[Congressional Record Volume 143, Number 120 (Thursday, September 11, 1997)]
[Extensions of Remarks]
[Pages E1741-E1744]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                        BLACK LUNG COMPENSATION

                                 ______
                                 

                          HON. ANNE M. NORTHUP

                              of kentucky

                    in the house of representatives

                      Thursday, September 11, 1997

  Mrs. NORTHUP. Mr. Speaker, I rise today to voice my opposition to 
regulations proposed by the Department of Labor regarding black lung 
compensation.

[[Page E1742]]

  I strongly believe injured parties should be compensated, and the 
current black lung progarm has provided much needed relief to many coal 
miners. However, the regulations proposed by the Department of Labor go 
far beyond necessary retribution and would effectively eliminate the 
coal mining industry in my State of Kentucky and other States that are 
home to small coal operators.
  As a member of the Kentucky State Assembly, I participated in a 
special session in December where we revamped the workers compensation 
system to ensure the solvency of a program that was bankrupt. Now the 
Labor Department is proposing changes to the Federal Black Lung Program 
that are moving directly in the opposite direction.
  On January 22, 1997, the Department of Labor--Employment Standards 
Administration--issued proposed changes to the Black Lung Benefits 
Program. These regulations would change the legal definition of 
pneumoconiosis--black lung--to include other lung abnormalities. The 
regulations would also declare the disorder progressive, so if someone 
who worked in coal mines for even a short time and was a smoker and 
developed lung cancer, the cause of the cancer would be job related, 
even if the prevailing medical information concluded it was smoking 
related. Furthermore, there would be the presumption that any sign of 
lung problem, even an x ray that showed a shadow on the lung of a 
smoker, would be progressive and eventually result in disability and 
death. This is true even in cases where there is no current physical 
limitation. Such a presumption is simply inaccurate.
  In addition, the Department would allow all cases to be reopened and 
reconsidered under the new guidelines. In some cases, even the widow or 
survivors of the claimant would be entitled to reopen cases. This is 
about 80,000 cases.
  About 230,000 miners, survivors, or dependents receive either 
compensation and/or medical benefits under the Federal Black Lung 
Program. To date, more than $32 billion have been spent providing black 
lung benefits to miners and their survivors. The current program is 
supported by Congress. I am not arguing that this program should be cut 
or eliminated. Rather, I believe the program should be left alone.
  The authorizing committee agrees that the Department of Labor should 
not implement the proposed changes to this program. In fact, the 
committee wrote Secretary Herman with their concerns earlier this year. 
Summarizing, the committee believes that the regulation changes go 
directly against the will of the Congress, which considered similar 
changes in the 103d Congress--but did not pass.
  What's more, thorough economic impact studies have not been 
performed. As such, information on the costs of the proposed changes to 
the Federal Government and the coal companies is insufficient to allow 
these regulations to be implemented. While the Department of Labor 
concludes that the proposed regulations will result in an increased 
cost of only $28 to $40 million to the Federal Government, this 
conclusion is based on an inaccurate assumption that the claims 
approval rate will increase only from 7.5 to 9 percent. The conclusion 
does not account for any change in the initial filing rate or refiling 
rate and ignores the fact that many lawyers are waiting for a chance to 
refile their clients' claims. Analyses of the legislation considered in 
the 103d Congress--which was similar to the proposed regulations--
indicated that as many as 80,000 previously denied claims could be 
refiled and could cost as much as an additional $30 billion.
  In addition, the proposed regulations will not only directly cost 
taxpayers through costs to the Black Lung Program. They also will 
severely impact small coal operators. These costs could effectively 
eliminate small coal operators in such States as Kentucky and have an 
enormous impact on rural communities that depend on the coal industry.
  The Department of Labor failed to provide appropriate information to 
substantiate the basis for the claim that the proposed rules will not 
have a significant impact on a substantial number of small businesses. 
In fact, the Small Business Administration [SBA] Office of Advocacy has 
filed formal complaint regarding the failure of the Department of Labor 
to comply with the Regulatory Flexibility Act [RFA] as amended by the 
Small Business Regulatory Enforcement Fairness Act [SBREFA]. The goal 
of these laws is to require agencies during consideration of 
regulations to analyze the impact on small businesses. The Department 
of Labor has failed to follow the guidelines set in law and consider 
the impact of these proposed regulations on small businesses.
  The proposed regulations have also been opposed by the American Bar 
Association [ABA], which adopted a resolution expressing its opposition 
to any principle in the new regulations.
  I am submitting documents by both SBA and ABA for the Record.
  In short, the new regulations would have a terrible impact on 
Kentucky and other States which are home to small coal operators. While 
I strongly believe injured parties should be compensated, these 
proposed regulations go far beyond necessary retribution and would 
effectively eliminate the coal mining industry in my State of Kentucky 
at huge economic cost to taxpayers nationally.

         U.S. Small Business Administration, Office of Chief 
           Counsel for Advocacy,
                                  Washington, DC, August 21, 1997.
     Hon. Bernard E. Anderson,
     Assistant Secretary, Employment Standards Administration, 
         Department of Labor, Washington, DC.

     Re: RIN 1215-AA99: Regulations Implementing the Federal Coal 
     Mine Health and Safety Act of 1969, as Amended.

       Dear Mr. Anderson: This letter is the official comments of 
     the Small Business Administration's (SBA) Office of Advocacy 
     on the Employment Standards Administration's (ESA) rule for 
     implementing the Black Lung Benefits Act.\1\ These comments 
     are to be placed on the public docket.
---------------------------------------------------------------------------
     See footnotes at end of article.
---------------------------------------------------------------------------
       The Office of Advocacy was established by Congress under 
     Public Law No. 94-305 to represent the views of small 
     businesses before Federal agencies and Congress. Advocacy is 
     required by Sec. 612 of the Regulatory Flexibility Act (RFA) 
     \2\ to monitor agencies' compliance with the RFA.
       Advocacy has two primary concerns with the proposal. (1) 
     Advocacy will address the ESA's failure to use established 
     SBA size standards. The ESA is required by the RFA to use the 
     SBA definitions when determining the economic impact of the 
     rule or to follow the appropriate statutory process for 
     selecting an alternative size standard. (2) Advocacy will 
     also address the agency's economic impact analysis. Advocacy 
     believes that the ESA's RFA certification \3\ is inadequate 
     because the agency has failed to provide appropriate data to 
     substantiate a factual basis for this certification. \4\ 
     Based on a preliminary assessment and information received 
     from mining industry employers, Advocacy is convinced that 
     the proposed changes to the black lung regulations may have a 
     significant impact on a substantial number of small entities. 
     The agency should complete an initial regulatory flexibility 
     analysis detailing the potential impact of this rule on small 
     businesses.


                       Small Business Definition

       When determining if a proposed rule will have a significant 
     economic impact on a substantial number of small entities,\5\ 
     the RFA requires that agencies comply with the size standards 
     established by the SBA.\6\ If an agency decides to deviate 
     from the pre-established size standard for the purposes of a 
     particular rule, the agency must consult with the SBA prior 
     to publishing the proposed rule. The agency also must publish 
     the alternative size standard for public comment.
       For the purposes of the proposed rule, ESA defines a small 
     mine as a mine with a net worth of less than $10 million or 
     has been in operation for less than three years. The SBA 
     defines a small mine as a mine which employs less than 500 
     employees. Although the preamble discusses the use of SBA and 
     Mine Safety and Health Administration (MSHA) definitions, 
     there is no indication that ESA contacted SBA to discuss 
     alternatives. For the purposes of determining the economic 
     impact of the proposed rule on small businesses, ESA must use 
     the SBA definition or follow the statutory procedure for 
     developing an alternative. ESA's decision to deviate from 
     SBA's standards for the economic analysis was made 
     independent of any consultation with the Office of Advocacy. 
     Such a decision, without consultation with Advocacy, is a 
     violation of the law.


                Quantitative Data on the Mining Industry

       Advocacy contends that the agency has not provided the 
     quantitative data necessary to substantiate the agency's 
     certification that this rule will not have a substantial 
     impact on small businesses. In fact, the agency has not 
     provided the public with estimates on the number of small 
     mines which will be affected by this rule, either as a whole 
     or by mining sector (e.g., surface and underground bituminous 
     and anthracite). Data available to Advocacy indicate that the 
     coal mining industry includes 1,811 small firms, 95 percent 
     of the mines in the industry.\7\ Therefore, Advocacy 
     maintains that there are a substantial number of small firms 
     affected by this rule and an initial regulatory flexibility 
     analysis must be completed.


                        Economic Impact Analysis

       Determining a rule's impact on small businesses and other 
     small entities is an important part of the rulemaking 
     process.\8\ It is the burden of the agency to conduct a 
     complete analysis of the affected industry and publish its 
     findings for public comment. The analysis should provide a 
     detailed breakdown of the economic impact proposed changes by 
     various sizes, types of operations, and practices within the 
     small mining industry.
       The economic impact data provided by the ESA on small coal 
     mining firms is not sufficient to substantiate the agency's 
     assertion that ``small firms are not expected to be 
     disproportionately affected by these changes.'' \9\ First, 
     the criteria for RFA is a significant impact (not a 
     ``disproportionate'' burden).

[[Page E1743]]

     After evaluating the preliminary information provided by ESA 
     in the preamble, the Office of Advocacy concludes that the 
     impact on small firms likely would be both significant and 
     disproportionate.
       For instance:
       The agency predicts that in a maximum impact scenario, the 
     total costs for the coal industry would be an additional 
     $3.65 per $100 of payroll. This would be an 84 percent 
     increase over current costs ($4.33 per $100 of payroll).\10\
       The agency projects that approval rates for claims will 
     increase and result in an increase in the premium rate of 
     less than 75 cents per $100 of payroll for underground 
     bituminous miners. Using ESA estimates of the average annual 
     per employee wage cost of $38,355, the increase in premium 
     rates for this industry sector would be $287 per employee 
     each year. This would be a 17 percent increase in insurance 
     costs.
       Advocacy examined just one sector of this industry to 
     demonstrate just how significant the cost of this rule will 
     be for small firms. For an anthracite mine with 20 employees, 
     the costs of labor represents 37 percent of revenue value. 
     ESA indicates that average labor costs in the industry equal 
     less than one fourth of the value of its product output. 
     Assuming that receipts are equal to output, this size and 
     type of mine does not enjoy the economies of scale and higher 
     productivity per employee of larger mines. Therefore, the 
     insurance costs based on payroll will be significantly 
     greater. We estimate that similar costs will be discovered 
     for many or all of the small mines affected by this rule.\11\
       Given the rule's potential economic impact on small mines, 
     Advocacy is making several suggestions for improving the 
     agency's economic data. Generally, the process of preparing 
     an economic analysis requires an ample amount of due 
     diligence on the part of the agency. In order to provide the 
     public with the necessary economic information to solicit 
     constructive public comment, the ESA's process of analyzing 
     the impact of the black lung regulations should be 
     transparent, clearly illustrating the cost of implementing 
     the rule on the various segments which comprise the small 
     mining industry. Economic assumptions and methodologies 
     should be made known so that the analysis can be reviewed 
     actuarially. If costs are determined to be significant in 
     a particular industry sector and/or in a particular small 
     business size range, this would justify a full analysis 
     with regulatory alternatives for small entities.
       The following are specific recommendations to improve the 
     data to determine economic impact more realistically.
       The agency is using the criteria of one percent of payroll 
     as the threshold for determining ``significant.'' However, 
     Advocacy believes that this threshold is inappropriate and 
     essentially meaningless. First, small firms' costs may be 
     concentrated in payroll and not other operating costs. 
     Therefore, the percentage of costs will be much greater for 
     small mines relative to larger, mechanized mines. Second, 
     with payroll cost increases, there is no indication of 
     correlating revenue or profit increases. Our preliminary 
     investigation of the industry shows that the product prices 
     are fixed, established by long-term contract. Larger firms 
     may be able to absorb the costs in the short term with some 
     measure of profitability. Smaller firms, however, may not be 
     able to assume the added costs and remain competitive. Sector 
     specific profit margins and standard industry practices, like 
     long-term contracting, must be discussed in the analysis.
       The analysis should use SBA size standards to determine the 
     impact of the proposed changes by various size ranges. Cost 
     projections by size range is fundamental to determining 
     economic impact. An example of how economic impact can vary 
     by size is illustrated by the anthracite industry. Based on 
     1994 U.S. Census data, anthracite mines with fewer than 20 
     employees had estimated annual receipts of $821,000, mines 
     with 20-24 employees had estimated receipts of $2.07 million 
     and mines with 25-29 employees had estimated receipts of 
     $2.99 million. Clearly, increased insurance premiums would 
     have a significantly different economic impact depending on 
     the size of the anthracite firm.
       The rule is anticipated to have a $40 million \12\ impact 
     on the entire coal mining industry. The agency's use of 
     aggregate numbers to determine anticipated economic impact is 
     not particularly useful. The analysis should explore how the 
     regulation will impact specific sectors (e.g., anthracite and 
     bituminous) within the industry by various sized firms. The 
     analysis should also examine the rule's impact on different 
     mining practices, e.g. surface and underground mining.
       The agency's economic data has concentrated on the rule's 
     impact to commercially-insured coal mines. The agency should 
     also estimate the impact of the rule on self-insured mines. 
     In addition, the analysis should compare the potential impact 
     of the rule between self-insured and commercial-insured 
     firms.
       To assist the agency, Advocacy has provided 1994 U.S. 
     Census Bureau data detailing industry specific firm size by 
     number of employees and company receipts. (The ESA indicated 
     that the lack of such data was a reason not to use 
     established SBA size standards in its economic impact study. 
     \13\) For future reference, this information can be easily 
     retrieved from Advocacy's homepage at http://www.sba.gov/
 ADVO/.


                                Outreach

       As we have indicated, Advocacy is convinced that this rule 
     could have significant impact on small mines. Therefore, 
     Advocacy recommends that the agency conduct extensive 
     outreach to small mines to solicit information on the 
     economic impact of this rule. Within the U.S. Government, 
     several sources of information are available. For instance, 
     the ESA's sister agency, the MSHA, maintains detailed 
     industry data and mining company mailing lists. This 
     information could be used for outreach purposes. The Office 
     of Advocacy is also available to assist ESA identify small 
     mining business organizations.
       The RFA suggests that direct communication with the 
     regulated industry can be beneficial for complying with the 
     law. \14\ Advocacy encourages ESA to incorporate the 
     expertise of the mining business community, input from the 
     regulated community is crucial to the development of an 
     analysis which accurately reflects the industry.


                               Conclusion

       In 1996 Congress and the President enacted the SBREFA, 
     thus, renewing a public policy commitment to small businesses 
     by reminding agencies of RFA obligations and by allowing by 
     small businesses (through judicial review) to challenge 
     agencies that fail to comply with the law. Good public policy 
     and the law dictate that agencies provide the public a 
     factual basis for an agency determining whether a rulemaking 
     will have ``a significant impact on a substantial number of 
     small entities.''
       Advocacy has been contacted by several organizations 
     representing various sectors of small coal mines concerned 
     that these proposed changes were substantially understated by 
     the agency and would significantly increase the cost and 
     availability of black lung workers' compensation insurance. 
     Advocacy encourages the agency to review the record for small 
     businesses comments made on all aspects of the proposal. 
     Aggressive outreach to the small mining industry will help 
     determine the true economic impact of this proposed rule and 
     any information on alternatives which would meet the agency's 
     public policy objectives while mitigating the impact of the 
     rule on small business.
       In order for the ESA to meet its requirements under the 
     RFA, the agency must develop a meaningful economic analysis 
     which can be defended upon critical review. In the analysis, 
     the agency also must use the SBA definition of small business 
     or follow the statutory procedure for proposing an 
     alternative definition.
       If you have any questions about our comments, please 
     contact me or Sarah Rice of my staff at (202) 205-6532.
           Sincerely,
                                                   Jere W. Glover,
                                       Chief Counsel for Advocacy.
     Enclosure.


     
                                                                    ____
                                     American Bar Association,

                                     Chicago, IL, August 15, 1997.
     Via Federal Express

     The Honorable Alexis Herman,
     Secretary of Labor, U.S. Department of Labor, Washington, DC.

     Re: Proposed Regulations to Restructure the Black Lung 
     Program

       Dear Secretary Herman: As President of the American Bar 
     Association, I am transmitting to you the enclosed resolution 
     that was adopted by the House of Delegates of the American 
     Bar Association during the ABA's Annual meeting in San 
     Francisco last week. The resolution comments on the proposed 
     regulations at 62 Federal Register 3337 et seq. that pertain 
     to the Federal Black Lung compensation program. The 
     resolution now constitutes the official policy of the ABA.
       The ABA appreciates this opportunity to submit its views to 
     you. If you should have any questions, please feel free to 
     call me directly at 215-977-2290.
           Sincerely,

                                           Jerome J. Shestack,

                              President, American Bar Association.
     Enclosure.


     
                                                                    ____
  Resolution of the American Bar Association--Adopted by the House of 
                         Delegates, August 1997

       Resolved, That the American Bar Association expresses its 
     opposition in principle to any revisions of the Code of 
     Federal Regulations (20 CFR Part 725) recommended by the 
     United States Department of Labor on Wednesday, January 22, 
     1997 [62 Federal Register 3337 et seq.] pertaining to the 
     Federal Black Lung compensation program which are contrary to 
     the requirements of the Federal Administrative Procedure Act 
     or the Black Lung Benefit Act.
       Further resolved, That the American Bar Association 
     expresses its opposition to the following proposed revisions 
     of the Code of Federal Regulations (20 CFR Part 725) 
     recommended by the United States Department of Labor on 
     Wednesday, January 22, 1997 [62 Federal Register 3337 et 
     seq.] which pertain the Federal Black Lung compensation 
     program:
       Section 725.103--Burden of Proof: asserts authority to 
     adopt burden-shifting presumptions.
       Section 725.309--Additional Claims: revises the extent to 
     which the common law concepts of res judicata, or claim 
     preclusion, and collateral estoppel, or issue preclusion, 
     apply to the adjudication of black lung benefits claims.
       Section 725.401--Claims Development--General: transfers 
     adjudicative functions from administrative law judges to 
     district director.

[[Page E1744]]

       Section 725.405--Development of Medical Evidence: fails to 
     account for district director obligation to develop evidence 
     other than medical evidence.
       Section 725.405(c)--Medical Examination and Tests: limits 
     the development of medical evidence.
       Section 725.408--Operator's Response to Notification: 
     requires potentially liable operators to respond to 
     notification of its status within thirty days, research up to 
     27 years of employment data within sixty days of notification 
     to submit evidence to claims examiner to support its position 
     that it is not a potentially responsible operator.
       Section 725.413(c)--Initial Adjudication by the District 
     Director: transfers adjudication functions from the ALJ to 
     the district director, limits development of medical 
     evidence.
       Section 725.414--Development of Evidence: defines the 
     amount and type of medical evidence which each party may 
     submit.
       Section 725.415--Action by the District Director After 
     Development of Operator's Evidence: provides for adjudication 
     at an informal hearing before the district director that is 
     not an on-the-record proceeding under oath.
       Section 725.416--Conferences: permits sanctions, including 
     abandonment or waiver of the right to contest issues, for 
     failure to appear at an informal conference and permits the 
     conference procedures to be within the discretion of the 
     district director.
       Section 725.454--Time and Place of Hearing: Transfer of 
     Cases: deletes language permitting the ALJ to reopen the 
     hearing or admit additional evidence for good cause shown.
       Section 725.456--Introduction of Documentary Evidence: 
     deletes authority of the ALJs to perform certain functions 
     and denies all parties, rights to fully cross-examine adverse 
     evidence and witnesses.
       Section 725.457--Witnesses: denies all parties, rights to 
     fully cross-examine adverse evidence and witnesses; denies 
     full development of a record at the hearing; limits expert 
     witness testimony.


                               FOOTNOTES

     \1\ Fed. Reg., Vol. 62, No. 14 (January 22, 1997), p.p. 3338-
     3435.
     \2\ 5 U.S.C. Sec. Sec. 601 et seq.
     \3\ Fed. Reg., Vol. 62, No. 14 (January 22, 1997), p. 3373.
     \4\ 5 U.S.C. Sec. 605(b).
     \5\ 5 U.S.C. Sec. 601.
     \6\ 13 C.F.R. part 121.
     \7\ See 13 C.F.R. part 121 and U.S. Bureau of the Census data 
     1994.
     \8\ In the preamble, the agency appears to indicate that 
     economic impact to small business can be correlated to the 
     $100 million per year impact used for the Unfunded Mandates 
     Reform Act of 1995. The use of the $100 million threshold is 
     not relevant for determining the economic impact of the 
     regulation to a particular size or a particular type of coal 
     mine.
     \9\ Fed. Reg., Vol. 62, No. 14 (January 22, 1997), p. 3373.
     \10\ Fed. Reg., Vol. 62, No. 14 (January 22, 1997), p. 3372.
     \11\ Using data from the U.S. Bureau of the Census on firm 
     revenues and the ESA. Advocacy calculated that an anthracite 
     mine with 20 employees would have annual revenues of 
     $2,069,000. This amount divided by 20 employees indicates 
     that the firm has revenues of $103,450 per employee. With an 
     average employee salary of $38,355, the firm is incurring 37 
     percent labor costs. If the agency challenges this assertion, 
     then ESA should provide additional information on industry 
     salaries.
     \12\ Fed. Reg., Vol. 62, No. 14 (January 22, 1997), p. 3373.
     \13\ Fed. Reg., Vol. 62, No. 14 (January 22, 1997), p. 3371.
     \14\ 5 U.S.C. Sec. 609.

     

                          ____________________