or Tribe must be certified with completion of 
coal mine reclamation by the Secretary of Interior. The Navajo Nation 
applied and received its certification for completion in 1994. The 
Navajo Nation AML program has reclaimed over 1300 mine sites, and since 
many of the problem sites have been addressed, the Navajo Nation 
amended the Navajo Reclamation Plan in accordance with Sec. 411 of 
SMCRA to implement PFP's (Public Facility Projects). Those chapters/
communities that are impacted by present and past mining activities are 
eligible for PFP funding through a competitive proposal process. To 
date, the Navajo Nation, through the Navajo Nation Council Resources 
Committee, selected and approved 31 PFP's through partnership and 
leverage funding. These PFP's are funded by the 50% of reclamation fees 
collected annually on the Navajo Nation pursuant to Sec. 402(g)(1)(b) 
of SMCRA. The PFP's develop infrastructure such as roads, waste 
management systems, and water services. The Navajo Nation has complied 
with the requirements of SMCRA and we have properly utilized our share 
of reclamation fees in accordance with the priorities set forth in 
SMCRA. The Navajo Nation strongly opposes any amendment to 
Sec. 402(g)(1)(b) that will deny us our reclamation allocation and 
divert it to states who have not yet completed reclamation activities. 
We believe it fundamentally unfair to punish a certified tribe (like 
the Navajo Nation) by taking the annual reclamation fees we contribute 
to the AML fund and redirecting it to States that are not certified. 
This would effectively penalize the Navajo Nation for taking the 
responsibility to reclaim the most hazardous and harmful externalities 
associated with mining on its land. There is not a state in the union 
that faces the vast array of infrastructure problems confronting the 
Navajo people; we desperately need our allocation of the reclamation 
fees available under Sec. 402(g)(1)(b) and we urge the committee to 
raise the tribal share of the reclamation fees so we may confront our 
infrastructure problems. At the very least, we recommend that tribes 
continue to receive the 50% allocation currently authorized under 
SMCRA. It is vital that Native Nations continue to receive their share 
of allocations at a rate of 50% or greater. We recognize the need to 
address problem areas in the Eastern States; however, we believe that 
these priorities can be met without punishing tribes and other states. 
The Thomas bill, S. 2086 , strives to strike such a balance. The 
Administration bill, S. 2049, sponsored by Senator Specter, completely 
eliminates the State/Tribal share allocation and we cannot support such 
a proposal.

(2) Promptly release the unappropriated balance of Tribal and State 
        Share allocations
    Since the inception of the program, the Navajo Nation's share of 
the reclamation fee is $87M. We have expended approximately $57M on AML 
reclamation efforts. The Navajo Nation balance of approximately $30M 
sits idle in the Federal Treasury and has not been allocated to us. We 
request the prompt return of our trust fund balance. S. 2086 and S. 
2049 address the return of our trust fund balance in different ways. S. 
2086 would return our balance to us by the end of 2004 through a 
provision authorizing payments to certified States and tribes that do 
not have lands available under the Mineral Leasing Act. S. 2049 
authorizes a payout of the balance over ten years; however, the Navajo 
Nation cannot support this alternative if it will eliminate our 
allocation of the annual reclamation fees available under 
Sec. 402(g)(1)(b). The Navajo Nation desperately needs our trust fund 
balance to address many of the infrastructure problems mentioned above 
and we request that our balance be returned to us in an expeditious 
manner so we can address these concerns.

(3) Extend the Reclamation Fee expiration date to September 30, 2018
    We are here today because the expiration date is due to expire 
September 30, 2004. We respectfully urge the committee to extend the 
expiration date to September 30, 2018. We believe this will allow OSM 
enough time to meet their goal of cleaning up priority sites and allow 
States and Tribes to achieve the goals that SMCRA was intended to 
accomplish.

(4) The Navajo Nation requests that tribes participating in SMCRA be 
        treated on equal footing with the states and become eligible to 
        apply for Tribal Primacy under Title V of SMCRA, subject to 
        applicable SMCRA regulations
    This committee is well aware of the struggles facing Native Nations 
in their push towards self-determination. Regretfully, the word has 
lost its meaning when it applies to the relationship between Native 
Nations and the Federal Government. Mr. Chairman, we believe that it 
was the original intent of the authors of SMCRA to treat Indian Tribes 
on equal footing with the states in regards to tribal primacy. For 
example, I reference Conference Report No. 95-337 from July 20, 1977, a 
conference that you were a participant in Mr. Chairman. On page 114 of 
the report the comments for Section 710 read as follows:

          The House bill was adopted by the Conferees. It was identical 
        to the language reported by the Senate Energy and Natural 
        Resources Committee. However, the Senate had replaced this 
        section with a new Title VIII which would have treated Indian 
        tribes in much the same way as States are treated under the 
        Act, in particular by allowing tribal authorities to submit 
        regulatory programs for approval by the Secretary. The 
        Conferees rejected this Senate approach, agreeing instead to 
        the House bill in requiring that a study be carried out by the 
        Secretary and that operations on Indian lands comply with the 
        performance standards of the act.

    Instead, Section 710 of SMCRA directed the Secretary of the 
Interior (Secretary) to consult with Indian tribes, and submit a report 
to Congress on the question of regulation of surface mining on Indian 
lands. The purpose was to propose legislation authorizing Indian tribes 
to elect to assume regulatory duties over the administration and 
enforcement of surface mining of coal on Indian lands. Today, almost 27 
years have passed since SMCRA became law and the Department of Interior 
(DOI) has failed to propose legislation allowing Native Nations to 
assume primacy for regulation of surface coal mining activities on 
their lands. The failure to propose such legislation is not due to a 
lack of cooperation between the Navajo Nation and DOI. See the 
following timeline:

   1982: OSM entered into a Cooperative Agreement with the 
        Navajo Nation, Crow, and Hopi Tribes, funding them to conduct 
        several activities, including developing tribal regulations on 
        surface mining that are necessary prerequisites for assuming 
        tribal primacy;
   1984: DOI provided a report to Congress which recommended 
        Tribes be allowed to obtain approval of either partial or full 
        regulatory programs;
   1984: Congress passed Public Law 100-71 on Tribal Primacy 
        authorizing the AML programs for the Navajo Nation, Hopi, and 
        Crow tribes without first obtaining regulatory programs;
   1986: The Government Accounting Office recommended to the 
        House Committee on Interior and Insular Affairs that regulatory 
        capabilities of tribes to assume primacy should be assessed;
   1987: OSM responds to the Committee with a report assessing 
        the readiness of the three tribes to assume primacy. OSM stated 
        that the Navajo Nation was the most qualified tribal entity to 
        assume primacy for control of the surface coal mine 
        reclamation.
   1989: Funding for the Title V program under the Cooperative 
        Agreement with OSM ceased in 1989, because DOI abandoned the 
        pursuance of tribal primacy legislation;
   1992: Congress passed the Energy Policy Act, which amended 
        Section 710 of SMCRA and provided for annual coal grants to 
        four coal owning tribes.

House Report No. 102-474 (viii) p. 2313, reveals the intent behind 
Title XXV, Sec. 2514 of the Energy Policy Act of 1992, which amended 
Sec. 710 of SMCRA:

          This section provides that the Navajo, Hopi, Northern 
        Cheyenne, and Crow tribes will be eligible for funding to 
        operate tribal offices of surface coal mining regulation. Each 
        of these tribes have significant coal resources located on 
        their reservations. Funding for these offices will allow for 
        the development of tribal regulations and provide tribal 
        employment and training in the area of mining and mineral 
        resource regulation. The Committee intends these offices to 
        work cooperatively with the Office of Surface Mining 
        Reclamation and Enforcement of the Department of Interior in 
        all matters relating to surface mining activities on Indian 
        lands. The Committee intends this section to provide each of 
        the tribes with the ability to be more involved and gain 
        expertise in the regulatory activities regarding surface mining 
        operations on Indian lands. This section is not intended to 
        alter, expand, or diminish the current regulatory jurisdiction 
        of these tribes over all lands within the exterior boundaries 
        of their reservations.

   1996: After four years, DOI finally provided limited funding 
        to the coal owning tribes in accordance with the Congressional 
        amendment to Sec. 710.

    The Navajo Nation has fully cooperated with OSM and we believe we 
have the necessary expertise to assume full primacy over all regulatory 
and inspection aspects of surface mining on the Navajo Nation. However, 
OSM has failed to introduce or advocate on behalf of Tribal primacy 
legislation. For 20 years now, Congress has been in receipt of the 
Secretary's recommendations regarding tribal primacy. OSM is not 
authorized to accept applications for primacy until authorized by 
Congress. Since 1977, twenty-four coal mining states have obtained 
primacy from OSM for the authority to regulate, inspect, and enforce 
surface coal mining within those states. The Navajo Nation is ready to 
assume primacy over the regulation and enforcement of coal mining on 
our land. We realize that there are details and jurisdictional issues 
that must be addressed by the tribes and OSM when tribes apply for 
primacy. However, we are simply requesting that Congress allow tribes 
the opportunity to apply for tribal primacy and become eligible to 
receive 100% of the cost associated with the approved program. We 
believe that we can regulate and inspect our mines in a quick and 
efficient manner. OSM cannot respond to inspection requests and 
managerial duties in an expeditious manner because the three nearest 
offices are in Denver, Colorado, Farmington, New Mexico, and 
Albuquerque, New Mexico. The Navajo Nation can respond and oversee the 
operations of Navajo mines quickly and responsibly, with less cost to 
the Federal government. Therefore, we urge this Committee to adopt the 
following proposed amendment to Sec. 710 of SMCRA:

                            SECTION 710 (J)

          Notwithstanding any other provision of this section, Indian 
        tribes may be considered as states under Sections 503 and 504, 
        and apply for and receive primacy under the provision of 
        504(e). Grants for developing, administering , and enforcing 
        tribal programs shall be provided in accordance with the 
        provisions of Section 705, except that tribes shall be eligible 
        for 100% of the cost of developing, administering, and 
        enforcing the approved program.

    Without the approval of Congress, Native Nations will never be able 
to apply for primacy and regulate surface coal mining and reclamation 
operations on their lands. We respectfully request that this committee 
approve our proposed amendment.

                               CONCLUSION

    The Navajo Nation fully supports the reauthorization of SMCRA. The 
infrastructure on Navajo land is in desperate need of improvement and 
SMCRA helps facilitate our infrastructure needs through use of Public 
Facility Projects under Sec. 411. This is apparent by the recent 
funding of 31 Public Facility Projects through partnership and leverage 
funding. The Navajo Nation does not have the infrastructure 
capabilities that the states have. West Virginia (a state roughly the 
same size as the Navajo Nation) has 18,000 miles of paved road. In 
comparison, the Navajo Nation has 2,000 miles of paved roads. We have 
been a faithful and active participant in SMCRA, and we ask that you 
increase and/or continue our Tribal share allocation under 
Sec. 402(g)(b)(1), promptly release our unallocated trust fund balance 
of $30M, and extend the expiration date to September 30, 2018. In 
closing, we urge the Committee to adhere to the principles of self-
determination and allow the Navajo Nation and other Native Nations the 
opportunity to apply for primacy under Section (s) 503 and 504 of 
SMCRA. We have been working towards assuming primacy for almost 30 
years, allow us to take the final step. I thank the Committee, on 
behalf of my people, for the opportunity to testify today and we look 
forward to reaching a workable solution concerning the SMCRA 
reauthorization.

    Senator Thomas. Thank you.
    Mr. Gauvin.

         STATEMENT OF CHARLES F. GAUVIN, PRESIDENT AND 
                     CEO OF TROUT UNLIMITED

    Mr. Gauvin. Thank you, Mr. Chairman, committee members. We 
really appreciate the opportunity to present our views on S. 
2086 and S. 2049.
    I want to present a few highlights from our written 
testimony. I want to emphasize that unlike the other gentlemen 
up on this panel, I and my organization are not experts in 
SMCRA or AML generally and certainly not the allocation issues 
that are confronting you in this hearing and in your 
deliberations. What we are experts in is in watershed 
restoration which has become an important use of SMCRA funds, 
AML funds in particular.
    AML reauthorization, as we all know, gives us a very 
important opportunity to fulfill a promise we made a generation 
ago to the people living in and around coal country in the 
United States. It also gives us an opportunity once again to 
renew a source of funds for remedying public safety threats and 
the immense amount of ecological damage across a broad swath of 
America's landscape that has been visited upon it by surface 
mining and coal mining.
    We have a great opportunity before us, as Secretary Norton 
noted, to finish the job of dealing with acid mine drainage, 
which the Office of Surface Mining now has characterized as the 
single largest source of pollution in Appalachia.
    Now, as to our views with respect to the legislation, a few 
core principles. First, we believe that that the health and 
safety of the 3.5 million people living in and around coal 
country must continue to be the first priority of the AML 
program.
    Secondly, we believe ecological restoration continues to 
have a very important place in the AML program and should not 
be legislated away as a funding priority. We support, 
therefore, retaining the law's existing system of priorities 
which we believe gives the States the flexibility they need to 
get the job done.
    I want to note that as you go across Appalachia, in many 
places ecological restoration that is being conducted with AML 
funds is meeting very important health and safety needs as well 
as creating a degree of economic well-being which would not 
exist otherwise. We can protect current and future drinking 
water sources and reduce human exposure to toxic metals by 
going to the headwater sources of acid mine drainage and 
treating them with AML and CSI funds.
    For many rural communities in West Virginia and 
Pennsylvania and places like that and Kentucky as well, 
watershed restoration using AML funding is key to economic 
growth. These are communities often that are isolated, that are 
not in the mainstream economically anymore, have not been for 
generations, and really need a shot in the arm. Recreationally 
based ecotourism and such is really an important opportunity 
for them, and that can be facilitated by the use of AML funds.
    We have made great strides in the past 10 years, in 
particular in watershed restoration using AML funds. We are 
developing practical solutions and technology transfer that 
really will help communities in these beleaguered parts of the 
country to develop very sustainable, on-the-ground solutions 
and really attend to their watersheds using AML funds.
    I want to also note that in addition to having tremendous 
community support in coal country, States are rising to the 
challenge. Pennsylvania now has a new $800 million ``growing 
greener'' bond issue with which its taxpayers will fund $100 
million worth of watershed restoration in areas that are 
plagued by AMD.
    It is very important to note that for us to use this money 
effectively and much more effectively than has been done in the 
past, we need to build better human infrastructure and better 
partnerships to put the money on the ground. I cannot tell you 
how many of our 400 chapters around the country that have tried 
to put these projects together and have found the technical 
aspects of getting AML funding somewhat daunting, and in some 
cases as an obstacle to really doing the projects necessary to 
get the work done. But we are moving head. We are getting the 
work done.
    Kettle Creek in Pennsylvania is an outstanding example. We 
have photographs up. This is one of the problems we are 
treating in the headwaters of Kettle Creek. This is what is 
known as the kill zone on the Hewling Branch, a tributary of 
Kettle Creek. This is an ecological zone of death from acid 
mine drainage. This problem is being dealt with through a 
passive treatment technology through this use of this pond and 
crushed limestone. Projects like this are no longer on the 
fringe of scientific understanding. They are technologies that 
can be facilitated and transferred around the country, and as 
we spread the word and the capability, more and more AML monies 
will be needed.
    Briefly I want to mention that we are also doing this in 
Kentucky, Senator Bunning's home State, on Rock Creek in the 
Daniel Boone National Forest; Senator Lamar Alexander's home 
State of Tennessee on Coal Creek. These projects need to be 
facilitated. They need to have a steady source of funding.
    So for all of those reasons, we urge you to retain the 
general welfare priority of SMCRA, fulfill SMCRA's promise by 
making AML funding off budget and increase the CSI because we 
foresee a growing need. In fact, there is a pent-up need for 
that funding.
    Extend the authorization, if you can, to 25 years and not 
the shorter times in the two bills.
    And then finally, consider authorizing a similar fund for 
cleaning up abandoned hardrock mine States in the West. We have 
a tremendous pilot project going on in Utah on the American 
Fork River where we are working with Kennecott and Tiffany and 
Company to do a lot of this type of work in the West.
    So I will wind up my testimony by thanking all of you for 
the opportunity to appear and we stand ready to help you and 
work with you in delivering on the promise we made a generation 
ago to coal country.
    [The prepared statement of Mr. Gauvin follows:]

     Prepared Statement of Charles F. Gauvin, President and CEO of 
                            Trout Unlimited

    Mr. Chairman, members of the Committee, I appreciate the 
opportunity to appear today to give you the views of Trout Unlimited 
(TU) on two bills before the Committee, S. 2086 and S. 2049, both of 
which are designed to reauthorize and amend the Abandoned Mine 
Reclamation Fund (AML Fund) created by the Surface Mining Control and 
Reclamation Act (SMCRA). TU commends the Committee for holding the 
hearing and moving forward on reauthorizing this important program, 
which is set to expire at the end of Fiscal Year 2004.
    TU is the nation's largest coldwater fisheries conservation group 
dedicated to the protection and restoration of our nation's trout and 
salmon resources, and the watersheds that sustain those resources. TU 
has over 130,000 members in 450 chapters in 38 states. Our members 
generally are trout and salmon anglers who give back to the resources 
they love by voluntarily contributing substantial amounts of their 
personal time and resources to fisheries habitat protection and 
restoration efforts. The average TU chapter donates 1,000 hours of 
volunteer time on an annual basis.
    We are not experts in the intricacies of the AML Fund, however, we 
are experts in watershed restoration. In the past seven years, TU has 
worked with a wide variety of Federal, state, and local partners to 
restore watersheds degraded by abandoned mines and other past 
management practices. These efforts have taken place in many states 
including New York, Pennsylvania, Idaho, Montana, New Mexico and 
Vermont. Given our experience, one point is crystal clear 
reauthorization of, and increased funding for, the AML fund will 
provide additional money and resources for watershed restoration.
    Passed in 1977, SMCRA gives the Office of Surface Mining (OSM) 
authority to regulate coal mining and to collect fees from coal 
companies to create the AML Fund. The funds are used by the states and 
OSM to reclaim coal mining sites that were deserted before the law was 
enacted in 1977. The law protects our Nation's resources by improving 
the health of its watersheds and landscapes that are affected by 
current and past mining practices. Completed reclamation projects 
conducted under the law have improved the quality of tens of thousands 
of lives, restored water quality, and improved fishing and hunting.
    Reauthorization of the AML Fund is about fulfilling a promise made 
to protect Americans living in the coal fields from serious safety and 
environmental hazards. Secretary Norton said it well recently when she 
said that reauthorizing the AML Fund is about ``finishing the job.'' 
After implementing the program for 26 years, an estimated 7,000 mine 
sites remain unreclaimed. According to OSM, about 3.5 million people 
live less than one mile from abandoned coal mines. Unreclaimed high 
walls, burning slag piles, and gaping holes in the ground are some of 
the pressing hazards that have been, and should remain, the highest 
priorities of the program.
    In addressing reclamation of abandoned coal mines, ecological 
restoration should not be pitted against public health. They are 
largely overlapping. Both improve the quality of life and both improve 
the health of public watersheds. TU and its members know about water 
and watersheds, and we are here today because too many of the nation's 
streams run orange because of pollution from abandoned coal mines. The 
states and the OSM estimate that thousands of miles of Appalachian 
mountain streams are damaged by acid mine drainage from abandoned coal 
mines. It is one of the nation's largest remaining water quality 
problems.
    The good news is that, although the problem is vast, practical 
solutions exist to fix it. TU, OSM and states are working together 
throughout the eastern mountain region to address acid mine drainage 
problems. The job is far from finished. We urge the Committee and the 
sponsors of the bills to move expeditiously to enact the 
reauthorization, and to use the reauthorization legislation to increase 
funding for restoration of watersheds damaged by pollution from 
abandoned coal mines.
    Acid drainage flowing from abandoned coal mines has left some 
streams devoid of any life. EPA has singled out drainage from abandoned 
coal mines as the number one water quality problem in the Appalachian 
mountain region of the eastern U.S. Much of the problem originated 
years ago from coal production that helped build America and fueled our 
war efforts during World War I and II.
    Acid drainage is water containing acidity, iron, manganese, 
aluminum, and other metals. It is caused by exposing coal and bedrock 
high in pyrite (iron-sulfide) to oxygen and moisture as a result of 
surface or underground mining operations. If produced in sufficient 
quantity, iron hydroxide and sulfuric acid, a result of chemical and 
biological reaction, may contaminate surface and ground water.
    According to EPA, OSM and state water quality agencies, thousands 
of miles of streams are badly polluted with acid drainage. Acid 
drainage problems exist in Pennsylvania, West Virginia, Ohio, Kentucky, 
Maryland, Indiana, Illinois, Oklahoma, Iowa, Missouri, Kansas, 
Tennessee, Virginia, Alabama, and Georgia. The worst, most extensive 
pollution is from decades-old abandoned coal mines in Pennsylvania and 
West Virginia.
    In an effort to demonstrate how practical solutions could be 
applied to an otherwise daunting task, TU, OSM, the commonwealth of 
Pennsylvania, and private funders have spent more than $2 million to 
date cleaning up acid mine drainage pollution in the lower part of the 
Kettle Creek watershed in north-central Pennsylvania. I'll discuss our 
progress momentarily, but this is just one part of one very important 
watershed in the state. We estimate the need for, and are seeking, an 
additional $8 million to finish the acid mine drainage cleanup job on 
Kettle Creek.
    Just downstream, TU and others are now looking at the larger 
watershed into which Kettle Creek flows, the West Branch of the 
Susquehanna River, possibly the most polluted large river in America. 
Approximately 150 miles of the mainstem and more than 500 miles of 
coldwater tributaries have been rendered essentially lifeless due to 
toxic concentrations of metals and acidity from acid mine drainage, 
much of which is from abandoned mines. Overall, 72 percent of the 6,992 
square-mile West Branch basin is affected by acid mine drainage--the 
source for 96 percent of the pollution in the West Branch watershed.
    The scope of the problem in the West Branch is daunting: removing 
the high concentrations of toxic metals and neutralizing the pH of the 
acid mine drainage polluted water could cost hundreds of millions of 
dollars. At the same time, successful restoration of the West Branch 
will yield enormous economic and human health benefits that in turn 
will translate into a better way of life for the local communities. In 
addition, the potential for fishery restoration is phenomenal. Each 
stream in the watershed has been assessed as a potential high quality 
coldwater fishery or exceptional value stream. The headwaters of most 
streams above the acid mine drainage impaired areas are classified by 
the state as Class A wild trout fisheries. In short, on the West 
Branch, as in many other places, the technology to fix the problem is 
available. States, communities and conservation groups have the will. 
All we need is more funding.
    The AML Fund currently provides some limited but extremely useful 
funds for cleaning up the polluted water. More funding is needed.
    TU is familiar with two sources that receive moneys from the AML 
Fund for cleaning up abandoned mine pollution:

   OSM's Clean Streams Initiative, funded at $10 million in FY 
        2004 from the Federal share of the AML Fund, and
   Decisions made by individual states to allocate some of the 
        funding they receive from the AML Fund to finance cleanup 
        programs.

    Started in 1994 with only four million dollars, the purpose of the 
Clean Streams Initiative is to facilitate and coordinate citizen 
groups, university researchers, the coal industry, corporations, the 
conservation organizations, and local, state, and federal government 
agencies that are involved in cleaning up streams polluted by acid 
drainage.
    The science and the effectiveness of the cleanups provided by this 
funding are improving every year. Methods of water treatment used to 
eliminate acid drainage from abandoned underground mines can be grouped 
into two types. The most common method is chemical treatment. Called 
active treatment because it requires constant maintenance, this method 
usually involves neutralizing acid-polluted water with hydrated lime or 
crushed limestone. This treatment reduces acidity and significantly 
decreases iron and other metals. However, it is expensive to construct 
and operate and is considered a temporary measure because the acid 
drainage problem has not been permanently eliminated.
    The second treatment method is called biological, or passive 
control. This technology involves the construction of a treatment 
system that is permanent and requires little or no maintenance. Passive 
control measures involve the use of anoxic drains, limestone rock 
channels, alkaline recharge of ground water, and diversion of drainage 
through man-made wetlands or other settling structures. Passive 
treatment systems are relatively inexpensive to construct and have been 
very successful on small discharges of acid drainage, such as those on 
the Kettle Creek watershed.
    TU has worked with state agencies and OSM on cleanup projects in 
five eastern states, Pennsylvania, Maryland, West Virginia, Kentucky 
and Tennessee. Highlights include the following:

                       KETTLE CREEK, PENNSYLVANIA

    The AML Fund has provided several hundred thousand dollars to 
restore Kettle Creek. TU and its partners have made significant 
progress during the past five years in efforts to abate acid mine 
drainage in the lower Kettle Creek watershed. Our Lower Kettle Creek 
Restoration Plan provides the overall blueprint that guides the 
assessment and remediation activities, and this plan is being 
supplemented with data from airborne remote sensing surveys conducted 
by the U.S. Department of Energy National Energy Technology Laboratory. 
These surveys utilized thermal infrared and helicopter-mounted 
electromagnetic technologies to identify the acid mine drainage 
problems and to target key areas for remediation work.
    Two on-the-ground projects have already been completed as a direct 
result of the Lower Kettle Creek Restoration Plan and several more are 
currently under way. The ultimate goal of our project work is to 
reclaim17 miles of Kettle trout stream. The completed projects will 
restore native brook trout populations, create a new recreational 
fishery, expand the local economy that depends on outdoor recreation 
and tourism, improve water quality in local communities, and contribute 
to the overall restoration of the West Branch Susquehanna as it flows 
downstream to the Chesapeake Bay.

                          ROCK CREEK, KENTUCKY

    In Kentucky, TU is working with OSM, state water and fisheries 
agencies, and the U.S. Forest Service to restore Rock Creek in the 
Daniel Boone National Forest. Although parts of the creek are healthy 
and provide fine trout fishing, some stretches are badly damaged by 
acid mine drainage from abandoned coal mines. TU and its partner 
agencies are removing coal mine refuse from the banks of one stretch of 
the creek, and are implementing passive liming and treatment of other 
acid-impaired stretches, in a large-scale effort to restore this key 
tributary of the Cumberland River.

                         COAL CREEK, TENNESSEE

    In east Tennessee, TU's Clinch River chapter is working hand-in-
glove with the community of Briceville to clean up acid mine drainage 
in Coal Creek, a tributary of the Clinch River. After addressing 
chronic flooding and stream bank erosion problems that plagued the 
community for decades, the chapter is turning its attention toward the 
creation of four new wetlands near abandoned mine sites. The wetlands 
will filter out the majority of pollutants, including acid and heavy 
metals, such as iron, which currently pollute Coal Creek. But in order 
to initiate construction, our local volunteers are depending upon 
funding from the Clean Streams Initiative not only to purchase the 
necessary materials, but also to imbue the owners of abandoned mines 
with the trust that our ample will to do good work is matched by the 
means to carry it out.
    The ``general welfare'' priority currently in SMCRA allows 
watershed clean up to occur and it must be retained, as S. 2049 does, 
but S. 2086 does not.
    Section 4 of S. 2086 would eliminate the general welfare provision 
of both Priority 1 and Priority 2. As I have stated, TU has no 
intention of advocating any changes in the public health and safety 
priorities of the existing Reclamation Fund law. However, the large 
need for cleaning up water pollution caused by abandoned coal mines, 
and the great benefits to communities and states derived there from, 
leads TU to be a strong advocate of retaining the priorities in current 
law. We urge the Committee to do so. General welfare projects in 
Priority 1 and Priority 2 should continue to be funded.
    Fulfill the promise of SMCRA by making the AML Fund off-budget and 
increasing funding for the Clean Streams Initiative: the sooner the 
reclamation work is funded, the sooner it is finished.
    If we all agree that our goal is to ``finish the job,'' then let's 
get on with it. Currently, more than $6 billion is needed to fix high 
priority public health hazards associated with abandoned coal mines. To 
clean up water and watersheds, a total of $15 billion is needed. 
Despite this need, more than $1.5 billion that has been collected 
remains unspent. Clearly, a reauthorized AML Fund must keep the funding 
tap open. Therefore, TU encourages the Committee to make the AML Fund 
off-budget and not subject to the annual appropriations process.
    The fee reduction in both bills is inappropriate given the 
overarching objective of putting money on the ground to complete 
projects. Both bills phase in substantial reductions in fees collected 
from coal mining companies over the life of the new authorization. In 
light of existing funding needs, we see no reason why the fee reduction 
is appropriate. We urge the Committee to retain the current fee 
structure. TU believes the current fee structure will be more palatable 
to companies if they are assured that all of the fees are expended on 
the purposes set forth in SMCRA as would be achieved by making the fund 
off-budget.
    Finally, we urge the Committee to dedicate $25 million annually 
from the off-budget Reclamation Fund to the Clean Streams Initiative. 
We urge the Committee to support increasing the Clean Streams 
Initiative funding from its current level of $10 million up to $25 
million over the course of the 15 year authorization.
    Consider authorizing a similar reclamation fund for cleaning up 
abandoned hardrock mine pollution in the western U.S.
    Although a few western states, such as Wyoming, use some of their 
AML Fund allocations for non-coal mine abandoned hardrock sites, the 
need for restoration of these sites far outstrips the available 
resources. In the West, it is not a matter of finishing the job of 
cleaning up abandoned hardrock mining sites, it is imperative to get 
started. Indeed, according to EPA, abandoned mines affect the health of 
40% of western headwater streams. This pollution threatens coldwater 
fisheries, contaminates drinking water for millions living downstream, 
and jeopardizes local economies. We urge the Committee to take a 
serious look at the problem and to start developing a legislative 
solution to establish a complimentary or corollary fund for cleaning up 
abandoned hardrock mines.
    Extend the authorization to 25 years rather than the 15 year 
extensions in the current bills.
    Everyone agrees that the minimum amount of time needed to finish 
the job is 25 years. As such, TU supports extending the reauthorization 
to 25 years rather than the 15 years currently provided by both bills.
    The coal fields have sustained us through some of our greatest 
national challenges, and now it is time to give back to those lands, 
and those who live on them, to see that they are restored.
    Senators Thomas and Specter, Representatives Peterson, Sherwood, 
Cubin and Rahall have demonstrated good leadership by introducing bills 
to reauthorize this invaluable source of money. Also, we appreciate the 
strong role that Secretary Norton and the Department of the Interior 
have played in proposing a bill, introduced by Senator Specter and 
Representative Peterson, as well as the substantial funding increase 
for FY 2005 proposed by the Bush Administration from the Reclamation 
Fund. But the legislative road is long, and the legislative season is 
short. TU pledges to work with the Committee to help craft appropriate 
amendments and move a bill to the Senate floor expeditiously. We owe it 
the communities of the coal fields to finish the job.

    Senator Thomas. Thank you.
    Mr. Buckner.

 STATEMENT OF MICHEAL BUCKNER, RESEARCH DIRECTOR, UNITED MINE 
                WORKERS OF AMERICA, FAIRFAX, VA

    Mr. Buckner. Thank you, Mr. Chairman. My name is Micheal 
Buckner. I am the research director for the United Mine Workers 
of America. We appreciate the opportunity to be here today.
    Coal contributes significantly to our national economy, 
providing more than 50 percent of the electricity that American 
citizens use. American citizens I believe are woefully unaware 
of that fact. Many of them do not know that coal mining still 
exists. Coal miners are proud to do their part to provide 
domestically produced, low-cost energy to our Nation.
    They also strongly support the goals of the Surface Mining 
Act. They know that we need to mine coal in an environmentally 
sound manner. They know that we need to provide energy to the 
Nation. They also know that we need to keep the promises that 
have been made to the retirees.
    The debate about reauthorizing the Abandoned Mine Lands 
program will be full of very technical and complicated things, 
but it boils down to a very simple expression that we are 
debating about whether we are going to fulfill promises. Mr. 
Gauvin mentioned that we made a promise a generation ago that 
we would clean up the abandoned mine sites in the coal mining 
communities and we strongly support that.
    In 1946, the United Mine Workers signed a contract with the 
Federal Government in the Oval Office of the White House with 
President Truman that promised that if coal miners would 
produce energy for the Nation, when they retired, they would 
have a pension and health care.
    That system began to break down in the 1980's when we had 
conflicting court decisions. On the one hand, courts said that 
companies could walk away from those obligations by simply not 
signing a contract. On the other hand, the UMWA funds had a 
legal obligation to provide for that lifetime promise that 
originated in the White House.
    The 1992 Coal Act, in the wake of the Pittston strike, 
which caused the intervention of the first Bush administration 
and the appointment of a blue ribbon Federal Coal Commission, 
the Coal commission look at it and said that no longer can we 
rely on collective bargaining to keep the promise that 
originated in the White House. They found that coal miners had 
a legitimate expectation but that expectation was in jeopardy. 
So the Congress took those recommendations and enacted the Coal 
Act.
    The two promises were joined together and there was a 
specific reason that Congress joined together the promise of 
the Coal Act and the use of the AML interest money. That is 
because both of them represent legacy costs of the industry 
that compel a national solution. We cannot look to one company 
or one small group of companies to keep these promises.
    The Coal Act created the UMWA Combined Benefit Fund and the 
UMWA 1992 benefit plan. Congress intended that the financial 
mechanisms would be self-sustaining, and everyone, when that 
law passed, thought that we had put that promise to bed and 
that there would be no longer a problem. But the combination of 
a series of adverse court decisions, rapidly rising health care 
costs, a number of bankruptcies of major contributing 
employers, particularly in the steel industry, and recent low 
interest earnings from the AML fund have eroded those 
mechanisms. As a result, Congress has had to intervene three 
times with emergency appropriations in the last 5 years to 
avert a disastrous benefit cut among this elderly population.
    We were on the verge in the last few months of the trustees 
of the fund sending out notices that the benefits were about to 
be cut. I am pleased to report that the administration, with 
bipartisan support from members of Congress, has extended the 
Prescription Drug Demonstration program that was initiated in 
2001. That has averted the disastrous benefit cut that was 
looming about a month ago. However, that is only a temporary 
reprieve and we need a long-term solution.
    We believe that there is a growing bipartisan consensus 
within the administration and within the Congress that we need 
a long-term solution to these financial problems of the Coal 
Act.
    We also think that it is fitting and proper that the 
wedding of the AML program with the fulfilling of this promise 
needs to be reauthorized. We need to provide for sufficient 
duration and level of tax to take care of the priority 1 and 
priority 2 reclamation needs. We need to focus the spending on 
the public health and safety projects. We need to resolve in 
this debate the longstanding political dispute between the 
States and OSM over the State share collections.
    And last, but certainly not least in our mind, we need to 
provide that long-term financial solution so that we can 
finally tell these retirees that the promise that originated in 
the White House, that was reiterated by Congress in 1992 will 
be met and they do not have to worry from month to month or 
from year to year about whether their benefits are going to be 
secure. It is very heart-rending when we have meetings with our 
retirees to have an 85-year-old widow come up to you with fear 
in her eyes and say, am I going to have my benefits cut? That 
does not need to happen.
    I think that the reforms embodied in the Cubin-Rahall 
proposal in the House--and I understand that a bipartisan group 
of Senators are in discussions about introducing a companion 
bill--can help alleviate those fears among these retired miners 
and widows, and the United Mine Workers supports H.R. 3796 and 
the reforms embodied in that proposal. We strongly encourage 
the Senate to look at those reforms when it considers the 
reauthorization of the program.
    We stand ready to work with you, but we believe that all 
these promises need to be fulfilled and time is of the essence. 
Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Buckner follows:]

       Prepared Statement of Micheal Buckner, Research Director, 
                     United Mine Workers of America

    Mr. Chairman, members of the Committee, I am Micheal Buckner, 
Research Director 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 Committee 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 bi-partisan 
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 bi-partisan consensus that there is a pressing need for 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 solvency for the Coal Act.

    Three primary AML re-authorization bills have been introduced. The 
Administration proposal (S. 2049) has been introduced by Senator 
Specter of Pennsylvania. Senators Thomas and Enzi of Wyoming have 
introduced S. 2086. In the House of Representatives, 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. We have been advised that a 
bi-partisan group of Senators is in discussions about introducing a 
companion bill in the Senate. All of the AML proposals extend the 
authority of the AML to collect the reclamation fees at a lower rate 
than current law mandates. S. 2086 provides for the shortest duration 
of the fee and the lowest rate, and therefore raises less revenue than 
the other two major proposals. While both the Administration bill and 
the Cubin/Rahall bill lower rates for all production, S. 2086 only 
reduces fees for surface mining. Because of its shorter duration, it 
raises only about two-thirds of the amounts raised by S. 2049 and H.R. 
3796, both of which raise about $3 billion of revenue with slight 
differences in fee duration and amounts. However, S. 2086 and S. 2049 
do not provide for a long-term financial solution for 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 bi-partisan 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.
    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 bi-partisan 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 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 orphan 
retirees. A compromise was developed that would finance orphans through 
the use of interest on monies held in the Abandoned Mine Lands (AML) 
fund. In addition, the Union accepted a legislative compromise that 
included the transfer of $210 million of pension assets from the UMWA 
1950 Pension Plan. With these compromises in place, the legislation was 
passed by Congress and signed into law by President Bush as part of the 
Energy Policy Act.
    Under the Coal Act, two new statutory funds were created--the UMWA 
Combined Benefit Fund (CBF) and the UMWA 1992 Benefit Fund. The former 
UMWA 1950 and 1974 Benefit Funds were merged into the Combined Fund, 
which was charged with providing health care and death benefits to 
retirees who were receiving benefits from the UMWA 1950 and 1974 
Benefit Plans on or before July 20, 1992. The CBF was essentially 
closed to new beneficiaries. The Coal Act also mandated that employers 
who were maintaining employer benefit plans under UMWA contracts at the 
time of passage would be required to continue those plans under Section 
9711 of the Coal Act. Section 9711 was enacted to prevent future 
``dumping'' of retiree health care obligations by companies that remain 
in business. To provide for future orphans not eligible for benefits 
from the CBF, Congress established the UMWA 1992 Benefit Fund to 
provide health care to miners who retired prior to October 1, 1994 and 
whose employers are no longer providing benefits under their 9711 
plans.
    The CBF is financed by per-beneficiary premiums paid by employers 
with retirees in the fund. The premium is set by the Social Security 
Administration and is escalated each year by the medical component of 
the Consumer Price Index. Interest earned by the AML Fund is made 
available to finance the cost of orphan retirees. The remainder of CBF 
income derives from Medicare capitation and risk sharing arrangements, 
DOL Black Lung payments, investment income and miscellaneous court 
settlements. The benefits for orphans covered by the UMWA 1992 Fund are 
financed solely by operators that were signatory to the NBCWA of 1988.
    In passing the Coal Act, Congress recognized the legitimacy of the 
Coal Commission's finding that ``retired miners are entitled to the 
health care benefits that were promised and guaranteed them.'' Congress 
specifically had three policy purposes in mind in passing the Coal Act:

          (1) to remedy problems with the provision and funding of 
        health care benefits with respect to the beneficiaries of 
        multiemployer benefit plans that provide health care benefits 
        to retirees in the coal industry;
          (2) to allow for sufficient operating assets for such plans; 
        and
          (3) to provide for the continuation of a privately financed 
        self-sufficient program for the delivery of health care 
        benefits to the beneficiaries of such plans.

    Without question, Congress intended that the Coal Act should 
provide ``sufficient operating assets'' to ensure the continuation of 
health care to retired coal miners. However, the financial mechanisms 
have been eroded and have placed the Coal Act in continuing financial 
crises.

                         RECENT COURT DECISIONS

    The 2002 GAO study found that a number of court decisions have 
eroded the financial condition of the Combined Fund and the legal 
onslaught on the Coal Act continues. While Congress clearly intended 
that the Coal Act be financially self-sustaining, various court 
decisions have undercut Congressional intent. A 1995 decision by a 
federal court in Alabama in NCA v. Chater overturned the premium 
determination by the Social Security Administration (SSA) and reduced 
the premium paid by employers by about 10%. Over time, the effect of 
this decision was to remove hundreds of millions of dollars from the 
financing structure of the Coal Act. A 1999 decision by the same court 
ordered the CBF to return about $40 million in contributions to the 
employers, representing the difference between the original SSA premium 
rate actually paid and the rate established in NCA. The trustees of the 
CBF filed suit against the Social Security Administration in the 
District of Columbia in an attempt to set aside the NCA decision. In 
late-2002, the D.C. Court struck down the Social Security 
Administration's nationwide application of the NCA decision and ordered 
SSA to report to the Court what premium rate should apply to companies 
not covered by the NCA decision. In June 2003, SSA notified the Court 
it would apply a higher premium to companies not covered by the earlier 
decision. However, over 200 companies have filed another action in 
Alabama asking to avoid paying the higher rate.
    In 1998, the Supreme Court rendered a decision in Eastern 
Enterprises that struck down the obligation to contribute to the CBF 
for companies that were signatory to earlier NBCWAs but did not sign 
the 1974 or later contracts. Those employers were relieved of their 
contribution obligations in the future and the Combined Fund returned 
millions of dollars in prior contributions. Most of these retirees are 
now part of the unassigned beneficiary pool whose benefits are funded 
from other sources. Since that time, a number of other companies who 
signed the 1974 or later NBCWAs have also attempted to convince the 
courts that they, too, should be relieved of their responsibility. I am 
pleased to report that most of these cases have now completed their 
appeals process, with the courts holding that the companies cannot walk 
away from their Coal Act obligations.
    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 steel companies have further reduced the 
premiums paid to the CBF, increased orphan costs for the AML fund, and 
added thousands of 9711 plan beneficiaries to the 1992 Plan. The 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

    Mr. Chairman, there is a growing bi-partisan consensus that 
Congress needs to 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.
    Mr. Chairman, we thank you for the opportunity to add our support 
to the effort to re-authorize the AML program and to provide a long-
term solution to the financial problems of the Coal Act. I would be 
happy to answer any questions you may have.

    Senator Thomas. We have been joined by the Senators from 
Kentucky and from Tennessee. Mr. Bunning, did you have a 
statement?
    Senator Bunning. I have a short statement if it is all 
right.
    Senator Thomas. Yes.

          STATEMENT OF HON. JIM BUNNING, U.S. SENATOR 
                         FROM KENTUCKY

    Senator Bunning. Thank you, Mr. Chairman. I am glad we are 
holding this hearing today on a very important issue for 
Kentucky and the Nation. Abandoned mine reclamation is a vital 
issue for people living near coalfields. This is a particularly 
significant issue for the citizens of Kentucky. This program 
helps to eliminate health and safety dangers associated with 
past mining. It also ensures that abandoned mine land is 
reclaimed to provide a better environment.
    I have worked hard during my time in the Senate to ensure 
that this vital program continues. Every year I ask the 
appropriators to give increased funding to it. Every year since 
I have been in the Senate. Over $1.6 billion is currently 
sitting in the fund, and I believe that the money should be 
going directly to the States instead of being used by the 
Federal Government for other purposes.
    Kentucky has over $330 million worth of high priority 
abandoned mine land areas that still need to be reclaimed. It 
is third in the Nation for having the worst reclamation 
problems. Third.
    Therefore, I believe that reauthorization of this program 
needs to be completed this year. We cannot let this program 
simply end when much remains to be done.
    I would like to see some changes to the program. One of 
these changes is to see Kentucky receive more of its State 
share back from the Federal Government. Kentucky's share is 
about $128 million. That money could help Kentucky reclaim more 
land which would better the environment and the citizens living 
near and around the coalfields.
    I look forward to hearing about the legislation that has 
been introduced in the Senate. I believe that Senator Thomas' 
proposal is a very good start at helping Kentucky because it 
gives more money back to the States.
    I am also pleased to have testifying here today Mr. Steve 
Hohmann who is Director of the Kentucky Division of Abandoned 
Mine Lands. Mr. Hohmann has worked tirelessly on this issue to 
help Kentucky reclaim its mines in an effective manner and in a 
productive manner. I appreciate you being here.
    Thank you, Mr. Chairman.
    Senator Thomas. Senator Alexander.

 STATEMENT OF HON. LAMAR ALEXANDER, U.S. SENATOR FROM TENNESSEE

    Senator Alexander. Thank you, Mr. Chairman, and thank you 
to the witnesses for coming.
    Abandoned mining lands can be a serious health and 
environmental threat. The clean water problems caused by these 
activities is especially pronounced and especially a concern to 
me. It makes land unusable and it keeps some of our poorest 
counties in Tennessee from cleaning up their land and cleaning 
up their water and getting themselves in a position to attract 
and create good, new jobs. So I agree with what Senator Bunning 
said, and I commend the leadership of the other Senators in 
moving toward the reauthorization of this.
    I hope we will have enough money in this reauthorization 
and subsequent appropriations to, as the Secretary said, finish 
the job. I will be listening and reading the testimony to see 
if the years suggested here are long enough for that.
    I am wondering about whether we should reduce the fee in 
light of all the needs that we have. In Tennessee, it will 
probably take, they say, $33 million to clean up high priority 
sites and sites that impact the general welfare of our rural 
communities. I believe the general welfare provision is an 
important provision.
    Tennessee has the most serious problem with priority 1 and 
2 sites of the non-program States. We are on a par with 
Arkansas and Maryland which are minimum program States.
    There is another issue with so-called super reach-back 
companies, Mr. Chairman, because the 1992 Coal Act required 
certain companies to pay benefits. The law was held 
unconstitutional. Some companies got paid back by the Federal 
Government, some did not. Those that did not should be refunded 
their payments like the other companies.
    I am hoping we can learn more about the appropriate 
reclamation fee level on coal, the appropriate period for 
collection of the fees, as I mentioned a little earlier. I am 
here today to hope we can get a better understanding of the 
level of effort necessary to finish the job.
    And I thank the chairman for his work on his legislation 
and for scheduling the hearing.
    Senator Thomas. Thank you.
    We will have a little round of questions now and we will 
try to be short in our questions, and perhaps you can be short 
in your answers as well.
    Mr. Jarrett, you talked about the difficulty in setting 
priorities and so on. Would it not be helpful if the States 
receiving the money were directly involved in setting the 
priorities themselves and spending the money?
    Mr. Jarrett. Senator, the States do set the priorities on 
their inventory. The inventory numbers and the priority of 
those sites have all been established by the States.
    Senator Thomas. Well, the States do not have the money. The 
Feds decide how they use the money.
    Mr. Jarrett. The Federal SMCRA determines how the money 
gets allocated to the States. The allocation formula is set by 
law. That allocation formula dictates on an annual basis how 
much money each State gets. Essentially the way that works is 
whatever the appropriation is that we get on an annual basis, 
that amount of money is divided up into two pots, if you will. 
One of those pots is distributed on the basis of current 
production. The other pot of money is distributed on the basis 
of historic production so the States would get an amount of 
money out of each of those pots, an amount equal to their 
percentage of the national total for historic production and 
current production.
    Senator Thomas. That is true, but you are talking about 
one-half of the funds. The other half is not going out there. I 
mean, that is what this is all about.
    Mr. Jarrett. I think that is part of what this is about, 
and it is true. There are about $1.6 billion that has not been 
appropriated.
    Senator Thomas. Well, I just am saying that States ought to 
have, it seems to me, a little more direct funding to their 
programs.
    Mr. Hohmann, if we continue with the 50/50 split on the 
tax, half for the Feds, half for the States, what would be 
wrong with having the half go directly to the States?
    Mr. Hohmann. Senator, I think that, representing the 
associations, our consensus opinion on that is that we think 
the 50 percent State share should be returned to the States as 
expeditiously as possible, and that is Kentucky's position 
also.
    Senator Thomas. Well, I am going a little further than 
that. I am saying when it is extracted, just like the fee on 
mineral rights, they go directly to the States. They do not go 
to the Feds.
    Mr. Hohmann. We have really never discussed that before, 
but a direct reimbursement to the States would be something 
that would be unique and would eliminate that.
    Senator Thomas. Well, it is not unique in the mineral 
business. That is the way it is done. When you lease oil or gas 
lands, there is a certain amount and part of it goes directly 
to the State and part of it goes directly to the Feds.
    Mr. Green, have you ever thought much about--what is it--
low Btu coal in the West is worth about $5.50, something like 
that.
    Mr. Green. That is correct, Mr. Chairman.
    Senator Thomas. Coal in the East is worth like $45 or 
something like that.
    Mr. Green. That is my understanding, yes, sir.
    Senator Thomas. But they both pay 35 cents.
    Mr. Green. If they were surfaced mined, Mr. Chairman, that 
is correct.
    Senator Thomas. Is that a fair way to do it? What I am 
saying is the percentage of the cost is 1 percent for some 
people and 6 or 8 or 10 percent for someone else.
    Mr. Green. Mr. Chairman, I think we would agree with your 
position on that issue, that a percentage of the selling price 
of the coal could be a more equitable way of assessing the 
reclamation fee. Yes, sir.
    Senator Thomas. One of the more immediate problems has been 
transportation. You have a ton of coal in Wyoming. It goes back 
to Indiana or somewhere in the Midwest. It costs three times as 
much to get the coal there as it does to produce the coal. So 
the fee is sometimes unfair.
    Well, I will stop and we will go around. Senator Bingaman.
    Senator Bingaman. Thank you, Mr. Chairman.
    Mr. Jarrett, you are speaking for the administration here. 
Your position, as I understand it, is that you favor reducing 
the fee although there are enormous unmet needs out there. Is 
it also your position that you favor the proposal Senator 
Thomas is making to go ahead and directly fund this off budget? 
I mean, the proposal is that the money would not be subject to 
appropriation, would not be subject to budget limits in any 
way, as I understand it. Is that the administration's position?
    Mr. Jarrett. That is not the administration's position. Our 
proposal requires discretionary budget spending.
    Senator Bingaman. So you do not favor direct spending of 
these funds.
    Mr. Jarrett. That is correct.
    Senator Bingaman. And what is your position on cutting the 
fee? Senator Alexander asked about that. You believe we should 
cut the fee?
    Mr. Jarrett. It would be my belief that the State of 
Wyoming felt that fee reduction was an important feature. I 
have personally talked to many in the mining industry who tell 
me that fee reduction is not necessary. All coal operators, 
obviously, do not agree with that. But it is my understanding 
that as long as all operators are paying the same fee and no 
one operator is given a competitive advantage or disadvantage 
over another operator, that the amount of the fee is not 
critical.
    Some operators insist that there be a fee cut. We have 
thought hard to increase our budget request, and as you know, 
we have increased our budget request by $53 million in our 2005 
budget. So the fee cuts that we have proposed represent the 
difference between what our total budget request is and what 
the AML fee collection projections would be without the 
reduction. So we are remaining relatively revenue neutral.
    Senator Bingaman. I am still not clear. Are you supporting 
a fee cut or not?
    Mr. Jarrett. We are supporting a fee cut.
    Senator Bingaman. I am concerned that we allow States to 
deal with their hardrock mine reclamation problems on the same 
basis that they are able to deal with their coal mine 
reclamation problems. Do either of these bills restrict the use 
of AML funding for non-coal reclamation as compared to current 
law?
    Mr. Jarrett. The administration's proposal does not make 
that restriction, and as I understand Senator Thomas' proposal, 
it likewise does not impose that restriction.
    Senator Bingaman. So from your perspective, that option 
should be available to the States to use these funds in the 
same way with regard to non-coal reclamation.
    Mr. Jarrett. Senator, under our proposal, we tried to 
devise a proposal that would provide each of the States the 
amount of money that they would need to reclaim their priority 
1 and priority 2 coal-related AML problems. But I do believe 
that the States should have the discretion, once they receive 
that amount of money, to spend it on what that State believes 
is the most important project. So if a State has an abandoned 
hardrock mine that is, in the State's view, far more dangerous 
than one of the abandoned coal mine sites, we believe the State 
should have the discretion to make that choice.
    Senator Bingaman. Why should we not be trying to allocate 
funds on the basis of the number of non-coal mines as well as 
the number of coal mines?
    Mr. Jarrett. I would be concerned about that proposal and 
question the fairness of asking the coal industry to pay for 
reclamation of non-coal sites.
    Senator Bingaman. Would you support any effort to obtain 
funds to deal with these non-coal sites? If we should not use 
the coal-generated revenues in that way, what should we do 
about the non-coal sites?
    Mr. Jarrett. Well, under our proposal, under current law, 
and under Senator Thomas' proposal, they can use the AML 
dollars to reclaim those sites. I would personally be very 
interested in working with anyone who wanted to develop a 
program that dealt with the abandoned non-coal sites in a more 
comprehensive way than we are doing under our program.
    Senator Thomas. Thank you.
    Senator Bingaman. Have I asked all my questions?
    [Laughter.]
    Senator Thomas. We will come back.
    Senator Bunning.
    Senator Bunning. Thank you.
    Mr. Jarrett, Mr. Hohmann, Kentucky has over--over--$330 
million of high priority reclamation that remains to be done 
presently. The administration's proposal provides Kentucky with 
only $400,000 more for fiscal year 2005. It was appropriated in 
fiscal year 2004. Yet, States such as Virginia and Ohio 
received $700,000 and $1.6 million more in funding, 
respectively. Why do States with less reclamation problems than 
Kentucky receive more money under the administration's 
proposal? Why is Kentucky's share of reclamation funding as low 
as it is?
    Now, do not give me the old following the formula stuff 
because we pay a heck of a lot more into that AML abandoned 
mine fund than Virginia and Ohio combined. So let us look at it 
in a reasonable fashion. Why is Kentucky sucking wind as far as 
getting money back to reclaim the mines and the damage done by 
the mines?
    Mr. Jarrett. Under the administration's proposal, each 
State would receive an equal share of funds based on the 
magnitude of the problem because under our proposal, we would 
be distributing the money based on historic production. So a 
State like Kentucky that has almost 11 percent of the AML 
problems on a nationwide basis would get 11 percent of however 
much money Congress actually appropriated in any 1 year.
    Senator Bunning. Well, then why are we doing--under this 
present administration's funding level, why is it so low 
compared to other States that are much more in line and have 
less problems in reclamation than Kentucky does? Certainly 
Virginia and Ohio do not have 11 percent of the historical coal 
production.
    Mr. Jarrett. That is true, but if we are talking about the 
current allocation, the 2003 allocation or the 2004 allocation, 
which is being made under current law, we are not allowed. We 
do not have the authority to distribute money based on the 
magnitude of the problem. That is the issue that we are trying 
to address in our proposal.
    Senator Bunning. Mr. Jarrett, OSM has said that its plan 
will be better for the Nation because States that have finished 
their reclamation will get out of the program, leaving more 
money for other States under the administration's proposal. 
What steps will OSM take to ensure that States that have 
finished their reclamation will get out of the program and not 
request continued funding?
    Mr. Jarrett. The only way to accomplish that is to change 
the allocation formula, as we have proposed, so that those 
distributions will be based solely on the magnitude of the AML 
problem. Under our proposal and under current law, once a State 
has completed that AML reclamation, it is no longer entitled to 
a distribution from the historic production account.
    Senator Bunning. What is the problem with distributing the 
money that is in the trust fund in direct proportion to the 
needs of the States that need the money?
    Mr. Jarrett. That is exactly what we are proposing in the 
administration's bill.
    Senator Bunning. No, you are not because when I proposed it 
in a law, the administration opposed the law that I proposed. 
So maybe you were not there but maybe someone else might have 
been. But the administration did not cooperate and we still 
have the huge problem in Kentucky.
    Mr. Jarrett. I am not familiar with----
    Senator Bunning. I proposed bringing the exact amount of 
dollars that Kentucky had contributed into the fund back to 
Kentucky to take care of the needs.
    Thank you for your time.
    Senator Thomas. Thank you, Senator.
    Senator Alexander.
    Senator Alexander. Thank you, Mr. Chairman.
    I have got a couple of questions about the general welfare 
provisions to make sure that I understand them properly. 
Perhaps, Mr. Jarrett, you would be the right one to ask. How 
much would it cost to reclaim abandoned mining lands if the 
general welfare provisions are kept in the law?
    Mr. Jarrett. We have on the inventory $3.6 billion worth of 
construction to complete the priority 2 general welfare 
problems.
    Senator Alexander. Any of you might want to comment on 
this. What are the potential health and environmental impacts 
of not including the general welfare provisions in the law?
    Mr. Gauvin. Senator, I think you would find in certain key 
watersheds in the country an inability to continue addressing 
problems in headwater streams where you do not typically have 
the most pressing public safety problems, but where you have 
continuing contributions of principally acid mine drainage to 
major watersheds.
    The west branch of the Susquehanna, a principal tributary 
of the Chesapeake Bay system, has about a 15-mile dead zone in 
its mainstem which is the result of cumulative acid mine 
drainage contributions from headwater streams in north central 
Pennsylvania. Most of the work on those streams would not come 
within the first priority of public health and safety, but I 
think all would agree that it is critical work not only for the 
Chesapeake Bay but for the economies of the communities 
involved. I am sure you could find examples in Kentucky, 
Tennessee, and elsewhere.
    Senator Alexander. Anyone else on that question?
    [No response.]
    Senator Alexander. The only other comment--I am trying to 
understand the relationship of the fee level to the Secretary's 
statement that we want to finish the job. And comments have 
been made about the fact that in the end it is a minimal charge 
on the electricity costs. So I guess my question would be, why 
are we considering reducing the fee when there is so much to be 
done? I suppose part of the answer is that not all the money 
ends up going to do what it is supposed to do.
    But would any of you like to make a comment on the fee 
level, in addition to what you have said in your statements, 
the fee level as compared with the size of finishing the job?
    [No response.]
    Senator Alexander. Does that mean you all think it should 
be the same or reduced or increased?
    Mr. Buckner. Senator, the mine workers think that we need 
to have a fee set at an appropriate level and duration to take 
care of the reclamation needs. The estimates are that there are 
about $3 billion of priority 1 and 2 public health and safety 
issues. We think that should be the first focus. I believe that 
the administration bill and the Cubin-Rahall bill both would 
raise approximately the same amount of money, in the range of 
about $3 billion. I believe Mr. Thomas' bill, because of its 
shorter duration, would raise only about two-thirds of that 
amount of money.
    Senator Alexander. Thank you, Mr. Chairman.
    Senator Thomas. You are welcome. Thank you.
    Mr. Green, we talk about the priorities and the 
certification of some States which has an impact, apparently, 
on the distribution. This goes back to the 1970's I believe. 
How do you feel about the certification process?
    Mr. Green. Mr. Chairman, you are correct that Wyoming is in 
a somewhat unique position in that we are the major contributor 
to the AML trust fund and also have a unique status as a 
certified State. I think it is unfortunate that our status as a 
certified State has been interpreted to mean that we no longer 
have any priority 1 or priority 2 coal problems remaining and 
that misconception is often extended to the assumption that we 
have no priority 1 or priority 2 hardrock or non-coal problems 
left in the State of Wyoming.
    As I mentioned in my written testimony, the State of 
Wyoming certified in 1984, as a result of some serious mine-
related deaths that had occurred at non-coal sites. Inventory 
processes that were available to us at that time were somewhat 
rudimentary. In fact, they were based only on aerial 
photography and not on research into historic mine maps in 
historic mining districts. I can only assume that the decision 
to certify was made jointly by elected officials in the State 
of Wyoming at that time and that certification request was 
approved by OSM at that time. One would hope that they made 
that decision in the best interests of the program in the State 
of Wyoming.
    I think, however, all States have underestimated the long-
term effects of the deteriorating conditions in historic coal 
mine areas as well as non-coal areas. As I mentioned, we have 
got over 30,000 acres in one county. In Sweetwater County 
alone, we have approximately 30,000 acres of land that has been 
undermined by historic coal production activities. We have 
mitigated about 8,000 acres that exist within the city limits 
of Rock Springs. But we see a need for continuing funding 
available to the State of Wyoming to address those ongoing coal 
problems.
    Senator Thomas. Good. Thank you.
    I have a question here that Chairman Domenici sent Mr. 
Jarrett. In 1992, Congress ordered you to transfer the interest 
from AML funds to the United Mine Workers Combined Benefit Fund 
to cover health premiums. If the interest is insufficient to 
cover the shortfall, the Secretary is ordered to make up the 
difference, up to $70 million. The law is unclear regarding how 
the amount due is determined other than the trustees of the CBF 
will estimate how much to be debited. Exactly how does this 
work? How do you determine how much money to send to CBF?
    Mr. Jarrett. On an annual basis, the managers of the 
Combined Benefit Fund give us the estimate of their needs. Our 
finance staff also makes an estimate of the amount of interest 
we will earn during the coming year, and we transfer the lower 
amount of those two, up to $70 million. Then in subsequent 
years, once the final numbers are in and our books are audited, 
we make adjustments.
    Senator Thomas. So, Mr. Buckner, this is following on Mr. 
Domenici's question. It says, I cannot think of another 
government program where we transfer government funds to a 
private party where the party determines the amount of payment 
without any kind of government oversight.
    Mr. Buckner. Well, I think clearly there is oversight, as 
Mr. Jarrett just pointed out. The UMWA health and retirement 
funds and OSM have a memorandum of understanding that governs 
the transfer of those funds. It is based on a projection of 
what the needs will be for the coming year. At the end of that 
year, based on actual health expenditures, there is an 
adjustment. In some years the fund pays back OSM. In some years 
OSM owes more money to the fund. But the adjustment is made and 
the oversight is there.
    Senator Thomas. But there is no third party that 
independently evaluates whether your requests are legitimate or 
illegitimate.
    Mr. Buckner. Well, I assume that OSM looks at the fund's 
books. The General Accounting Office has done a number of 
studies of----
    Senator Thomas. General Accounting has?
    Mr. Buckner. Yes, a number of studies of the Combined 
Benefit Fund. And I would assume that the Inspector General of 
the Interior Department also would have authority if there are 
questions, but I believe that----
    Senator Thomas. Well, it seems on the surface that here is 
a group that is going to get money, I tell you how much money I 
want, and they pay it. That is an unusual situation.
    Mr. Buckner. But that is so that the benefits can flow 
during the year. At the end of the year, there is a true-up and 
if the OSM transfer has been in excess of the actual health 
expenditures, the fund pays back OSM that difference.
    Senator Thomas. Do you know, Mr. Jarrett, how much money 
has been generated in this fund since it began, the AML fund?
    Mr. Jarrett. Total interest?
    Senator Thomas. Total. Not total interest. Total payments 
from production.
    Mr. Jarrett. We will be glad to provide that information.
    Senator Thomas. I would like to know how much has been 
generated and how much has been spent on reclamation.
    Mr. Jarrett. On reclamation?
    Senator Thomas. Yes.
    Mr. Jarrett. And interest transferred?
    Senator Thomas. I am not worried about that.
    Mr. Jarrett. Okay, I am sorry.
    Senator Thomas. You are talking about reclamation being the 
reason for this whole thing. I would like to know how much 
money was paid in by the producers, total, and how much has 
been spent on reclamation.
    Mr. Jarrett. I will be glad to provide that to the 
committee.
    Senator Thomas. I am about through here. Do you have the 
authority to look at the books for the Combined Benefit Fund?
    Mr. Jarrett. I think there are controls in place to make 
sure that the money that we send to the Combined Benefit Fund 
is spent for the purpose.
    Senator Thomas. Maybe you could tell me how that works. 
Would you? If you do not know, find out what the real authority 
is and who does it and how detailed it is.
    Mr. Jarrett. We will be glad to provide that to you, 
Senator. I think the real issue is who is conducting oversight 
of the Combined Benefit Fund.
    Senator Thomas. That is right.
    Mr. Jarrett. We can verify that the money we sent was spent 
for the purpose for which it was intended, but that is 
different than saying we provide oversight over how that 
program is being managed.
    Senator Thomas. There is a feeling among some, not 
necessarily me, that there is not enough oversight on that as 
to how it is actually done.
    Senator.
    Senator Bingaman. Thank you, Mr. Chairman.
    Mr. Jarrett, one of the points I made in my opening 
statement--and I think President Shirley made it too--is that 
we would like to be sure that tribes are treated in the same 
way that States are treated under this legislation and under 
this program. How do the two bills that we are considering here 
today differ with regard to the treatment of Indian tribes 
under the AML program?
    Mr. Jarrett. Both of the bills treat the tribes the same as 
they treat the States with respect to the AML program. Now, 
under Senator Thomas' proposal, the tribes, as would the 
States, would continue to be eligible to receive 50 percent 
State share of future collections. Under the administration's 
proposal, the States and the tribes would not be eligible to 
receive 50 percent State share of future collections. But both 
bills, while they treat them differently, each bill treats the 
tribes exactly the same way they treat the States.
    Senator Bingaman. One of the other points that President 
Shirley made is that he believes that tribes, particularly the 
Navajo Nation, should be able to assume primacy for the 
regulation of coal mining activities on their land. What is the 
administration's position on that?
    Mr. Jarrett. Our position on that issue is that that is 
prohibited under current law and certainly within Congress' 
right to amend SMCRA to allow that.
    Senator Bingaman. And you have no problem with us doing so? 
You do not oppose that amendment?
    Mr. Jarrett. We would obviously want to see exactly what 
that amendment said. We have met with many of the tribes on 
this issue, and I do not believe that they are asking that they 
just be given carte blanche authority to run their regulatory 
program. I think they want to be treated the same as the States 
in the sense of we want to apply for it and go through the 
scrutiny that we would go through with any State to decide 
whether or not to grant primacy.
    Senator Bingaman. And current law does not allow you to do 
that?
    Mr. Jarrett. That is correct.
    Senator Bingaman. I think there is a statement in your 
testimony about how you are seeking authority for the Secretary 
to certify completion of coal reclamation in a State. Has there 
been a problem in your not being able to do this? I do not 
really understand what the issue is here that we need to be 
addressing.
    Mr. Jarrett. To the best of my knowledge, there has not 
been a problem. That particular provision was something that 
was being insisted upon by some in a previous House version of 
reauthorization. From our perspective, the criteria does not 
change. The Secretary could not certify a State that was not 
finished with its AML work any more than we would allow a State 
to certify before they finished that job. So at best, that 
provision would allow us to keep the paperwork current with the 
program. The reality is that the funding is not tied into 
certification.
    Senator Bingaman. Mr. Buckner, could you just again provide 
to the committee anything, any analysis that you have of the 
two bills as they relate to the provisions dealing with 
financial problems in the Combined Benefit Fund? I am just 
unclear in my own mind as to which of the two bills is most 
favorable from your perspective or does what you think ought to 
be done.
    Mr. Buckner. Well, the bill that the United Mine Workers 
believes that the Senate ought to consider is a bill that has 
gotten strong bipartisan support in the House, and we hope that 
very shortly there will be a bill introduced in the Senate, a 
companion bill, H.R. 3796, the Cubin-Rahall approach. It has 
garnered support from the three largest coal-producing States, 
Wyoming, West Virginia, and Kentucky. Virtually every House 
member has signed onto that bill.
    The problem with the administration bill is that--I 
mentioned, Senator, that there had been several court decisions 
that have undermined the financial condition of the fund. One 
of those was a decision that is called the NCA decision which 
essentially knocked down the amount of premium that the Social 
Security Administration had set originally when the Coal Act 
was passed that the assigned operators have to pay, knocked it 
down by about 10 percent in 1995.
    In addition, we have got an escalator clause that does not 
really truly reflect the increase in cost at the funds. It 
measures the medical component of the CPI. So while it may 
capture the inflation of a procedure, it does not reflect the 
reality of a closed, elderly population requiring increased 
utilization of services.
    So with the combination of the court decision that knocked 
down the amount that the contributing operators had to pay and 
an escalator that does not truly reflect the true costs, each 
year we are falling further and further behind.
    The administration proposal carries forward the provision 
of current law which said that the interest money is only to be 
used to pay for the cost of orphan beneficiaries. The Cubin-
Rahall approach opens up that money to cure deficits, which is 
what Congress has done three times in the past 5 years. So we 
believe that the administration bill and the Thomas bill do not 
adequately address the future needs that are going to arise.
    We have also got problems, Senator, with a growing burden 
from bankrupt companies in the steel industry, particularly 
thousands of beneficiaries that, when Congress passed the law, 
were paid for by the steel companies and are no longer being 
paid for by Bethlehem, LTV, Kaiser Steel, and others. We do not 
think that the Congress anticipated that type of burden. 
Essentially what we have got are greater needs being placed on 
the fund, more employers being drawn out of the fund in terms 
of contributions. So the financing mechanisms that Congress set 
up in 1992 are taking heavy weight and are about to collapse 
And we do not think the administration proposal will cure that. 
We do think the Cubin-Rahall approach will.
    Senator Bingaman. Thank you very much.
    Thank you, Mr. Chairman.
    Senator Thomas. Just very briefly. What do the steel 
companies have to do with the coal miners?
    Mr. Buckner. Most of the old-line steel companies, Senator, 
were integrated steel producers----
    Senator Thomas. I understand but they are not coal miners.
    Mr. Buckner. No. They were coal miners. They produced the 
coal----
    Senator Thomas. These guys were not coal miners.
    Mr. Buckner. No, no. They produced coal in coal mines----
    Senator Thomas. I am talking about the people.
    Mr. Buckner. Yes.
    Senator Thomas. You keep saying that they are getting to be 
90 years old. When does this expire?
    Mr. Buckner. Well, it will expire when the last beneficiary 
dies.
    Senator Thomas. When is that?
    Mr. Buckner. I do not know what----
    Senator Thomas. I mean, roughly. What are you talking 
about? You tried to do something differently in 1998 I believe 
to extend it further.
    Mr. Buckner. In 1998? I am not sure what you are talking 
about.
    Senator Thomas. Well, I guess what I am saying in general 
terms, number one, is it confined to coal miners? And number 
two, is there any end to it, or will you continue to find 
companies that have to be subsidized?
    Mr. Buckner. Well, the only people who are in there are 
people who worked in the coal industry under the National 
Bituminous Coal Wage Agreement. The steel companies employed 
coal miners in their coal mines, and under the Coal Act, they 
were responsible for providing those benefits. They have gone 
bankrupt because of the collapse of the steel industry, and 
under the law, the fund has the responsibility to pick those 
up.
    I just want to raise the issue that I do not think Congress 
anticipated in 1992 that such companies as Bethlehem Steel, 
which were once considered your blue chip stocks, would not be 
around in 2004.
    Senator Thomas. Well, thank you, gentlemen.
    I have a letter here of Kennecott Energy I would like to 
put in the record.
    I want to thank you for being here. I think all of us agree 
we need to go forward. We need to find a way to continue with 
the reclamation project. We need to continue to be able to have 
fairness in the taxation area. I think we need to continue to 
seek to ensure that the purpose for these funds is being 
utilized and that the funds are actually there. So we will 
continue to work together on it.
    Some of the members who were not here may have some written 
questions for you in the next 24 hours or so, and we will leave 
the record open for that.
    So thank you again for being here. You were a very good 
panel, and we appreciate it.
    [Whereupon, at 11:30 a.m., the hearing was adjourned.]


                               APPENDIXES

                              ----------                              


                               Appendix I

                   Responses to Additional Questions

                              ----------                              

                        Department of the Interior,
           Office of Congressional and Legislative Affairs,
                                    Washington, DC, April 30, 2004.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Mr. Chairman: Enclosed are responses prepared by the Office of 
Surface Mining Reclamation and Enforcement to questions submitted 
following the March 11, 2004, hearing on S. 2049, to amend the Surface 
Mining Control and Reclamation Act of 1977 to reauthorize collection of 
reclamation fees, revise the abandoned mine reclamation program, 
promote remining, authorize the Office of Surface Mining to collect the 
black lung excise tax, and make sundry other changes; and S. 2086, to 
amend the Surface Mining Control and Reclamation Act of 1977 to improve 
the reclamation of abandoned mines.
    Thank you for the opportunity to provide this material to the 
Committee.
            Sincerely,
                                             Jane M. Lyder,
                                               Legislative Counsel.
[Enclosure]
               Responses to Questions From Senator Thomas
    Question 1. In non-certified states, what amount has been spent on 
non-coal reclamation projects?
    Answer. As of September 30, 2003, non-certified States and Tribes 
have received $2.6 billion in grants from the AML fund. Of that amount, 
$33 million (1.3 percent) went for noncoal reclamation projects.
    Question 2. What types of projects does that include?
    Answer. Vertical openings accounted for 58 percent ($19.0 million) 
and portals accounted for 30 percent ($9.9 million) of the non-coal 
reclamation projects approved in non-certified States and Tribes 
through September 30, 2003. Most of this reclamation was done under 
section 409 of SMCRA, which authorizes expenditure of AML funds for 
reclamation of voids, open and abandoned tunnels, shafts, and entryways 
resulting from any previous non-coal mining operation if the surface 
impacts of those operations constitute an extreme danger to public 
health, safety, or property. A complete summary is presented in the 
table below.

    NON-CERTIFIED PROGRAM STATES AND TRIBES AND TENN.--NON-COAL, ALL
                PRIORITIES, ALL PROGRAM TYPES--30 SEP 03
------------------------------------------------------------------------
                                                         Completed
                                                  ----------------------
                                                                  % of
                                                      Amount      total
------------------------------------------------------------------------
Vertical Openings................................  $19,007,038    57.61%
Portals..........................................    9,870,647    29.92%
Subsidence.......................................    2,092,313     6.34%
Dangerous Piles & Embankments....................      522,344     1.58%
Dangerous Highwalls..............................      449,409     1.36%
Hazardous Equipment & Facilities.................      394,809     1.20%
Highwall.........................................      326,034     0.99%
Pits.............................................      150,689     0.46%
Spoil............................................       85,339     0.26%
Gobs.............................................       78,250     0.24%
Dangerous slides.................................        7,582     0.02%
Polluted Water: Agr. & Indust....................        5,000     0.02%
Clogged Stream Lands.............................        2,500     0.01%
                                                  ----------------------
    Total........................................  $32,991,954      100%
------------------------------------------------------------------------
Source: AMLIS

    Question 3. How much has been spent on non-coal reclamation for P3, 
P4, and P5 projects in the non-certified states?
    Answer. P3, P4, and P5 projects account for $640,000 (1.9 percent) 
of the $33 million spent on noncoal projects in the non-certified 
States and tribes as of September 30, 2003.
    Question 4. There is an estimated $3 billion worth of P1 and P2 
priority needs in the country and there is an un-appropriated balance 
of $1.56 billion in the AML Trust Fund. I have also been told it could 
take between 15 and 20 years to address these needs. How quickly could 
the needs be addressed if the Trust Fund was released to the states?
    Answer. Unless Congress reauthorizes the reclamation fee in a 
manner that addresses the allocation issue, many P1 and P2 problems may 
never be addressed. The AML inventory currently contains $3 billion 
worth of unreclaimed P1 and P2 health and safety problems, a figure 
that does not include administrative costs. Of the $1.56 billion 
unappropriated balance in the AML fund, $532 million is allocated to 
certified States and Tribes--those States and Tribes that have 
completed their coal-related reclamation. In addition, $302 million is 
allocated to the Rural Abandoned Mine Program, which, when it was 
active, generally focused on lower priority sites. That leaves less 
than $0.8 billion available to fund grants for coal-related 
reclamation, run the Federal and emergency reclamation program, and 
fund other authorized uses of the AML fund. Therefore, release of the 
$1.56 billion unappropriated balance in the AML fund would result in 
reclamation of only a fraction of existing P1 and P2 sites. The number 
of problems that could be addressed and the time it would take to 
complete those projects would depend if Congress releases the balance 
of the fund to target States and Tribes with existing P1 and P2 
problems. However, even under the most optimistic scenario, a majority 
of existing P1 and P2 sites would remain unreclaimed should Congress 
merely release the unappropriated balance without extending fee 
collections.
    Question 5. You testified that the Office of Surface Mining (OSM) 
has the opportunity to review the Combined Benefit Fund (CBF) books. Do 
you conduct a financial audit, or receive an audit, of the CBF on an 
annual basis?
    Answer. The United Mine Workers of America Combined Benefit Fund 
(CBF) is audited annually by the accounting firm of KPMG LLP. OSM 
typically receives a copy of the financial statements and related audit 
opinion. However, OSM has no oversight over how and to whom CBF awards 
claims. According to the CBF, the final audited report for 2003 is 
expected within 30 days.
    After conducting an audit of the funds transferred to the CBF from 
1996 to 2000, the inspector General for the Department of the Interior 
generally found that the amounts transferred and the amounts paid for 
health care benefits were accurate (see Report Number 01-I-187, 
attached).* The Inspector General also issued a related Advisory Letter 
(Report Number 01-I-188, attached) that concluded that the CBF may not 
be able to meet its long-term financial obligations, that the 
preparation of the transfer bill needed to be simplified, and that 
administrative costs are an authorized use of transferred funds.
---------------------------------------------------------------------------
    * The report has been retained in committee files.
---------------------------------------------------------------------------
    Question 6. How do (you) determine or verify that the funds 
transferred from OSM to the CBF are used for authorized purposes.
    Answer. The CBF provides OSM with an annual auditor's statement 
that the CBF's determinations of operators' and related persons' 
business status reflect reasonable application of the guidelines for 
such determinations, which the CBF has previously disclosed to OSM. 
This procedure is set forth in the current memorandum of understanding 
between the CBF and OSM. While this is not an audit, it is an 
independent review using agreed-upon procedures.
    Question 7. Should Congress authorize AML fee collections in excess 
of annual appropriations? If so, why?
    Answer. We believe that AML fee collections should closely match 
annual appropriations from the AML fund, thus making the program 
revenue-neutral and avoiding placement of any unnecessary costs on 
customers. We also believe that the program should continue to be self-
financed, by the AML fee, and donations that are directed to AML 
projects. The graduated fee reductions in our bill would accomplish 
both goals.
              Responses to Questions From Senator Bingaman
    Question 1. S. 2049 makes extensive revisions to section 411 of 
SMCRA. Does this affect the ability of a State or tribe to use AML 
funds for noncoal reclamation work? Do you interpret any provisions of 
S. 2049, S. 2086, or H.R. 3796 (Cubin-Rahall) as affecting a State or 
Tribe's ability to use AML funds for noncoal reclamation work?
    Answer. SMCRA contains two provisions (sections 409 and 411) 
authorizing use of AML funds for noncoal reclamation. All bills would 
continue to allow non-certified States and tribes to use AML funds 
under section 409 to reclaim abandoned noncoal sites that could 
endanger life or property, that constitute a hazard to public health or 
safety, or that degrade the environment, provided that the sites also 
meet the criteria for a Priority 1 problem site under section 403(a)(1) 
of SMCRA.
    Section 411 of SMCRA currently provides that certified States and 
tribes (those that have completed all coal-related reclamation) are 
eligible to receive AML grants for noncoal reclamation, using their 
State-share allocation. S. 2086 (Thomas), H.R. 3796 (Cubin-Rahall), S. 
2208 (Rockefeller-Bond-Bunning), and S. 2211 (Rockefeller) would retain 
this provision, while S. 2049 (Specter) would eliminate it. However, S. 
2049 also would authorize distribution of the unappropriated balance in 
existing State-share accounts to certified States and tribes over the 
next ten years. States and Tribes would be free to use those 
distributions for any purpose that they deem appropriate, including any 
type of noncoal reclamation, with the only restriction being a 
requirement to address any coalrelated Priority 1 or 2 problems that 
arise during those years. Therefore, certified States and tribes would 
have greater latitude in conducting noncoal reclamation under S. 2049 
than they would have under grants awarded under existing section 411.
    Question 2. What is the scope and extent of abandoned hardrock mine 
sites nationwide? Please provide estimates on a state-by-state basis. 
Please also provide such information with respect to the reservation 
lands of Tribes that have AML programs.
    Answer. We do not maintain an inventory of abandoned hardrock 
mines. However, the chart below shows data that states have entered 
into the inventory for non-coal sites. These data are in no way 
comprehensive--they represent only a fraction of non-coal reclamation 
activities and needs. OSM does not have a database reflecting the 
universe of non-coal sites that have been reclaimed or that are in need 
of reclamation. States and tribes are under no obligation to maintain 
an inventory of non-coal sites, nor are they required to report non-
coal reclamation.

       NONCOAL RECLAMATION PROJECTS IN NATIONAL ABANDONED MINE LAND INVENTORY SYSTEM AS OF APRIL 13, 2004
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                  Unfunded     Funded    Completed
                          State/tribe                             projects    projects    projects      Total
----------------------------------------------------------------------------------------------------------------
Alaska........................................................       67,500          0      650,697      718,197
Alabama.......................................................            0          0       94,942       94,942
Arkansas......................................................      250,000          0            0      250,000
Colorado......................................................   17,685,943  1,741,048   33,944,734   53,269,725
Crow Tribe....................................................            0          0    1,169,047    1,169,047
Illinois......................................................       65,000          0    1,507,432    1,572,432
Kansas........................................................      650,000      5,000            0      655,500
Missouri......................................................    9,601,800          0      191,149    9,792,949
Montana.......................................................   80,405,692          0   17,875,034   98,280,726
Navajo Nation.................................................       10,221     46,945   22,883,547   22,940,713
New Mexico....................................................    2,034,700    215,000    2,584,679    4,834,379
Ohio..........................................................    1,323,200          0      182,048    1,505,248
Texas.........................................................   19,930,545  3,535,634   17,779,669   41,245,848
Utah..........................................................    3,175,500    345,033    6,213,413    9,732,946
Wyoming.......................................................   24,617,707  1,868,030  168,335,687  194,821,424
                                                               -------------------------------------------------
    Totals....................................................  159,818,308  7,756,690  273,411,078  440,884,076
----------------------------------------------------------------------------------------------------------------

    Question 3. How do S. 2049, S. 2086, and H.R. 3796 differ in their 
treatment of Indian tribes under the AML program? How does this differ 
from existing law?
    Answer. Under existing law, Tribes with approved AML reclamation 
plans have the same status as States with respect to grant awards and 
the allocation of fees from coal extracted from their lands. For the 
most part, all the bills now under consideration would adhere to that 
principle.
    In practical terms, the provisions in the bills that are likely to 
affect the Tribes the most are those concerning the minimum program 
allocation, which SMCRA currently sets at $2 million per year and 
Congress has historically funded at $1.5 million per year. Under SMCRA, 
only those States and Tribes with an approved AML reclamation plan, 
eligible lands or waters, and unreclaimed Priority 1 or 2 problem sites 
qualify for the minimum program allocation.
    S. 2049 (Specter) and S. 2208 (Rockefeller-Bond-Bunning) would not 
substantively alter those provisions. However, S. 2086 (Thomas), S. 
2211 (Rockefeller), and H.R. 3796 (Cubin-Rahall) would remove the 
requirement that States and Tribes must have unreclaimed Priority 1 or 
2 problem sites to qualify for the minimum program allocation. In 
addition, they would guarantee an annual grant of $2 million to minimum 
program States and tribes over and above whatever grant amount they may 
receive under the historic production formula.
    S. 2049 (Specter) would provide for a ten-year payout of the 
unappropriated balance of the State-share accounts in the AML fund for 
all certified States and Tribes. Under S. 2086 (Thomas), certified 
States and Tribes would receive a distribution equal to the 
unappropriated balance in their State-share accounts in the AML fund, 
although aggregate distributions to States and Tribes with no land 
subject to leasing under the Mineral Leasing Act would be capped at $65 
million. H.R. 3796 (Cubin-Rahall) and S. 2211 (Rockefeller) would 
provide similar distributions, but only to certified States with 
leasable public domain land. Certified Tribes apparently would receive 
no distributions under those two bills.
    Question 4. The Navajo Nation relies on AML funding to undertake 
important public facilities work pursuant to the Surface Mining Control 
and Reclamation Act. Does S. 2049, S. 2086, or H.R. 3796 restrict the 
use of funds for this purpose?
    Answer. At present, section 403(a)(4) of SMCRA authorizes the 
expenditure of AML funds in non-certified States and Tribes for the 
protection, repair, replacement, construction, or enhancement of public 
facilities adversely affected by coal mining practices. Section 411(e) 
of SMCRA authorizes certified States and Tribes to spend AML funds on 
public facilities adversely affected by any mineral mining and 
processing practices. That paragraph also authorizes certified States 
and Tribes to spend AML funds to construct public facilities in 
communities impacted by coal or other mineral mining and processing 
practices.
    S. 2208 (Rockefeller-Bond-Bunning) would not change these 
provisions. S. 2086 (Thomas), H.R. 3796 (Cubin-Rahall), and S. 2211 
(Rockefeller) would remove section 403(a)(5), which would have the 
effect of eliminating the authority for non-certified States to spend 
AML grant funds on public facilities unless that expenditure involves a 
Priority 1 or 2 problem. S. 2049 (Specter) would eliminate the 
authority for AML grants to certified States and Tribes under section 
411, but it also would authorize distribution, over ten years, of the 
unappropriated State-share balance for those States and Tribes, which 
would allow certified States and Tribes to spend those funds on 
anything that they deemed appropriate, including public facilities.
    Question 5. What is the Department's position on Tribes assuming 
primacy for the regulation of coal mining activities on their lands? 
Would the Administration support legislation to do so?
    Answer. Section 710 of SMCRA directed the Secretary to study the 
regulation of surface coal mining operations on Indian lands and 
develop legislation designed to allow Tribes to assume full regulatory 
authority over the administration and enforcement of the regulation of 
surface coal mining on Indian lands. The Secretary completed and 
submitted the required report to Congress in 1984. In 1987, Congress 
granted authority to the Navajo Nation and the Hopi and Crow tribes to 
obtain approval of AML reclamation plans, but it took no action on 
authority for regulatory programs. The Energy Policy Act of 1992 
required that OSM make grants to the Navajo Nation and the Hopi, Crow, 
and Northern Cheyenne tribes to assist the tribes in developing 
regulatory programs.
    In 1995, OSM initiated an effort with the Tribes to develop a 
consensus legislative package. While the effort has resulted in the 
development of several draft legislative proposals, the Tribes have not 
been able to achieve consensus. Therefore, no proposal has been 
forwarded to Congress. We continue to work with the Tribes to resolve 
the outstanding issues, and with Congress should any legislation be 
introduced.
    Question 6. Could you please provide an analysis of the differences 
in how the Senate bills address the issue of coal miner retiree 
benefits? How does this approach differ from the approach in H.R. 3796?
    What are the estimates of the funds that would be available for 
this purpose on an annual basis under each of the three bills? Please 
provide a table showing projections for the periods covered by the 
authorization in each bill.
    Answer. The following table summarizes the principal differences in 
the provisions of the various bills. A more detailed narrative 
description appears after the table.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                     Rockefeller-Bond-
                                        Specter bill  (S.    Thomas bill  (S. 2086)    Cubin-Rahall bill    Rockefeller bill  (S.    Bunning bill  (S.
                                              2049)                                       (H.R. 3796)               2211)                  2208)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Allowable uses of transferred funds  Health benefits for     Health benefits for     All CBF accounts (to   Any shortfall between  Any shortfall between
                                      unassigned              unassigned              offset any deficit     premium income and     premium income and
                                      beneficiaries in CBF.   beneficiaries in CBF.   in net assets).        expenditures for all   expenditures for all
                                                                                                             CBF premium accounts   CBF premium accounts
                                                                                                             and 1992 and 1993      and 1992 and 1993
                                                                                                             UMWA Benefit Plans.    UMWA Benefit Plans.

Retains $70 million cap on annual    No....................  Yes, with possible      No...................  No...................  No.
 transfer.                                                    exception of transfer
                                                              of stranded interest.

Source of transferred funds besides  Stranded interest.....  Stranded interest.....  Stranded interest      Stranded interest (if  Stranded interest
 interest earned that fiscal year.                                                    plus unappropriated    needed to offset any   plus unappropriated
                                                                                      balance of RAMP        deficit in the net     balance of RAMP
                                                                                      allocation.            assets of the CBF)     allocation.
                                                                                                             plus unapropriated
                                                                                                             balance of RAMP
                                                                                                             allocation.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Section 402(h) of SMCRA currently requires the annual transfer to 
the United Mine Workers of America (UMWA) Combined Benefit Fund (CBF) 
of the amount of interest that the Secretary estimates will be earned 
and paid to the AML fund during that year, not to exceed the amount of 
projected expenditures for health care benefits for unassigned 
beneficiaries under the CBF. There are presently about 17,000 such 
beneficiaries. The Act requires that the transfer be made at the 
beginning of each fiscal year. Any adjustments necessary to ensure that 
the transfers reflect actual expenditures must be made in later years. 
The total amount transferred for any one year may not exceed $70 
million.
    S. 2049, the Administration's bill, would remove the $70 million 
cap on annual transfers and make any interest earned in prior years 
that has not already been transferred (``stranded interest'') available 
for future transfers. Transfers would remain limited to the amount 
needed to cover health care benefits for unassigned beneficiaries under 
the CBF.
    S. 2086 would make the stranded interest available for transfer in 
fiscal year 2006 and future years. Existing section 402(h) of SMCRA 
would remain unchanged. The bill is not clear on whether transfers of 
stranded interest are subject to the $70 million cap on annual 
transfers. Transfers would remain limited to the amount needed to cover 
health care benefits for unassigned beneficiaries under the CBF.
    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. Finally, it would make both the stranded 
interest and the unappropriated balance of the Rural Abandoned Mine 
Program (RAMP) allocation (currently approximately $302 million) 
available for transfer to the CBF, if needed, in FY 2004 and future 
years.
    S. 2211 would require annual transfers of interest equal to the 
amount by which--

   Projected expenditures from all CBF premium accounts exceed 
        anticipated CBF health benefit premium receipts;
   Projected benefit expenditures under the 1992 UMWA Benefit 
        Plan exceed anticipated premium receipts under that plan 
        (including any security provided to that plan that is available 
        for the provision of benefits); and
   Projected benefit expenditures under the 1993 UMWA Benefit 
        Plan (the multiemployer health benefit plan established after 
        July 20, 1992, by the parties that are the settlors of the 1992 
        Plan) exceed anticipated income to that plan.

    Transfers to the 1992 and 1993 plans would be allowed only to the 
extent that the Secretary determines that funds would be available 
after meeting the needs of the CBF.
    S. 2211 also makes the unappropriated balance of the RAMP 
allocation available for transfers to the CBF and the 1992 and 1993 
plans, if needed, in FY 2004 and future years. Finally, S. 2211 removes 
the $70 million cap on annual transfers and makes the stranded interest 
available for transfer to the CBF if needed to offset any deficit in 
the net assets of the CBF, beginning with FY 2004.
    S. 2208 is substantively identical to S. 2211 with the exception 
that S. 2208 would make the stranded interest available for transfer to 
the 1992 and 1993 plans if it is not needed to offset the deficit in 
the net assets of the CBF.
    The following table provides hypothetical estimates of the funds 
that would be available for transfer to the CBF and (under S. 2208 and 
S. 2211) the 1992 and 1993 UMWA Benefit Plans, under each of the bills 
for the fiscal years covered by the authorization in each bill, to the 
extent that such information is available.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         S. 2049  (Specter/        H.R. 3796 (Cubin/Rahall)        S. 2086 (Thomas)
                                                                          Administration)           S. 2208 (Rockefeller et  ---------------------------
                                                                  -------------------------------        al.)  S. 2211
                                                                                                         (Rockefeller)
                                FY                                                               ----------------------------   Interest      Available
                                                                       Interest       Available                   Available     earnings    ``Stranded''
                                                                       earnings     ``Stranded''    Interest    ``Stranded''    (see note     interest
                                                                                      interest      earnings     interest &                  (see note)
                                                                                                                RAMP balance
--------------------------------------------------------------------------------------------------------------------------------------------------------
2005.............................................................      $71,042,550   $86,878,603   $71,042,550  $430,797,118   $71,042,553           N/A
2006.............................................................       71,408,082    58,700,895    69,285,912   361,294,556    70,971,565  $102,781,236
2007.............................................................       75,824,828    36,578,326    70,370,511   273,795,703    75,306,637   108,087,873
2008.............................................................       78,296,430    18,552,626    68,631,855   180,463,705    77,692,675   115,780,548
2009.............................................................       79,056,179     3,553,675    63,771,775    55,451,086    78,331,421   124,111,969
2010.............................................................       79,198,050             0    61,463,927             0    78,170,004   132,281,972
2011.............................................................       79,421,385             0    61,859,927             0     78,21,484   140,503,456
2012.............................................................       79,980,013             0    62,431,927             0    78,451,229   148,954,685
2013.............................................................       80,681,596             0    63,135,927             0    78,779,083   157,733,768
2014.............................................................       81,493,796             0           N/A           N/A    79,209,362   166,943,131
2015.............................................................       90,390,081     8,896,285           N/A           N/A             0   184,695,307
2016.............................................................       91,046,472    17,407,370           N/A           N/A             0   192,492,578
2017.............................................................       91,917,196    26,789,179           N/A           N/A             0   192,492,578
2018.............................................................       92,992,666    37,246,458           N/A           N/A             0   192,492,578
2019.............................................................       94,225,997    48,937,068           N/A           N/A             0   192,492,578
                                                                  --------------------------------------------------------------------------------------
                                                                    $1,236,975,321  ............  $591,994,311  ............  $766,176,013
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: S. 2086 (Thomas) retains the $70 million cap on annual interest transfers, so interest earned above that level would not be available for
  transfer. Although not clear, it appears that the cap also may apply to transfers of stranded interest. If so, none of the stranded interest would be
  available for transfer under this bill.

    OSM does not have sufficient expense and revenue information from 
either the 1992 or 1993 plan to evaluate interest earning projections 
for S. 2211 and S. 2208. Therefore, we have used the net asset deficit 
as a conservative estimate through FY 2013, which is the last 
information provided to us by the CBF.
    H.R. 3796 directs OSM to pay any deficit in the net assets of the 
CBF, and both Rockefeller bills (S. 2208 and S. 2211) make the stranded 
interest available for this purpose. The CBF provided OSM projected net 
asset deficits through the end of 2012 from a document prepared by an 
actuary in September 2003. The impact of FY2004 actual transactions is 
not reflected in these figures. However, preliminary figures indicate 
that interest payments will be insufficient to cover the deficit in the 
net assets of the CBF after 4 years in S. 2211 and H.R. 3796
    Under S. 2086, annual interest earnings in excess of $70 million 
would not be available for transfer. Although not completely clear, it 
appears that the $70 million cap also would apply to transfers of 
stranded interest. If so, we project that none of the stranded interest 
would be transferred to the CBF under this bill.
    Question 7. Please provide a table showing the amounts transferred 
historically to the Combined Benefit Fund (CBF) from the AML Fund by 
year.
    Answer. The following table presents the requested data to the 
nearest dollar.

------------------------------------------------------------------------
                                                               Amount
                                                             transferred
                        Fiscal year                            to CBF
                                                              during FY
------------------------------------------------------------------------
1996......................................................   $47,183,764
1997......................................................    31,373,799
1998......................................................    32,561,520
1999......................................................    81,766,325
2000......................................................   108,959,942
2001......................................................   181,959,942
2002......................................................    90,352,800
2003......................................................    89,858,283
                                                           -------------
    Totals................................................  $664,016,375
------------------------------------------------------------------------

    Question 8. Does the Department interpret existing law as granting 
the Secretary authority to extend the reclamation fee administratively?
    If so, does the Secretary have authority to extend the fee at 
current levels?
    Please attach any written analysis provided by the Solicitor's 
Office on this issue.
    Answer. Section 402(b) of SMCRA currently specifies that, after 
September 30, 2004, ``the fee shall be established at a rate to 
continue to provide for the deposit referred to in subsection (h).'' 
The meaning of this provision is somewhat unambiguous, since section 
402(h), the provision referenced in section 402(b), merely requires 
that interest earned by and paid to the AML fund be transferred to the 
United Mine Workers of America Combined Benefit Fund for debit against 
that Fund's unassigned beneficiaries premium account.
    While SMCRA provides the Secretary with the authority to establish 
new fee rates, we have not reached a final decision on what those rates 
should be or whether SMCRA would allow the transfer of the fees 
themselves rather than just the interest earned on the Fund.
    Question 9. Why do you seek authority for the Secretary to certify 
completion of coal reclamation in a State? Has certification been a 
problem? What issue is this meant to address?
    Answer. Both current law and the Administration's proposal tie 
allocation of the historic coal production funds to the number of 
Priority 1 and Priority 2 coal problems a State or Tribe has. Under 
current law, certification allows States and tribes more discretion in 
the use of State-share funds, so there is incentive to certify. Under 
the Administration's bill, that incentive will not exist because States 
and Tribes will have depleted the remaining balance in their State-
share accounts by the time that they complete reclamation of their coal 
problems.
    Certification has not been an issue to date. Our proposal would 
simply allow the Administration to keep our records current and 
accurate. The Administration's proposal does not alter the criteria for 
certification under the current law. The Secretary would not be able to 
certify completion of coal problems under our proposal if the State or 
Tribe could not certify under current law.
    Question 10. Do you support elimination of the criteria of threat 
to the general welfare in prioritizing sites for reclamation? What 
effect would such a change have in the program? How many sites would be 
eliminated from the inventory due to this change?
    How much less would be expended under the program if this criteria 
were eliminated?
    How would this affect environmental remediation under the program?
    How would this affect the remediation of water pollution under the 
program?
    Answer. In developing our legislative proposal, we did not consider 
P1 and P2 general welfare sites when determining how long to extend the 
fee or how much money to collect. Instead, we focused exclusively on P1 
and P2 health and safety problems. However, the Administration favors 
keeping general welfare problems in the inventory to allow States and 
Tribes some flexibility in conducting their programs and determining 
which sites should be reclaimed. As an alternative, we do not object to 
reducing general welfare problems to the Priority 3 category.
    In practice, States and Tribes have focused on P1 and P2 health and 
safety problems, not general welfare P2 sites, so the effect of the 
potential change on the program would be minimal. While there are 
approximately $3.6 billion worth of P2 general welfare sites on the 
inventory, none have been addressed, which means that no dollars have 
been spent to date on reclamation of general welfare problems.
    If the change were adopted, eighteen watershed-based, multiple-site 
problem areas in Pennsylvania would be removed from the inventory.
    We anticipate little or no savings if the change were to be 
adopted. No reclamation grant funds have thus far been expended on 
general welfare problems. To the degree that these problems are 
addressed in the future, we anticipate that funding would be provided 
from either the acid mine drainage set-aside or the Clean Streams 
program.
    The impact of this change would be minimal on both environmental 
remediation and the remediation of water pollution under the AML 
reclamation program. We anticipate little impact to environmental 
remediation because States and Tribes have not and are not addressing 
general welfare problems through AML reclamation grants, apart from the 
acid mine drainage set-aside program. States and Tribes would still be 
able to address acid mine drainage problems through the acid mine 
drainage treatment set-aside program.
    Question 11. Please describe the Clean Streams Program. What impact 
would the provisions of S. 2049, S. 2086, and H.R. 3796 have on this 
program?
    Answer. The Clean Streams Program began as the Appalachian Clean 
Streams Initiative, a broad-based program to eliminate acid drainage 
from abandoned coal mines. Today, the program continues to focus on 
cleaning up acid mine drainage problems, using a combination of private 
and government resources. It is an opportunity for a partnership 
approach to one of the major environmental problems facing the regional 
ecosystems of the coalfields.
    The mission of the Clean Streams Program is to coordinate and 
facilitate the exchange of information and eliminate duplicative 
efforts among citizen groups, university researchers, the coal 
industry, corporations, the environmental community, and local, state, 
and federal government agencies that are involved in cleaning up 
streams polluted by acid drainage. Watershed associations, community 
groups, and recreation associations are working together with funding 
from government and private sources, including matching and in-kind 
services. This cooperative approach results in improved efficiency and 
better leverage in the use of public funds.
    Funding for the Clean Streams Program currently comes from the 
Federal Operations allocation under section 402(g)(3) of SMCRA. Subject 
to appropriation, funds would still available for this program under 
all bills currently being considered.
    Question 12. I understand that the interest earned on the AML Fund 
is typically at a low rate, which is disadvantageous when such interest 
is relied upon to fund the CBF. Does either Senate bill or H.R. 3796 
address this issue? If so, how? Has OSM explored opportunities to earn 
higher interest on the Fund without legislation? Please describe the 
opportunities and constraints.
    Answer. The AML fund has been invested in U.S. Treasury securities 
since 1992. Until recently, our investment strategy was to maximize 
liquidity by investing in securities with maturities of 180 days or 
less. The interest rate on the fund's investments averaged 4.46 percent 
between 1992 and 2001. This strategy more than met the needs identified 
by the CBF for unassigned beneficiaries during those years. However, 
short-term interest rates began dropping at the end of 2001 and today 
the average rate mirrors the Federal funds rate of 1 percent.
    In October 2003, after internal reviews and discussions with 
stakeholders, we revised our investment strategy to improve yields by 
purchasing 10-year Treasury notes, which were earning 4.25 percent 
interest at that time. We had planned to spread purchases of these 
notes over the course of FY 2004 to take advantage of anticipated 
interest rate increases. However, when the 10-year interest rate went 
down in February 2004, we accelerated our purchases. Approximately $1.3 
billion of the fund is now invested in long-term Treasury securities 
with a weighted average interest rate of 4.17 percent. If short-term 
interest rates remain at 1 percent for the remainder of 2004, the AML 
fund should earn $46 million in interest during the current fiscal 
year. While this strategy does not fully meet CBF needs, earnings are 
far better than if we had maintained purely a short-term strategy.
    At present, section 401(e) of SMCRA requires that the AML fund be 
invested in public debt securities with maturities suitable for the 
needs of the fund. S. 2086 (Thomas) and S. 2208 (Rockefeller-Bond-
Bunning) would make no changes to this provision.
    S. 2049, the Administration bill, would revise section 401(e) to 
require that the Secretary of the Treasury invest the fund in public 
debt securities with maturities determined by the Secretary of the 
Interior and suitable for both the needs of the AML fund and achieving 
the purposes of the transfers to the CBF, which reflects our current 
investment strategy to increase the fund's earnings.
    S. 2211 (Rockefeller) and H.R. 3796 (Cubin-Rahall) would revise 
section 401(e) by deleting the requirement that investment securities 
have maturities suitable for the needs of the AML fund. Instead, they 
would require that the maturities be suitable for achieving the 
purposes of the transfers to the CBF (in the case of H.R. 3796) or all 
UMWA health benefit plans (in the case of S. 2211).
    Question 13. Please provide for the record your projections of 
annual payments to each State and Tribe under: (1) S. 2049; (2) S. 
2086; (3) H.R. 3796; and (4) current law. Please include all payments 
(including State Share balance and ongoing payments).
    Answer. Annual payments under these proposals will change over 
time. The following table shows projected AML grant fund distributions 
to States and Tribes in FY 2009, the fifth year of operation, which is 
likely to be a relatively ``normal'' year in most plans if 
appropriation levels remain stable. All amounts are shown in millions 
of dollars. For additional information, see the attached tables showing 
25-year funding projections for each proposal.*
---------------------------------------------------------------------------
    * The 25-year funding table has been retained in committee files.

----------------------------------------------------------------------------------------------------------------
                                                                                                         FY 2004
                                                                  H.R. 3796 &                  Current     and
                                          S. 2049       S. 2086     S. 2211       S. 2208      law--if   forward
             State/tribe              (Administration  (Thomas)     (Cubin-    (Rockefeller-   fee is    if fee
                                         proposal)                  Rahall,    Bond-Bunning)     not       is
                                                                 Rockefeller)                  renewed   renewed
----------------------------------------------------------------------------------------------------------------
Alabama.............................           4.2          3.6         3.6            2.9         2.3       2.9
Alaska..............................           2.0          2.0         2.0            1.5         0.3       1.5
Arkansas............................           2.0          2.0         2.0            1.5         0.0       1.5
Colorado............................           2.5          3.9         3.6            2.6         3.2       2.6
Illinois............................           0.0          9.1         9.2            8.3         4.0       8.3
Indiana.............................           3.9          7.2         6.8            5.0         5.6       5.1
Iowa................................           2.0          2.0         2.0            1.5         0.0       1.5
Kansas..............................           2.0          2.0         2.0            1.5         0.1       1.5
Kentucky............................          15.7         21.7        20.7           15.3        17.0      15.3
Louisiana...........................           0.1          2.0         2.0            0.1         0.2       0.1
Maryland............................           2.0          2.0         2.0            1.5         0.5       1.5
Missouri............................           2.0          2.0         2.0            1.5         0.1       1.5
Montana.............................           4.7      \1\ 4.8     \1\ 4.8            3.4         6.2       3.4
New Mexico..........................           2.2          3.0         2.8            1.8         2.9       1.8
North Dakota........................           2.0          2.0         2.0            1.5         1.6       1.5
Ohio................................           9.7          6.6         6.5            5.5         3.3       5.5
Oklahoma............................           2.0          2.0         2.0            1.5         0.3       1.5
Pennsylvania........................          51.7         24.8        25.6           24.0         7.9      24
Tennessee...........................           0.0          2.0         2.0            0.0         0.0       0.0
Texas...............................           2.0          2.0         2.3            1.5         2.7       1.5
Utah................................           2.0          2.3         2.2            1.5         2.0       1.5
Virginia............................           4.8          5.0         4.9            3.8         3.6       3.8
West Virginia.......................          29.7         26.8        26.2           20.8        17.3      20.8
Wyoming.............................          41.9     \1\ 52.7    \1\ 52.7           30.3        55.1      30.3
Crow Tribe..........................           0.8          2.0         2.0            0.5         1.0       0.6
Hopi Tribe..........................           0.6          2.0         2.0            0.4         0.7       0.4
Navajo Nation.......................           3.0          2.0         3.6            2.3         4.1       2.3
                                     ---------------------------------------------------------------------------
  Total funding.....................        $195.5       $199.5      $199.5         $142.0      $142.0    $142.0
----------------------------------------------------------------------------------------------------------------
\1\ Payment from Mineral Leasing Act revenues.

    Question 14. Please provide for the record your projections of 
annual AML fee collections under: (1) S. 2049; (2) S. 2086; (3) H.R. 
3796; and (4) current law.
    Answer. The following table provides the requested projections, in 
millions of dollars, as well as some others for comparison purposes.

----------------------------------------------------------------------------------------------------------------
                                                                                S. 2208, S.
                                                                                 2211, H.R.
                                                        S. 2049                     3796                 Current
                    Fiscal year                     (Administration   S. 2086  (Rockefeller-   Current   law if
                                                       proposal)     (Thomas)  Bond-Bunning,     law    extended
                                                                                Rockefeller,
                                                                               Cubin-Rahall)
----------------------------------------------------------------------------------------------------------------
2005..............................................         239          211          225           0       280
2006..............................................         246          217          231           0       288
2007..............................................         252          224          239           0       297
2008..............................................         256          228          243           0       303
2009..............................................         263          232          247           0       308
2010..............................................         253          237          253           0       316
2011..............................................         257          241          257           0       320
2012..............................................         260          243          260           0       323
2013..............................................         263          245          263           0       326
2014..............................................         265          248          265           0       330
2015..............................................         260            0          268           0       334
2016..............................................         264            0          272           0       339
2017..............................................         268            0          276           0       345
2018..............................................         272            0          279           0       348
2019..............................................           0            0          283           0       354
                                                   -------------------------------------------------------------
  Totals..........................................       3,618        2,326        3,960           0     4,810
----------------------------------------------------------------------------------------------------------------

    Question 15. Please provide for the record an analysis of the 
States and Tribes' Legislative Concept Paper, dated February 27, 2003 
(attached). Please provide projections of annual payments to each State 
and Tribe under this proposal. Please provide projections of annual AML 
fee collections under the proposal. What are the Administration's views 
on the allocation formula under this proposal? What are the 
Administration's estimates of how long it will take to complete 
reclamation of Priority 1 and 2 sites under this proposal? Please also 
provide projections of funds that will be available on an annual basis 
for transfer to the CBF under this proposal.
    Answer. This paper advocates five major changes to SMCRA. It 
would--

   Renew the AML fee at current rates for 12 years.
   Eliminate the allocation for the Rural Abandoned Mine 
        Program.
   Support a minimum program funding level of $2 million per 
        year.
   Distribute the State-share allocation of fee collections 
        without appropriation.
   Remove the 30 percent cap for using AML grants for water 
        supply projects.

    The proposal would continue to allocate 50 percent of collections 
to a State-share account as does the current law.
    The table below presents projected distributions for FY 2005 and FY 
2012. Fifty percent of all collections would be distributed to the 
State or Tribe in which the fees were collected. Thirty percent of 
collections would be distributed to the non-certified States and Tribes 
based upon historic coal production. Since grants would be non-
discretionary spending, and collections are projected to increase, 
grants would increase steadily under this proposal.
    The following table provides projections of annual AML fee 
collections under the proposal, in millions of dollars:

------------------------------------------------------------------------
                                                              Projected
                       Fiscal year                          collections
------------------------------------------------------------------------
2005.....................................................        280
2006.....................................................        288
2007.....................................................        297
2008.....................................................        303
2009.....................................................        308
2010.....................................................        316
2011.....................................................        320
2012.....................................................        323
2013.....................................................        326
2014.....................................................        330
2015.....................................................        334
2016.....................................................        339
                                                          --------------
    Total................................................      3,764
------------------------------------------------------------------------

    We do not support the allocation formula this proposal sets out. 
Other than changing the RAMP allocation to a historic coal production 
allocation, it makes no change to the allocation formula currently in 
SMCRA.
    We have come to the conclusion that, while we have made significant 
achievements in reclaiming mine sites abandoned prior to the enactment 
of SMCRA, various factors have changed considerably since 1977, 
creating a fundamental imbalance in the way AML funds are allocated.
    In fact, we are convinced that the ability of the AML program to 
meet its primary objective of abating AML problems on a priority basis 
is being hindered by this allocation formula. It results in a 
progressive distribution of resources away from the most serious AML 
problems.
    Generally, there is a strong correlation between a State's or 
Tribe's historic production and the magnitude of its AML problem. 
Therefore, grant dollars from the historic production account are 
distributed to each in an amount proportional to the magnitude of its 
AML problem. However, the majority of the grant dollars are distributed 
to the States and Tribes on the basis of current production. There is 
no relationship between the current production State-share portion of 
the grant and the magnitude of the AML problem in that State or Tribe. 
Consequently, there is no parity among the states and tribes in terms 
of the rate of AML reclamation.

------------------------------------------------------------------------
                                              FY 2005         FY 2012
               State/tribe                 Distribution    Distribution
------------------------------------------------------------------------
Alabama.................................         4.3             4.5
Alaska..................................         2.0             2.0
arkansas................................         2.0             2.0
Colorado................................         4.7             5.2
Illinois................................        12.6            13.0
Indiana.................................         8.6             9.4
Iowa....................................         2.0             2.0
Kansas..................................         2.0             2.0
Kentucky................................        24.2            26.4
Louisiana...............................         0.2             0.2
Maryland................................         2.0             2.0
Missouri................................         2.0             2.0
Montana.................................         5.6             6.5
New Mexico..............................         3.1             3.5
North Dakota............................         2.0             2.1
Ohio....................................         8.7             9.1
Oklahoma................................         2.0             2.0
Pennsylvania............................        37.5            38.2
Texas...................................         2.2             2.6
Utah....................................         2.6             2.9
Virginia................................         5.8             6.3
West Virginia...........................        34.7            37.2
Wyoming.................................        62.1            71.6
Crow Tribe..............................         1.0             1.1
Hopi Tribe..............................         0.7             0.7
Naajo Nation............................         3.4             3.9
                                         -------------------------------
    Totals..............................       238.0           258.4
------------------------------------------------------------------------

    Because the proposal does not change the 50 percent State-share 
allocation of collections based upon current production, it does not 
change the diversion of funds away from the reclamation of high-
priority coal problems. We estimate that it would take approximately 40 
years on average to finish the job under this proposal. In some 
instances, it would take over a century to complete all the 
reclamation.
    The following table provides projections of funds that would be 
available on an annual basis for transfer to the CBF under this 
proposal:

------------------------------------------------------------------------
                                                                Amount
                                                  Earnings   transferred
                  Fiscal year                       ($)       to CBF ($)
                                                                  *
------------------------------------------------------------------------
2004..........................................   44,737,497   70,000,000
2005..........................................   69,228,105   70,000,000
2006..........................................   69,350,185   70,000,000
2007..........................................   74,279,544   70,000,000
2008..........................................   77,353,315   70,000,000
2009..........................................   78,669,152   70,000,000
2010..........................................   79,050,595   70,000,000
2011..........................................   79,448,821   70,000,000
2012..........................................   79,864,570   70,000,000
2013..........................................   80,298,611   70,000,000
2014..........................................   80,751,749   70,000,000
                                               -------------------------
    Totals....................................  813,032,145  770,000,000
------------------------------------------------------------------------
* The proposal could be read as either containing an implied $70,000,000
  cap or as requiring the transfer of all interest earned.

    Question 16. How many deaths have occurred at unreclaimed mine 
sites since 1977? Please provide the data by year and location (State 
or Tribe), if available.
    Answer. There is no systematic national accounting of how many 
people have been hurt or killed at abandoned coal mine sites, so we 
have to rely on anecdotal information. For example, we know of at least 
45 deaths and 19 injuries at abandoned mine sites in the anthracite 
region of Pennsylvania alone in the past 30 years. Oklahoma has 
reported 11 deaths in 10 years.
    Question 17. What constraints do you think should be placed on the 
use of AML funds distributed to certified States and Tribes? Is it the 
Administration's position that these funds should be available for non-
mining related purposes? If so, what is the policy rationale?
    Answer. As set forth in S. 2049 (Specter), we believe that 
certified States and Indian tribes should be able to use distributions 
from the unappropriated balances of their State-share accounts for 
whatever purposes they see fit, provided that they address any high-
priority coal-related AML problems that arise after certification.
    Question 18. Under S. 2049, S. 2086, and H.R. 3796, how much 
funding will be available for the Small Operator's Assistance Program, 
emergency work, and reclamation work in nonprogram states?
    Answer. None of the bills alters the amount of funding available 
for these programs. Funding is a function of the appropriations process 
as neither the existing law nor the pending legislation establishes a 
defined funding level for these programs. For informational purposes, 
the following table summarizes the funding provided over the past three 
years, in millions of dollars:

------------------------------------------------------------------------
                Program                   FY 2001    FY 2002    FY 2003
------------------------------------------------------------------------
SOAP...................................      1.5        1.5        1.5
State emergency program grants.........      2.9        8.7        9.7
Federal emergency projects.............     10.9       10.9        0.0
Federal reclamation projects...........      2.4        2.4        1.3
------------------------------------------------------------------------

    Question 19. How much is Tennessee expected to receive under each 
of the Senate bills and H.R. 3796? How much has been expended in 
Tennessee annually since OSM took over the Tennessee program? How many 
sites are on the Tennessee inventory?
    Answer. Tennessee does not have an approved State regulatory 
program under section 503 of SMCRA. Therefore, by law, it is not 
eligible to receive any of the funds that Congress appropriates for 
grants to States and Tribes with approved AML reclamation programs. See 
section 405(c) of SMCRA. S. 2049 (Specter) and S. 2208 (Rockefeller-
Bond-Bunning) would not change Tennessee's current status. However, S. 
2086 (Thomas), S. 2211 (Rockefeller), and H.R. 3796 (Cubin-Rahall) 
would require that Tennessee receive the same grant amounts as minimum 
program States and Tribes under section 402(g)(8) of SMCRA. The 
Administration is worried that if Tennessee regains eligibility after 
relinquishing its regulatory program, other States may follow and fail 
to maintain their regulatory programs. Under SMCRA, one of the major 
incentives for States to assume primacy for the regulation of surface 
coal mining operations is the ability to receive AML reclamation 
grants. This could burden the government with significant additional 
costs annually if OSM has to operate these regulatory programs.
    With respect to how much Tennessee would receive under the various 
bills, S. 2086, S. 2211, and H.R. 3796 would require annual grants of 
not less than $2 million. The State would not receive any grants under 
either the current version of SMCRA or S. 2049.
    However, we would continue to reclaim high-priority sites in 
Tennessee with money appropriated for Federal reclamation operations. 
The following table summarizes Federal AML reclamation expenditures in 
Tennessee since the State relinquished primacy and a full Federal 
regulatory program took effect on October 1, 1984. Tennessee had 291 
sites in the AML Inventory as of September 30, 2003, of which 139 have 
yet to be reclaimed at an estimated cost of $34 million.

----------------------------------------------------------------------------------------------------------------
                                                                                      TN  High-
                                                                     TN  Emergency     Priority
                            Fiscal year                                 Projects       Projects     Totals  ($)
                                                                     Completed ($)  Completed ($)
----------------------------------------------------------------------------------------------------------------
2003...............................................................       25,044        988,390      1,013,434
2002...............................................................      122,046      1,134,378      1,256,424
2001...............................................................       10,620      2,229,553      2,240,173
2000...............................................................      280,169      1,023,538      1,303,707
1999...............................................................        1,216        927,349        928,565
1998...............................................................      108,209      1,450,000      1,558,209
1997...............................................................      315,330      1,469,043      1,784,373
1996...............................................................            0        919,000        919,000
1995...............................................................            0        674,000        674,000
1994...............................................................       81,938        995,825      1,077,763
1993...............................................................      283,127        520,000        803,127
1992...............................................................       19,545        675,000        694,545
1991...............................................................      291,535        579,861        871,396
1990...............................................................            0        555,660        555,660
1989...............................................................       84,934        325,545        410,479
1988...............................................................      610,924              0        610,924
1987...............................................................      633,664      2,046,000      2,679,664
1986...............................................................       71,714      1,557,827      1,629,541
1985...............................................................            0        789,075        789,075
                                                                    --------------------------------------------
    Totals.........................................................    2,940,015     18,860,044     21,800,059
----------------------------------------------------------------------------------------------------------------

    Question 20. Is there a requirement that the AML Fund balance be 
paid to the States and Tribes if the fee is not reauthorized?
    Answer. The AML fund balance would remain subject to appropriations 
and appropriations would, unless otherwise directed, be allocated 
according to the existing formula.
    Question 21. Will certified States be required to maintain AML 
programs? If not, how will certified States address any new AML 
problems, as required by section 401(d)(2)(D) in S. 2049?
    Answer. Under the Administration's proposal, S. 2049, certified 
States and tribes would not be required to maintain AML programs, as 
they are no longer eligible for AML grants. However, we anticipate that 
most certified States and tribes will maintain those programs in some 
form to administer the payouts from the unappropriated balances in 
their State-share accounts. In the event that a State disbands its 
program, another agency would need to be designated as the grant 
recipient in charge of compliance with all grant-related requirements 
and procedures. Other State agencies with construction expertise, such 
as State emergency management agencies, should be capable of handling 
any health or safety coal-related AML problems that arise.
    Question 22. At the hearing, some questions were raised regarding 
what procedures are in place to govern the transfer of AML interest to 
the CBF. Are these procedures set forth in a memorandum of 
understanding or similar document? If so, please provide a copy. Does 
OSM receive reports on the use of the AML funds transferred to the CBF?
    Answer. A memorandum of understanding between OSM and the United 
Mine Workers of America Combined Benefit Fund, which was signed by both 
parties on October 12, 2000, establishes the procedures governing the 
transfer of funds. A copy is attached.* We do not receive reports on 
the use of transferred funds, but we do receive copies of audited 
financial statements and the results of an independent review of the 
CBF procedures in determining the amount transferred.
---------------------------------------------------------------------------
    * Retained in committee files.
---------------------------------------------------------------------------
    Question 23. What is the projected annual revenue impact resulting 
from the decrease in the AML fee as proposed in: (1) S. 2049; (2) S. 
2086; and H.R. 3796? Please provide a table displaying annual 
projections for the periods covered by the authorizations in each bill.
    Answer. The following table summarizes the revenue impacts of the 
bills under consideration:

----------------------------------------------------------------------------------------------------------------
                Estimated fee collection receipts  (Millions of $)                   Reduction in estimated fee
----------------------------------------------------------------------------------  collection receipts compared
                                                                                    with current law  (Millions
                                                                                               of $)
                                                               S. 2208,   Current ------------------------------
               Fiscal year                 S. 2049   S. 2086   S. 2211,     law                         S. 2208,
                                                              H.R. 3796             S. 2049   S. 2086   S. 2211,
                                                                                                       H.R. 3796
----------------------------------------------------------------------------------------------------------------
2005....................................     239       211       225        280      (41)        (69)    (55)
2006....................................     246       217       231        288      (42)        (71)    (57)
2007....................................     252       224       239        297      (45)        (73)    (59)
2008....................................     256       228       243        303      (46)        (75)    (60)
2009....................................     263       232       247        308      (45)        (76)    (61)
2010....................................     253       237       253        316      (63)        (78)    (63)
2011....................................     257       241       257        320      (63)        (79)    (63)
2012....................................     260       243       260        323      (63)        (80)    (63)
2013....................................     263       245       263        326      (64)        (81)    (64)
2014....................................     265       248       265        330      (64)        (82)    (64)
2015....................................     260       251       268        334      (74)        (83)    (66)
2016....................................     264       254       272        339      (74)        (84)    (67)
2017....................................     268       259       276        345      (76)        (86)    (68)
2018....................................     272       262       279        348      (77)        (87)    (69)
                                         -----------------------------------------------------------------------
  Totals................................   3,618     3,352     3,577      4,456     (838)     (1,104)   (879)
----------------------------------------------------------------------------------------------------------------

    Question 24. How do S. 2049, S. 2086, and H.R. 3796 differ in their 
treatment of the balance in the Rural Abandoned Mine Program (RAMP)?
    Answer. The unappropriated balance of the RAMP allocation within 
the AML fund is slightly in excess of $300 million. S. 2049, the 
Administration's bill, would return the entire balance to the fund 
without allocation, meaning that it would be available for 
appropriation for any authorized use of the AML fund. Our expectation 
is that those funds would be used for future grants for reclamation of 
high-priority coal-related AML problems.
    S. 2086 would make up to $65 million of the unappropriated balance 
(excluding interest) available for payments to certified States and 
Tribes that do not have lands available for leasing under the Mineral 
Leasing Act. Those payments, which would be proportional to and in lieu 
of payment of the unappropriated balance of their State-share 
allocations, would not be subject to appropriation and would begin in 
fiscal year 2005. The expenditure of those funds would not be subject 
to any SMCRA restrictions. S. 2086 does not specify what would happen 
to the remaining funds in the RAMP allocation.
    Under H.R. 3796, the entire unappropriated balance of the RAMP 
allocation (excluding interest) would be available for transfer, 
beginning in fiscal year 2004, to the UMWA Combined Benefit Fund (CBF) 
to offset the amount of any deficit in the net assets of the CBF.
    S. 2211 would make the entire unappropriated balance of the RAMP 
allocation (excluding interest) available for transfer, beginning in 
fiscal year 2004, to the CBF and the 1992 and 1993 UMWA benefit plans, 
if needed to cover premium or income shortfalls in those plans.
    S. 2208 would make the entire unappropriated balance of the RAMP 
allocation (including interest) available for transfer to the CBF and 
the 1992 and 1993 UMWA benefit plans, if needed to cover premium or 
income shortfalls in those plans.
              Responses to Questions From Senator Domenici
    Question 1. Why does the Administration/OSM feel it is necessary 
for the Secretary to unilaterally certify states/tribes as having 
completed their coal priorities? Under what circumstances would the 
Secretary deem it necessary to certify a state? What has taken place to 
necessitate a change from the current language regarding certification?
    Answer. Both current law and the Administration's proposal tie 
allocation of the historic coal production component of the AML fund to 
the number of Priority 1 and Priority 2 coal problems within a State or 
Tribe. Under current law, certification allows States and tribes more 
discretion in the use of State-share funds, so there is incentive to 
certify. Under the Administration's bill, that incentive would not 
exist because State-share allocations will have been depleted by the 
time that States and Tribes complete reclamation of their coal problems 
and become eligible to certify.
    The proposal to allow the Secretary to certify States and tribes 
would simply enable us to keep our records current and accurate by 
certifying all States and Tribes that complete the reclamation of coal-
related AML problems. The Administration's proposal would not change 
the current criteria for certification. The Secretary would not be able 
to certify completion of coal problems under our proposal if the State 
or Tribe could not certify under current law.
    Question 2. Is there a requirement and a mechanism for the return 
of Trust Fund balances to the states/tribes if the AML fee is not 
authorized?
    Answer. No. The Trust Fund balances are subject to appropriations. 
If Congress does not reauthorize the reclamation fee in a manner that 
addresses the allocation issue, some Priority 1 (P1) and Priority 2 
(P2) problems may never be addressed. The AML inventory currently 
contains $3 billion worth of unreclaimed P1 and P2 health and safety 
problems, a figure that does not include administrative costs. Of the 
$1.56 billion unappropriated balance in the AML fund, $532 million is 
allocated to certified States and Tribes--those States and Tribes that 
have completed their coal-related reclamation. In addition, $302 
million is allocated to the Rural Abandoned Mine Program, which, when 
it was active, generally focused on lower priority sites. That leaves 
less than $0.8 billion available to fund grants for coal-related 
reclamation, run the Federal and emergency reclamation program, and 
fund other authorized uses of the AML fund. Therefore, release of the 
$1.56 billion unappropriated balance in the AML fund would result in 
reclamation of only a fraction of existing P1 and P2 sites. The number 
of problems that could be addressed and the time it would take to 
complete those projects would depend upon the manner in which Congress 
releases the balance of the fund to States and Tribes. However, even 
under the most optimistic scenario, a majority of existing P1 and P2 
sites would remain unreclaimed should Congress merely release the 
unappropriated balance without extending fee collections.
    Question 3. If Trust Fund balances will be returned if the AML fee 
is not reauthorized, what do certified states/tribes gain from the OSM 
proposal? In either case, they get only their portion of the Trust 
Fund. Under the OSM proposal, coal producers in those same states and 
tribes would continue to pay reclamation fees but no money would be 
returned to the certified state/tribes. If the fee is not reauthorized, 
coal producers in those states would save $1.5 billion in fees. How 
does OSM reconcile this scenario?
    Answer. As AML fund balances are subject to appropriation, it is 
uncertain as to whether Trust fund balances would be returned to 
certified States and Tribes if the AML fee is not reauthorized. We 
believe that reclamation of high-priority coal-related AML sites is a 
national problem that requires a national solution. The Nation as a 
whole benefited from the coal extracted in the years before the 
enactment of SMCRA. Accordingly, we believe it is appropriate for the 
Nation as a whole to help reclaim the adverse impacts that resulted 
from that mining. We determined that the best approach would be to 
strike a balance between the interests of the western states, where the 
majority of coal is being mined today, while addressing the high 
priority health and safety needs that currently exist in the east. As a 
result, we fashioned a proposal that addresses both needs. The 
Administration's proposal would honor the commitment in SMCRA to 
dedicate 50 percent of the fees collected before September 30, 2004, to 
the States and tribes in which the coal was mined. Certified states and 
tribes would receive their unappropriated State-share balances as of 
that date over a ten-year period and their citizens would live without 
the effects of hazardous coal mines in their midst. Our proposal also 
would remove the requirement that expenditures of those funds comply 
with section 411 of SMCRA, so certified States and tribes would have 
considerably more latitude in the use of those funds than they would if 
the law remained unchanged.
    If the fee is not reauthorized, $1.5 billion will not be collected 
in revenue leaving hazardous mines. Since the coal fee is passed on to 
coal consumers, we believe that any net savings will be realized by the 
nation, not any individual state. For example, in the largest producing 
states, most of the coal is sold to companies in other states.
    The Administration's proposal will result in reclamation occurring 
much faster than under the current allocation formula, thereby 
addressing the pressing health and safety concerns for millions of 
Americans who live on or near our Nation's coalfields. Finally, the 
proposal's graduated fee reductions make the program revenue neutral 
and have the added benefit of resulting in lower costs to consumers who 
purchase electricity from producers that burn coal in their plants.
    Question 4. Under the Administration's proposal, what happens when 
the appropriation is not sufficient to cover both the payout to 
certified states and the historic formula/minimum state payments under 
403(b)? What happens to state share funds if a state cannot get them 
all back before 2014 because of less than anticipated allocations from 
Congress?
    Answer. The Administration is committed to efficient and effective 
reauthorization and has demonstrated that commitment in its fiscal year 
2005 budget request. We believe that the fiscally prudent course is to 
keep distributions to certified States and Tribes subject to 
appropriation. If a certified State or Tribe does not receive a full 
payout of its State-share allocation before 2014, we would seek 
appropriations in subsequent years to distribute the remaining funds on 
a prorated basis determined by each State or tribal share remaining to 
be distributed.
    Question 5. Under the Administration proposal, are states required 
to work on all priority 1 and 2 problems only, or are they able to work 
on priority 3 features along with the higher priority problems? Can 
work done by the states still reflect a mix of priorities?
    Answer. Under the Administration's proposal, AML grant funds would 
be distributed based upon historic coal productions, which 
substantially correlates to the occurrence and severity of unreclaimed 
health and safety coal-related Priority 1 and 2 problems. However, the 
Administration's proposal does not limit States and tribes to 
addressing only those problems. We believe States and Tribes should 
have flexibility in conducting their programs. States and Tribes could 
continue to do a mix of priorities. However, our emphasis is on 
Priority 1 and 2 health and safety problems, an emphasis that States 
and Tribes have shared overwhelmingly, as non-certified State and 
tribes have chosen to address very few lower priority sites to date.
    Question 6. There seems to be some disagreement about the scope and 
priority of abandoned mine problems in each state and nationwide. How 
do the States and OSM update their inventories, and how do we make sure 
that problems are prioritized consistently from state to state?
    Answer. We agree that the quality of the inventories varies from 
state to state. Nevertheless, we are confident that the overall 
inventory is a good national indicator of the scope and magnitude of 
the problem left to address. In general, we believe that all states are 
making a good-faith effort to rank and evaluate the problems based upon 
their individual State or Tribal plan as approved by the Secretary, 
which require use of the priorities in SMCRA.
    Because the inventories do differ, we do not view them as a 
sufficient basis for determining the level of grant funding and the 
overall allocation of collected funds. We have instead chosen historic 
coal production as a basis for grant funding allocations because 
historic coal production is an objective, statistically-based method 
that will direct funds to the remaining problems with a high degree of 
accuracy, equity, and proportionality.
    States and Tribes update their inventories as necessary by direct 
input to the OSM database. While OSM does not approve these updates, we 
do review the inventory for anomalies. Moreover, we review inventory 
updates whenever we perceive a need in oversight.
    Question 7. In 1992, Congress ordered you to transfer the interest 
from the AML fund to the UMWA's Combined Benefit Fund, to cover health 
care premiums for miners whose employers have gone out of business. If 
the interest is insufficient to make up the CBF's shortfall, the 
Secretary of the Interior is ordered to make up the difference, up to 
$70 million.
    The law is unclear regarding how the amount due the CBF is to be 
determined and paid, other than that the Trustees of the CBF will 
``estimate'' how much is to ``be debited against the unassigned 
beneficiaries premium account.'' Exactly how does this work? How do you 
determine how much to send the CBF?
    Answer. Our Memorandum of Understanding with the CBF, as signed by 
both parties on October 12, 2000, calls for the CBF to provide an 
estimate of the per beneficiary expenses for unassigned beneficiaries 
for the plan year, which coincides with the Federal fiscal year. This 
is based on an actuarial study commissioned by the CBF.
    The CBF also provides a listing of the unassigned beneficiaries as 
of September 1st each year. The Social Security Administration provides 
the base unassigned beneficiaries for this list each year. The CBF then 
makes adjustments based on ``out of business'' status not recognized by 
the Social Security Administration. An audit firm validates these 
changes based on procedures agreed upon by OSM and the CBF. The audit 
firm provides OSM a report of its findings, if any.
    CBF takes these adjusted unassigned beneficiaries multiplied by the 
estimated actuarial costs to arrive at their estimate. Concurrently, 
OSM estimates the amount of interest it expects to earn on investment 
of the AML fund. OSM then transfers the lesser of the CBF estimate of 
expenses or the OSM-estimated interest.
    The Memorandum of Understanding also provides for adjustments to 
actual costs and earnings by both CBF and OSM after the end of the plan 
year. In its billing, the CBF makes these actual cost adjustments and 
other prior-period adjustments based on court rulings or new bankruptcy 
information, subject to the guidelines listed above. Typically, an 
annual CBF billing covers both positive and negative adjustments for a 
number of prior plan years.
    Question 8. Do you have the authority to independently evaluate the 
amount that the CBF estimates should be transferred or oversee how it 
is expended? I'd appreciate it if you could describe to us how the 
Trustees justify the expenditures for the unassigned beneficiaries. 
What means do they use to ensure--and reassure the government--that the 
money is going to those for who it is intended?
    Answer. The Memorandum of Understanding discussed in the response 
to Question 7 provides the Federal Government the right to audit all 
records pertaining to the transfer of funds to the CBF. This includes 
records involving the determination of eligible beneficiaries, the 
estimate of expenditures, the receipt and use of Federal funds, the 
determination of actual costs, including administrative costs within 
the context of reasonable and sound accounting practices, and the 
computation of subsequent adjustments. We receive copies of audited 
financial statements and the results of an independent review of the 
CBF procedures in determining the amount transferred. However, we do 
not receive reports on the use of transferred funds.
    In 1999-2000, the Inspector General audited the funds transferred 
to CBF from 1996 to 2000 (Report Number 01-I-187, report attached).* 
The IG reported that, ``in general the transferred amounts were 
accurate.'' The IG also issued a related Advisory Letter (Report Number 
01-1-188, report attached) that addressed the overall financial 
condition of the CBF, the efficiency of the fund transfer process, and 
the appropriateness of charging administrative costs. The Advisory 
Letter concluded that the CBF may not be able to meet its long-term 
financial obligations, that the preparation of the transfer bill needed 
to be simplified, and that administrative costs are an authorized 
charge to the transfer bill. OSM will request a follow-up audit in 
fiscal year 2005. Additionally, the CBF has engaged a public accounting 
firm to perform a special review to verify the unassigned beneficiary 
listing on an annual basis. OSM receives the results of this review 
annually.
---------------------------------------------------------------------------
    * The report has been retained in committee files.
---------------------------------------------------------------------------
    Question. It is my understanding that over $6 billion has been 
collected in AML fees from coal operators since the program's inception 
in 1977 but that only $1.5 billion has been expended addressing 
priority environmental and safety projects.
    Missouri gets nearly 90% of its coal from surface mined coal in 
Wyoming and electric ratepayers, both industrial and residential, in 
Mo. are incurring the costs for the program. Senator Thomas has 
proposed a greater reduction in the AML fee for surface mined coal than 
proposed by the Administration. Will the Administration support Sen. 
Thomas's proposal that will help ratepayers in Missouri and the other 
states consuming surface mined coal?
    Answer. We agree that the cost of the AML fee is passed along. 
However, the cost passed on to individual consumers is extremely small. 
The Administration supports a fee reduction at a level that would keep 
collections on pace with expenditures. We believe that the fee 
reductions in Senator Thomas' proposal would not keep pace with the 
projected cleanup needs in our Nation's coalfields.
              Responses to Questions From Senator Bunning
    Question 1. Mr. Jarrett and Mr. Hohman, state allocations for 
reclamation have traditionally been based on historic coal production. 
Kentucky has the third worst reclamation problems in the nation. 
However, it receives less money than other states such as Ohio and 
Virginia who have less reclamation problems. Why is the state 
allocation based on historic coal production instead of based on 
reclamation needs? What difficulties do you see in changing the 
allocation to focus on reclamation need instead of historic production?
    Answer. We agree that future allocations for reclamation of AML 
sites should be based upon need. That is exactly what the 
Administration's proposal seeks to accomplish. Our analysis shows that 
the most objective method of allocating funds to high-priority sites is 
a formula based on historic production, because there is a substantial 
correlation between historic production and the occurrence of high-
priority problem sites. We are certainly willing to work with you to 
improve our proposal. However, we also believe that it is important to 
honor the promise in SMCRA that 50 percent of the fees collected before 
September 30, 2004, be allocated to the States and tribes from which 
the coal was produced.
    In our extensive analysis of the AML program and the many issues 
surrounding the program, we examined various scenarios that would best 
enable us to direct the funds to the areas where the problems exist. 
There are two mechanisms for doing this: using historic coal production 
or an inventory. We chose to use historic coal production because it is 
an objective measure that substantially correlates with the magnitude 
of the coal-related high priority health and safety problems. Indeed, 
we found a very close correlation between the occurrence of Priority 1 
and 2 problems (as shown on the states' inventory) and historic coal 
production (coal mined before 1977). Neither Virginia nor Ohio receive 
more in annual grants than Kentucky. In descending order, the largest 
state inventories of Priority 1 and 2 coal related health and safety 
problems are those in Pennsylvania ($1 billion), West Virginia ($735 
million), and Kentucky ($323 million). These three states make up 69 
percent of the total inventory as reported by the states and tribes.
    The states with the greatest historic coal production are 
Pennsylvania (34.2 percent), West Virginia (19.7 percent), Illinois 
(10.6 percent), and Kentucky (10.4 percent). Under the Administration's 
proposal, Kentucky and Illinois would receive $15.7 million in grants, 
the third- and fourth-largest grants. Illinois, where historic coal 
production came mostly from underground mining, has a relative small 
inventory, and would complete its coal reclamation in a few years. 
Ohio, which ranks fifth in historic coal production and has the sixth-
largest inventory would receive a grant of $9.7 million (fifth-
largest), and Virginia, which ranks sixth in historic coal production 
and has the fifth-largest inventory, would receive a grant of $4.7 
million (sixth largest).
    To change the allocation formula, first, one must recognize that 
AML problems are national and require a national solution. Funds 
collected within any state should be used to clean up AML problems in 
any state where they exist. Second, states for which the Stateshare 
allocation is the major component of their grants will avoid funding 
decreases and receive grant increases in future years under the 
Administration's proposal.
    Question 4. Mr. Jarrett, does Kentucky receive the same total 
amount of funding that it will receive under the Thomas bill?
    Answer. Under the administration's bill, Kentucky will receive $391 
million over 22 years, which is sufficient to address the current 
construction costs of all recorded problems in the State's AML 
inventory as well as costs such as project design and planning. Under 
Senator Thomas's bill, Kentucky would receive an additional $69 million 
in the same 22-year period, which is above the costs of current AML 
problems. However, at that point, other states would still have over 
$600 million in health and safety coal-related problems to reclaim. 
Nevertheless, under Senator Thomas' bill, Kentucky would continue to 
receive $16.5 million in State-share distributions each year for 
another 3 years and longer, if the fee is extended for the length of 
time needed to generate sufficient funds to reclaim all health and 
safety sites in other states.
    The following table shows possible Kentucky funding for the next 25 
years under each bill, with estimated total AML grant distributions in 
millions of dollars. For comparison, Kentucky's current inventory of 
Priority 1 and 2 coal reclamation projects is $323.5 million, which, 
with the addition of 20 percent for design, engineering, inspection, 
etc., would constitute a total program need of $388.2 million.

------------------------------------------------------------------------
                                                             Estimated
            Bill number                    Sponsor         total funding
                                                           for Kentucky
------------------------------------------------------------------------
S. 2049, H.R. 3778................  Administration bill   $391.7 million
                                     (Specter).
H.R. 3796.........................  Cubin-Rahall bill...   493.4 million
S. 2086...........................  Thomas bill.........   510.3 million
S. 2211...........................  Rockefeller bill....   493.4 million
S. 2208...........................  Rockefeller-Bond-      382.5 million
                                     Bunning bill.
                                    No change to current   139.5 million
                                     law.

Kentucky AML inventory (plus 20% for overhead): $388.2 million
------------------------------------------------------------------------

    Question 7. Mr. Jarrett and Mr. Buckner, the Administration 
recently announced a $190 million Medicare prescription drug 
demonstration program for the Combined Health Benefit Fund for coal 
retirees. The Specter bill proposes to make over $100 million of 
accumulated reclamation interest available to the combined health 
benefit fund. Will both of these amounts together be sufficient to meet 
the obligations of the Combined Benefit Fund?
    Answer. Based on available information, we estimate that with the 
recently announced $190 million Medicare prescription drug 
demonstration program along with the availability of $100 million of 
current accumulated ``stranded interest'' and the increased earnings on 
the AML fund, there should be sufficient interest available to meet the 
needs of the unassigned beneficiaries of the Combined Benefit Fund 
through 2009. We further estimate that from 2015 forward, the interest 
earned on the fund will be sufficient to meet the needs of the 
unassigned beneficiaries of the Combined Benefit Fund.
                                 ______
                                 
      National Association of Abandoned Mine Land Programs,
                                                    March 23, 2004.
Hon. Pete V. Domenici,
Chairman, Senate Energy and Natural Resources Committee, Washington, 
        DC.
    Dear Chairman Domenici: Enclosed with this letter are my responses 
to questions from several members of the Committee following my 
testimony at the AML Hearing on March 11, 2004. Please contact me if 
you need further information.
            Sincerely,
                                             Steve Hohmann,
                                                         President.
              Responses to Questions From Senator Domenici
    Question 1. You state that ``any adjustment to the current 
certification process should not inhibit the ability to states and 
tribes to address high priority non-coal projects. Exactly what are you 
concerned about, and what should we do or not do?
    Answer. The NAAMLP believes that if states and tribes are required 
to certify completion of coal related problems they should not be 
precluded from working on high priority non-coal problems with state 
share funding. Maximum flexibility and discretion should remain with 
the states and tribes to fund projects, coal or non-coal, within their 
respective borders.
    Question 2. There seems to be some disagreement about the scope and 
priority of abandoned mine problems in each state and nationwide. How 
do the States and OSM update their inventories, and how do we make sure 
that problems are prioritized consistently from state to state?
    Answer. There are indeed some challenges associated with how we 
define the scope and priority of AML problems. For one thing, 
construction costs used in the inventory are not uniform nationwide. 
However, the inventory is a good indicator of the general location and 
distribution of AML problems. The inventory has merit because it 
documents actual on-ground problems in a particular state. So, we do 
know from the inventory that those on-ground problems are legitimate 
and far exceed the amount of funding currently available to reclaim 
them.
    Discrepancies may exist in the designation of priorities from state 
to state; however, some degree of standardization is achieved through 
the inventory forms each state must complete in order to enter a site 
into the inventory. The forms ask standard questions and depending on 
the answers, a site is designated a Priority One, Two, or Three.
    The real controversy surrounding priorities is over the designation 
of certain ``general welfare'' problems as Priority Two health and 
safety issues. Some parties believe that this practice usurped the 
Priority system and its intent under Title IV. Those parties advocate 
an OSM review of the inventory to identify these sites and remove them. 
This is one of the provisions in the Thomas bill, S. 2086, and the 
Cubin/Rahall bill, H.R. 3796.
    Also, the Thomas bill and the Cubin/Rahall bill attempt to address 
the prioritization issue in the future by requiring OSM to approve all 
state and tribal additions to the inventory.
              Responses to Questions From Senator Bingaman
    Question 1. I understand that the National Association of Abandoned 
Mine Land Programs has developed a Legislative Concept Paper and 
Proposal for Extension of the Abandoned Mine Land Reclamation Program, 
dated February 27, 2003. Please provide for the record information 
describing this proposal and the rationale supporting it.
    Answer. I have attached a copy of the Legislation Concept Paper and 
its supporting rationale.*
---------------------------------------------------------------------------
    * The Legislation Concept Paper has been retained in committee 
files.
---------------------------------------------------------------------------
    Question 2. What process was used to develop the proposal? Does the 
proposal have the support of the States and Tribes with AML programs?
    Answer. The Legislative Concept Paper began as a resolution that 
the NAAMLP passed at our September 2002 Annual Meeting in Utah. The 
resolution addressed items relating to reauthorization on which the 
states and tribes, at that time, had reached a consensus. Through a 
series of conference calls, the resolution was developed into a concept 
paper in the months following the annual meeting. Work on the paper was 
finalized at the NAAMLP Winter Meeting in Texas in February 2003.
    The proposal had consensus from the states and tribes at the time 
it was adopted. Currently, the paper has not been the focus of our 
group's discussions. Since specific legislation has been introduced our 
attention has been diverted to addressing those proposals. It is my 
belief that the concept paper still has broad consensus from our 
members.

              Responses to Questions from Senator Bunning

    Question 1. Mr. Jarrett and Mr. Hohrnann, state allocations for 
reclamation have traditionally been based on historic coal production. 
Kentucky has the third worst reclamation problems in the nation. 
However, it receives less money than other states such as Ohio and 
Virginia who have less reclamation problems. Why is the state 
allocation based on historic coal production instead of based on 
reclamation needs? What difficulties do you see in changing the 
allocation to focus on reclamation need instead of historic production?
    Answer. Currently, Kentucky receives more in reclamation grants 
than Ohio and Virginia. That's because the current allocation relies on 
historic production and state share to distribute funds. OSM's proposal 
relies solely on historic production to distribute funding and that is 
why Kentucky would receive less money than Ohio and Virginia under S. 
2049.
    There is no direct relationship between historic production and the 
number of AML problems in any given state. Kentucky's historic 
production percentage is 10.6%, less than Illinois with a percentage of 
10.8%. Yet Kentucky has eight times the amount of unfunded Priority One 
and Two sites in the inventory than Illinois. Allowing states with 
fewer AML problems to receive significantly higher annual grants than 
Kentucky is not an equitable method of addressing the AML problem 
nationwide.
    There should be no difficulty in beginning to address the 
reclamation needs in Kentucky. by maintaining the state share as in 
current law and preserved in S. 2086, the Thomas bill. Keeping the 
state share as in the Thomas bill would ensure that Kentucky received 
increased funding into the future.
    Question 3. Mr. Hohmann, you mentioned that you liked the Thomas 
Bill with certain modifications. Can you elaborate on the modifications 
that you think need to be made to the bill to better reclaim the lands 
in Kentucky?
    Answer. Kentucky actually prefers the reauthorization changes made 
under the Cubin/Rahall bill (HR 3796) that is currently in the House. 
Although the Thomas bill is similar to the Cubin/Rahall bill in many 
ways, most notably that it keeps the state share intact, there are 
differences between the two. At a minimum, the Thomas bill should be 
modified to include the following from the Cubin/Rahall bill:

          i. Extend the program to 2019.
          ii. Continue to allow the AML Enhancement Rule.
          iii. Include provisions to bolster the UMW Combined Benefit 
        Fund.

    Question 5. The Thomas Bill continues to pay out the state share of 
the reclamation fund. The Specter Bill, however, eliminates this. Mr. 
Hohmann, why is it important for Kentucky to keep the state share 
intact? Does Kentucky treat the state share money it receives different 
than the historic production money?
    Answer. Kentucky has the third largest state share balance in the 
AML Trust Fund. Kentucky's share is $120 million. It is important to 
Kentucky to keep state share intact and return that money to the state 
in a manner that offers significant and immediate funding increases. 
Implicit in SMCRA is the promise from the federal government to return 
those funds to the states from which they were collected. S. 2049 
returns those funds in a method that treats them like historic coal 
share, contrary to the way they are now distributed. State share funds 
should be returned as expeditiously as possible, not based on historic 
coal production. Additionally, we have estimated that the amount of 
fees Kentucky coal operators will pay into the AML fund during the 
first eight years of reauthorization under the Specter Bill will be in 
excess of $190 million. None of those fees would be Kentucky's state 
share. All $190 million would go to the federal share. Under the Thomas 
Bill, S. 2086, Kentucky would be able to claim ownership of 50% of that 
amount--$95 million.
    Kentucky treats all funding the same. All AML funding, state or 
federal share, to Kentucky is used to reclaim high priority coal 
related problems. The same holds true in other eastern states. So, it 
isn't necessary to employ the historic coal share to make Kentucky and 
others spend AML funds on historic coal problems.
    Question 6. Mr. Hohmann, why does Kentucky continue to receive new 
complaints about abandoned mines this far into the program? Hasn't 
Kentucky reclaimed most of its mines?
    Answer. There are mainly three reasons for this. First, the 
coalfields are dynamic. Subdivisions and other development continue to 
expand into areas that were never before accessed by people . Abandoned 
Mines that were once remote are suddenly next door to a family with 
five children living in a new subdivision. The mine is now a hazard. 
Second, the AML program reclaims the hazards from the abandoned mines, 
not necessarily the mine itself. This is because it may not be cost 
effective or even feasible to reclaim an entire mine. When a large 
abandoned underground mine leaks water into the hillside causing a 
landslide, the AML program repairs the landslide, not the entire mine. 
The mine may then begin to leak water at another location, causing 
another AML problem. Third, sometimes AML problems do not manifest 
themselves until many, many years after mining. Again, a large 
underground mine may not leak for many years until a roof fall occurs 
causing a sudden rush of water. Or the roof fall could cause one area 
of the mine to accumulate water when it never had before, causing 
seepage to the outside. That same roof fall could also cause surface 
subsidence decades after mining was completed.
                                 ______
                                 
                              The State of Wyoming,
                       Department of Environmental Quality,
                                      Cheyenne, WY, March 22, 2004.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Senator Domenici: Thank you for the opportunity to appear 
before the Committee on Energy and Natural Resources and to present 
Wyoming's views regarding abandoned mine land legislation.
    Enclosed herewith, please find Wyoming's response to the question 
submitted for the record.
    Wyoming appreciates the hard work by you and your Committee to 
develop abandoned mine land legislation that will allow states to 
continue to address serious hazards to public hcalth and safety. The 
bill proposed by Senator Thomas of Wyoming insures that all entities 
with a stake in the outcome of these deliberations are treated fairly.
    Thank you for the opportunity to provide this additional 
information.
            Sincerely,
                                             Evan J. Green,
                                                  AML dministrator.
[Enclosure.]
        Response of Mr. Green to Question From Senator Domenici
    Question. There seems to be some disagreement about the scope and 
priority of abandoned mine land problems in each state and nationwide. 
How do the States and OS M update their inventories, and how do we make 
sure that problems are prioritized consistently from state to state?
    Answer. I will address the three issues raised in the question from 
the perspective of Wyoming's experience in managing our state AML 
program:

   scope and priority of the problems in each state and 
        nationwide
   updating of State and OSM inventory data bases
   consistency of site categorization and prioritization from 
        state to state

    These issues present challenges for each state and for OSM, and are 
topics of ongoing discussion as we attempt to develop consistency in 
defining the scope of the problem and setting appropriate funding 
priorities to address these problems

                          SCOPE OF THE PROBLEM

    Wyoming maintains both an internal site data base and also reports 
site information to the OSM Abandoned Mine Land Inventory System 
(AMLIS). There are discrepancies between Wyoming's internal data base 
and the AMLIS system for several reasons. New sites are constantly 
being identified through our inventory process. These new sites are 
recorded in Wyoming's internal data base, but are not entered into 
AMLIS until we have complete information including a cost estimate 
based on a field inspection of the site. The AMLIS inventory provides a 
reasonably accurate, broad-brush estimate of the scope of remaining 
work; but may lag behind individual state inventories. Wyoming does not 
enter sites into AMLIS until we have verified the eligibility and 
hazard ranking of the location. What is clear is that the sites 
currently in the AMLIS system are verified legitimate sites, and that 
the cost of reclaiming those sites is substantially in excess of the 
funds available.
    Wyoming and other coal states are constantly discovering or 
identifying new sites which are legitimate hazards that should be 
reclaimed to protect public health and safety. Old mines continue to 
deteriorate, subsidence features occur with regularity, historic 
hazards formerly within active coal permits become eligible for AML 
funding. At the time of the passage of SMCRA, Wyoming and perhaps other 
states were not aware of the total scope of the problem, nor of the 
potential for ongoing deterioration in historic mining districts. This 
uncertainty leads in some cases to discrepancies in the estimates of 
the amount of funds required to ``finish the job.''

              UPDATING STATE AND OSM INVENTORY DATA BASES

    As noted above, individual states report site information to the 
OSM AMLIS data base, and as in the case of--Wyoming, may also maintain 
working data bases for internal use prior to AMLIS entry. Wyoming has 
an ongoing inventory process to identify new and hazardous sites. Like 
many states, Wyoming receives reports of previously unknown hazards 
from private landowners, federal land management agencies, hunters and 
hikers, mining companies, and AML contractors working on other 
projects. These sites are recorded, and as resources allow, verified 
for eligibility and cost before being entered into the AMLIS data base. 
OSM is dependent on the individual states and Tribes to report site 
information, and does not have the resources to verify these sites or 
secure information independently.

  CONSISTENCY OF SITE CATEGORIZATION AND PRIORITIZATION FROM STATE TO 
                                 STATE

    This is perhaps the most difficult and contentious issue referenced 
in the question. Not all states may categorize a site in the same way, 
nor assign the same priority. AMLIS reporting provides some consistency 
since all states use the same inventory form to enter information into 
the data base. The questions on the form, if answered correctly and 
based on accurate information, should drive categorization as either a 
Priority One, Priority Two, or Priority Three. Wyoming defaults to the 
SMCRA definitions of Priorities for our internal data base as well, and 
addresses lower priority sites only if those sites occur in conjunction 
with a higher priority project. Wyoming certainly has enough P1 and P2 
sites to consume both the current state share of the AML trust fund, 
and funding from future state allocations.
    Some states want the flexibility to designate some ``general 
welfare'' sites as Priority Two health and safety projects. While this 
is not an issue in Wyoming, it is obvious that the expenditure of AML 
funds for other than legitimate Priority One and Priority Two projects 
will extend both the time and the resources required to complete high 
hazard projects nationwide. Alternatively, individual states closest to 
the problem are probably in the best position to prioritize projects 
and sites, and address them accordingly.
    Wyoming notes that both the Cubin/Rahall and the Thomas bills 
currently under consideration would require a review of both current 
AMLIS site listing and of future state AMLIS submissions to insure that 
these sites meet the Priority One or Two criteria.

                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

                        Pennsylvania Environmental Council,
                                                     March 9, 2004.
Hon. Pete V. Domenici,
Chairman, U.S. Senate Committee on Energy and Natural Resources, 
        Dirksen Senate Building, Washington, DC.
    Dear Senator Domenici: The Pennsylvania Environmental Council 
strongly supports the Bush Administration's proposal to modify and 
reauthorize the Abandoned Mine Reclamation Fund before it expires on 
September 30, 2004. We thank Senator Specter for taking the lead in the 
Senate to introduce this timely proposal as S. 2049 and are grateful to 
Senator Santorum for signing on as a co-sponsor. Both Senators have 
shown a commitment to improve the program to efficiently and 
effectively reclaim the country's abandoned coal mine legacy. We also 
appreciate the leadership of Congressman Peterson, who introduced the 
proposal in the House of Representatives as H.R. 3778.
    On February 4, Interior Secretary Gale Norton traveled to 
Pennsylvania to announce the Administration's historic proposal and to 
personally view our massive abandoned coal mine problems. The 
Pennsylvania Environmental Council was pleased to join Secretary 
Norton, Congressmen Peterson and Sherwood, and Governor Rendell for the 
announcement. During her trip to Harrisburg, Secretary Norton noted 
that of the more than 3.5 million Americans who still live less than a 
mile from a dangerous high-priority abandoned coal mine site, nearly 
half--about 1.5 million people--live in Pennsylvania.
    Secretary Norton captured the problem when she said, ``Everyone in 
America has benefited from Pennsylvania coal for almost 300 years, but 
only Pennsylvanians have had to live--and sometimes die--with the 
consequences. The Administration's legislation, introduced by Senator 
Specter, will get serious about saving lives, improving health and 
safety, and restoring ruined landscapes in Pennsylvania.''
    Specifically, this legislation is important to protect our 
communities and families from hazards posed by coal mines abandoned 
before 1977. Dangerous shafts, mountains of black waste, polluted 
waters, and depressed economies abound in Pennsylvania. 44 of 
Pennsylvania's 67 counties contain a total of nearly 200,000 acres of 
abandoned mine lands. Abandoned mines pollute public water supplies, 
destroy fish and wildlife habitat, and threaten human health and 
safety. Abandoned mine drainage is among the largest sources of water 
quality impairment in the Commonwealth, plaguing over 2,100 miles of 
streams.
    The Commonwealth currently receives about $24 million per year from 
the Fund. In addition, Pennsylvania has committed substantial state and 
private dollars and countless hours of professional and volunteer time 
to addressing the abandoned mine problems. We have successfully 
leveraged federal funds to clean up toxic mine water, extinguish mine 
fires, and eliminate other dangerous abandoned mine hazards, but the 
job is far from finished. This proposal would increase that level to 
over $35 million per year over the next 15 years, enabling Pennsylvania 
to make significant progress in cleaning up abandoned mine lands and 
abandoned mine drainage.
    The Abandoned Mine Reclamation Fund is not currently structured to 
efficiently and effectively complete the job of reclaiming coal mine 
lands abandoned before 1977. The states that fueled the coal boom in 
the early and middle part of this century and helped fight two World 
Wars currently have low coal production relative to our western 
counterparts, yet we have the largest legacy of adverse mining impacts 
from before 1977. The majority of grants distributed to the states are 
based on current rather than historic production. When the program 
began in 1977, production in the eastern states was high enough to 
ensure that our states received a proportion of the funds that roughly 
aligned with the extent of our problems. Since then, production has 
shifted away from the states--including Pennsylvania--with high 
historic production and 94% of the abandoned mine land problems.
    Office of Surface Mining Director Jeff Jarrett captured the essence 
of the problem in a white paper entitled The Job's Not Finished in 
which he pointed out that ``there is a direct correlation between a 
state or tribe's historic production and the magnitude of its AML 
problem . . . there is no relationship between the current production 
state share portion of the grant and the magnitude of the AML problem 
in that state or tribe.''
    We are very pleased that Senator Specter's legislation changes the 
formula to direct resources from the Fund to states based upon historic 
coal production. It corrects existing imbalances and directs resources 
toward states like Pennsylvania with the most severe problems. As a 
result, it will rapidly increase the pace at which we will be able to 
finish the job of reclaiming our dangerous abandoned mine sites and the 
waters they pollute.
    As abandoned mine lands are reclaimed, they offer potential 
locations for economic development. By developing and marketing 
abandoned mine lands that would normally struggle to attract new 
investment, these ``grayfields'' can be turned into regional benefits 
by creating economic opportunities, preventing sprawl, and conserving 
open space and watershed resources.
    The Pennsylvania Environmental Council thanks Senator Specter for 
taking the initiative to lead the charge in the Senate to fix the Fund, 
help improve the quality of life in coalfield communities, and restore 
our lands and waters. Failure to act continues a cycle of depressed 
economies and unemployment while exposing our communities and families 
to health and safety hazards. We urge you and your colleagues in the 
Senate to pass S. 2049.
            Sincerely,
                                       Andrew S. McElwaine,
                                                 President and CEO.
                                 ______
                                 
                                          State of Wyoming,
                                      Cheyenne, WY, March 10, 2004.
Chairman Pete V. Domenici,
Senator Jeff Bingaman,
U.S. Senate Committee on Energy and Natural Resources, Dirksen Office 
        Building, Washington, DC.
    Dear Senators Domenici and Bingaman: Three different bills have 
been introduced in Congress to address the reauthorization of the 
Surface Mining Conservation Reclamation (SMCRA). As the Governor of the 
nations' largest coal producing state and by far the largest 
contributor to the fund, I write to give you Wyoming's perspective, and 
seek support for our position.
    Within the original 1977 enactment of SMCRA is the Abandoned Mine 
Land (AML) Fund--now set to expire on September 30, 2004. This fund was 
designed to provide for the clean-up and rehabilitation of mining 
locations throughout the United States.
    As mentioned above, there are at least three legislative proposals 
now filed that would extend SMCRA and the AML Fund. Unfortunately, 
current law and the proposals filed have become vastly more complex.
    We would ask you though, to consider the following as the most 
critical aspects of any renewal.

   The return of money overdue the states and tribes.

    The federal government has been collecting a per ton tax on mined 
coal for over 25 years. Half of this tax is by law to be returned to 
the states and tribes from which is generated. This is not happening. 
The fund currently owes over one billion dollars to 27 states and 
tribes. These funds should be returned to the states it legally belongs 
to, immediately, and without restriction.

   Reaffinning the commitment to work with the states in the 
        future.

    The original concept of the fund--that half of the moneys collected 
be returned to the states--is sound. Reaffirming this commitment will 
allow coal producing states to stay up with their necessary and 
evolving reclamation needs--needs that exceed those acknowledged by the 
federal government.

   Cutting the rate of the tax.

    Wyoming agrees with the proposals pending before Congress that the 
rate of tax is too high and should be reduced.

   Commitments made to miners and their families should be 
        honored.

    The federal government must honor the promises it has made to coal 
miners and their families when it agreed to pay their health care 
expenses. I believe the Cubin-Rahall proposal provides a viable 
solution to this facet of the issue.
    I would ask that you consider supporting the proposition that a 
state is entitled to rely on the promises of the federal government. We 
ask you to advocate not for charity or handouts on behalf of any 
constituency, but rather for the proposition that when Washington, DC 
makes a promise to its citizens, or its states, it will keep it. That 
when Washington, DC takes from the states and promises to repay, it 
will.
    Thank you for your time and consideration.
            Best Regard,
                                          Dave Freudenthal,
                                                          Governor.
                                 ______
                                 
                                  Kennecott Energy Company,
                                      Gillette, WY, March 10, 2004.
Hon. Craig Thomas,
U.S. Senate, Washington, DC.
    Dear Senator Thomas: On behalf of the Kennecott Energy Company 
(Kennecott), thank you for introducing S. 2086, the Abandoned Mine Land 
Reclamation Reform Act of 2004. It is my understanding that the Senate 
Committee on Energy and Natural Resources will hold an oversight 
hearing on the Abandoned Mine Land (AML) program March 11, 2004. I 
wanted you to know before that hearing that Kennecott supports S. 2086 
and your efforts to address the issues surrounding the AML program.
    Kennecott believes that the AML program should be reformed in a 
manner that brings fairness to the fee structure, stops the expansion 
of the use of AML fees beyond their original intent, spends the 
collected monies where it is most needed, and fulfills its commitment 
to the participating states. S. 2086 addresses these issues in a fair 
and balanced manner and we thank you for your leadership.
    Kennecott supports your efforts in addressing the fee structure 
under the AML program. As you know, many western states have addressed 
their abandoned coal mine problems, yet coal companies operating in 
these states are still required to pay significant AML fees. I am 
hopeful that during the reauthorizations process, Congress will reduce 
the AML fees, which will ultimately reduce the cost of energy to the 
consumer.
    Again, thank you for introducing S. 2086 and for your leadership on 
this important issue.
            Best regards,
                                           Bret K. Clayton,
                                                 President and CEO.
                                 ______
                                 
                   New Mexico Energy, Minerals, and
                              Natural Resources Department,
                                      Sante Fe, NM, March 10, 2004.
Hon. Peter V. Domenici, Chairman,
Hon. Jeff Bingaman, Ranking Minority Member,
U.S. Senate Committee on Energy and Natural Resources, Dirksen Senate 
        Office Building, Washington, DC.

Senate Committee on Energy And Natural Resources Hearing on Abandoned 
        Mine Land Legislation, March 11, 2004
    Dear Chairman Domenici and Senator Bingaman: On behalf of the New 
Mexico Energy, Minerals and Natural Resources Department, we 
respectfully submit a Statement to be entered into the record of the 
Senate Committee on Energy And Natural Resources Hearing on Abandoned 
Mine Land Legislation. We appreciate the opportunity to present this 
statement, and look forward to working with the Committee in the 
future. We are available to answer any questions you or your staff may 
have on this topic.
            Sincerely,
                                   Joanna Prukop,
                                           Secretary of Energy, 
                                               Minerals and Natural 
                                               Resources.
[Attachments]
                          State of New Mexico
    Thank you for the opportunity to present a statement on this 
important topic. New Mexico brings an important perspective to the 
debate over the future of the abandoned mine land (AML) program. As a 
state with a smaller AML program, we struggle to efficiently and 
effectively employ our limited resources in the face of large problem. 
As a Western state with abandoned coal mines remaining to be reclaimed, 
we struggle with balancing the need to complete the coal mine projects 
with the enormous need to safeguard the numerous and dangerous 
abandoned non-coal mines. And with other Western states, we share the 
concerns that expanding residential development and recreational use 
are increasing the exposure to abandoned mine dangers.
    New Mexico has a long and distinguished mining history. Native 
Americans mined turquoise, lead, coal and copper hundreds of years 
before Europeans arrived in North America. Spanish exploration and 
mining began in the late 1500s and expanded across the state. In the 
1820s, the discovery of gold near Cerrillos triggered a rush decades 
before the California Gold Rush. Coal mining expanded in the nineteenth 
century driven by demand from the military, the railroads and non-coal 
mines across the Southwest. Today, New Mexico is home to some of the 
largest copper and coal mines in the United States.
    Centuries of mining have also left another legacy: thousands of 
open pits and shafts and other mine hazards that pose a serious threat 
to public health and safety. Since 1990, we are aware of at least five 
fatalities at abandoned mines in New Mexico. Numerous other serious 
injuries and costly rescues have occurred at these mines. Among the 
victims have been both local residents and visitors to New Mexico.
    The Abandoned Mine Land Program, established under Title IV of the 
Surface Mining Control and Reclamation Act of 1977 (SMCRA), has made 
significant gains in eliminating abandoned mine land threats across 
America. By directing funds to state agencies, the AML Program allows 
the states to focus on the greatest threats to public health and 
safety.
    In New Mexico, a small annual AML grant funds a program that has 
completed numerous projects across the state. New Mexico's annual grant 
has averaged near 51,800,000 in recent years. Despite the small grant, 
New Mexico's AML program has received national and regional awards for 
its reclamation work. During the history of our program, over 1000 mine 
openings have been closed and hundreds of acres of mice waste have been 
remediated in New Mexico.
    In addition to protecting public health and safety, the New Mexico 
AML program has provided numerous other public benefits. AML projects 
are a source of construction contracts and jobs for New Mexicans. While 
most project investigation and design work is conducted in-house, all 
construction work is performed by private contractors, almost all of 
whom are based in New Mexico.
    AML projects have also expanded our knowledge of New Mexico's 
mining heritage and created opportunities for public recreation. The 
Cerrillos Hills Project, completed in 2003 with the closure of 90 mine 
openings, allowed the expansion of a newly created historic park. 
Hiking and horseback riding trails now run past former mine hazards 
where interpretive signs and overlooks allow the visitors to learn 
about early mining history. The Sugarite Coal Mine Project near Raton, 
which earned several national awards in 2002, involved the reclamation 
of coal mine openings and mine waste piles now located within a popular 
state park.
    However, despite these gains, considerable work remains in New 
Mexico. We estimate that over 15,000 mine openings at more than 5000 
mine sites in New Mexico remain unreclaimed. While significant costly 
coal mine projects remain, the majority of the sites are found in large 
non-coal mining districts. In both the Lake Valley and Orogrande 
Districts in southern New Mexico, where the AML program has recently 
begun planning projects, the number of unreclaimed mine features exceed 
a thousand. The Orogrande District is the site of the most recent 
fatality in New Mexico.
    In addition, as development and public recreation moves further 
into areas once considered remote, the threat from long forgotten mine 
workings increases. Newly designated recreational areas increasingly 
provide access to old mining districts. The Lake Valley District, 
located far from populated areas, is now publicized as a ``Back Country 
Byway'' by the BLM. An example of development encroaching on mining 
areas occurred this past summer when a person broke into a closed mine 
near Santa Fe fell down the shaft and had to be rescued. When the 
abandoned mine was closed 15 years ago, there were not even 4-wheel 
drive roads nearby; today, the site is adjacent to a subdivision.
    For these reasons, New Mexico urges Congress to reauthorize the AML 
fee in SMCRA. New Mexico has been and remains a strong supporter of the 
efforts of the National Association of Abandoned Mine Land Programs and 
the Interstate Mining Compact Commission to develop a reauthorization 
proposal that focuses the fee expenditure on the greatest needs and 
treats all states equitably. Gov. Richardson has also sponsored a 
Western Governor's Association on AML issues.
    In reviewing the proposals for AML fee reauthorization, New Mexico 
urges that reauthorization legislation address the following key 
issues:

   The fee collection authority should be extended for a 
        sufficient period, at least 12 years, to address the majority 
        of high priority health and safety problems throughout the 
        country.
   The minimum annual funding for states should be set at a 
        guaranteed level of $2 million. The efficiency of state 
        programs depends on long term planning and on the ability to 
        maintain a staff that can effectively investigate and design 
        projects. Having a guaranteed minimum annual grant is essential 
        to the effective use of the funds. The minimum funding level 
        should be used for both uncertified and certified states.
   The control over the ``certification'' of state programs 
        should remain in the hands of the states. AML programs work on 
        multi-year projects and therefore need to plan the transition 
        to certification. SMCRA currently allows the states to decide 
        when certification is appropriate and there is no reason to 
        change this provision.
   The ``state share'' portion of AML fee distribution must 
        remain intact. The state share, in coordination with the 
        historic production share, is essential for the equitable 
        funding of the state and tribal programs. The ``state share'' 
        has been criticized for diverting a majority of AML funds to 
        the Western states. That criticism is not true. For example, in 
        2002, the western jurisdictions of New Mexico, Montana, 
        Colorado, Utah, Wyoming, Navajo and Hopi provided 58% of the 
        AML fee collections but only received 26% of the AML 
        distributions. Because of current production, the Western 
        states do, and will continue to, contribute the majority of the 
        AML fee revenues. Because of historic production, the Eastern 
        states will always receive the majority of the distributions. 
        The state share insures that the Western states and tribes 
        receive at least some of the distributions.
   Any amendments to SMCRA should not inhibit the ability of 
        the states and tribes to address high priority non-coal 
        projects. SMCRA recognizes that high priority non-coal projects 
        are an appropriate use of the funds. We urge Congress to 
        consider alternatives for addressing the numerous and costly 
        non-coal projects not currently covered by SMCRA.
   Any changes to the funding mechanisms in SMCRA should treat 
        tribal AML programs fairly. New Mexico has worked extensively 
        with the Navajo and Hopi AML programs, both of which are 
        enormously successful.
   The legislation should contain a mechanism for the eventual 
        return to the states of the accumulated and unappropriated 
        state share portion of the AML trust fund.

    We appreciate the opportunity to present this statement, and look 
forward to working with the Committee in the future.
                                 ______
                                 
       Pennsylvania Department of Environmental Protection,
                                    Harrisburg, PA. March 29, 2004.
Hon. Pete V. Domenici,
Chairman, U.S. Senate Committee on Energy and Natural Resources, 
        Dirksen Senate Building, Washington, DC.
    Dear Senator Domenici: I am writing to reiterate Pennsylvania's 
strong support for the reauthorization of fee collections under the 
Surface Mining Control and Reclamation Act of 1977 (SMCRA). The 
authority to collect this fee expires on September 30, 2004, but the 
need for its continuation is unquestioned wherever coal has been mined 
in this nation.
    I appreciate the focus that the Committee on Energy and Natural 
Resources, with your leadership, has brought to bear on this issue. The 
committee hearing chaired by Senator Thomas on March 11, 2004, was an 
important step toward the ultimate goal of ensuring that needed 
resources are available to clean up Pennsylvania's and the nation's 
abandoned mine lands. More than one third of the nation's inventory of 
abandoned mine lands is found in Pennsylvania. More than 1.5 million of 
the 3.5 million people the Office of Surface Mining (OSM) estimates 
live within one mile of a hazard associated with abandoned mines are 
Pennsylvanians. It is imperative that we fulfill the commitment made 
with the passage of SMCRA in 1977: that is, to reclaim our abandoned 
mine lands so that health and safety hazards are eliminated, the 
quality of our environment is protected, and our ability to 
beneficially use our land and water resources is maintained.
    The Committee is considering two bills on this issue: S. 2049 is 
supported by the Administration and was introduced by Senator Arlen 
Specter and cosponsored by Senators Rick Santorum and George Voinovich; 
and S. 2086 was introduced by Senator Craig Thomas and cosponsored by 
Senator Michael Enzi. Pennsylvania favors Senator Specter's bill, as it 
more effectively directs the distribution of funds to reclaim existing 
high-priority health and safety problems. As the committee analyzes the 
individual provisions of each of these bills, we offer the following 
specific comments.
    Pennsylvania believes the Committee should ensure that the 
following concepts are part of the final version of any bill it 
approves. These concepts are important if the goals of the program are 
to be achieved and both bills support them to some degree.

   Extension of fee collections.
   Elimination of the Rural Abandoned Mine Program (RAMP) and 
        allocation of the funds for distribution under the historic 
        coal formula.
   Continuation of the ten percent set-aside for acid mine 
        drainage remediation.
   Elimination of the lien requirements.
   Incentives for remining.
   Repays the state share balance as of September 30, 2004.
   Provides for funding for the Combined Benefits Fund (CBF).
   Provides a minimum of $2 million to non-certified states and 
        tribes.

    Senator Specter's bill, S. 2049, makes good progress in addressing 
many of the objectives outlined above. For example, it proposes to 
extend fee collections for an additional 14 years. Although the bill 
also proposes an approximate 20 percent fee reduction, the adverse 
impact of the reduced revenue is lessened since allocations would be 
based entirely on historical coal production. The bill transfers the 
current RAMP balance to the federal share for use on highpriority 
problems and also redirects that portion of future revenues for the 
same purpose. Additional provisions that Pennsylvania supports include 
the continuation of the ten percent AMD Set-Aside program, elimination 
of lien requirements, inclusion of remining incentives, and funding for 
the CBF.
    S. 2049 provides that future collections will be allocated to non-
certified states and tribes based on the historic coal formula. The 
states and tribes with the largest amount of mining performed prior to 
the passage of SMCRA are also the states that have the largest 
inventory of high-priority problems. The historic coal production 
formula for allocation of collections ensures that needed resources are 
made available to deal with the largest inventories of highpriority 
problems.
    The issues that are the subject of these legislative proposals are 
complex, so it is not surprising that there are differences in 
approach. Pennsylvania is encouraged by the fact that Senator Specter's 
bill, S. 2049, and S. 2086, sponsored by Senator Thomas, are in firm 
agreement on the fundamental goal of extending the authority to collect 
the fees mandated by SMCRA. Further, there is agreement between the two 
bills on several important provisions, such as continuation of the ten 
percent set-aside acid mine drainage program, removal of lien 
requirements, and some support for remining incentives. The differences 
in approach between the two bills offer opportunities to compromise in 
a way that would strengthen the final version. The most important 
example is that Senator Specter's bill relies only on revenues 
generated through fee collections, and so does not accommodate future 
allocations for certified states beyond those needed to distribute 
their unappropriated state share balances. S. 2086, on the other hand, 
supports future payments to this group by introducing a new source of 
funding--the unallocated ten percent of the royalties collected from 
minerals produced on federal lands. Because increasing the size of the 
pie makes the task of reconciling conflicting objectives easier, 
Pennsylvania supports the provision in S. 2086 that uses these revenues 
to pay state share balances and future state share allocations for 
certified states with public lands. Montana and Wyoming would qualify 
under this provision; the funds that are no longer needed for these two 
states are then available to be reallocated for distribution using the 
historic coal production formula.
    S. 2049 proposes that states and tribes with approved AML programs 
be required to administer the emergency program as well. Emergencies in 
Pennsylvania are currently funded under the OSM budget. We believe that 
an integral part of implementation of this provision should be a 
commitment to providing the additional needed resources, so 
Pennsylvania does not find itself having to divert funds from its 
existing allocation. S. 2049 also proposes that there should be a limit 
on the amount of funds awarded under the historic coal production 
formula. Pennsylvania understands the desire to ensure the allocation 
formula proposed in S. 2049 does not result in reduced allocations for 
individual states or tribes. We recommend a careful consideration of 
this provision to ensure that the imposition of a statutory limit does 
not cause difficulty in making justifiable adjustments in the future.
    S. 2086 includes a key provision that can be relied on to develop a 
stronger bill. Although S. 2086 proposes continued funding for states 
that have completed work on highpriority problems, thus diverting 
critical resources from the areas where they are most needed, it does 
so by introducing additional funds from mineral leasing revenue on 
public lands. Pennsylvania recognizes the importance of this issue to 
the affected states, and believes this is a reasonable compromise 
approach. A provision in S. 2086 would eliminate an existing program 
authorized by current law--the exception allowed for ``government-
financed'' operations that enable reclamation to be accomplished at no 
cost to the program. In the last four years, Pennsylvania has overseen 
80 projects, reclaimed 700 acres and saved four million dollars through 
the implementation of this program. Given the huge reclamation task 
Pennsylvania continues to face, I call on the Committee to recognize 
the benefit to the program provided by the reclamation of hundreds of 
acres annually with zero cost for construction and to continue its 
support.
    I urge you to give serious consideration to the issues discussed 
above. We owe it to our citizens to make decisions that will enable the 
reclamation of the high-priority coal problems that still face this 
nation. An allocation formula that is structured to deliver funds to 
the states and tribes where the problems are located is a critical part 
of our obligation. I look forward to the discussion as the Committee 
continues its work to reauthorize fee collections prior to the 
expiration date of September 30, 2004.
            Sincerely,
                                       Kathleen A. McGinty,
                                                         Secretary.
                                 ______
                                 
                   Statement of Citizens Coal Council
    Mr. Chairman, members of the committee, this statement is submitted 
on behalf of Citizens Coal Council to the Senate Energy and Natural 
Resources Committee on the issue of the reauthorization of the 
Abandoned Mine Lands program. CCCappreciates 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, clean up 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 benefited 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 benefited from the utilities' longtime 
dependence on coal, and thus has a responsibility to pay for the clean-
up 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 adopt 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 clean up 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, 20 states will not be done the 10 
years called for in S. 2086--two-thirds of states and tribes getting 
AML funds. These states are Alaska, Arkansas, Alabama, Colorado, Iowa, 
Kansas, Kentucky, Maryland, Michigan, Missouri, Montana, North Dakota, 
Ohio, Oklahoma, Pennsylvania, Tennessee, Utah, Virginia, Washington, 
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
    S. 2049 call 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 highwalls, 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
    S. 2086 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.

        (please refer to a recent study ``The Scientific Imperative for 
        Defending Small Streams and Wetlands.)

    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

    Mr. Chairman 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.

                                 ______
                                 
Statement of Mari Jo Flanagan, Assistant General Counsel and Director--
          Government & Regulatory Affairs, The Brink's Company

                              INTRODUCTION

    The Brink's Company is pleased to submit this testimony in 
conjunction with the Committee's hearings on S. 2086 and S. 2049, bills 
to amend the Surface Mining Control and Reclamation Act of 1977 and 
reauthorize the abandoned mine lands (AML) program and to adakess, in 
part, issues related to the Combined Benefit Fund (CBF) established 
under the Coal Industry Retiree Health Benefit Act of 1992 (Coal Act). 
I offer the following testimony on behalf of The Brink's Company, 
formerly named The Pittston Company and all of its subsidiaries.
    The two bills before the Committee today propose important changes 
to the nation's abandoned mines programs, but also include specific and 
differing changes in the relationship between the Abandoned Mine Land 
Reclamation program (AML program) and tile UMWA Combined Benefit Fund 
or CBF, a separate fund established by the Coal Act to address coal 
miners' health benefits. It is the CBF aspects of S. 2086 and S. 2049 
that Brink's would like to address today.

                               BACKGROUND

    The Coal Act was enacted in late 1992 to secure the health benefits 
of more than 100,000 UMWA retirees and dependants who were receiving 
health care from two collectively bargained multiemployer benefit plans 
sponsored by the United Mine Workers of America (UMWA) and the 
Bituminous Coal Operators Association (BCOA). The Act's financing 
provisions were bitterly contested by many companies--including Brink's 
predecessor Pittston--because they were fundamentally unfair and were 
expected to be financially devastating. Subsequent events have proven 
our concerns to be well founded.
    Through more than 40 years of collective bargaining, the UMWA and 
the BCOA created and sponsored one of the most expansive and costly 
benefit programs in the country. The Coal Act shifted a significant 
portion of the cost of this expansive program to companies that were no 
longer part of the BCOA, or even still in the coal business. Among 
other things, the Coal Act relieved the UMWA and the BCOA of their 
responsibility for managing the scope and financing of coal miners' 
retiree health care. The Act merged the collectively bargained 
multiemployer plans into a new statutory benefit plan called the UMWA 
Combined Benefit Fund to assume that task.
    Importantly, the Coal Act included a ``related person'' provision, 
under which joint and several liability was imposed on corporate 
parents and related companies of coal mining companies along with the 
coal mining company, even though these affiliated companies had no 
connection to the coal mining business other than having a common 
parent. Today, those related companies are liable for their coal 
company affiliate's obligation to pay premiums to tile UMWA Combined 
Fund. In some cases these premium liabilities amount to hundreds of 
millions of dollars.
    Brink's, Incorporated, a company whose armored trucks are so well 
recognized throughout our country, is a perfect example of the 
unintended and unfair consequences of the Coal Act's liability scheme. 
Brink's, Incorporated is owned by The Brink's Company, the same parent 
that owned coal mines in the 1970s and 1980s, and that owned 
subsidiaries in the mining business. In 2003, The Brink's Company 
completed divestiture of its coal mining operations and today it is not 
itself, nor through any subsidiary, in the coal mining business. Yet, 
by virtue of its historic common parent to former coal mining 
companies, Brink's, Incorporated, which was never in the mining 
business, is saddled with joint and several liability for hundreds of 
millions of dollars of CBF obligation.
    At the outset I want to be perfectly clear that The Brink's Company 
is not proposing that it evade its obligations to the CBF.
    Proponents of the joint and several liability provisions in the 
Coal Act have argued that those provisions were necessary to ensure 
that the entirety of a corporate groups assets would be available to 
pay for coal miner health and pension benefits. Yet, there is no valid 
reason why non-coal mining companies should have to bear these legacy 
liabilities for separate corporate entities in a completely different 
industry. Indeed, the statute has had the exact reverse effect from 
what was intended--these legacy Coal Act liabilities significantly 
depress the financial picture of the entire corporate family, 
particularly the non-coal affiliates, and reduce significantly the 
appeal of investors to become shareholders and infuse capital that 
would be utilized to directly or indirectly fund the obligation to pay 
premiums into the Combined Fund to provide these generous benefits. A 
perhaps unintended, but very real consequence of this dynamic is that 
many coal companies and their parent organizations have gone bankrupt, 
and the non-coal miring businesses (like Brinks, Incorporated) are 
forced to forego recognition of their economic success to fund the 
obligations of a family member that once was in the coal industry.

                RECOMMENDATIONS FOR CONGRESSIONAL ACTION

    Brink's urges the Committee to consider addressing this issue in S. 
2086 and S. 2049, and we present a simple and fair solution--eliminate 
the ongoing joint and several liability provisions for those companies 
that are today prepared to assume their full obligation by prepaying 
their Combined Benefit Fund obligations, backed by an ongoing 
obligation of the parent company. This is a win-win situation for all 
concerned.
    The Combined Fund would receive the actuarial value of the future 
premium obligation from the obligated company. This solution could 
virtually eliminate the consequences of what in fact transpired last 
year when LTV Steel, Bethlehem Steel and National Steel--each of whom 
was a participant in the coal mining industry and a major contributor 
to the Combined Fund--entered into bankruptcy and were no longer able 
to meet their obligations. The Combined Fund would no longer be at the 
mercy of adverse conditions, which might in some future year result in 
the entire group being unable to honor its statutory obligations. This 
proposal, coupled with the AML funding changes proposed elsewhere in 
these bills will provide to the CBF predictability and certainty, which 
will assist in ensuring its financial stability, as its future 
obligations will be ``pre-funded'' and further secured by the parent 
company's retention of the obligation.
    This course of action will present a substantial positive economic 
effect for non-coal mining companies, like Brink's, Incorporated, 
which, once relieved of the financial stigma of joint and several 
liability for a sibling's obligations can use their financial strength 
to raise funds in the capital markets, maintain their current growth 
and employment rates, and create even more domestic jobs in the future 
through both national and international expansion.
    I want to be clear, however, and state again that The Brink's 
Company is not proposing that it evade its obligations to the CBF. 
Since the parent remains liable to resume paying premiums in the event 
the prepaid amount should be depleted while beneficiaries remain alive, 
the Combined Fund is at no risk of loss.
    There is a second issue that Brink's urges the Committee to address 
in considering S. 2086 and S. 2049, and that is the Coal Act's 
requirements that those current and former coal companies that today 
survive must assume liability for ``unassigned beneficiaries''--those 
miners who worked for coal mining entities that are no longer in 
business. On its face, this feature of the Coal Act was unfair when 
enacted in 1992, and has become even more severe in recent years as 
some of the major steel companies addressed above have gone bankrupt. 
The effect of these bankruptcies simply multiplies the burdens on those 
companies, such as The Brink's Company, that today remain viable. The 
result is to create an ever-dwindling number of companies that must 
shoulder the burden of those companies who, through misfortune or 
design, have failed financially and no longer pay for their 
obligations.
    Brink's does not object to the statutory requirement that each 
individual coal mining company provide ongoing health benefits to its 
employees. As the weaker companies fail financially and drop out of the 
picture; however, the present law exposes surviving companies (and 
their entire non-coal mining corporate family as discussed in the 
previous section), to an obligation to provide benefits to miners with 
whom the company never had an employment relationship. This situation 
was created by Congress, and we ask that the Committee eliminate those 
provisions which impose on the remaining companies the burden of paying 
for the health care benefits of these ``orphan'' retirees, in addition 
to providing relief from the Act's joint and several liability 
provisions.
    We request that the Committee modify the Act to provide Brinks and 
other companies subject to section 9711 of the Act relief from the 
``related person'' provisions of this section. Section 9711 requires 
coal companies (and their ``related persons'') to maintain an employer 
sponsored benefit plan for certain retirees who are not eligible for 
enrollment in the Combined Fund. The proposed change to section 9711 
provides that, in a process similar to that relating to the CBF, 
affiliates of a coal company would be relieved from the Act's onerous 
joint and several liability provisions upon posting financial 
guarantees to secure performance of the requirements imposed under 
section 9711. Importantly, under the proposed language, the parent 
would remain liable for such obligations in the event the financial 
guarantees should ever prove inadequate to cover the health care 
obligations under this section.
    We urge the Committee to consider seriously the changes to S. 2086 
and S. 2049 that I have discussed; changes which do not conflict with 
the goals or intent of the Coal Act but which would redress the unfair 
burden that has saddled our company and other contributors to the 
economy of the United States.
    Thank you.
                                 ______
                                 
        Statement of Joe Love, Chairman, National Coalition for 
                       Abandoned Mine Reclamation

    Mr. Chairman and Committee members of the Energy and Natural 
Resources Committee, my comments are directed toward extension of Title 
IV of the Surface Mine Control and Reclamation Act of 1977 (SMCRA) as 
amended and specifically toward the two Senate Bills S. 2049 and S. 
2086.
    The National Coalition for Abandoned Mine Reclamation represents 
all states impacted by past mining and represents a grassroots 
initiative to help citizens improve their communities and the quality 
of life in which they live by reclaiming the scars of past mining. The 
Coalition has support from the 3000 local Conservation Districts, State 
and National Watershed Associations and local cities and communities 
impacted by past mining. Our Coalition has been an active supporter of 
reclamation initiatives since 1983. The goal of the Coalition is to 
reclaim all the scars placed on the land by past mining.
    We have studied both Bills and have the following comments:
    We strongly support:
    1. The extension of SMCRA. We also agree that based on the amount 
of work remaining in the current inventory and fee schedule in S. 2049, 
we support the target dates of 2018 or 2019 for completion of 
reclamation of past un-reclaimed coal mine sites that endanger public 
health and safety. We agree with the reduction of fees over time as 
outlined in S. 2049.
    2. The creation of one single account from the fee collections and 
distribute grants to non-certified states and tribes based on historic 
coal production. This will better direct reclamation funds to those 
locations having the greatest health and safety problems and impacting 
the greatest number of persons.
    3. Distribution of all un-appropriated balance to states and tribes 
as outline in S. 2049. Although we support this part of the bill, we 
need to point out that approximately 300 million of this un-
appropriated balance was collected for the Rural Abandoned Mine Program 
(RAMP) administered by the USDA/Natural Resources Conservation Service, 
working though local Conservation Districts, for the purpose of 
reclaiming abandoned mine lands on private lands. Consideration should 
be given to this issue of using these funds for reclaiming reclamation 
sites under the Rural Abandoned Mine Program (RAMP). We do not support 
S. 2086 that proposes to use the RAMP funds for certified states having 
no health and safety problems and only very small amounts of 
environmental problems remaining. We would suggest that those states 
use their own state resources to reclaim those sites, allowing the 
unappropriated RAMP funds be allocated to states having huge amounts of 
environmental problems remaining (see item # 6 below).
    Support the following:
    1. S. 2049 providing no AML grants, from coal fees collection after 
enactment of the new extension, to states having certified completion 
but provides for direct grants based on justified needs from the 
respective state or tribe and availability of appropriated funds.
    2. S. 2049 to provide needed health coverage for unassigned 
beneficiaries.
    3. Two million allocations for minimum states and tribes including 
the state of Tennessee with an approved AML reclamation plan.
    4. Remining incentives that will achieve greater reclamation 
health, safety and environmental problems with less cost.
    5. S. 2049 providing incentive for states to assume responsibility 
for the emergency program.
    6. Continuing the Rural Abandoned Mine Program (RAMP) as authorized 
in the 1977 Act and providing the opportunity for funding this 
important program from the general fund. We urge the Committee to 
strengthen this Bill by amending section 406 (B) Authorization of 
Appropriations as follows--Providing for an annual allocation of no 
less than 25 million to the Secretary of Agriculture, from the general 
fund of the Treasury to carry out the provisions of this section. At 
the present time, there are ten times the environmental problems than 
the health and safety problems, which will not be addressed without 
having a Rural Abandoned Mine Program (RAMP). Most of these abandoned 
mine sites involve private landowners who do not have the resources 
necessary to correct the problems. Many of these areas generate greater 
pollution problems than the safety and health concerns. RAMP would be 
the tool to address the environmental problems separate and not a 
duplication of other programs.
    We do not Support the following:
    1. Future reclamation set-aside program for the states as outline 
in S. 2049. This program was established to maintain a funding balance 
in the states and tribes AML programs. It is the Coalition position 
that funds appropriated should be used as quickly as possible for 
reclamation of abandoned mine land and not set-aside for the future. If 
Congress passes an extension of SMCRA as proposed in S. 2049, states 
and tribes have a three year window to use these funds for reclamation 
and if not used are available for others to utilize. We believe this 
adequate amount of time to use these funds without and additional set-
aside program where the funds may not be used for tens of years. We 
support this authorization be deleted as provided for in S. 2086 and 
H.R. 3796.
    We appreciate the opportunity to present this written testimony, 
Mr. Chairman, and strongly recommend that Congress take action to 
extend SMCRA during this session. We encourage you to consider our 
recommendations, which we believe, will strengthen the reclamation 
efforts and encourage a partnership effort at the local, state and 
federal level. We request that this become part of the hearing record. 
We request the complete record of the hearing testimony given during 
the hearing.
    Thank you.
                                 ______
                                 
              Statement of The National Mining Association

    Chairman Domenici, Ranking Member Bingaman, and members of the 
Committee: the National Mining Association (NMA) expresses its 
appreciation for the opportunity to comment on the administration and 
performance of the Abandoned Mine Reclamation program established under 
the Surface Mining Control and Reclamation Act of 1977 (SMCRA).
    The National Mining Association (NMA) represents producers of over 
80 percent of America's coal, a reliable, affordable, domestic fuel 
that is the source for more than fifty percent (50%) of the electricity 
that America uses today. NMA also represents companies that produce 
metals and non-metals, companies that are among the nation..'s larger 
industrial energy consumers. NMA members also include manufacturers of 
processing equipment, machinery and supplies, transporters, and 
engineering, consulting and financial institutions serving the mining 
industry.
    The Abandoned Mine Reclamation program was established with the 
principal objective of restoring unreclaimed lands mined for coal prior 
to SMCRA's effective date of August 3, 1977 that pose threats to the 
public health and safety. The Abandoned Mine Land (AML) fee paid on 
each ton of coal produced and sold to fund the program was authorized 
initially until 1992, but has been extended twice. With the current 
authorization scheduled to expire on September 30, 2004, there have 
been many viewpoints expressed about the remaining requirements and the 
need to extend the fee to support those requirements. In this regard, 
NMA provides the Committee the following observations about the history 
of the program, and offers various considerations to assist the 
Committee in making public policy decisions about the program's future.

                       REVENUES AND EXPENDITURES

    Since 1978, the coal industry has contributed almost $6 billion to 
the AML Fund. The Office of Surface Mining (OSM) reports that as of 
September 30, 2002 about $1.66 billion have been spent reclaiming the 
high priority portion (Priority 1 & 2) of the abandoned coal mined 
lands inventory. Another $195 million has been used to reclaim priority 
3 coal sites, and $238 million for non-coal projects. Appropriations 
from the AML Fund for this period totaled about $4.4 billion. In other 
words, less than half of all the money appropriated is finding its way 
to onthe-ground reclamation of the inventory of coal and non-coal 
projects. Placed in the context of the high priority coal inventory-the 
principal mission of the program-about one of every three dollars 
appropriated from the AML Fund reaches that objective.

                       PROGRESS AND EXPECTATIONS

    In 1986, the National Academy of Sciences (NAS) performed a mid-
term review of the AML program. See National Academy of Sciences, 
Abandoned Mined Lands: A Mid-Course Revietiv of the National 
Reclamation Program for Coal (1986).* At that time, the NAS projected 
that by the expiration of the AML fee in 1992, total revenue for the 
program would reach about $3.3 billion. As it turns out, the projection 
was close to the mark with actual receipts reaching slightly more than 
$3.2 billion. NAS also found at that time that most States expressed 
confidence that they would complete reclamation of their priority 1 and 
2 inventory of projects by 1992. Id. at 65. It was this confidence that 
resulted in the States' view that in the meantime they should reclaim 
lower priorities even before they complete the two top priorities. Id. 
This approach apparently had some merit since NAS projected all the 
states, except six, would have enough funds from their state share 
alone to reclaim priority 1 and 2 projects with an estimated cost of 
about $811 million. Moreover, the total state share alone appeared to 
be adequate to reclaim all priorities at an estimated cost of about 
$1.7 billion. Id. at 154-55. In short, at the time of the mid-term 
review of the program, more than ample funds appeared to be available 
to address not only the high priority coal inventory, but the other 
priorities as well.
---------------------------------------------------------------------------
    * The review has been retained in committee files.
---------------------------------------------------------------------------
    By 1992, $870 million of the high priority coal inventory had been 
reclaimed. But now the target had moved, and OSM reported that the 
remaining high priority coal inventory was $2.6 billion almost three 
times the inventory reported in 1986. Since then, it appears that 
things have actually regressed. Since 1998, it appears that for each 
dollar of high priority inventory reclaimed, two dollars are added as 
unfunded high priorities. Now the high priority coal inventory is 
almost $3 billion. And, after $4.4 billion in appropriations from the 
AML Fund, only $1.66 billion of the high priority coal inventory has 
been reclaimed. Continuing business as usual would mean that it will 
require at least $9 billion to reclaim the current $3 billion high 
priority coal inventory.

                   STRUCTURAL IMPEDIMENTS TO SUCCESS

    Twenty five years, two AML fee extensions, and almost $6 billion 
later, you will hear that the `'job is not finished.'' You will also 
hear various viewpoints on why that is the case. We believe the answer 
largely lies with structural impediments in the current law related to 
grant formulas, competing program demands that all conspire to thwart 
cost-effective achievement of the program's principal purpose, and 
revenue allocation.
    The AML Program has been called upon to serve many different 
demands. It has also been designed to serve those demands through 
multiple delivery mechanisms. We have Federal programs and State 
programs. And, within each of those we have special programs, such as 
the Rural Abandoned Mine Program, Emergency Programs, Appalachian Clean 
Streams Initiatives, various State Set-Aside Programs, and Technology 
Development and Transfer Programs. All of these programs compete for 
funds under various priorities and funding formulas. The first two 
priorities which comprise the program's core objective relate to 
restoring abandoned coal mine ,lands that pose dangers to the public 
health and safety. There is no overarching requirement that funds be 
directed toward the high priority coal inventory. Indeed, it appears 
that these other programs operate as exit ramps to divert funds away 
from the high priority inventory. And, all of these programs carry with 
them extensive federal and state administrative costs.
    According to the OSM white paper, ``The Job's Not Finished'', 
around 1989 the demographics of coal production changed and an 
imbalance developed between fund availability and needs. As a result, 
the statutory allocation formula for AML revenue precludes the use of a 
substantial portion of the industry's AML fees for the high priority 
coal inventory. Half of all fees paid on coal production in a state are 
earmarked for AML use in that state regardless of the remaining high 
priority coal AML needs. During the early years of the program, this 
allocation structure posed little consequence for assuring that AML 
fees were available for high priority coal inventory. As coal 
production increased in the West with a relatively smaller coal AML 
inventory, a larger proportion of AML fee revenue became unavailable 
for high priority coal projects in other regions with a larger share of 
the high priority needs. OSM's recent white paper explains the 
consequences of this imbalance. For the first 15 years of the program, 
95% of all state grants were used for high priority coal projects. 
However, over the past 10 years, only 64% of all state grants have been 
used for the program's core objective. And, this percentage will 
continue to decline absent changes to the law.

                      CONSIDERATIONS GOING FORWARD

    By the time the current fee authorization expires this year, the 
coal industry will have paid $6.5 billion in AML fees. Simple math 
tells us that this sum should have been sufficient to complete both the 
already reclaimed and current high priority coal inventory with $2 
billion to spare. Will it require $9 billion perhaps more to complete 
the current high priority coal inventory? The answer will depend upon 
choices made about whether and how the program is reauthorized. We set 
forth below several of the questions faced in dealing with the current 
program structure and requirements. Not surprisingly, each constituency 
will have different answers and preferences.

1. Multiple Delivery Mechanisms and Programs
    Do we need-can we afford-the multiple delivery mechanisms and 
subprograms that divert funds away from the high priority coal 
inventory? RAMP is a prime example of this diversion. The program 
competes with state needs and has not been funded since 1996. 
Nonetheless, 10% of all AML fees paid annually are still allocated to 
RAMP which now has over $280 million allocated to that account which 
cannot be used for other purposes. Emergency Programs also present a 
duplicative system with some states assuming the responsibility, while 
9 states--two of which have the most emergencies--declining to assume 
that responsibility as part of their approved AML programs. States 
still use a provision of the law added in 1990 that allows funds to be 
set-aside in anticipation of the fee expiring in 1995. There is 
something wrong with the concept of setting aside industry AML fees for 
future use, and then calling for the industry to keep paying because 
the job is not yet finished.

2. Fund Allocation and Distribution
    Should the current allocation and distribution formula be replaced 
with a system that directs AML fee revenues to areas with the greatest 
need in terms of remaining high priority coal inventory? OSM's white 
paper indicates that the historic production (pre1977) is a close 
surrogate for where the high priority coal inventory sites are located. 
If such a change is made, what happens to the current allocations? 
States that have completed their high priority coal inventory may feel 
that they should receive some portion or all of the unexpended balances 
in their accounts. Distribution of those amounts will affect funding 
requirements. For example, the unexpended state share for the certified 
states comprises 30% of the unappropriated AML balance. The allocation 
and distribution issues present the most fundamental question: Does 
coal AML remain a national problem that still requires a national 
solution? If so, should the solution be administered in a manner more 
fitting and efficient for a national problem?

3. Adhering to Priorities
    What good are priorities if there are so many and there is not an 
overarching requirement to abide by them? Presently, the law sets out 
no less than five priorities ranging from the protection of the public 
health and safety from extreme dangers posed by abandoned coal mined 
lands to the development of land. There is no requirement that AML fees 
be used first for the top priority before moving on to lower 
priorities. In at least two states, the amount of AML fees used to 
reclaim priority 3 areas either approximates or exceeds the amount 
spent to reclaim priority 1 and 2 areas. In each case, the amounts 
spent in these states for priority 3 projects would have been more than 
enough to finish their current unreclaimed priority 1 and 2 
inventories.

4. The Inventory
    Does the high priority coal inventory serve as a benchmark for 
measuring progress and success? Each time it appears the goal becomes 
closer, the goal line is moved further.away. In 1998, the remaining 
high priority coal inventory was less than $2.5 billion. In 1999, the 
inventory swelled by an additional $3 billion as a result of a state-
which already accounted for one-third of the inventory-moving up lower 
priorities to the priority 1 and 2 inventory. But even when that 
inexplicable swelling is removed, the inventory continues to grow by 
about $2 for every $1 dollar of high priority coal reclamation. To 
some, the inventory has transformed itself from a management tool to a 
funding gimmick to establish the AML program as a permanent fixture. 
Some suggest that the inventory should be frozen to avoid this 
temptation and provide focus and discipline for future expenditures.

5. Administrative Costs
    How much do we need to spend in order to spend? A General 
Accounting Office (GAO) report found that between 1985-1990 $360 
million, or 28%, of the $1.3 billion spent during that period was used 
for Federal and State administrative expenses. General Accounting 
Office, Surface Mining. Management of the Abandoned Mined Land Fund 
(July 1991). But even this amount may understate the percentage of 
funds used for administration since, as GAO noted, some States 
incorporate administrative expenses into their construction grants that 
are counted as reclamation project costs. As for Federal expenses, GAO 
reported that during that period OSM spent $137 million for 
administration while using about $100 million for reclamation projects. 
We are not aware of any single source of information tracking the 
amount of AML fees used for administration. But piecing together 
various sources related to AML program performance suggests that over 
$1 billion has been spent to administer the program.

6. The AML Fee
    What should the levels of the fee be and how much more can or 
should the coal industry pay into the AML fund? The job may not be 
finished, but the lack of AML fees is not the reason. The amount the 
coal industry receives for each ton of coal it sells has declined since 
the fee's inception, annual AML fee revenue continues to increase 
substantially with the rise in coal production. This is because the AML 
fee rates remain constant for each ton of coal. When the AML fee was 
being debated in the late 1970s, coal prices were forecasted to exceed 
$50/ton, and it was believed that the AML fee would be a nominal tax, 
at most. In 1982, the average nominal price of coal nationwide was 
$27.25/ton ($41.13 in 1996 dollars). In 2002, the average price of coal 
was about $17.80/ton ($16.08 in 1996 dollars).
    Once again, NMA appreciates the opportunity to present its 
observations on the history of the AML program. We hope the various 
considerations will assist the Energy and Natural Resources Committee 
as it addresses the public policy decisions inherent in coal AML 
program.

