[Senate Hearing 109-256]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-256
 
      AMEND THE SURFACE MINING CONTROL AND RECLAMATION ACT OF 1977

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                                   ON

                                 S. 961

   A BILL TO AMEND THE SURFACE MINING ACT OF 1977 TO REAUTHORIZE AND 
 REFORM THE ABANDONED MINE RECLAMATION PROGRAM, AND FOR OTHER PURPOSES

                                S. 1701

     A BILL TO AMEND THE SURFACE MINING ACT OF 1977 TO IMPROVE THE 
                     RECLAMATION OF ABANDONED MINES

                               __________

                           SEPTEMBER 27, 2005


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


                                 ______

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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                 PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho                JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming                DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee           BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska               RON WYDEN, Oregon
RICHARD M. BURR, North Carolina,     TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida                MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri            DIANNE FEINSTEIN, California
CONRAD BURNS, Montana                MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia               JON S. CORZINE, New Jersey
GORDON SMITH, Oregon                 KEN SALAZAR, Colorado
JIM BUNNING, Kentucky

                       Alex Flint, Staff Director
                   Judith K. Pensabene, Chief Counsel
                  Bob Simon, Democratic Staff Director
                  Sam Fowler, Democratic Chief Counsel
                  Karen Billups, Deputy Chief Counsel
                Patty Beneke, Democratic Senior Counsel
                    Mike Connor, Democratic Counsel


                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Alexander, Hon. Lamar, U.S. Senator from Tennessee...............    76
Allen, Hon. George, U.S. Senator from Virginia...................    33
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     3
Bunning, Hon. Jim, U.S. Senator from Kentucky....................    37
Craig, Hon. Larry E., U.S. Senator from Idaho....................     4
Finkenbinder, David, Vice President, Congressional Affairs, 
  National Mining Association....................................    66
Gauvin, Charles, President and CEO, Trout Unlimited, Arlington, 
  VA.............................................................    47
Green, Evan J., Administrator, Wyoming Abandoned Mine Land 
  Program, Department of Environmental Quality, State of Wyoming.    17
Hohmann, Steve, Director, Division of Abandoned Mine Lands, 
  Kentucky Department of Natural Resources.......................    23
Kane, Daniel J., International Secretary-Treasurer, United Mine 
  Workers of America, Fairfax, VA................................    52
Lewis, Lorraine, Executive Director, UMWA Health and Retirement 
  Funds..........................................................    60
McElwaine, Andrew, President and CEO, Pennsylvania Environmental 
  Council, Harrisburg, PA........................................    40
Salazar, Hon. Ken, U.S. Senator from Colorado....................    34
Santorum, Hon. Rick, U.S. Senator from Pennsylvania..............     2
Shirley, Joe, Jr., President, The Navajo Nation, Window Rock, AZ.    11
Shope, Thomas D., Chief of Staff, Office of Surface Mining, U.S. 
  Department of the Interior.....................................     5
Talent, Hon. James M., U.S. Senator from Missouri................     3
Thomas, Hon. Craig, U.S. Senator from Wyoming....................     1

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    79

                              Appendix II

Additional material submitted for the record.....................   111

 
      AMEND THE SURFACE MINING CONTROL AND RECLAMATION ACT OF 1977

                              ----------                              


                      TUESDAY, SEPTEMBER 27, 2005

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 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. Let's call the committee to order. Mr. 
Domenici asked me to preside and get us going here. He may show 
up somewhat later. I hope so.
    I want to thank you all for being here. This is a 
continuing issue with us, of course, the AML reauthorization. 
We've been through it several times, and I'm, frankly, pleased 
that we are here. I hope that we can, this time, come up with a 
program to renew, and not simply extend it through 
authorization of the appropriations, as was the done the last 
time.
    So, that's why we're here. Of course, the Abandoned Mine 
Land Reclamation has resulted in the cleanup of some of the 
Nation's worst abandoned coal mines. As you know, the program 
is funded through a fee on nearly every ton of coal. The 
existing law has always credited half of the fees to the States 
and the Indian tribes and half to the Federal Government. 
Currently, the AML fee is scheduled to expire on June 30, 2006. 
So, there are some time constraints.
    It's important to remember that the reclamation program 
does not retire at that time. A common misconception exists 
that the reclamation program ends. It's only an affirmative 
action by Congress that would end reclamation. Reclamation of 
abandoned coal mines is important, and I will oppose any 
legislation initiative to terminate that program. In fact, I 
believe more money should be directed to the program. I'm not 
convinced, of course, that others all share this view.
    We must take a look at the current AML Trust Fund account 
balance to understand how I came to this conclusion. As of July 
1, 2005, the Reclamation Fund held $1.7 billion of 
unappropriated funds. Under existing law, of the more than $1.7 
billion already collected and held in trust, $1.1 billion is 
due to the States and the Indian tribes. Under existing law, my 
State of Wyoming is owed more than $450 million.
    The release of these funds over the last quarter century 
would have had a tremendous impact on the communities 
throughout the United States. It's frustrating for all of us--
the States and the tribes--to see so much money available, yet 
untouchable.
    The bill I introduced 2 weeks ago, in addition to returning 
the money to the States and the tribes, extends the AML fee for 
an additional 10 years, ensuring the money continues to flow 
into this worthwhile program. My proposal also contains a 
mechanism that would allow the States and the Indian tribes 
more timely access to their share of the AML fee. And I 
recognize that my proposal is not as comprehensive as some 
others that have been circulated. It does not address the 
issues related to healthcare. It does extend the existing 
program. Before creating new obligations, we must ensure that 
the existing programs are being honored.
    So, we are committed to finding a solution, even though 
there are different ideas. Whatever the solution, it will 
require a compromise, of course. And, therefore, we're here to 
seek to deal with this issue.
    [The prepared statements of Senator Santorum and Talent 
follow:]

        Prepared Statement of Hon. Rick Santorum, U.S. Senator 
                           From Pennsylvania

    Mr. Chairman, my strong support for the reauthorization of the 
Abandoned Mine Land (AML) fund brings me to submit this statement for 
the Committee's record.
    Since its inception, the AML fund has provided a valuable resource 
in the cleansing of our nation's streams and lands in the wake of 
mining exploration. My home state of Pennsylvania, in fact, has the 
most abandoned mine land sites in the nation and has utilized the Fund 
to improve the quality of our environment. It is evident that more 
needs to be done to fix this problem.
    I am proud to represent the Commonwealth of Pennsylvania that has 
been one of our nation's leaders in the reclamation of abandoned mine 
lands. Pennsylvania has been working hard to reclaim its abandoned 
mines and has completed hundreds of stream pollution abatement 
projects. Despite the successes seen through the implementation of 
Pennsylvania's initiatives, there is a clear necessity to reauthorize 
the federal AML fund. According to the National Abandoned Mine Land 
Inventory, my home Commonwealth of Pennsylvania has over $1 billion 
worth of Priority 1 and 2 abandoned mine land sites.
    These statistics should not come as a surprise to your committee. 
As you are aware, AML problems are primarily located in states with 
high historic production. Historic production records show that the 
eastern United States accounts for 94 percent of all of the country's 
AML problems. Pennsylvania is no exception. The pressing situation 
facing our state today is that one-third of all national 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.
    I recognize the difficulty in assessing and properly allocating 
funds to address all of our nation's AML sites. However, I believe that 
across the nation and especially in Pennsylvania, there is a pressing 
need to more equitably shift the funding priority from current 
production sites to historic production sites. This would ensure that 
all abandoned mines could begin to be restored and re-utilized in an 
environmentally friendly and expeditious manner.
    While the economic costs associated with reclaiming AML sites has 
increased, the human toll has also mounted in recent years. Because of 
the prevalence of AML sites throughout our nation, deaths associated 
with these sites have been far too commonplace. Last year, in 
Pennsylvania alone, five fatalities were associated with AML sites. In 
my opinion, this is five too many.
    Given the large-scale damage and dangers experienced by my 
constituents, I believe it is essential that the reauthorization of the 
AML fund protect coalfield communities and restore damaged natural 
resources. It is my great hope that the experiences of my constituents 
and the coal-mining heritage of my Commonwealth will weigh heavily as 
your committee continues the process of reauthorizing the AML fund.
    For these reasons, Mr. Chairman, I am pleased that you and your 
committee have taken up this important issue nearly a year before the 
fund expires. I look forward to working with you and your committee as 
this progress continues. As the mining legacy in my home state shows, 
AML sites impact the safety of communities, affect environmental 
quality, and hinder economic progress. It is essential to my 
Commonwealth and my constituents that we extend and reform the 
abandoned mine land reclamation program for the safety of our nation, 
the safety of our environment, and the safety of our economy.

                                 ______
                                 
 Prepared Statement of Hon. James M. Talent, U.S. Senator From Missouri

    AML is a worthy and important program that we need to continue.
    But we need to find a way to do it that addresses all of the myriad 
of issues comprehensively and not in a piecemeal fashion, and we need 
to do it in such a way that provides balance between the States and 
certainty without excessive cost or a changing of the financial 
expectations of the mine workers and their survivors.
    I appreciate Sen. Thomas's efforts to fix a flaw in the 
administration of the AML fund--we should keep our promise and return 
to the States that paid the AML fees the amounts the law says should be 
returned (50%). That's fair.
    We also should make sure that the fees are not overly burdensome. 
But I think we need a more comprehensive solution.
    We're trying to do a lot more with the AML funds with respect to 
retiree health benefits than was envisioned in 1992. There are a lot 
more ``orphaned'' retirees in the program than was originally 
envisioned.
    There's also a lot more in the way of projects being done that are 
beyond the core mission of reclaiming pre-1977 abandoned mines. These 
things are good and helpful, but it seems that we will never complete 
the job we started in 1977.
    It also seems to me that there should be some finality to the 
program, both with respect to the pre-1977 priority reclamation sites 
and with respect to the inclusion of retirees to be paid for by the 
fees. It seems we have a moving target as to the total reclamation 
costs, one that seemingly we will never reach.
    In his prepared testimony, Mr. Finkenbinder points out the poor 
history of estimates of reclamation costs and their eventual cost, 
noting that in 1986 we expected to pay for all of the top priority 
projects ($811 million) by 1992. But in 1992, we had spent $870 billion 
on high priority projects and yet the remaining projects were now 
estimated to cost $2.6 billion. Now the inventory of reclamation 
projects is up to nearly $3 billion, and this after $8 billion in fees 
have been recovered. And yet we seem to be no closer to solving the 
problem.
    Mr. Chairman, I would like to submit for the record a letter I 
received from a number of coal companies, mine workers and other coal 
interests. It includes a proposal that attempts to comprehensively 
address funding for all of the reclamation and retiree health benefit 
issues we are dealing with here. I appreciate the attempt, but at a 
cost of $3.1 billion, I think it may be too costly.
    We need to find another way of addressing these issues 
comprehensively. Nevertheless, this compromise proposal will inform our 
debate and may lead us to a better solution that addresses the needs of 
all interested parties.

    Let me call on the Senator from New Mexico.

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

    Senator Bingaman. Thank you very much, Mr. Chairman, for 
having the hearing. I think this is a very useful way for us to 
begin serious deliberation in this Congress on this issue.
    This Abandoned Mine Land Program that was started in 1977 
is very important. The work of the program is far from 
completed. The Office of Surface Mining estimates that there 
are $3 billion worth of priority-one and -two problems that 
threaten public health and safety and $3.6 billion worth of 
general welfare problems that remain un-reclaimed.
    In my home State of New Mexico, according to OSM's data, 
there is still coal-related work to do. There are dangerous 
piles and embankments to remediate, hazardous waters to 
reclaim, and vertical mine openings to close. In addition, the 
Surface Mining Act allows AML funding to be used to remediate 
not only abandoned coal mines, but also, importantly, abandoned 
hard-rock mine sites, in certain circumstances.
    I understand that non-coal reclamation work is also 
important on several Indian reservations, including the Navajo 
Reservation. I want to ensure that funding for this important 
non-coal work is also continued.
    In 1992, interest from the AML Fund has served as a source 
of revenue to address another very crucial issue, and that is 
coal-miner retiree health benefits. Providing such benefits 
presents an ongoing and a difficult issue for us here. The 
legislation before the committee today addresses this issue. 
I'm obviously interested in ensuring that we do right by these 
retired coalminers, and I look forward to hearing from 
witnesses for the United Mine Workers of America and the UMWA 
Health Benefits Fund.
    The issue of crucial importance to this bill involves the 
Indian tribes. Absent from the bills is a provision to allow 
tribes to be granted primacy for the regulatory program under 
title 5 of the Surface Mining Act. I believe this change in law 
is long overdue. I appreciate President Shirley, of The Navajo 
Nation, being here today to testify on this and other aspects 
of the legislation.
    This is an important issue for our States, for Indian 
tribes. It's also an important national issue. I think it is 
imperative that Congress take action to extend the 
authorization and collect the coal reclamation fee before that 
authority expires.
    So, again, thank you for having the hearing.
    Senator Thomas. Thank you, sir.
    The Senator from Idaho.

        STATEMENT OF HON. LARRY E. CRAIG, U.S. SENATOR 
                           FROM IDAHO

    Senator Craig. Well, thank you very much, Mr. Chairman.
    Your legislation, and that introduced by Senator 
Rockefeller, are the two pieces we're looking at today, and I 
thank you for getting in front of the expiration date by nearly 
a year to examine this and move this committee, with its 
authority, in the right direction to deal with reauthorization.
    Obviously, I, personally, from a State standpoint, don't 
have a dog in this fight. You have a $450 million dog. By 
Wyoming or Idaho standards, that's a big dog. And I think 
that's something that has to be recognized, that we don't just 
buildup large funds that the Federal Government can use for 
budgetary purposes, but they move in the direction they were 
intended to move.
    I've also looked at--and I know that it is not in the 
jurisdiction of this committee--the issue of reach-back and 
super-reach-back. That's a Finance Committee issue, I believe. 
I know that Senator Talent and Senator Bunning are interested 
in that. And I, too, am interested in that, to try to get that 
resolved. But I hope this hearing allows us to move forward and 
to reauthorize, in a timely manner, this important legislation.
    I also note that your legislation probably expedites the 
issue of the unappropriated funds as it relates to States, and 
allows that to return to States more quickly, as it should. And 
I'm supportive of your effort there.
    So, I'm here to listen this morning, and gain more 
information on the issue.
    Thank you.
    Senator Thomas. Thank you, sir.
    And thank all of you who have come to testify today. It's 
very important that we hear from you and hear the specific 
concerns and information that you have.
    I am especially pleased, of course, to have Mr. Green here, 
from Wyoming, and thank you, sir.
    On our first panel, we have Mr. Thomas Shope, Chief of 
Staff, Office of Surface Mining, U.S. Department of the 
Interior; Mr. Joe Shirley, Jr., president, The Navajo Nation, 
Window Rock, Arizona; Mr. Evan Green, administrator, Abandoned 
Mine Lands Division, the State of Wyoming, Cheyenne, Wyoming; 
Mr. Steve Hohmann, director, Division of Abandoned Mine Lands, 
State of Kentucky.
    Gentlemen, welcome. Your full statement will be put into 
the record, and if you could summarize your statement in about 
5 minutes, why, that would help us get through our work, and 
then we'll have an opportunity to ask questions.
    So, Mr. Shope, if we may begin with you, sir.

STATEMENT OF THOMAS D. SHOPE, CHIEF OF STAFF, OFFICE OF SURFACE 
            MINING, U.S. DEPARTMENT OF THE INTERIOR

    Mr. Shope. Thank you, Senator.
    Mr. 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's authority to collect the 
abandoned mine-land fee.
    I'd like to thank Senator Thomas for introducing his bill, 
S. 1701, as well as Senator Rockefeller for introducing his 
bill, S. 961. We applaud the efforts of these sponsors seeking 
to reauthorize OSM's authority to collect the AML fee and to 
make positive changes to this important program.
    As we enter the third year of this reauthorization effort, 
it's important to keep in mind that there are an estimated 3.5 
million Americans who live less than one mile from a dangerous 
high-priority abandoned mine site. The lives, health, and 
safety of these citizens are threatened daily by these sites. 
People are frequently injured, and too often die, as a result 
of the hazards of abandoned coal-mine lands.
    The administration believes that the AML problem is a 
national problem that calls for a national solution. The 
administration believes AML funding needs to be focused on the 
areas most damaged by this Nation's reliance on coal for 
industrial development and wartime production that occurred 
long before the establishment of reclamation requirements in 
the Surface Mining Control and Reclamation Act. The AML 
problems that currently exist in so many States are directly 
related to a State's historic coal production. Focusing the 
future distribution of fees based on historic production will 
put more money where the problems are, where it is most needed.
    As you consider the proposals that have been advanced to 
address these needs, the administration urges that you consider 
some fundamental principles that we believe should be reflected 
in any legislation seeking to reauthorize AML fee-collection 
authority.
    We believe that any proposal should expedite the cleanup of 
high-priority health- and safety-related abandoned coal mines, 
should provide for the expedited payment of unappropriated 
State-share balances to certified States and tribes, and should 
do so within the President's mandatory and discretionary 
spending limits.
    To honor these principles and finish the job, legislation 
must strike a balance that addresses both the ongoing problems 
faced by States with high-priority coal-related health and 
safety issues, while not placing it--at a disadvantage those 
States and tribes where the majority of fees are currently 
generated.
    The introduction of S. 1701 and S. 961 show a continued 
commitment by Congress to reach resolution of the issues under 
debate. I think all of us share a commitment to reform OSM's 
fee-collection authority to fulfill our mandate to address 
high-priority health and safety concerns, and to do so in a 
manner that directs the funds to the States and tribes where 
they are most needed.
    The administration supports the proposed elimination of the 
AML allocation for the RAMP program found within S. 1701 and S. 
961 and the reallocation of those fees for high-priority needs. 
However, under the allocation structures of both proposals, at 
the fee rate and collection periods proposed, we believe an 
insufficient amount of funds will be collected and available to 
finish the job of reclaiming the high-priority health and 
safety coal sites on the current inventory.
    The administration also supports the principle of honoring 
the commitments made to States and tribes under the current law 
through the expedited payment of unappropriated State-share 
balances. In fact, the administration proposed additional 
funding in its fiscal year 2005 and 2006 budgets to provide 
for, among other things, the accelerated return of State share. 
However, we believe the proposed repayment plan in S. 1701, 
including provisions for mandatory spending, is not consistent 
with the administration's budget and program priorities.
    We have submitted written testimony that more fully 
explains the administration's views on the problems with the 
current AML distribution, as well as analysis of the individual 
provisions of the bills under consideration. We believe the 
introduction of S. 1701 and S. 961 signal the continuation of 
constructive efforts and a productive discussion to amend and 
reform the AML program.
    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 before the looming expiration 
date. We recognize that these issues can be contentious. But 
those of us at the Office of Surface Mining are eager to 
continue working through them with the committee.
    Once again, we thank the committee for this opportunity to 
present the administration's views on these important 
legislative proposals.
    [The prepared statement of Mr. Shope follows:]

   Prepared Statement of Thomas D. Shope, Chief of Staff, Office of 
  Surface Mining Reclamation and Enforcement, U.S. 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. I would like to thank Senator Thomas for 
introducing his bill, S. 1701, as well as Senator Rockefeller for 
introducing his bill, S. 961. We applaud the efforts of these sponsors 
seeking to reauthorize OSM's authority to collect the AML fee, set to 
expire on June 30, 2006, and to make positive changes to this important 
program. We look forward to working with the Senate on the important 
issues surrounding the collection and use of the AML fee.
    As we enter the third year of this reauthorization effort, it is 
important to keep in mind that there are an estimated 3.5 million 
Americans who live less than one mile from a dangerous, high-priority 
abandoned mine site whose lives, health and safety are threatened daily 
by these sites. People are frequently injured and too often die as a 
result of the hazards of abandoned mine lands.
    The Administration believes that the AML problem is a national 
problem that calls for a national solution. The Administration believes 
AML funding needs to be focused 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.
    The Administration supports the repayment of the unappropriated 
balances for certified states. However, we cannot support creating new 
mandatory spending programs with which to make such repayment. 
Moreover, while the allocation formula has improved, neither proposal 
would adequately expedite the cleanup of high priority lands, and 
therefore the Administration cannot support the allocation provisions 
as drafted. For the reasons noted here, we cannot support the bills as 
drafted; however, we would like to work with the Committee to reach an 
agreeable solution.

                               BACKGROUND

    Since the enactment of the SMCRA by Congress in 1977, the AML 
program has reclaimed thousands of dangerous sites left by abandoned 
coal mines, resulting in increased safety for millions of Americans. 
Specifically, more than 285,000 acres of abandoned coal mine sites have 
been reclaimed through $3.5 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 in construction costs alone are 
needed to reclaim the high priority health and safety coal related 
problems remaining.
    Even if we were to use all of the AML fees collected between now 
and June 30, 2006, the date the fee collection authority is scheduled 
to expire, as well as the unappropriated balance of $1.6 billion, we 
would still have insufficient funds to address the health and safety-
related surface mining problems in part because of the fund's current 
distribution formula. Even under a simple extension of the current law 
and the current distribution formula, it would take non-certified 
states an average of 47 more years to complete reclamation. In some 
cases, remediation could take nearly a century.
    We do not believe the current allocation system will enable us to 
complete the job of reclamation in the most efficient way we believe 
Congress intended. We view the expiration of the current AML fee 
collection authority as an opportunity to reform the AML program 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% of the 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 it is 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 believes any legislation seeking to reauthorize 
the AML fee collection authority must reflect the following principles:

   Expedite the cleanup of high priority heath and safety 
        abandoned coal mines.
   Provide for the expedited payment of unappropriated balances 
        to certified States and Tribes.
   The total cost must not exceed the President's Budget and 
        must not include mandatory funding.

    These principles 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. 
In light of those principles, we offer the following analysis of the 
key elements of the bills under consideration by this Committee.

                             BILL ANALYSIS

    There are three factors that must be considered in order to 
complete high priority work; the fee rate, the length of time 
authorized to collect the fee, and the way the money is allocated 
toward high priority reclamation or other uses.

                            FEE ALLOCATIONS

    Both S. 1701 and S. 961 would continue the current practice of 
allocating 50% of the fees collected in a state to that state or 
tribe's ``State-share'' or ``tribal-share'' account, without regard to 
that state or tribe's coal reclamation needs.
    S. 1701 would add a new provision requiring that all aggregate 
unappropriated State-share and tribal-share balances (as of October 1, 
2006) be returned to those States and Indian tribes between December 
31, 2006 and December 31, 2010. The schedule and amount to be paid each 
year would be dependent upon the total State-share balance with larger 
balances requiring a longer payout period. These payments would not be 
subject to Congressional appropriation.
    While the Administration agrees with the principal of honoring the 
commitments made to states and tribes under the current law, and has 
proposed additional funding in its FY 2005 and FY 2006 budget to 
provide for, inter alia, the accelerated return of State-share, the 
Administration cannot support the proposed repayment plan including 
provisions for mandatory spending because it is not consistent with the 
Administration's budget and program priorities.
    Both S. 1701 and S. 961 would increase the percentage of funding 
that goes towards the historical production allocation, and thereby 
accelerate the cleanup of high priority sites by discontinuing the RAMP 
allocation and increasing the historical production (that portion 
distributed based on need) allocation from 20% to 30% of the AML fee 
revenues.
    The Administration supports the elimination of the AML allocation 
for the RAMP program and the reallocation of those fees for high 
priority needs
         aml reclamation fee rates/length of collection period
    S. 1701 modifies reclamation fee rates with stepped decreases 
through the life of the extension to September 30, 2016, a 10 year 
extension. An estimated total of $2.8 billion would be collected over 
the life of this proposed extension.
    S. 961 maintains the fee rates currently established by law but 
extends the OSM's authority to collect those fees through 2019, a 13 
year extension. An estimated total of $4.4 billion would be collected 
over the life of this proposed extension.
    As previously indicated, under the allocation structures of both 
proposals, at the fee rate and collection periods proposed, an 
insufficient amount of funds will be collected and available to finish 
the job of reclaiming the high priority health and safety coal sites on 
the current inventory.

       UNITED MINE WORKERS OF AMERICA COMBINED BENEFIT FUND (CBF)

    While providing health care benefits is not part of OSM's mission, 
providing for the transfer of funds to the CBF, equivalent to the 
amount of interest earned on the AML fund, is an important obligation. 
Both S. 1701 and S. 961 honor the commitments made to the 16,500 
unassigned beneficiaries of the CBF under current law by maintaining 
these transfers including the assignment of interest ``stranded'' from 
prior years. S. 1701 also adjusts the annual cap on transfers to the 
CBF from the amount of estimated AML fund interest earnings during the 
current fiscal year to the amount of interest actually earned during 
the prior fiscal year.
    S. 961 expands the obligations of the interest transferred to 
include two additional UMWA plans. Interest would be made available for 
UMWA plans in the following order of priority: the CBF, the 1992 Plan, 
and the 1993 Plan. In addition, any unappropriated balance of the RAMP 
allocation would be available for these transfers, beginning with FY 
2004. The Administration does not support paying benefits for 
additional beneficiaries, beyond the unassigned beneficiaries in the 
CBF, out of the AML fund.

                        MINIMUM PROGRAM FUNDING

    Both S. 1701 and S. 961 provide that no State or tribe with an 
approved AML program would receive an annual grant of less than $2 
million. This provision would ensure that States and tribes with 
relatively little historic production would receive an amount conducive 
to the operation of a viable reclamation program. The Administration is 
concerned about provisions in both bills that add 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. The precedent of allowing a non-primacy 
state to receive AML grants could have a detrimental effect on the 
overall state-federal primacy scheme which has proven to be an 
effective method of surface mining regulation. Furthermore, both 
proposals call for removing current provisions which restrict the 
granting of funds to minimum programs based upon need. This removal 
would result in a further diversion of needed funds from either the 
historical production account or the federal operations account. In 
order to ensure that efforts focus on priority sites, the 
Administration would prefer to see this minimum restricted to states 
with high priority problem sites.

                                REMINING
 
   Both bills take a positive step in reinstating remining incentives 
which have now expired. These incentives 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. 
1701 also 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.

                        AML RECLAMATION PRIORITY

    Both bills impact a state's or tribe's autonomy to make 
expenditures from the AML fund on eligible lands and water for coal-
related sites by altering the current priority structure. Both S. 1701 
and S. 961 amend the current priority system to eliminate the general 
welfare component of priorities 1 and 2, leaving public health and 
safety as the principle elements of those priorities. S. 961 takes an 
additional step of requiring a scrub of the AML inventory to eliminate 
all general welfare entries since 1998. S. 1701 proposes adding 
environmental restoration of adjacent lands to the P1 category.
    S. 1701 and S. 961 both require that priority 3 environmental work 
be undertaken only if it is incidental to a priority 1 or 2 project. 
Finally, S. 961 eliminates the P4 and P5 priorities, which relate to 
construction of public facilities and development of publicly owned 
land.
    Both S. 1701 and S. 961 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. 
Removing the cap is consistent with the 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.

                      ACID MINE DRAINAGE SET ASIDE

    Both S. 1701 and S. 961 modify the existing provision in SMCRA that 
allows States to set aside ten percent of grant awards made from their 
State-share and historical production allocations. Both bills eliminate 
the option to place those monies in a special State trust fund for use 
for AML reclamation purposes. Both bills also propose streamlining the 
requirements for the placement of those monies into accounts for the 
abatement and treatment of acid mine drainage. S. 1701 calls for 
increasing the percentage of grant awards that may be set aside in 
these accounts from 10% to 20%.

                      STATE COLLECTION OF AML FEES

    S. 1701 adds a new section to SMCRA to allow States and Indian 
tribes the ability to collect reclamation fees and retain half of the 
fees collected in lieu of receiving a State-share allocation. As 
proposed, a State or tribe has the option to collect the AML fee, 
retain 50% and provide the remaining 50% to the Secretary of the 
Interior. States and tribes would have to use the retained funds for 
the purposes and priorities established under the AML program. The 
Administration has concerns regarding this provision. First, the OSM is 
very proud of our 99.9% collection rate of AML fees. This achievement 
is the result of our employee's years of experience and expertise as 
well as an efficient infrastructure to support the collection of these 
fees. The efficacy and cost of having 26 different agencies collecting 
and processing AML fees, in addition to maintaining the federal 
infrastructure to collect and account for the fees submitted to it, is 
a substantial issue of concern. In addition, issues of equity arise 
over the inability of smaller AML programs to staff and maintain this 
collection function as compared to programs with larger revenue and 
capacity. Finally, the constitutionality of a state or tribal AML 
program collecting the federally imposed AML fee is an unanswered area 
of concern.

                                  COST

    The Administration is concerned about the cost of both S. 1701 and 
S. 961. As discussed above, the Administration believes any bill to 
reauthorize the AML should not exceed the cost assumed in the 
President's budget.

                               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.
    We believe the introduction of S. 1701 and S. 961 signal the 
continuation of constructive efforts 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 on June 30, 2006. 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 recognize that 
these issues can be contentious, but we are eager to continue working 
through these issues with the Committee. We look forward to an open and 
productive dialogue 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.
    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. Okay. Thank you, sir. Appreciate it.
    Mr. Shirley.

           STATEMENT OF JOE SHIRLEY, JR., PRESIDENT, 
               THE NAVAJO NATION, WINDOW ROCK, AZ

    Mr. Shirley. Thank you, Chairman Thomas, Senator Bingaman, 
committee members. Thank you for the opportunity to testify 
before you this morning on the Surface Mining Control and 
Reclamation Act of 1977.
    The Surface Mining Control and Reclamation Act of 1977 is 
tremendously important to The Navajo Nation and the Navajo 
people. SMCRA has allowed The Navajo Nation to clean up most of 
the environmental and physical hazards presented by the 1,300-
plus abandoned mine lands that exist on Navajo land.
    As a certified tribe, The Navajo Nation has also used funds 
from the Abandoned Mine Land Trust Fund for Public Safety 
Infrastructure Projects, or PFPs. These projects, entirely 
within the scope of SMCRA, allow certified States and tribes to 
address the many impacts to communities caused by past and 
present mining activities. The Navajo Nation believes it is 
essential to maintain SMCRA and the AML fee to provide 
essential cleanup of abandoned mines and rehabilitation for 
communities affected by mining.
    Mining companies have reaped the benefits of Navajo coal 
for decades, but have given so little back to the communities 
which have been affected by their activities. They have 
polluted our water, soil, and air, and have not rectified the 
communities or the sites they have disturbed when the leave.
    The issue of abandoned mines is more than just a problem 
with the mines themselves, although the environmental and 
physical hazards posed by many of the mines are severe. The 
problem is: How do you put communities back together when the 
mining companies simply walk away?
    SMCRA benefits a way--presents a way of helping these 
communities. Through the AML fee collection, The Navajo Nation 
has contributed approximately $186 million to the AML Trust 
Fund, of which our nation has been entitled to an estimated $93 
million. The Navajo Nation's total expenditure of the AML funds 
for reclamation and other projects is approximately $62 
million.
    Since 1994, The Navajo Nation has been a certified tribe, 
meaning that it has completed the rehabilitation of its 
abandoned coal mines and is now allowed to use its tribal share 
of the reclamation fee for PFPs to help communities that are 
impacted by mining activities, pursuant to section 411 of 
SMCRA.
    The Navajo Nation currently has an unappropriated AML Trust 
Fund balance of approximately $32 million that the U.S. Office 
of Surface Mining and Reclamation Enforcement has not yet 
disbursed. This is a small fraction of the overall balance of 
the AML Trust fund. But, for The Navajo Nation, the rightful 
disbursement of this money represents a tremendous opportunity 
to help the Navajo people that have been affected by coal-
mining activities.
    The Navajo Nation encourages the committee to increase, or 
at least continue, the allocation of the reclamation fee 
collected annually to the tribes, under section 402(G)(1)(b); 
promptly disburse the unappropriated AML Trust Fund balances of 
States and Tribes; extend the expiration date for the 
reclamation fee beyond September 2018; continue to allow the 
flexibility to allow certified States and tribes to spend AML 
funds pursuant to the goals and objectives of SMCRA; allow The 
Navajo Nation the opportunity to apply for primacy under title 
5, subject to applicable SMCRA regulations.
    First, The Navajo Nation requests that the committee 
increase and/or continue the allocation of the reclamation fees 
collected annually to the tribes under section 402(G)(1)(b). 
The Navajo Nation opposes any amendment to section 402(G)(1)(b) 
that will deny us our allocation and divert it to States which 
have not yet completed reclamation activities. This would 
effectively penalize The Navajo Nation for taking the 
responsibility to reclaim the most hazardous and harmful mines 
on Navajo land. 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-
facility projects. These projects help build infrastructure 
such as roads, waste management systems, and water services. We 
desperately need our allocation of the reclamation fees, and 
urge the committee to raise the tribal share of the reclamation 
fee so we may confront our infrastructure problems.
    At the very least, we recommend that tribes continue to 
receive the 50-percent allocation currently authorized by 
SMCRA.
    Second, The Navajo Nation requests that our unappropriated 
balance of approximately $32 million be promptly released. We 
seek the expeditious return of our Trust Fund balance while 
remaining an active participant in SMCRA.
    Third, The Navajo Nation requests that the reclamation fee 
expiration date be extended to at least September 2018. We 
believe that this will allow OSM enough time to clean up 
priority sites and meet the goals of SMCRA.
    Finally, The Navajo Nation requests that the tribes 
participating in SMCRA be treated on equal footing with the 
States and become eligible to apply for tribal primacy under 
title 5 of SMCRA. We believe that Congress originally intended 
SMCRA to treat Indian tribes as States are treated in regards 
to regulating mining activities.
    The Navajo Nation is ready to assume primacy over the 
regulation enforcement of coal mining on our land.
    In closing, The Navajo Nation has long supported 
reauthorization of SMCRA. The AML fee allocation provides an 
important opportunity for The Navajo Nation to not only finish 
the last of the reclamation activities, but also to continue 
the PFPs to help those communities impacted by mining.
    The Navajo Nation has strongly supported the release of the 
unappropriated Trust Fund balance and the ability to collect 
our own AML fees. While The Navajo Nation is encouraged by the 
efforts of Senator Thomas in S. 1701 to address the concerns of 
the AML program, we urge the committee to include the primacy 
provisions in their legislation to ensure that The Navajo 
Nation will have the ability to be treated like States and 
determine for itself how it will manage its own surface mining 
and reclamation activities.
    Thank you for the opportunity to provide this testimony to 
the committee.
    [The prepared statement of Mr. Shirley follows:]

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

                              INTRODUCTION

    Thank you for the opportunity to submit this testimony for the 
record concerning the Navajo Nation's position on the reauthorization 
of the Surface Mining Control and Reclamation Act of 1977 (SMCRA), 
Public Law 95-87. The purpose of this hearing is to discuss two pieces 
of legislation that address SMCRA; S. 1701 and S. 961 both titled the 
``Abandoned Mine Land Reform Act of 2005.'' I would like to discuss the 
position of the Navajo Nation regarding SMCRA reauthorization in 
general, the beneficial uses of the Abandoned Mine Land (AML) funds, 
and the expansion of SMCRA to allow the Navajo Nation to finally apply 
for the ability to regulate mining activities on Navajo land.
    The Navajo Nation is the largest federally recognized Native 
American Tribe in the United States with close to 300,000 Tribal 
members, and a sovereign territory roughly equivalent in size to the 
State of West Virginia. The Navajo Nation is one of three coal-
producing Tribes in the country along with the Hopi Tribe and the Crow 
Tribe. While the Navajo Nation has benefited financially from mining on 
our lands, we have also experienced the negative effects of what mining 
has left behind. As companies folded their mining operations, many of 
them simply removed their machinery and left open scars behind. Each 
abandoned mine presents a physical and environmental, and in some cases 
a radiological, hazard for the Navajo people and our land.
    Mining companies have reaped the benefits of Navajo coal for 
decades to fuel coal-fired power plants that have aided the rapid 
expansion of the American Southwest. While the coal mining companies 
and the power plant operators have earned tremendous profits, and the 
economies of Phoenix, Albuquerque, and Las Vegas, among other 
population centers, have boomed, the Navajo Nation, the home to this 
precious resource continues to exist in a condition that most Americans 
would find deplorable. The majority of Navajo people live without the 
modern conveniences of electricity, running water, and sewage systems. 
The unemployment rate on the Navajo Nation hovers around 50%, while the 
poverty rate is approximately 56%. The State of West Virginia, which as 
noted earlier is approximately the same size of the Navajo Nation, has 
18,000 miles of paved road; the Navajo Nation has only 2000 miles of 
paved roads.
    The reason for presenting these statistics to you today is less to 
use this hearing as an opportunity to illustrate the dire situation 
faced by so many Navajos, but to point out that the companies that have 
for decades come in and taken our coal have given so little back to the 
communities which have been affected by their activities. They have 
polluted our water, soil, and air, and have done little to rectify the 
communities or the sites they have disturbed when they leave. The issue 
of abandoned mines is more than just a problem with the mines 
themselves, although the environmental and physical hazards posed by 
many of the mines are severe, the problem is how do you put communities 
back together when the mining companies simply walk away?
    SMCRA presents a way of helping these communities. Through the AML 
fee collection the Navajo Nation has contributed approximately $186 
million to the AML Trust Fund, of which the Nation has been entitled to 
an estimated $93 million. The Navajo Nation's total expenditure of AML 
funds for reclamation and other projects is approximately $62 million. 
Since 1994, the Navajo Nation has been a certified Tribe, meaning that 
it has completed the rehabilitation of its abandoned coal mines and is 
now allowed to use its Tribal share of the reclamation fee for Public 
Facility Infrastructure Projects (PFPs) to help communities that have 
been impacted by mining activities pursuant to Sec. 411 of SMCRA.
    The Navajo Nation currently has an unappropriated AML trust fund 
balance of approximately $32 million that the U.S. Office of Surface 
Mining Reclamation and Enforcement (OSM) has not yet dispersed. This is 
a small fraction of the overall balance of the AML Trust Fund, but for 
the Navajo Nation the rightful disbursement of this money represents a 
tremendous opportunity to help the Navajo people that have been 
affected by coal mining activities. No one would argue that the AML 
Trust Fund has been dispersed efficiently, but it is essential to the 
Navajo Nation that this fee continues and that the Navajo Nation be 
allowed to use its Tribal share to further develop these PFPs.

                  THE NAVAJO NATION POSITION IN BRIEF

    In recognizing the importance of the reauthorization of SMCRA to 
the Navajo people, the Intergovernmental Relations Committee of the 
Navajo Nation Council approved a resolution asking Congress to:

    1. Increase, or at least continue, the allocation of the 
reclamation fee collected annually to the Tribes under 
Sec. 402(g)(1)(B);
    2. Promptly disburse the unappropriated AML Trust Fund balances of 
States and Tribes;
    3. Extend the expiration date for the reclamation fee beyond 
September 2018;
    4. Continue to allow the flexibility to allow certified States and 
Tribes to spend AML funds pursuant to the goals and objectives of 
SMCRA;
    5. Allow the Navajo Nation the opportunity to apply for primacy 
under Title V, subject to applicable SMCRA regulations.

                               DISCUSSION

Reauthorization
    The Navajo Nation urges the Committee to move quickly to 
reauthorize SMCRA. While the program has been criticized for how it has 
released the funds to which States and Tribes are entitled, and for 
amassing such a large balance in the AML Trust Fund, currently at 
almost $2 billion, the program itself is well designed in concept if 
not in application. Throughout the country, thousands of dangerous 
abandoned mines and impacted communities that have been affected by 
mining activity. The portion of the AML fee that the federal government 
retains for its own uses provides the best way to encourage current 
mining companies to rectify the activities of past mining where there 
is little current mining to generate the fees necessary to mount a 
successful rehabilitation. Similarly, the portion of the AML fee that 
is supposed to be returned to the States and Tribes allows those 
sovereign entities to clean up the past and present impacts of mining. 
The Navajo Nation applauds the work of the Committee to streamline the 
AML program and to continue this rehabilitation opportunity so vital to 
the health and well-being of the Navajo people.

AML Fee Collection
    The Navajo Nation urges the committee to increase, or at least 
continue, the collection and allocation of reclamation fees. The AML 
fee collection and Tribal share allocation provide an important 
resource for the Navajo Nation to continue the clean up of abandoned 
mine lands and the rehabilitation of communities impacted by past 
mining. Since the inception of this program, the Navajo Nation has 
reclaimed over 1,300 mine sites and addressed many of the physical and 
environmental hazards posed by these sites. In 1990, SMCRA was amended 
to allow the use of the Tribal share to reclaim abandoned uranium and 
coppermines where they constitute a hazard to public health and safety, 
and to facilitate land and water projects and public facility projects 
in areas impacted by mining activities. In order to use these funds for 
projects other than abandoned coal mine lands, a State or Tribe must be 
certified that it has completed its coal mine clean up. The Navajo 
Nation received its certification in 1994. Since that time, in 
compliance with Sec. 411 of SMCRA, the Navajo Nation has used the AML 
funds to aid communities impacted by past or present mining through a 
competitive proposal process. If the project is approved, the Tribal 
share allocation is used to leverage further financing for the 
construction of infrastructure projects such as roads, electrical power 
lines, waste management, and municipal water systems.
    The Navajo Nation will strongly support legislation that increases 
or continues the reclamation fee and continues the ability of States 
and Tribes to use the State or Tribal share for the clean up of 
abandoned mine lands and PFPs. The Navajo Nation opposes any attempt to 
change Sec. 402(g)(1)(B) to no longer allow a certified State or Tribe 
to receive its 50% allocation and divert this money to States or Tribes 
that have not completed their reclamation activities. A change of this 
sort would essentially punish the Navajo Nation for quickly and 
efficiently reclaiming its abandoned mine lands and receiving its 
certification status.
    The Navajo Nation desperately needs the allocation of reclamation 
fees to confront the vast infrastructure problems existing on Navajo 
land. The Navajo Nation has complied with the requirements of SMCRA and 
has made tremendous strides in not only reclaiming abandoned mine lands 
but also in rehabilitating the communities effected by past and present 
mining activities.
    At a minimum, the Navajo Nation recommends to the Committee to 
maintain the 50% allocation currently authorized under SMCRA. However, 
given the infrastructure problems faced by the Navajo Nation and other 
Tribes, we urge the committee to increase the Tribal share to help 
Tribes address these infrastructure issues.

Extension of the Reclamation Fee Expiration Date
    Since September 30, 2004, the AML reclamation fee has continued 
through a series of congressionally mandated extensions. The Navajo 
Nation requests that any reauthorization of SMCRA extend the expiration 
date to at least September 2018. The number of abandoned mine sites in 
the U.S. is vast, and the impacts of past mining are felt in many 
communities. An extension to 2018 would allow the OSM a sufficient 
period of time to rehabilitate their priority sites and allow States 
and Tribes to achieve the goals and objectives of SMCRA.

Trust Fund Balance
    The Navajo Nation's share of the unappropriated AML Trust Fund 
balance is currently around $32 million. This is money that exists due 
to the coal mining activities on the Navajo Nation, and as such, the 
Navajo Nation has a right to expect this money will be retuned to the 
Nation as per SMCRA. The Navajo Nation does not object to aiding the 
cleanup of abandoned mine sites across the nation using the portion of 
the AML fee allocated to OSM. However, the Navajo Nation does object to 
having almost $32 million sitting in a trust fund for no appreciable 
reason to help shore up the federal budget when there are so many 
Navajo people and communities that can be helped by using this money as 
it was originally intended. The Navajo Nation desperately needs this 
money to continue cleanup AML problems and infrastructure development.

Primacy
    Within Indian Country, there is no greater principal than that of 
sovereignty and self-determination. The ability of the Tribes to 
determine for ourselves what is best for our land and our people has 
been recognized repeatedly by the federal government. Congress too 
recognized this principal in 1977 during the consideration and passage 
of SMCRA. SMCRA allows States to apply for and receive the ability to 
regulate surface mining activities on State and Federal lands in 
Sec. 503. While Congress seems to have been unsure of how best to allow 
Tribes to apply for and receive primacy over mining activities, it 
directed the Secretary to consult with Indian Tribes and conduct a 
study to determine how best to facilitate the granting of primacy over 
Tribal lands. The purpose of this study was to propose legislation that 
would authorize Tribes to apply for and receive primacy to assume the 
regulatory duties over the administration and enforcement of surface 
mining on Indian lands in a manner to similar to that of States.
    In the ensuing 28 years, the Secretary has failed to propose 
legislation that would allow Native Nations to assume primacy as 
directed by Congress. The Navajo Nation has worked extensively with the 
Department of Interior to facilitate this proposed legislation.

   1982: OSM entered into a Cooperative Agreement with the 
        Navajo, 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, 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, '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 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. Despite 
having 28 years to make their recommendations, OSM has failed to 
introduce or advocate on behalf of Tribal primacy legislation. Congress 
has had the Secretary's recommendations regarding Tribal primacy for 18 
years; however, OSM is not authorized to accept applications for 
primacy until authorized by Congress.
    Twenty-four coal mining States have obtained primacy from OSM for 
the authority to regulate, inspect, and enforce surface coal mining 
within those states since 1977. The Navajo Nation has the ability and 
the experience to assume authority over the regulation and enforcement 
of coal mining on Navajo land. While the Navajo Nation understands that 
there may be some jurisdictional question that require Tribes and OSM 
to continue to work together to address, the Navajo Nation requests 
simply 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. The Navajo Nation believes it can regulate and 
inspect existing mining operations in a timely 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 language that would 
authorize the application and granting of primacy to Native Nations.
    The following is proposal language that would satisfy this 
requirement. We are aware that there have been several other proposals 
that would also allow the Navajo Nation to apply for primacy. The 
Navajo Nation would work with any potential sponsor to facilitate this 
change.

                            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.''

    The Navajo Nation respectfully requests that the Committee approve 
an amendment to SMCRA that would allow the Navajo Nation to apply for 
primacy. Without this legislative change the Navajo Nation would never 
be able to apply for primacy to regulate surface mining and reclamation 
activities on our own lands. Finally, it is important to note again 
that the Navajo Nation is not asking for a legislative change that 
grants it primacy. We are simply asking for the ability to be treated 
like a State and apply for primacy.

Pending Legislation
    After reviewing the pending legislation, the Navajo Nation feels 
that the S. 1701 introduced by Senator Thomas comes the closest to 
satisfying the Navajo Nation's needs. First, S. 1701 extends the AML 
fee collection until 2016. While not the extension to 2018 that the 
Navajo Nation feels would be a sufficient amount of time to finish 
reclamation activities, this point is outweighed by the other benefits 
of the legislation. Second, S. 1701 begins to disburse the 
unappropriated trust fund balances beginning next year. For the Navajo 
Nation with a balance of approximately $32 million this amounts to 
three payments equal to one quarter of the total balance paid out for 
three years. The Navajo Nation strongly supports this provision.
    Third, Senator Thomas' legislation continues to allow AML 
allocations to be used for PFPs. The importance of continuing to allow 
SMCRA allocations to be used for PFPs cannot be underestimated for the 
Navajo Nation. Finally, Senator Thomas' legislation proposes a unique 
solution to the current problem of undisbursed funds sitting in the 
federal treasury. Namely, S. 1701 allows States and Tribes to collect 
their own AML fees and then provide 50% to the federal government. The 
Navajo Nation strongly supports this move to ensure that States and 
Tribes receive their allocations in a timely manner as opposed to 
waiting for the money to be appropriated.

                               CONCLUSION

    The Navajo Nation has long supported the reauthorization of SMCRA. 
The AML fee allocation provides an important opportunity for the Navajo 
Nation to not only finish the last of the reclamation activities, but 
also to continue the PFPs to help those communities impacted by mining. 
The Navajo Nation also strongly supports the release of the 
unappropriated trust fund balance and the ability to collect our own 
AML fees. While the Navajo Nation is encouraged by the efforts of 
Senator Thomas and S. 1701 to address the concerns of the AML program, 
we urge the committee to include the primacy provisions in the 
legislation to ensure that the Navajo Nation will have the ability to 
be treated like States and determine for themselves how they will 
manage their own surface mining and reclamation activities. The Navajo 
Nation has established that it has the expertise and processes in place 
to effectively handle this authority. Thank you for the opportunity to 
provide this testimony to the Committee.

    Senator Thomas. Thank you, sir. I'm glad you're here.
    Mr. Green.

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

    Mr. Green. Thank you, Senator Thomas.
    My name is Evan Green. I'm the administrator of the 
Abandoned Mine Land Division of the Wyoming Department of 
Environmental Quality. I'm 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 Senate Energy and Natural Resources 
Committee for inviting Wyoming to present our views on this 
important issue.
    I would also like to recognize the hard work by Members of 
Congress, by the Office of Surface Mining, and by the AML 
States and tribes in attempting to craft a reauthorization 
proposal that will be fair to all entities with an interest in 
the outcome of this deliberation.
    My thanks also go to your individual staffs for their 
assistance in this process.
    As to the specific bills before you today, Wyoming supports 
the reauthorization concepts contained in S. 1701 offered by 
Senator Thomas. We have some serious concerns with several 
provisions of S. 961 sponsored by Senator Rockefeller.
    The interests of the Nation's most productive coal-
producing State with respect to S. 1701 are:
    First, a prompt release of Wyoming's share of the AML Trust 
fund. S. 1701 provides for a payout of these funds over a 5-
year period. And this schedule is acceptable.
    Second, a fair share of future AML revenues returned to the 
State with the flexibility to use these funds to address the 
impacts of mineral development. S. 1701 meets this criterion.
    Third, a reduced fee structure that lowers the tax burden 
on Wyoming coal producers. S. 1701 provides a phased fee 
reduction over the course of the program extension.
    Wyoming also appreciates the option of allowing States to 
collect the reclamation fee.
    As to S. 961, Wyoming cannot agree to provisions which do 
not address the State's needs. For example, Wyoming coal 
producers would pay almost $2 billion in reclamation fees over 
the term of the extension, but the State would continue to 
receive only about 25 to 30 percent of collections, as we have 
in the past. SMCRA promised 50-percent return, and that promise 
should be honored.
    Wyoming's Trust Fund of $450 million would not be returned, 
and there is no commitment that Wyoming or other States would 
receive Trust Fund balances in future years.
    And, finally, Wyoming would remain subject to the 
limitations on project prioritization currently in SMCRA. As a 
certified State, Wyoming should have the authority to decide 
how to spend the funds generated by our coal producers.
    Just a few words on Wyoming's track record. Wyoming's 
record of administering its AML program demonstrates our 
commitment to the program and its appropriate application to 
meet the needs of our State. Wyoming has used AML funds very 
efficiently. We maintain a 95-percent obligation rate, which 
means that the money is put to work quickly on the ground to 
address hazardous sites. Our administrative costs are less than 
5 percent.
    Wyoming has closed more than 1,300 hazardous mine openings, 
reclaimed over 30,000 acres of disturbed land, and controlled 
or abated 22 mine fires. Thirty-five miles of hazardous high 
walls have been reduced to safer slopes, and over $115 million 
have been spent to mitigate and prevent coal-mine subsidence in 
Wyoming communities.
    In regards to work remaining, Wyoming's continuing 
inventory of historic mining districts has identified almost 
400 additional coal sites, and over 650 non-coal sites that 
continue to pose a hazard to Wyoming citizens and to visitors 
to our State. Control of mine fires in response to ongoing 
subsidence and emergency situations are not included in this 
total. These will continue to be a liability to Wyoming in the 
future.
    Mining activities have impacted every one of Wyoming's 23 
counties. Many communities continue to suffer the direct 
effects of energy development and the boom-and-bust nature of 
the State's economy.
    Infrastructure projects, such as public water systems, 
hospitals, health clinics, and other projects addressing public 
health and safety, will continue to be a priority.
    All of the States and tribes have continuing reclamation 
needs under the legitimate and original purposes of SMCRA. 
Wyoming believes the reauthorization legislation should honor 
the government's commitment to return the States' and tribes' 
share of the AML Trust Fund and that all participating States 
and tribes should be fairly treated.
    I, again, appreciate the opportunity to present Wyoming's 
position today.
    Thank you.
    [The prepared statement of Mr. Green follows:]

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

    Good Morning, Mr. Chairman. My name is Evan Green. I am the 
Administrator of the Wyoming Abandoned Mine Land Division of the 
Department of Environmental Quality. I wish to thank Chairman Domenici 
and the members of the Senate Committee on Energy and Natural Resources 
for inviting the State of Wyoming to testify at this hearing today.
    I have been invited here today to speak briefly on the 
reauthorization of Abandoned Mine Land Reclamation fee, and changes to 
the Surface Mining Control and Reclamation Act of 1977 as proposed by 
S. 1701 and S. 961. As you know, I speak from the perspective of our 
nations largest producer of coal and therefore, the nations largest 
source of AML funds. I commend you for your willingness to hear from 
representatives of coal producing states and other interested parties 
about this important issue. As always, Wyoming stands ready to work 
with the Congress in addressing the shortcomings of SMCRA and the need 
for a fair and equitable distribution of past collections and future 
revenues from the AML fee.

                     SUMMARY OF WYOMING'S POSITION

    I wish to begin by saying that Wyoming supports many of the AML fee 
reauthorization concepts contained in S. 1701 sponsored by Senators 
Thomas and Enzi of Wyoming. This approach addresses both the serious 
reclamation needs facing our state and provides relief for our mining 
industry.
    To be specific, we request that this Committee support S. 1701 on 
the following items:

   A prompt release of Wyoming's share of long overdue funds 
        from the AML Trust Fund. S. 1701 provides this release over a 
        five-year period; a time frame we find acceptable.
   Guaranteeing a fair share of future AML revenues to complete 
        the reclamation of abandoned mine sites in Wyoming, and address 
        the impacts of energy development on Wyoming communities and 
        the State's infrastructure. Wyoming appreciates the opportunity 
        provided by S. 1701 to collect reclamation fees and retain the 
        State's 50% share.
   A reduced fee structure that lowers the tax burden on 
        Wyoming coal producers.

    In contrast, however, there are provisions in S. 961 that do not 
address the needs of our country's largest and most productive coal 
producing state. For example:

   Wyoming's coal producers would pay almost $2 billion in 
        reclamation fees over the term of the extension, but the state 
        would continue to receive only 25-30% of what it pays in going 
        forward. Since 1977, SMCRA has promised a 50% return to the 
        states, that law and promise, must finally be kept.
   Wyoming's trust fund of $450 million, money owed the state 
        pursuant to laws passed by this body, must be returned in a 
        timely fashion.
   Escalating construction costs, inflation, and a lack of 
        interest on the fund depreciate the real value of Wyoming's 
        share of this account. Congress promised not only Wyoming, but 
        also other coal producing states this money, but has never kept 
        this promise. We believe strongly that this funding denial 
        should not stand.
   There is no commitment that Wyoming, or other states, will 
        receive trust fund balances in future years.
   Wyoming would remain subject to the limitations on project 
        prioritization currently in SMCRA. As a certified state, 
        Wyoming should have the authority to decide how to spend the 
        funds generated by our coal producers.

                                HISTORY

    When the Surface Mining Control and Reclamation Act was enacted in 
1977, it included a fee on coal production. Proceeds from the fee were 
placed in the Abandoned Mine Land (AML) fund. By law, one-half of the 
fees collected in each state or on tribal lands were to be returned to 
the state or tribe of origin. The other half of the collections were to 
be spent at the discretion of the Secretary of the Interior to address 
reclamation issues of national importance. All AML expenditures, 
including state and tribal shares and the OSM's allocation, are subject 
to the federal budgeting process and annual appropriation by Congress.
    Since the middle of the 19th Century, Wyoming has been a major 
source of energy, fueling America's industrial revolution and 
supporting its 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 did the 
market for Wyoming coal. Mines opened in Sheridan and Campbell counties 
to supply demands nationwide for clean and inexpensive 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 will be 
discussed below, ongoing inventory efforts continue to show 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, such as S. 1701.
    Despite the bills intent and the clear mandate of law, Congress has 
never appropriated to states and tribes the 50% of fee collections 
guaranteed by law. Wyoming, for example, has received only 29% of fees 
collected in our state since the approval of its reclamation plan in 
1983. This is a refusal of the Federal Government to discharge the 
obligations it placed on itself under law.
    We are very concerned that Wyoming's coal producers will be asked 
to bear the largest burden of AML fee collections without the return of 
an equitable portion of those funds to Wyoming. In 2004, Wyoming 
producers paid over $130,000,000, yet Wyoming's AML program received 
only $29,900,000 in distributions. That's only 22.5% of money Wyoming 
contributed, while other states have received 40%, 50% and even over 
100% of their contributions.
    Appropriations from Congress to address AML problems in Wyoming and 
other coal states are constrained by budget ceilings established by 
Office of Management and Budget. Annual AML distributions to states and 
tribes have never reached the 50% of AML fee collections mandated by 
Congress in SMCRA. As a result, the AML Trust Fund now contains almost 
$1.5 billion, of which $972 million is the states share balance, which 
by law is to be distributed to AML states and tribes.
    Through fiscal 2004, Wyoming coal companies have paid over $2 
billion into the fund. Only about 29% of these collections have 
returned to the State. Wyoming has received only $529,706,000 in annual 
allocations. Over $450,000,000 million of Wyoming's state share resides 
in the AML fund. This money, now idle in this federal account, could be 
put to productive use reclaiming hazardous mine sites and mitigating 
the deleterious effects of mining and mineral processing activities in 
Wyoming communities.

                 OBLIGATIONS TO COMBINED BENEFITS FUND

    The 1992 Coal Act shifted the AML Trust Fund interest away from 
reclamation and towards the social needs of the dependents of the 
United Mine Workers and the desires of the bituminous coal operators by 
subsidizing shortfalls in the Combined Benefits Fund (CBF).
    These social priorities have steered AML funds away from the needs 
of states and tribes, especially those states that produce the lion's 
share of the Nation's coal. Again, we recognize the need for the fund 
and support its goals.

               ACCOMPLISHMENTS OF THE WYOMING AML PROGRAM

    Since implementation of the Surface Mining Control and Reclamation 
Act of 1977, Wyoming coal producers have paid over $2 billion dollars 
in reclamation fees into the AML Trust Fund. In return, Wyoming has 
received about $530 million dollars, or 29% of these total collections, 
far less than what it is owed under law. Wyoming consistently maintains 
an obligation rate in excess of 95% of funds received, and spends less 
than 4% on administrative costs. As to the application and 
administration of this fund, Wyoming's hands are clean.
    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 $115 million have 
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 $96 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 of about 6% a year. Unfortunately, 
Wyoming has not enjoyed economic diversification and remains largely 
dependent on mineral extraction, primarily coal, oil and gas. 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.

                          CERTIFICATION ISSUES

    Wyoming is subject to continuing criticism for its decision to 
certify in 1984. Based on information at the time, Wyoming believed 
that sufficient funding (the full 50% of collections) would be 
available to address known P1 and P2 coal sites. We now know that this 
honest and legitimate reliance was misplaced. Also, the state placed a 
high priority on reclaiming the vast and extremely hazardous pits and 
high walls left by uranium extraction in the 1960's and 1970's; a 
perfectly legitimate concern at that time. Finally, it must be 
remembered that the federal government reviewed and approved of 
Wyoming's certification.
    At the time, Wyoming also assumed that the AML program would expire 
in 1992 and decided to exercise the State's option to address both coal 
and non-coal hazards to public health and safety. Again, the 
certification was applied for by Wyoming, and was granted by the 
federal government. Wyoming's critics have used our certified status to 
claim that Wyoming has completed its reclamation of abandoned mine land 
sites or has no remaining hazards to be addressed.
    Nothing could be further from the truth. Criticism of Wyoming's 
status is, therefore, inappropriate and is, if anything, a diversion 
from the real and difficult issues imposed by this law. Wyoming still 
has a substantial internal inventory of P1 and P2 coal sites, some of 
which were unknown at the time of certification.

              HAZARDS REMAINING TO BE RECLAIMED IN WYOMING

    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 a 
wealth of 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 State AML 
rapid response program, or under the normal AML project priority 
system.
    Wyoming AML is currently in the final stages of a major statewide 
inventory process, the first comprehensive study of its kind, 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 the Bureau of 
Mines records, from company files, museum records, and archives of the 
Wyoming State Geologic Survey. Files and records from the Department of 
Energy (uranium), from Federal Land Management Agencies, and from the 
U.S. Geologic Survey were reviewed in detail for information on the 
location of mines and mining districts.
    The results of this intensive research were validated by site 
inspections in the field during the 2004 field season. Results from the 
inventory project verify that there are 393 additional P1 and P2 coal 
sites and 650 non-coal sites. As it has done in the past, Wyoming will 
move forward to address the challenges faced by abandoned mine lands.

      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. This is only the fulfillment of obligations Congress imposed 
by law upon itself.
    Because annual AML appropriations to States and Tribes have lagged 
behind AML fee collections, the AML fund has a current balance of $1.5 
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 $475 million 
by September 30, 2005. 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 
conditions, so the certified states are able to use the funds, as they 
deem appropriate.

2. A Fair Share of Future Revenues
    Wyoming wants it's legally mandated 50% of future fee collections 
returned to the State to address remaining hazardous coal and non-coal 
mine sites.
    The reauthorization proposals currently under consideration will 
require Wyoming coal producers to pay $1 to $1.5 billion dollars into 
the AML Trust Fund in the next 10 to 15 years. Wyoming recognizes that 
the problems in Eastern States must be addressed, but the state making 
the largest financial contribution to the AML program should receive 
just compensation from future fee collections. Wyoming citizens remain 
at risk from the hazards of abandoned mines, as do citizens in other 
states with similar issues. 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, and S. 1701 would allow 
the State to address those impacts. 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 ongoing 
conditions that will exist in perpetuity. The result of Wyoming's 
inventory work is not yet reflected in the Abandoned Mine Land 
Information System (AMLIS).
    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 
6 to 8 percent a year. This increase in production will offset a 
portion of the fee reduction and will generate funds for additional 
reclamation work nationwide. All coal producers, as well as energy 
consumers, would benefit from a reduction in reclamation fees.

4. Objections to S. 961
    As discussed above, Wyoming has strong concerns with the proposal 
contained in S. 961. Wyoming strongly objects to any proposal that 
would continue to tax Wyoming coal producers and fail to return its 
legal share of those collections to the State. We believe that the bill 
sponsored by Senators Thomas and Enzi is fair to all states and tribes 
with AML programs.

                               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.
    We believe Congress should go further than S. 1701, which omits 
some critical elements of reforming SMCRA once and for all. S. 971, 
while putting forward positive and constructive ideals, also falls 
short in Wyoming's view. What is needed is comprehensive reform 
addressing each and every element of SMCRA so that all stakeholders may 
be able to fulfill their obligations.
    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 to 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 and Natural 
Resources Committee for the opportunity to be heard on these important 
issues.

    Senator Thomas. Thank you, sir.
    Mr. Hohmann.

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

    Mr. Hohmann. Good morning, Mr. Chairman. My name is Steve 
Hohmann, and I'm director of the Division of Abandoned Mine 
Lands within the Kentucky Department for Natural Resources.
    I'm appearing here today on behalf of the National 
Association of Abandoned Mine Land Programs and the Interstate 
Mining Compact Commission, and I thank you for the opportunity 
to discuss pending legislation that addresses the future of the 
Abandoned Mine Reclamation Program.
    In particular, I would like to address the views of the 
States and tribes regarding the future collections of AML fees, 
adequate funding for our Abandoned Mine Land Programs, and 
related legislative adjustments.
    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 by State reclamation 
programs. Please remember that the AML Program is, first and 
foremost, designed to protect public health and safety. The 
bulk of State and tribal AML projects directly correct an AML 
feature that threatens someone's personal safety or welfare. 
For example, last year, in my home State of Kentucky, the AML 
Program reclaimed over 125 abandoned mine hazards, including 19 
dangerous landslides and 73 mine openings. We also improved 
water quality in 5.6 miles of stream. All together, these 
abatement projects removed abandoned-mine hazards that 
threatened over 3,500 Kentuckians.
    Additionally in 2005, the Kentucky AML Program completed 
six water-supply projects that installed 59 miles of water line 
directly providing 823 households with potable water. Many 
hundreds more residents were able to tap into AML-installed 
water-mains.
    Although the States and tribes have made significant 
progress abating AML hazards, the escalating costs of 
reclamation, coupled with decreasing AML grants, hinders our 
ability to reduce the AML problem inventory. AML sites tend to 
get worse over time, thus increasing reclamation costs. And 
inflation exacerbates these costs.
    The inventory is also dynamic. 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-mine sites.
    The States and tribes, through the IMCC and 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 reflect a minimalist 
approach to AML reform. They are as follows:
    First, to extend fee-collection authority to at least 2020 
to allow enough time to collect sufficient money to address the 
significant AML problems that remain.
    Second, to adjust the procedure by which States and tribes 
receive their annual allocations.
    Third, to eliminate the Rural Abandoned Mine Program, or 
RAMP, and to reallocate those moneys to the historic coal-
production share.
    Fourth, to assure adequate funding for minimum program 
States who have consistently received less than their promised 
share of funding over the past several years.
    Fifth, to address a few other select provisions that will 
enhance the overall effectiveness of the AML program, such as 
re-mining incentives and State AMD set-aside programs.
    And, finally, to address how the accumulated unappropriated 
State- and tribal-share balances in the fund will be 
distributed, while, at the same time, assuring that an adequate 
State-share continues for the balance of the program.
    In general, Mr. Chairman, we can support most of the 
provisions contained in S. 1701 and S. 961 that have been 
introduced by Senators Thomas and Rockefeller. As a bottom 
line, we believe that Congress should take expedited action to 
preserve--and, ideally, enhance--this vital program. In this 
regard, if there are opportunities to amend these bills, we 
have a few suggestions.
    First, we do not believe it is necessary to adjust the 
current priority scheme in section 403 to eliminate the 
general-welfare provision, or priorities four and five. To our 
knowledge, there is no evidence of abuse by the States or 
tribes regarding our selection of AML projects. However, to the 
extent that Congress believes the priority system should be 
adjusted in some way, we believe it would be appropriate to 
increase the Acid Mine Drainage Set-aside Program from 10 
percent to, ideally, 30 percent.
    Second, in terms of reducing AML fees, as proposed in S. 
1701, we do not believe such a reduction is necessary, simply 
because the fee has never been adjusted for inflation over the 
past 27 years. However, if Congress believes that a fee--a 
reduction in the fee is necessary, then it is critical to 
extend fee collection to at least 2020 to allow enough time to 
collect sufficient money to address the significant AML hazards 
that remain in the inventory.
    And, finally, we trust that any moneys diverted for use by 
the Combined Benefit Fund will be limited to interest on the 
AML Trust Fund only, and not to the principal. We believe it is 
essential that the principal in the fund be maintained for its 
intended purposes.
    We appreciate the opportunity to present this testimony 
today, Mr. Chairman, and look forward to working with you in 
the future.
    Thank you.
    [The prepared statement of Mr. Hohmann follows:]

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

    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 21 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 pending legislation that 
addresses 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 regarding several reauthorization 
issues including 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.
    Mr. Chairman, all parties affected by AML reauthorization agree 
that, 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 also provides 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's Division of Reclamation Support, as of June 30, 2005, the states 
and tribes have obligated 96% of all AML funds received. Also, based on 
information maintained by OSM in its Abandoned Mine Land Inventory 
System (AMLIS), as of June 30, 2005, $1.9 billion worth of priority 1 
and 2 coal-related problems have been funded and reclaimed. Another 
$354 million worth of priority 3 problems have been funded or completed 
(many in conjunction with a priority 1 or 2 project) and $398 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. We must 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. In fact, OSM is currently revamping the 
inventory to include data on health and safety features and the number 
of citizens safeguarded from the hazards associated with those 
features. 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 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 $300 million will be collected from AML receipts in FY 
2006 (assuming no fee adjustment). If the federal government returned 
all $300 million to the local economies for abandoned mine land re-
construction, almost 7,000 additional jobs could be created with an 
additional $175 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 and tribal AML programs. Since the mid-1980's, 
funding for state and tribal AML grants has been declining. For 
instance, in the FY 2006 budget, OSM proposed a decrease for the second 
year in a row for state and tribal AML grants. These grants are 
separate from moneys allocated to the states for the Appalachian Clean 
Streams Initiative (ACSI) and for state-administered emergency 
programs. The non-ACSI, non-emergency state and tribal AML grants are 
the lifeblood of state and tribal AML programs and represent the 
primary source of funding for the majority of priority 1 and 2 AML work 
that is undertaken each year. Over the past two fiscal years, and now 
again this year, we have seen a disturbing downward trend in these 
critical baseline grants: $142 million in FY 2004; $136 million in FY 
2005; and now a proposed amount of $129 million for FY 2006. These 
numbers are based on an detailed analysis of information contained in 
OSM's budget justification document.
    We are losing ground, Mr. Chairman, in the battle to address high 
priority AML sites that threaten our citizens. It is essential that 
this trend be reversed immediately if we are to accomplish the goals 
and objectives of the AML program. We therefore request that, as a part 
of AML reauthorization, the Committee address the matter of increasing 
baseline state and tribal AML grants to a level that will support 
vibrant and effective programs. We believe this can best be achieved by 
taking the AML appropriation off-budget. We also urge the Committee to 
provide for the expeditious return of unappropriated state and tribal 
share balances so that additional moneys can be directed to high 
priority AML hazards and problems.
    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 newest expiration date of June 30, 2006, we are again beginning 
to see various legislative proposals for how the Fund should be handled 
and how SMCRA should be amended. The states and tribes, through IMCC, 
the National Association of Abandoned Mine Land Programs and the 
Western Governors Associations 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 to at least 2020 to allow 
        enough time to collect sufficient money to address the 
        significant AML problems that remain.
   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 program's extended time frame.
   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.

    The two bills that are the subject of today's hearing address 
several of these concerns and, to that extent, are an excellent 
starting point toward AML reauthorization. In particular, S. 1701 
introduced by Senator Thomas amends Title IV by extending fee 
collection until 2016; provides for a phased reduction of fees over 
that same period of time; eliminates RAMP and moves those allocated 
moneys to historic coal production; provides for a guaranteed annual 
minimum program allocation of $2 million; increases the acid mind 
drainage set-aside from 10 to 20 percent; insures repayment of 
unappropriated state and tribal share balances and does so off-budget; 
eliminates the problematic lien provision in Section 408; removes the 
30 percent cap on water restoration projects; and provides for various 
remining incentives. The bill also provides a unique opportunity for 
states and tribes to collect AML fees on their own, returning to the 
federal government its 50 percent share, and requires all amendments to 
the AML inventory to be approved by the Secretary. Finally the bill 
adjusts the priority scheme under section 403 by eliminating the 
``general welfare'' clause and allowing priority 3 projects concerning 
environmental impacts to be addressed only in conjunction with a 
priority 1 or 2 project.
    S. 961, introduced by Senator Rockefeller, addresses some of these 
same provisions in Title IV, but extends fee collection to 2019; 
maintains the AMD set aside at 10 percent; eliminates priorities 4 and 
5 in section 403; allows the Secretary to initiate certification under 
Section 411 on his/her own volition; and provides for a scrub of the 
AML inventory to eliminate general welfare sites that were added after 
1998. Both bills address the Combined Benefit Fund (CBF) for retired 
mine workers, including making the full amount of interest generated on 
the AML Fund available for CBF purposes and freeing up stranded 
interest in the AML Fund for purposes of CBF. S. 961 would also make 
the unappropriated RAMP share balance available for the CBF.
    In general, Mr. Chairman, we can support most of the provisions in 
both of these bills. As a bottom line, we believe it is essential that 
expedited action be taken by Congress to preserve and ideally enhance 
this vital program. In this regard, if there are opportunities to amend 
these bills, we have a few suggestions. First, we do not believe it is 
necessary to adjust the current priority scheme in section 403 to 
eliminate the ``general welfare'' provision or priorities 4 and 5. To 
our knowledge, there is no evidence of abuse or inappropriate action by 
the states or tribes regarding our selection of worthy AML projects 
over the past 27 years of the program. OSM, who is responsible for 
conducting annual oversight of our programs, has reviewed our project 
selection and has consistently lauded us for the effective and 
efficient use of our AML funds and for the legitimacy and value of the 
projects we choose to undertake. However, to the extent that Congress 
believes that the priority system must be adjusted in some way, we 
believe it would then be appropriate to increase the acid mine drainage 
(AMD) set-aside program from10 percent to ideally 30 percent.
    Second, in terms of reducing AML fees as proposed in S. 1701, we do 
not believe such a reduction is necessary, particularly in light of the 
fact that there have never been any adjustments in the fee for 
inflation over the past 27 years. However, if Congress believes that a 
reduction in the fee is necessary, it is critical to extend fee 
collection to at least 2020 to allow enough time to collect sufficient 
money to address the significant AML problems that remain in the 
inventory.
    Finally, we trust that any moneys diverted for use by the Combined 
Benefit Fund (CBF) will be limited to interest on the AML Trust Fund 
only, and not to the principal. We believe it is essential that the 
principal in the Fund be maintained for its intended purposes. To do 
otherwise would be to subvert the entire premise of Title IV and to 
undermine the original intentions of SMCRA's framers.
    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 June of 2006. It is even more obvious 
that, regardless of what the unappropriated balance in the Fund is 
(currently $1.8 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 long-term 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.
   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. The restoration of these citizens' 
        communities is also being impacted by delays in returning the 
        unappropriated state and tribal share balances. 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. Well, thank you, sir. And thank all of you 
for being here. We'll take a minute or two for some questions, 
and go around for the various Senators to do that.
    Mr. Shope, if I may begin with you. First of all, share 
with Jeff our appreciation for his work at OSM, please. He's 
done a good job.
    I just have one question. S. 1701 contains a provision that 
allows the States and tribes to collect the fee, retain their 
shares, and submit the balance. What is the administration's 
position on that?
    Mr. Shope. Well, thank you, Senator. I will pass on to 
Director Jarrett your comments.
    With respect to that provision, we are enthused by the 
novel approaches that are coming out of this committee, 
including that particular provision. We do have some particular 
concerns, however, with it. Those concerns basically fall into 
three categories: logistics and the costs of that effort, the 
equity of such an effort, and perhaps the legality of it.
    First, with respect to logistics, OSM is very proud of its 
99.9 percent collection rate for AML fees. We have an expertise 
and an infrastructure that is already well established and in 
place. We have a very efficient and effective program in order 
to collect those fees. The concept of potentially expanding 
that program to have as many as 26 different agencies 
collecting the same fee, as well as maintaining the Federal 
Government, OSM's, responsibility to collect, audit and oversee 
those fee collections, does raise some concerns, as far as the 
cost and the logistics, as well as potential confusion for the 
regulated community as to what the fee rate is, and who it is 
they're paying it to.
    As far as the equity is concerned, there would be a concern 
for smaller programs that may not be able to take advantage of 
that opportunity; whereas, larger programs that would have 
sufficient resources could, in fact, take advantage of it.
    And, finally, there are some outstanding questions that 
have been raised, concerning the legality or constitutionality 
of allowing a State to collect a federally imposed AML fee. 
Again, that's just an outstanding question.
    So, again, we applaud the novel approach. We think there 
needs to be some further discussion and analysis of that.
    Senator Thomas. Thank you very much. Obviously, the reason 
for it being there is so that the States would be able to 
maintain the money that they say is their share.
    Mr. Shirley, thank you for your observations. Even though 
you're certified, you still have needs that you think AML funds 
could be used for. Could you elaborate on those?
    Mr. Shirley. Well, some of the needs are, basically, the 
Public Facility Infrastructure Program, you know, where some of 
the mining that has been impacted by--some of the communities 
that have been impacted by the mining. We have road needs, we 
have water--need for water distribution, power lines, just any 
number of things that makes a community viable and functioning.
    Senator Thomas. That are related to mining.
    Mr. Shirley. That are related to mining, yes. And these are 
communities impacted by mining.
    Senator Thomas. Thank you.
    Mr. Green, you didn't comment on how long you think the fee 
should be extended. Do you have a position on that?
    Mr. Green. We would accept the provision in your bill, 
Senator Thomas.
    Senator Thomas. You mentioned the State partnering with 
Federal agencies to eliminate mine-related hazards on Federal 
land. How would these be financed?
    Mr. Green. Senator, we currently have an outstanding 
agreement with the Bureau of Land Management. The BLM's AML 
program has contributed over a million and a half dollars to 
supplement those funds available through the OSM funding to the 
State of Wyoming, primarily for cleaning up priority-three 
hazards, environmental impact on BLM land. This is in addition 
to the funds that the State of Wyoming's AML program would 
normally spend on public lands.
    We have also entered into cooperative funding agreements 
with the National Park Service and with the Western Federal 
Highways Division for certain reclamation projects.
    Senator Thomas. Okay, fine. Thank you, sir.
    Mr. Hohmann, I've heard views opposing re-mining. Our 
proposal includes language that would allow this activity to 
take place. You expressed support for re-mining. Could you 
elaborate on that, please?
    Mr. Hohmann. Yes, sir. Re-mining is a very good way to save 
the AML fund precious dollars in the long run by having 
existing mining companies in--as part of their mining and 
reclamation efforts, go in and reclaim some of these abandoned 
mine hazards.
    In my State, in Kentucky, we take advantage of the AML 
enhancement rule, which is a form of re-mining incentive, which 
has allowed us to clean up several coal refuse piles at no cost 
to the State, to our AML fund, by working and partnering with 
coal companies who are mining in the area, and getting them to 
mine through these gob piles and reclaiming.
    Senator Thomas. Thank you, sir.
    Senator Bingaman.
    Senator Bingaman. Thank you very much, Mr. Chairman.
    Mr. Shope, let me ask, first, on the administration's 
position. As I understand it, the bill that the administration 
proposed in the last Congress called for reducing the Abandoned 
Mine Reclamation fee. Is that still your position? You believe 
that fee ought to be reduced?
    Mr. Shope. Senator, we believe that the fee, standing 
alone, in and of itself, can't be viewed in a vacuum. It needs 
to be part of the formulae--a larger formula, which is: the 
amount of the fee, the length that the fee is assessed, and 
then what happens to that fee once it is assessed. There are 
different proposals, different ways of making that formula 
equate to completing the high-priority reclamation that is out 
there. Under S. 1701, there is a fee-cut in there. Under S. 
961, there is no fee-cut. Neither one of those proposals--
taking into account the length of time, the amount of money 
that's collected, and where it's being appropriated--gets the 
high-priority job done. Under our bill that we introduced last 
year, we also had a fee-cut in it. However, because we made 
adjustments to the allocation, there was sufficient money.
    So, in and of itself, a fee-cut cannot be analyzed in a 
vacuum. It needs to be taken into consideration with the entire 
package that's out there.
    Senator Bingaman. So, your position is that you do not 
support a fee-cut unless it would allow for sufficient funds to 
do all of the reclamation--the high-priority reclamation work 
that you believe is in the inventory?
    Mr. Shope. That's correct.
    Senator Bingaman. Okay. You also--well, I don't know what 
position you've taken. I guess, let me ask the administration's 
position on the tribal primacy. As I understand President 
Shirley's testimony, his suggestion is that tribes be allowed 
to seek primacy for the title 5 regulatory program under the 
same standards that States currently can do that. Do you favor 
that, or oppose that?
    Mr. Shope. Senator, the current law does not permit tribes 
to apply for primacy. We do support the ability of a tribe to 
apply for primacy of the regulatory program. Of course, the 
particulars of such legislation would have to be reviewed, but 
we do support that. We've been working with the tribes in that 
effort. And, in fact, we have been funding the tribes to gear 
up toward that effort by providing them funding for training of 
inspectors and other regulatory matters.
    Senator Bingaman. Thank you very much for that answer--one 
of the features of the administration's proposal last Congress 
was to change the formula so that more money would be directed 
to States with the greatest need. The practical effect of that 
would be to shift funding from the West to the East. You 
indicate that continues to be the position of the 
administration.
    I guess, one issue there that occurs is: Do you believe 
that the 50-percent State-share should be eliminated in the 
future? Modified? Maintained? What's your view on that?
    Mr. Shope. Well, again, Senator, last year--we've been 
working at this for some time now--the proposal that we put 
forth last year did recognize removal of the State-share, going 
forward. Of course, it did follow our principals, which were, 
first and foremost, to provide more funding to high-priority 
coal-reclamation needs, and to get the expedited payment of 
unappropriated State-share balances that currently remain, but 
to do so within the confines of the budget restrictions which 
we have. Again, that gets back to my earlier answer to your 
question. It's--one element of that formula, in and of itself, 
can't be viewed alone. You need to look at the entire package.
    So, the proposal that we put forth last year, as I 
mentioned, did have a fee-cut in it, but it did collect 
sufficient funds and, by shifting the allocation formula toward 
high-priority coal sites, was able to accomplish the job. There 
may be other proposals that are out there. That's why the 
administration, this year, did not put in specific legislation. 
However, we did provide funding, or proposed funding, in the 
President's budget to make legislation that comports with those 
principles.
    Senator Bingaman. Well, in one part of your testimony that, 
I guess, leaves me somewhat confused, you state these various 
principles that should guide this AML legislation. And, 
included in that, you say that States that have certified 
completion of their coal reclamation work should be given 
expedited payment of the unappropriated State-share balances. I 
understand that. Does it make more sense to pay uncertified 
States--or doesn't it make more sense to pay uncertified States 
their unappropriated balances so that they can go ahead and do 
the work to get certified?
    Mr. Shope. We certainly agree with that, Senator. In fact, 
our proposal from last year would have done just that. The $58 
million that we requested in the 2006 budget, or the $53 
million in the 2005 budget, would have gone not just to 
certified States, it would have increased the grants to 
certified States, as well as the grants to non-certified 
States. In fact, out of $58 million that was requested in the 
President's 2006 budget, approximately $21 million would have 
been an increase to certified States, while $37 million would 
have gone toward non-certified States.
    Senator Bingaman. My time's up, Mr. Chairman. Thank you.
    Senator Thomas. Thank you, sir.
    Senator Allen.

         STATEMENT OF HON. GEORGE ALLEN, U.S. SENATOR 
                         FROM VIRGINIA

    Senator Allen. Thank you, Mr. Chairman. And thank our 
witnesses. And, most importantly, thank you for having this 
hearing.
    I'm going to make a statement and give you, as a leader of 
this, my perspective.
    First and foremost, coal is so important for our economy. 
We've gone through the energy bill. It is clear, for 
electricity generation in the future, we ought to be using 
clean coal technology. After all, we are the Saudi Arabia of 
the world in coal and, I think, advanced nuclear.
    Part of the ability for us to have viable companies and 
production of coal revolves around this issue, the reclamation 
issue, as well as the health-benefits issue for miners. We, in 
Virginia, understand, as do people in the Commonwealth of 
Kentucky and Wyoming and elsewhere, the importance of 
protecting our environment, where coal production originated, 
and those surrounding communities. These abandoned mines do 
pose a danger in those communities. We're faced here, Mr. 
Chairman, with a problem that requires, in my view, a 
comprehensive solution. Listening to Mr. Hohmann, from the 
Commonwealth of Kentucky, a lot of his views are very similar 
to the situation and sensibilities and views of, I think, the 
Commonwealth of Virginia. And I know Senator Talent and Senator 
Bunning and I seem to have a similar approach to this.
    We need to address the deficiencies in the Abandoned Mine 
Reclamation Program. It ought to be a plan that is developed 
equitably and expeditiously, providing needed funds for each of 
the affected States, including my Commonwealth of Virginia that 
has 106 unfunded sites.
    I may not think that either of these two bills that have 
been proposed in the Senate are ideal, at least they may be a 
framework where we can bring all the various companies and 
people who are concerned about this together to get a 
comprehensive solution, to address the long-term viability of 
the Abandoned Mine Land Reclamation Program, as well as the 
Coal Industry Retiree Health Benefit Act.
    I'm pleased to see that many of what once seemed like an 
intractable issues in all of those concerning the combined 
benefit fund are being resolved, hopefully resolved, especially 
ones that are important to some Virginia-based enterprises.
    So, I hope that, Mr. Chairman, the leadership here, and 
also on the House side, will work in this committee, with all 
the parties who are involved here, to adopt an affordable, 
equitable bill, in light of the existing very tight and taut 
budget environment.
    I'm looking forward to some very positive solutions to 
reform the Abandoned Mine Reclamation Program and the Combined 
Benefit Fund, and will be hearing different views on that 
through this panel. And I hope that we'll agree that we've got 
to find a workable solution, a solution so that we do have the 
proper utilization of clean coal. It's important for jobs, it's 
important for our national security and the competitiveness of 
our country. But is important that both abandoned-mine lands, 
as well as the health-benefits issue, get resolved.
    And I look forward to working with you, Mr. Chairman, and 
my colleagues Senator Bunning and Senator Talent, and all the 
different interested parties, and hopefully getting this done. 
It's important for those involved in it, and important for the 
future of our country. And I thank you for your very brave and 
courageous leadership in undertaking this. And maybe from this 
cauldron--I am hopeful and prayerful that we'll come up with a 
solution that everyone can agree with.
    Senator Thomas. Thank you.
    Senator Allen. Thank you, Mr. Chairman.
    Senator Thomas. You mean everyone doesn't agree with it?
    [Laughter.]
    Senator Allen. They're just slight disagreements. We'll all 
get on the same--maybe we'll all get on the same----
    Senator Thomas. I'm sure we will. Thank you very much, sir.
    Senator Allen. Thank you, Mr. Chairman.
    Senator Salazar.

          STATEMENT OF HON. KEN SALAZAR, U.S. SENATOR 
                         FROM COLORADO

    Senator Salazar. Thank you very much, Mr. Chairman.
    In the interest of time, I will submit my opening statement 
for the record.
    Senator Thomas. It will be in the record, sir.
    [The prepared statement of Senator Salazar follows:]
   Prepared Statement of Hon. Ken Salazar, U.S. Senator From Colorado
    Good morning. Thank you, Mr. Chairman. I want to thank you, Senator 
Bingaman and Senator Thomas for holding this important hearing.
    A legacy of Colorado's mining heritage is abandoned mines and mine 
sites with no identifiable owner or operator, who may be responsible 
for site clean-up and reclamation. As a result, public funds are 
necessary to address health, safety and environmental issues at these 
sites. Unfortunately, the uncertainty of the availability of federal 
funds for this purpose affects Colorado's ability to address the 
remaining AML problems in the state.
    Currently in Colorado, there are more than 17,000 abandoned mine 
sites that require safeguarding, 33 underground coal mine fires, and 
150 sites that require environmental cleanup. The state estimates that 
it will take at least $200 million to address these long-standing 
problems. In addition, there are some 50,000 acres of land along 
Colorado's Front Range that are at risk of subsidence as a result of 
abandoned coal mines.
    There are several principles that I will keep in mind as I evaluate 
alternative legislative proposals for reauthorizing the AML reclamation 
fund. They include:

   Any reduction in the amount of the fees paid by industry 
        should be accompanied by a reasonable extension of the life of 
        the program. I note that all of the bills before us would 
        extend authority to collect the fee by at least 10 years to 
        compensate for the proposed reduction in fees.
   Any changes in the amount of fees collected should be 
        revenue neutral to Colorado. Given the size of the problem in 
        Colorado, a shift of funds to eastern AML sites would be 
        inappropriate and place an unfair burden on Colorado taxpayers.
   Current legislation allows for the reclamation of non-coal 
        sites (Section 409 of SMCRA). This allows Colorado and other 
        western states the greatest flexibility to deal with all 
        abandoned mine problems.
   Some of the legislative proposal have included new language, 
        which would authorize the Secretary of the Interior, ``on the 
        Secretary's own volition,'' to certify that a state has 
        completed its coal-related abandoned mine problems. This seems 
        both unnecessary and unwise. I look forward to hearing more 
        about the reasons for this proposal.

    Colorado's current unappropriated balance is approximately $24 
million, a fraction of what is owed to Wyoming. But like the gentleman 
from Wyoming, I believe any repayment scenario must provide Colorado 
and other western states with the flexibility to complete remaining 
abandoned mine land reclamation. Further, access to the balance should 
not be contingent upon certification, as Colorado may never certify--
because of the coal mine fires that need to be addressed in perpetuity.
    Action is also critical because fees collected for the AML program 
fund medical benefits to several thousand mine workers. Through the 
United Mine Workers of America, coal miners living in 45 states who 
worked for companies that no longer exist are provided access to health 
care. While Colorado represents a small number of mine workers covered 
by this program as compared to states like Pennsylvania and West 
Virginia, my commitment to the promise made to these workers remains 
the same.
    Unfortunately, with the increasing number of steel and coal company 
bankruptcies and the rise in health care costs, the burden is falling 
on fewer companies who are already struggling to thrive. It is my hope 
that today's witnesses will offer their insights on this issue so that 
we can develop a solution that is both fair and true to the intent of 
the law.
    Thank you, Mr. Chairman. I look forward to working with you and 
with Senator Thomas on this important issue affecting both of our great 
states.

    Senator Salazar. And let me just state, Mr. Chairman, that 
I think it is very important that you do hold this hearing, and 
I applaud for your efforts in holding this hearing.
    I was noting, in reading some of the materials from our 
staff, that, when we project out to the year 2018, that 65 
percent of all of the funds going into the AML are coming from 
the State of Wyoming. So, I understand the importance of this 
issue to your State, and also to our country, in terms of how 
we deal with the abandoned mine-land issues that we're facing.
    I have a question for you, Mr. Shope. Frankly, I don't 
understand how you end up with the administration's position 
that what we ought to do is to cut the fees for AML. When you 
look at your own projections, it seems that, even when you 
limit the dollars that are needed for the priority-one and -two 
sites, you come up with the needed amount of somewhere in the 
neighborhood of $6.3 billion. And I think when someone looks at 
the question of whether or not we have enough money to take 
care of the AML issues that we're facing around the country, 
that you have to conclude that we simply have a revenue problem 
here. The need is much greater than the amount of money that we 
actually have.
    And so, I don't understand why it is that OSM and the 
administration would be taking the position that would reduce 
the revenue stream coming in, when we have these huge needs 
that are being unmet. Can you respond to that question?
    Mr. Shope. Certainly, Senator. And, again, let me clarify 
that the administration's position is that--the guiding 
principle is, there needs to be sufficient funds collected to 
reclaim those high-priority health and safety sites. There's 
not--we are not wed to a fee cut. It depends on--as I explained 
before, a formula of the amount of fee that's to be assessed, 
length of time, and then what you do with it when you collect 
that fee. Under the administration's bill from the last 
Congress, that provision did have a fee-cut in it, but there 
was also sufficient money that was being brought in and 
reallocated. By eliminating State-share, we did have sufficient 
funds collected to address all those high-priority sites.
    Senator Salazar. So you would arrive at the conclusion that 
there would be sufficient funds to take care of the needs by 
taking the money away from the State-share?
    Mr. Shope. Under the administration's proposal from last 
year, that is correct. That's correct. Now, coming forward into 
this Congress, we recognized that that didn't work last year. 
Our proposal, like all of the other proposals, was not 
successful. That's why we put forth our principles and have 
been working with the committee, standing ready to look at 
different ideas and see: Based upon those three factors, are 
sufficient funds being collected? If they are, then that is a 
bill that would meet our principle of reclaiming the highest-
priority sites.
    Senator Salazar. I don't have a position on this. What we 
have done with AML is, we've imposed fees on current operations 
for coal mining around the country, but especially how it 
affects the surface mines in places like Wyoming and other 
places around the country that operate through surface mines. 
Now, when you look at the whole legacy of coal mining, which is 
multi-generational and multi-century, do you believe that it's 
fair for the current coal operations in place to essentially 
bear the burden of paying for those costs of reclamation for 
those legacy effects on our environment?
    Mr. Shope. Senator, that decision was made long before I 
began my Federal service. Do I think it's an important program 
and is yielding important results? Do I have a personal 
opinion? I don't know if it's appropriate for me to offer my 
personal opinion as to whether that is, in fact, the most 
appropriate way. That's for this committee to decide.
    Senator Salazar. If you were king for the day, okay, and 
somebody were to come to you, and say, ``Here are the huge 
needs that we have from Kentucky, West Virginia, Wyoming, and 
all over this country with respect to AML, and we only have a 
very small portion of the money that we need in order to take 
care of these needs that have been built up over more than two 
centuries in America, how would you propose that we fund those 
needs?''
    Mr. Shope. Well, if I were king for a day, I guess I'd have 
to be elected Senator to make those kinds of important 
decisions, Senator.
    [Laughter.]
    Mr. Shope. Again, it's my responsibility to use the money 
that is provided under that scheme. Whether--the equity, I 
leave to this committee.
    Senator Salazar. Okay. Let me ask you just one other 
question. I applaud Senator Thomas and his legislation with 
respect to the authority of the States and the Governors of the 
States--to do the certification of completion of the program at 
the State level. I understand that the administration's 
position would essentially provide that authority to the 
Secretary of the Interior to create that certification. Can you 
clarify for me, on the record, whether you are supportive of 
the approach that Senator Thomas has taken on his bill, which 
is essentially to leave the program, as it is, in place today, 
and allow the Governor to make the certification? Or does the 
administration still want the Secretary of the Interior to make 
that decision?
    Mr. Shope. We would be supportive of Senator Thomas's 
proposal. The reason that that was in our legislation last year 
was because it was dependent upon the particular package that 
we had put together, which was--it was more--the certification 
provision was entered into the bill because--as an 
administrative clarification. Under our proposal, sufficient 
funds would be given to a particular State, based upon their 
high-priority needs. Once they received all those funds, there 
would be no impetus to certify; and so, we needed to have some 
provision within the statute to allow us to go ahead and 
administratively certify that State and proceed forward.
    Senator Salazar. Thank you, Mr. Shope.
    And, again, Chairman Thomas, thank you for taking on this 
issue and holding this hearing today.
    Senator Thomas. Thank you, sir.
    Senator Bunning.

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

    Senator Bunning. Thank you, Mr. Chairman.
    I have an opening statement. I would like to include it in 
the record.
    Senator Thomas. It will be in the record, sir.
    Senator Bunning. Thank you.
    [The prepared statement of Senator Bunning follows:]
   Prepared Statement of Hon. Jim Bunning, U.S. Senator From Kentucky
    Thank you, Mr. Chairman.
    I am glad that we are again examining the issues involving the 
Abandoned Mine Reclamation Fund.
    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.
    This Committee has worked on this issue for a couple of years now. 
A consensus regarding how to reauthorize the AML program has been 
difficult to achieve because not only are there varying mining 
reclamation issues among almost 26 states and tribes, but also there 
are shortages in healthcare funding issues that we must grapple with 
due to AML interest being used to pay for the Combined Benefit Health 
Fund.
    I have worked hard during my time in the Senate to ensure that the 
AML program continues. Every year I ask appropriators to give increased 
funding to it. Over $1.2 billion, however, is currently sitting in the 
fund unappropriated. I believe that the money should be going directly 
to the states to reclaim mines in a more timely and efficient manner 
instead of being used by the federal government for other purposes.
    Kentucky's unappropriated state share balance is about $125 
million.
    And Kentucky is third in the nation for having the worst 
reclamation problems with over $330 million worth of high priority 
abandoned mine land areas that still need to be reclaimed. So, giving 
back the state share balance would go a long way in helping it finish 
its reclamation.
    The longer we wait to return the funding to the states, the more it 
will cost and the longer it will take to reclaim the mines. After 25 
years of this program and over $7.5 billion contributed to the Fund by 
the coal companies, more mining sites should have been reclaimed.
    I know many people are trying to develop a consensus to solve the 
issues surrounding the AML Fund. I am hopeful a consensus can be 
achieved so that we can move this program forward instead of continuing 
to reauthorize it on short-term timeframes.
    I look forward to hearing about the legislation that has been 
proposed or introduced in the Senate.
    I also am 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 efficient and productive manner. I look forward to 
hearing his testimony.
    Thank you Mr. Chairman.

    Senator Bunning. Mr. Hohmann, there are several AML 
proposals, as you well know, out there right now. What are the 
specific AML reclamation needs of Kentucky that I need to make 
sure are met with a final bill?
    Mr. Hohmann. Senator, I think, in a nutshell, what Kentucky 
needs is more time and more money.
    [Laughter.]
    Mr. Hohmann. We have a----
    Senator Bunning. Well, that's familiar with everyone.
    Mr. Hohmann. Without those two things, we won't be able to 
meet, in the foreseeable future, the reclamation need in 
Kentucky, which is, right now, approaching--over, excuse me, 
$330 million worth of high-priority abandoned mine-land sites. 
So, looking into the future, certainly increased funding and 
more time to accomplish the reclamation is what we need. The 
reclamation I'm speaking of doesn't really--that I just spoke 
of--doesn't include the waterline need in our rural coalfields, 
where the groundwater has been contaminated by past mining, and 
people can't drink it. We have waterline projects lined up like 
boxcars, waiting on funding. And so, what we need, actually, is 
just some more time and increased funding.
    Senator Bunning. Kentucky has an awful lot of priority-one 
and -two sites to finish. How long do you expect it to take for 
Kentucky to clean up those sites? Under the current proposals, 
will additional funding and the payback of the owned State 
Kentucky share of approximately $125 million shorten the 
expected timeframe of finishing Kentucky's worst reclamation 
sites?
    Mr. Hohmann. Yes, sir. If we were to receive our $125 
million State-share balance, that would certainly boost our 
ability to reclaim these unfunded sites that we have out there. 
Currently, I don't have an estimate, at the funding level we're 
getting, on how much--how long it would take to reclaim all of 
the sites. But if you do some math, a $330 million unfunded 
obligation, at the rate of $15 million a year, which is about 
what we receive now, you're looking at a long time into the 
future, since we also add more sites each year.
    Senator Bunning. In 1991, a GAO report found that 
approximately 28 percent of the AML funds spent went to 
administrative expenses, including both State and Federal 
expenses. Do you believe that this statistic is still accurate? 
And, if so, is this figure high compared to other programs? Is 
there any tracking information available to show how the AML 
funds are spent?
    Mr. Hohmann. Yes, sir, the tracking mechanism is maintained 
by OSM, I believe, on what portion of a grant is----
    Senator Bunning. OSM?
    Mr. Hohmann [continuing]. Yes--is expenses on 
administrative, versus on-the-ground reclamation costs. And I 
do believe the 28 percent is high, because it depends on how 
you identify, or how you define, ``administrative costs.'' 
Depending on that, you can go very high--28 percent--or you 
can--if you include other costs, it can be low. And I think 
that the States, in the past few years, have looked--and OSM 
has looked--at this issue and found that it's more like a 12 
percent cost that is associated with the administrative expense 
of the AML program, not 28 percent.
    Senator Bunning. Twelve percent, now.
    Mr. Hohmann. Yes, sir.
    Senator Bunning. We'll check that out. Last, over $3 
billion worth of high-priority coal inventory nationwide 
remains to be reclaimed. This is about three times the 
inventory reported in 1986. Why does the inventory continue to 
increase, instead of shrink?
    Mr. Hohmann. Well, there are several reasons for that, 
Senator. First of all, the appropriation, the funding, for AML 
has decreased in years--over the years, and there has not been 
as much on-the-ground reclamation accomplished. Second, I 
believe that, because these sites are unattended, or 
unaddressed, they tend to get worse over time. And the cost of 
addressing them goes up.
    And, finally, you have population movements into areas that 
were once remote. And the abandoned mines that were there posed 
no hazards to people, but as populations in the Virginia, West 
Virginia, Pennsylvania, Kentucky coalfields expands into 
formerly rural areas, and people live closer to abandoned mine 
sites, those mines now become problems, and they're added to 
the inventory.
    Senator Bunning. Are you telling me that people are moving 
closer--in eastern Kentucky--to the abandoned mine sites? Is 
there more population, or what are you telling me?
    Mr. Hohmann. That is exactly the case, Senator. There are 
abandoned mines that people inadvertently, or for whatever 
reason, move closer to and have children, and those children 
are playing out in what were once very remote areas, and now 
they're playing in subdivisions that have been created near 
abandoned mines. And those mines pose hazards to those 
children, where, once--before that, they were very remote, and 
no one got around them. They weren't even on the inventory.
    Senator Bunning. I want to ask Mr. Shope one more question.
    Do you know how much Kentucky will receive in AML funding 
and how--over how long, under the Thomas and Rockefeller 
proposed legislation?
    Mr. Shope. Senator, we do not have specific figures 
calculated out, for a very good reason. One is that there are a 
number of variables and assumptions that would have to be made 
to make those determinations, particularly under S. 1701, with 
the provision of the States collecting their own State-share. 
The number of States that would take advantage of that 
provision, and the program size of the States that take 
advantage of that provision, would dramatically alter the 
amount of income that comes into the fund; and, thereby, it's 
safe to assume the appropriation levels that we would get would 
be significantly altered.
    Senator Bunning. Thank you, Mr. Chairman.
    Senator Thomas. Okay, thank you, gentlemen. Thank you very 
much. We appreciate your being here. We certainly all agree 
there's a problem to be resolved here, and we need to find a 
way to do it.
    So, we'd like to now invite the second panel to come up, 
please.
    We're very pleased to have our second panel here, made up 
of Mr. Andrew McElwaine, president and CEO of Pennsylvania 
Environmental Council; Mr. Charles Gauvin, president and CEO, 
Trout Unlimited; Mr. Daniel Kane, secretary-treasurer, United 
Mine Workers; Ms. Lorraine Lewis, executive director, the 
United Mine Workers Health and Retirement Fund; and Mr. Dave 
Finkenbinder, vice president, Congressional Affairs, National 
Mining Association.
    Thank all of you for being here. We look forward to your 
testimony. As we mentioned before, if you can limit it to 5 
minutes, we'd appreciate it. And your total statement will be 
put in the record.
    So, Mr. McElwaine.

       STATEMENT OF ANDREW McELWAINE, PRESIDENT AND CEO, 
       PENNSYLVANIA ENVIRONMENTAL COUNCIL, HARRISBURG, PA

    Mr. McElwaine. Thank you very much, Chairman Thomas, for 
this opportunity.
    Let me also, just as an example of the Pennsylvania/Wyoming 
connection, bring you greetings from my maternal uncle, Thomas 
F. Strook, of Natrona County. And we also have a Wyoming--
Wyoming County, Pennsylvania, and the entire Wyoming Valley of 
Pennsylvania, which is in the heart of our coal country.
    Senator Thomas. Good.
    Mr. McElwaine. Mr. Chairman, Pennsylvania Environmental 
Council is a 35-year-old organization. We were created as a 
coalition of industry, environmental organizations, and public 
citizens, and we continue that to this day. So, we are a 
nontraditional environmental organization, to say the least.
    The position I'm about to present has been approved by all 
of our members, corporate as well as environmental.
    Mr. Chairman, the work is not done, as we have already 
heard, with title 4 of SMCRA. And I want to emphasize the 
remaining threat.
    According to the U.S. Department of the Interior's Office 
of Surface Mining, since 1999 more than 40 people have drowned 
in mining pits and quarries. At least 15 deaths, and many more 
injuries, have occurred during the same time period in falls 
and ATV rollovers at quarries and pits. In just this year, 
Pennsylvania saw five more fatalities related to AML sites. 
Abandoned mine sites have left extensive dangerous high walls, 
open pits, coal-refuse spoil piles, open mines, and more than 
3,000 miles of streams polluted by abandoned-mine drainage.
    Past coal-mining practices have led to erosion, landslides, 
polluted water supplies, destruction of fish and wildlife 
habitat, and an overall reduction in the natural beauty of the 
Eastern United States.
    OSM reports that over 3.6 million Americans live within one 
mile of priority-one and -two AML sites. More than half, just 
over 1.6 million, of those listed live in the State of 
Pennsylvania.
    With that in mind, Mr. Chairman, I'm here today not only on 
behalf of my organization, but more than 200 coalfield 
communities, conservation and watershed groups, and we have 
coordinated with similar groups from Chattanooga, Tennessee, to 
Scranton, Pennsylvania. We've all agreed, as Mr. Shope did, on 
a set of principles, and--rather than trying to lay out 
specific legislation.
    Our principles are as follows:
    We support continued funding from the AML fund for water-
quality cleanup. It is absolutely critical that abandoned-mine 
drainage, which contaminated so much drinking and surface 
water, continue to be eligible for funding from title 4.
    We also advocate keeping the current priorities--one, two, 
and three. These current priorities should be maintained, 
including the ability to fund water-related projects under 
priority two and three.
    We support full appropriation to the States of future fees. 
And future collections to the fund should be fully spent for 
their intended purpose of cleaning up abandoned-mine problems.
    We also encourage the redevelopment of abandoned mine lands 
for economic use. And we are beginning to see this happen, 
particularly in our Wyoming Valley. States should be able to 
use title 4 funds in ways that promote reclamation, leverage 
private investment, and, where it is appropriate, encourage 
redevelopment and reuse of these sites.
    We also support provisions in last year's administration 
proposal to change some of the allocation. Particularly, we 
believe the allocation formula should be 60 percent historic 
and 40 percent current production in order to move forward on 
the billions needed for priority-one and -two reclamation.
    We support proposals that would take the program off 
budget. We also support increasing the minimum program funding 
to $4 million. And, also, we believe that non-primacy States 
should get a guaranteed minimum.
    We also support continued transfer of the interest, but not 
the principal, of the Combined Benefit Fund to our friends and 
neighbors, former mine workers.
    We also support a lengthy extension of the program to 2025, 
Mr. Chairman.
    With those principles, we regret that we cannot, at this 
time, support S. 1701 or S. 961, as we believe they would take 
the program in a different direction from supporting damaged 
coalfield communities. However, we do support H.R. 2721, 
introduced on the House side by Congressman Peterson of 
Pennsylvania. However, with that, I want to emphasize, I've 
heard a very positive set of statements from members of the 
committee, as well as from witnesses, about working together 
and trying to resolve our differences. I welcome Senator 
Allen's comments, earlier, to that point. And I want to 
emphasize that coalfield communities are very anxious for the 
future of this program and, based on that anxiety, very willing 
to work with you, Mr. Chairman, and the staff in the future.
    [The prepared statement of Mr. McElwaine follows:]

Prepared Statement of Andrew McElwaine, President and CEO, Pennsylvania 
                         Environmental Council

                              INTRODUCTION

    Mr. Chairman and members of the Committee, thank you for inviting 
me to participate in today's hearing. My name is Andrew McElwaine and I 
am President and CEO of the Pennsylvania Environmental Council, a 
statewide non-profit group that has offices throughout the state. I am 
testifying on behalf of the Pennsylvania Abandoned Mine Land Campaign, 
a coalition of over 200 Pennsylvania conservation groups, including 150 
watershed organizations from all Commonwealth coalfield counties. Over 
the last two years, we have also worked with community leaders from ten 
states in an effort to formulate recommendations that have the broadest 
base of support.
    I want to reiterate our profound appreciation for your interest in 
working for an effective AML reauthorization. To be successful, the 
AMLF reauthorization must combine necessary, predictable, mandatory 
funding without compromising existing environmental laws. It is 
essential to our state and others that the federal government extend 
and reform the abandoned mine land reclamation program as I will 
describe in my testimony. And of course an AMLF program that works to 
protect communities and restore environments also produces jobs and 
creates economic opportunities. We hope that our expressions of support 
and caution, aimed at helping you arrive at an agreement that truly 
works for communities in Pennsylvania and the other coal producing 
states, can help you resolve outstanding issues within the next few 
days.

                                HISTORY

    Pennsylvania has the most abandoned mine land sites in the nation 
and has been a leader in improving the quality of its environment after 
many years of mismanagement. In 1968, Pennsylvania passed the Land and 
Water Conservation and Reclamation Act, a major initiative to address 
abandoned mine reclamation. This act spurred Operation Scarlift, which 
was instituted to clean up the damage caused by abandoned mines. It 
used a total of $141,000,000 to complete 500 stream pollution abatement 
projects, extinguish 75 fires, remove 150 areas of subsidence, and 
prevent air pollution at 30 sites of burning refuse banks.
    Since that time, Pennsylvania has initiated several other programs 
that have provided state funding for abandoned mine reclamation. Most 
recently, under Governor Ridge in 1999, the state created its Growing 
Greener program which made available a substantial portion of $500 
million for reclamation and stream clean ups. In July of this year, 
Governor Rendell signed into law Growing Greener II, which provides 
$625 million for stream clean ups and other environmental improvements. 
At least $60 million will be available specifically for AML related 
impacts.
    Pennsylvania has also pursued an aggressive remining program, where 
the state has formed partnerships with the private operators and 
citizen groups to maximize the use of AML funds. DEP estimates that 
$950 million in federal and state money has been spent in Pennsylvania 
to deal with abandoned mine problems. As indicated earlier, a 
substantial portion of that funding came from state sources. We have 
adopted a strategic approach that identifies those sites that are most 
dangerous or having the greatest environmental impact and target our 
resources accordingly.

                    REMAINING ENVIRONMENTAL PROBLEMS

    Despite our successes, significant environmental problems related 
to past mining practices remain. The National Abandoned Mine Land 
Inventory lists for Pennsylvania over $1 billion of Priority 1 and 2 
sites. These numbers were calculated in the early 1980's, nearly a 
quarter century ago, and have not been adjusted for inflation.
    These estimates reflect real problems. According to the US 
Department of Interior's Office of Surface Mining (OSM), since 1999, 
more than 40 people have drowned in mining pits and quarries. At least 
15 deaths, and many more injuries, have occurred during the same time 
period in falls and ATV rollovers at quarries and pits. In the last 
year Pennsylvania saw five more fatalities related to AML sites. 
Abandoned mine sites have left extensive dangerous highwalls, open 
pits, coal refuse spoil piles, old mine openings, and more than 3,000 
miles of streams polluted by abandoned mine drainage. Past coal mining 
practices have led to erosion, landslides, polluted water supplies, 
destruction of fish and wildlife habitat, and an overall reduction in 
natural beauty.
    The OSM reports that over 3.6 million people in the United States 
live within one mile of Priority 1 & 2 Sites. More than half, just over 
1.6 million of those listed, live in Pennsylvania. (See Appendix A, 
which is taken from a white paper prepared on this topic by OSM in 
2003). People continue to die, local economies are stymied, and ongoing 
environmental degradation is obvious to even casual observers. As is 
reflected in Appendix B, over 184,000 acres in our state still need to 
be reclaimed. And, Pennsylvania is not alone; other states face similar 
ongoing problems.

                       OVERVIEW OF WHAT WE SEEK:

    Provided below are provisions that were crafted over a two year 
period in a collaboration of coalfield community leaders from ten 
states (Alabama, Illinois, Indiana, North Carolina, Ohio, Pennsylvania, 
Tennessee, Virginia, West Virginia, and Virginia):

   Funding for water (Abandoned Mine Drainage): Abandoned mines 
        leak acidic, alkaline, and metal-contaminated water, polluting 
        public water supplies, destroying fish and wildlife habitat, 
        depressing local economies, and threatening human health and 
        safety. Pennsylvania is representative of eastern coal states 
        with abandoned mine drainage (AMD) problems, and abandoned mine 
        drainage is the largest contributor to water quality impairment 
        in the Commonwealth. Over 3,000 miles of Pennsylvania's streams 
        are impaired by AMD. It is critical that abandoned mine 
        drainage problems continue to be eligible for funding.
   Keep priorities 1, 2, and 3: Three priority areas are 
        eligible for funding to correct adverse effects of coal mining 
        practices under Title IV. Priority 1 provides for the 
        protection of public health, safety, general welfare, and 
        property from extreme danger. Priority 2 provides for the 
        protection of public health, safety, and general welfare. 
        Priority 3 provides for the restoration of degraded land and 
        water resources and the environment. States need to retain the 
        discretion to use their allocations from the Fund for projects 
        falling into any of the three priorities. The current 
        priorities should be maintained, including the ability to fund 
        water-related projects under Priorities 2 and 3.
   Full allocation to states of future fees: As of June 30, 
        2005, the Fund has an unappropriated balance of over $1.7 
        billion. The state share of this balance is approximately $1.1 
        billion. (Pennsylvania maintains the fourth highest balance at 
        $58.4 million.) Future collections to the Fund should be fully 
        allocated for their intended purpose of cleaning up abandoned 
        mine problems.
   Encourage redevelopment of abandoned mine lands: As 
        abandoned mine lands are reclaimed, they offer potential 
        locations for economic development projects. By developing and 
        marketing abandoned mine lands that would normally struggle to 
        attract new investment, these ``grayfields'' can be turned into 
        regional benefits by creating economic opportunities, 
        preventing sprawl, and conserving open space and natural 
        resources. For example, government facilities could be 
        encouraged to locate on these sites rather than on previously 
        undeveloped green spaces. States should be able to use Title IV 
        funds in ways that promote reclamation, leverage private 
        investment, and, where it is appropriate, encourage 
        redevelopment.
   Reformulation: Many states that fueled the coal boom in the 
        early and middle part of the last century currently have low 
        coal production, yet they have the largest legacy of adverse 
        mining impacts from before 1977. Currently, the federal share 
        of collected monies is allocated based on 40% for current 
        production, 40% on historic production, and 20% to the Rural 
        Abandoned Mine Land Program (RAMP). It has been damaging to 
        coalfield communities that RAMP has not been funded in the last 
        eight fiscal years. If RAMP is retained, then it should be 
        funded through same off-budget structure as the rest of the AML 
        program. This will allow states with the most pre-1977 problems 
        to correct them much more quickly. The allocation formula 
        should be changed to 60% historic and 40% current production.
   Take the program off-budget: Each fiscal year, the President 
        and Congress must appropriate monies from the fund as part of 
        the federal budget process As a result, the Fund is subject to 
        political pressures and fiscal pressures from other federal 
        programs. The fees collected to the fund should be returned to 
        states and tribes without the need for appropriation each year, 
        thus ensuring that the funds will be used for their intended 
        purposes. This would enable states to better plan strategic 
        multi-year AML reclamation projects.
   Increase the minimum program funding to $4 million: 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 1990, this funding 
        has been set at $2 million. In many years, minimum program 
        states have received significantly less. Increasing this amount 
        would help make up for past under-funding and ensure that 
        states with significant AML problems but low production would 
        be able to continue running effective programs. This 
        potentially effects eleven states. Annual funding for minimum 
        program states should be raised to $4 million.
   Non-primacy states should get a guaranteed minimum: States 
        which do not have their own coal regulatory programs are not 
        eligible for a 50% share of funds collected in the state or 
        funding based on historic production. Federally managed (non-
        primacy states) programs should be guaranteed minimum program 
        funding if they demonstrate the ability to operate an effective 
        abandoned mine reclamation program. This would enable a state 
        like Tennessee to mitigate the damage in one decade instead of 
        four.
   Maintain transfer of interest to the Combined Benefit Fund: 
        Interest generated on the Abandoned Mine Reclamation Fund is 
        currently transferred to the Combined Benefit Fund to defray 
        health care costs for retired miners and their dependents whose 
        companies have gone bankrupt or are no longer in business. The 
        CBF pays for health care expenses remaining after Medicare and 
        Medicaid reimbursement and pays for prescription drugs. The 
        transfer of interest to the Combined Benefit Fund should 
        continue with no fee reduction.
   Extend the end date: The scope of the abandoned mine problem 
        continues to outpace available resources. Based on current 
        funding levels, projected future production, and estimated 
        costs of cleaning up inventoried sites, it will at least 15 
        years, potentially more than 20 years to address abandoned mine 
        problems. Extending the program 20 years would honor the 
        intentions of the original law to unburden communities plagued 
        by unreclaimed coal mines. The program should be extended until 
        at least 2025.

                         ESSENTIAL PROVISIONS:

    There are a number of provisions that my organization and the 
Pennsylvania coalition believe are essential for AML reauthorization to 
protect coalfield communities and restore damaged natural resources. 
First and foremost, we need to remember that this program was 
originally created to address the significant environmental problems 
facing Pennsylvania and other states. We should not lose sight of this, 
so we believe that reauthorization legislation should do the following:

    1. Off-budget mandatory assured funding of AML programs in historic 
production states.
    2. The environmental provisions included in H.R. 2721 should be 
incorporated within any AML reauthorization legislation:

          a. Minimum program states should receive $4million/year for 
        the length of the program;
          b. Mandatory payments to states should be made within 30 days 
        of collection, and no less frequently than semi-annually;
          c. Allow full state discretion in utilization of state set-
        aside funds, with state set-aside funds increased from the 
        current 10% to 30%;
          d. Preserve Priorities 1, 2 and 3--essential for water 
        quality restoration;
          e. Remining: PEC supports remining because there have been 
        many successful projects, though we understand that it remains 
        controversial within some coalfield communities. In appendix C, 
        we outline some of the conditions that the coalition with which 
        we are involved believes should accompany a remining program.

    3. Keep AML reclamation fees at current levels with the current 
structure. In 1977, no inflation factor was built into the fee, so 
while the costs of AML reclamation have gone up significantly over the 
past 28 years, the fees have remained unchanged, and now represent a 
much small fraction of both the cost of coal and the cost of 
reclamation. Even with the fee unchanged, the program is not likely to 
collect enough money to complete AML restoration within 15 years.
    4. AML Reauthorization period should be no less than 15 years, 20 
is needed, because in past years so little AML money has been made 
available, so the restoration intended by Congress has not actually 
been funded.
    5. AML reauthorization legislation should specify that the source 
of funding for AML programs should be AML reclamation fees

                               CONCLUSION

    The legacy of past mining practices is still evident on the 
landscape and in the waters of Pennsylvania and other states. It 
adversely impacts our safety, environmental quality, economic 
viability, and overall quality of life. We have made progress, but our 
work is not done. It is essential to our state and others that the 
federal government extend and reform the abandoned mine land 
reclamation program. Our coalition believes strongly that the final 
legislation should include the provisions that I have listed above. Our 
communities and environmental quality depend on your action.
    Again, thank you inviting me to testify. I am available to answer 
questions.
                                 ______
                                 
                               APPENDIX A

               FROM US DOI OSM MAY 28, 2003 WHITE PAPER 
     ``PEOPLE POTENTIALLY AT RISK FROM PRIORITY 1 & 2 AML HAZARDS''
                  APPROXIMATE NUMBER OF PEOPLE AT RISK

    From a \1/2\ mile radius of each priority 1 & 2 AML site in the 
continental United States, the national total number of people at risk 
is estimated at over 1.2 million. The individual State and Tribal range 
of people potentially at risk from priority 1 & 2 AML hazards is from 0 
to 527,120 in the coal producing entities. At the 1 mile radius of each 
priority 1 & 2 AML site in the continental United States, the national 
total number of people potentially at risk rises to over 3.6 million 
people. This coincides with an individual State and Tribal range of 
people potentially at risk from 0 to 1,649,959 in entities that have 
produced coal. At both intervals, the Eastern part of the United States 
incurred the most people potentially at risk from priority 1 & 2 AML 
hazards.

------------------------------------------------------------------------
                                          People             People
               State                  Potentially at     Potentially at
                                      Risk  1/2 Mile      Risk  1 Mile
------------------------------------------------------------------------
Alabama...........................          27,469            100,383
Alaska............................             148                596
Arkansas..........................           4,490             17,782
Colorado..........................          24,185             32,196
Illinois..........................          49,331            101,348
Indiana...........................           9,410             24,432
Iowa..............................           3,440             11,602
Kansas............................          15,157             57,023
Kentucky..........................         114,228            402,001
Louisiana.........................               0                  0
Maryland..........................           9,161             30,969
Missouri..........................          14,958             36,127
Montana...........................           1,157              4,591
New Mexico........................             987              3,964
North Dakota......................             594              2,368
Ohio..............................          56,626            169,198
Oklahoma..........................          18,455             55,611
Pennsylvania......................         527,120          1,649,959
Tennessee.........................          13,694             42,505
Texas.............................             875              2,867
Utah..............................             324              1,297
Virginia..........................          47,932            140,577
Washington........................           9,280             16,255
West Virginia.....................         265,758            693,161
Wyoming...........................           2,387              9,716
Cheyenne River....................               3                 11
Crow Tribe........................               5                 18
Hopi Tribe........................               0                  0
Navajo Nation.....................              42                166
Windriver.........................               4                 19
                                   -------------------------------------
    Total/Average.................       1,217,220          3,606,742
------------------------------------------------------------------------

                               APPENDIX B

  Documented Unreclaimed Abandoned Mine Land (AML) Sites, Features, and
                    Acres in Pennsylvania, by County
------------------------------------------------------------------------
                                                Number of
          County Name             Number of    Unreclaimed      Acres
                                  AML Sites   AML Features
------------------------------------------------------------------------
Allegheny.....................        263           763         4,514
Armstrong.....................        313         1,548        17,772
Beaver........................         72           323         2,810
Bedford.......................         39           167         1,128
Blair.........................         12            72           766
Bradford......................          2             3             0
Butler........................        275         1,401         8,724
Cambria.......................        265         1,374         4,973
Cameron.......................          9            40           361
Carbon........................         30           270         2,827
Centre........................        121           709         5,866
Chester.......................          1             2             0
Clarion.......................        393         2,135        15,227
Clearfield....................        588         3,374        23,715
Clinton.......................         49           233         1,441
Columbia......................         20           244         2,158
Crawford......................          1             5            28
Dauphin.......................         10            86           410
Elk...........................        101           619         4,053
Fayette.......................        226         1,058         5,482
Fulton........................          5            14           244
Greene........................         34           130           511
Huntingdon....................         32           143         1,169
Indiana.......................        278         1,555         8,400
Jefferson.....................        319         1,817        10,441
Lackawanna....................        143           732         5,481
Lawrence......................        101           418         4,996
Lebanon.......................          3             9             0
Luzerne.......................        211         1,169        10,466
Lycoming......................          9            65           239
McKean........................         27            93           862
Mercer........................         74           284         2,237
Northumberland................         97           951         6,331
Schuylkill....................        316         2,639        16,355
Somerset......................        185           923         3,152
Sullivan......................          8            32            52
Susquehanna...................          3            17            73
Tioga.........................         46           209           925
Venango 67....................        279         1,956
Warren........................          2             3            16
Washington....................        184           547         3,315
Wayne.........................          8            30            94
Westmoreland..................        228           887         4,862
Wyoming.......................          2             4             0
                               -----------------------------------------
    Total.....................      5,172        27,376      184,431
------------------------------------------------------------------------
Source: Pennsylvania Department of Environmental Protection; March 20,
  2002

                                 ______
                                 
                               APPENDIX C

 COALFIELD COMMUNITY REMINING RECOMMENDATIONS FOR AMLF REAUTHORIZATION 
                         FROM THE PA COALITION

    Background: Despite many positive and successful remining 
activities, particularly in PA, there remain many serious issues with 
remining in PA and other historical production states. Among the most 
damaging remining activities are those conducted on steep slopes where, 
instead of cleaning up abandoned mine sites, strip miners are expanding 
mine operations in ways that make existing environmental problems even 
worse.
    To qualify as an AMLF activity, remining should meet these minimum 
standards:

   Should only be subsidized with AML money if the primary 
        purpose and goal is reclamation
   Must demonstrate the reclamation required by SMCRA is 
        feasible, and this must still be a condition of permitting of 
        the activity
   There will be no reduction of environmental standards for 
        that operation
   If a mining project that includes ``remining'' takes in 
        additional acreage outside of the original AML site then AML 
        funds should not be used to subsidize the mining outside of the 
        AML area
   Removal of the financial risk to companies of bond 
        forfeiture by use of AML money for performance bonds reduces 
        the incentive to reclaim the site
   No waivers of reclamation fees
   Incentives and rebates will be given AFTER reclamation takes 
        place, not prior to reclamation

    Senator Thomas. Okay. Thank you very much, sir.
    Mr. Gauvin.

     STATEMENT OF CHARLES GAUVIN, PRESIDENT AND CEO, TROUT 
                    UNLIMITED, ARLINGTON, VA

    Mr. Gauvin. Thank you, Mr. Chairman. I'm delighted to be 
here today. And, I must say, we were here about a year ago, as 
this process that you initiated was beginning, and I'm 
delighted to see that bridges are being built and we're coming 
closer to consensus on some of these important issues.
    Trout Unlimited's a bit of a niche player in the AML 
equation. But the niche that we occupy is a very important one. 
Within the Eastern United States--in particular, in the more 
historical range of coal mining, surface mining--you have a 
host of problems involving water quality and ecological damage 
that are huge priorities for my organization--and, indeed, our 
national water-quality problems--that must be addressed.
    I'll also mention, separately at the end, some issues in 
the West that we could productively address, as well.
    But we're here not really to represent the effete fly 
fishing/trout-fishing community that wants to see streams 
reclaimed in their own right, and restored in their own right, 
but really to emphasize that trout, and the aquatic food web 
that supports them is very, very important to the ecological 
integrity of the Appalachian region and that trout are the 
keystone predators; by dealing with the water-quality problems 
that have so ravaged trout populations in mining country, you 
are doing a huge ecological service and, I might also add, 
doing a great deal for public water supplies and for a number 
of the environmental and public-safety and -health values that 
we all cherish and that Congress sought to conquer, to restore, 
and to address in SMCRA.
    We, at Trout Unlimited, are the only national organization 
that's working on the ground to implement the OSM's Clean 
Streams Initiative and to work with States and some of their 
allocated money toward stream and watershed cleanup. We've 
developed some tremendous partnerships in that process. Most 
profoundly and recently in the State of Pennsylvania, working 
in the Kettle Creek Watershed, which is a key component, one of 
the five major tributaries, the west branch of the Susquehanna, 
which, as some of you may know, has a 14-mile dead zone. It's 
devoid of life--and that is a serious problem for the 
Chesapeake Bay and other downstream basins--simply because of 
acid mine drainage in five key tributaries. We have worked very 
hard to develop technologies--passive treatment technologies 
that don't require a lot of energy, that have a long life, and 
essentially involve wetland restoration and other techniques to 
make this a practical approach, economically, environmentally, 
and from an engineering standpoint.
    We are doing some of the same work in Kentucky on streams 
in the Daniel Boone National Forest. We've done work in the 
similar manner in other streams in Pennsylvania.
    The OSM's Clean Streams Initiative is critical to that 
effort, as I mentioned, as well, the decisions by individual 
States to allocate some of the funding they receive through AML 
to cleanup programs.
    I'd like to mention a few principles and recommendations 
that we would like to bring to the table, as I said, as a 
highly interested niche player in this process.
    The first is that we retain the existing laws' priorities 
and the flexibility that's inherent in them.
    The second is that we pick an authorization period that is 
at least a reasonable stab at what's needed to get the job 
done, and that would be, in our estimation, 25 years. And, you 
know, you look at the priority lists and you look at OSM's 
inventory, and that inventory gets larger on all the priorities 
as you delve more deeply. The estimates on our end are that, 
basically, to do a good job on watershed restoration and our 
pressing water-quality problems, you're looking at about $15 
billion.
    We support, therefore, maintaining the existing fee levels, 
and we would like to see mandatory funding and an increase in 
available funding for the Clean Streams Initiative. This has 
been a tremendous boon, something that we've been able to tap 
that's been created administratively.
    And then, finally, I'm sure, of interest to you, Mr. 
Chairman, we would like to see a similar effort developed, and 
a similar program developed, to start reclaiming hard-rock-
mine-damaged streams in the West. Forty percent of the western 
headwater streams are impaired by hard-rock-mine damage, and we 
think that SMCRA has provided a tremendous example that could 
be implemented on the ground to address that.
    Thank you for the opportunity to present our remarks.
    [The prepared statement of Mr. Gauvin follows:]

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

    Mr. Chairman, Members of the Committee, I appreciate the 
opportunity to appear today to discuss two bills currently before the 
Committee, S. 1701 and S. 961, both of which would reauthorize and 
amend the Abandoned Mine Reclamation Fund (AML Fund) created by the 
Surface Mining Control and Reclamation Act (SMCRA). TU commends you for 
holding the hearing in order to move forward on reauthorizing this 
important program, which is set to expire in 2006.
    TU is a national 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 144,000 
members in more than 400 chapters in 35 states. TU members generally 
are trout and salmon anglers who voluntarily contribute substantial 
amounts of their personal time and resources to aquatic habitat 
protection and restoration efforts. TU chapters invested over 460,000 
hours of volunteer time into trout and salmon conservation in 2004.
    Over the past several years, TU volunteers and staff have 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: long term reauthorization of, 
and increased funding for the AML fund will provide necessary 
additional money and resources for watershed restoration. Funding these 
efforts will have a positive impact on public health and safety as well 
as the environment.
    Enacted into law 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. The law protects our Nation's people 
and resources by improving the health of watersheds that are affected 
by current and past mining practices. Completed reclamation projects 
conducted as a result of the law have improved the quality of tens of 
thousands of people's 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. After implementing the program for 27 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. 
Addressing the public safety risks posed by unreclaimed high walls, 
burning slag piles, and gaping holes in the ground has been, and should 
remain, the highest priority 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 mines. The 
states and 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 work we are doing benefits more than just trout streams. 
Because trout are the keystone predator in ecosystems, they are a 
critical barometer of water quality and overall ecological health. 
Bottom line, if the water is clean enough for trout, the water is clean 
enough for people.
    The good news is that, although the problem is vast, practical 
solutions exist to fix it. TU, OSM and states are working together to 
address acid mine drainage problems. But the job is far from finished. 
We urge the Committee to move expeditiously to enact the 
reauthorization including increased funds 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. Much of the problem originated years ago from coal 
production that helped build America and fueled our war efforts during 
World Wars 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 may contaminate surface and 
groundwater.
    In an effort to demonstrate how practical solutions could be 
applied to an otherwise daunting task, TU, OSM, 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. We estimate that an additional 
$8 million will be needed to complete the acid mine drainage cleanup on 
Kettle Creek.
    TU and others are now looking to replicate our success in 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 mainstream 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. 
Overall, 72 percent of the 7,000 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 West Branch restoration work is modeled on the methods that TU 
and its partners have developed on the Kettle Creek watershed and the 
benefits of eliminating acid mine drainage in the area are numerous. 
For example, the potential for fishery restoration on all of the 
degraded streams is phenomenal because most of them are potential trout 
streams.
    Other benefits from abandoned mine restoration include increased 
property values and quality of life for those living in the area, 
improved hunting opportunities, and job creation. Pennsylvania 
estimates that for every million dollars spent on abandoned mine land 
restoration construction contracts, about 27 people are employed 
directly or indirectly. Similarly, in testimony submitted to the 
Committee last year, the State of New Mexico noted that AML projects 
are a source of jobs for New Mexicans and stated that, ``all 
construction work is performed by private. contractors, almost all of 
whom are based in New Mexico.''
    In sum, 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 that is needed is a stable source of funding 
to contribute towards the overall cost.
    The AML Fund currently provides some limited but extremely useful 
funds for cleaning up polluted water. More and stable funding is 
needed. TU is.familiar with two ways in which the AML Fund provides 
resources for cleanups:

   GSM's Clean Streams Initiative, currently funded at $10 
        million annually, derived from the federal share of the AML 
        Fund, and
   Decisions made by individual states to allocate some of the 
        funding they receive through the AML Fund to cleanup programs.

    Started in 1994, the Clean Streams Initiative focuses on 
eliminating abandoned coal mine drainage and aspires to be a true 
citizen-government-industry partnership bringing together a unique 
combination of manpower, funding, and expertise. The initiative has so 
far funded 77 projects in 10 states, combining the skills of university 
researchers, coal industry figures, citizen groups, the business 
community, conservationists, and local, state, and federal 
representatives. The initiative has proven to be a particularly 
effective method of empowering volunteer-led restoration work.
    The science and effectiveness of the cleanups paid for, in part, by 
the AML Fund, 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 a 
number of eastern states. 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 used 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 underway. The ultimate goal of our project work is to reclaim 
17 miles of 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 of the Susquehanna as it flows 
downstream to the Chesapeake Bay.

                         COAL CREEK, TENNESSEE

    In east Tennessee, TU's Clinch River chapter is working closely 
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.

                          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.

    As you consider the two bills, we recommend the following:
    Retain flexibility in existing law's priorities. S. 961 eliminates 
the ``general welfare'' provision of both priories 1 and 2. TU has no 
intention of advocating any changes, in the public health and safety 
priorities of the existing 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 current priorities.
    Although S. 1701 also eliminates the ``general welfare'' provision 
of priorities 1 and 2, it does allow land, water and environmental 
restoration on land that is adjacent to a priority 1 site to be treated 
as priority 1. Moreover, we recognize and appreciate the fact that S. 
1701 increases the allowable percentage, from 10% to 20%, of funds that 
states can set aside for acid mine drainage. While this language 
definitely helps, we prefer to retain the ``general welfare'' 
provisions in priorities 1 and 2 so that states can retain the full 
range of existing options in determining how to best prioritize the 
needs of communities.
    S. 961 requires the Secretary to review all amendments to the AML 
inventory made after 1998 and remove sites that rely upon the general 
welfare standard. We disagree with this provision and, as mentioned 
above, recommend that general welfare projects in priority 1 and 
priority 2 continue to be funded.
    Extend the authorization to 25 years. Everyone agrees that we need 
to ``finish the job'' of making communities safer and cleaner. S. 1701 
would only ensure the viability of the AML Fund for 10 years and S. 961 
extends the authority for 13 years. Most experts agree that given the 
complicated nature of the remaining challenges, a horizon of 25 years 
is more likely needed to complete the tasks before us. Reauthorization 
legislation should extend the life of the fund for the same time frame.
    Maintain existing fee levels. S. 1701 reduces the existing fee 
levels which we feel is inappropriate given the overarching objective 
of putting money on the ground to complete projects. We recognize and 
appreciate that S. 1701 contains fee reductions that are less than 
those contained in the bill introduced by Senator Thomas during the 
108th Congress. However, we respectfully request that the Committee 
retain the current fee structure as S. 961 does.
    Provide mandatory funding and increase available funding for the 
Clean Streams Initiative. S. 1701 requires that OSM provide the 
existing balance of the state-share and tribal-share allocations to the 
states and tribes through mandatory payments not subject to the 
appropriations process. We agree with the concept of making AML funding 
mandatory because if our goal is to ``finish the job,'' we should 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. Therefore, TU encourages the Committee to make the 
entire AML Fund off-budget and not subject to the annual appropriations 
process.
    Moreover, we recommend that you dedicate $25 million annually from 
the off-budget Reclamation Fund to the Clean Streams Initiative. 
Specifically, we urge you to gradually increase funding for the Clean 
Streams Initiative from its current $10 million level up to $25 million 
annually over the 25 year authorization.
    Consider authorizing a similar reclamation fund for cleaning up 
abandoned hardrock mine pollution in the western United States. 
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 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.
    It is estimated that more than 500,000 abandoned hardrock mine 
sites litter the western landscape. 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 recommend that 
the Committee take a serious look at the problem and start developing a 
legislative solution to establish a fund for cleaning up abandoned 
hardrock mines.
    As a first step, we recommend you authorize and fund a west-wide 
inventory of abandoned hardrock mines. Upon completion of such an 
inventory, interested parties will be better able to assess and 
prioritize cleanup projects.
    To conclude, thank you for your leadership and commitment to 
reaching consensus on a long-term reauthorization of the AML Fund. TU 
pledges to work with the Committee to help craft appropriate amendments 
and move a bill to the Senate floor expeditiously.

    Senator Thomas. Thank you, sir.
    Mr. Kane.

          STATEMENT OF DANIEL J. KANE, INTERNATIONAL 
          SECRETARY-TREASURER, UNITED MINE WORKERS OF 
                      AMERICA, FAIRFAX, VA

    Mr. Kane. Good morning, Mr. Chairman and members of the 
committee. My name is Daniel Kane. I'm the secretary-treasurer 
of the United Mine Workers of America.
    The UMWA is a labor union that represents the interests of 
coalminers and other workers in the coalfields across the 
United States and Canada for 115 years. And we appreciate the 
opportunity to speak before the committee to discuss the AML 
Reclamation Fund and its vital relationship to the UMWA health 
and retirement funds.
    Representing people who live and work in the Nation's 
coalfields, the UMWA has a strong interest in both the 
reclamation of abandoned mine lands and the preservation of 
healthcare 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 of 
these goals.
    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 moneys held in the AML fund to earn 
interest. In 1992, the Energy Policy Act extended the AML fees 
t0 2004 and authorized the use of AML interest to pay for the 
cost benefits for certain eligible retirees under the Coal Act. 
Congress has further extended the authority of OSM to collect 
AML fees through June 2006.
    We believe that when Congress authorized the use of AML 
interest to finance the cost of healthcare for retired 
coalminers, 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 
represented legacy costs of the coal industry and compelled a 
national response.
    Unfortunately, since Congress expressed that intent some 
years ago, bankruptcies in the coal and steel industry, rapidly 
rising healthcare costs, and a number of adverse conditions--
court decisions--have eroded the funding status of the Combined 
Benefit Fund and placed it in jeopardy several times.
    Now, Congress has intervened three times since 1999 to 
shore up the financial condition of the fund through emergency 
appropriations, but a long-term solution for the financial 
problems of the UMWA Health and Retirement Funds coincides with 
the need to authorize the AML fund. We believe that the 
reauthorization of the effort can, and should, meet several 
broad-based policy objectives. It should provide sufficient 
duration and level of tax to fund the reclamation needs. It 
should focus on priority-one and -two public health and safety 
projects. It should resolve the longstanding dispute between 
States and the OSM. And it should provide long-term financial 
solvency for the Health and Retirement Funds.
    Mr. Chairman, opponents periodically allege that the 
benefits provided by the Health and Retirement Funds are a 
little generous and should be cut. While the costs to the 
beneficiary tend to be lower than some plans, I want to stress 
that these benefit plans and this retirement package represents 
a long-time labor package, between the UMWA and the industry, 
which began in 1946 in the White House. Coalminers and their 
widows gave up wages, they gave up numerous other contractual 
benefits, in return for their health benefits. Any cuts and in 
the loss of these benefits would severely hamper the living 
conditions in coalfield communities. Many of these retirees 
live on wages--the 1974 fund, for example, the pension benefits 
are less than $500 a month. For 1950 pensioners, it's less than 
$300 a month.
    This was part of the deal. We can't go back and offer these 
retirees the money that they gave up in wages. We can't go back 
over decades and pay the other benefits that they sacrificed to 
get their retiree healthcare. We think that the retiree 
healthcare benefits have to be continued, because they 
represent a promise made at the highest levels of our 
government.
    The debate is long since over. As a result of the Coal 
Commission, chaired by then-Secretary of Labor Elizabeth Dole 
after the Pittston dispute, the commission found that UMWA 
retirees have a legitimate expectation of the healthcare that 
was promised to them over the decades.
    The Congress has already decided how that should be 
financed, and now we're talking about long-term solvency for 
that fund.
    We appreciate the opportunity to appear here today and 
remind you that we have a broad coalition of various 
stakeholders who agree with the Cubin-Peterson-Rahall 
compromise, and we strongly support that compromise. And we 
thank you for the opportunity to appear here today and give our 
position.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Kane follows:]

     Prepared Statement of Daniel J. Kane, International Secretary-
               Treasurer, United Mine Workers of America

    Mr. Chairman, members of the Committee, I am Daniel J. Kane, 
International Secretary-Treasurer 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 115 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 UMWA Health Funds. 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 affected by coal 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. Congress has further extended the authority of OSM to collect 
AML fees through June 2006.
    The UMWA believes that when Congress authorized the use of AML 
interest to finance the cost of health care for retired coal miner, 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 was attempting 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 37,000 
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 low interest 
earnings at the AML Fund have eroded those financing mechanisms and 
placed the CBF in financial jeopardy.
    Bankruptcies in the coal and steel industries 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. For example, the bankruptcy of Bethlehem 
Steel in 2003 added nearly 4,000 new beneficiaries to the 1992 and 1993 
Funds. Last year's bankruptcy of Horizon Natural Resources added about 
1,500 new beneficiaries to the UMWA 1992 Fund and about 2,200 new 
beneficiaries to the UMWA 1993 Fund. These two bankruptcies alone added 
about 7,000 beneficiaries to the 1992 and 1993 Funds, more than 35% of 
the total population of the two funds. These continuing financial 
difficulties highlight the need for Congress to enact Coal Act reforms 
as part of its AML re-authorization.
    Congress has intervened three times since 1999 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 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 prescription drug coverage expands to the Medicare 
population.
    With bipartisan support from members of Congress, CMS announced an 
extension of the prescription drug demonstration program in early 2004 
that extended the program until September 30, 2005. I am pleased to 
report that Secretary Michael Leavitt recently announced a further 
extension of the prescription drug demonstration until September 30, 
2007. This demonstration extension is certainly welcome news; however, 
is does not alter the fact that there is a pressing need for a long-
term solution to the financial problems of the UMWA health care funds.
    The need for a long-term solution for the financial problems of the 
UMWA health care funds 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 UMWA health 
        care funds.

    Mr. Chairman, opponents periodically allege that the benefits 
provided by the UMWA Funds are too generous and should be cut. While 
the costs to the beneficiary tend to be lower than some plans, the 
benefits are not substantially more generous than other plans in 
comparable industries. The GAO compared the UMWA Funds benefits to 
retiree plans in manufacturing covering union and salaried retirees in 
2002 and found that ``many features of the Fund's health plans are 
similar to those offered in the comparison plans. In particular, the 
Funds' coverage for hospital and physician services, which account for 
the majority of health care spending, is comparable to the coverage 
provided by the other plans.''
    Everyone should keep in mind that these retirees have made 
significant financial contributions to their health care, to the tune 
of $210 million that was transferred from their pension plan pursuant 
to the Coal Act. In addition over the years, miners traded lower wages 
and lower pensions for the promise of retiree health care. The average 
pension for a 1950 pensioner is $375 per month and their widows receive 
$155 per month in pension benefits. For the 1974 Plan retirees, the 
average pension is $532 per month while the average surviving spouse 
benefit is $373 per month. Thus, they do not have the financial ability 
to bear the kinds of co-payments that some retirees pay. To renege on 
the historic bargain they made over many decades to accept lower wages 
and pensions for this health care package would be a cruel and crushing 
economic blow.
    In addition, this is an aged, fragile population that is sicker 
than the average Medicare population. A study performed by Mercer Human 
Resources Consulting found this population to have a 35% greater burden 
of illness compared to the Medicare population. Cutting the level of 
benefits for a population such as this would be a cruel response to the 
continuing financial crisis.
    Two bills have been introduced in the Senate dealing with AML 
reauthorization--S. 961 by Senator Rockefeller and S. 1701 by Senator 
Thomas. Both bills would extend the AML fee collection (through 2019 
and 2016, respectively) and provide continued AML interest transfers to 
the Combined Benefit Fund. Recognizing the growing orphan problem, S. 
961 would also permit transfers to support orphan retirees in the 1992 
and 1993 plans. While we appreciate both these efforts, we must 
recognize that they do not represent the long term financial solution 
that many have called for. In order to come up with a long term 
solution, the UMWA has been working with a coalition of Coal Act/AML 
stakeholders to devise legislation that is a modified version of S. 961 
that would satisfy the needs of all parties, including the 
``reachback'' companies and the ``final judgment'' companies. 
Representatives Cubin and Rahall made an effort to attach the 
legislation to the Energy bill during the House-Senate Energy 
Conference, but the effort failed partly because of confusion about the 
AML provisions of the bill. Since that time, many of those who opposed 
that effort are now supporting the coalition effort. The proposed 
legislation, known as the Cubin-Peterson-Rahall compromise, would:

    1) Extend the AML program for 15 years and reduce the fees from 
35 cents to 28 cents per ton for surface mined coal, from 15 cents to 
12 cents for underground coal and from 10 cents to 8 cents per ton for 
lignite. States will automatically receive their share of AML funding 
on an ongoing basis.
    2) Provide that the unallocated federal share of moneys that are 
paid to the U. S. Treasury under the Mineral Leasing Act after date of 
enactment shall be used to make payments to states and tribes of their 
unappropriated balance of state share collections.
    3) Amend SMCRA to provide for annual transfers of AML Fund interest 
(including stranded interest and unappropriated RAMP funds) each year 
to the CBF, 1992, and 1993 Funds to pay health benefits of orphan 
beneficiaries and cover any deficits.
    4) Provide that transfers to the 1993 Plan are limited to the cost 
of providing benefits to orphan beneficiaries as of December 31, 2005.
    5) Beginning in January 1, 2006 sufficient federal on-shore mineral 
leasing and royalty revenues will be used as needed to pay for:

          a. Health care costs of orphan retirees in CBF, 1992 and 1993 
        Funds.
          b. Health care costs of CBF retirees attributable to the 
        ``reachback'' companies.
          c. Payment to ``Final Judgment'' companies equal to 
        unreimbursed premiums (plus interest) paid to the Combined 
        Benefit Fund.
          To the extent such proceeds are insufficient, ongoing orphan 
        obligations will be met from general funds as a mandatory 
        appropriation.

    6) Modify SMCRA allocation formulas to provide that states with 
higher reclamation obligations such as Pennsylvania, Kentucky and West 
Virginia, receive higher allocations.
    7) Provide that ``minimum program'' states will receive $3.0 
million per year.

    This legislation has garnered support from the various stakeholders 
in the AML/retiree health care debate. It is a carefully crafted 
compromise and we believe it is worthy of support from this committee.

                               GAO STUDY

    In 2002, the U.S. Government Accountability Office (GAO) issued a 
report on the Coal Act entitled ``Retired Coal Miners' Health Benefit 
Funds: Financial Challenges Continue.'' While the report was issued 
three years ago, its conclusions are still pertinent today. 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 GAO report clearly supports the positions the UMWA has 
advocated before Congress and the need for additional legislation. A 
promise made in the White House in 1946 was subsequently reaffirmed in 
1992. Congress intended the Coal Act to be self-sustaining and self-
financing, but various 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 industry retiree 
health care funding crisis.
    This is a unique population and a unique situation. We are unaware 
of any other instance 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 Government Accountability 
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 the coalition bill crafted by 
Representatives Cubin, Rahall and Peterson.

      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 in 1990 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, while most companies were paying the higher rate 
under protest, over 200 companies filed suit seeking to overturn the 
higher rate. In August 2005, the United States District Court for the 
District of Maryland issued a ruling in favor of the companies and 
enjoining the CBF from applying the higher rate. If the CBF ultimately 
loses the premium rate case, it will have to reimburse the operators 
for about $72 million in higher premiums that were collected prior to 
the court ruling.
    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. 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 
escalating medical costs, loss of income, an increasing orphan 
population and an inadequate escalator have led to a continuing 
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 
Horizon bankruptcy in 2004 greatly increased the populations of the 
1992 and 1993 Benefit Funds. 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 UMWA Funds and reinforce the call for a long-term solution.

                NOW IS THE TIME FOR A LONG-TERM SOLUTION

    Mr. Chairman, there is a growing bipartisan consensus that Congress 
needs to forge a long-term solution to the coal industry retiree health 
care financial crisis. 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.
    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 UMWA Funds. I would be 
happy to answer any questions you may have.

    Senator Thomas. Thank you very much.
    Ms. Lewis.

       STATEMENT OF LORRAINE LEWIS, EXECUTIVE DIRECTOR, 
                UMWA HEALTH AND RETIREMENT FUNDS

    Ms. Lewis. Mr. Chairman, members of the committee, I'm 
Lorraine Lewis, executive director of the Funds. On behalf of 
the trustees, I am pleased to accept the committee's invitation 
to testify.
    Through a combination of collective bargaining and 
government mandate, retiree health benefit plans have been part 
of the fund since 1946. During this time, mine workers accepted 
more modest pensions, for example, in exchange for those health 
benefits. The 1990 Coal Commission report noted this fact.
    The facts that follow here in my presentation relate to all 
three of the health benefit plans that we administer, including 
the Combined Benefit Fund, which is the fund that receives the 
annual transfer from the AML fund.
    The coal industry and Mine Workers Union have made 
important agreements during the past 59 years to require multi-
employer contributions to the Health Benefit Funds. 
Unfortunately, as the actuarial projections show, the current 
funding arrangements will yield either increasing negative 
balances, in the case of the CBF, the Combined Benefit Fund, or 
the--excuse me--and the 1993 benefit plan, or increasingly 
burdensome premiums paid by operators, in the case of our 1992 
benefit plan.
    The CBF has 37,000 beneficiaries. The median age is 81. A 
full three-quarters of the population are elderly widows and 
spouses. Operators pay statutory premiums based on assigned 
beneficiaries. At the start, the beneficiaries themselves 
contributed $200 million from their pension plan to startup the 
fund. The CBF receives annual transfers from the AML fund to 
cover unassigned beneficiary costs. Growing deficits and cash-
flow shortages pose the risk of reducing benefits in the summer 
of 2007.
    Our 1992 and 1993 plans are orphan plans, with 
approximately 11,000 and 7,000 beneficiaries, respectively. 
Most beneficiaries in the 1992 plan, and all in the 1993 plan, 
have no employer in business to pay for their benefits. Both 
plans have had unexpected population increases due to steel-
industry bankruptcies and the recent Horizon bankruptcy. 
Deficits and cash-flow shortages pose a risk of reductions in 
benefits in the 1993 plan in early 2006.
    There is a special need for these health benefits. The 
beneficiaries in this population are typically female, elderly, 
and chronically ill. A recent study found that they bear a 
burden of illness 35 percent greater than the average for the 
general Medicare population.
    The beneficiaries, the funds, and the Federal Government 
all reap advantages from the funds' aggressive managed-care 
cost-containment programs. These programs are designed to 
preserve beneficiary health status, prevent or minimize the 
effects of catastrophic illness, and avert the need for costly 
emergency services. The funds' managed-care strategies include 
an array of innovated coordination-of-care programs and 
disease-management programs.
    Other programs contain initiatives to ensure the cost-
effective use of available resources. Examples include 
contracts with hospitals and providers to pay Medicare levels 
for Medicare and non-Medicare beneficiaries, a cost-effective 
network of durable medical-equipment providers, co-pay 
incentives to promote use of mail-order drugs, and requirements 
for use of generic drugs.
    The study I noted a moment ago found that expenditures by 
the funds in Medicare for the care of our beneficiaries are 
about 7 percent lower than would be expected for a population 
with their burden of illness. Since 1990, we have been involved 
in a risk-sharing demonstration program with Medicare, covering 
services provided under Parts A and B. We calculate that, 
between 1997 and 2004, the Government's share of the 
demonstration savings exceeded a total of $130 million. In 
2001, the demonstration was expanded to include support for the 
fund's prescription-drug benefit. Under its terms, the funds 
are developing a program designed to help physicians improve 
the quality and cost-effectiveness of drug therapies for 
chronically ill elderly Medicare beneficiaries. The addition of 
the drug component has enhanced the fund's value to Medicare as 
a laboratory for such innovations, especially relevant today as 
Medicare prepares to launch the new Part D prescription-drug 
program.
    The funds are ERISA plans, with equal numbers of management 
and labor appointed trustees. They submit audited financial 
statements and other annual reports to the Departments of 
Labor, HHS, and Interior. GAO, the Interior Department's 
Inspector General, and the Center for Medicare Services have 
all reviewed the funds' programs and operations in the past few 
years.
    And I'd be very happy to answer any questions you may have.
    [The prepared statement of Ms. Lewis follows:]

 Prepared Statement of Lorraine Lewis, Executive Director, UMWA Health 
                          and Retirement Funds

    I am Lorraine Lewis, Executive Director of the UMWA Health and 
Retirement Funds. On behalf of the Trustees of the UMWA Combined 
Benefit Fund, the UMWA 1992 Benefit Plan and the UMWA 1993 Benefit 
Plan, I am pleased to accept the Committee's invitation to testify 
today.

                THE PLANS AND THE POPULATIONS THEY SERVE

    The three plans are continuations of the health benefit plans that 
were first provided to coal miner retirees and their families pursuant 
to an agreement between the Mine Workers Union and the Federal 
government in 1946 when President Truman seized the nations' coal mines 
to resolve a nationwide strike. Retiree health care was continued 
through collective bargaining in the industry from that time until 
passage of the Coal Act in 1992 and beyond. Historically, the Mine 
Workers have accepted lower wages and more modest pensions in exchange 
for more complete health care coverage. See Coal Commission Report (The 
Secretary of Labor's Advisory Commission on United Mine Workers of 
America Retiree Health Benefits, November 1990) pages 32-41, 48-50. The 
beneficiaries of the plans reside primarily in the coal fields of 
Appalachia and are generally at the lower end of the economic ladder. 
For example, a coal miner's widow typical of the beneficiaries of the 
Combined Benefit Fund receives a pension from the UMWA 1950 Pension 
Plan of $155 per month.
    According to the results of a 2004 study conducted by Mercer Human 
Resources Consulting, the beneficiary population served by the UMWA 
Funds bears a burden of illness 35% percent greater than the average 
for the general Medicare population. On a series of biannual surveys 
conducted by the UMWA Funds, over 50% percent of the responding 
beneficiaries reported their health as ``fair'' or ``poor'' as 
distinguished from the other available categories of ``excellent,'' 
``very good,'' or ``good.'' The GAO Report, ``Retired Coal Miners 
Health Benefit Funds Financial Challenges Continue'' of April 2002 
(page 18) reached a similar conclusion.

               MANAGED CARE AND COST CONTAINMENT PROGRAMS

    Over a number of years, the plans have developed aggressive, 
successful managed care and cost containment programs. The Mercer study 
reported that the cost of health care for the plans was significantly 
less, by seven percent, than the level to be expected for the burden of 
illness found in the population.
    These programs include contracts with hospitals and other providers 
to pay at Medicare levels for the plans' Medicare and non-Medicare 
eligible beneficiaries and the establishment of a network of durable 
medical equipment providers with bargained lower costs. Costs in the 
plans' prescription drug benefit programs are managed by use of co-pay 
incentives to promote use of mail-order drugs, requirements for use of 
generics when available in the absence of medical necessity for brand 
name drugs, and a preferred product program encouraging use of less 
expensive therapeutic equivalents in important drug classes. The plans 
also employ expert medical management teams to ensure the most 
effective courses of treatment, especially for beneficiaries with a 
high burden of chronic illness, and these services help to reduce 
hospital admissions and save costs over the long term. A more complete 
description of the UMWA Funds managed care and cost containment 
programs is found in Appendix A.*
---------------------------------------------------------------------------
    * Appendixes A and B have been retained in committee files.
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                    ERISA GOVERNED HEALTH CARE PLANS

    All three of these health plans are employee welfare benefit plans 
within the meaning of the Employee Retirement Income Security Act of 
1974 (``ERISA''). As ERISA fiduciaries, the Trustees do not advocate 
any particular legislative proposal. Since Congress first considered 
the Coal Industry Retiree Health Benefit Act of 1992, however, the 
Trustees have recognized all efforts by members of Congress to resolve 
the problems of continuing the promised health care for retired coal 
miners and their dependents as constructive, and, in the interest of 
the plans' participants and beneficiaries, they have made staff 
available to respond to requests for information that might be relevant 
to these considerations.
    Each of the plans is a separate employee benefit plan under ERISA, 
each with its own population of beneficiaries, separate funding 
mechanism and plan of benefits, and each with its own board of 
trustees. The Coal Act requires the Combined Fund Trustees, to the 
maximum extent feasible using available plan resources, to maintain the 
level of benefits provided by the predecessor plans in 1992, and the 
Act requires the 1992 Benefit Plan to guarantee this same level of 
benefits.
    Pursuant to the Taft-Hartley Act, an equal number of trustees are 
appointed by the UMWA and by employers who support the plans. While 
some individual trustees serve on more than one of the plans, the board 
of each plan is required by ERISA to use that plan's assets in 
accordance with the written plan documents and exclusively for the 
plan's beneficiaries. Consistent with these requirements, however, 
these plans derive certain advantages from receiving joint 
administrative services pursuant to agreements with the UMWA 1974 
Pension Trust for shared office space and staff services.

   CONTRACTS WITH SERVICE PROVIDERS, DEPARTMENT OF LABOR AND MEDICARE

    The three plans also pool their bargaining power to jointly enter 
into contracts with a medical claims processor, a pharmacy benefit 
manager, a medical management vendor, and a network of cooperating 
health care providers. Significantly, the three plans also jointly 
contract with the Medicare program and with the Department of Labor's 
Black Lung program to provide federally funded benefits to their 
beneficiaries.
    Since 1990, the Funds' health care plans' contract with the 
Medicare program has taken the form of a demonstration project under 
which the Funds have received capitation payments in exchange for 
providing Medicare Part B benefits to Medicare eligible beneficiaries. 
Since 1997, the demonstration contract has included a risk sharing 
arrangement covering services delivered to eligible beneficiaries under 
Medicare Part A. Beginning in 2001, as part of the continuing 
demonstration project under contract with the Medicare program, the 
Funds have conducted a prescription drug demonstration under which the 
UMWA Funds three health plans operate a pilot program designed to help 
physicians improve the quality and effectiveness of prescription drug 
therapy provided to elderly chronically ill beneficiaries who receive 
their care under fee-for-service arrangements. In exchange, the Centers 
for Medicare and Medicaid Services (``CMS'') pays a portion of the cost 
of providing prescription drugs to Medicare eligible beneficiaries 
under the UMWA Funds' plans of benefits. The plans have applied for 
renewal of the demonstration project and on September 20, 2005, CMS 
announced that the demonstration would be extended to September 30, 
2007. While some terms remain to be worked out with CMS, the figures in 
Appendix B take this renewal of the prescription drug demonstration 
into account.

                       THE COMBINED BENEFIT FUND

    The Coal Act directed the merger of two existing collectively 
bargained health benefit plans, the UMWA 1950 and 1974 Benefit Plans, 
to form the UMWA Combined Benefit Fund to cover only those 
beneficiaries already covered by those two plans on July 20, 1992. This 
closed the Combined Fund population to new retirees. This population 
was then approximately 108,000. Reduced by mortality, this population 
is now approximately 37,000, composed of approximately 8,500 retired 
mine workers and 28,500 dependents, of whom approximately 22,000 are 
widows of mine workers. Combined Fund beneficiaries are elderly, their 
median age is 81. Their median household income, based on a survey done 
in 2000, was $17,076. Approximately 94% of this population is Medicare-
eligible.
    The Coal Act requires the Combined Fund to have seven trustees. Two 
are appointed by the UMWA. There are two management-appointed trustees, 
one appointed by the Bituminous Coal Operators Association (``BCOA''), 
and the other appointed by the three operators who, among those that 
did not sign the 1988 National Bituminous Coal Wage Agreement, have the 
largest number of beneficiaries assigned to them. The three remaining 
``neutral'' trustees are appointed by the other four.
    Under the Coal Act, the Social Security Administration (``SSA'') 
assigns Combined Fund beneficiaries to coal industry operators who 
signed Coal Wage Agreements with the UMWA and employed the retired 
miners who were, or whose widows were, primary beneficiaries of the 
1950 or 1974 Benefit Plan at the time of the Coal Act's enactment.
    Assigned operators are required to pay premiums for each assigned 
beneficiary in accordance with a premium rate set by the SSA pursuant 
to a formula set out in the Act. They also pay a proportionate share of 
death benefit premiums and of premiums for unassigned beneficiaries.
Unassigned beneficiaries.
    Unassigned beneficiaries are those whose employers have gone out of 
business. There has been a steady shift within the Combined Fund's 
population from assigned beneficiaries to unassigned beneficiaries as 
operators have ceased business activity, with this shift increasing due 
to recent steel industry bankruptcies and the Horizon Natural Resources 
bankruptcy. In 2005 the average unassigned population has been 
approximately 16,700.
    To avoid as much as possible the requirement that operators pay for 
expenses of beneficiaries who did not work for them, the Coal Act 
required that the beneficiaries themselves contribute $210 million from 
the UMWA 1950 Pension Plan, the plan that provided most of their 
pensions, primarily to cover unassigned beneficiaries' expenses during 
the first three plan years of the Combined Fund's operations. Beginning 
October 1, 1995, the Coal Act and the corresponding 1992 amendments to 
the Surface Mining Control and Reclamation Act (``SMCRA'') provide for 
an annual transfer to the CBF of the interest earned by the Abandoned 
Mine Lands Reclamation Fund (``the AML Fund'') to cover unassigned 
expenses. Transfers occur in years when fees are required to be paid to 
the AML Fund. This requirement, set by the 1992 amendments to expire on 
September 30, 2004, has been extended, most recently to June 30, 2006 
by this year's Interior Department Appropriation Act. The SMCRA also 
provides the Secretary of the Interior with rulemaking authority to 
establish additional fee requirements beyond the expiration date 
sufficient to continue the program of annual transfers to the Combined 
Benefit Fund.

Financial difficulty and the risk of reducing benefits.
    Since 1999, for two primary reasons, the Combined Fund has faced 
the prospect of deficits and the risk of reducing benefits. First, the 
premium rate increases prescribed by the Coal Act have not kept pace 
with the increases in health care costs, especially the costs of 
prescription drugs and the increase in utilization of health care as 
the population ages toward the end of life. Second, a long-running 
litigation between operators and the Social Security Administration and 
the Combined Fund Trustees regarding the Coal Act's premium rate 
formula has reduced or threatened to reduce the premiums paid by 
assigned operators by ten percent. To avoid the need for reducing 
benefits, Congress has on three occasions enacted special 
appropriations from interest earned by the AML Fund to be transferred 
to the Combined Fund. The amounts of these appropriations were: in 
1999, $68 million; in 2001, $53 million; and in 2003, $34 million.
    Most recently, on August 12, 2005, the U.S. District Court for 
Maryland ruled in favor of the operators in a phase of the ongoing 
premium rate litigation, requiring the Social Security Administration 
to re-establish lower rates for all operators. The Trustees of the 
Combined Fund have appealed this decision to the Fourth Circuit.
    Through July 31, 2005, the Combined Fund had received from assigned 
operators and related persons $72,544,000 in payment of premium 
differential assessments at rates set by the Social Security 
Commissioner pursuant to the Commissioner's June 10, 2003, Premium 
Decision that has now been set aside by the Maryland District Court. 
Based upon cash flow projections, the Funds' Comptroller has calculated 
that, assuming return of this differential premium amount in the form 
of credits against the monthly premium obligations of assigned 
operators who made premium differential payments, and assuming an 
extension of the Combined Fund's Medicare Prescription Drug 
Demonstration Project that has recently been announced, at an estimated 
funding level of $73,391,417 for plan year 2006 and $65,643,862 for 
plan year 2007, disbursements for medical benefits, death benefits and 
administrative costs will exceed cash on hand and receipts from income 
in the month of August 2007. At that point, the Combined Fund will be 
in a ``cash negative'' position. The Combined Fund Trustees have 
decided that, if such a cash negative position is reached, they must 
reduce benefits and they would be required to advise beneficiaries of 
such reductions some number of months in advance of such action.
    Appendix B sets out projected total population and unassigned 
population, as well as projected year ending fund balances and annual 
deficits in the Combined Fund.

                         THE 1992 BENEFIT PLAN

    The Coal Act requires that all coal industry operators who were 
providing single employer health plans pursuant to a Coal Wage 
Agreement with the UMWA at the time of the enactment must continue 
those plans in effect for retirees who retired before October 1, 1994. 
The Coal Act also required the UMWA and BCOA to create the UMWA 1992 
Benefit Plan. The population covered by this plan includes: 1) those 
who would have been covered by the 1950 or 1974 Benefit Plan but were 
not covered by the Combined Fund because their eligibility was 
established after the cut-off date in 1992; and 2) those who were 
entitled under the Coal Act to continue receiving health benefits under 
a single employer health plan, but do not receive those benefits 
because of the employer's failure to provide them. Usually this is 
because the employer has gone out of business.
    The median age of the 1992 Plans' beneficiary population is 72. 
This population's median household income, based on a 2000 survey, was 
$19,800, and approximately 80% of the population is eligible for 
Medicare.

Orphan retirees and their health care costs.
    The 1992 Plan is a continuation, mandated by statute, of the 
industry's undertaking to provide health benefits to retirees known as 
``orphans,'' those whose industry employers have gone out of business 
leaving the retiree and dependent family members without an employer to 
sponsor their benefits. They correspond to the unassigned beneficiaries 
in the Combined Fund.
    Funding of 1992 Plan is through ``per-beneficiary premiums'' 
required to be paid by last signatory employers to whom retiree and 
beneficiaries may be attributed and by ``prefunding premiums'' paid by 
1988 Agreement operators. Because most of the Plan's population cannot 
be attributed to any employer that is still in business, most of the 
Plan's expenses are paid by the operators who pay prefunding premiums. 
The prefunding premium cost is therefore equivalent to the cost of 
orphan retirees and beneficiaries in the 1992 Plan, and this is a cost 
paid by operators who did not employ any of the orphan miners in 
question. The amount of prefunding premium paid by each 1988 Agreement 
operator is determined by the number of retiree beneficiaries the 
operator has covered by its single employer health plan mandated to be 
continued by section 9711 of the Coal Act. (Hence the term ``9711 
plan.'') In addition, operators who provide single employer 9711 plans 
must post security with the 1992 Plan to pay for three years of 
benefits in case the 1992 Plan must take over their obligation to 
provide benefits.
    The 1992 Plan's population was expected to grow as normal attrition 
of some industry employers occurred. Unfortunately the orphan 
population of the 1992 Plan has jumped up dramatically since 2002, 
because of the major steel industry bankruptcies and the Horizon 
Natural Resources bankruptcy. For 2002, the 1992 Plan's average 
population over the year was 6,432; for 2005 the Plan's average 
population is 11,392. If there are no more substantial shifts of 
retiree populations to the 1992 Plan from failing operators, the 
population is expected to gradually decline through mortality. The 
prefunding premium cost, the cost of orphan retiree health care, 
however, is expected to climb sharply because the security bond posted 
by a substantial failing steel industry operator will have been 
exhausted and because of the persistent rise in health care costs, 
especially the costs of prescription drugs. Thus the orphan retiree 
health cost of the 1992 Plan is expected to rise from around $16 
million this year to $26 million next year, reach approximately $60 
million in the last three years of this decade and continue to rise 
thereafter.
    Appendix B sets out the current and projected population and the 
current and projected costs of providing benefits to orphan in the 1992 
Plan.

                         THE 1993 BENEFIT PLAN

    Through collective bargaining the UMWA and BCOA have created the 
UMWA 1993 Benefit Plan to continue the industry's undertaking to 
provide health care to orphan retirees, covering those who retired 
after the September 30, 1994 cut-off date for coverage under the 1992 
Benefit Plan. The plan has strict rules requiring that, before retirees 
and their dependents are eligible, their last signatory employer must 
have had an obligation to contribute to the 1993 Plan and actually have 
contributed. Funding for the 1993 Plan has come from employers' 
contributions based on hours worked in the mines, currently $0.50 per 
hour, and also from annual $2000 premiums, and in 2005 a separate one 
time $3000 premium.
    The 1993 Plan's population has a median age of 59 and had a median 
household income of $19,056, based on a survey in 2000. Approximately 
38% of this population is Medicare eligible.
Escalating population and costs; the risk of reducing benefits.
    Like the 1992 Plan, a moderate rate of growth in the population of 
the 1993 Plan was expected, and like the 1992 Plan, this expectation 
has been upset by recent bankruptcies in the steel industry and 
especially by the Horizon Natural Resources bankruptcy, causing the 
population to double, from less than 3,500 to approximately 7,000 in 
the last two years.
    Because of this increased population and the increased health care 
costs, the 1993 Plan faces the risk of reducing benefits. The Plan's 
governing documents provide that, if at specified periodic valuations 
the value of the Plan's net assets available for plan benefits fall 
below $2 million, the Trustees are required to reduce benefits 
sufficiently to achieve solvency by the end of the current Coal Wage 
Agreement, December 31, 2006. Current actuarial projections indicate 
that this threshold may be reached in early 2006.
    Appendix B sets out the projected population and the projected year 
ending balances and annual deficits for the 1993 Plan.

                               OVERSIGHT

    As ERISA plans, all three of the plans must be administered by 
boards of trustees who must comply with the fiduciary requirements of 
ERISA, including avoiding prohibited transactions, prudent asset 
management and administration for the exclusive benefit of participants 
and beneficiaries. Trustees may be held personally liable for any 
breaches of these duties. Each plan must submit an annual report to the 
Secretary of Labor (Form 5500), that must include the report of an 
independent auditor on the annual financial statement of the plan.
    In addition to the requirement of an annual audited financial 
report, the three plans must submit an annual cost report to the 
Medicare program under the Medicare contract, and this report is also 
subject to an annual audit.
    The Combined Fund is subject to an annual review by its independent 
auditors of its transactions with the Office of Surface Mining 
regarding transfers from the AML Fund, and this transfer program has 
also been audited by the Department of Interior's Inspector General.
    Finally, because of continuing interest by the Congress, the 
Government Accountability Office has conducted reviews on several 
occasions, most recently in 2002.
    I would be pleased to respond to any questions the members may 
have.

    Senator Thomas. Okay. Thank you very much.
    Mr. Finkenbinder.

STATEMENT OF DAVID FINKENBINDER, VICE PRESIDENT, CONGRESSIONAL 
              AFFAIRS, NATIONAL MINING ASSOCIATION

    Mr. Finkenbinder. Thank you, Mr. Chairman, members of the 
committee. On behalf of the National Mining Association, I want 
to express our appreciation for this opportunity to comment on 
the administration and performance of the AML program 
established under the Surface Mining Act.
    The AML program was established with the principal 
objective to restore unreclaimed lands mined prior to August 3, 
1977, that pose threats to public health and safety. AML, which 
is paid by on each ton of coal produced and sold to fund the 
program, was originally authorized until 1992, but has been 
extended several times, as we have heard.
    The current reauthorization expires on June 30, and I'm 
sure many viewpoints expressed here today about the remaining 
requirements and the need to extend the fee to support those 
requirements have been, and will be, presented.
    While various interests of NMA's membership have dictated 
that NMA have no position on the specific related to AML 
reauthorization or the coal-miner benefits, NMA will provide 
observations about the history of the program and various 
public-policy considerations regarding the future of the 
program.
    Since 1978, the coal industry has contributed more than 
$7.5 billion to the AML fund. OSM reports that, as of 2002, 
about $1.62 billion of high-priority abandoned-mine inventory 
has been reclaimed. Another $320 million has been used to 
reclaim priority-three sites, and $285 million have been used 
for non-coal projects. The appropriations from the AML fund for 
this period total $5.7 billion. In other words, less than 40 
percent of the money appropriated is finding its way to on-the-
ground reclamation of inventory of coal and non-coal projects. 
Placed in the context of high-priority coal sites, the 
principal mission of the project--of the program, less than 30 
cents on every dollar appropriated from AML reaches its 
objective.
    As we have stated in our written testimony, based on 
National Academy of Sciences and OSM reports that have been 
issued over the years, the inventory of priority sites has 
grown, along with the number of reclaimed sites, the fees 
collected, and the appropriations from the fund. For example, 
in 1986, NAS prepared a midcourse review for the program. At 
that time, NAS found that most States expressed confidence that 
they would complete their reclamation of priority-one and -two 
sites by 1992. By 1992, the total revenue of the program had 
reached $3.2 billion, and $870 million worth of high-priority 
coal inventory had been reclaimed, and the remaining inventory 
was now $2.6 billion. Now the high-priority coal inventory is 
almost $3 billion. And after $5.7 billion in appropriations 
from the AML fund, only $1.8 billion in high-priority sites 
have been reclaimed. It looks like we're going backward.
    We hear the job is not finished. By June 2006, the coal 
industry will have paid $8 billion into the fund. How much will 
this take? We don't know.
    In our written testimony, we have set out several questions 
facing--faced in dealing with the current program structure and 
requirements. Not surprisingly, each constituency will have 
different answers and different preferences.
    The first question is: Do we need, can we afford, multiple 
delivery mechanisms and subprograms that divert funds away from 
high-priority projects? For example, the RAMP program and 
another one where States can set-aside funds in anticipation of 
the fee expiring. The question would be begged: Why set aside 
fees for a future use and then ask the industry to keep paying 
fees because the job is not finished?
    Should the current allocation and distribution formula be 
replaced with a different system that takes into account the 
changes in the coal mining and the--excuse me--in coal mining 
since passage of the--of SMCRA?
    What good are priorities if there are so many of them and 
there is no overarching requirement to abide by them?
    Fourth, why does the high-priority coal inventory serve 
as--does the high-priority coal inventory serve as an accurate 
benchmark for success? Each time the goal gets closer, it is 
moved back.
    So far as administrative costs are concerned, how much do 
we need to spend to learn how to spend?
    In light of the foregoing, what level should the fee be? 
And how much more should the coal industry pay into the AML 
fund? The job is not finished. The lack of AML fees is not the 
reason.
    Mr. Chairman, thank you, again, for the opportunity to 
present NMA's observations.
    [The prepared statement of Mr. Finkenbinder follows:]

Prepared Statement of David Finkenbinder, Vice President, Congressional 
                  Affairs, National Mining Association

    Mr. Chairman, members of the Committee, on behalf of the National 
Mining Association, I want to express our appreciation for this 
opportunity to comment on the administration and performance of the 
Abandoned Mined Land (AML) Program established under the Surface Mining 
Control and Reclamation Act of 1977.
    The AML Program was established with the principal objective to 
restore unreclaimed lands mined for coal prior to August 3, 1977 that 
pose threats to the public health and safety. The AML fee paid on each 
ton of coal produced and sold to fund the program was authorized 
initially until 1992, but has been extended twice. With the current 
authorization scheduled to expire on June 30, 2006, there will 
undoubtedly be many viewpoints expressed today about the remaining 
requirements and the need to extend the fee to support those 
requirements. In this regard, Mr. Chairman, NMA has no position on the 
Coal Act or issues surrounding the reauthorization of the AML, but 
offers some observations about the history of the program, and presents 
various considerations to assist you and your colleagues in making 
public policy decisions about the program's future.

                       REVENUES AND EXPENDITURES

    Since 1978, the coal industry has contributed more than $7.5 
billion to the AML Fund. The Office of Surface Mining (OSM) reports 
that as of September 30, 2002 about $1.62 billion of the high priority 
(Priority 1 & 2) abandoned coal mined lands inventory has been 
reclaimed. Another $320 million has been used to reclaim priority 3 
coal sites, and $285 million for non-coal projects. Appropriations from 
the AML Fund for this period totaled about $5.7 billion. In other 
words, less than forty per cent of all the money appropriated is 
finding its way to on-the-ground reclamation of the inventory of coal 
and non-coal projects. Placed in the context of the high priority coal 
inventory--the principal mission of the program--less than thirty cents 
of every dollar appropriated from the AML Fund reaches that objective.

                       PROGRESS AND EXPECTATIONS

    In 1986, the National Academy of Sciences (NAS) performed a mid-
term review of the AML program. See National Academy of Sciences, 
Abandoned Mined Lands: A Mid-Course Review of the National Reclamation 
Program for Coal (1986). At that time, the NAS projected that by the 
expiration of the AML fee in 1992, total revenue for the program would 
reach about $3.3 billion. As it turns out, the projection was close to 
the mark with actual receipts reaching slightly more than $3.2 billion. 
NAS also found at that time that most States expressed confidence that 
they would complete reclamation of their priority 1 and 2 inventory of 
projects by 1992. Id. at 65. It was this confidence that resulted in 
the States' view that in the meantime they should reclaim lower 
priorities even before they complete the two top priorities. Id. This 
approach apparently had some merit since as NAS projected all the 
states, except six, would have enough funds from their state share 
alone to reclaim priority 1 and 2 projects with an estimated cost of 
about $811 million. Moreover, the total state share alone appeared to 
be adequate to reclaim all priorities at an estimated cost of about 
$1.7 billion. Id. at 154-55. In short, at the time of the mid-term 
review of the program more than ample funds appeared to be available to 
address not only the high priority coal inventory, but the other 
priorities as well.
    By 1992, $870 million of the high priority coal inventory had been 
reclaimed. But now the target had moved, and OSM reported that the 
remaining high priority coal inventory was $2.6 billion--almost three 
times the inventory reported in 1986. Since then, it appears that 
things have actually regressed. Since 1998, it appears that for each 
dollar of high priority inventory reclaimed, two dollars are added as 
unfunded high priorities. Now the high priority coal inventory is 
almost $3 billion. And, after $5.7 billion in appropriations from the 
AML Fund, only $1.62 billion of the high priority coal inventory has 
been reclaimed. Continuing business as usual would mean that it will 
require at least $9 billion to reclaim the current $3 billion high 
priority coal inventory.

                   STRUCTURAL IMPEDIMENTS TO SUCCESS

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

                      CONSIDERATIONS GOING FORWARD

    By the time the current fee authorization expires next year, the 
coal industry will have paid $8 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 $3 
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 as of last year had accumulated $331 million which cannot be 
used for other purposes unless expressly reprogrammed by Congress. 
Emergency Programs also present a duplicative system with some states 
assuming the responsibility, while 9 states--two of which have the most 
emergencies--declining to assume that responsibility as part of their 
approved AML programs. States still use a provision of the law added in 
1990 that allows funds to be set-aside in anticipation of the fee 
expiring in 1995. There is something wrong with the concept of setting 
aside industry AML fees for future use, and then calling for the 
industry to keep paying because the job is not yet finished.

2. Fund Allocation and Distribution
    Should the current allocation and distribution formula be replaced 
with a system that directs AML fee revenues to areas with the greatest 
need in terms of remaining high priority coal inventory? OSM's white 
paper indicates that the historic production (pre-1977) is a close 
surrogate for where the high priority coal inventory sites are located. 
If such a change is made, what happens to the current allocations? 
States that have completed their high priority coal inventory may feel 
that they should receive some portion or all of the unexpended balances 
in their accounts. Distribution of those amounts will affect funding 
requirements. For example, the unexpended state share for the certified 
states comprises 30% of the unappropriated AML balance. The allocation 
and distribution issues present the most fundamental question: Does 
coal AML remain a national problem that still requires of a national 
solution? If so, should the solution be administered in a manner more 
fitting and efficient for a national problem?

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

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

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

6. The AML Fee
    What should the levels of the fee be and how much more can or 
should the coal industry pay into the AML fund? The job may not be 
finished, but the lack of AML fees is not the reason.
    Mr. Chairman, thank you again for the opportunity to present NMA's 
observations on the history of the AML program. We hope the various 
considerations will assist you and your Subcommittee as you address the 
public policy decisions regarding the coal AML program.

    Senator Thomas. Okay. Thank you very much, sir. We 
appreciate it.
    Mr. McElwaine, support for the bill introduced by Mr. 
Peterson--as you know, the bill paid through revenues primarily 
generated in the West. Do you have any suggestion on how we 
generate additional revenues from the Eastern part of the 
country? Or do you suggest transferring all the money from the 
West to the East?
    Mr. McElwaine. Well, Mr. Chairman, the industry has 
benefited significantly from the existence of the AML fund. 
Since it was created, in 1977, Congress has, on the basis of 
the existence of the AML fund, exempted coal mining from the 
provisions of the 1980 and 1987 Superfund statutes, as well as 
the 1984 RCRA, subtitle C, statute. And so, Mr. Chairman, if 
we're going to give relief to the industry, on the one hand, in 
terms of paying for the Abandoned Mine Land Fund, I think 
Congress needs to go back in to Superfund and RCRA and look at 
those exemptions. I mean, there clearly was justification for 
those exemptions, because the--you could say, ``Well, the 
industry is covered by AML, therefore that should take care of 
the Superfund liability and RCRA.'' But now, if we're going to 
say, ``Well, let's not cover them with AML anymore,'' then I 
think we need to go back into Superfund, and we need to go back 
into RCRA, and say, ``Gee, maybe we need to put some of these 
burdens and these obligations on the industry, instead.''
    Senator Thomas. I see. My question, of course, was on the 
allocation, or the fund it comes from, and where you spend it, 
but I understand.
    Mr. Gauvin, does Trout Unlimited have any reactions, 
particularly, to the re-mining proposition?
    Mr. Gauvin. We believe that re-mining is a legitimate 
technique of achieving some of the water-quality objectives 
that we would like to achieve. And there are some places in 
coal country where re-mining is the best approach to dealing 
with acid mine drainage. So, properly done, we're fine with it.
    Senator Thomas. Sometimes, I suppose a reclamation project 
doesn't really have anything to do with water quality.
    Mr. Gauvin. There are certainly some parts of the country 
where reclamation often has little to do with water quality.
    Senator Thomas. Little to do with it.
    Mr. Gauvin. But there are places, entire regions of the 
country, where reclamation issues are largely about water 
quality.
    Senator Thomas. Mr. Kane, you indicated that the healthcare 
were paid by interest on the trust fund balances.
    Mr. Kane. That's right.
    Senator Thomas. And, of course, the reason there's interest 
is because the money hasn't been paid out of the fund that's 
prescribed under the law. How would you resolve that?
    Mr. Kane. Well, one of the things that I would recognize is 
the fact that Congress has already made a decision on this 
issue, back in the early 1990's, when they determined how the 
funding would be established. And it was their intent, we 
believe that these funds would have an ongoing and stable basis 
of funding to provide the healthcare benefits.
    One of the things that we think has to be balanced out is 
the mine reclamation--the reclamation of abandoned mine lands--
and also the healthcare costs of retired miners. Both of these 
are legacy costs of the industry.
    The AML fund is an ongoing fund, and we have strongly 
supported, along with numerous other of the stakeholders, its 
reauthorization. We think that's extremely important.
    Senator Thomas. But my question was--under the original 
bill, moneys were supposed to go to the States. But they didn't 
go to the States, and, therefore, created a fund, and, 
therefore, there's interest to pay what you're talking about.
    Mr. Kane. That's right, and----
    Senator Thomas. If you went by the law and distributed the 
fund, there wouldn't be that much interest.
    Mr. Kane. Well, we're certainly not against the ongoing 
distribution of funds for mine reclamation. That is something 
that we think has to be ongoing. As I said earlier, we do 
support the cleaning up of these abandoned mine lands. However, 
every time funds are collected, they're going to be invested 
somehow, and Congress decided to invest those funds to earn 
interest. And there was something that had to be done with that 
interest. It could either stay in the fund--they felt that it 
was the logical thing to do to use those for retiree healthcare 
costs. So, we're not against--we're not against the use of 
funds for the cleanup of abandoned mine lands, but we also 
think that there's going to be interest, always--there's going 
to be funds available, and this represents a logical way to use 
those funds.
    And I want to restate, this is a debate that was held back 
in the early 1990's----
    Senator Thomas. I know, but my question is--the funds are 
there, because the funds haven't been distributed. Isn't that 
true?
    Mr. Kane. Well, one of the reasons that we came here today 
was to address that issue. And we think that the compromise 
reached by Representatives Cubin, Rahall, and Peterson 
addresses that.
    Senator Thomas. To take the money from somewhere else.
    Ms. Lewis, you mentioned the age of these folks is 
generally pretty old.
    Ms. Lewis. Yes, sir.
    Senator Thomas. So, they're eligible for Medicare, is that 
true?
    Ms. Lewis. In our population, currently of about 50,000 
beneficiaries, the Medicare eligibility funds all--across all 
three funds is about 68 percent. The highest--excuse me, it's 
84 percent--the highest eligibility is in the CBF, which is at 
94 percent. The 1992 plan is 80 percent. And then the 1993 plan 
is 38 percent.
    Senator Thomas. I see. I can't remember the details, but 
there's been discussion about different groups coming in. When 
did the original beneficiaries begin to be recognized?
    Ms. Lewis. Well, the funds were established in the 1940's, 
60 years ago, under--there was originally a--or 1950----
    Senator Thomas. No, but I mean, when the funds to----
    Ms. Lewis [continuing]. Under the----
    Senator Thomas [continuing]. Offset the----
    Ms. Lewis. Under the Coal Act of 1992, the statute required 
the establishment of the Combined Benefit Fund, which combined 
two funds, a 1950 fund and a 1974 benefit fund. They became the 
Combined Benefit Fund. The population was about 108,000 
beneficiaries, and it was a closed population.
    Senator Thomas. What, generally, do you see in the future? 
When these people reach older age, are they going to be 
replaced by others, or what--how do you----
    Ms. Lewis. Not in the Combined Benefit Fund. The mortality 
rate, ultimately, it's right about 9 percent a year right now, 
and there will just continue to be mortality and deaths, and, 
ultimately, the fund will no longer be populated.
    The other fund that was established in 1992 was the 1992 
benefit fund.
    Senator Thomas. Yes.
    Ms. Lewis. And its population, essentially an orphan 
population, because the contributing--the paying employers are 
out of business. That fund probably, at this point, based on 
our information, has reached--it's at the high end, at 11,000. 
It will--it's pretty much stabilized, based on our projections 
about what we think is coming down the road, and it will 
ultimately drop off, as well. And our Attachment B to our 
longer testimony shows those numbers in the----
    Senator Thomas. When, generally, would these benefits 
expire? Would that no longer be necessary? Or is there a time 
things end?
    Ms. Lewis. Let me just check. I'll have to provide that for 
the record, Senator.
    Senator Thomas. If you would, please.
    Mr. Finkenbinder, how do you respond to the idea that there 
will be an increase in priority sites due to an increase in 
population density? Is that a concern to you?
    Mr. Finkenbinder. It certainly appears to be the case. I'm 
not sure where it's going to occur. There's a good possibility 
that it can occur. It has in some of the more populated 
regions--Evansville, Indiana, for instance. However, Evansville 
also, I thought, has a zoning prohibition on coal mining, and 
most of the mines have closed down there. So, it's the older 
mines, I think, that are coming into contact with more 
populated areas. And I think the newer mines, as folks that 
have been out to our mines have seen, are located in more 
remote areas.
    Senator Thomas. I see.
    Mr. Finkenbinder. Specifically, I don't have any statistics 
to support or deny that.
    Senator Thomas. Okay. Thank you.
    Senator Bunning.
    Senator Bunning. Thank you, Mr. Chairman.
    Mr. Finkenbinder?
    Mr. Finkenbinder. Yes, sir.
    Senator Bunning. I understand that the National Mining 
Association has coal companies on both sides of the AML issue, 
with only some having healthcare issues. What do you see as the 
biggest issue affecting the different coal companies' 
constituencies?
    Mr. Finkenbinder. That's a good question. I think that the 
questions that I have laid out here are the ones that are the 
concerns from the AML perspective. So far as the benefits 
perspective is concerned, I am not privy to conversations for 
the last--since essentially 1992, the National Mining 
Association has stood down on these because of the various 
positions taken by our membership.
    Senator Bunning. I would like to go back to a question that 
the chairman asked both the two gentlemen sitting on the far 
left. Neither answered the question. It related to East and 
West. Most of the money, as the chairman says, is coming out of 
the West, and he asked if you think that should be continued, 
and neither of you answered it.
    Mr. McElwaine. I believe it should, Senator.
    Senator Bunning. You believe the Western coalfields should 
pay the largest portion?
    Mr. McElwaine. Sir, I believe that the legacy issues 
involved should be paid for by the industry, wherever it may be 
located.
    Senator Bunning. The legacy costs should be paid by the 
Western coalfields?
    Mr. McElwaine. We still mine a fair amount of coal in my 
State, too, Senator.
    Senator Bunning. Well, we still mine about--we have 550 in 
Kentucky, still, sir, to be mined. So you think the West should 
pay more?
    Mr. McElwaine. I didn't--Senator, with respect, I didn't 
say ``pay more.'' I just said that the funding should come from 
industry, wherever it may be located, that the program--the 
cleanup of legacy sites should not be held hostage to wherever 
the industry----
    Senator Bunning. Well, don't you think there are more 
legacy sites East than West?
    Mr. McElwaine. Yes, sir, because mining is historically in 
our part of the country. Yes, sir.
    Senator Bunning. Okay.
    Both the UMWA folks, Ms. Lewis and Mr. Kane, I've have 
heard for several years that the CBF and the 1992 funds will go 
bankrupt very shortly, yet this has not happened. Why have the 
expected bankruptcies not occurred? What is the latest 
projection of funding shortfalls for these funds?
    Mr. Kane. Would you like to take that?
    Ms. Lewis. Senator, the cash analysis for the Combined 
Benefit Fund, at this point, shows that it will be short in 
August 2007. That is a defined contribution plan, and the 
payments are made--essentially, premiums from the coal 
operators and, of course, the Medicare demonstration money that 
comes in from--revenue from Medicare and also the AML transfer, 
annual AML transfer. The 1992 plan is a defined-benefit plan. 
The statute requires that the benefits are guaranteed; and, 
therefore, the expenses and the needs to pay the health 
benefits are to be paid by the existing operators, and they are 
assessed both--either a per-beneficiary premium every year or a 
unfunded premium--pre-funding premium. And then they're also 
required to post a bond in the event that they go out of 
business.
    So, that fund will always see the benefits paid, but the 
projections show that the amount of the annual premiums 
assessed on the operators is rising dramatically and will 
continue to rise because of the increase in the population.
    Senator Bunning. Mr. Kane, I want to go back to something 
that you said the Congress just assumed in the relationship 
with the funding of 1992 and the CBF. Do you know that there 
was never a hearing held in the Ways and Means Committee in the 
Congress on that issue? I happened to be on the Ways and the 
Means Committee at the time, in the House.
    Mr. Kane. I'm not aware of that fact, Senator.
    Senator Bunning. That bill came directly from the Senate to 
the floor of House of Representatives, and there was very 
little discussion on the floor. There was some, but very 
little. And the fact that the Ways and Means Committee members 
didn't have any input, but it was added on in the Senate and 
came to the House as a fact that the Finance Committee had done 
or that Senator Rockefeller had added on the floor of the 
Senate.
    Mr. Kane. I certainly can't dispute that fact, Senator. The 
fact remains, though, that this entire program came about as a 
result of the Coal Commission, which was chaired by, then-
Secretary of Labor Elizabeth Dole, and it was done with the--
with input--there were representatives of government, labor, 
industry, the healthcare industry, academia. The entire issue 
was debated widely, on a national level. And this came about as 
a result or a recommendation from that commission and was acted 
on by Congress.
    We believe that when Congress enacted that bill, that they 
intended it to be an ongoing program and for the Coal Act to be 
funded for as long as it needed.
    Senator Bunning. Well, there's some of us that will dispute 
that, but I'm not going to get into a hassle over it right now, 
for the simple reason that, as a member of the Ways and Means 
Committee at the time, it was never brought before our 
committee for a discussion.
    I yield back.
    Senator Thomas. Thank you very much.
    Senator Talent.
    Senator Talent. Thanks, Mr. Chairman.
    I have had other hearings. I haven't been able to be here 
for a lot of this. I know this is a difficult issue, because 
it's just difficult. I mean, if Senator Craig were here, I 
would say we're trying to pour ten pounds of potatoes into a 
five-pound sack. Maybe, in his honor, I'll say it anyway.
    We've been trying to take care of reclamation, return money 
to the States, and also take care of orphan miners, and there's 
just not enough money, the way I look at it. I do think that 
there may be a clue in how to square the circle if we remember 
that at the time these funds were established, I think they 
estimated $800 million in top priority reclamation projects, 
and we've now collected $8 billion in fees. So, maybe we can 
try and seek some kind of finality in that.
    I have a letter, which I received from a broad coalition of 
coal workers and companies, and chief among which was the UMWA. 
And maybe all I'll do, Mr. Chairman, because I know a lot of 
the other issues have been covered, is to ask Mr. Kane, 
specifically, if he could ascribe the effort that led to this 
letter and the compromise proposal that's attached to it, and 
why you believe it's something that we ought to consider. And 
then I'd ask if I could put the letter in the record, Mr. 
Chairman.*
---------------------------------------------------------------------------
    * The letter can be found in the appendix.
---------------------------------------------------------------------------
    Mr. Kane. Certainly, I'd be glad to. Thank you, Senator.
    The coalition consists of a majority of stakeholders who 
are interested in both the long-term viability of the AML 
program and the coal industry Retiree Health Benefit Act. The 
UMWA is working closely with companies representing the 
interests of the BCOA, the reachbacks, the final-judgment 
companies, and others on this effort. In the House, 
Representatives Cubin of Wyoming, Peterson of Pennsylvania, and 
Rahall of West Virginia have taken a leadership role in this 
comprehensive reform proposal.
    The compromise represents a major breakthrough in resolving 
both the reclamation and the orphan retiree healthcare issues 
after years of trying to resolve a variety of very complex 
issues.
    Under the proposal, the concerns raised by other witnesses 
today are addressed. All States receive substantially higher 
amounts, going forward, to complete their reclamation needs. 
And all States, like Wyoming, Kentucky, and the Navajo Nation, 
receive their unappropriated State-share balances. At the same 
time, proposal provides the long-term solution for the 
healthcare needs of the orphan retirees and the UMWA healthcare 
funds.
    We recommend that the committee consider the comprehensive 
proposal being considered in the House under the leadership of 
Representatives Cubin, Peterson, and Rahall as the 
comprehensive solution to the issues raised in the hearing 
today. It is the belief of the coalition that all of the issues 
discussed in the hearing today are interrelated and need to be 
addressed by Congress in a comprehensive solution. Absent a 
comprehensive solution, it is unlikely that any of the issues 
can be resolved.
    Senator Talent. I thank you, Mr. Kane. I think the proposal 
is certainly a good start. It's expensive. I don't know that 
we're going to be able to resolve this in any way without 
finding some more funds someplace. So, I think it's worth 
looking at, and I appreciate your explaining it.
    Thank you, Mr. Chairman.
    Senator Thomas. Okay, thank you.
    Well, thank you. Just one final comment. Mr. McElwaine, you 
talked about the East and the West coal. When the Eastern coal 
is worth about $50 and the Western coal is worth about $10, 
what would you think about changing the fee?
    Mr. McElwaine. Senator Thomas, I want to make clear that 
the coalitions I work with have not drawn any lines in the 
sand.
    Senator Thomas. Okay. I'm just making a point.
    Mr. McElwaine. Yeah.
    Senator Thomas. Senator Alexander regrets that he's unable 
to attend, but he has a statement for the record, and we will 
include it.
    [The prepared statement of Senator Alexander follows:]
Prepared Statement of Hon. Lamar Alexander, U.S. Senator From Tennessee
    Abandoned mining lands can pose a serious health and environmental 
threat. These lands can contribute to contamination of our waters, make 
land unusable, and impact economic development in many rural 
communities.
    In Tennessee, we have concerns with job loss in our rural 
communities. Cleaning up these abandoned mining lands not only corrects 
health and environmental hazards, but it also provides jobs in 
economically depressed areas. In Tennessee, it is estimated that it 
will cost $33 million to clean up the high priority sites and those 
sites that impact the general welfare of our rural communities. 
Tennessee has the most serious problem with priority 1 and 2 sites of 
the non-program states. Tennessee's problems are on par with those of 
Arkansas and Maryland which are minimum program states. Senator 
Thomas's proposal will permit Tennessee to receive baseline program 
funding and clean up our problems sooner.
    There is another AML issue that is particularly important to many 
Tennesseans. The 1992 Coal Act required certain coal companies to pay 
health care benefits to retired union members. This Act impacted 
companies that did not promise these benefits. In 1998, the Supreme 
Court declared the law unconstitutional for the pre-1974 signatory 
companies, including Blue Diamond Coal Company (which is in Tennessee), 
and other companies in Pennsylvania, Indiana, Ohio, Virginia, and 
Texas.
    These so-called ``Super Reach Back'' companies are the only ones 
not to be repaid what is justifiably owed to them. Companies who broke 
the law and did not pay were not penalized. Others who paid but did not 
litigate received a full refund. This issue has come up before the 
Congress on numerous occasions, and now is the time to correct this 
issue. The ``Super Reach Backs'' should be refunded their payments and 
interest like other coal companies.
    I am hoping that this hearing will advise the Committee relative to 
the appropriate reclamation fee on coal and the appropriate period for 
the collection of the fee. I am also hopeful that we can get a better 
understanding of the level of effort needed to clean up our nation's 
abandoned mining lands. We really need to have a clearer understanding 
of the cost associated with our AML problems to determine the 
reclamation fee, how long the fee should be imposed, and the minimum 
program funding needed to address the high priority problems.

    Senator Thomas. I would like unanimous consent, also, to 
include in the record statements from Joanna Prukop, Secretary, 
Energy, Minerals, and Natural Resource Department of New 
Mexico.*
---------------------------------------------------------------------------
    * The statement can be found in the appendix.
---------------------------------------------------------------------------
    So, thank you very much for being here. There are some 
questions, Ms. Lewis, as to when this time expires and when we 
have to do something else to pay for the healthcare and those 
kinds of things.
    Ms. Lewis. Yes, sir.
    Senator Thomas. So, in any event, it's an issue. I think 
we're all committed to finding a solution, and we appreciate 
very much your being here and for assisting in finding that 
solution.
    With that, the committee is adjourned.
    [Whereupon, at 11:50 a.m., the hearing was adjourned.]

                               APPENDIXES

                              ----------                              


                               Appendix I

                   Responses to Additional Questions

                              ----------                              

      National Association of Abandoned Mine Land Programs,
                                    Frankfort, KY, October 5, 2005.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Senator Domenici: Thank you for providing the Interstate 
Mining Compact Commission and the National Association of Abandoned 
Mine Land Programs the opportunity to testify before your Committee on 
September 27. We appreciate the time before the Committee to comment on 
Senate bills 1701 and 961.
    Please find below the responses to the follow-up questions from the 
committee.
    Thank you again for the opportunity to testify and to address these 
important questions. Please do not hesitate to contact me if you need 
further information.
            Sincerely,
                                             Steve Hohmann,
                                       Director, State of Kentucky.
[Enclosure.]

    Question 1. You state that ``any adjustment to the current 
certification process should not inhibit the ability of 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. In the past, there have been suggestions to change the 
provisions of Section 409 of SMCRA by disallowing noncoal work in 
states that are not certified and that have high priority coal related 
work remaining. We do not believe any changes to Sections 409 are 
necessary. States and Tribes should have the option, as is allowed 
under current SMCRA guidelines, to reclaim those non-coal sites that 
pose an extreme hazard to either residents of the area, or visitors to 
the site. If new legislation eliminates this option, states and Tribes 
could be forced to reclaim lower priority coal sites while leaving high 
priority non-coal hazards in place. Most states do not have programs or 
funding in place for reclamation of non-coal hazards, so SMCRA funding 
is the only option available to provide protection to the public from 
these dangers. New legislation should continue to allow states, those 
closest to the problem, an appropriate level of flexibility to 
prioritize extreme hazards posed by non-coal sites.
    The other concern is with regard to certification under Section 
411. Some legislative approaches (including S. 961) would allow the 
Secretary (or others) to initiate the certification process on his/her 
own volition, rather than on application by the state or tribe. We 
believe that this could result in undue pressures on a state or tribe, 
thereby throwing its AML program into unnecessary and unproductive 
turmoil. Pursuant to the primacy principles of SMCRA, the states and 
tribes are in the best position to know whether certification is 
appropriate and in the best interests of the state or tribe. OSM 
appears to agree with us on this matter, as the agency stated its 
intent at the hearing not to pursue Secretarial certification.
    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. We begin by noting that the alleged ``disagreement'' about 
the ``scope and priority of abandoned mine problems'' does not reside 
with OSM or the states. Rather, detractors of the AML program and 
opponents of reauthorization legislation have used it as a smokescreen. 
They have little knowledge of how the inventory operates or how the 
states and tribes prioritize the limited funding they receive each 
year. The allegation also demonstrates complete unfamiliarity with or 
lack of comprehension about the nature of the AML inventory envisioned 
by Congress. The inventory has always been a planning tool that would 
by its nature evolve to reflect new problems and priorities. OSM's own 
guidance on how to define priority problems does not require or even 
anticipate similar results from state to state, given the fact that 
diversity is inherent in the concept of state primacy under SMCRA.
    State, tribes, and OSM update the AML inventory (AMLIS) when new 
problems are reported and as reclamation abates an AML problem. Section 
403 of SMCRA and OSM directives governing the AML inventory provide a 
framework for states and tribes to consistently prioritize AML 
problems. However, states and tribes exercise individual discretion in 
prioritizing AML problems and must have flexibility because of varying 
land uses and population densities occurring in different regions of 
the country. An AML problem categorized as priority I or II in the 
western U.S. may not necessarily receive the same priority in the east. 
We believe Congress intentionally allowed this flexibility pursuant to 
the primacy scheme set forth in SMCRA and subsequent amendments. It has 
also been reaffirmed by OSM in its policy directives, which provide for 
AML programs to be adaptable to different regions of the country, 
thereby extending program safeguards to as many citizens as possible.
    Question 3. In Mr. Finkenbinder's testimony, he complained about 
how the ``goal line'' keeps moving with respect to the inventory of 
priority sites. Do you agree with the assertion that less serious sites 
are being added to the list as more problematic sites are addressed? 
What do you say in response to testimony we have before us today that 
one reason for the increase in priority sites is due to an increase in 
population density in and around old coal mining sites?
    Answer. Mr. Finkenbinder, in delivering testimony for the National 
Mining Association (NMA), complained of many things, one of them being 
the moving ``goal line'', but he failed to comment on the legislation 
that was the subject of the hearing and offered no constructive 
proposal to deal with the failings he cited.
    The ``goal line'' is a euphemism concocted and perpetuated by 
interests whose only ``goal line'' is to end the AML program. While we 
understand that the AML program was not intended to last forever, we do 
believe it was intended to remain in place as long as there are 
nationwide AML problem to address. (We agree with the statement made by 
Mr. Tom Shope of OSM in his testimony when he stated that, ``The 
Administration believes the AML problem is a national problem that 
calls for a national solution.'') Therefore, the ``goal line'' cannot 
be expressed in terms of an immutable number of AML problems in an 
inventory. The ``goal line'' must be expressed as a mission. The 
mission of the program is defined not by the inventory, but rather by 
the framework outlined by Congress in Title IV, its subsequent 
amendments, and OSM interpretations. The mission is to eliminate coal 
and noncoal AML problems (not AML mine sites) in a scheme that 
generally requires reclamation based on a priority system until we are 
no longer faced with a national problem requiring a national solution.
    The NMA wishes to limit the scope, or goals, of the AML program by 
discarding OSM policies and Congressional intent embodied in amendments 
to Title IV since SMCRA was adopted in 1978. In doing so, NMA is 
dismissing the flexibility needed by individual states and tribes to 
work on AML problems that are most important to each of them. This 
enables NMA to misrepresent the goal of the AML program as a single 
purpose and then mistakenly claim that the goal has not been met.
    There are several reasons why the AML inventory continues to grow. 
The most important are matters of funding reality. First, an AML site 
can produce many AML problems. Often, the state reclamation authority 
cannot reclaim the mine itself; it can only reclaim the AML problem the 
site caused. Because of this reality, the site can cause many problems 
that take years to manifest. For instance, a large AML contour mine can 
cause a landslide in the year 2005. The AML program will undertake a 
project to reclaim the landslide, but cannot possibly afford to reclaim 
the entire contour mine. So the mine remains in its unreclaimed state 
and can cause another landslide or other AML problems in the future. 
Hence, it becomes apparent that because the mission of the program is 
to focus on AML problems, and its financial limitations preclude 
enormous reclamation projects, the ``goal line'' mentality that defines 
the AML problem within a finite universe is unreasonable.
    Second, the NMA states that less than 40% of the funds collected 
for the AML program have found their way to on-ground reclamation of 
high priority, coal-related problems. NMA's statement insinuates this 
is due to watered down priorities, abuse of priorities by the states, 
and excessive administrative costs. However, the real culprit 
accounting for the low percentage of funds for reclamation is the 
unappropriated balance. In fact, in 2001 OSM reported that only 54% of 
the fees collected have been allocated to the states over the life of 
the AML program. The balance, which now stands at $1.6 billion, is the 
single most important factor limiting the amount of money available for 
on-ground AML reclamation. Year after year of dwindling appropriations 
for AML programs have seriously compromised states' and tribes' ability 
to address the AML problems on the inventory. Inflated construction 
costs compound the problem by shrinking the buying power of the few AML 
dollars that reach the AML programs. Without a doubt, the ``moving goal 
line'' scenario would be minimized, if not eliminated, had state and 
tribal AML programs been given full funding, vis-a-vis collections, 
over the past 27 years. In this context, and using the ``goal line'' 
analogy here for the sake of argument, it is obvious that the goal line 
has not been moved. Rather, the state and tribal AML programs have been 
repeatedly penalized and set further back from the goal line.
    Third, new AML problems emerge all the time. The states and tribes 
stand by our statement made in testimony that one reason for the 
increase in the number of priority AML problems (mistakenly interpreted 
as ``moving the goal line'') is the movement of populations into areas 
where abandoned mines exist that were formerly rural and consequently 
had little or no human intrusion. Once subdivisions and neighborhoods 
expand into these areas, AML sites that once posed no threat because of 
their remoteness now become dangerous to people who live near them. We 
have no quantitative statistics to depict the number of AML problems 
that have appeared because of population migration. However, this is a 
general trend our AML programs have observed in the past few years and 
it continues to occur.
    We also take issue with another observation made in the NMA 
statement. NMA quotes a GAO report that states that, between 1985 and 
1990, the states and tribes spent 28% of their AML grant funds on 
administrative costs to operate the AML program. NMA goes on to say 
that this percentage is probably low since AML programs bury 
administrative costs in their construction projects to avoid detection.
    First, Title IV of SMCRA allows states and tribes to pay 
administrative costs from their AML grants. Most states would not have 
an AML program if not allowed to fund program administration from the 
AML grant.
    Second, the percentage of administrative costs borne by the AML 
program is determined by the definition of administrative costs. For 
example, while NMA may believe that AML project inspection is an 
administrative cost, OSM has determined (as do many other federal 
agencies with similar construction-based programs) that project 
inspection is a legitimate construction cost. Certainly, if the AML 
agency were to contract the design and construction to an outside 
consultant, all design and inspection costs would be included in the 
construction account, not the administrative account. So the same 
should hold true when the agency decides to assume the duty of design 
and inspection. In fact, it is often the case that the agency can 
assume these duties for less expense than if done by a third party, 
thus saving overall AML funds regardless of whether it is an 
administrative or construction cost.
    Third, in January 2001 the states and tribes of the NAAMLP 
conducted their own survey of the administrative costs associated with 
the AML program. We found that percentages varied widely from state to 
state (mainly because of how states define administrative costs) but 
the average was 14%. This percentage was determined based upon the 
definition of administrative costs found in the OSM Federal Assistance 
Manual in Chapter 5-10(A).
    To further support our position on administrative costs, we point 
to the OSM 2004 Annual Report. In Table 3 on page 16 in the Abandoned 
Mine Land section of that report, OSM itemizes administrative costs for 
the grant year. Table 3 indicates that states and tribes spent 
$24,094,797 on administrative costs out of a total grant of 
$200,905,691. In other words, according to OSM states and tribes spent 
12% of the grant on administrative costs. This correlates very closely 
with the percentage from the 2001 NAAMLP survey. We believe the 
percentages we have presented to the committee represent a more 
accurate picture of ``how much we need to spend in order to spend'' 
than the numbers quoted by NMA.
                                 ______
                                 
                                  State of Wyoming,
                       Department of Environmental Quality,
                                     Cheyenne, WY, October 5, 2005.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Senator Domenici: Thank you for giving the State of Wyoming 
the opportunity to testify before your committee on Senate Bills 1701 
and 961. Wyoming is pleased to provide the following written response 
for the record to the questions enclosed with your letter of September 
29, 2005.
            Sincerely,
                                             Evan J. Green,
                                                 AML Administrator.
[Enclosure.]

    Question 1. 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. The Office of Surface Mining (OSM), through the Casper 
Wyoming Field Office, reviews the State's Abandoned Mine Land Inventory 
System (AMLIS) entries for accuracy and appropriate priority 
designation.
    Broad guidelines for the States and Tribes to use in prioritizing 
hazardous sites are contained in the Surface Mining Control and 
Reclamation Act (SMCRA). These guidelines are further defined by the 
criteria that OSM directs the States to use when entering hazardous 
sites into AMLIS. Wyoming believes that individual states should retain 
the flexibility to prioritize sites and budget sites for reclamation 
based on the state's assessment of the hazards to public health and 
safety. Abandoned mine sites may pose different problems in densely 
populated states like Pennsylvania or West Virginia than in a sparsely 
populated state. Wyoming relies on the integrity and experience of its 
mine reclamation professionals in the assessment of hazards to citizens 
and visitors
    Wyoming has just completed a comprehensive statewide inventory 
process designed to gather technical and cost data relative to 
remaining coal and non-coal hazards. Wyoming has a high level of 
confidence in the accuracy of this process. Over 10,000 sites were 
identified from original sources and databases, including the Bureau of 
Mines, USGS, the Wyoming Geological Survey, local museums, and company 
records. These sites were then screened to eliminate duplicates and 
verify production records. About 1,200 sites were singled out for field 
verification. Based on site visits by qualified mining and reclamation 
engineers, cost data is now being developed for 393 priority 1 and 
priority 2 coal sites, and for 650 hazardous non-coal sites. These 
sites will be placed on the Abandoned Mine Land Inventory System 
(AMLIS) as funds are available to budget these sites for reclamation.
    Question 2. In Mr. Finkenbinder's testimony, he complained about 
how the ``goal line'' keeps moving with respect to the inventory of 
priority sites. Do you agree with the assertion that less serious sites 
are being added to the list as more problematic sites are addressed? 
What do you say in response to testimony we have before us today that 
one reason for the increase in priority sites is due to an increase in 
population density in and around old coal mining sites?
    Answer. Wyoming's inventory and budgeting process considers only 
Priority 1 and Priority 2 hazards. Priority 3 sites (primarily 
environmental issues) are reclaimed only in conjunction with P1 and P2 
sites. For example, coal slack in a drainage would be reclaimed only if 
the material could be used economically as backfill to close a P1 or 
P2. Wyoming has a sufficient inventory of high priority sites and does 
not add less serious sites to our inventory. We do retain an internal 
inventory of ``less serious'' sites. Responsible AML program management 
would dictate that those responsible for protecting the public from AML 
hazards maintain an accurate inventory of sites that may become 
Priority 1 in the future due to opening of subsidence features, mine 
roof failures, or erosion into open workings. Note that these ``less 
serious'' sites are not entered into AMLIS.
    The number and cost of remaining sites has been increasing for a 
number of reasons. Historical coal fields are notoriously unstable. As 
mine timbers decay and old closures deteriorate, new priority 1 sites 
open up exposing all the dangers associated with public access to 
underground workings. Costs of reclamation have increased dramatically 
over normal inflation due to rising costs of fuel and construction 
materials. The longer reclamation is delayed, the more it will cost.
    Wyoming agrees that one reason for an increase in high priority 
sites is the encroachment of subdivisions into historical mine fields. 
Also, as more and more people utilize recreational opportunities in the 
West, visitation to remote but easily accessible sites on public land 
increases the possibility of a catastrophe. People in Western states 
have died driving into mine shafts or air vents, overturning vehicles 
in closed but unreclaimed subsidence features, riding off-road vehicles 
over highwalls, and exploring open mine shafts and adits. Individual 
states are in the best position to prioritize hazards to public health 
and safety within the guidelines provided by SMCRA.
                                 ______
                                 
                            United Mine Workers of America,
                                     Fairfax, VA, October 14, 2005.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Mr. Chairman: I want to thank you for the opportunity to 
testify at the September 27, 2005 hearing on reauthorization of AML 
program and reform of the Coal Act. We appreciate the committee's 
continued interest in the UMWA Funds and its programs to keep the 
promise of lifetime health care to retired coal miners.
    Attached are answers to the questions you submitted for the record. 
Please let me know if I can be of further service as the committee 
finalizes its work to reauthorize the AM1 program.
            Sincerely,
                                             Daniel J. Kane
                                 International Secretary-Treasurer.
[Enclosure.]
           UMWA Responses to Questions From Chairman Domenici
    Question 1. In your testimony, you describe proposed legislation 
that you refer to as the ``Cubin-Peterson-Rahall'' compromise. This so-
called ``compromise'' does seem to provide something for everyone, but 
it's unclear at this point exactly how much it would cost. Your 
testimony indicates that, in addition to lowering the AML fee and 
paying back the state share balances, the ``compromise'' would provide 
for the transfer of AML Fund interest and unappropriated funds to the 
``CBF, 1992 and 1993 Funds to pay health benefits for orphans and cover 
any deficits.'' In addition, you describe the use of additional 
revenues from mineral leasing and royalty revenue ``as needed'' to 
cover ``health care costs of orphan retirees in the CBF, 1992 and 1993 
Funds.'' Exactly what portion of the costs of these funds would the 
legislation cover? In particular, since the 1992 Fund is completely 
paid for by specified companies, and as such, will not run a 
``deficit,'' how would this legislation determine the level of payments 
to be made for that Fund? What is the total amount of government 
liability for these Funds under this proposal?
    Answer. The Cubin-Peterson-Rahall compromise would provide support 
for unassigned CBF beneficiaries and would permit the use of AML 
interest to cure deficits in the CBF, much as Congress has done on 
three separate occasions with emergency appropriations of AML interest. 
It also would permit transfers to help pay for orphan beneficiaries in 
the 1992 and 1993 Plans. For the 1993 Plan, the compromise would limit 
transfers only to orphan retirees who were in the 1993 Plan as of 
December 31, 2005.
    The compromise legislation would also substitute mineral leasing 
revenues for premiums currently paid by so-called ``reachback'' 
operators and would reimburse contributions made by the ``final 
judgment'' companies\1\ to the CBF prior to the Eastern Enterprises 
Supreme Court decision.
---------------------------------------------------------------------------
    \1\ ``Final judgment'' companies are companies that had received a 
final adverse judgment on their court challenge to the Coal Act prior 
to the Supreme Court ruling in Eastern Enterprises. These companies 
were relieved of prospective liabilities to the CBF as a result of the 
Eastern ruling, but did not receive reimbursement of previously paid 
premiums because their cases had gone to final judgment and the courts 
upheld the CBF's position regarding reimbursement.
---------------------------------------------------------------------------
    The Coal Act provides that the trustees of the 1992 Plan should set 
the premium rates paid by coal operators at a level sufficient to cover 
the costs of running the plan. Consequently, the 1988 Agreement 
operators are billed whatever premium amounts are needed to pay the 
health costs of the plan and are required by law to pay such premiums. 
Therefore, your observation is correct that there is no projected 
deficit in the 1992 Plan. The problem is that the orphan population has 
grown significantly in recent years due to bankruptcies of several 
large companies, including Bethlehem Steel in 2003 and Horizon Natural 
Resources in 2004. These two companies alone added about 7,000 
beneficiaries to the 1992 and 1993 Plans. As the population grows and 
medical costs escalate, an ever-increasing burden is placed on the 
companies contributing to the plan. For example, the pre-funding 
premium for the 1992 Plan has increased from $82 per beneficiary in 
1993 to nearly $650 per beneficiary in 2006.\2\ The pre-funding premium 
is projected to increase to $3,470 per beneficiary in 2017.
---------------------------------------------------------------------------
    \2\ Rates for 2006 have not been finalized. The 1992 Plan is funded 
through ``per beneficiary premiums'' required to be paid by last 
signatory employers to whom retirees may be attributed and by ``pre-
funding premiums'' paid by 1988 Agreement operators. Because most of 
the Plan's population cannot be attributed to any employer that remains 
in business, most of the Plan's expenses are paid by the operators who 
pay pre-funding premiums. The pre-funding premium cost is therefore 
equivalent to the cost of orphan retirees and beneficiaries in the 1992 
Plan, and this cost is paid by operators who did not employ the orphan 
miners. The amount of pre-funding premium paid by each 1988 Agreement 
operator is determined by the number of retiree the operator has in its 
single employer health plan mandated to be maintained by section 9711 
of the Coal Act. (Hence the term ``9711 plan.'') In addition, operators 
who provide 9711 plans must post security with the 1992 Plan to pay for 
three years of benefits in case the 1992 Plan must assume the 
obligation to provide benefits.
---------------------------------------------------------------------------
    In addition, if the reachback and final judgment companies are to 
receive relief under the compromise, it only seems fair to also provide 
some orphan retiree relief to the remaining companies that will 
continue to finance the UMWA Funds. Under current law, the final 
judgment companies have no ongoing liability and the reachback 
companies only pay for the costs of their retirees in the CBF. They 
have no Section 9711 retiree obligations, nor do they contribute to the 
1992 or 1993 Plans. In contrast, the 1988 Agreement employers pay for 
their retirees in the CBF, over 40,000 beneficiaries in their Section 
9711 plans under the Coal Act, as well as the orphan costs of about 
18,000 beneficiaries in the 1992 and 1993 plans. Under the compromise, 
the remaining contributing operators will continue to pay for their own 
retirees, but will receive help with the orphan retirees from federal 
sources.
    The total expenditures under the compromise bill for health care 
benefits are projected at $2.3 billion over ten years, about $1.4 
billion more than under current law.\3\ The projection for the CBF is 
$1.1 billion, $640 million for the 1992 Plan and $560 million for the 
1993 Plan. We understand that the Congressional Budget Office (CBO) 
scored the bill in July 2005 as increasing spending for health benefits 
about $1.5 billion and increasing revenues about $0.7 billion, for a 
net increase of $0.8 billion. We also understand that the Senate Budget 
Committee and the House Resources Committee have asked CBO to provide 
an analysis on the compromise.
---------------------------------------------------------------------------
    \3\ Under current law, the CBF is entitled to interest earned each 
year on the AML Fund up to the amount need to pay for unassigned 
beneficiary costs. OSM maintains there is a cap of $70 million on the 
annual transfers. The UMWA disagrees with OSM about the $70 million 
cap. Even conceding for argument's sake that OSM is correct, this would 
imply a transfer of $700 million over ten years.
---------------------------------------------------------------------------
    Question 2. We now have a long history of transfers of money from 
the federal government to keep the CBF solvent. I understand your 
desire to ensure the solvency of the 1992 and 1993 Funds as well. 
However, please summarize your case for why the American taxpayer 
should assume the liability for the 1992 and 1993 Funds. According to 
Ms. Lewis' testimony, the costs of the 1992 Fund are required to be 
covered by industry operators and will not run a deficit. Why should 
Congress assume responsibility for the 1993 Fund, which is entirely the 
product of a collective bargaining agreement between the UMWA and coal 
operators?
    Answer. The underlying premise of the Coal Commission 
recommendations and the Coal Act was that each coal operator would pay 
for its own retirees and mechanisms would be put in place to prevent 
dumping of retiree health obligations onto other operators and the UMWA 
Funds. If that premise had in fact been fulfilled, there likely would 
not be a need to seek relief for the 1992 and 1993 Plans. However, the 
bankruptcy laws have been used by companies to shed their retiree 
obligations-both contractual and Coal Act--while the underlying assets 
of the companies remain in business, competing with the companies that 
shoulder the burden for their retirees. The steel plants and coal mines 
owned by LTV, Bethlehem Steel and Horizon Natural Resources continue to 
operate today, generating revenues for their owners that are enhanced 
because the bankruptcy laws allowed them to dump their retiree health 
liabilities onto the UMWA Funds. The remaining contributing employers--
who continue to pay for their own retirees--have shouldered an 
additional orphan burden because the bankruptcy laws have been used as 
a laundromat by some employers to wash away their Coal Act and 
contractual retiree health care obligations. This is precisely the sort 
of retiree dumping that the Coal Act was intended to prevent. Because 
the law has failed to prevent the dumping of retirees onto the UMWA 
Funds, however, we are in danger of returning to the situation the Coal 
Act sought to address--a small number of employers burdened with the 
retiree costs of companies that have avoided their obligations, often 
companies that are in direct competition with the remaining 
contributing employers.
    All three plans--the CBF, 1992 and 1993 Funds--are successors to 
the original UMWA Welfare Fund that was negotiated in the White House 
in 1946 between the UMWA and the Federal Government during a period of 
government seizure of the nation's bituminous coal mines. Since that 
time, every branch of the federal government has had a role in shaping 
the UMWA Funds. When the Coal Commission examined the coal industry 
retiree health problem in detail in 1990, it concluded that:

          ``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.''

    All of the retirees, regardless of the plan they receive their 
health benefits from, worked in the same mines, under the same 
contracts, facing the same dangerous conditions to produce energy for 
America. They all have legitimate expectations of health benefits for 
life. They all received the same promise. The only difference is the 
date of their retirement. Every retiree who is covered by the 
compromise was retired or working in the industry at the time the 
lifetime promise was made. We believe that orphan retirees, those whose 
companies have gone out of business, have the same legitimate 
expectations as those whose employers remain in business. The problem 
is how to fund those benefits. The situation that is developing now is 
the same issue that led to passage of the Coal Act; a dwindling number 
of employers bearing a heavy burden for retirees who did not work for 
them.
    The financing mechanism contemplated by the Cubin-Peterson-Rahall 
compromise would first use interest money from the AML Fund, then 
revenues from on-shore mineral leasing, then would look to general 
revenues only if those sources of financing proved insufficient.
    Question 3. What is the status of the 1993 Fund? We understand that 
it is the product of a collective bargaining agreement. When does that 
collective bargaining agreement expire, and what is the status of 
negotiations regarding a new agreement?
    Answer. As of September 30, 2005 there were 7,117 total 
beneficiaries in the UMWA 1993 Benefit Plan, up from 3,887 at the same 
point in 2004. The 1993 Plan had net assets available for future 
benefits of $11.2 million as of August 31, 2005. The current projection 
is that the 1993 Plan, absent additional funding, will exhaust its cash 
sometime in the first half of 2006. The National Bituminous Coal Wage 
Agreement of 2002 (NBCWA) is scheduled to expire December 31, 2006. 
Negotiations for a successor agreement have not yet begun.

           UMWA Responses to Questions From Senator Bingaman

    Question 1. Please provide a state-by-state breakdown of the number 
of UMWA health plan beneficiaries.
    Answer. A list of beneficiaries by state and health plan is 
attached.
    Question 2. How many so-called ``orphaned'' or ``unassigned'' 
beneficiaries are in each Fund?
    Answer. Attached is a population projection for the three plans 
that was prepared by the UMWA Funds based on actuarial projections by 
the Funds health actuary, King Associates. In 2005, the average 
population of the CBF was 38,518 beneficiaries, of which 16,721 were 
unassigned beneficiaries. For the 1992 Plan, the average population in 
2005 was 11,392 beneficiaries, the great majority of whom are orphan 
beneficiaries. When companies go out of business, the 1992 Plan 
collects the bond or other security that is required by the Coal Act 
and any other money that may be due the Plan from the company or its 
estate. These monies are then used to pay for those beneficiaries for 
as long as the money lasts, at which time they would be considered 
orphans. For the 1993 Plan, all of the beneficiaries are considered 
orphans because, by definition, their employers are no longer in 
business. As of September 30, 2005, there were 7,117 total 
beneficiaries in the 1993 Plan.

            UMWA Responses to Questions From Senator Salazar

    Question 1. Which of these legislative proposals does the UMW 
prefer? Could you explain why you favor a certain proposal over others?
    Answer. The UMWA is supporting the Cubin-Peterson-Rahall compromise 
legislation, which has not yet been introduced in the U.S. Senate. Of 
the two bills pending in the Senate (S. 961 by Senator Rockefeller and 
S. 1701 by Senator Thomas), we believe S. 961 is a better bill because 
it recognizes the need for assistance with orphans in the 1992 and 1993 
plans. However, the Cubin-Peterson-Rahall compromise offers better 
financial mechanisms to ensure that the promise of lifetime health care 
to coal industry retirees is fulfilled. In addition, the compromise 
deals comprehensively with Coal Act issues raised by all interested 
parties, including the retirees, contributing employers, the 
``reachback'' companies and the ``final judgment'' companies.
    Question 2. It appears that you are working hard to reduce 
healthcare costs by using a number of measures--given the rising cost 
of healthcare, your efforts are noteworthy. Have you worked with other 
healthcare systems, like the Veterans Affairs system, to develop 
policies? Are their certain cost-saving measures that you are precluded 
from implementing?
    Answer. The UMWA Funds has been the site of a Medicare 
demonstration program since 1990, which has made the Funds a test bed 
for developing, evaluating and disseminating new programs for the care 
of chronically-ill, frail, elderly beneficiaries. The central thrust of 
the Funds managed care activities is to ensure that beneficiaries 
receive medically necessary care at the appropriate level in a manner 
that is consistent with standards of high quality and cost 
effectiveness.
    According to the results of a 2004 study conducted by Mercer Human 
Resources Consulting, the beneficiary population served by the UMWA 
Funds has a 35% percent greater burden of illness compared to the 
general Medicare population. On a series of biannual surveys conducted 
by the UMWA Funds, over 50% percent of the responding beneficiaries 
reported their health as ``fair'' or ``poor'' as distinguished from the 
other available categories of ``excellent,'' ``very good,'' or 
``good.'' The Mercer study further reported that the cost of health 
care for the plans was significantly less--by seven percent--than the 
level to be expected for the burden of illness found in the population. 
We believe this result lower than expected costs in a population with 
greater than average health burdens--is a direct result of the UMWA 
Funds managed care programs.
    These programs include contracts with hospitals and other providers 
to pay at Medicare levels for the plans' Medicare and non-Medicare 
eligible beneficiaries and the establishment of a network of durable 
medical equipment providers with bargained lower costs. Costs in the 
plans' prescription drug benefit programs are managed by use of co-pay 
incentives for use of mail-order drugs, requirements for use of 
generics when available in the absence of medical necessity for brand 
name drugs, and a preferred product program encouraging use of less 
expensive therapeutic equivalents in important drug classes. The plans 
also employ expert medical management teams to ensure the most 
effective courses of treatment, especially for beneficiaries with a 
high burden of chronic illness, and these services help to reduce 
hospital admissions and save costs over the long term. A full report on 
the UMWA Funds managed care programs was submitted for the hearing 
record as an attachment to the Funds testimony.
    The UMWA believes these efforts have proven effective and we 
consistently encourage the trustees and staff of the UMWA Funds to 
develop innovative programs that will improve the quality and cost of 
care given to our retirees. We do not share the philosophy that seems 
prevalent in many corporate plans that the way to ``control'' costs is 
to ``shift'' them to the beneficiary. While these efforts may 
temporarily lower the cost to the corporate sponsor (at the expense of 
the beneficiary), they do nothing to tackle the underlying problem of 
escalating health costs.

 UMWA HEALTH AND RETIREMENT FUNDS DISTRIBUTION OF BENEFICIARIES BY STATE
                                AND PLAN
                     [Data Current as of 08/31/2005]
------------------------------------------------------------------------
                                 CBF      1992 BP    1993 BP     Total
------------------------------------------------------------------------
AK..........................       12          2          3         17
AL..........................    1,343        216        138      1,697
AR..........................      163          7          1        171
AZ..........................       89         13          0        102
CA..........................      159          6          2        167
CO..........................      382        130         12        524
CT..........................       15          1          0         16
DC..........................       11          0          0         11
DE..........................       27          5          0         32
FL..........................      777        130         39        946
GA..........................      127         24          5        156
HI..........................        0          1          0          1
IA..........................       15          2          0         17
ID..........................       12          0          0         12
IL..........................      974      1,019        868      2,861
IN..........................      530        387        528      1,445
KS..........................       45         63         57        165
KY..........................    4,661      1,282        636      6,579
IA..........................       12          0          0         12
MA..........................        9          1          0         10
MD..........................      209         20          2        231
ME..........................        1          1          0          2
MI..........................      228          6          2        236
MN..........................       10          1          2         13
MO..........................       71         14         25        110
MS..........................       15          1          1         17
MT..........................       40          3          0         43
NC..........................      394         82         35        511
ND..........................        3          0          0          3
NE..........................        6          0          0          6
NH..........................        6          0          0          6
NJ..........................       73          4          0         77
NM..........................       75         19          2         96
NV..........................       21          4          2         27
NY..........................      124          2          2        128
OH..........................    2,457        236        159      2,852
OK..........................      138         15          6        159
OR..........................       18          0          0         18
PA..........................    7,119      3,089      1,185     11,393
PR..........................        0          2          0          2
RI..........................        2          0          0          2
SC..........................      141         34          8        183
SD..........................        1                     2          3
TN..........................    1,014        105         46      1,165
TX..........................       88         24          4        116
UT..........................      413         74         61        548
VA..........................    3,326        540        365      4,231
VT..........................        2          0          0          2
WA..........................      100          2          2        104
WI..........................       16          4          0         20
WV..........................   11,423      3,722      2,889     18,034
WY..........................       97          2          4        103
Other.......................        3          1          0          4
                             -------------------------------------------
Total.......................   36,997     11,296      7,093     55,386
------------------------------------------------------------------------


                                                       UMWA HEALTH & RETIREMENT FUNDS  KING ASSOCIATES ACTUARIAL PROJECTIONS THROUGH 2017
                                                               [Updated to Most Current Available Information--September 22, 2005]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                        Plan Year                               2002           2003           2004           2005           2006           2007           2008           2009           2010
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Combined Benefit Fund
Ending Fund Balance (000's)..............................    ($10,822)      ($29,419)      ($24,735)      ($28,202)      ($64,016)      ($64,399)     ($135,744)     ($196,370)     ($253,614)
Annual Deficit (000's)...................................    ($18,597)         $4,684       ($3,487)      ($35,814)         ($383)      ($71,345)      ($60,626)      ($57,244)
Average Beneficiary Population...........................       52,034         47,298         42,856         38,518         34,714         31,186         27,933         24,953         22,233
Avg. Unassigned Beneficiary Pop..........................       15,614         16,597         17,302         16,721         15,533         14,370         13,244         12,165         11,138
1992 Benefit Plan
Prefunding Premiums Collected (000's)....................      $21,195        $23,768        $20,819        $15,875        $26,059        $44,732        $59,190        $61,028        $62,869
Average Beneficiary Population...........................        6,432          8,126         10,618         11,392         10,917         10,430          9,931          9,432          8,936
1993 Benefit Plan
Ending Fund Balance (000's)..............................       ($261)         ($309)         ($192)         $1,292      ($19,769)      ($49,614)      ($90,598)     ($139,183)     ($195,128)
Annual Deficit (000's)...................................        ($48)           $117         $1,484      ($21,061)      ($29,745)      ($41,084)      ($48,565)      ($55,985)
Average Beneficiary Population...........................        2,948          3,357          3,902          5,530          7,535          8,248          8,780          9,142          9,374
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Figures reflect the Funds' estimates of CMS prescription drug funding, including Medicare demonstration funding through September 30, 2007 and Retiree Drug Subsidy beginning January 1, 2006.
Figures also reflect a preliminary estimate of a Part A risk contract payment to CMS during fall 2006, based on the latest available data.

                                 ______
                                 

                                   UMWA HEALTH & RETIREMENT FUNDS  KING ASSOCIATES ACTUARIAL PROJECTIONS THROUGH 2017
                                           [Updated to Most Current Available Information--September 22, 2005]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                   Plan Year                          2011           2012           2013           2014           2015           2016           2017
--------------------------------------------------------------------------------------------------------------------------------------------------------
Combined Benefit Fund
Ending Fund Balance (000's)....................   ($307,041)     ($354,218)     ($399,897)     ($443,876)     ($486,037)     ($526,143)     ($564,107)
Annual Deficit (000's).........................    ($53,427)      ($47,177)      ($45,679)      ($43,979)      ($42,161)      ($40,106)      ($37,964)
Average Beneficiary Population.................       19,759         17,518         15,500         13,636         11,972         10,545          9,289
Avg. Unassigned Beneficiary Pop. 10,186........        9,252          8,400          7,579          6,824          6,164          5,568
1992 Benefit Plan
Prefunding Premiums Collected (000's)..........      $64,687        $66,239        $87,854        $69,292        $71,076        $73,295        $75,449
Average Beneficiary Population (000's).........        8,444          7,938          7,417          8,901          6,436          6,029          5,637
1993 Benefit Plan
Ending Fund Balance (000's)....................   ($258,640)     ($329,797)     ($408,669)     ($495,584)     ($591,162)     ($698,410)     ($812,250)
Annual Deficit (000's).........................    ($63,512)      ($71,157)      ($78,872)      ($86,895)      ($96,598)     ($105,248)     ($115,840)
Average Beneficiary Population.................        9,522          9,591          9,585          9,541          9,482          9,425          9,372
--------------------------------------------------------------------------------------------------------------------------------------------------------
Figures reflect the Funds' estimates of CMS prescription drug funding, Including Medicare demonstration funding through September 30, 2007 and Retiree
  Drug Subsidy beginning January 1,2006.
Figures also reflect a preliminary estimate of a Part A risk contract payment to CMS during fall 2006, based on the latest available data

                                 ______
                                 
                               National Mining Association,
                                  Washington, DC, October 14, 2005.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Chairman Domenici: The National Mining Association (NMA) 
appreciates the opportunity to testify before the Senate Committee on 
Energy and Natural Resources on September 27, 2005, to give testimony 
regarding S. 1701 and S. 961.
    The following are NMA's responses to questions in writing received 
by NMA on September 29, 2005, from Chairman Domenici and October 11, 
2005, from Ranking Member Bingaman.
            Sincerely yours,
                                     David O. Finkenbinder,
                                Vice President, Government Affairs.
[Enclosure.]

   Responses of David Finkenbinder to Questions From Senator Domenici

    Question 1. In your testimony, you complained about how the ``goal 
line'' keeps moving with respect to the inventory of priority sites. Do 
you have any data to support the assertion that less serious sites are 
being added to the list as more problematic sites are being addressed? 
What do you say in response to testimony we have before us today that 
one reason for the increase in priority sites is due to the increase in 
population density in and around old mining sites?
    Answer. The point made in NMA's testimony is that the high priority 
inventory has continued to expand while there appears to be only 
relatively modest progress made in on-the-ground reclamation of that 
inventory. In our testimony we noted that when the National Academy of 
Sciences (NAS) reviewed the performance of the AML program half way 
through the original authorization period (1986), NAS reported that 
almost all states indicated they would complete reclamation of their 
priority 1 & 2 inventory by the time fee authorization expired in 1992. 
The efficacy of the AML inventory, in terms of its lack of consistent 
criteria and the application of the criteria, has been the subject of 
controversy over the years. In addition to the NAS study we cited in 
our testimony, GAO (``Surface Mining--Information on the Updated AML 
Inventory,'' 88-196BR) and OSM (``Assessment, Evaluation, and Analysis 
of the Fee Collection Provisions and the AML Program of SMCRA,'' August 
1990) have also documented this concern. We have attached a table from 
the OSM report that shows the extraordinary increase in the inventory 
between 1983 and 1989 as well as the results of the inventory review 
mandated under the FY1989 Interior Appropriations Bill. You will also 
note the dramatic change in various states' share of the inventory as 
the inventory was expanded and revised in a relatively short period of 
six years. As the OSM report notes, some states were generous in adding 
sites and the attendant cost estimates due to the linkage between the 
inventory share and funding levels.
    Our other point about the inventory and priorities was that several 
states expended considerable sums on Priority 3 sites while substantial 
amounts of unreclaimed Priority 1 and 2 sites remained in their states. 
The data contained on OSM's website indicates that Indiana and 
Illinois, for example, have actually expended more AML money on 
priority 3 sites than the Priority 1 & 2 sites in their states.
    We have no reason to doubt that the increase in the Priority 1 & 2 
inventory is in part a result of the increase in population density 
around certain AMLs. However, to our knowledge no one claims that 
population density is the sole or even perhaps the principal reason for 
change in the Priority 1 & 2 inventory.
    Question 2. In his testimony, Mr. Kane describes a proposal he 
refers to as the ``Cubin-Peterson-Rahall compromise.'' What is the 
position of the National Mining Association on this proposal?
    Answer. The NMA has no position on the ``Cubin-Peterson-Rahall 
compromise.''
   Responses of David Finkenbinder to Questions From Senator Bingaman
    Question 1. Does the NMA support the extension of the AML fee? If 
so at what rate?
    Answer. The NMA has no position on the extension of the AML fee.
    Question 2. Do you support the modification of the allocation of 
funds under the Surface Mining Control and Reclamation Act to ensure 
that funds are directed to the States with the highest needs?
    Answer. The NMA has no position on the allocation AML funds.
    Question 3. Do you support the payment of unappropriated AML state 
share balances to the states, even where states have certified 
completion of their AML coal work?
    Answer. The NMA has no position on the payment of AML state share 
balances to the states, even where states have certified completion of 
their AML coal work.
    Question 4. Do you support the use of Mineral Leasing Act receipts 
to defray expenses of the UMWA coal miner retiree health benefits 
funds?
    Answer. The NMA has no position on the use of Mineral Leasing Act 
receipts to defray expenses of the UMWA coal miner retiree health 
benefits funds.
                                 ______
                                 
 ASSESSMENT, EVALUATION, AND ANALYSIS OF THE FEE COLLECTION PROVISIONS 
 AND THE ABANDONED MINE LAND RECLAMATION PROGRAM OF THE SURFACE MINING 
                  CONTROL AND RECLAMATION ACT OF 1977
 division of abandoned mine land reclamation office of surface mining 
                      reclamation and enforcement
                              august 1990

                                                       AML INVENTORY OF PRIORITY ONE AND TWO PROBLEM AREAS IN PROGRAM STATES AS OF 05/1/90
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        Historical Coal Prod.                           AML Inventory 1986     AML Inventory 1987
                                                        Tonnage Base Upon EIS    AML Inventory 1983    \1\ (As of 12/04/86)   \1\ (As of 11/30/87)   AML Inventory  1989     AML Inventory 1989
                      State Name                           \1\ (86/87/88/89        \1\ (84/85/86        (1987 Allocation)      (1988 Allocation)     \1\ \2\  (Existing)        (Scrub) \3\
                                                             Allocations)           Allocations)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ALABAMA...............................................                 2.86%                  2.11%                  0.19%                  0.59%                  0.68%                  1.25%
ALASKA................................................                 0.03%                  0.00%                  0.00%                  0.01%                  0.00%                  0.01%
ARKANSAS..............................................                 0.24%                  0.17%                  0.11%                  0.37%                  0.37%                  0.44%
COLORADO..............................................                 1.39%                  0.02%                  0.69%                  0.37%                  0.41%                  0.75%
ILLINOIS..............................................                10.60%                  4.01%                  1.26%                  0.81%                  0.82%                  1.54%
INDIANA...............................................                 3.45%                  1.36%                  2.77%                  1.17%                  1.31%                  2.85%
IOWA..................................................                 0.84%                  0.96%                  0.57%                  0.49%                  0.51%                  0.78%
KANSAS................................................                 0.68%                  0.57%                  2.85%                  2.06%                  2.07%                  2.36%
KENTUCKY..............................................                10.39%                  0.00%                 24.35%                 10.79%                  9.27%                 12.71%
LOUISIANA.............................................                 0.00%                  0.00%                  0.00%                  0.00%                  0.00%                  0.00%
MARYLAND..............................................                 0.67%                  0.15%                  0.00%                  0.53%                  0.52%                  0.24%
MISSOURI..............................................                 0.82%                  2.35%                  5.70%                  2.34%                  2.37%                  2.64%
MONTANA...............................................                 0.68%                  0.08%                  0.49%                  0.33%                  0.30%                  0.69%
NEW MEXICO............................................                 0.50%                  0.17%                  0.08%                  0.09%                  0.08%                  0.18%
NORTH DAKOTA..........................................                 0.43%                  0.19%                  0.19%                  0.21%                  0.20%                  0.47%
OHIO..................................................                 6.50%                 12.16%                  5.26%                  3.57%                  3.43%                  6.33%
OKLAHOMA..............................................                 0.49%                  1.73%                  2.24%                  2.41%                  2.44%                  1.28%
PENNSYLVANIA..........................................                34.26%                 64.09%                 42.30%                 28.17%                 29.54%                 37.99%
TEXAS.................................................                 0.14%                  0.00%                  0.49%                  0.18%                  0.18%                  0.32%
UTAH..................................................                 0.81%                  0.00%                  0.08%                  0.25%                  0.25%                  0.56%
VIRGINIA..............................................                 3.19%                  0.82%                  5.16%                  4.02%                  3.74%                  5.00%
WEST VIRGINIA.........................................                19.69%                  6.71%                  3.69%                 40.60%                 40.86%                 20.36%
WYOMING...............................................                 1.36%                  2.21%                  1.49%                  0.56%                  0.56%                  1.08%
CROW TRIBE............................................                 0.00%                  0.00%                  0.00%                  0.00%                  0.00%                  0.00%
HOPI TRIBE............................................                 0.00%                  0.00%                  0.03%                  0.04%                  0.04%                  0.08%
NAVAJO TRIBE..........................................                 0.00%                  0.07%                  0.00%                  0.04%                  0.05%                  0.08%
                                                       -----------------------------------------------------------------------------------------------------------------------------------------
    PROGRAM STATES ONLY...............................               100.00%                100.00%                100.00%                100.00%                100.00%                100.00%
                                                       -----------------------------------------------------------------------------------------------------------------------------------------
    TOTAL TONS  1000.........................        43,851,643                    \4\                    \4\                    \4\                    \4\                    \4\
    TOTAL DOLLARS.....................................               \4\           $651,473,289         $2,128,290,793         $5,787,716,527         $5,691,365,196         $2,885,957,935
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ INVENTORY AND HISTORICAL COAL DATA EXTRACTED FROM ALLOCATION RECORDS
\2\ CURRENT INVENTORY HAS RAMP ACCOMPLISHMENTS/PROJECT AREAS SEPARATED AND NOT INCLUDED
\3\ DATA AS OF 07/13/90.
\4\ NOT APPLICABLE.

                                 ______
                                 
                      Abandoned Mine Land Program

RECLAIMED PUBLIC HEALTH AND SAFETY COAL RELATED PROBLEMS BY STATE/INDIAN
                                  TRIBE
                            [Priority 1 & 2]
------------------------------------------------------------------------
             State/Indian Tribe                  (000$)      % of Total
------------------------------------------------------------------------
Alaska......................................     10,526           0.6
Alabama.....................................     32,620           2.0
Arkansas....................................     18,646           1.1
California..................................      1,340           0.1
Cheyenne River..............................      2,647           0.2
Colorado....................................      9,600           0.6
Crow........................................      3,093           0.2
Northern Cheyenne...........................        339           0.0
Fort Berthold...............................         52           0.0
Fort Peck...................................        134           0.0
Georgia.....................................      3,651           0.2
Hopi........................................      1,226           0.1
Iowa........................................     25,087           1.5
Idaho.......................................          0           0.0
llinois.....................................     58,210           3.6
Indiana.....................................     43,944           2.7
Jicarilla Apache............................         21           0.0
Kansas......................................     16,678           1.0
Kentucky....................................    263,071          16.2
Maryland....................................     18,618           1.1
Michigan....................................      2,342           0.1
Missouri....................................     42,163           2.6
Montana.....................................     17,897           1.1
Navajo......................................      1,544           0.1
North Carolina..............................        163           0.0
North Dakota................................     27,538           1.7
New Mexico..................................      6,325           0.4
Ohio........................................     85,603           5.3
Oklahoma....................................     21,114           1.3
Oregon......................................         36           0.0
Pennsylvania................................    345,564          21.3
Rocky Boys..................................         52           0.0
Rhode Island................................        554           0.0
South Dakota................................         37           0.0
Southern Ute................................         90           0.0
Tennessee...................................     15,305           0.9
Texas.......................................      6,788           0.4
Uintah And Ouray............................        102           0.0
Ute Mountain Ute............................         14           0.0
Utah........................................      8,069           0.5
Virginia....................................     73,465           4.5
Washington..................................      1,945           0.1
Wind River..................................         55           0.0
West Virginia...............................    341,726          21.0
Wyoming.....................................    116,601           7.2
                                             ---------------------------
    Total...................................  1,624,597
------------------------------------------------------------------------
Source: Abandoned Mine Land Inventory. (Quarter ending SEPO4), Programs:
  Acid Mine Drainage Plan, Coal Interim Site Funding, Coal Insolvent
  Surety Site Funding, Clean Streams Initiative, Enhanced AML Rule
  Projects, FRP, State Emergency Program, Pre-SMCRA Coal State/Indian
  Tribe Grant Funding, State Set Aside & Watershed Cooperative
  Agreements

                                 ______
                                 
      Response of Charles Gauvin to Question From Senator Domenici

    Question 1. Mr. McElwaine's testimony supports providing incentives 
for mining companies to mine old abandoned mine sites, With the 
understanding that they will reclaim the site. What is Trout 
Unlimited's position on remining?
    Answer. Trout Unlimited supports remining as long as it meets the 
minimum standards set forth in Mr. McElwaine's testimony as follows:

   Should only be subsidized with AML money if the primary 
        purpose and goal is reclamation;
   Must demonstrate the reclamation required by SMCRA is 
        feasible, and this must still be a condition of permitting of 
        the activity;
   There will be no reduction of environmental standards for 
        that operation;
   If a mining project that includes ``remining'' takes in 
        additional acreage outside of the original AML site then AML 
        funds should not be used to subsidize the mining outside of the 
        AML area;
   Removal of the financial risk to companies of bond 
        forfeiture by use of AML money for performance bonds reduces 
        the incentive to reclaim the site;
   No waivers of reclamation fees; and
   Incentives and rebates will be given AFTER reclamation takes 
        place, not prior to reclamation.
                                 ______
                                 
    Responses of Andrew McElwaine to Questions From Senator Domenici

    Question 1. Both S. 1701 and S. 961 propose to eliminate the 
``general welfare'' language from the AML priority 2 definition. Would 
this change prevent the reclamation of acid mine drainage sites in 
Pennsylvania and elsewhere? What portion of the sites on the 
Pennsylvania priority list would be affected, if any?
    Answer. The ``general welfare'' language has been a part of SMCRA 
since the law was first passed in 1977 and is included in the 
definitions of both Priority 1 and Priority 2 categories. In January 
1995, OSM updated its Policy Directive on the Abandoned Mine Land 
Inventory System to provide specific guidance on the Priority 2 
eligibility of problem areas based on ``general welfare'' criteria.
    Although Pennsylvania has properly applied OSM guidelines with 
regard to inventory management, we have continued to use ``health and 
safety'' criteria in selecting Priority 1 and 2 projects for 
expenditures. An acid mine drainage project without a ``health and 
safety'' component would likely be classified as a Priority 3 problem 
and would qualify for funding using funds from the 10% setaside program 
or OSM's Appalachian Clean Streams Initiative (ACSI).
    In summary, elimination of the ``general welfare'' language would 
reduce Pennsylvania's inventory, but it does not reduce the number of 
actual sites affected by AMD. This problem remains. Nor does it 
eliminate sites that have contaminated water in the middle of 
communities that do not have a physical component like a highwall or 
shaft. Pennsylvania coalfield communities have been identified as 
having certain health problems in higher quantities than other areas. 
Eliminating the general welfare language would narrow the eligibility 
of sites in Pennsylvania, and it could severely impair our ability to 
be as strategic and cost effective as possible in developing a 
response. It would be even more harmful to other historical production 
states that do not yet benefit from strong AML programs, as does 
Pennsylvania.
    At this time we are not able to quantify the large number of sites 
that would be impacted by eliminating this language, but we will seek 
that information for the Committee.
    Question 2. Mr. Finkenbinder's testimony states that the 
``inventory has transformed itself into a funding gimmick in order to 
establish the AML program as a ``permanent fixture.'' Do you agree with 
this statement, and how do you reply to those who criticize decisions 
made by the State of Pennsylvania with respect to sites included in its 
inventory of priority 1 and 2 sites?
    Answer. We absolutely do not agree with Mr. Finkenbinder's 
statement. Given the extent of abandoned mine lands in Pennsylvania 
relative to the rate at which resources have been applied to the 
problem, the AML Program could indeed be required for generations if we 
continue with business as usual. But that is precisely why Pennsylvania 
has called for a reauthorization plan that will deliver sufficient 
resources to address the highest priority problems and to ensure that 
the job is completed in as quickly as possible.
    With regard to Mr. Finkenbinder's testimony, we are confident that 
Pennsylvania's additions to the inventory are in full compliance with 
``AML-1'' of OSM's Directives System, which provides guidelines on 
maintenance of the Abandoned Mine Land Inventory System. Further, OSM 
has not notified Pennsylvania that it has any concerns about the way 
``AML-1'' has been implemented.
    We agree with the Kentucky Department for Natural Resources, the 
National Association of Abandoned Mine Land Programs, and the 
Interstate Mining Compact Commission testimony on September 27, 2005 
that, ``there is no evidence of abuse of inappropriate action by the 
states or tribes regarding our selection of worthy AML projects over 
the past 27 years of the program.''
    Pennsylvania has been working diligently to clean up these sites as 
soon as possible for the environmental and economic health of our coal 
communities. As I pointed out in my testimony the state taxpayers and 
private groups have made significant investments of their own dollars 
to help clean up AML sites. And, the Pennsylvania AML Campaign is 
supporting a 15 year reauthorization, because citizens and the 
Commonwealth want to get the job done as soon as possible. Any support 
for a reduced AML reclamation fee makes it harder for Pennsylvania to 
complete the job in the 15 year timeframe. Ironically, support for a 
reduction in the current AML reclamation fee is likely to make the AML 
program the ``permanent fixture'' that Mr. Finkenbinder opposes.
    Finally, in Pennsylvania there are still 185,000 acres of abandoned 
mine lands, and over 3,000 miles of polluted streams. Nationally, 3.6 
million persons live within one mile of dangerous priority 1 and 2 
sites. In Pennsylvania, 1.6 million persons live within one mile of 
these sites. This is no ``gimmick,'' but represents real and urgent 
problems. When these AML sites are fully reclaimed, then there will be 
no need for further funding. Until that time, we must ensure that there 
are sufficient funds to tackle the problems that residents in the 
coalfield communities must see, hear, and smell.
    Question 3. You state in your testimony that you support programs 
that give incentives for mining companies to mine old abandoned mine 
sites, with the understanding that those sites will be reclaimed in the 
process. This is commonly called ``remining,'' and you admit that it is 
controversial in some quarters. Others believe it is a win-win 
situation that provides a cost-effective means to get old mine sites 
reclaimed. What has your experience in Pennsylvania been with remining?
    Answer. Overall, Pennsylvania's experience with remining has been 
quite positive. Going back to 1997 when the regulatory program started 
systematically monitoring remining activity, Pennsylvania's coal 
industry has been issued more than 460 permits for mining activities 
that include remining. These operations were projected to eliminate 130 
miles of highwall, reclaim nearly 20,000 acres and improve more than 
140 miles of stream at an estimated value of more than $110 million.
    Remining is very similar to other kinds of mining, but has the 
added benefit of reclaiming abandoned mine lands that would otherwise 
remain dangerous and unusable, and have to be paid for with AML funds. 
Many coalfield communities want the assurance that remining operations 
are subject to the same environmental laws and regulations and are held 
to the same standards. They are concerned that some proposals would 
weaken these standards by offering lower bonds or bonds paid for by 
entities other than the company, removing financial incentives to mine 
carefully. Further, there is a concern that the standards may not 
protect coalfield communities from blasting damage, new discharges, 
dewatered streams, and polluted/lost private drinking water supplies. 
With 1.6 million Pennsylvanians living near these sites, AML 
reauthorization must maintain the same standards for remining as for 
mining.
    Operators have conducted remining operations because it makes 
economic sense. With increased demand for coal, remining is expected to 
expand. Incentives would enable more remining operations to be 
implemented, and would help maintain the benefit of reclamation of 
abandoned mine lands at no cost to the AML program or the Commonwealth.
    One current positive example of the importance of remining is 
provided by Mile Lake, an abandoned mine land site in Pennsylvania's 
anthracite region, in Northumberland County. Secretary of Interior Gale 
Norton had the opportunity frilly over this site in February 2004. This 
abandoned mine land site is particularly dangerous as it has been 
associated with four reported deaths. PA's DEP has recently issued a 
permit for this site to be remined. The remining will enable the 
hazardous water-filled pit and dangerous highwall to be eliminated, 
while saving the AML Fund at least $1.3 million--the estimated cost to 
reclaim these features through a stand alone AML reclamation project.
                                 ______
                                 
                        Department of the Interior,
           Office of Congressional and Legislative Affairs,
                                 Washington, DC, December 30, 2005.
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 September 27, 2005, hearing on ``Abandoned Mine 
Reclamation.''
    Thank you for the opportunity to provide this material to the 
Committee.
            Sincerely,
                                             Jane M. Lyder,
                                               Legislative Counsel.
[Enclosures.]

    Responses of Thomas D. Shope to Questions From Senator Domenici

    Question 1. SMCRA directed the Secretary to conduct a study on how 
to best enable Indian tribes to assume primacy with respect to the 
regulation of surface mining on Indian lands. In the 28 years since the 
enactment of SMCRA, the Secretary and the Navajo Nation have worked 
together to prepare for the grant of primacy to the Navajo Nation, but, 
without legislation, the Secretary does not have authority to consider 
an application for primacy. The Navajo Nation has requested an 
amendment to SMCRA that would allow the Navajo Nation to apply for 
primacy. Does the department support such an amendment?
    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 surface coal 
mining on Indian lands. In 1984, the Secretary completed and submitted 
the required report to Congress. The report contained draft legislation 
and recommendations on 12 issues related to Tribal primacy. The 
recommendations reflected the Secretary's views at that time as to how 
those issues should be resolved.
    In 1987, Congress granted authority to the Navajo Nation and the 
Hopi and Crow tribes to obtain approval of AML reclamation plans. 
However, Congress did not authorize Tribal primacy for regulatory 
programs.
    Subsequently, 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 
legislative proposal. While that effort resulted in the development of 
several draft legislative proposals, the Tribes have not been able to 
achieve consensus. As a result, no proposal has been forwarded to 
Congress.
    We would be pleased to assist Congress in developing legislation to 
address this issue.
    Question 2. In 1992, Congress ordered you to transfer the interest 
from the AML fund to the UMW'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 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 to the CBF? Do you have the authority to 
independently evaluate the amount that the CBF estimates should be 
transferred?
    Answer. The October 12, 2000, Memorandum of Understanding with the 
CBF, requires 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 list of the 
unassigned beneficiaries as of September 1St each year.
    The CBF list is determined by first taking a list of unassigned 
beneficiaries as maintained by the Social Security Administration (SSA) 
and deleting beneficiaries based upon known deaths not recorded by the 
SSA. The list is then refined by making adjustments based upon court 
cases and companies that are no longer in business. An audit firm 
reviews these changes based on procedures agreed upon by OSM and the 
CBF. The audit firm provides OSM a report of its review findings, if 
any.
    The CBF then multiples the number of unassigned beneficiaries by 
the estimated actuarial costs to arrive at its 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, not to exceed $70 million.
    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.
    The Memorandum of Understanding also provides that the Federal 
Government reserves the right to audit any and all 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.
    Question 3. Does the Administration/OSM feel it is necessary for 
the Secretary to have the authority 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. We see no reason for the Secretary to have unilateral 
authority to certify a State or Indian Tribe. Current law and each of 
the proposed bills tie allocation of the historic coal production funds 
to the number of Priority 1 and Priority 2 (high priority) coal 
problems a State or Tribe has. Under current law, certification allows 
States and tribes more discretion in the use of State-share funds. As a 
result, there is an incentive for States and Tribes to certify. That 
does not change in any of the proposed legislation.
    Certification has not been an issue to date.
    Question 4. Is there a requirement and a mechanism for the return 
of the State Share balances to the states/tribes if the AML fee is not 
reauthorized?
    Answer. Under current law, 50 percent of the funds collected in a 
State or Tribe must be allocated to that State or Indian Tribe for 
grants. These allocated funds are either distributed in grants through 
the appropriations process or are credited to a State or Tribes account 
to be distributed in grants in future years through the appropriations 
process. This remains true if the authority to collect the fee is not 
extended.
    Question 5. 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. States, Tribes, and the OSM routinely update the Abandoned 
Mine Land Inventory System (AMLIS) when new problems are reported or 
when reclamation abates an existing AML problem. This is an ongoing 
process that happens throughout the year. Section 403 of SMCRA and OSM 
directives governing the AML inventory provide a framework for States 
and Tribes to consistently prioritize AML problems. However, States and 
Tribes exercise individual discretion in prioritizing AML problems and 
must have continuing flexibility in prioritization due to varying land 
use needs and population increases that are occurring in various parts 
of the country. We believe it was Congress' intent to permit this 
flexibility under the primacy scheme set forth in SMCRA and subsequent 
amendments. It has also been reaffirmed by OSM in its policy 
directives, which provide for AML programs to be adaptable to different 
regions of the country, thereby extending program safeguards to as many 
citizens as possible.

    Responses of Thomas D. Shope to Questions From Senator Bingaman

    Question 1. I have attached a copy of draft legislation that I 
understand is being discussed by some members of the House (hereinafter 
referred to as the 9/8/05 Draft). Do you interpret S. 961, S. 1701, or 
the 9/8/05 Draft to affect the ability of a State or tribe to use AML 
funds for noncoal reclamation work?
    Answer. Neither of the two bills nor the draft legislation would 
alter the non-coal reclamation provisions found in sections 409 and 411 
of SMCRA. Under all three bills, paragraphs (b) and (c) of section 409 
would continue to authorize non-certified states and Indian tribes to 
receive grants for non-coal reclamation from their state/tribal share 
allocation or their historical production allocation, provided the non-
coal project meets the extreme danger priority in section 403(a)(1).
    In addition, S. 961 and S. 1701 would continue to authorize 
certified states and tribes to receive grants from their state/tribal 
share allocation. Under section 411 of SMCRA, those grants may be used 
for non-coal reclamation. However, S. 1701 would add a new section 
402(i) that would allow states to collect the reclamation fees and 
retain half of those fees. The bill provides that if a state elects to 
exercise this option, it would no longer be eligible to receive grants 
from its state share allocation. Moreover, the portion of the fees that 
a state collects and retains would have to be used for the purposes of 
section 403, which would appear to preclude their use for non-coal 
reclamation.
    Under the 9/08/05 Draft, certified states and tribes would no 
longer receive grants from their state/tribal share, but they would 
receive equivalent payments, either from Mineral Leasing Act revenues 
or directly from the Treasury, in place of those grants. States and 
tribes could use those payments for any purpose approved by the state 
legislature or the tribal council, with priority given to addressing 
the impacts of mineral development, including non-coal reclamation 
projects.
    Finally, it appears that all three bills would extend minimum 
program grant guarantees to both certified and non-certified states and 
tribes, rather than limiting them to non-certified states and tribes 
with Priority 1 and 2 (high priority) coal problems, as the current law 
does. Thus, all three bills have the potential of expanding the pool of 
grant monies available for non-coal reclamation.
    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.
    Has a comprehensive inventory of abandoned hardrock mine sites been 
undertaken?
    Answer. Under SMCRA, the OSM is only required to inventory Priority 
1 and 2 problems related to past coal mining. States and Tribes can 
reclaim non-coal problems if they are deemed to present a greater 
threat to human health and safety than remaining coal related problems 
or if they have certified that they have addressed all coal related 
problems. While non-coal problems do not have to be entered into OSM's 
Abandoned Mine Land Inventory System (AMLIS) until a non-coal 
reclamation project is funded in a grant, some States and Tribes have 
entered unfunded non-coal problems into AMLIS. However, this is not a 
complete inventory.
    The costs of non-coal Priority 1 and 2 problems reported in AMLIS 
are shown by State and Indian tribe in the table below as of September 
30, 2005.

----------------------------------------------------------------------------------------------------------------
            State/Tribe Name                  Unfunded           Funded           Completed           Total
----------------------------------------------------------------------------------------------------------------
ALASKA..................................       1,735,000            100,00           691,019         2,526,019
ALABAMA.................................               0                 0            94,942            94,942
ARKANSAS................................         270,000                 0                 0           270,000
COLORADO................................      47,971,578         1,522,303        35,497,741        84,985,622
CROW....................................               0                 0         1,169,047         1,169,047
ILLINOIS................................          65,000                 0         1,507,432         1,572,432
KANSAS..................................         660,000                 0           250,081           910,081
LOUISIANA...............................       6,870,638                 0                 0         6,870,638
MISSOURI................................       9,480,800                 0           385,201         9,866,001
MONTANA.................................      93,625,000         1,766,400        22,940,640       118,332,040
NAVAJO..................................          10,221            46,945        23,901,488        23,958,654
NEW MEXICO..............................       2,102,700           272,000         3,421,275         5,795,975
OHIO....................................       1,323,200                 0           182,048         1,505,248
TEXAS...................................      19,984,045           506,739        21,283,444        41,774,228
UTAH....................................       2,663,500            85,000         6,815,883       219,121,090
WYOMING.................................      35,824,056         3,611,367       179,685,667       219,121,090
                                         -----------------------------------------------------------------------
    Report Total........................     222,585,738         7,910,754       297,825,908       528,316,400
----------------------------------------------------------------------------------------------------------------

    Question 3. The Navajo Nation relies on AML funding to undertake 
important public facilities work pursuant to the Surface Mining Control 
and Reclamation Act. Do you read S. 961, S. 1701, or the 9/8/05 Draft 
as restricting the use of funds for this purpose?
    Answer. Since the Navajo have certified that they have completed 
all known coal problems, they may spend their tribal share on public 
facilities projects. Neither S. 961, S. 1702, nor the 9/8/05 Draft, if 
enacted as currently drafted, would affect this.
    Question 4. What is the Department's position on Tribes assuming 
primacy for the regulation of coal mining activities on their lands?
    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 surface coal 
mining on Indian lands. In 1984, the Secretary completed and submitted 
the required report to Congress. The report contained draft legislation 
and recommendations on 12 issues related to Tribal primacy. The 
recommendations reflected the Secretary's views at that time as to how 
those issues should be resolved.
    In 1987, Congress granted authority to the Navajo Nation and the 
Hopi and Crow tribes to obtain approval of AML reclamation plans. 
However, Congress did not authorize Tribal primacy for regulatory 
programs.
    Subsequently, 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 
legislative proposal. While that effort resulted in the development of 
several draft legislative proposals, the Tribes have not been able to 
achieve consensus. As a result, no proposal has been forwarded to 
Congress.
    Question 4a. Would the Administration support legislation to do so?
    We would be happy to review any legislation developed to address 
this issue.
    Question 4b. Will you work with me to craft a provision to 
accomplish this result?
    Yes. We would be pleased to assist you in the development of 
legislation to address this issue.
    Question 5. Could you please provide an analysis of the differences 
in how S. 961, S. 1701, the 9/8/05 Draft, and current law address the 
issue of coal miner retiree health benefits?
    What are the estimates of the funds that would be made available 
for this purpose on an annual basis under (1) S. 961; (2) S. 1701; (3) 
the 9/8/05 Draft; (4) current law (assuming extension of the current 
fee collection authority through 2020; and (5) current law (assuming 
the fee collection authority expires June 30, 2006)? Please provide a 
table showing projections for the periods covered by the authorization 
in each bill.
    Answer. Current law requires the use of an amount equal to the 
interest earned from the AML fund to help pay for health benefit 
premiums for unassigned beneficiaries under the United Mine Workers of 
America's (UMWA's) Combined Benefit Fund (CBF). At the beginning of 
each fiscal year, OSM transfers an amount equal to the amount that the 
trustees of the CBF estimate they will spend on healthcare benefits for 
unassigned beneficiaries during that fiscal year. The amount of the 
transfer is capped at either the amount of interest earned or the CBF's 
actual expenditures to provide those benefits or $70 million, whichever 
is less.
    S. 961 would eliminate the $70 million cap and greatly expand the 
scope of the transfers. Instead of being limited to health benefits for 
unassigned beneficiaries in the CBF, transfers under S. 961 would be 
used to cover total net deficits of the CBF as well as any difference 
between revenues and expenditures for two other UMWA retiree health 
benefit plans, the 1992 Benefit Plan, and the multiemployer plan of 
July 20, 1992, which is known as the 1993 Benefit Plan. In the event 
funds available for transfer are insufficient to cover the revenue 
shortfalls of all three plans, the bill specifies that funds must be 
directed first to the CBF, then to the 1992 Plan, and finally to the 
1993 Plan. All prior interest credited to the AML fund but not 
previously transferred to the CBF, known as ``stranded interest,'' 
would be available for transfer to the CBF, beginning with FY 2004, to 
reduce any deficit in the net assets of the CBF. The bill also 
specifies that the unappropriated balance of the Rural Abandoned Mine 
Program (RAMP) allocation would be available for those transfers, 
beginning with FY 2004. It should be noted, however, that Title I of 
P.L. 109-54, which contains the FY 2006 appropriations for the 
Department of the Interior, transferred those funds to the Federal 
operations allocation on October 1, 2005, to meet anticipated needs in 
that area. While P.L. 109-54 does not conflict with the language of S. 
961, the amount of money to be transferred would be limited to new 
contributions to the RAMP allocation from October 1, 2005, forward. 
Those contributions are unlikely to be very significant because S. 961 
also terminates contributions to the RAMP allocation from fees 
collected for coal produced after the date of enactment.
    S. 1701 is very similar to the current law. There are only two 
changes. First, the bill appears to provide that, beginning with fiscal 
year 2007, the annual cap on transfers to the CBF will change from the 
amount of interest estimated to be earned from the AML fund during the 
current fiscal year to the amount of interest actually earned during 
the prior fiscal year. However, because the bill makes no changes to 
section 402(h)(2) of SMCRA, which continues to calculate transfer 
amounts in terms of estimated interest earnings during the current 
fiscal year, the meaning of the changes to section 402(h)(1) remains 
uncertain. Second, the bill makes all prior interest credited to the 
AML fund (stranded interest) available for transfer to the CBF, 
beginning with fiscal year 2006.
    The 9/8/05 Draft resembles S. 961 in that it eliminates the $70 
million cap and expands the allowable uses of the of the transfers from 
the AML fund by authorizing use of transferred funds to cover revenue 
shortfalls for any of the three UMWA retiree health benefit plans. It 
also would make stranded interest and the unappropriated balance of the 
RAMP allocation available for transfer (although, as previously noted, 
P.L. 109-54 has already transferred the RAMP balance to a different 
account). Most significantly, the 9/8/04 Draft provides that, once AML-
related funding sources are exhausted, revenue shortfalls in the UMWA 
plans would be addressed as follows: first, through the transfer of 
undesignated Mineral Leasing Act revenues; second, through the transfer 
of up to $320,000,000 in excess receipts under the Mineral Leasing Act; 
and third, by direct transfers from the General Fund of the Treasury, 
if necessary. Using the same funding sources, the bill also authorizes 
CBF premium refunds with interest for certain operators, up to an 
aggregate maximum of $36,000,000. The bill's provisions would take 
effect in fiscal year 2006.

                              ESTIMATED ANNUAL TRANSFERS TO UMWA CBF FROM AML FUND
                                             [Thousands of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                        Current Law
                                                                                          (current   Current Law
                                                                                           rates       (current
           Fiscal Year               S. 961          S. 1701           9/8/05 Draft       extended      rates
                                                                                          through    expire 6/30/
                                                                                           2020)         06)
----------------------------------------------------------------------------------------------------------------
2006............................      105,106  Not Avail. \1\.....  Not Avail.........       70,000       70,000
2007............................       87,838  Not Avail..........  Not Avail.........       70,000       70,000
2008............................       95,703  Not Avail..........  Not Avail.........       70,000       70,000
2009............................      103,738  Not Avail..........  Not Avail.........       70,000       70,000
2010............................      110,717  Not Avail..........  Not Avail.........       70,000       70,000
2011............................      118,036  Not Avail..........  Not Avail.........       70,000       70,000
2012............................      126,061  Not Avail..........  Not Avail.........       70,000       70,000
2013............................      132,768  Not Avail..........  Not Avail.........       70,000       67,745
2014............................      139,177  Not Avail..........  Not Avail.........       70,000       64,768
2015............................      145,651  Not Avail..........  Not Avail.........       70,000       64,111
2016............................      131,348  Not Avail..........  Not Avail.........       70,000       61,182
2017............................      107,964  Not Avail..........  Not Avail.........       70,000       58,147
2018............................      137,036  Not Avail..........  Not Avail.........       70,000       55,081
2019............................      178,254  Not Avail..........  Not Avail.........       70,000       51,986
2020............................      186,952  Not Avail..........  Not Avail.........       70,000       48,864
                                 -------------------------------------------------------------------------------
    Total.......................    1,906,349  Not Avail..........  Not Avail.........    1,050,000      961,884
----------------------------------------------------------------------------------------------------------------
\1\ Note: We have not provided estimates of the funds that would be made available for coal miner retiree health
  benefits either under S. 1701 or the 9/8/05 Draft because of the significant variables involved in those
  bills. Of particular concern in S. 1701 is the question of which States would choose to take over the
  collection of AML fees and which States would have OSM continue to handle fee collection. OSM cannot project
  the amount of funds that would be made available under this legislation without guidance on the appropriate
  assumptions to use. However, we would be pleased to provide tables if further parameters are given.

    Question 6. 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
                      Fiscal Year                         Transferred to
                                                          CBF during FY
------------------------------------------------------------------------
1996...................................................     47,183,764
1997...................................................     31,373,799
1998...................................................     32,561,520
1999...................................................     81,766,325
2000...................................................     40,959,942
2000--P.L. 106-113 \1\.................................     68,000,000
2001...................................................    102,943,411
2001--P.L. 106-291 \1\.................................     78,901,537
2002...................................................    113,606,257
2002--P.L. 106-291 \2\.................................   (23,253,457)
2003...................................................     56,079,283
2003--P.L. 108-7 \3\...................................     33,779,000
2004...................................................     14,966,929
2005...................................................     66,533,254
                                                        ----------------
    Totals.............................................   745,401,565
------------------------------------------------------------------------
\1\ Supplemental transfer from reserve pool to address deficits in CBF.
  Monies came from the reserve pool of interest earned between 1993 and
  1995.
\2\ Rescissions and refunds made by the CBF to OSM as a result of over-
  estimates.
\3\ Supplemental transfer from reserve pool to address deficits in CBF.
  Monies came from the reserve pool of interest earned between 1993 and
  1995.

    Question 7. What is the projected interest for the next 20 years 
generated by the AML fund under: (1) S. 961; (2) S. 1701; (3) the 9/8/
05 Draft; (4) current law (assuming extension of the current provisions 
and fee collection authority through 2020); (5) current law (assuming 
fee collection authority expires on June 30, 2006)?
    Answer. Estimates are shown in the table below.

                                            ESTIMATED INTEREST EARNED
                                               [Dollars in 1,000s]
----------------------------------------------------------------------------------------------------------------
                                                                                          Current
                                                                              9/8/05       Law--       Current
             Fiscal Year                 S. 961            S. 1701            Draft     Extended to  Law--  June
                                                                                            2020       30, 2006
----------------------------------------------------------------------------------------------------------------
2006................................       87,838  Not Avail. \1\........       86,739       87,838       87,838
2007................................       95,703  Not Avail.............       93,852       97,023       92,098
2008................................      103,738  Not Avail.............       96,716      105,908       90,673
2009................................      110,717  Not Avail.............       95,235      114,085       87,586
2010................................      118,036  Not Avail.............       93,906      123,045       84,175
2011................................      126,061  Not Avail.............       94,015      133,187       80,537
2012................................      132,768  Not Avail.............       93,296      142,322       76,331
2013................................      139,177  Not Avail.............       92,372      151,578       72,336
2014................................      145,651  Not Avail.............       91,488      161,314       68,224
2015................................      154,305  Not Avail.............       92,696      173,650       66,133
2016................................      161,092  Not Avail.............       91,266      184,560       61,894
2017................................      168,915  Not Avail.............       89,633      196,065       57,504
2018................................      178,254  Not Avail.............       88,760      208,230       52,997
2019................................      186,952  Not Avail.............       87,951      221,138       48,371
2020................................      186,122  Not Avail.............       87,181      234,846       44,891
                                     ---------------------------------------------------------------------------
    Total...........................    2,095,329  Not Avail.............    1,375,106    2,334,789    1,071,588
----------------------------------------------------------------------------------------------------------------
\1\ Note: We have not provided estimates of the interest that would be made available under S. 1701 because of
  the significant variables involved in that legislation. Of particular concern in S. 1701 is the question of
  which States would choose to take over the collection of AML fees and which States would have OSM continue to
  handle fee collection. OSM cannot project the amount of interest that would be made available under this
  legislation without guidance on the appropriate assumptions to use. OSM will be happy to provide tables if
  further parameters are given.

    Interest computations are made quarterly, on the last day of the 
month following the quarter. This is because operators have 30 days to 
remit the fee collections to OSM. Thus, funds due on June 30, 2006, 
will be paid to OSM on July 31, 2006, and interest will be calculated 
at that point. This interest will be credited to FY 2006 as it was 
earned in that year. Even if the fee collection authority is extended, 
the next collection would be due on October 31, 2006, and interest will 
be calculated at that point. This interest would be considered interest 
collected in FY 2007, as it will have been earned at that point.
    Question 8. What is your position on whether the Secretary should 
have authority unilaterally to certify completion of coal reclamation 
in a State? Has certification been a problem?
    Answer. We see no reason for the Secretary to have unilateral 
authority to certify a State or Indian Tribe. We see no problems with 
certification under the current law, or any of the proposed bills under 
consideration. Current law and each of the proposed bills 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. That 
does not change in any of the proposed legislation.
    Certification has not been an issue to date.
    Question 9. Do you support elimination of the general welfare 
criterion 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?
    Answer. We think the general welfare criterion is valid in 
determining whether a site should be eligible for reclamation. We do 
not think it should be eliminated entirely. However, we believe that it 
should be moved to a Priority 3 (environmental) classification. In this 
way, States could address such problems, if necessary, but at a lower 
priority. However, we note that whenever the level of high priority 
problems remaining to be addressed is discussed, these types of sites 
are not included. In all our discussion of the magnitude of the problem 
remaining, we considered only Priority 1 and Priority 2 Health and 
Safety Problems. Such a change would have minimal effect on the 
program. We have no records indicating that any money from AML 
construction grants have been spent on such sites. According to the 
Abandoned Mine Land Inventory System, approximately $3.6 billion would 
be removed from the inventory.
    Question 9a. How much less would be expended under the program if 
this criteria were eliminated?
    Answer. We anticipate that there would be little change in the 
program expenditures as no money is now being spent on general welfare 
problems.
    Question 9b. How would this affect environmental remediation under 
the program?
    Answer. If the criterion were eliminated, the most likely result 
would be that the sites currently classified as Priority 2 would 
qualify as Priority 3, or environmental problems and most would remain 
eligible for reclamation.
    Question 9c. How would this affect the remediation of water 
pollution under the program?
    Answer. All of the problems classified as Priority 2 by using 
solely the general welfare criteria are related to water pollution or 
degradation. As mentioned above, if these sites were reclassified as 
Priority 3 sites, they would remain eligible for reclamation.
    Question 10. What is your estimate of the cost of reclaiming 
priority 3 sites?
    Answer. Under SMCRA, OSM is only required to systematically 
inventory Priority 1 and 2 (high priority) problems related to past 
coal mining. Priority 3 problems do not have to be entered into AMLIS 
until Priority 3 reclamation is funded. While States and Tribes do 
enter some unfunded Priority 3 problems, we do not possess a complete 
inventory. As of September 30, 2005, unfunded Priority 3 problems 
reflected in the AMLIS totaled $1.9 billion.
    We note that an early study of abandoned mine lands disturbed by 
coal mining nationwide was prepared in 1979 by Wilton Johnson and 
George Miller of the U.S. Bureau of Mines. The study is 
entitled,''Abandoned Coal-Mined Lands: Nature, Extent, and Cost of 
Reclamation'' It estimated the total cost to reclaim all known 
abandoned mine lands was $31.6 billion in 1978 dollars. By comparison, 
we now estimate that it would cost $3 billion to reclaim the remaining 
Priority 1 and Priority 2 lands.
    Question 11. Please describe the Clean Streams Program. What 
impact, if any, would the provisions of S. 961, S. 1701, and the 9/8/05 
Draft 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. The Program utilizes 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 agencies that are involved in cleaning up streams polluted 
by acid drainage. Watershed associations, community groups, and 
recreation associations work together using funding from government and 
private sources, including matching funds and in-kind services. This 
cooperative approach results in improved efficiency and better leverage 
in the use of public funds, and encourages local community involvement.
    Funding for the Clean Streams Program currently comes from the 
Federal Operations allocation under section 402(g) (3) of SMCRA. None 
of the bills currently under consideration would change this Program.
    Question 12. Has OSM explored opportunities to earn a higher rate 
of return on the AML Fund? Please describe the opportunities and 
constraints. Can you suggest any legislation that would be of 
assistance in increasing the rate of return on the Fund?
    Answer. 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. 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 funds 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, 
declining to a low of under 1 percent in September 2003. While they 
began to climb after that, the rate was still so low that we could not 
transfer sufficient funds to the CBF.
    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 planned to spread purchases of these notes 
over the course of Fiscal Year 2004 in order to take advantage of 
anticipated interest rate increases. However, when the 10-year interest 
rate dropped 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. The current strategy is to hold all long-term notes until 
maturity, which will occur in 2013 and 2014. The remaining amount 
(approximately $750 million) is invested at the one-day Federal Funds 
rate, which is our minimum liquidity need. The interest rate on these 
Federal funds averaged 2.65 percent in FY 2005. This strategy provided 
over $75 million in interest earnings in FY 2005. If the short-term 
rate exceeds the coupon rate on the long term notes in the future, then 
OSM will have to analyze the costs and benefits associated with moving 
all investments into short-term instruments.
    One possibility would be to authorize OSM to invest in Par Value 
Specials. That is, investments with a specific rate of return set by 
law. The coupon rate is stable, but not as high as it is on OSM's 10-
year notes, but OSM would not have to worry about early redemption 
penalties, as these instruments are redeemable at par.
    Question 12a. What has been the rate of return on the AML Fund for 
each of the last 10 years?
    Answer.

------------------------------------------------------------------------
                                                          Rate of Return
                          Year                               (percent)
------------------------------------------------------------------------
1996....................................................          5.07
1997....................................................          5.03
1998....................................................          5.00
1999....................................................          4.48
2000....................................................          5.15
2001....................................................          4.82
2002....................................................          1.86
2003....................................................          1.23
2004....................................................          2.76
2005....................................................          3.61
------------------------------------------------------------------------
Note: These rates are the OSM rate of return, which include both short
  term and long-term investments. For instance, in 2005, OSM had $1.3
  billion invested in long-term securities at a rate of 4.17 percent and
  $.75 billion invested in Federal Funds at 2.65 percent, which gave us
  an average earning rate for the year of 3.61 percent.

    Question 13. Please provide for the record your projections of 
annual payments to each State and tribe under: (1) S. 961; (2) S. 1701; 
(3) the 9/8/05 Draft; (4) current law (assuming extension of the 
current provisions and fee collection authority through 2020); and (5) 
current law (assuming authority to collect the fee expires on June 30, 
2006). Please include all payments (including payments of 
unappropriated State Share balance and annual payments).
    Please also provide for each bill an estimate of excess funding 
over reclamation need (as defined by the priorities set forth in SMCRA) 
and unfunded need by state.
    Please provide a table setting forth for each bill the required 
annual payment of unappropriated balances by State and Tribe.
    Answer. Tables with payment projections for (1), (3), (4), and (5) 
are attached.* We have not projected payments for S. 1701 because of 
the significant variables involved in that legislation. Of particular 
concern is the question of which States would choose to take over the 
collection of AML fees and which States would have OSM continue to 
handle fee collection. The resulting partial distributions of State 
share funds become quite complex. OSM cannot project distributions 
without guidance on the appropriate assumptions. However, we would be 
pleased to provide tables if further parameters are given.
---------------------------------------------------------------------------
    * Retained in committee files.
---------------------------------------------------------------------------
    Question 14. Please provide for the record your projections of 
annual AML fee collections under (1) S. 961; (2) S. 1701; (3) the 9/8/
05 Draft; and (4) current law (assuming extension of current provisions 
and fee collection authority through 2020).
    Answer. Projected Collections are shown below.

 
                                             [Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
                                                                                                   Current Law--
                        Fiscal Year                            S. 961      S. 1701       9/8/05     Extended to
                                                                                         Draft          2020
----------------------------------------------------------------------------------------------------------------
2006......................................................    303,778      296,941      243,391       303,778
2007......................................................    311,803      290,711      249,810       311,803
2008......................................................    317,659      296,092      254,495       317,659
2009......................................................    322,328      272,894      258,230       322,328
2010......................................................    322,971      273,452      258,745       322,971
2011......................................................    325,628      275,783      260,871       325,628
2012......................................................    328,298      278,062      263,006       328,298
2013......................................................    329,885      264,277      264,277       329,885
2014......................................................    331,874      265,868      268,867       331,874
2015......................................................    334,569      268,023      268,023       334,569
2016......................................................    337,091      270,041      253,279       337,091
2017......................................................    340,115            0      255,547       340,115
2018......................................................    344,416            0      258,772       344,416
2019......................................................    349,912            0      262,894       349,912
2020......................................................          0            0      267,053       355,457
                                                           -----------------------------------------------------
    Total.................................................  4,600,327    3,052,144    3,887,260     4,955,784
----------------------------------------------------------------------------------------------------------------

    Question 15. 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. As a 
result, we must rely on anecdotal information. However, we are aware of 
at least 45 deaths and 19 injuries at abandoned mine sites in the 
anthracite region of Pennsylvania in the past 30 years alone. In 
addition, the State of Oklahoma has reported 11 deaths in the pastl0 
years.
    Question 16. 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. Certified States and Tribes should first use AML funds 
distributed to them to address any newly discovered coal reclamation 
problems within their boundaries. Beyond that, we believe that 
certified States and Tribes should be able to use distributions from 
the unappropriated balances of their State-share accounts for whatever 
purposes they deem appropriate.
    Question 17. 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 AML funds transferred to the 
CBF?
    Answer. The procedures governing the transfer of AML interest to 
the CBF are set forth in a Memorandum of Understanding that was signed 
on October 12, 2000. A copy of the Memorandum of Understanding follows 
this response.*
---------------------------------------------------------------------------
    * The memorandum has been retained in committee files.
---------------------------------------------------------------------------
    OSM does not receive reports on the use of AML funds transferred to 
CBF.
    Question 18. What are the current balances of the so-called 
``stranded'' AML Interest and the Rural Abandoned Mine Land Program 
(RAMP)?
    Answer. As of September 30, 2005, the ``stranded interest'' balance 
was $105,105,947.72. This represents the amounts earned in excess of 
eligible CBF transfers in any given year. Public Law 109-54, the 
Interior Appropriations Act for FY 2006, provides that the balance of 
the RAMP funds (section 402(g)(2) of the Surface Mining Control and 
Reclamation Act of 1977) on September 30, 2005 are to reallocated to 
the allocation established in section 402(g)(3) of the Surface Mining 
Control and Reclamation Act of 1977 (the Federal operations 
allocation). As a result, the RAMP balance on October 1 2005 became 
zero. A total of $361,118,412.68 was transferred to the Federal Expense 
Pool which is section 402(g)(3).
    Question 19. Please provide an analysis of the remining provisions 
included in S. 1701 and the 9/8/05 Draft. What is the appropriate level 
of incentive for industry to undertake such a project? Please explain.
    Answer. Both bills would reinstate the remining incentives in 
section 510(e) of SMCRA that expired September 30, 2004. One of the 
expired remining incentives reduced the revegetation responsibility 
period from 5 years to 2 years in the East and Midwest and from 10 
years to 5 years in the West. The other incentive granted operators an 
exemption from the permit block sanction in section 510(c) if the 
violations that would have otherwise resulted in application of that 
sanction were caused by unanticipated events or conditions encountered 
during remining operations. (Section 510(c) prohibits issuance of a 
permit to any operator responsible for an unabated violation unless the 
violation is in the process of being corrected.) Under S. 1701, the 
reinstated incentives would expire September 30, 2015, while the 9/8/05 
Draft provides that those incentives would expire September 30, 2020
    Both bills also would add a new section 415 to SMCRA to allow the 
Secretary to adopt regulations authorizing remining incentives that 
would leverage the use of AML funds by facilitating remining operations 
that would achieve more reclamation of eligible abandoned mine lands 
than could be achieved without the incentives. The bills list two 
examples of acceptable incentives: a waiver of reclamation fees and the 
use of AML funds to underwrite performance bonds for the remining 
operation. Both bills also limit use of the first incentive (rebate or 
waiver of reclamation fees) to the removal or reprocessing of abandoned 
coal mine waste or to remining operations on lands that have Priority 1 
or 2 (high priority) AML problems. In addition, the amount of the fee 
rebate or waiver may not exceed the estimated cost of reclaiming the 
land under the AML reclamation program.
    Both bills also require that, in each instance in which an 
incentive is to be used, the Secretary of the Interior determine, with 
the concurrence of the State regulatory authority, that the eligible 
land would not likely be remined and reclaimed without the incentives. 
By referencing the State regulatory authority, rather than the more 
generally applicable ``regulatory authority,'' the bills may foreclose 
the possibility of applying those incentives to remining operations on 
lands for which OSM is the regulatory authority. Furthermore, requiring 
individual concurrence by the Secretary in each instance in which an 
incentive is to be applied may conflict with one of the basic 
principles of SMCRA, which is that States should have the primary 
regulatory authority for surface coal mining and reclamation operations 
within their boundaries. Therefore, it would be more appropriate for 
the legislation to require that the determination be made by the agency 
in charge of administering the AML reclamation plan, with the 
concurrence of the regulatory authority.
    The appropriate level of incentive necessary to persuade industry 
to undertake a remining operation would be highly case-specific, 
depending on the amount and type of coal that may be recovered, the 
extent of the reclamation required, the potential environmental and 
other problems that may be encountered, the price of coal, and the 
availability and cost of surety bonds or other types of bonds.
    In a highly competitive coal market or for a site with marginal 
profitability, waiving or reducing the reclamation fee could make the 
difference between a profitable mine and a decision not to mine at all. 
When surety bonds are scarce, expensive, or both, as they have been in 
recent years, the use of AML funds to underwrite performance bonds 
could provide a powerful incentive to achieve reclamation of AML sites 
without the government having to expend any funds. Using state funds, 
the Commonwealth of Pennsylvania has already established a very 
successful revolving bond fund for remining operations.

    Responses of Thomas D. Shope to Questions From Senator Cantwell

    Qustion 1. What is the level of fees that have been collected in 
relations to mining activities within the State of Washington since the 
authorization of the fee on coal production under SMCRA? Please provide 
a total amount and a listing of collections related to coal produced in 
the State of Washington by fiscal year.
    Answer. Figures in the table below include fees and late payment 
interest and penalties collected. Figures are rounded to the nearest 
dollar.

------------------------------------------------------------------------
                                                            State of
                     Fiscal Year                        Washington Fees
------------------------------------------------------------------------
1978.................................................      $1,703,363
1979.................................................       1,720,936
1980.................................................       1,783,743
1981.................................................       1,621,216
1982.................................................       1,537,156
1983.................................................       1,398,349
1984.................................................       1,397,822
1985.................................................       1,492,521
1986.................................................       1,601,531
1987.................................................       1,550,133
1988.................................................       1,342,007
1989.................................................       1,714,634
1990.................................................       1,661,425
1991.................................................       1,653,846
1992.................................................       1,868,522
1993.................................................       1,623,218
1994.................................................       1,685,667
1995.................................................       1,517,541
1996.................................................       1,617,617
1997.................................................       1,409,330
1998.................................................       1,747,629
1999.................................................       1,518,208
2000.................................................       1,337,407
2001.................................................       1,702,271
2002.................................................       1,529,929
2003.................................................       2,321,286
2004.................................................       2,123,418
2005.................................................       1,906,147
                                                      ------------------
    Washington Historical Total......................      46,086,872
------------------------------------------------------------------------

    Question 2. What has been the federal expenditure allocated towards 
addressing AML hazards in the State of Washington under the provisions 
of SMCRA? Please provide a breakdown by AML priority, total federal 
appropriations to AML projects, a breakdown of projects by fiscal year, 
a characterization of the AML hazard addressed, and disclose any 
emergency expenditure.
    Answer. Federal expenditures on completed AML reclamation in the 
State of Washington total $4.8 million. Emergency reclamation accounted 
for 35 percent of these expenditures. The primary problems reclaimed 
were vertical openings, subsidence, and portals.
    The Federal expenditures on completed AML reclamation in the State 
of Washington are shown in the table below.

------------------------------------------------------------------------
              County                    Project Type          Amount
------------------------------------------------------------------------
Cowlitz...........................  Other...............           3,994
Garfield..........................  Emergency...........          15,033
King..............................  Other...............       1,796,891
                                    Emergency...........       1,543,036
                                                               3,339,927
Kittitas..........................  Other...............         367,288
Lewis.............................  Other...............          71,744
                                    Emergency...........          10,225
                                                                  81,969
Pierce............................  Other...............         694,294
                                    Emergency...........         106,609
                                                                 800,903
Skagit............................  Other...............          27,638
Thurston..........................  Other...............          48,018
Whatcom...........................  Other...............          76,481
                                    Emergency...........          19,225
                                                                  95,706
                                                         ---------------
    Total.........................  Other...............       3,086,348
                                    Emergency...........       1,694,128
                                                               4,780,475
------------------------------------------------------------------------

    Question 3. How many priority 1 and 2 projects remain to be 
addressed within the State of Washington? What counties are those 
projects located in? As you respond, please identify the specific 
location of remaining Priority 1 and 2 sites, and if remaining Priority 
1 and 2 sites are located within incorporated cities and identify the 
city if applicable.
    Answer. Forty four Priority 1 and 2 Problem Areas remain to be 
addressed in the State of Washington. A Problem Area is a unique 
geographic area containing one or more abandoned mine land problems. 
These 44 problem areas are shown by county in the table below. The 
estimated cost of reclaiming these problem areas is also shown by 
county. This information is in OSM's Abandoned Mine Land Inventory. 
This database does not indicate if a Problem Area is in an incorporated 
city, and we do not have that information.

------------------------------------------------------------------------
                                              Number of
                  County                       Problem    Unfunded Costs
                                                Areas
------------------------------------------------------------------------
King......................................       18            1,598,600
Kittitas..................................        9              522,000
Lewis.....................................        2               24,000
Pierce....................................        9            2,337,500
Skagit....................................        1               10,000
Thurston..................................        1               15,000
Whatcom...................................        4               52,500
                                           -----------------------------
    Washington............................       44            4,559,600
------------------------------------------------------------------------

    The county in which each of the 44 problem areas is located is 
shown in the table below along with the estimated cost of reclaiming 
the problem area and its longitude and latitude.

----------------------------------------------------------------------------------------------------------------
              AMLIS--KEY                          County             Unfunded Costs     Longitude     Latitude
----------------------------------------------------------------------------------------------------------------
WA000009FRA...........................  King.....................         850,000      -121.983333     47.341667
WA000011FRA...........................  King.....................         182,000      -122.145833     47.520833
WA000030FRA...........................  King.....................          10,000      -121.983333     47.316667
WA000056FRA...........................  King.....................          10,000      -121.887500     47.334722
WA000064FRA...........................  King.....................          50,000      -121.925000     47.268333
WA000066FRA...........................  King.....................         100,000      -121.958333     47.286667
WA000067FRA...........................  King.....................           6,000      -121.875000     47.250000
WA000072FRA...........................  King.....................          27,000      -122.000000     47.551944
WA000078FRA...........................  King.....................           5,000      -121.941667     47.525000
WA000079FRA...........................  King.....................          11,250      -121.918889     47.473611
WA000082FRA...........................  King.....................          20,000      -122.111111     47.451389
WA000086FRA...........................  King.....................         130,000      -121.918056     47.272222
WA000087FRA...........................  King.....................          57,500      -121.950000     47.325000
WA000088FRA...........................  King.....................          16,850      -121.906667     47.297778
WA000089FRA...........................  King.....................           6,000      -122.020833     47.275000
WA000122FRA...........................  King.....................         100,000      -122.039444     47.525000
WA000132FRA...........................  King.....................          12,000      -122.058333     47.516667
WA000154FRA...........................  King.....................           5,000      -122.206944     47.447778
WA000001FRA...........................  Kittitas.................           5,000      -120.926111     47.200833
WA000005FRA...........................  Kittitas.................          40,000      -121.125000     47.125000
WA000117FRA...........................  Kittitas.................           5,000      -120.875000     47.125000
WA000221FRA...........................  Kittitas.................           5,000      -121.125000     47.125000
WA000224FRA...........................  Kittitas.................         182,000      -121.125000     47.250000
WA000225FRA...........................  Kittitas.................           5,000      -121.125000     47.125000
WA000226FRA...........................  Kittitas.................           5,000      -120.925000     47.173611
WA000229FRA...........................  Kittitas.................         102,000      -121.125000     47.250000
WA000230FRA...........................  Kittitas.................         173,000      -120.958333     47.233333
WA000031FRA...........................  Lewis....................           8,000      -122.875000     46.625000
WA000039FRA...........................  Lewis....................          16,000      -122.875000     46.625000
WA000010FRA...........................  Pierce...................         202,500      -122.036667     47.101667
WA000040FRA...........................  Pierce...................         345,000      -122.041667     47.069444
WA000071FRA...........................  Pierce...................          50,000      -122.000000     47.000000
WA000100FRA...........................  Pierce...................         210,000      -122.010000     47.023611
WA000101FRA...........................  Pierce...................          35,000      -122.040278     47.041667
WA000102FRA...........................  Pierce...................         150,000      -122.000000     47.000000
WA000103FRA...........................  Pierce...................       1,240,000      -122.025000     47.086111
WA000104FRA...........................  Pierce...................          55,000      -122.016667     47.122222
WA000111FRA...........................  Pierce...................          50,000      -122.050000     47.055556
WA000076FRA...........................  Skagit...................          10,000      -122.166667     48.418889
WA000043FRA...........................  Thurston.................          15,000      -122.768333     46.816667
WA000069FRA...........................  Whatcom..................          10,000      -121.920833     48.833333
WA000073FRA...........................  Whatcom..................          18,500      -122.233333     48.791667
WA000146FRA...........................  Whatcom..................          12,000      -122.495833     48.775000
WA000147FRA...........................  Whatcom..................          12,000      -122.480556     48.745833
                                       -------------------------------------------------------------------------
    Total.............................    .......................      14,559,600
----------------------------------------------------------------------------------------------------------------

    Question 4. What is the estimated total cost of addressing unfunded 
priority 1 and 2 sites within the State of Washington?
    Answer. As of September 30, 2005, the total cost of addressing 
unfunded Priority 1 and 2 sites within the State of Washington is 
estimated to be $4.6 million.
    Question 5. Is it still possible for the State of Washington to 
create an approved State Reclamation Program? If so, what factors does 
OSM consider when approving or disapproving a State reclamation 
program?
    Answer. Yes, the State of Washington can still submit and receive 
approval of a State AML reclamation plan. The requirements and 
procedures for plan submission and approval are set forth in the 
regulations at 30 CFR Part 884. Specifically, as provided in 30 CFR 
884.14, before approving a State AML reclamation plan, the Director of 
OSM must----

    (1) Hold a public hearing on the plan within the State or find that 
the State provided adequate notice and opportunity for public comment;
    (2) Solicit and consider the views of other Federal agencies;
    (3) Determine that the State has the legal authority, policies, and 
administrative structure necessary to carry out the proposed plan;
    (4) Determine that the plan meets all the requirements of 
Subchapter R of 30 CFR Chapter VII;
    (5) Determine that the State has an approved State regulatory 
program under section 503 of SMCRA; and
    (6) Determine that the proposed plan is in compliance with all 
applicable State and Federal laws and regulations.

    One of the most time-consuming and resource-intensive of those 
requirements is likely to be submitting and obtaining approval of a 
State regulatory program for coal exploration and surface coal mining 
and reclamation operations on non-Federal, non-Indian lands within the 
State. The requirements for submitting a proposed State regulatory 
program are found in 30 CFR 731.14, while the criteria and procedures 
for review and approval of a proposed regulatory program are located in 
30 CFR Part 732. Among other things, the State of Washington will need 
to adopt laws and regulations consistent with SMCRA and its 
implementing regulations; designate a State regulatory authority; and 
demonstrate that it has sufficient legal, technical, and administrative 
personnel and sufficient funding to implement the provisions of the 
regulatory program and other applicable State and Federal laws.

     Responses of Thomas D. Shope to Questions From Senator Salazar

    Question 1. Why would it be desirable for the Secretary of Interior 
to certify that a state has completed its coal-related abandoned mine 
reclamation activities, rather than a Governor, who is more familiar 
with a state's AML problems? (I am referring to language in the Cubin/
Rahall/Peterson bill, which is not in the Thomas bill).
    Answer. We see no reason for the Secretary to have unilateral 
authority to certify a State or Indian Tribe. Current law and each of 
the proposed bills 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. That does not change in any of the proposed legislations.
    Question 2. Would such a provision authorize the Secretary to 
divert funds collected in one state to solve AML problems in another 
state?
    Answer. No. All States and Indian tribes are entitled to receive in 
grants one half of the AML fee collected within their boundaries, 
irrespective of whether they are certified.
    Certification means that a State or Indian Tribe can no longer 
receive supplemental grants based upon historic coal production, but 
can use their grants for purposes other than coal reclamation. However, 
since supplemental grants can be given only to States or Indian tribes 
if they have Priority 1 or Priority 2 coal problems in their inventory, 
these grants are curtailed without the need to force a State or Indian 
Tribe to certify.
    Question 3. Is this a ``state's rights'' issue, inasmuch as the 
authority to initiate certification is currently vested in the Governor 
of the affected state?
    Answer. We believe the decision to certify under any other the 
proposed legislation should remain with the States and Tribes.

    [Responses to the following questions were not received at 
the time this hearing went to press:]

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                Washington, DC, September 29, 2005.
Mr. Joe Shirley, Jr.,
President, The Navajo Nation,
    Dear President Shirley: I would like to take this opportunity to 
thank you for appearing before the Senate Committee on Energy and 
Natural Resources on Tuesday, September 27, 2005, to give testimony 
regarding S. 1701, a bill to amend the Surface Mining Control and 
Reclamation Act of 1977 to improve the reclamation of abandoned mines; 
and S. 961, a bill to amend the Surface Mining Control and Reclamation 
Act of 1977 to reauthorize and reform the Abandoned Mine Reclamation 
Program, and for other purposes.
    Enclosed herewith please find a list of questions which have been 
submitted for the record. If possible, I would like to have your 
response to these questions by Thursday, October 14, 2005.
    Thank you in advance for your prompt consideration.
            Sincerely,
                                          Pete V. Domenici,
                                                          Chairman.
[Enclosure.]

                    Questions From Senator Bingaman

    Question 1. What is the greatest need for AML funds on reservation 
lands?
    Question 2. What is the extent of noncoal reclamation work to be 
done?
    Question 3. What is the nature of the public facilities projects 
you are undertaking?
    Question 4. Please describe some of the public health and safety 
issues you are confronting with respect to abandoned and unreclaimed 
mine sites.
    Question 5. I understand that you support allowing Tribes to 
maintain approved regulatory programs under SMCRA. Who currently 
regulates coal mines on tribal lands?
    Question 5a. Does the Navajo Nation administer all permits for 
mines (e.g., Clean Air Act, etc.) with the exception of those 
administered by OSM?
                                 ______
                                 
                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                Washington, DC, September 29, 2005.
Ms. Lorraine Lewis,
Executive Director, UMWA Health and Retirement Funds,
    Dear Ms. Lewis: I would like to take this opportunity to thank you 
for appearing before the Senate Committee on Energy and Natural 
Resources on Tuesday, September 27, 2005, to give testimony regarding 
S. 1701, a bill to amend the Surface Mining Control and Reclamation Act 
of 1977 to improve the reclamation of abandoned mines; and S. 961, a 
bill to amend the Surface Mining Control and Reclamation Act of 1977 to 
reauthorize and reform the Abandoned Mine Reclamation Program, and for 
other purposes.
    Enclosed herewith please find a list of questions which have been 
submitted for the record. If possible, I would like to have your 
response to these questions by Thursday, October 14, 2005.
    Thank you in advance for your prompt consideration.
            Sincerely,
                                          Pete V. Domenici,
                                                          Chairman.
[Enclosure.]

                    Questions From Senator Domenici

    Question 1. What is the total amount of additional funding needed 
to keep the CBF, and 1993 Fund solvent for the next ten years?
    Question 2. By law, the costs of the 1992 Fund is covered by 
certain coal-producing companies. However, how much is the cost of the 
1992 Fund expected to increase over 2005 levels over the next ten 
years?
    Question 3. S. 961 would dedicate all of the accumulated and future 
interest from the AML fund to offset costs of the CBF, and the 1992 and 
1993 Funds. Even if the current balance in the fund is not reduced by 
increased reclamation funding and/or repayment of state share balances, 
would enough interest be generated by the AML fund to keep these Funds 
solvent?
    Question 4. If additional funds are not provided by Congress, when, 
if ever, will each of the three funds face a ``cash negative'' position 
and be forced to make benefit cuts?
    Question 5. Please provide a list of the so-called ``reachback'' 
companies that are responsible for payment under the Coal Act. What is 
the collective responsibility of these companies per year?
    Question 6. How many beneficiaries were added to the 1992 Fund by 
the Horizon bankruptcy? You stated in your oral testimony that you do 
not expect a great number of beneficiaries to be added to the 1992 Fund 
in the near future. However, do you have an estimate of the total 
possible population that would be eligible for coverage under the 1992 
Fund should the company that is currently responsible for their 
benefits go bankrupt?
    Question 7. What is the current per beneficiary premium paid by the 
companies that are signatories to the collective bargaining agreement 
that established the 1993 Fund? How much is contributed by each 
beneficiary per household? When does the collective bargaining 
agreement that established the 1993 Fund expire? Do the projections 
regarding the solvency of the 1993 Fund on the chart that accompanied 
your testimony assume the continuation of the terms of the existing 
collective bargaining agreement with respect to the 1993 Fund?

                    Questions From Senator Bingaman

    Question 1. Please provide for the record a table displaying the 
projected deficits of the CBF over the next 12 years.
    Question 1a. How would S. 1701 and S. 961 each affect these 
deficits? Please provide a table displaying annual projections.
    Question 1b. How will these deficits affect the health care 
benefits of retired coal miners and their dependents?
    Question 1c. How many people will be affected?
    Question 2. Please provide for the record a table displaying annual 
deficits in the CBF since 1990, the amounts transferred from the AML 
Fund, and amounts appropriated to address the deficits.
    Question 3. What is the procedure for the transfer of AML interest 
to the CBF and for reconciling the estimated expenditures from the CBF 
with the actual expenditures?
    Question 3a. Is the CBF the subject of any internal or external 
audits? If so, how frequently are these undertaken and by whom?
    Question 3b. What role, if any, does OSM have with respect to 
procedures and oversight of the CBF? What reports are provided to OSM?
    Question 3c. You mentioned that GAO has reviewed matters relating 
to the CBF. What reviews of the CBF have been undertaken by GAO? What 
has been the outcome of these reviews?
    Question 4. I understand that there has been a prescription drug 
demonstration program that the Funds have participated in that has been 
continued through September of 2007. Could you please describe this 
program and provide the annual revenue impact of having this program in 
place?
    Question 5. What is the potential revenue impact of the so-called 
``premium litigation'' that is currently pending? Please describe the 
key issues in that litigation.

                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

  Statement of Joanna Prukop, Secretary, Energy, Minerals and Natural 
               Resources Department, State of New Mexico

    Thank you for the opportunity to present a statement on this 
important topic.
    We appreciate the efforts of this Committee and the bill sponsors 
to propose legislation that will extend the abandoned mine land 
reclamation fee under Title IV of the Surface Mining Control and 
Reclamation Act of 1977 (SMCRA) and therefore continue this valuable 
and needed program.
    New Mexico's Abandoned Mine Concerns. New Mexico has a long and 
distinguished mining history. Native Americans mined coal, turquoise, 
lead, 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. The nineteenth and twentieth centuries 
witnessed a number of mining booms across the State driven by the 
search for coal, gold, silver, copper and uranium among others. Today, 
New Mexico is home to some of the largest active coal and hard rock 
mining facilities in the United States.
    Centuries of mining have also left another legacy: thousands of 
mine openings and other mine hazards that pose serious threats 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. In addition, 
abandoned mines across New Mexico pose significant threats to property 
and the environment through pollution, subsidence and underground 
fires.
    Benefits of New Mexico's AML Program. The Abandoned Mine Land 
Program 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 
is now near $1,600,000. 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 2000 mine openings have 
been closed and hundreds of acres of coal mine waste have been 
reclaimed 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 awarded by competitive bids to 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 AML Project, completed in 2003 with the closure of 90 
mine openings, allowed the expansion of a newly created historic park 
that focuses on mining history. The Sugarite Coal Mine Project near 
Raton involved the reclamation of coal mine openings and waste piles 
located within a popular state park. And the recently completed Lake 
Valley AML Project will allow the BLM to expand hiking trails into a 
historic mining area.
    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 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. An example of development 
encroaching on mining areas occurred last year when someone broke into 
a closed mine near Santa Fe and fell down a shaft and had to be 
rescued. When this abandoned mine was closed 15 years ago, there were 
not even 4-wheel drive roads nearby; today, the site is adjacent to a 
subdivision.
    New Mexico's Position. New Mexico strongly urges Congress to 
reauthorize the AML fee in SMCRA. New Mexico has joined with other 
states in supporting the efforts of the National Governors' 
Association, the Western Governors' Association, the National 
Association of Abandoned Mine Land Programs and the Interstate Mining 
Compact Commission to push for AML fee reauthorization.
    Governor Richardson strongly supports the specific proposals set 
forth in the attached Western Governors' Association Resolution 05-26 
adopted by the WGA in June. In addition, the New Mexico House of 
Representatives unanimously adopted the attached House Memorial 14 
earlier this year. Both the WGA Resolution and the House Memorial urge 
that the AML fee be extended and that the state share balances be 
returned to the States. As a western state with a small AML program, we 
wish to highlight the following issues that are of great importance to 
New Mexico and are shared by other Western states with smaller programs 
such as Utah, Colorado and Montana.

   The minimum annual funding for states should be increased 
        and guaranteed at a level of at least $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.
   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.

    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 seek to balance the need to complete the coal mine AML 
projects with the 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.
    We appreciate the opportunity to present this statement, and look 
forward to working with the Committee in the future.
                                 ______
                                 
                                            AML/Coal Act Coalition.
Senator Jim Talent,
Committee on Energy and Natural Resources, U.S. Senate, Washington, DC.
    Dear Senator Talent: We represent interested stakeholders who have 
been working for many months to develop a compromise proposal to 
address the long-term viability of the Abandoned Mine Land reclamation 
program and the Coal Industry Retiree Health Benefit Act. We are 
pleased to learn that the Senate Energy Committee will be holding a 
hearing on September 27th relating to AML reform, and appreciate your 
interest in this issue.
    We are also grateful for the leadership shown by Representatives 
Cubin, Rahall, and Peterson to develop a comprehensive reform proposal 
dealing with AML/Coal Act issues. The undersigned organizations support 
this important compromise, which represents a breakthrough after many 
months of trying to resolve a variety of complex issues. We believe the 
attached legislative proposal gives us the best opportunity to achieve 
meaningful AML/Coal Act reform.
    We respectfully request that you include this letter and the 
accompanying language* as part of the hearing record on September 27th.
---------------------------------------------------------------------------
    * Retained in committee files.
---------------------------------------------------------------------------
                    Berwind Corporation
                    Bituminous Coal Operators Association of America
                    Blue Diamond Coal Company of Tennessee, Virginia 
                            and Kentucky
                    The Brink's Company
                    Consol Energy
                    Davon, Inc. of Ohio
                    Drummond
                    Foundation Coal Corporation
                    Harbaugh Diesel Engine Co. of Pennsylvania
                    Lindsey Coal Mining Co. of Pennsylvania
                    Lone Star Steel Co. of Texas
                    The North American Coal Corporation
                    Orlando Utility Commission, Florida
                    Peabody Energy
                    Pennsylvania Electric Co. of Pennsylvania
                    Princeton Mining Co. of Indiana
                    Sherwood-Templeton Coal Co. of Indiana
                    Templeton Coal Co. of Indiana and Iowa
                    United Mine Workers of America
                    United States Steel Corporation
                    Virginia Lee. Co. of Virginia
                                 ______
                                 
                 Statement of The Citizens Coal Council

    The Citizens Coal Council (CCC) welcomes this opportunity to submit 
comments concerning the state of coalfield citizens and the abandoned 
lands and waters in the communities in which they live. The following 
comments are related to the proposed bills for Abandoned Mine Land 
(AML) reauthorization reform for the AML Reclamation Program. The 
Citizens Coal Council represents a clear voice for citizens who are 
directly impacted by surface and underground coal mining activities. We 
recognize the need to reclaim AML sites in the coalfields of our 
nation. Member groups of the Citizens Coal Council have been active in 
seeking workable plans and achievable objectives relating to SMCRA and 
AML reclamation. Current draft legislation and suggestions contain 
important pieces to achieve AML reclamation, but still leave an unclear 
program to plan, implement, maintain, and manage an integrated AML 
program. The Office of Surface Mining Reclamation needs to focus on an 
emphasis on reclamation quality, safety, efficiency, and strategies 
relative to the complex environmental issues surrounding any proposal. 
We urge the Senate Energy Committee and members of Congress to try to 
understand what it is like to live in the coalfields where children 
draw pictures of the streams colored red, not blue ``because that is 
what the creek behind my house looks like.'' We urge the Senate Energy 
Committee and members of Congress not to assume that issuing funds to 
be used to achieve more reclamation by so-called ``remining'' of these 
lands will be the solution. Remining has caused major problems in parts 
of Appalachia and is not a universal panacea. We need to create 
incentives for alternative reclamation programs in the coalfields of 
our nation.
    The challenges of such a complex enterprise must embrace the 
diversity of all stakeholders, but it must cease to expect the 
coalfields of Appalachia to serve as national sacrifice zones. It must 
focus on workable reclamation programs and systems that achieve 
improvements to the communities already impacted from AML sites. The 
unanswered concerns that the concurrence of the regulatory authority 
(either federal of state) that the AML site is otherwise not likely to 
be reclaimed raises a ``red flag'' as to who is making such decisions. 
The wisdom of past congressional actions makes it clear that AML 
reclamation must be to maintain and preserve all efforts to reclaim AML 
sites for the protection of coalfield citizens. AML reform must not 
become a mechanism to funnel subsidies of federal funds into the coal 
industry. Real AML reform will take a serious commitment by Congress to 
address the goals, objectives and policies of the AML program. Before 
approving any new AML reform actions, Congress should require more 
detailed evidence of these proposed reform actions. Does the wheel need 
to be fixed, or does Congress need better management of current AML 
Reclamation Program's goals, objectives and policies?

  SUMMARY OF PROPOSED ABANDONED MINE LAND PROGRAM REAUTHORIZATION AND 
                           REFORM LEGISLATION

Background
    In 1977, Congress passed the Surface Mining Control and Reclamation 
Act (SMCRA). Among other provisions this law created the Abandoned Mine 
Land (AML) fund to pay for reclamation and restoration of land and 
water resources adversely impacted by pre-1977 coal mining. Coal 
operators pay a fee (15 cents per ton of deep mine coal and 35 cents 
per ton of surface mine coal) into the AML fund. The 1977 law set up a 
formula for distribution of this funding and established criteria and 
priorities for what sites could be cleaned up.
    Generally, sites eligible for AML funding are lands and waters, 
which were affected by coal mining or processing and abandoned before 
the enactment of SMCRA. These sites are categorized by 5 priorities. 
These are: (1) immediate threats to public health, safety, and general 
welfare, (2) threats to public health, safety, and general welfare (3) 
threats to land and water resources and the environment (4) public 
facilities adversely affected by past mining practices, and (5) public 
lands adversely affected by coal mining.
    The funds collected from coal operators are supposed to be 
distributed to states to fund clean up of abandoned mine sites. Most of 
the money goes to states, which have ``approved AML programs.'' In 
order to have an ``approved program,'' a state or tribe must have 
regulatory primacy for coal mining. Under current law, states with 
approved programs or ``program states'' are to receive fifty percent of 
the funds collected in that state. The other fifty percent becomes part 
of the federal share. Forty percent of the federal share is supposed to 
be distributed to states based on how much coal was mined in those 
states before 1977 (historic production.) Twenty percent of the federal 
share is to be transferred to the Department of Agriculture for the 
Rural Abandoned Mine Program (RAMP). Program states are supposed to 
receive minimum funding of $2 million. Program states that do not 
receive $2 million based on current or historic production (minimum 
program states) are to receive money from the federal share to bring 
them up to $2 million. The rest of the federal share is to be used to 
pay for the administration of the federal Abandoned Mine Land program 
and to pay for emergencies in non-program states (states without 
regulatory primacy for coal.)
    Title IV of SMCRA has been amended multiple times to reauthorize 
and change the AML program. Currently, the law allows for a transfer of 
interest from the AML fund to the Combined Benefits Fund (CBF) of the 
United Mine Workers of America (UMWA). Other provisions have also been 
added, such as giving States the option of setting aside ten percent of 
their funding for acid mine drainage abatement.
    Nationally, less than twenty percent of AML sites have been 
reclaimed. The AML program should be reauthorized, so that States can 
continue to address the impact pre-1977 mining had on coalfield 
communities. Reauthorization provides the opportunity to improve the 
program in addition to extending it.
    The Citizens Coal Council (CCC) a coalition of many citizens' 
organizations has worked to draft language for AML reauthorization. 
Members of CCC have worked to include language, which would benefit all 
citizens in coalfield communities. The CCC draft represents months of 
effort by coalfield residents to come up with a proposal, which will 
continue the AML program while improving it so that more funding goes 
to the areas where it is needed.

                   THE CITIZENS COAL COUNCIL PROPOSAL

Extends the collection of the AML fee and the AML program to 2029
    At current funding levels the present sunset date would leave the 
nation with more than 85% of the inventoried abandoned mine land 
problems unreclaimed.
    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. .

Increases 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. It happens that many areas which mined much of the coal 
before 1977 currently have low coal production.
    By increasing the amount of the federal share of AML money, which 
is distributed based on historic production from 40% to 60%, this bill 
will facilitate clean up in areas with backlogs of AML problems.
    In order to increase the percent, which is distributed based on 
historic production the bill, shifts RAMP (Rural Abandoned Mine Land 
Program) funding to the General Fund. RAMP has not been funded through 
AML for many fiscal years. This will allow RAMP, an Agriculture 
Department program, to receive appropriations under the Agriculture 
Appropriations bill.

Increases the 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 1990, this minimum program funding 
has been set at $2 million. However, most years minimum program states 
have received significantly less. These states have demonstrated a 
desire to operate meaningful clean-up programs but struggle to do so 
with current funding. This increase would both help to make up for past 
under-funding and insure that states with significant AML problems but 
low production would be able to continue running effective programs.
    There are 26 states and tribes with approved Abandoned Mine Land 
(AML) Reclamation Programs. Presently ten states are Minimum Program 
States (Alaska, Arkansas, Iowa, Kansas, Maryland, Missouri, New Mexico, 
North Dakota, Oklahoma and Utah.) Over the years, coal production in 
these states declined to the point that there was not sufficient AML 
funding to administer an effective AML program. (The AML program is 
funded by a fee paid by coal operators on each ton of coal mined. Fifty 
percent of the money collected in each state is distributed back to 
that state for AML clean-up work.) Congress established the ``minimum 
program'' in FY 1988 requiring that each State with an approved AML 
program receive no less the $1.5 million.
    With $500 to $600 million of high priority AML problems resulting 
in deaths each year, Minimum Program States, with broad support, 
convinced Congress that the annual minimum program funding should be at 
least $2 million. As a result, Congress passed the Abandoned Mine 
Reclamation Act of 1990, adding 402(g) 8, which set an annual minimum 
funding level of not less than $2 million for all approved programs. 
For the next three fiscal years, Minimum Program states received the 
annual $2 million. However, since FY 1995 Minimum Program states have 
only received $1.5 million.
    At least 25% of the high priority AML sites are in Minimum Program 
States, but these states receive less than 10% of total AML funding 
each year.
    An annual appropriation of $1.5 million to Minimum Program States 
is simply inadequate to reclaim the number of high priority AML sites 
in each State. Why? Because at this level AML staffs are reduced to a 
``bare bones'' staff, reclamation contracts must be phased, and less 
reclamation is completed.
    For Minimum Program States to once again operate an effective, 
viable, and efficient AML reclamation program, minimum program funding 
should be set at an annual level of $4 million.

Includes 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. This bill would grant federally 
managed (non-primacy state) programs $4 million minimum program funding 
if they demonstrate the ability to operate an effective abandoned mine 
reclamation program.
    Tennessee is a non-primacy state, with hundreds of AML sites that 
need to be cleaned up. Giving Tennessee the same guarantee of minimum 
program funding as program states (and increasing minimum funding to $4 
million), would make it possible to address the abandoned mine land 
problem in Tennessee in one decade instead of four.
Other aspects of the existing SMCRA title IV program would remain 
        unchanged. These include:

   Keeping all 5 Priorities of AML sites as outlined in current 
        law. This will allow States to continue to treat water quality 
        as high priority and continue to address environmental problems
   Allocating 50% of reclamation fees collected from a State or 
        Indian tribe to that State or Indian tribe subject to 
        appropriations.
   Maintaining the 10% set-aside of annual grants for acid mine 
        drainage projects.
   Allow for a transfer of interest from AML fund the to UMWA 
        CBF, while affirming that supporting the CBF is not the primary 
        purpose of interest from the AML fund. Restoration of coalfield 
        environments is.

    Since 1992 interest from the AML fund has been transferred to the 
UMWA Combined Benefits Fund (CBF). This bill would simplify the 
language to permit an annual transfer of interest to the CBF. It also 
adds language, which clarifies that interest payment transfer to the 
Combined Benefits Fund is only one of the several priorities the 
Secretary must fulfill. Transfer of funds to the CBF was not the 
original intent of the organic Act and this amendment reaffirms that 
accrued interest funds shall be used to meet other priorities as well.
    Keep the general welfare clause. This will allow state agencies to 
treat sites that have a negative impact on communities but are not a 
threat to safety to be classified as priority 2 sites. This is the same 
priority give to sites that are not an immediate safety threat but that 
have the potential to impact health or safety.

Why we need The `General Welfare' Provision.
    In 403(a) SMCRA sets out the priorities for AML reclamation 
projects. According to the law priority (2) sites are those that pose a 
threat to public health, safety, and general welfare. While priority 
(3) sites are those that impact land and water resources and the 
environment. Priority (1) is the category for sites that pose a direct 
threat. The `general welfare' clause allows state agencies to classify 
sites that are not threaten health or safety but do impact the overall 
welfare of a community as a higher priority.
    In many cases, toxic mine drainage degrades the welfare of a 
community even if it is not a threat to safety. In other cases, there 
are sites--an abandoned highwall in the middle of a huge tract of 
company land for example--that are potential safety threats but do not 
directly impact the welfare of a community. The `general welfare' 
clause gives equal priority to a site that oozes toxic mine drainage 
into a stream that flows through the heart of a community as a highwall 
that is surrounded by acres of undeveloped land.
    Without the `general welfare' clause AML sites that cause community 
problems but are not dangerous would all have to be classified as 
priority (3) sites and would not be able to be addressed until all the 
potential safety threats are cleaned up.
    The `general welfare' clause should be preserved in SMCRA so that 
sites that have a community impact can continue to be treated as a high 
priority even if their impact is not defined as related to health or 
safety. The communities experiencing these impacts know that the effect 
of contaminated water is one of degradation to health, safety, and the 
economy.

The AML Fee Should Be Increased
    To adjust the AML fee to reflect inflation, it should be raised to 
$1.09 for strip-mined coal and $0.47 for deep mined coal. This would 
help provide adequate funding for AML and still allow for funding for 
the other burdens, such as the UMWA Combined Benefits Fund.
    The AML fee (35 cent per ton of strip mined coal and 15 cents per 
ton of deep mined coal) has remained the same since 1977. The fee has 
never been adjusted upwards to reflect the rising cost of reclamation, 
which has risen with inflation. In 2004 and now in 2005, proposals have 
been put forward that would reduce the AML fee. Given that only two 
thirds of all the abandoned mine land sites have been reclaimed we 
cannot afford to reduce the AML fee.
    The selling price of coal has recently more than doubled. Instead 
of looking at reducing the fee Congress should look at the option of 
increasing it.

 REMINING: CITIZENS COAL COUNCIL CONCERNS ABOUT THE USE OF AML FUNDING 
                  TO SUBSIDIZE ``REMINING'' OPERATIONS

Background
    Many state regulatory agencies are promoting the possibility of 
coal companies reclaiming abandoned mine sites in the process of doing 
new mining. This approach to address the abandoned mine land issue has 
had success in some parts of the country but has caused great concern 
among local residents in other areas.
    The term ``remining'' gets applied to two very different 
activities. One is when a coal operator mines coal on an abandoned mine 
site. In this case, because the law now requires reclamation, a 
remining operation must also reclaim the area. The second activity that 
the term is applied to is the reprocessing of coal refuse piles. In 
this situation, the refuse pile is actually mined for remnant coal--
there is no new surface disturbance. Sometimes remining is promoted as 
a way to reclaim abandoned mine sites that would otherwise be cleaned 
up by the Abandoned Mine Land (AML) program.
    There is a difference between remining and reclamation of abandoned 
mine sites: the purpose of AML reclamation is to reclaim a site that 
was left abandoned; the purpose of ``remining'' is to remove coal. 
Under current AML law if the purpose of an operation is to remove coal, 
it must be permitted as a coal mine not an AML reclamation job.
    In the mining regulations, there are provisions that loosen 
requirements on operators that are mining an area that has been 
previously mined. (E.g. operators are held to less stringent water 
quality standards) There is not language in AML law that links remining 
and AML reclamation. The purpose of the AML program and fund is not to 
encourage or subsidize new mining but to pay for reclamation of an 
area, which was damaged by mining before 1977.

Remining operations are ``mining'' operations
    There is a relevant distinction between mining projects where the 
goal is to mine coal and reclamation projects where the goal is to 
reclaim an area mined before 1977. Any remining operation brings with 
it the same potential environmental hazards and community impacts as 
any other mining operation. Remining should only be subsidized with AML 
money if the primary purpose and goal is reclamation. And, there is 
already a provision in Title IV of SMCRA that allows sale of coal, 
which is removed in the process of an AML reclamation job to be used to 
off set the cost of AML reclamation.

Reprocessing of coal refuse
    To the extent that this type of remining (reprocessing refuse coal) 
can be done without new surface disturbance it should not be 
discouraged. When Congress or federal agencies make decisions about 
remining they should clarify which type of remining is the subject of 
the decision.

Remining as cover for controversial mining projects
    In remining, the motivation for the operation is coal extraction; 
the AML reclamation is an incidental benefit. Coalfield residents are 
very weary of remining activities being used to justify controversial 
mining projects. This is particularly the case in the steep slope areas 
of the southern mountains where mountaintop removal has become a 
dominant form of surface mining. If Congress ties AML to remining 
incentives it should include a provision that prohibits the use of AML 
money to subsidize mountaintop removal and cross ridge mining projects.

Use of AML money for performance bonds
    Performance bonds are the mechanism in SMCRA that help insure that 
if a company does not complete reclamation on a new mining project 
there will be money to pay for clean-up of that site. In addition, the 
bonds are away of encouraging companies to follow the law and reclaim 
the land they disturb, that is, if the company leaves a new mine 
without reclaiming it they loose money. Using AML money for performance 
bonds is simply irresponsible. It takes away the financial risk to 
companies of bond forfeiture thus leaving the company with less 
incentive to reclaim the site.

Remining projects expanding outside of the original AML site
    There is significant concern that remining activities will take in 
acreage outside of the original AML site. If a mining project that 
includes ``remining'' takes in additional acreage outside of the 
original AML site then AML funds should not be used to subsidize the 
mining outside of the AML area.

Using AML money to encourage remining of areas with AMD
    Remining AML sites always has the potential to increase the size of 
the problem. This is especially the case with AML sites that produce 
toxic drainage. While the reclamation associated with a remining job 
might help alleviate a toxic mine drainage problem, depending on the 
nature of the problem, the surface disturbance that is part of any 
mining operation will likely expose more toxic materials to air and 
water increasing the problem.

Exempting remining from environmental standards
    While the reclamation associated with a remining job might help 
alleviate a toxic mine drainage problem, depending on the nature of the 
problem, the surface disturbance that is part of any mining operation 
will likely expose more toxic materials to air and water increasing the 
problem. If AML funds are used as an incentive for a new mining 
operation this operation should have to demonstrate that the 
reclamation required by SMCRA is feasible and there should be no 
reduction of environmental standards for that operation.
    CCC urges members of the Senate Energy Committee and Congress to 
carefully take a ``hard look'' at any proposed Senate or House bill 
that would allow federal funds to be used for ``remining'' activities. 
At first it sounds like a great idea and reasonable use of federal 
funds, but the potential long-term cost may put an unreasonable burden 
upon Congress to fund perpetual treatment of AML ``remining'' sites. 
Everyone makes choices in life. To define and allow federal funds for 
incentives to conduct ``remining'' surface and underground coal mining 
operations must carry the strongest possible assessment and evaluation 
procedures within any proposed AML reform bill. The current bills do 
not. The full measurement of pre-permitting and post-reclamation of AML 
so-called ``reclaimed'' sites is unknown as compared to current 
permitting to carry out the present federal and state AML Reclamation 
Programs. There are existing alternatives to reclamation of AML sites 
as compared to just ``remining'' AML sites. These alternative 
reclamation activities could be more cost effective. We ask that the 
Senate Energy Committee and members of Congress require a more detailed 
AML Reform Reclamation bill that outlines the full ramifications of 
allowing ``remining'' of AML sites while other alternatives are 
available to the Office of Surface Mining Reclamation and Enforcement.

                               CONCLUSION

    Citizens Coal Council has been a voice for citizens who live in the 
coalfields of our nation and charges this committee and Congress to 
address our concerns. Congress and this committee are currently on a 
mission to expand the production and uses of coal throughout the 
nation. Because Congress is actively encouraging this vigorous 
expansion of the uses of coal, Congress cannot forget or overlook that 
ALL USES OF COAL REQUIRE MINING IN THE COALFIELDS. CLEAN COAL REQUIRES 
MINING IN THE COALFIELDS. COAL GASIFICATION REQUIRES MINING IN THE 
COALFIELDS. HYDROGEN FROM COAL REQUIRES MINING IN THE COALFIELDS. Given 
the current events in our nation, Congress must assume a ``guarding'' 
role as protectors of our nation's watersheds and community water 
supplies. Homeland security starts in the local communities in our 
nation. Coalfield citizens are NOT secure. Their children sleep in 
their clothes in case flooding occurs from the mountain top removal 
site or remined steep slope near their homes. Children are killed while 
they sleep in their beds by boulders or by overloaded coal trucks while 
they travel on their roads. Their homes and resources are blasted and 
broken. Their streams are unfishable. Their water undrinkable. We have 
sacrificed our communities in the past for this nation. We continue to 
be asked to sacrifice our quality of life. We deserve to have our needs 
met, and we ask that the Senate Energy Committee and members of 
Congress will put coalfield citizen's concerns first when acting upon 
any AML reclamation reform. Thank you for this opportunity to submit 
comments. Submitted by the Citizens Coal Council, P.O. Box 1080, 
Washington, PA 15301. Contact: Landon Medley at 931 946-2951 or Beverly 
Braverman at [email protected] or 724 455-4200.
                                 ______
                                 
                             Save Our Cumberland Mountains,
                                   Lake City, TN, October 11, 2005.
Mr. Steve Waskiewicz,
Staff Assistant, Committee on Energy and Natural Resources, U.S. 
        Senate, Washington, DC.
    Dear Mr. Waskiewicz: SOCM would like to submit the following and 
the attached documents to the record from the AML Reauthorization 
Hearing that was held on September 27th.
    Save Our Cumberland Mountains (SOCM) is a grassroots organization 
that has worked on environmental justice in the Tennessee coal fields. 
SOCM has over 2500 members in Tennessee and is also a member of the 
Citizens Coal Council a national coalition of coalfield organizations. 
SOCM appreciates this opportunity to submit comments on the Senate 
hearing on Reauthorization of the Abandoned Mine Land Program.
    SOCM encourages members of Congress to act to reauthorize this 
important program. There are still several hundred Abandoned Mine Land 
sites in Tennessee that need to be reclaimed and hundreds throughout 
the country. However, SOCM is concerned about some of the provisions in 
the exiting AML reauthorization proposals. Two of our concerns, which 
are outlined in the attached documents, are the elimination of the 
general welfare clause and new subsidies for remining operations.
    The attached document titled ``Concerns about Cubin-Rahall-Peterson 
and General Welfare Funding'' refers to a Cubin-Peterson-Rahall 
proposal. This proposal was included in the record by Senator Talent 
(and referred to during the hearing) on behalf of the ``AML/Coal Act 
Reform Coalition.''
    The attached document ``Remining in the Southern Mountains: 
Concerns of Coal Field Residents'' was prepared by SOCM and the 
Citizens Coal Council. It comments on the remining incentives that are 
included in the Thomas bill as well as the continuation of regulatory 
incentives that are part of both the Thomas and Rockefeller Bills.*
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    * The attachments have been retained in committee files.
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    Thank you for the opportunity to submit comments for the record. 
Sincerely
            Sincerely,
                                           Jonathan Dudley,
                                       Strip Mine Committee, staff.
[Enclosures.]

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