[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
H.R. 5479, COAL ACCOUNT-
ABILITY AND RETIRED
EMPLOYEE ACT OF 2010
=======================================================================
LEGISLATIVE HEARING
before the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
Wednesday, June 23, 2010
__________
Serial No. 111-59
__________
Printed for the use of the Committee on Natural Resources
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index.html
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COMMITTEE ON NATURAL RESOURCES
NICK J. RAHALL, II, West Virginia, Chairman
DOC HASTINGS, Washington, Ranking Republican Member
Dale E. Kildee, Michigan Don Young, Alaska
Eni F.H. Faleomavaega, American Elton Gallegly, California
Samoa John J. Duncan, Jr., Tennessee
Frank Pallone, Jr., New Jersey Jeff Flake, Arizona
Grace F. Napolitano, California Henry E. Brown, Jr., South
Rush D. Holt, New Jersey Carolina
Raul M. Grijalva, Arizona Cathy McMorris Rodgers, Washington
Madeleine Z. Bordallo, Guam Louie Gohmert, Texas
Jim Costa, California Rob Bishop, Utah
Dan Boren, Oklahoma Bill Shuster, Pennsylvania
Gregorio Sablan, Northern Marianas Doug Lamborn, Colorado
Martin T. Heinrich, New Mexico Adrian Smith, Nebraska
Ben Ray Lujan, New Mexico Robert J. Wittman, Virginia
George Miller, California Paul C. Broun, Georgia
Edward J. Markey, Massachusetts John Fleming, Louisiana
Peter A. DeFazio, Oregon Mike Coffman, Colorado
Maurice D. Hinchey, New York Jason Chaffetz, Utah
Donna M. Christensen, Virgin Cynthia M. Lummis, Wyoming
Islands Tom McClintock, California
Diana DeGette, Colorado Bill Cassidy, Louisiana
Ron Kind, Wisconsin
Lois Capps, California
Jay Inslee, Washington
Joe Baca, California
Stephanie Herseth Sandlin, South
Dakota
John P. Sarbanes, Maryland
Carol Shea-Porter, New Hampshire
Niki Tsongas, Massachusetts
Frank Kratovil, Jr., Maryland
Pedro R. Pierluisi, Puerto Rico
James H. Zoia, Chief of Staff
Rick Healy, Chief Counsel
Todd Young, Republican Chief of Staff
Lisa Pittman, Republican Chief Counsel
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CONTENTS
----------
Page
Hearing held on Wednesday, June 23, 2010......................... 1
Statement of Members:
Lummis, Hon. Cynthia M., a Representative in Congress from
the State of Wyoming....................................... 11
Prepared statement of.................................... 12
Rahall, Hon. Nick J., II, a Representative in Congress from
the State of West Virginia................................. 1
Prepared statement of.................................... 3
Statement of Witnesses:
Roberts, Cecil E., President, United Mine Workers of America. 4
Prepared statement of.................................... 6
Whitehouse, Alfred, Chief of the Division of Reclamation
Support, Office of Surface Mining Reclamation and
Enforcement, U.S. Department of the Interior............... 22
Prepared statement of.................................... 23
Young, David M., President, Bituminous Coal Operators'
Association, Inc........................................... 13
Prepared statement of.................................... 14
LEGISLATIVE HEARING ON H.R. 5479, TO AMEND THE SURFACE MINING CONTROL
AND RECLAMATION ACT OF 1977 TO PROVIDE FOR USE OF EXCESS FUNDS
AVAILABLE UNDER THAT ACT TO PROVIDE FOR CERTAIN BENEFITS, AND FOR OTHER
PURPOSES. ``COAL ACCOUNTABILITY AND RETIRED EMPLOYEE ACT OF 2010''
----------
Wednesday, June 23, 2010
U.S. House of Representatives
Committee on Natural Resources
Washington, D.C.
----------
The Committee met, pursuant to call, at 10:02 a.m. in Room
1324, Longworth House Office Building, Hon. Nick J. Rahall, II
[Chairman of the Committee] presiding.
Present: Representatives Rahall, Holt, Christensen, Inslee,
Hastings, Smith, and Lummis.
STATEMENT OF THE HON. NICK J. RAHALL, II, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WEST VIRGINIA
The Chairman. The Committee on Natural Resources will come
to order. I would begin by observing that while the horrific
disaster which took place at the Upper Big Branch Coal Mine in
my home county of Raleigh, West Virginia, has largely been
swept from the national spotlight by the explosion of the
Deepwater Horizon rig in the Gulf of Mexico, it continues to
weigh heavily on the citizens of West Virginia and throughout
the coalfields. Federal and state investigations are
proceeding, and we in the Congress are developing a legislative
response to ensure a more safe working environment for our
nation's underground coal miners--brave and hardworking souls,
every one of them.
While the country continues to focus on the Gulf of Mexico
and the impact that spill is having on so many businesses, on
the people and the economy of that region, I do believe and, in
fact, I insist that we, as a nation, continue to address the
plight of the coal miner and the economy of coalfield
communities in the Appalachian Region, and that is what we are
doing this morning. Today the Committee is meeting for the
consideration of H.R. 5479, The Coal Accountability and Retired
Employee Act of 2010, or the CARE Act.
This legislation keeps faith with an historic Federal
commitment made to the mine workers in 1946. At the time, with
President Harry Truman looking on, Interior Secretary Julius
Krug signed an agreement with the UMWA President John L. Lewis
guaranteeing the health and welfare of the coal miner. The
Krug-Lewis agreement was the very foundation for a welfare and
retirement system established for the mine workers and their
dependents. This Federal guarantee to the mine workers also
served as the basis for the 1992 Coal Act, in which through my
efforts Congress authorized a transfer of interest accruing to
the account to the unspent balance of the Abandoned Mine
Reclamation Fund for the purpose of providing solvency to
UMWA's health care fund.
At the time, because so many companies had escaped their
responsibility under the National Bituminous Coal Wage
Agreement, over 60 percent of the people who received their
health care under the UMWA's program never worked for the coal
operators, who were making premium payments. This large
``orphaned'' miner population threatened to overwhelm the
entire system. The 1992 legislation threw a lifeline to the
health care fund for several years, but as more and more coal
companies abrogated their responsibilities, Congress was
compelled to act again in the 2006 amendments to the Abandoned
Mine Reclamation Program, which provides transfers of general
funds to ensure the solvency of the UMWA's three health care
plans.
The problems which plagued the UMWA health program in the
past are now afflicting their pension plan. At present, well
over half of the current retirees never worked for the coal
companies currently participating in that plan. This situation,
as well as the recent economic downturn, has placed the pension
plan on the road to insolvency. At stake are the pensions of
over 120,000 people, around 38,000 who reside in my home state
of West Virginia, and the economic viability of the
contributing coal companies.
Think about that. These hardworking people who engaged in
the noble but often dangerous occupation of mining coal for the
energy security of this country now may find, in their elderly
years, dilemma and confusion when it comes to the security of
their pensions. I fought long, I fought hard, and I was
relentless in my efforts to get these coal miners the health
care they deserve, and I will not allow their pensions to be
threatened. This matter has been the first thing on my mind
when I wake up in the morning, and it is in my prayers every
evening.
The pending legislation would tap into these funds made
available by the 2000 amendments to the Abandoned Mine
Reclamation Program that are not necessary for any current law
obligation, and transfer those amounts to the UMWA pension fund
in order to ensure its solvency. I have spent a career standing
up for our coal miners, their widows, and our coalfield
communities, whether it be black lung benefits, coal mine
safety, or health care, and I will tell you this, I will fight
for these individuals' pensions with every breath in my body.
I would like to particularly thank UMWA President Cecil
Roberts for being here this morning. He is the President of a
union with a proud tradition, and one which has pioneered many
things in the American workplace that we take for granted
today, such as the eight-hour workday and collective bargaining
rights. Cecil Roberts' every breath of air is devoted to what
is just and good for our nation's coal miners, across the
coalfields and across this world.
I commend him, I thank him for his expertise, for his
professionalism and, most importantly, for the friendship that
he has bestowed upon this Chairman and so many of us in the
coalfields from whence he comes. Our second panelist this
morning will be Mr. David Young, an individual I have known for
quite a while as well, President of the Bituminous Coal
Operators' Association, and an individual who knows coal and
knows our coalfield communities intimately as well. I would now
recognize the Ranking Member before we move on to the panel.
Mr. Hastings. Thank you, Mr. Chairman. Mr. Chairman, I
don't have an opening statement and I intended to yield my time
to Mrs. Lummis from Wyoming, and if we could do that when she
arrives I would appreciate that courtesy, but I have no opening
statement myself.
The Chairman. The Chair will recognize Mrs. Lummis as soon
as she arrives. And pending that, we will move on with our
panel. I have already introduced him, Mr. Cecil Roberts,
President of the United Mine Workers of America, and Mr. David
Young, President of the Bituminous Coal Operators' Association.
Gentlemen, we do have your prepared testimony and it will be
made a part of the record as if actually read, and you may
proceed as you desire. Cecil, you want to start?
[The prepared statement of Chairman Rahall follows:]
Statement of The Honorable Nick J. Rahall, II, Chairman,
Committee on Natural Resources
The Committee on Natural Resources will come to order. I would
begin by observing that while the horrific disaster which took place at
the Upper Big Branch coal mine in my home county of Raleigh, West
Virginia, has largely been swept from the national spotlight by the
explosion of the Deepwater Horizon rig in the Gulf of Mexico, it
continues to weigh heavily on the citizens of West Virginia and
throughout the coalfields.
Federal and State investigations are proceeding. And we in the
Congress are developing a legislative response to ensure a more safe
working environment for our Nation's underground coal miners: Brave and
hardworking souls, every one of them.
While the country continues to focus on the Gulf of Mexico, and the
impact that spill is having on so many businesses, people and the
economy of that region, I do believe--and in fact, I insist--that we as
a Nation continue to address the plight of the coal miner and the
economy of coalfield communities in the Appalachian Region. And that is
what we are doing this morning.
Today, the committee is meeting for the consideration of H.R. 5479,
the ``Coal Accountability and Retired Employee Act of 2010'' or the
CARE Act. This legislation keeps faith with an historic federal
commitment made to the mineworkers in 1946.
At the time, with President Harry Truman looking on, Interior
Secretary Julius Krug signed an agreement with UMWA President John L.
Lewis guaranteeing the health and welfare of the coal miner. The Krug-
Lewis Agreement was the very foundation for a welfare and retirement
system established for the mineworkers and their dependents.
This Federal guarantee to the mineworkers also served as the basis
for the 1992 Coal Act, in which through my efforts Congress authorized
the transfer of interest accruing to the unspent balance of the
Abandoned Mine Reclamation Fund for the purpose of providing solvency
to the UMWA's health care fund.
At the time, because so many companies had escaped their
responsibility under the National Bituminous Coal Wage Agreement, over
60% of the people who received their health care under the UMWA's
program never worked for the coal operators who were making premium
payments. This large ``orphaned'' miner population threatened to
overwhelm the entire system.
That 1992 legislation threw a lifeline to the health care fund for
several years, but as more and more coal companies abrogated their
responsibilities, Congress was compelled to act again in the 2006
amendments to the Abandoned Mine Reclamation Program which provided
transfers of general funds to insure the solvency of the UMWA's three
health care plans.
The problems which plagued the UMWA health program in the past are
now afflicting their pension plan. At present, well over half of the
current retirees never worked for the coal companies currently
participating in that plan. This situation, as well as the recent
economic downturn, has placed the pension plan on the road to
insolvency.
At stake are the pensions of over 120,000 people--around 38,000 who
reside in my home State of West Virginia--and the economic viability of
the contributing coal companies.
Think about that. These hardworking people, who engaged in the
noble but often dangerous occupation of mining coal for the energy
security of this country, now may find, in their elderly years, dilemma
and confusion when it comes to the security of their pensions. I fought
long,
I fought hard, and I was relentless in my efforts to get these coal
miners the health care they deserve. And I will not now allow their
pensions to be threatened. This matter has been the first thing on my
mind when I wake up in the morning, and it is in my prayers every
evening.
The pending legislation would tap into funds made available by the
2006 amendments to the Abandoned Mine Reclamation Program that are not
necessary for any current law obligation, and transfer those amounts to
the UMWA pension fund in order to insure its solvency.
I have spent a career standing up for the coal miner, their widows
and coalfield communities. Whether it be black lung benefits, coal mine
safety, or health care. And I will tell you this: I will fight for
these people's pensions with every breath in my body.
I would like to particularly thank UMWA President Cecil Roberts for
being here this morning. He is the president of a union with a proud
tradition, and one which pioneered many things in the American
workplace that we take for granted today such as the eight-hour workday
and collective bargaining rights.
______
STATEMENT OF CECIL E. ROBERTS, PRESIDENT,
UNITED MINE WORKERS OF AMERICA
Mr. Roberts. Thank you very much, Mr. Chairman, for
allowing the United Mine Workers to participate in this hearing
today and thank you for scheduling the hearing. Let me begin by
thanking you, not only for the hearing today but the friendship
that you and I have had for over 30 years now, and the efforts
that you have made on behalf of coal miners, one of which was
my dad who we know passed away a couple years ago, and he died
with dignity, had the best health care in the world. And one of
the widows who receives a pension that we are going to talk
about today happens to be my mother who will be 91 here in a
few weeks.
So, this is not only something that is an institutional
question for us, this is a very personal situation for every
member of United Mine Workers. In West Virginia, Pennsylvania,
Ohio, Kentucky, wherever we are from, we all have someone who
is drawing a pension and we all have someone that has health
care. We did an analysis in the last month, and about 152,000
Americans who live in the coalfields have health care, and I
think they can look to you, Mr. Chairman, that over 100,000 of
them have health care as a direct response to what you have
done in this Congress.
I still remember meeting with you in 1992 when you came up
with the concept of using the interest money to help pay the
health care benefits that were guaranteed as you said in 1946
in Harry Truman's White House. And I appreciate the fact that
you have continued to fight not only for health care but for
the safety of all coal miners, and I just wanted to reiterate
what you just said, our hearts and prayers go out today to the
29 families from Upper Big Branch. While this was a non-union
mine, I have said frequently that we all know one another.
In the coalfields I was personal friends with some of these
miners who passed away, and our prayers are with those miners
and we appreciate very much your hard work in trying to make
the mines in this country safe and for the black lung victims,
we know over 100,000 miners have died from pneumoconiosis in
this country, and you have been a champion to provide benefits
and safer workplaces for those people. We come today, Mr.
Chairman, it is somewhat ironic, the history of the coalfields
has been one of conflict if you go back to the early days, and
quite frankly even occasionally today.
But the problem we come today with is not of the making of
the Union and it is not the making of the coal industry, and it
certainly wasn't something that the pensioners and the
beneficiaries of this fund created. The fund that we are going
to talk about here today or we will be talking about today at
the time of the signing of the last collective bargaining
agreement had over $6 billion in assets and was about 94
percent funded. There is only one event, only one, that has
occurred since the signing of this collective bargaining
agreement to the present to change the funding status of this,
and that was the recession that hit in 2008.
It is ironic as we come here today that we have chosen, and
we respect decisions of Congress to bail out Wall Street, we
see the CEOs that made the decisions that led to the financial
downfall of our economy now getting bonuses, I don't fault them
for that. But the decisions that they made have adversely
affected a lot of people in this country, and I find it very
tragic that it is affecting hardworking coal miners, it is
adversely affecting or could adversely affect people who are in
their 90s. Some people in this fund are as old as 100 years
old.
A few years ago we did an analysis of this fund and found
that the oldest beneficiary was 112, unfortunately that lady
has passed away since we did that analysis, but I can say to
you today if we did another analysis, we will find someone in
this fund that is at least 100 years of age. I think that
people depend greatly--in fact, I know they depend greatly--on
these pension checks. I want to point out to the Committee that
in the last ten years $6 billion has been paid to retirees or
their widows, most of this in Appalachia.
The people, the states that receive the most from this are
states, I think West Virginia is first, I think Pennsylvania is
second, I believe Kentucky is third, and I believe Virginia is
fourth. A lot of hand loading went on in the old days in these
areas, at one time coal mining was very labor intensive. And
that is not the case now, it is highly mechanized, longwalls
producing lots and lots of coal with very few people. So, today
we come and, as the Pension Protection Act tells us, we have to
do certain things--one of which would be to increase funding to
this plan and ask the coal industry that did nothing wrong to
pay as much as $20 an hour into this fund, which would bankrupt
some of them, put people out of work, and perhaps lead to total
collapse of this fund.
The other thing is eventually you get around to the
possibility of reducing benefits. I have to tell you what I
told our members, I am not going to be a person who supports
the cutting of benefits for people who have earned them. These
people have given their lives to this industry, we have all
benefitted from this, all of us. Fifty percent of the
electricity in this country comes from coal, our economy is
being fueled off the backs of these coal miners who are now
retired, and their widows who are now surviving, and I think
this nation made a promise to these people and this promise
should be kept. And I will be glad to answer any questions that
you have, Mr. Chairman.
[The prepared statement of Mr. Roberts follows:]
Statement of Cecil E. Roberts, President, United Mine Workers of
America
Mr. Chairman and Members of the Committee:
I want to thank you for the opportunity to be here today to speak
on behalf of over 120,000 current and former UMWA members who are
participants in the UMWA 1974 Pension Plan. Let me state at the outset
that the UMWA strongly supports H.R. 5479 and urges the Committee and
the Congress to enact it as soon as possible.
The 1974 Pension Plan is a Taft-Hartley multiemployer pension plan
negotiated between the UMWA and the Bituminous Coal Operators'
Association (BCOA). It is part of the UMWA Health and Retirement Funds,
a separate institution jointly administered by trustees appointed by
the UMWA and BCOA. The 1974 Plan provides pension benefits to coal
miners who work under the National Bituminous Coal Wage Agreement
(NBCWA). Other funds administered by the UMWA Health and Retirement
Funds provide health benefits to retired coal miners and their
dependents under the Coal Act and the NBCWA.
When the last NBCWA was negotiated at the end of 2006, the 1974
Plan had approximately $6 billion in assets and was about 93% funded.
As of May 31, 2010 the 1974 Plan had total assets of $4.3 billion and
its funding level has fallen below 80%. It currently pays out about
$650 million per year in pension benefits to some 97,500 retired and
disabled miners and surviving spouses. Employers operating under the
NBCWA of 2007 are currently contributing $5.00 per hour worked by their
UMWA-represented employees. The rate will increase to $5.50 in January
2011. Under the provisions of the Pension Protection Act (PPA), because
the plan's funding level is below 80%, the UMWA and the BCOA as plan
sponsors will have to adopt funding improvement plans that may raise
contribution rates to $20 per hour worked by UMWA members. If such
rates are required, signatory employers may seek to withdraw from the
plan or go out of business.
I have attached a chart to this statement that shows projections of
the funded status of the plan made by the 1974 Plan's actuary in
December 2007 and then again in October 2009. You'll note that prior to
the financial crisis the 1974 Plan was well funded at about 93% and was
projected to steadily improve its funded status throughout the coming
decade. This projection, shown as the green line on the chart, was done
at the end of 2007 before the credit crisis led to the financial
meltdown on Wall Street. Now look at the same projection made in late
2009, shown as the red line. As you can see, instead of being in good
shape for as far as the actuary could project, the 1974 Plan is now on
a steady downward path. Only one thing changed in that intervening
period between these two projections-the 2008 financial crisis caused
markets to fall precipitously and placed the country in the worst
economic slump since the Great Depression.
As I mentioned, the 1974 Plan currently pays out about $650 million
per year in pension benefits to retired miners and surviving spouses.
Due to the demographics of the coal industry this represents the period
of our highest payout. The loss of assets in 2008 due to the financial
crisis could not have come at a worse time for the 1974 Plan. The
second chart attached to the statement shows the assets and liabilities
of the 1974 Plan over the last fifteen years. As you'll note the
economic decline in the aftermath of 9/11 terrorist attacks led to
declines in the value of the Plan's assets in 2002 and 2003. But the
assets of the Plan stayed relatively close to the liabilities. With the
sharp market declines due to the 2008 financial crisis, the Plan has
developed a significant separation between assets and liabilities, one
that is not expected to close even with a return to less volatile
financial markets.
The 1974 Pension Plan finds itself in dire financial straights
solely as a result of the financial crisis of 2008. While it has been
well managed and in good financial shape for many years, the market
crash in 2008 and early 2009 left the 1974 Plan with a significant loss
of assets just at the time of its greatest payout. Indeed, the trustees
who govern the 1974 Plan and the investment professionals they employ
have done an exemplary job investing the Plan's assets over many years.
They have a well diversified portfolio of investments that has produced
returns comparable to or better than many of their pension industry
peers. However, the 2008 financial crisis left such a deep hole for the
Plan that, without a significant increase in income, the plan's
actuaries project that the financial condition of the plan will
continue to erode.
The UMWA 1974 Pension Plan grew out of a contract between the
federal government and the UMWA at a time of government seizure of the
nation's bituminous coal mines in 1946. The Krug-Lewis Agreement, named
for Secretary of the Interior Julius Krug and UMWA president John L.
Lewis, was signed in the White House under the watchful eye of
President Harry S. Truman. The Krug-Lewis agreement called for the
creation of a Retirement fund to provide for payments to miners for
disability, death or retirement and a Medical and Hospital fund to
provide medical, hospital and related services.
The Retirement fund created by the Krug-Lewis agreement became the
object of intense dispute between the UMWA and the coal operators (when
the government returned the mines to private control) and as a result,
pension payments were delayed for several years. It was only after
intervention by the Speaker of the House of Representatives and the
appointment of Senator Styles Bridges of New Hampshire as the neutral
trustee that pension payments were activated in 1950. Since that time,
the 1974 Pension and its predecessors have provided pension benefits to
hundreds of thousands of retired coal miners. The federal government
has had a long history of involvement with the UMWA Health and
Retirement Funds. Both Democratic and Republican administrations, as
well as Democratic and Republican Congresses, have recognized the
special promise contained in the agreement between the federal
government and the coal miners. And while there were times when the
fulfillment of that promise was in doubt, each time Congress and the
president have risen to the occasion and ensured that the promise was
kept.
The retirees and surviving spouses who depend on the 1974 Pension
Plan live in all 50 states, but the majority of them still reside in
the coal mining states of West Virginia, Pennsylvania, Kentucky,
Illinois, Virginia, Alabama, Ohio and Indiana. A state by state
breakdown of active, retired and terminated vested participants is
attached to this statement. Many of the retirees are elderly with
nearly 40% of the retired population over 75 years of age and about 17%
of the population over 85 years of age. The 1974 Plan provides them
with modest but crucial income. The average pension benefit for a
retired miner currently receiving benefits from the 1974 Pension Plan
is $590 per month and for a surviving spouse the average benefit is
about $304 per month.
The financial crisis of 2008 and its economic aftermath were not
the fault of the retired miners. Nor was it the fault of their
representatives in the UMWA or the coal operators with whom we bargain.
The cause of the financial crisis lay primarily with the banks and
other large financial institutions on Wall Street. While the very same
institutions that created the crisis were bailed out with taxpayer
money, the victims of the crisis such as pension funds have been left
to their own devices.
An analysis of the 1974 Plan shows that a significant portion of
the Plan's population and liabilities are related to companies that are
now defunct and no longer contribute to the Plan. About 40% of the
Plan's liabilities are related to retirees whose employers no longer
contribute to the 1974 Plan; nearly 54% of the 1974 Plan population is
composed of participants whose employer no longer contributes to the
plan. So the 1974 Pension Plan is dealing with the same orphan retiree
problem that Congress has grappled with in the Coal Act.
The 2007 National Bituminous Coal Wage Agreement (NBCWA) is
scheduled to expire on December 31, 2011. The Pension Protection Act
enacted in 2006 requires multiemployer pension plans to maintain a
certain level of funding or face consequences. Generally, this is 80%
funding for multiemployer plans. Plans that fall below this level are
considered in ``endangered'' status. Plans that fall below 80% and have
an Accumulated Funding Deficiency in the next six years are considered
``seriously endangered.'' Plans that fall below 65% funding and have a
projected AFD in the next four years are considered in
``critical''status. Under the PPA, plans that fall into endangered or
critical status must adopt funding improvement or rehabilitation plans
to reduce the underfunding over the next ten to fifteen years. These
plans may involve increases in contributions by employers, reduction or
elimination of certain benefits, or a combination of both. As noted
earlier, the 1974 Plan's actuarial projections indicate that a
contribution rate of about $20 per hour may be necessary to satisfy the
PPA. As a bargainer I don't like making public predictions about what
positions my bargaining partners may take in negotiations. But I will
say that if the law requires coal operators a choice of paying $20 per
hour or attempting to withdraw from the plan, many of them will be
tempted to try to withdraw. The UMWA, of course, will seek to prevent
that. The conflict that will result if employers seek to abandon the
1974 Plan will not be in the best interests of any of the parties to
the contract, the coal field communities or the nation at large. The
UMWA wants to avoid disruption in the nation's coal fields when the
NBCWA expires in 2011. But we will take whatever actions are necessary
and within our power to protect the 1974 Pension Plan and the more than
120,000 miners and widows who depend on it for economic sustenance. It
may well be that conflict in the coal fields cannot be avoided; but we
believe that H.R. 5479 offers a better way forward.
H.R. 5479 simply builds on the framework and mechanisms Congress
has put in place to deal with the problem of orphan retiree health care
benefits in the coal industry. It provides for the transfer to the 1974
Pension Plan of funds that exceed the amounts needed to meet existing
obligations to the States and the UMWA Health and Retirement Funds
retiree health plans under Title IV of the Surface Mining Control and
Reclamation Act of 1977. In 2006, Congress amended Title IV to provide
for a permanent appropriation of up to $490 million a year to repay 50%
of the Abandoned Mine Land (AML) reclamation fees generated from
certified States that have completed abandoned coal mine reclamation
projects and to supplement interest earned on the AML fund to ensure
the solvency of the three health plans administered by the UMWA Health
and Retirement Funds. I want to point out that allowing the 1974 Plan
to access the permanent appropriation would in no way jeopardize
payments to the States or to the retiree health plans. They would
continue to have first priority claim to the permanent appropriation.
Under H.R. 5479, only funds not needed to fulfill those existing
obligations would be available to the 1974 Plan.
Mr. Chairman, a promise was made to the nation's coal miners in the
White House long ago in 1946. That promise was that if the miners
produced the energy that the nation so desperately needed, they would
have pensions and health care when they retired so they could live out
their lives with a small measure of dignity and security. I submit that
coal miners have earned these benefits through hard work that has
allowed many Americans to enjoy a better life. We only have to look at
the recent disasters in the coal fields, such as the Sago mine and
Upper Big Branch tragedies in West Virginia and the Crandall Canyon
mine in Utah to know how dangerous the work of coal mining can be.
While these tragedies draw public attention, many miners die quietly
without notice each year from black lung disease. The National
Institute for Occupational Safety and Health (NIOSH) estimates that up
until a few years ago as many as 1,500 miners died each year from
complications of black lung. That's a Titanic going down in the coal
fields each and every year. All told, NIOSH estimates that more than
10,000 miners died of black lung disease in the last decade. I think
any reasonable observer would agree that coal miners work in harsh
conditions that endanger their lives in many ways. They should not have
to worry about the modest pensions that have been promised them after
they retire.
The miners who depend on the UMWA Health and Retirement Funds and
the 1974 Pension Plan have upheld their part of the bargain made in
President Truman's White House. Now, through no fault of their own,
their pension plan has fallen into financial difficulty. Congress has
already seen fit to permanently appropriate up to $490 million per year
to fulfill the promise of retiree health care for these same retirees.
It appears likely that because of the efficiency with which the UMWA
Funds delivers medical care, the full amount will not be needed each
year. We think it makes good sense to extend the application of that
commitment to the 1974 Pension Plan. We urge the Committee and the
Congress to enact H.R. 5479 to ensure that the promise is kept to the
nation's coal miners.
We appreciate the opportunity to be here today and would be happy
to answer any questions you may have.
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.eps__
The Chairman. Thank you, Cecil, I will have some questions,
but per the request of the Ranking Member and before going to
you, Dave, I would like to recognize the gentlelady from
Wyoming.
Ms. Lummis. Thank you very much, Mr. Chairman.
The Chairman. For any comments, opening statement you would
like to make.
STATEMENT OF THE HON. CYNTHIA M. LUMMIS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WYOMING
Ms. Lummis. I so appreciate this opportunity and want to
welcome our panel this morning as well. Thank you, Mr.
Chairman, and thank you, Mr. Hastings, for yielding to me. The
nation's leader in coal is Wyoming, and we have a vested
interest in the fate of the AML Program. Since AML's creation
in 1977, Wyoming has worked diligently to reclaim mining sites
on over 32,000 acres. This work was done despite the Federal
Government's failure to distribute AML funds to the states as
required by law.
Finally, under the bipartisan leadership of the Chairman of
this Committee and others, a bipartisan agreement was reached
in 2006 that finally granted Wyoming, West Virginia, and other
states what the Federal Government had co-opted for nearly 30
years. Chairman Rahall's understanding of this complicated
history of AML has resulted in the carefully crafted
legislation under consideration by the Committee today.
As currently written and absent other interference, it
appears the legislation would have no effect on the historic
agreement reached in 2006 on certified states and tribes. I
commend the Chairman for his artful drafting of this bill.
Having said that, I have two concerns that I sincerely hope the
Chairman will consider. There were many, including the Chairman
himself I would suspect, who hoped that following passage of
the 2006 agreement, this issue had finally been put to rest for
the good of everyone involved. Unfortunately, that has not been
the case, the program has continued to be the target of those
who do not understand the promises made and broken by the
Federal Government throughout the history of AML.
The sharks continue to circle, Mr. Chairman, and I am
deeply concerned that passage of this legislation will give
opponents the opening they have been seeking. On a more
philosophical level, the intent of the legislation under
consideration helps to highlight what is a very troubling
trend. From so called agency guidance to coal lash to permit
suspensions and delays to Clean Air and Water Act revisions and
more, the Obama Administration has worked overtime to hinder
domestic coal production. The only possible outcome of these
policies is a crippled industry unable to hire new workers of
any kind.
Again, I have great respect for the Chairman of this
Committee. His leadership on the AML Program is undisputed. I
understand his desire to shore up a failing pension plan for
coal miners. However, if we were truly concerned about the fate
of America's hardworking coal miners, we would also be working
night and day to beat back the onslaught from an Administration
hell-bent on halting coal production altogether. I look forward
to working with the Chairman on all of these issues in the
weeks ahead. And, Mr. Chairman, again, I am thankful for the
opportunity to present my statement. I yield back.
[The prepared statement of Ms. Lummis follows:]
Statement of The Honorable Cynthia M. Lummis, a Representative in
Congress from the State of Wyoming
Thank you Mr. Chairman, and thank you Mr. Hastings for yielding me
the time.
As the nation's leading producer of coal, Wyoming has a vested
interest in the fate of the Abandon Mine Lands (AML) program. Since
AML's creation in 1977, Wyoming has worked diligently to reclaim mining
sites on over 32,000 acres. This work was done despite the federal
government's failure to distribute AML funds to the states as required
by the law. Finally, and under the leadership of the Chairman of this
Committee and others, a bi-partisan agreement was reached in 2006 that
finally granted to Wyoming, West Virginia, and other states what the
federal government had co-opted for nearly 30 years.
Chairman Rahall's understanding of the complicated history of AML
has resulted in the carefully crafted legislation under consideration
by the Committee today. As currently written, and absent other
interference, it appears the legislation would have no affect on the
historic agreement reached in 2006 on certified states and tribes. I
commend the Chairman for his artful drafting of this bill.
Having said that, I have two concerns that I sincerely hope the
Chairman will consider today. There were many, including the Chairman
himself I would suspect, who hoped that following passage of the 2006
agreement this issue had finally been put to rest for the good of
everyone involved. Unfortunately, that has not been the case. The
program has continued to be the target of those who do not understand
the promises made, and broken, by the federal government throughout the
history of AML. The sharks continue to circle, Mr. Chairman, and I am
deeply concerned that passage of this legislation will give opponents
the opening they've been seeking.
On a more philosophical level, the intent of the legislation under
consideration helps to highlight what is a very troubling trend. From
so-called agency ``guidance,'' to coal ash, to permit suspensions and
delays, to Clean Air and Water Act revisions and more, the Obama
Administration has worked overtime to hinder domestic coal production.
The only possible outcome of these policies is a crippled industry
unable to hire new workers of any kind.
Again, I have great respect for the Chairman of this Committee; his
leadership on the AML program is undisputed. I understand his desire to
shore up a failing pension plan for coal miners. However, if we were
truly concerned about the fate of America's hardworking coal miners, we
would be working night and day to beat back the onslaught from an
Administration hell bent on halting coal production altogether.
I look forward to working with the Chairman on all of these issues
in the weeks ahead.
______
The Chairman. Thank you. Let us proceed with our panel. I
have already introduced Mr. Dave Young. Dave?
STATEMENT OF DAVID M. YOUNG, PRESIDENT,
BITUMINOUS COAL OPERATORS' ASSOCIATION, INC.
Mr. Young. Mr. Chairman and Members of the Committee, I am
pleased to be here this morning to testify on a matter of
critical importance to the organized coal industry. As
President of the Bituminous Coal Operators' Association, the
BCOA represents its member companies in collective bargaining
with negotiations for the National Bituminous Coal Wage
Agreement with the United Mine Workers of America. The BCOA is
also the management settlor of the UMWA 1974 Pension Plan, a
multi-employer pension plan created by the National Bituminous
Coal Wage Agreement.
I am here today to testify in support of H.R. 5479, The
Coal Accountability and Retired Employee Act of 2010. H.R. 5479
would make available funds generated by the provisions of the
Surface Mining Act of 2006 to the 1974 plan to offset funding
needed for the losses caused by the 2008 market collapse. This
legislation is necessary to protect the pensions of the 1974
Pension Plan beneficiaries and to avoid either a plan
insolvency or plan termination under Title IV of ERISA.
Prior to the 2008 market collapse, as referenced by
President Roberts earlier, the Plan was 94 percent funded and
on a clear path to full funding. However, the combination of
the 2008 market decline on plan net assets and the Plan being
in its peak cash flow years today that require nearly $700
million annually to meet pension benefit obligations means that
the restoration of prior funding levels really is no longer
realistic today.
The root cause of the Plan's difficulty has been a
persistent decline in the number of contributing employers
really since the 1970s, which in a large part reflects the
shift in coal production from east to west in response to
governmental environmental policy at that time. The result is
that today the 1974 plan is nearly a 12-to-1 ratio of retirees
to active miners. This imbalance clearly creates a crushing
financial burden for the remaining contributing employers.
The result is today a last man's club of only ten employer
groups supporting the pension benefits of over 110,000
retirees. Yet the signatory contributing employers of these
groups only employ 10,000 representative active miners
themselves. I should note that about one-third, or 33,000, of
the pension beneficiaries as we have discussed are really
widows of retired miners, and nearly 10,000 of these retirees
are totally disabled miners.
Passage of H.R. 5479 will allow these remaining signatory
employers to continue funding pension benefits for all of their
current and former employees, and at the same time help to
protect the 66,000 in our estimate retired ``orphan'' miners
whose employers are no longer in the coal business for various
reasons. The companies that currently contribute to the '74
Pension Plan are the last line of defense for the plan and
stand in the shoes of the government when it comes to funding
the pension benefits of those orphan miners, who under other
circumstances would already be the responsibility of the
pension benefit guarantee corporation.
As an example, Bethlehem Steel entered bankruptcy a few
years ago. Employees of the steel company became the
responsibility of the PBGC. However, miners who retired from
Bethlehem Steel at the same time remained in the 1974 Plan, and
their full benefits guaranteed and funded by the remaining
contributors to the '74 Pension Plan. Mr. Chairman, as you
know, the government has been deeply involved in the coal
industry and with these plans since the 1940s. Indeed, the
mines were seized unbelievably in 1946 with the express purpose
of establishing this pension program.
The pension benefits did not start until the Speaker of the
House Joseph Martin in 1948 met with the fund trustees and
effected the appointment of Senator Styles Bridges as a neutral
trustee. Senator Bridges then sided with John L. Lewis, the
UMWA President and trustee in agreeing to a pay-as-you-go
funding structure and setting the retirement age, length of
service requirements that are still the core of today's benefit
program.
Together all of us, the miners, the companies, and the
government, have made a great deal of difference in the lives
of people in the coalfields and for our energy needs. Today we
are once again at a juncture when the historic promise to these
miners is in jeopardy. We believe that H.R. 5479 recognizes
this stark fact and provides the best way to correct it. Thank
you for this opportunity to support and protect the livelihood
of the nation's retired coal miners.
[The prepared statement of Mr. Young follows:]
Statement of David M. Young, President,
Bituminous Coal Operators' Association, Inc.
Mr. Chairman and members of the Committee. My name is David Young.
I am pleased to be here this morning to testify on a matter of critical
importance to the organized coal industry. I am President of the
Bituminous Coal Operators' Association (BCOA). The BCOA represents its
member companies in collective bargaining negotiations for the National
Bituminous Coal Wage Agreement (NBCWA) with the United Mine Workers of
America. The BCOA is also the management Settlor of the UMWA 1974
Pension Plan, a multi-employer pension plan created by the NBCWA.
I am here today to testify in support of H.R. 5479, The Coal
Accountability and Retired Employee Act of 2010. H.R. 5479 would make
available funds generated by the provisions of the Surface Mining Act
of 2006 to the 1974 Plan to offset funding needed for losses caused by
the 2008 market collapse. This legislation is necessary to protect the
pensions of the 1974 Pension Plan beneficiaries and to avoid either
plan insolvency or plan termination under Title IV of ERISA.
Prior to the 2008 market collapse, the 1974 Plan was 94% funded and
on a clear path to full funding. However, the combination of the 2008
market decline on Plan net assets and the Plan being in its peak cash
flow years, that require nearly $700 Million per year to meet pension
benefit obligations, means that restoration of prior funding levels is
no longer realistic.
The root cause of the Plan's difficultly has been a persistent
decline in the number of contributing Employers since the 1970s, which
in large part reflects the shift in coal production from east to west
in response to governmental environmental policy. The result is that
today the 1974 Plan has a nearly 12-to-1 ratio of retirees to active
miners. This imbalance clearly creates a crushing financial burden for
the remaining contributing Employers.
The result is today a last man's club of only ten employer groups
support the pension benefits of over 110,000 retirees; yet the
signatory contributing Employers of these groups only employ 10,000
represented active miners themselves. I should note that about one-
third or more than 33,000 of the pension beneficiaries are widows of
retired miners and nearly 10,000 are totally disabled miners.
Passage of H.R. 5479 will allow these remaining signatory Employers
to continue funding pension benefits for all their current and former
employees and, at the same time, help to protect the more than 66,000
retired ``orphan'' miners whose employers are no longer in the coal
business. The companies that currently contribute to the 1974 Pension
Plan are the last line of defense for the Plan and stand in the shoes
of the government when it comes to funding the pension benefits of
these ``orphan'' miners--who, under other circumstances, would already
be the responsibility of the Pension Benefit Guarantee Corporation
(PBGC). For example, when Bethlehem Steel entered bankruptcy, Employees
of the steel company became the responsibility of the PBGC. However,
miners who retired from Bethlehem Steel remained in the 1974 Plan with
their full benefits guaranteed and funded by the remaining contributing
Employers.
Mr. Chairman, as you know, the government has been deeply involved
in the coal industry and with these Plans since the 1940's. Indeed, the
mines were seized in 1946 with the express purpose of establishing this
pension program. The pension benefits did not start until the Speaker
of the House Joseph Martin (R-MA) in 1948 met with the Fund Trustees
and effected the appointment of Senator Styles Bridges (R-NH) as
neutral trustee. Senator Bridges then sided with John L. Lewis, the
UMWA President and Trustee in agreeing to a pay-as-you-go funding
structure and setting the retirement age and length of service
requirements that are still the core of today's benefit program.
Together, all of us, the miners, the companies and the government,
have made a great deal of difference in the lives of people in the
coalfields and for our energy needs. Today we are once again at a
juncture when the historic promise to these miners is in jeopardy. We
believe that H.R. 5479 recognizes this stark fact and provides the best
way to correct it. Thank you for this opportunity to support and
protect the livelihood of the nation's retired coal miners.
______
The Chairman. Thank you, gentlemen, both for your
compelling testimony and the manner in which you presented it.
Let me start by asking both of you about the types of pensions
involved. We are not talking about gold-plated pensions, as we
are all aware. President Roberts, you said the average pension
for a surviving spouse for example is only $304 a month. So,
basically, these women are getting along with their UMWA health
care, their pension, Social Security, is that correct? That is
what they are asked to----
Mr. Roberts. That is correct, Mr. Chairman.
The Chairman. That is what they are asked to live on these
days in face of rising costs of everything it confronts us.
Mr. Roberts. Correct.
The Chairman. Let us discuss the orphan population for a
moment. President Roberts, you stated that pension benefits are
provided to 97,500 retired and disabled miners and nearly 54
percent of the plan population is composed of people whose
employer no longer contributes to the plan. If you add in
active participants and terminated vested participants, the
total population is slightly over 120,000 with about 60 percent
of them being orphans. Could you please explain a little bit
more in detail about how this large orphan population came
about?
Mr. Roberts. I believe I can, Mr. Chairman. If you go to
what Mr. Young said about Bethlehem, at one time we know
Bethlehem was one of the largest corporations in America, had
at one time I think 120,000 employees. Many people may not
realize this, but Bethlehem owned many coal mines in
Pennsylvania and West Virginia in particular. In fact my dad's
last employer was Bethenergy which was a subsidiary of
Bethlehem Steel, but we know what happened with Bethlehem, they
went into bankruptcy.
And one of the things that has happened here, as opposed to
the Federal Government picking up the pensions of the
Bethenergy workers, we have between negotiations between the
Bituminous Coal Operators' Association and the Union continued
to provide those benefits now. The employees of Bethlehem Steel
retirees, the government has been subsidizing those pensions
through the Public Benefit Guarantee Corporation under ERISA.
So, we have tried and we have been successful in the coal
industry to make sure the government has not had to do that.
Now it is not just Bethlehem Steel that went into
bankruptcy over the years. If you go back and read the history
of coal production in this country, I will take you quickly
through this. In the '30s the UMWA was the largest union in the
country because coal was mined by hand with a shovel, very
labor intensive. I would like to go back to those employment
numbers, I don't know if we would want to go back to loading
coal again by hand.
But as time went on we had a mechanization period in the
late '40s, early '50s, and we went from like 800 and some
thousand workers down to like 300,000, and then as time went on
became more and more mechanized. However, we have also gone
through many, many bankruptcies and employers walking away from
this industry. You will not find, that I am aware of, one
single UMWA retiree being paid for by PBGC right now, unless
you, I think the Anthracite miners might have, a handful of
those might have fallen into that category. But the two parties
sitting here have been responsible and negotiated agreements
that allowed for the payment of pensions to continue for those
people who worked for companies that are gone.
They are not there for us to deal with, the Union can't go
and bargain with those people, they don't exist anymore. But
the two parties sitting here have continued to see that those
benefits arrive at the door every single month, and there are
about 100,000 people, Mr. Chairman, Members of the Committee,
that go to the post office or go out by the gate and reach in
there and get a check that they depend on very heavily. And $6
billion in the last ten years, you talk about economic stimulus
plan, that is pretty darn good when down in southern West
Virginia and eastern Kentucky and Appalachia. And by the way,
every state in the Union, all fifty states, have pensioners
that receive benefits.
The Chairman. Thank you.
Mr. Young. Mr. Chairman, can I follow up on that please?
The Chairman. Sure, sure, Dave.
Mr. Young. You know, I think I can relate from my own
experience in a prior life before coming to Washington about 11
years ago, I was in the coal industry about 20 years and spent
time in Appalachia and Indiana and Illinois and Kentucky as
well. Part of my experience was in Illinois in the early '90s.
I was there and worked for Old Ben Coal at the time, we had a
great operation there, we had four longwall mines and couple CM
mines and super people working for us.
And along came the Clean Air Act. And we saw a lot of coal
that moved from east to west, to the benefit of the Powder
River Basin, strictly due to sulfur. I was selling coal at the
time for $13 a ton, and you can't buy much for $13 when you get
2,000 pounds of anything, let alone coal, and we couldn't find
a market for that product. And unfortunately, I mean the
government has created part of this problem with the reduction
in manpower and the companies that have gone bankrupt or have
gone out of the business during this time period, most of whom
would have been organized in the east.
And I can relate personally at that time friends of mine,
people that I grew to know in Illinois, I shut down four
longwall mines doing a fabulous job, safe, efficient
operations, and 2,000 people went home, and I am not sure any
of them have worked a day since the early '90s. And that is
just one example, sir, I mean there are so many out there that
would break your heart sometimes. But we did a good job, and
for various reasons, Clean Air Act, we have gone to lower
sulfur coal. And you know, we see a lot of effects by climate
and we have a lot of unknowns even going today, where are we
going to go in the coal industry today? So, we need a policy as
you know, and I am sure you are going to help us get there.
Thank you.
The Chairman. Very good observation, Dave. The Chair
recognizes the gentleman from Washington, Mr. Hastings, who has
72 UMWA pensioners in his district.
Mr. Hastings. I am glad to know that. I don't know 72 of
them.
The Chairman. We will get you the names and addresses.
Mr. Hastings. Mr. Chairman, I will yield whatever time I
have to Mrs. Lummis if she has any questions.
The Chairman. The gentlelady from Wyoming is recognized,
who has 91 UMWA pensioners in her district.
Ms. Lummis. Mr. Chairman, I would be delighted to have
their names and addresses. You both have tremendous experience
in the coal industry and a lifelong effort to see some of these
changes through, and so my question is this. The 2000 changes
to SMCRA were important--excuse me, the 2006 changes, the
negotiation. How long did it take to negotiate the changes with
all these interested parties? I know it was a herculean effort.
Mr. Roberts. Let me be the first to try to speak to that.
By the way I should inform you that the first person to receive
a pension check from this fund in 1946 was from Wyoming, so
just a little historic note here today. And let me also, if I
may, thank the leadership in Wyoming. The Governor, the people
that were here from Congress at the time, never ever tried to
prevent the passage of this Act without taking care of these
pensioners' health care. And although there were very few
people in Wyoming who were receiving these benefits, the people
of Wyoming understood that we can't walk away from these, and I
wanted to thank you and everyone that was in a leadership
position in Wyoming and continues today for that.
This, I know this went on for years, years. I am guessing
at a minimum four years, but it might have been more. The
Chairman could tell you, he is doing the multiplications with
his hands up there. But when we were struggling from '92
forward with respect to trying to determine how to take care of
these health care benefits until we finally passed the '06
legislation, there was conversations about this all through
that period, I think is the best way to answer it.
Mr. Young. Let me comment, I was heavily involved, I came
to town in 1999, which is close to the Chairman's ten fingers
he put up there. And it was an issue at that time, it was there
before I arrived, and it was number one on our list. And I also
kind of woke up every morning praying about this orphan health
care issue. So, then it really came together when we worked
with all the states and we saw the value of the AML process and
the issues that were needed in all areas, and with that I think
it unified us as a group that we were able to solve the
problem.
Ms. Lummis. Well, it is to all of your credit that it was
solved, and I deeply appreciated it as well. Question for Mr.
Roberts. Do you support the President's proposed changes to
SMCRA? And I am talking now about the distributions in the
President's 2011 budget.
Mr. Roberts. Excuse me, could you be a little more specific
about what we are talking about?
Ms. Lummis. It has to do with the manner in which monies
are distributed, to exclude certified states.
Mr. Roberts. I think the answer to that is that we don't
support that. I must apologize that I am not as up to date on
that as you are, but I don't think the mine workers are on
record supporting--in fact, I believe we opposed it.
Ms. Lummis. Thank you. And one more question, are you
concerned that the rewrite of the stream buffer zone rule and
other actions by the Administration will adversely impact both
coal mining companies and their employees, some of whom are
union members?
Mr. Roberts. Yes, we have about, for your information,
about 1,000 UMWA members in southern West Virginia doing this
type work. We have worked with the industry with respect to
that, we are concerned about that, yes, ma'am.
Ms. Lummis. Mr. Chairman, those are all the questions I
have. Thank you very much.
The Chairman. Thank you. The gentleman from New Jersey, who
has West Virginia in his blood, is recognized, and who also has
54 UMWA pensioners in his district.
Mr. Holt. Well, I don't represent the entire State of New
Jersey, but there certainly are some in New Jersey and, of
course, many friends and acquaintances in West Virginia that I
have. But more to the point, President Roberts, you make in
your testimony, you state that a promise was made to the
nation's coal miners in the White House long ago in 1946. I
would like to draw attention to that. It is not how many
members of the UMWA are in each person's district, it is, are
we going to make good on our national promise, our national
obligation.
The miners have held up their end in difficult times, in
difficult circumstances while the energy market has changed
underneath them. And we have to do our best to hold up our
national obligation here, and I think the Chairman has done a
fine job with this. Let me ask Mr. Roberts to put this in
perspective and the declining prospects for the pension fund.
How does this compare with other pension funds? There is
trouble all over. I guess I would like to establish for the
record that this isn't an example of individual mismanagement.
Mr. Roberts. I thank you for that question and I think you
are making a very good point, Congressman. By the way thank you
for the kind remarks about the government keeping the promises
it makes, because once the government starts breaking promises
I think people start losing faith in their government. But we
just did a presentation throughout the country at four
different conferences. In 2008 when this fund saw the dramatic
decline of over $3.5 billion in assets, and no one did a thing
wrong here.
This fund was 92 to 94 percent funded, we increased the
contributions we asked industry to make, and those were
significant amounts. The contribution rate went from almost
zero to $5.50 for every hour people worked when we did the last
bargaining. We acted responsibly. But we, the industry, the
Union, did nothing wrong here. Certainly the pensioners did
nothing wrong, the beneficiaries did nothing wrong. But we saw
this collapse in '08 because of the mismanagement on Wall
Street. And I commend the Congress for trying to deal with that
problem also.
But to answer your question specifically, we have a chart
that where almost every pension plan in the United States had
this happen to them. One of the things that hasn't been
mentioned here that I think would be helpful to the Committee,
many of these plans will have an opportunity to recover ten
years, fifteen, whatever it may take. What is significantly
problematic here with this particular pension plan, we are at
our peak for paying out benefits.
We are paying out $660 some million a year now, which is
the highest amount we have ever had to pay out in any
particular year, and we anticipate that being higher as time
goes on for a period of time. At the same time, we have seen
our assets dramatically reduced because of the recession. The
problem is obvious here, is with the responsibility to pay
these benefits you may not have the time for this fund to
recover, like some plans may have that opportunity but this
fund will not.
Mr. Holt. Thank you.
Mr. Young. Congressman, could I add to that also?
Mr. Holt. Yes, Mr. Young.
Mr. Young. One unique item I think of our '74 pension fund,
that I have not heard from any other industry or area that I am
aware, is our twelve to one ratio of all the retirees that we
have out there which have certainly paid their way and done
their bit to get there. And now we are down to, you know, as
our organized industry is shrinking the ratio of active people
to try to fund those people, we had cash in the bank, we had
$6.7 billion at one point in time in the bank to make these
payments. They have disappeared.
And as President Roberts has said, with the ratio of what
few active people we have working for that 100,000 retirees, we
just don't have time as some other industries do. We are going
to be forced by the PPA to come up with a huge funding hourly
rate here, which is very difficult for someone to look at a
$18, $20 rate per hour for pensions, let alone the hourly rate.
The coal economics in the marketplace today will not pay for
that.
Mr. Holt. Well, thank you. And in the time that I don't
have remaining I will just say that I appreciate the Chairman's
undertaking this. The worst that can be said about this
legislation is, I think, it might not work to put the pension
fund back on sound footing. But for the sake of the miners we
have to try. Thank you.
The Chairman. The gentleman from Nebraska, Mr. Smith.
Mr. Smith. Thank you, Mr. Chairman. Actually my questions
have been answered, so I would yield back.
The Chairman. Let me finish asking my questions then. In
the '74 Plan, if the '74 Plan is certified as endangered or
critical later this year under the Pension Protection Act of
'06, funding improvement plans will have to be adopted.
President Roberts, in your testimony you note that under these
circumstances company contribution rates may have to rise from
$5 an hour to $20 an hour. What other adjustments would have to
be made?
Mr. Roberts. This is some new ground we are all plowing
here with this 2006 Act, Mr. Chairman, and I have spent more
time than I care to talk about with lawyers who are experts in
this field who at any given time will say, well we really don't
know what you are supposed to do with A if B happens. But you
have a classification of endangered, you have a classification
of seriously endangered, and the third classification is
critical. Obviously when you get to critical that is the most
severe declaration that could be made under this Act, and as I
understand it the IRS and the Department of Labor jointly have
responsibilities for enforcing this provision.
It requires us to come up with a, within 200 and some, it
is a little less than a year, they give you about a little less
than a year to come up with a funding mechanism to get out of
endangered or in seriously endangered or in critical. Critical,
if you get to that stage, not only would it mandate additional
funding but adjustment in benefits. And obviously it is the
same thing with seriously endangered too. Here is the thing I
think we might be missing here, and I think it needs to be
said. Would $20 an hour if the industry agreed to pay it fix
this problem?
I fear it might make it worse. I think we are going to have
fewer employers that will be standing in line to pay this. I
think what they may do is attempt to withdraw from this fund,
which they can do under the '74 Act, but that would create the
biggest legal fight. Perhaps I should point out that the
collective bargaining agreement itself expires at the end of
next year.
A union is not in the business of saying, well let us cut
our people's benefits. And, of course, the industry would tell
me they are not in the business of going out of business. So, I
think it is setting the stage here for a horrendous conflict
between the Union and the BCOA that we didn't create. Now we
find lots of things to fight about, we are pretty good at that,
but we didn't ask for this one to fight over.
So, we will have to establish a plan, the BCOA and the
Union are required to do this under this Act, and I guess
someone in the government either at the IRS or the Department
of Labor, it is a little bit unclear to me who makes these
decisions at what level, would either approve or disapprove
this plan. But I think actually the actuaries that you have
working for the '74 Plan are supposed to approve or disapprove
this funding mechanism to get the plan back under a what they
would call I guess solvency as we move forward. But it seems to
me like we will be given an almost impossible task here.
The Chairman. Let me ask you, worst case scenario and the
'74 Plan is completely insolvent and the PBGC takes over.
Mr. Roberts. That would be----
The Chairman. What can the retirees expect?
Mr. Roberts. Well, here is what happens, that is even over
and above the Pension Protection Act. The Pension Protection
Act was designed I think, I think Congress had good intentions
there and I respect that. But I think the Pension Protection
Act was geared so no one ever goes into the PBGC quite frankly.
But I think they may have also inadvertently created a
situation where PBGC will end up taking over some of these
plans. If PBGC takes over, we all understand that they say they
guarantee pensions, but they only guarantee them at a certain
level. We have done somewhat of an analysis here, and I think
people would in some instances be getting about half of what
they are getting now if the PBGC stepped in.
Now this is a failure of the Pension Protection Act to do
what it is supposed to do, this would be a failure of the Union
and the Coal Operators from being able to figure this out in
negotiations, the PBGC is now stepping in to say, we are going
to take over. At that point in time people do not get the
benefit level that they were entitled to. So, people that you
referred to as not having a gold-plated pension would be
getting less than they are now if we ever got to that stage.
But I am committed, and I have told our members this, I am
committed to keep that from happening.
The Chairman. Thank you.
Mr. Young. Let me follow up with that, Mr. Chairman. Also
we have also made kind of a quick look at how the beneficiaries
could be affected if the PBGC were to, forced to take over here
and our funding base fails for whatever reason. Unbelievable to
me that someone who is receiving, you know, it is going to be
an elderly lady probably, we are talking about widows here
again who is receiving a check for $304 a month, we think that
individual would see about a 10 percent cut in that check, if
you can believe that, down to about $270. And it just
progressively increases. So, you know, the more money you are
entitled to in your package the more the PBGC makes a cut. So,
our estimate would be, everyone would receive at a minimum of
10 percent cut, some could see as high as a 40 percent cut in
their retirement.
The Chairman. Thank you, gentlemen, thank you both for your
testimony today, we appreciate it.
The Committee will now hear from Mr. Alfred Whitehouse, the
Chief of the Division of Reclamation Support, Office of Surface
Mining Reclamation Enforcement. Nice to have you, Mr.
Whitehouse, before the Committee, good to see you again. And we
do have your prepared testimony and it will be made part of the
record as if actually read. You may proceed as you wish.
STATEMENT OF ALFRED WHITEHOUSE, CHIEF OF THE DIVISION OF
RECLAMATION SUPPORT, OFFICE OF SURFACE MINING RECLAMATION AND
ENFORCEMENT
Mr. Whitehouse. Mr. Chairman and Members of the Committee,
thank you very much for the opportunity to testify on behalf of
the Office of Surface Mining Reclamation and Enforcement on
H.R. 5479, The Coal Accountability and Retired Employee Act of
2010. H.R. 5479 would require that the unused portion of the
U.S. Treasury funds below the annual cap of $490 million
established by the 2006 amendments to the Surface Mining
Control and Reclamation Act be paid each year to the trustees
of the 1974 United Mine Workers of America Pension Plan. While
we recognize the importance of ensuring that retired miners
receive their pensions, we have serious concerns with this
bill. SMCRA established OSM for two basic purposes. First, to
ensure that the nation's coal mines operate in a manner that
protects citizens and the environment during mining operations
and restores the land to beneficial use after mining. Second,
to implement an abandoned mine land program to address the
hazards and environmental damage created by centuries of weakly
regulated coal mining that occurred before SMCRA's enactment.
The AML program is funded by a fee assessed on each ton of
coal produced and deposited in the Abandoned Mine Land
Reclamation Fund. Historically, Congress appropriated far less
money from the Abandoned Mine Land Fund than the total fees
collected, which allowed the fund to grow. Beginning in Fiscal
Year 1996, an amount equal to the interest earned by the AML
Fund but capped at $70 million has been available for transfer
to the United Mine Workers of America Combined Benefit Fund.
This was to defray the cost of providing health care to certain
retired coal miners and their dependents.
Congress amended SMCRA as part of the Tax Relief and Health
Care Act of 2006. The amendments removed the $70 million cap
and added funding for two additional UMWA health care plans.
After 2006 amendments, OSM became responsible for transferring
an annual amount to the three UMWA health care plans based on
estimated expenses. Any shortfall between the interest earned
by OSM and the amount of the transfer estimated by health care
plan trustees would be funded from the U.S. Treasury's general
fund.
Under Title IV of SMCRA, OSM expended $336 million from the
general Treasury fund in Fiscal Year 2010. Approximately $227
million was distributed through AML grants to states and
tribes, and approximately $108 million was transferred to the
three health care plans. H.R. 5479 would require an amount
representing the difference between the SMCRA transfer from the
Treasury general fund and the $490 million cap to be
transferred to the 1974 Pension Plan every fiscal year.
As a result, this bill would significantly increase
expenditures from the Treasury under SMCRA and would eliminate
all of the savings to be achieved through reductions proposed
in the President's Fiscal Year 2011 budget. For example, the
President's Fiscal Year 2011 budget proposes to eliminate
Abandoned Mine Land payments to states and tribes that have
been certified as completing reclamation of their high priority
abandoned mine land coal problems. Under the budget proposal,
the eliminated payments would remain in the Treasury.
However, H.R. 5479 would require that the full amount of
the cap on the SMCRA Treasury allocations be spent every year,
eliminating any savings. The Administration takes seriously the
financial problems facing many multi-employer pension plans,
including those sponsored by the United Mine Workers of
America, and is committed to working with Congress to find
solutions that address the long term solvency of these plans
and protect the retirement security of workers and their
beneficiaries.
However, we have serious concerns that H.R. 5479 if enacted
would add significant new costs and eliminate any savings
sought by the Administration's 2011 budget. Thank you very much
for the opportunity to appear before the Committee today and
testify on the bill. I look forward to working with the
Committee to ensure the nation's abandoned mine lands are
reclaimed.
[The prepared statement of Mr. Whitehouse follows:]
Statement of Alfred Whitehouse, Chief of the Division of Reclamation
Support, 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 testify on behalf of the Office of Surface Mining
Reclamation and Enforcement (OSM) regarding H.R. 5479, the Coal
Accountability and Retired Employee Act of 2010.
H.R. 5479 would require that the unused portion of U.S. Treasury
funds below the annual cap of $490 million established by the 2006
Amendments to the Surface Mining Control and Reclamation Act (SMCRA) be
paid each year to trustees of the 1974 United Mine Workers of America
(UMWA) Pension Plan. While we recognize the importance of ensuring that
retired miners receive their pensions, we have serious concerns with
this bill. We believe the AML program should remain focused on
reclaiming high priority abandoned coal mine sites, and further, this
bill is inconsistent with the President's Budget and goals of ensuring
greater fiscal responsibility during today's challenging economic
times.
Background
SMCRA established OSM for two basic purposes. First, to ensure that
the Nation's coal mines operate in a manner that protects citizens and
the environment during mining operations and to restore the land to
beneficial use following mining. Second, to implement an AML program to
address the hazards and environmental degradation created by centuries
of weakly regulated coal mining that occurred before SMCRA's enactment.
Title IV of SMCRA created an AML reclamation program funded by a
reclamation fee assessed on each ton of coal produced. The fees
collected have been placed in the Abandoned Mine Reclamation Fund (the
Fund). OSM, either directly or through grants to states and tribes with
approved AML reclamation plans under SMCRA, has been using the Fund
primarily to reclaim lands and waters adversely impacted by coal mining
conducted before the enactment of SMCRA and to mitigate the adverse
impacts of mining on individuals and communities. Eligible lands and
waters were those that were mined for coal or affected by coal mining
or coal processing, were abandoned or left inadequately reclaimed prior
to the enactment of SMCRA on August 3, 1977, and for which there was no
continuing reclamation responsibility under state or other Federal
laws.
Historically, Congress appropriated far less money from the Fund
than the total fees collected and deposited into the Fund on an annual
basis. This allowed the Fund to grow considerably in years past.
Beginning in Fiscal Year 1996, an amount equal to the interest earned
by and paid to the Fund has been available for direct transfer to the
United Mine Workers of America Combined Benefit Fund (CBF) to defray
the cost of providing health care benefits for certain retired coal
miners and their dependents. Prior to 2006, OSM's annual payments to
the CBF were limited to the lesser of the interest earned on the AML
fund, or $70 million.
In 2006, Congress amended SMCRA as part of the Tax Relief and
Health Care Act of 2006, (2006 Amendments). The amendments removed the
$70 million cap, and added funding for two additional UMWA health care
plans. With the 2006 Amendments, OSM became responsible for
transferring an annual amount based on the estimated expenses of three
UMWA Health Care Plans. Any shortfall between the amount of interest
earned by OSM, and the amount of the transfer estimated by health care
plan trustees would be funded from the U.S. Treasury's General Fund.
H.R. 5479
As noted earlier, the 2006 amendments capped SMCRA expenditures
from the Treasury General Fund at $490 million per year. In the current
fiscal year, approximately $227 million of the Treasury General Fund
was distributed through mandatory AML grants to states and tribes and
approximately $108 million was transferred to the three heath care
plans. Thus, OSM expended $336 million from the Treasury General Fund
in fiscal year 2010.
H.R. 5479 would require an amount representing the difference
between the SMCRA transfer from the Treasury General Fund and the $490
million cap to be transferred every fiscal year to the 1974 UMWA
Pension Plan. As a result, this bill would significantly increase
expenditures from the Treasury under SMCRA.
This bill would also most likely eliminate all of the savings to be
achieved through reductions proposed in the President's Fiscal Year
2011 budget. For example, the President's FY 2011 Budget proposes to
eliminate AML payments to states and tribes that have been certified as
completing reclamation of their high priority AML coal problems. Under
the proposal, the eliminated payments would remain in the treasury;
however, this bill would require that the full amount of the cap on
SMCRA Treasury allocations be spent every year, eliminating any
savings.
The Administration takes seriously the financial problems facing
many multiemployer pension plans, including those sponsored by the
UMWA, and understands the valuable benefits that these plans provide to
millions of workers and retirees. When people retire, they deserve to
know that they will receive the benefits they were promised. The
Administration is committed to working with the Congress to find
solutions that address the long-term solvency of these plans and
protects the retirement security of workers and retirees. However, we
have serious concerns that H.R. 5479, if enacted, would add significant
new costs, and eliminate savings sought by the Administration's FY 2011
budget
Thank you for the opportunity to appear before the Committee today
and testify on this bill. I look forward to working with the Committee
to ensure that the Nation's abandoned coal mine lands are adequately
reclaimed.
______
The Chairman. Thank you, Mr. Whitehouse. I realize fully,
and we have seen this many times in this city, that you are I
guess what we could call the proverbial sacrificial lamb at
this hearing, and you have been directed by OMB what to say
about the pending measure, and I am sure you would like to use
this money to make the deficit look smaller, that is
commonplace. But I would point out two things with respect to
your testimony. First, as I am sure you are aware, there would
be no AML Program today if it were not for this gentleman
sitting in this chair.
I almost singlehandedly, against utility and coal industry
opposition, extended the program in the late '80s, and then
again in '92, and played a major role in the '06 extension. I
say this because I know there are people within your agency who
simply do not like to be put in the position of managing funds
for the purpose of mine workers' health care plans, pure and
simple. And I believe that sentiment is coming out today with
respect to the pending legislation.
And second, as you heard me questioning President Cecil
Roberts, if the '74 plan goes under, then the PBGC takes over,
and guess who foots the bill? The taxpayers, the American
taxpayers, and that is a fact. So, I am not going to grill you
this morning or ask you any questions on your heartless
testimony, but I realize the position you have been put in and
I guess I will let it go at that. You will too, huh?
Mr. Whitehouse. Thank you very much.
The Chairman. OK----
Ms. Christensen. That is fine with me too.
The Chairman. That is fine with the gentlelady from the
Virgin Islands? Thank you.
Mr. Whitehouse. Thank you.
The Chairman. If there is no further business, the
Committee stands adjourned.
[Whereupon, at 10:57 a.m., the Committee was adjourned.]