[Federal Register Volume 75, Number 153 (Tuesday, August 10, 2010)]
[Rules and Regulations]
[Pages 48526-48547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19276]



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Part IV





Department of the Interior





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Office of Surface Mining Reclamation and Enforcement



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30 CFR Part 938



Pennsylvania Regulatory Program; Final Rule

  Federal Register / Vol. 75, No. 153 / Tuesday, August 10, 2010 / 
Rules and Regulations  

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DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation and Enforcement

30 CFR Part 938

[PA-153; Docket ID OSM-2008-0021]


Pennsylvania Regulatory Program

AGENCY: Office of Surface Mining Reclamation and Enforcement (OSM), 
Interior.

ACTION: Final rule; partial approval of amendment.

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SUMMARY: OSM is announcing its partial approval of a program amendment 
submitted by the Commonwealth of Pennsylvania for the purpose of 
addressing the need for financial guarantees to cover the costs of 
treatment of post-mining pollutional discharges and land reclamation 
for those surface coal mining sites that were originally bonded under 
the Commonwealth's now defunct alternative bonding system (ABS). OSM is 
requiring that Pennsylvania ensure that its program provides suitable, 
enforceable funding mechanisms sufficient to guarantee coverage of land 
reclamation at all original ABS sites.

DATES: Effective Date: August 10, 2010.

FOR FURTHER INFORMATION CONTACT: George Rieger, Director, Pittsburgh 
Field Division, Telephone: (717) 782-4036, e-mail: [email protected].


SUPPLEMENTARY INFORMATION:
I. Background on the Pennsylvania Program
II. Description of the Amendment
III. OSM Findings
IV. Summary and Disposition of Comments
V. OSM's Decision
VI. Procedural Determinations

I. Background on the Pennsylvania Program

    Section 503(a) of the Act permits a State to assume primacy for the 
regulation of surface coal mining and reclamation operations on non-
Federal and non-Indian lands within its borders by demonstrating that 
its State program includes, among other things, ``* * * a State law 
which provides for the regulation of surface coal mining and 
reclamation operations in accordance with the requirements of the Act 
``* * *; and rules and regulations consistent with regulations issued 
by the Secretary pursuant to the Act.'' See 30 U.S.C. 1253(a)(1) and 
(7). On the basis of these criteria, the Secretary of the Interior 
conditionally approved the Pennsylvania program on July 30, 1982.
    You can find additional background information on the Pennsylvania 
program, including the Secretary's findings, the disposition of 
comments, and conditions of approval in the July 30, 1982, Federal 
Register, 47 FR 33050. You can also find later actions concerning 
Pennsylvania's program and program amendments at 30 CFR 938.11, 938.12, 
938.13, 938.15 and 938.16.

General Discussion--Bonding Regulations

    SMCRA's implementing regulations at 30 CFR Part 800 specify the 
minimum requirements for filing and maintaining bonds and insurance for 
surface coal mining and reclamation operations under regulatory 
programs. This Part includes (but is not limited to) a description of 
the regulatory authority's responsibilities and definitions, the 
requirement to file a bond, the form of the performance bond, the 
period of liability, the determination of bond amount and adjustment of 
the amount, and the general terms and conditions of a bond.
    Coal operators are required to file a bond for reclamation of 
disturbed land in accordance with permit requirements. The bond should 
cover the entire permit area and the amount may be determined 
incrementally as reclamation phases are completed. Independent 
increments should be of sufficient size and configuration to provide 
for efficient reclamation operations should reclamation by the 
regulatory authority become necessary. The applicant can file a bond or 
another financial instrument to cover the bond amount.
    These bonding methods include a bond for the entire permit area, a 
cumulative bond schedule and bond for the initial area, an incremental 
bond schedule and bond for the first increment, or an alternative 
bonding system if it achieves the objectives and purposes of the 
bonding program. As set forth at 30 CFR 800.11(e), the objectives of 
the bonding program are: (1) To assure that the regulatory authority 
will have available sufficient money to complete the reclamation plan 
for any areas which may be in default at any time; and, (2) to provide 
a substantial economic incentive for the permittee to comply with all 
reclamation provisions.
    In addition to prescribing, by regulation, the terms and conditions 
for performance bonds, the regulatory authority is also responsible for 
determining the amount of the bond, including any adjustments to such 
amount. The determination of the bond amount should depend upon the 
requirements of the approved permit and reclamation plan and reflect 
the probable difficulty of reclamation. The amount of the bond should 
be sufficient to assure the completion of the reclamation plan if the 
work has to be completed by the regulatory authority.
    The amount of the bond shall be adjusted by the regulatory 
authority from time to time as the area requiring bond coverage is 
increased or decreased or where the cost of future reclamation changes. 
The regulatory authority may require periodic times or set a schedule 
for reevaluating and adjusting the bond amount to fulfill this 
requirement.
    The regulatory authority may release liability under a bond when 
reclamation activities are completed and may require forfeiture of such 
bonds if the terms of the permit or bond are not met. The liability 
period shall extend until all reclamation, restoration, and abatement 
work under the permit has been completed.
    Throughout the U.S., State regulatory programs have employed a 
variety of bonding programs, some electing to employ a conventional 
bonding program (full-cost bonding program that requires site-specific 
bonds as the only means of assuring reclamation following completion of 
mining) and others electing to employ an ABS as provided for in Sec.  
800.11(e).

Background on Pennsylvania's Bonding Program

    For almost 60 years Pennsylvania law has regulated surface mining 
and has required some degree of land reclamation. For most of the same 
period it has also required bonds, in changing amounts and formats, to 
ensure the required land reclamation. The current requirements for both 
land reclamation and bonding are found in the Surface Mining 
Conservation and Reclamation Act (PASMCRA) (52 p.s. SS 1396.1-1396.31), 
the Coal Refuse Disposal Control Act (CRDCA) (52, P.S. SS 30.51-30.66) 
and the Clean Streams Law (CSL) (35 p.s. SS 691.1-691.1001). These 
provisions require a bond to be filed prior to commencement of mining, 
and to be conditioned ``that the permittee shall faithfully perform all 
of the requirements'' of PASMCRA, the CSL, and other applicable 
statutes.
    The conventional bonding system is based on the mine operator's 
description of the maximum amount of reclamation needed during the term 
of the permit. The proposed dimensions of the mining activity are 
combined with bond rate guidelines to calculate the total bond. The 
PADEP developed bond rate guidelines using actual bid costs submitted 
for abandoned mine lands and forfeited mine sites reclamation contracts 
and other appropriate sources. Revised guidelines are published in the 
Pennsylvania Bulletin annually.

[[Page 48527]]

    Pennsylvania's mining laws provide the basis for conventional 
bonding. The conventional bonding system incorporates the bonding 
obligations of those acts and the regulations and considers the 
following criteria.
    The bond amount is the cost to the Commonwealth for hiring a 
contractor to complete the permitted reclamation plan to regulatory 
standards. It reflects the Commonwealth's maximum responsibilities 
under the approved operation and reclamation plan for land reclamation.
    The operation and reclamation plans in the coal mining permit 
application describe how the operator will mine and reclaim the site. 
The PADEP relies upon the operator's plan, plus site-specific special 
conditions, when calculating the total bond.
    Permit approval requires a finding that there is no presumptive 
evidence of pollution to the waters of the Commonwealth. Consequently, 
post-mining pollutional discharges of mine drainage are not anticipated 
in the reclamation plan. The calculation of the initial bond amount for 
a coal mining permit does not include costs for the treatment of mine 
drainage or anything not anticipated in the approved permit and 
reclamation plan.
    Many factors contribute to the design of a mine site, and therefore 
effect the rate of bond required for full reclamation. If the methods 
of mining or operation change, standards of reclamation change, or the 
cost of reclamation, restoration or abatement work increases, the PADEP 
will require the permittee to recalculate the bond.
    From 1982 until 2001, Pennsylvania's approved program included 
operation of an ABS for surface coal mines, coal refuse reprocessing 
operations and coal preparation plants. Under the ABS, in the event of 
bond forfeiture, the amount of bond posted by the operator for the 
forfeited site was supplemented by other funds (the Surface Mining 
Conservation and Reclamation Fund, or SMCR Fund). This fund (referred 
to as a bond pool) was funded in part by a per-acre reclamation fee 
paid by operators of permitted sites and was used to supplement site-
specific bonds posted by those operators for each mine site, in the 
event of bond forfeiture.
    In 1991, OSM's oversight activities determined that Pennsylvania's 
ABS included unfunded reclamation liabilities for backfilling, grading, 
and revegetating mined land and OSM determined that the ABS was 
financially incapable of abating or treating unanticipated pollutional 
discharges from bond forfeiture sites under its jurisdiction.
    In May 1991, OSM codified a required regulatory program amendment 
at 30 CFR 938.16(h), directing Pennsylvania to submit information by 
November 1991 which demonstrated that Pennsylvania's ABS was solvent. 
The program amendment required Pennsylvania to submit information 
demonstrating that the revenues generated by the collection of the 
reclamation fee, as amended in 25 Pa. Code 86.17(e) will assure that 
Pennsylvania's ABS can be operated in a manner that will meet the 
requirements of 30 CFR Part 800.11(e). See 56 FR 24687 (May 31, 1991).
    Additionally, in October 1991, OSM notified Pennsylvania that in 
order for Pennsylvania to maintain jurisdiction of the regulatory 
program under the Federal Surface Mining Control and Reclamation Act of 
1977, 30 U.S.C. 1201 et seq. Pennsylvania had to address program 
deficiencies related to administration of the ABS. This document is 
commonly referred to as a ``732 letter,'' because it was issued 
pursuant to the Federal regulations, at 30 CFR 732.17.
    These OSM actions identified a deficiency in the ABS concerning the 
system's ability to generate sufficient funds to complete the 
reclamation of all primacy ABS bond forfeiture sites, including the 
costs to treat pollutional discharges on these sites. Since 1991, 
Pennsylvania had undertaken actions and made changes to its bonding 
program in an effort to address the deficiencies identified. In the 
late 1990s, Pennsylvania concluded the ABS could not be amended to meet 
the Federal requirements, and in 2001, Pennsylvania terminated the ABS 
and converted the active permits covered by the ABS to a ``full-cost'' 
bonding program (conventional bonding program). This program requires a 
permittee to post a site-specific bond in an amount sufficient to cover 
the estimated costs to complete reclamation in the event of bond 
forfeiture.
    Following termination of the ABS, Pennsylvania and OSM developed a 
programmatic solution for addressing all of the discharges on the 
forfeited ABS sites, which was memorialized in a document titled 
``Pennsylvania Bonding System Enhancements.'' By letter dated June 12, 
2003, OSM notified the PADEP that the conversion to a full-cost bonding 
program, as well as other additional measures taken by the State, were 
sufficient to remedy the deficiencies cited in the 732 letter, which it 
declared to be terminated, and agreed with Pennsylvania that the only 
ABS obligation remaining was to expend remaining ABS monies for 
reclamation of forfeited sites.
    On October 7, 2003, OSM published a final rule removing the 
required amendment at 30 CFR 938.16(h) on the basis that the conversion 
from an ABS to a full-cost bonding program rendered the requirement to 
comply with 30 CFR 800.11(e) moot. See 68 FR 57805. Subsequent to these 
OSM actions, a lawsuit was filed in the U.S. District Court for the 
Middle District Court of Pennsylvania by several citizens groups in 
December 2003 challenging OSM's termination of the 1991 Part 732 Notice 
and its removal of the required program amendment in 30 CFR 938.16(h). 
(Pennsylvania Federation of Sportsmen's Clubs Inc. et al. v. Norton, 
No. 1:03-CV-2220). In 2006, the U.S. District Court granted a motion 
requesting dismissal of the case. The district court affirmed OSM's 
decision in a Memorandum Opinion and Order dated February 1, 2006. Id. 
The plaintiffs appealed the District Court's decision to the U.S. Court 
of Appeals for the Third Circuit.

Court Decision

    On August 2, 2007, the United States Court of Appeals for the Third 
Circuit reversed the district court's decision and set aside OSM's 
decision to remove the required amendment and the 732 letter. 
Pennsylvania Federation of Sportsmen's Clubs v. Kempthorne, 497 F.3d 
337 (3rd Cir. 2007) (Kempthorne). At issue, relevant to this notice, 
was whether OSM properly terminated the requirement that Pennsylvania 
demonstrate that its SMCR Fund was in compliance with 30 CFR 800.11(e). 
The ruling by the Third Circuit reinstated 938.16(h) and the 1991 Part 
732 Notice and remanded the decision to OSM.
    The court ruled that the primacy ABS forfeited sites, plus any 
additional sites permitted under the ABS whose reclamation costs are 
not fully covered by a conventional bond, remain subject to the 
requirements of 30 CFR Part 800.11(e)(1). The Third Circuit concluded: 
``While it is true that the `ABS Fund' continues to exist in name, it 
no longer operates as an ABS, that is, as a bond pool, to provide 
liability coverage for new and existing mining sites.'' 497 F.3d at 
349. However, the Court went on to ``conclude that 800.11(e) continues 
to apply to sites forfeited prior to the CBS [conventional bonding 
system] conversion.'' Id. at 353. In commenting further on 30 CFR 
800.11(e), the Court stated that ``[t]he plain language of this 
provision requires that Pennsylvania demonstrate adequate funding for 
mine discharge abatement

[[Page 48528]]

and treatment at all ABS forfeiture sites.'' Id. at 354.
    Finally, the court also concluded that ``a plain reading of the 
words `any areas which may be in default at any time' indicates that 
the obligations prescribed by Sec.  800.11(e) are not restricted to the 
immediate circumstances surrounding the approval of an ABS, but are 
instead ongoing in nature and apply at any time, so long as those 
mining areas originally bonded under the ABS, and not yet converted to 
CBS bonds, still exist.'' Id. at 352. As such, Pennsylvania shall 
provide for the complete reclamation and treatment of these sites and 
their pollutional discharges by assuring Pennsylvania has available 
sufficient money to complete reclamation for these sites at any time.

State Response

    Pennsylvania submitted the program amendment in an attempt to 
satisfy two mandates placed on the State's approved surface coal mining 
operations regulatory program in 1991. The mandates, in the form of a 
required amendment published in the Code of Federal Regulations, and a 
letter from OSM, required Pennsylvania to eliminate funding 
deficiencies in its bonding program.
    Two categories of surface coal mining sites requiring treatment of 
post-mining pollutional discharges and land reclamation are the subject 
of this notice: (1) Those sites that already had their bonds forfeited 
at the time of the dissolution of ABS; and (2) those that were 
permitted and had bonds that were not forfeited at the time of the 
dissolution of the ABS, but had existing reclamation liabilities, for 
which available financial guarantees were not sufficient to cover the 
entire cost of treatment or reclamation during the conversion to the 
Commonwealth's conventional bonding system. These sites, if forfeited, 
would be considered liabilities of the ABS.

II. Submission of the Amendment

    By letter dated August 1, 2008 (Administrative Record Number PA 
802.43), Pennsylvania sent OSM a proposed program amendment that is 
intended to satisfy a required amendment that was imposed by OSM in a 
final rule published in the Federal Register on May 31, 1991, 56 FR 
24687, and codified in the Federal Regulations at 30 CFR 938.16(h). 
This proposed program amendment is also intended to satisfy the 732 
letter dated October 1, 1991. Both the required amendment and the 732 
letter are discussed in more detail in Section I.
    OSM announced receipt of the proposed amendment in the January 14, 
2009, Federal Register (74 FR 2005-2015) (Administrative Record No. PA 
802.49) and in the same document invited public comment and provided an 
opportunity for a public meeting on the adequacy of the proposed 
amendment. The public comment period closed on February 13, 2009. We 
received comments from four entities; The Pennsylvania Coal Association 
comment dated February 11, 2009 (Administrative Record No. PA 802.59); 
PennFuture letter dated February 27, 2009, representing Pennsylvania 
Federation of Sportsmen's Clubs, Inc., the Sierra Club, Pennsylvania 
Council of Trout Unlimited, Citizens for Coal Field Justice, Mountain 
Watershed Association, Inc., and Citizen's for Pennsylvania's Future 
(Administrative Record No. PA 802.60); the United States Environmental 
Protection Agency memorandum dated February 13, 2009 (Administrative 
Record No. PA 802.58); and the Mining and Reclamation Advisory Board 
letter dated February 12, 2009 (Administrative Record No. PA 802.56). 
Two other Federal agencies responded with no comment (U.S. Fish and 
Wildlife Services' note dated January 22, 2009 (Administrative Record 
No. PA 802.52), and the U.S. Department of Labor memorandum received 
February 5, 2009 (Administrative Record No. PA 802.54).
    Treatment of Post-Mining Discharges (Parts A, C & E of the 
Amendment Submission): To address the treatment of post-mining 
discharges, Pennsylvania proposed regulatory provisions; provided a 
demonstration of sufficient funding; and proposed the use of treatment 
trusts.
    Land Reclamation (Parts B & D of the Amendment Submission): To 
address land reclamation liabilities for sites originally permitted 
under the ABS, Pennsylvania submitted a statutory provision and 
demonstration of sufficient funding.
    This program amendment consists of five parts: (A) Regulatory 
Changes to Establish Legally Enforceable Means of Funding the O&M and 
Recapitalization Costs for the ABS Legacy Sites; (B) The Conversion 
Assistance Program; (C) Trust Funds as an Alternative System and Other 
Equivalent Guarantee: Rationale for Approval; (D) Demonstration of 
Sufficient Funding for Outstanding Land Reclamation at Primacy ABS 
Forfeiture Sites; and, (E) Demonstration of Sufficient Funding for 
Construction of all Necessary Discharge Treatment Facilities at the 
Primacy ABS Forfeiture Sites.
    Regulatory Changes (Part A): Pennsylvania explains that the 
regulatory changes submitted with this amendment provide a ``legally 
enforceable mechanism'' for paying the costs of treating the discharges 
at the ABS legacy sites in perpetuity. In summary, these changes 
restructure the reclamation fee and dedicate other sources of funding 
for performing reclamation of the ABS sites. The PADEP recognizes the 
reclamation fee as a flexible source of funding for the operation and 
maintenance costs associated with treating discharges at the ABS legacy 
sites.
    Conversion Assistance Program and Treatment Trusts (Parts B and C): 
The conversion process included several changes to the active bonding 
program. Section 4(d.2) of the PASMCRA, 52 P.S. 1396.4(d.2), authorized 
PADEP to establish alternative financial assurance mechanisms that meet 
the purposes and objectives of the bonding program (i.e., Conversion 
Assistance Program and Treatment Trusts).
    Demonstrations of Sufficient Funding (Parts D and E): Pennsylvania 
submitted documentation to demonstrate that it has available sufficient 
funds to complete the outstanding land reclamation and sufficient funds 
to construct the necessary discharge-treatment facilities for all the 
ABS legacy sites at any time, as required by the Third Circuit's 
decision.
    Pennsylvania explains that the regulatory changes described in Part 
A, along with the remaining portions of this State program amendment, 
described in Parts B through E below, while they do not consist of 
changes to Pennsylvania regulations, are financial mechanisms PADEP has 
established that will work in concert with the regulatory changes 
described above to bring Pennsylvania into compliance with the required 
amendment at 30 CFR 938.16(h), the 1991 732 letter, and, consequently, 
with the ABS standard of sufficiency set forth in 30 CFR 800.11(e). 
Pennsylvania is seeking approval of this program amendment submission 
in its entirety in accordance with 30 CFR 732.17(h) and the Part 732 
Notices.

III. OSM Findings

Part A. Regulatory Changes To Establish Legally Enforceable Means of 
Funding the O&M and Recapitalization Costs for the ABS Legacy Sites

    The following is a description of the changes to Pennsylvania's 
Code that are being proposed:

[[Page 48529]]

Summary of Regulatory Changes--Section 86.1, Definitions
1. Subchapter A. General Provisions, Section 86.1: Definitions
    The terms, ABS legacy sites, operational area, operation and 
maintenance costs, primacy alternate bonding system, and 
recapitalization costs were added to Pennsylvania's list of definitions 
to clarify and define these terms when discussing and addressing sites 
that were permitted under the alternative bonding system.
    Finding: We are approving Pennsylvania's changes to its definitions 
that define the following terms: ABS legacy sites, operational area, 
operation and maintenance costs, primacy alternate bonding system, and 
recapitalization costs. There are no Federal counterparts to these 
definitions; however, they are not inconsistent with SMCRA and its 
implementing regulations.
Summary of Regulatory Changes--Section 86.17, Permit and Reclamation 
Fees
2. Subchapter B. Permits, General Requirements for Permits and Permit 
Applications, Section 86.17 Permit and Reclamation Fees
a. Section 86.17(e) Reclamation Fees:
    This provision revises the text of Section 86.17(e) to clarify the 
application of this subsection in the context of the CBS. The revisions 
provide that the reclamation fee is assessed for each acre of the 
approved operational area of the permit. The proposed revisions also 
clarify the manner in which the reclamation fee is assessed. Finally, 
minor editorial changes were made by adding references to Section 
86.143 (relating to the requirement to file a bond) and to the 
exception for remining areas provided in Section 86.283(c).
b. Section 86.17(e)(1) (deposit and use of reclamation fees)
    This provision, in conjunction with Section 86.187(a)(1), 
establishes a separate subaccount within the SMCR Fund called the 
Reclamation Fee O&M (operation and maintenance) Trust Account (RFO&M 
Account), and requires the PADEP to deposit all reclamation fees it 
collects into the RFO&M Account. The funds included in the account are 
held in trust by the Commonwealth to treat post-mining pollutional 
discharges at ABS legacy sites. This subsection also requires that the 
PADEP use the reclamation fees only for the purpose of paying the costs 
associated with treating such discharges. The reclamation fee is an 
adjustable source of revenue that PADEP will review annually to 
determine if adjustment of the fee is needed. In addition, this 
provision requires that all interest earned on the monies in the RFO&M 
Account be deposited into the account and be used only to pay the costs 
associated with treating post-mining pollutional discharges at ABS 
legacy sites.
c. Section 86.17(e)(2) (preparation of fiscal-year report on RFO&M 
Account)
    This provision requires the PADEP to prepare a report at the end of 
each fiscal year, which will include a financial analysis and 
projections of the revenues and expenditures of the RFO&M Account. The 
report must be made available for review by the Pennsylvania Mining and 
Reclamation Advisory Board (MRAB) and the general public. This 
provision establishes a process by which the MRAB and the general 
public can examine the PADEP's expenditure of funds from the RFO&M 
Account for the treatment of discharges at the ABS legacy sites, the 
amount of revenue deposited into the account during the prior fiscal 
year from the various dedicated revenue sources, the projected 
expenditures and projected revenue. Pennsylvania believes that this 
provision will assist OSM, the MRAB, affected persons in the industry, 
and interested members of the public, with their oversight of the 
PADEP's compliance with the requirements of 30 CFR 800.11(e) as applied 
to the ABS legacy sites, the Court ruling in Kempthorne, and the 
required program amendment at 30 CFR 938.16(h).
d. Section 86.17(e)(3) (amount of the reclamation fee)
    The amount of the reclamation fee is currently set at $100 per 
acre. Section 86.17(e)(3) requires the fee amount to be maintained at 
$100 per acre until December 31, 2009. After this initial period at 
$100 per acre, the reclamation fee will be adjusted annually based on 
criteria specified in Section 86.17(e)(3) and (4). This section also 
includes provisions concerning the potential for a permanent 
alternative source of funding to be used in lieu of the reclamation 
fee--if that alternative funding source meets the conditions in Section 
86.17(e)(3)(i) and (ii). Section 86.17(e)(3) provides that the PADEP 
was to begin annually adjusting the amount of the reclamation fee as of 
January 1, 2010, and will continue to do so, until either a permanent 
alternative funding source is established or the ABS Legacy Account 
becomes actuarially sound. Section 86.17(e)(3)(i) reiterates the 
commitment for annual adjustment of the reclamation fee until the ABS 
Legacy Account is actuarially sound, unless a permanent alternative 
funding source in place of the reclamation fee is used to fund the 
RFO&M Account. Section 86.17(e)(3)(ii) establishes the conditions that 
a permanent alternative funding source must meet before the reclamation 
fee could be discontinued and the permanent alternative source used 
instead. The State indicates that such an alternative funding source 
must be permanent; must provide sufficient revenues to maintain a 
balance in the RFO&M Account of at least $3,000,000; and must provide 
sufficient revenue to pay the annual operation and maintenance costs 
for all the ABS legacy sites.
e. Section 86.17(e)(4) (amount of the reclamation fee)
    The PADEP expected that the adjusted amount of the reclamation fee 
would become effective as of January 1, 2010, and will be similarly 
made effective on that date each year thereafter. Section 86.17(e)(3) 
sets the basic parameters for annually adjusting the amount of the 
reclamation fee, and Section 86.17(e)(4) lists the specific factors to 
be used in the PADEP's calculation of the adjusted amount. Section 
86.17(e)(3) requires that the reclamation fee be annually adjusted to 
ensure that there are sufficient revenues to maintain a balance of at 
least $3,000,000 in the RFO&M Account. Following the close of the 
Commonwealth's 2008-09 fiscal year (in June 2009), the PADEP must 
prepare its year-end financial analysis of the RFO&M Account pursuant 
to Section 86.17(e)(2). The 2008-09 fiscal-year report must include the 
PADEP's calculation of the amount of the reclamation fee for the 
calendar year commencing on January 1, 2010. Section 86.17(e)(4) 
prescribes the factors to be used for making the calculation--
essentially an analysis of the revenues and expenditures for the past 
year and projected revenues and expenditures for the current fiscal 
year.
    Section 86.17(e)(3) and (4) establish a mechanism for annually 
adjusting the amount of the reclamation fee. Pennsylvania indicates 
that the adjustment procedure is necessary to accommodate the 
fluctuations in the operation and maintenance costs for treating 
pollutional discharges at the ABS legacy sites that will occur over 
time. The PADEP believes that the adjustment procedure is also 
necessary in order to maintain a sufficient cushion in the RFO&M 
Account to prevent pollution and assure that the PADEP has

[[Page 48530]]

sufficient funds at any one time to treat the discharges at the ABS 
legacy sites, including any sites with discharges that were originally 
permitted under the ABS, and for which the bonds are subsequently 
forfeited before the posting of a full cost, conventional bond or other 
financial mechanism that is sufficient to cover the costs of discharge 
treatment, in accordance with 30 CFR 800.11(e).
f. Section 86.17(e)(5) (publishing amount of the adjusted reclamation 
fee; calculation appealable)
    Section 86.17(e)(5) is added to prescribe a procedure for the PADEP 
to publish the amount of the adjusted reclamation fee. The PADEP must 
review its calculation of the adjusted reclamation fee amount at a 
public meeting of the MRAB (most likely in October of each year), where 
the members of the MRAB, affected persons in the industry, and the 
general public will have an opportunity to comment on the PADEP's 
financial report and its calculation of the adjusted amount of the fee. 
The PADEP will subsequently publish the adjusted amount of the 
reclamation fee in the Pennsylvania Bulletin, with the adjusted amount 
becoming effective upon publication. This provision also establishes 
that PADEP's calculation of the adjusted reclamation fee is a final 
action appealable to the Environmental Hearing Board. According to 
Pennsylvania, section 86.17(e)(5) balances the PADEP's need for a 
flexible mechanism to assure funding to treat discharges at the ABS 
legacy sites with the interests of the industry and the public in 
reviewing, commenting on, and challenging, before an independent forum, 
the PADEP's administration of the RFO&M Account and the calculation of 
the new reclamation fee.
g. Section 86.17(e)(6) (conditions for ceasing collection of 
reclamation fee)
    Section 86.17(e)(6) requires the PADEP to cease assessment and 
collection of the reclamation fee when the ABS Legacy Account, 
established pursuant to section 86.187(a)(2)(i), is actuarially sound. 
The conditions which must be met for the ABS Legacy Account to become 
actuarially sound are prescribed here and in section 86.187(a)(2)(ii). 
The PADEP's current estimate of the annual operation and maintenance 
costs for treating the discharges at the ABS legacy sites is 
approximately $1,400,000. However, the ultimate annual amount needed 
for operation and maintenance costs will vary depending upon the number 
of additional underfunded sites which go into default and other 
relevant factors. When financial guarantees sufficient to cover 
reclamation costs have been approved for all mine sites permitted under 
the primacy ABS, no additional sites will need to be added to the class 
of ABS legacy sites. Once the PADEP completes construction of all 
necessary discharge treatment systems for all of the ABS legacy sites, 
the PADEP will determine the amount of annual operation and maintenance 
costs, including recapitalization costs, which will be necessary to 
treat the discharges at all of the ABS legacy sites. This provision 
allows the PADEP to cease collection of the reclamation fee when the 
ABS Legacy Account contains funds which generate interest at a rate 
sufficient to pay the annual operation and maintenance costs for 
treating post-mining pollutional discharges at all the ABS legacy 
sites. At that point, the State believes that the PADEP will always 
have sufficient funds on hand in the ABS Legacy Account to cover the 
costs of treating the discharges at all the ABS legacy sites, and that 
Pennsylvania will have met the requirements of 30 CFR 800.11(e) without 
the need for additional revenue from the reclamation fee.
    Findings: See findings in the section below.
Summary of Regulatory Changes--Section 86.187, Use of Money
a. Section 86.187(a)(1) (deposit of reclamation fee into RFO&M Account)
    Section 86.187 (relating to use of money) specifies the purposes 
for which the PADEP must use monies from fees, fines, penalties, bond 
forfeitures and other monies received under the PASMCRA, as well as 
interest earned on these monies. Pennsylvania believes that the 
enforceable regulatory mechanism created by these revisions will enable 
its bonding program to meet the requirements of 30 CFR 800.11(e).
    This provision, in conjunction with section 86.17(e)(1), has been 
revised to establish a separate subaccount within the SMCR Fund called 
the RFO&M Account, and to require that the reclamation fees collected 
by the PADEP pursuant to section 86.17(e) must be deposited into the 
RFO&M Account. The provision also directs that the interest accrued on 
collected reclamation fees must be deposited into the RFO&M Account.
b. Section 86.187(a)(1)(i) (deposit of civil penalties into RFO&M 
Account)
    Under section 18(a) of PASMCRA, civil penalties may be used by the 
PADEP for reclamation of surface coal mine sites, restoration of water 
supplies affected by surface coal mining, or for any other conservation 
purposes provided by the PASMCRA 52 P.S. Section 1396.18(a). The PADEP 
is thus authorized to use civil penalty monies, as a supplement to 
forfeited bonds, for purposes of reclaiming the ABS legacy sites 
including treatment of post-mining pollutional discharges at these 
sites. New section 86.187(a)(1)(i) will require the PADEP to deposit 
into the RFO&M Account a portion of the monies collected from civil 
penalties assessed pursuant to PASMCRA, and to use those monies 
deposited into the account to pay the costs associated with treating 
discharges at the ABS legacy sites. PADEP believes that, in order to 
comply with the Court's ruling in Kempthorne, it must identify and 
dedicate specified sources of revenue that will generate enough money 
to cover the costs for treating discharges at all the ABS legacy sites. 
This subsection identifies a source of revenue--civil penalties 
collected pursuant to PASMCRA--and requires the PADEP to use this 
source of revenue to fund the discharge-treatment costs of the ABS 
legacy sites.
    This provision recognizes that a percentage of the civil penalties 
collected must be allotted to the Environmental Education Fund by law. 
(See 35 P.S. Section 7528.) Section 86.187(a)(1)(i) also caps the 
amount of civil penalties that must be deposited into the Reclamation 
Fee O&M Account during a single fiscal year at $500,000. If the PADEP 
collects more than $500,000 in civil penalties during a fiscal year, 
section 86.187(a)(1)(i) gives the PADEP discretion to deposit the 
excess amount into the SMCR Fund where it may be used for the purposes 
described in section 86.187(a)(3).
    This provision provides an additional source of revenue for the 
RFO&M Account which is restricted to the same uses as all other funds 
deposited into the account. This additional revenue will further 
enhance the financial solvency of the account, in addition to the 
adjustable reclamation fee, and will provide PADEP with even more 
dedicated revenue for water treatment at ABS legacy sites.
c. Section 86.187(a)(1)(ii) (deposit of interest earned on other monies 
in the SMCR Fund into the RFO&M Account)
    Similar to the deposit of civil penalties required by section 
86.187(a)(1)(i), this section is being added to authorize the PADEP to 
deposit into the RFO&M Account a portion of the interest that is earned 
on other monies in the SMCR Fund. The SMCR Fund includes monies from

[[Page 48531]]

released bonds, license fees, and other sources; these funds earn 
interest that may be used by the PADEP for the purposes specified by 
section 18(a) of PASMCRA. See 52 P.S. section 1396.18(a); 25 Pa. Code 
section 86.187(a). This provision gives the PADEP discretion as to the 
amount of interest earned on other monies in the SMCR Fund which will 
be deposited into the RFO&M Account during any given fiscal year.
d. Section 86.187(a)(1)(iii) (deposit of other monies into the RFO&M 
Account)
    Section 86.187(a)(1)(iii) will give the PADEP authority to deposit 
other monies from sources such as legislative appropriations or 
donations into the RFO&M Account. In addition, in the event a change in 
the applicable law provides for it, this provision will give the PADEP 
authority to deposit into the RFO&M Account the fees that will be 
collected for ``sum-certain financial guarantees needed to facilitate 
full-cost bonding.'' (These devices are also known as ``conversion 
assistance financial guarantees'' or ``conversion assistance bonds'', 
and are described below in Section B.)
e. Section 86.187(a)(1)(iv) (restriction on use of monies in the RFO&M 
Account)
    Section 86.187(a)(1)(iv) specifies that all monies deposited into 
the RFO&M Account must be used to pay the costs associated with 
treating the post-mining pollutional discharges at the ABS legacy 
sites. This provision establishes that the funds held in the RFO&M 
Account are being held by the State in trust for the benefit of all the 
people of the State in order to protect their rights under Article I, 
Section 27 of the Pennsylvania Constitution. Pennsylvania believes that 
an actuarially sound account will satisfy the requirements of 30 CFR 
800.11(e).
f. Section 86.187(a)(2) (use of monies received from forfeiture of 
bonds)
    A minor editorial change is being made to this provision to clarify 
that funds received from the PADEP's forfeiture of bonds on ABS legacy 
sites will be used to reclaim the land and restore water supplies 
affected by the surface mining operations upon which liability was 
charged on the bond, and, more specifically, in accordance with the 
provisions in section 86.187(a)(2)(i) and (ii), which are being added 
as part of this final rulemaking.
g. Section 86.187(a)(2)(i) (deposit of monies from bonds forfeited on 
ABS Legacy Sites into separate subaccount)
    Section 86.187(a)(2)(i) establishes a separate subaccount within 
the SMCR Fund called the ABS Legacy Account. The funds received from 
the bonds forfeited on ABS legacy sites, and all interest accrued on 
such monies, must be deposited into the ABS Legacy Account according to 
new section 86.187(a)(2)(i). Section 86.187(a)(2)(i) will also provide 
regulatory authorization for the PADEP to deposit monies from other 
sources, such as appropriations, donations, or interest earned on other 
monies in the SMCR Fund, into this account. Finally, section 
86.187(a)(2)(i) authorizes the PADEP to transfer ``excess'' monies from 
the RFO&M Account into the ABS Legacy Account. This provision requires 
the PADEP to seek the MRAB's review and recommendation prior to 
transferring any ``excess'' funds. Pennsylvania indicates that section 
86.187(a)(2)(i) responds to the court ruling in the Kempthorne case 
regarding the obligation of the PADEP to meet the requirements of 30 
CFR 800.11(e).
    Section 86.187(a)(2)(i) will establish a type of savings account 
for monies ultimately to be used to pay the annual operation and 
maintenance costs associated with all of the ABS legacy sites. The 
PADEP currently has approximately $4.8 million in forfeited bonds held 
for primacy ABS forfeited discharge sites; these funds will constitute 
the initial principal in the ABS Legacy Account. Section 
86.187(a)(2)(iii), discussed below, prohibits the PADEP from making any 
disbursements from the ABS Legacy Account until the account becomes 
actuarially sound. The RFO&M Account will be used to pay the ongoing 
operation and maintenance costs on a pay-as-you-go basis, while funds 
in the ABS Legacy Account accumulate from earned interest and other 
potential income sources. Pennsylvania believes that the amendments to 
section 86.17(e) will enable the PADEP to annually replenish and 
maintain funds in the RFO&M Account sufficient to cover the annual 
operation and maintenance costs for treating discharges at the ABS 
legacy sites. Pennsylvania indicates that the ABS Legacy Account will 
grow to the point that the interest earned on that account will be 
enough to cover all the annual operation and maintenance costs for the 
ABS legacy sites, without the need to generate any additional revenue 
from other sources such as the reclamation fee.
h. Section 86.187(a)(2)(ii) (restriction on use of monies in ABS Legacy 
Account)
    This provision requires that all monies deposited into the ABS 
Legacy Account be used only to pay the operation and maintenance costs 
for treating discharges at the ABS legacy sites. As in section 
86.187(a)(1)(iv), the PADEP is declaring that it is establishing the 
ABS Legacy Sites Trust as an account in the SMCR Fund. The PADEP has 
included language in section 86.187(a)(2)(ii) that specifically 
establishes the trust called the ABS Legacy Account. This regulation 
states that all monies deposited in the ABS Legacy Account are held by 
the State in trust for the benefit of the people of the State to 
protect their rights under Article 1, Section 27 of the Pennsylvania 
Constitution.
i. Section 86.187(a)(2)(iii), (A), (B), (C) (restrictions on ABS Legacy 
Account)
    Section 86.187(a)(2)(iii) prohibits the PADEP from making any 
disbursements from the ABS Legacy Account until the account becomes 
actuarially sound. The conditions that must be met for the ABS Legacy 
Account to become actuarially sound are prescribed here. First, 
financial guarantees sufficient to cover all reclamation costs must 
have been approved by the PADEP for all mine sites permitted under the 
primacy ABS. Second, the PADEP must have completed construction of all 
necessary discharge treatment systems for all of the ABS legacy sites. 
Once the entire class of ABS legacy sites is known, and all necessary 
discharge treatment systems have been constructed for these sites, the 
PADEP will be able to establish the amount of annual operation and 
maintenance costs, including recapitalization costs, which will be 
necessary to treat all the discharges at all of the ABS legacy sites. 
Once this figure is known, the third condition precedent may be 
satisfied, i.e., the ABS Legacy Account and Reclamation O&M Trust 
Account must contain funds that generate interest at a rate and amount 
sufficient to pay the annual operation and maintenance costs for 
treating all post-mining pollutional discharges at all the ABS legacy 
sites. Pennsylvania believes that once the ABS Legacy Account becomes 
actuarially sound, the PADEP will always have sufficient funds on hand 
in the Account to cover the costs of treating the discharges at all the 
ABS legacy sites, and therefore, Pennsylvania's bonding program will 
meet the requirements of 30 CFR 800.11(e) without the need for any 
revenue from the reclamation fee or the other revenue sources dedicated 
to the RFO&M Account.

[[Page 48532]]

j. Section 86.187(a)(2)(iv) (transfer of remaining funds in RFO&M 
Account to ABS Legacy Account)
    Section 86.187(a)(2)(iv) provides for termination of the RFO&M 
Account when the ABS Legacy Account becomes actuarially sound. This 
provision authorizes the PADEP to transfer the remaining funds in the 
RFO&M Account into the ABS Legacy Account when the latter account 
becomes actuarially sound. At that point, the RFO&M Account will no 
longer be necessary and will terminate. In addition, the reclamation 
fee (or an alternative permanent funding source established in lieu of 
the reclamation fee) will no longer be needed and will cease to be 
collected, and the deposit of civil penalty monies into the RFO&M 
Account pursuant to section 86.186(a)(1)(i) will also cease.
    Findings: Sections 86.17(e), Reclamation Fees and 86.187, Use of 
Money
    By creating the RFO&M Account that is funded in large part by an 
adjustable reclamation fee dedicated to the treatment of AMD discharges 
on bond forfeiture sites that were originally covered by the ABS, 
Pennsylvania has created an alternative system of financial guarantees 
consistent with 30 CFR 800.11(e). Our finding recognizes that 
Pennsylvania has provided an alternative system that provides 
sufficient funding to treat AMD pollution originating from a defined 
set of bond forfeiture sites (ABS legacy sites), that the system can be 
adjusted to accommodate increases and decreases in treatment 
obligations, that implementation is supported by an enforceable 
commitment by Pennsylvania to provide the funding needed to construct 
treatment facilities, and that Pennsylvania has considered and 
accounted for foreseeable risks to its operation. Our finding also 
recognizes that even though this system is restricted to the treatment 
of mine drainage on ABS legacy sites, the system provides a substantial 
economic incentive to active mine operators because treatment costs are 
tied to reclamation fees assessed on each active operation. These 
reclamation fees may be raised due to operators' failures to provide 
for fully funded treatment guarantees on active sites that are 
subsequently forfeited. Indeed, any increases in ABS legacy site 
treatment costs potentially raise reclamation fee assessments on active 
mine sites.
    There are no specific Federal counterparts to the changes to 25 Pa. 
Code 86.17(e), 86.187(a)(1) and 86.187(a)(2). However, for the reasons 
set forth above, we find that these changes are consistent with the 
Federal regulation at 30 CFR 800.11(e), which contains the criteria for 
approval of an ABS, and we are therefore approving the changes. 
Nevertheless, some of the revisions warrant more detailed explanation, 
which follows.
    ABS Legacy Account: We find that the specific conditions at section 
86.17(e)(6)(i)(iii) for determining when the ABS Legacy Account is 
financially capable of covering the annual operation and maintenance 
costs for treating post-mining pollutional discharges at the ABS legacy 
sites are sufficient and observe that OSM will have oversight 
responsibilities at the time that any such transition to the use of the 
ABS Legacy Account is being proposed and acted upon. OSM's finding is 
limited to the creation of, or an alternative source of funding to, the 
RFO&M Account. When the State notifies OSM that it has determined that 
the ABS Legacy Account is deemed to be actuarially sound in accordance 
with the provisions of section 86.17(e)(6), OSM will review the basis 
for such a determination and approve or disapprove any termination of 
the reclamation fee or alternative permanent funding source.
    Alternative Permanent Funding Source: We are hereby approving these 
regulations at sections 86.17(e)(3), (e)(3)(i), (e)(3(ii), and 
86.187(a)(2)(iv), which refer to a possible ``alternative permanent 
funding source'' that could be created to substitute for the 
reclamation fee. The creation of any alternative permanent funding 
source, however, must first be proposed to us as a State program 
amendment, and could not be used to replace the reclamation fee to pay 
for treatment costs on ABS legacy sites until we approve such an 
amendment.
    Other Sources of Funding: Sections 86.17(e)(4)(ii), (e)(4)(v), 
86.187(a(1)(iii), and (a)(2)(iv) refer to ``other sources'' of money, 
including appropriations, donations, and fees paid by operators who 
receive conversion assistance guarantees. The regulations provide that 
these funds from ``other sources'' may be deposited into the RFO&M 
Account and, except for fees for conversion assistance guarantees, into 
the ABS Legacy Account. 86.187(a)(1)(iii), (a)(2)(i). The transfer of 
fees from conversion assistance guarantees into the Reclamation Fee O&M 
Account must be authorized by State law. Therefore, no such transfers 
may take place until Pennsylvania enacts the necessary statutory 
revision, and then obtains our approval of the revision as a program 
amendment. Any use of ``other sources'' of money cannot be made until 
we either approve the proposed sources through the State program 
amendment process or decide that the proposed sources do not constitute 
program amendments requiring our approval.

Part B. The Conversion Assistance Program

    When implementing the revised full-cost bonding program and 
converting the ABS permits to full-cost bonding, Pennsylvania had 
concerns regarding the financial ability of existing permittees to post 
significantly-increased bond amounts. Operators contemplating a new 
mining operation after August 2001 would be able to factor the revised 
bond guidelines into their decision making process, but existing ABS 
operators had already made financial and operational commitments based 
on their existing bonds and the ABS. Surety providers had made 
decisions to provide existing ABS bonds based on the risk they were 
willing to take at the time of permit issuance. As a result, many 
operators were unlikely to be able to comply with the mandatory bond 
adjustment. Those operators would be faced with the uncertainty of a 
negotiated settlement with the Department regarding bonding and 
reclamation liability or risk being forced out of business. The choice 
for the surety industry would likewise be difficult. They could either 
provide more bonds than their risk assessment dictated or be subject to 
forfeiture of the existing bond. There was a risk to Pennsylvania that 
forfeiture of existing inadequate bonds would further increase the 
deficit of the ABS.
    To address these risks, in 2001-2002, the PADEP developed and 
implemented a conversion assistance program in which Pennsylvania 
essentially operates as a surety and provides part of the bonding for 
sites converting to full-cost bonding, thus easing the transition for 
active operators to full-cost bonding and thereby preventing 
bankruptcies and/or abandonment of sites. Funded with an initial 
general-revenue appropriation of $7 million in June 2001 and 
supplemented by annual premiums paid by the industry, the Department 
issued a ``land reclamation financial guarantee'' in a sum-certain 
amount to individual ABS permittees required to convert to a full-cost 
bond for land reclamation on an existing permit. See Act of June 22, 
2001 (P.L. 979, No. 6A) known as the General Appropriation Act of 
2001,'' at 213. The Land Reclamation Financial Guarantees (LRFG) were 
issued only to ABS permittees that were converting to full-cost 
bonding; permit applicants

[[Page 48533]]

who submitted applications after termination of the ABS are not 
eligible for the conversion assistance program.
    The PADEP indicates that as of November 30, 1999, the forfeiture 
rate for primacy ABS permits was 10.4%. The PADEP concluded that, based 
on this historic rate, the $7 million principal would cover up to $70 
million in bond exposure. The PADEP determined that the $7 million, 
when combined with existing site bonds, would be sufficient to pay for 
all forfeitures that may occur. Additionally, premiums collected for 
the LRFGs would provide additional funds to complete reclamation.
    As part of this submission, Pennsylvania requests that OSM approve 
the Conversion Assistance Program and its use of the LRFG as a 
financial guarantee equivalent to a conventional bond. Section 4(d.2) 
of PASMCRA is submitted as part of this program amendment as the 
authority for employing LRFGs under the Conversion Assistance Program.
    Finding: Pennsylvania's use of LRFGs is consistent with the use of 
other conventional bonding mechanisms that provide sum-certain amounts 
payable to the regulatory authority to provide for reclamation in the 
event of operator default. In this case, the form of performance 
guarantee is provided by the Commonwealth of Pennsylvania as conversion 
assistance in an amount necessary to supplement the original site-
specific bond, such that the total amount of bond coverage provided is 
equivalent to the amount required under a CBS. In effect, for a limited 
number of permits that were in the ABS, and that are transitioning to 
full-cost bonding, the State is acting as a surety to guarantee part of 
the reclamation costs. However, SMCRA Section 509 (b) provides that a 
surety executing a bond must be ``* * * a corporate surety licensed to 
do business in the State * * *'' Given that restriction, OSM cannot 
approve the conversion assistance program as a conventional bond as 
requested by PADEP. Rather, OSM finds that the conversion assistance 
program is an alternative system that will achieve the objectives and 
purposes of a bonding program in accordance with Section 509(c) of 
SMCRA, and that the conversion assistance program meets the objectives 
of an ABS pursuant to 30 CFR 800.11(e). OSM is approving the conversion 
assistance program as a one-time alternative bonding mechanism 
implemented solely for the conversion process from the ABS to 
conventional bonding.
Other Sites Not Fully Converted to Full Cost Bonding
    PADEP stated that at the end of the conversion process (i.e., 
active ABS permits converting to conventional bonding) two permitted 
sites remain insufficiently bonded. These two anthracite operations are 
permitted by Lehigh Coal & Navigation (LCN) and Coal Contractors Inc. 
(CCI). The State contends it has made provisions for fully funding the 
outstanding reclamation obligations for these two sites through 
reclamation and payment schedules. PADEP stated in its submission that 
the land reclamation on the LCN site ``does not present a potential 
liability to Pennsylvania at this time because it is being adequately 
addressed through the Consent Order and Agreement (CO&A) process and, 
in any event, will most likely be addressed through permit transfer or 
remining operations.'' PADEP indicated the bond deficiency as of June 
2, 2008, amounted to $8.96 million, which was being addressed through 
quarterly payments ending in December 2011. In addition, LCN is 
required under a CO&A to complete backfilling at a rate of 1.7 million 
cubic yards annually to meet the bond obligation.
    We disagree with the State's assertion that the LCN site land 
reclamation is not a potential liability; neither bond deficiency 
payments nor land reclamation schedules pursuant to a CO&A, potential 
permit transfers, nor potential remining operations are equivalent 
substitutes for a full cost bond. None of these instruments constitutes 
the guarantee of sufficient funding to pay for the land reclamation 
required to be performed under the approved State program.
    For the CCI site, Pennsylvania contends it has sufficient monies 
available in the SMCR Fund to complete land reclamation in the event of 
forfeiture. The State estimates the CCI land reclamation liability in 
excess of the available bond amount to be about $170,000. 
Pennsylvania's contention that it has sufficient funds falls short of 
the type of ``guarantee'' ensured by the posting of an adequate bond, 
because it is not enforceable.
    Finding: Pennsylvania has not provided guaranteed funding to cover 
the cost of the outstanding land reclamation liabilities at the LCN and 
CCI sites in the event the bonds for these sites are forfeited. 
Therefore, OSM is revising the required amendment at 30 CFR 938.16(h) 
to require the PADEP to ensure that its program provides suitable, 
enforceable funding mechanisms that are sufficient to guarantee 
coverage of the full cost of land reclamation at all sites originally 
permitted and bonded under the ABS.

Part C. Trust Funds as an Alternative System and Other Equivalent 
Guarantee

    Beginning in the early 1990s, Pennsylvania developed and 
implemented treatment trust funds to guarantee the treatment of 
unanticipated post-mining pollutional discharges in perpetuity. 
Permittees unable or unwilling to provide a surety or collateral bond 
to cover the costs of a post-mining discharge can establish a site-
specific trust fund managed by a third-party trustee. The purpose of 
the trust is to generate sufficient income to cover all costs 
associated with treating these discharges in perpetuity. Trust funds 
have been established to cover discharge-treatment costs at ABS sites, 
although the Department's implementation of trust funds is not limited 
to sites formerly covered by the ABS. Pennsylvania had received 
approval from OSM to add annuities and trust funds to the list of 
acceptable collateral bonds on May 13, 2005. 70 FR 25472, amended at 70 
FR 52916.
    Pennsylvania is submitting the provision in Section 4(d.2) of 
PASMCRA for the additional purpose of providing the authority for the 
establishment of site-specific trust funds to be used to pay the costs 
of treating unanticipated post-mining pollutional discharges in 
perpetuity. Pennsylvania is requesting approval of site-specific trusts 
as an alternative financial assurance mechanism (not a collateral bond) 
consistent with Section 509(c) of SMCRA and other applicable provisions 
of SMCRA. Pennsylvania states that its site-specific trust fund program 
is an alternative financial system to a bonding program that achieves 
the objectives and purposes of a conventional bonding program, and 
provides equivalent guarantees no less effective than a performance 
bond and 30 CFR subchapter J.
    In support of its request for approval of site-specific trusts as 
an alternative financial assurance mechanism consistent with Section 
509(c) of SMCRA and other applicable provisions of SMCRA, PADEP 
provided descriptions of its authority to enter into trust agreements, 
trust development and management process, and some of the 
administrative and financial components. More specifically, PADEP has 
provided the following: Discussions of its authority, under Section 
4(d.2) of PASMCRA, to establish alternative financial assurance 
mechanisms; the use of the CO&A and a companion Trust Agreement; 
factors currently used to

[[Page 48534]]

determine the amount of a site-specific trust fund; and the use of 
AMDTreat for treatment cost estimation. PADEP's proposed amendment also 
discusses rates of return, inflation rates, and volatility rates used 
on previous trust agreements as well as how operation and maintenance 
and recapitalization costs are addressed. Finally, the amendment 
submission describes trust disbursement procedures and flexibility to 
allow the permittee a reasonable period of time to fully fund a 
treatment trust. (Administrative Record No. PA 802.44, Attachments 5 
and 7).
    Site-specific trusts are established by forms prescribed and 
furnished by the PADEP. The trust covers the area of land within the 
permit area necessary for the operator to operate and maintain the 
treatment facility. The amount of the trust is calculated based on all 
the costs of treating the post-mining discharge in perpetuity, and the 
trust generates sufficient money to cover the costs of treating the 
discharge even if the operator defaults on its obligation. Moreover, 
unlike a performance bond--a sum-certain instrument which does not 
increase in value--trust funds can keep pace with inflation, making 
them more suitable for guaranteeing long-term treatment obligations. 
Liability under the trust is for the duration of the reclamation. The 
CO&A is executed by the operator and the PADEP, and the declaration of 
trust will be executed by a trustee who must be registered to do 
business in Pennsylvania and meet criteria for reliability similar to a 
surety company. Finally, the trust amount is adjusted by the PADEP in 
the event the cost of reclamation changes, in accordance with Section 
509(e) of SMCRA. Thus, Pennsylvania asserts the trust funds program 
assures that the State will have available sufficient money to complete 
the reclamation plan for sites covered by site-specific trusts.
    Pennsylvania states that site-specific trusts also provide a 
substantial economic incentive for the permittee to comply with all 
reclamation provisions because the permittee must fund the necessary 
trust principal. Moreover, the CO&A for the treatment trust contains 
stipulated civil penalties which are invoked if the operator fails to 
comply with the terms of the CO&A or the Trust Agreement. A failure to 
comply would also effectively put the operator out of business due to 
the permit block and permit revocations that would result. Thus, 
Pennsylvania concludes, all of these aspects of the trust fund program 
render it no less stringent than Section 509 of SMCRA.
    Finding: When we approved Pennsylvania's use of treatment trusts 
and annuities as collateral bonds in 2005, we noted that Section 4(d.2) 
of PASMCRA expressly provides for the establishment of alternative 
financial assurance mechanisms including site-specific trust funds for 
the perpetual treatment of unanticipated post-mining discharges. We 
noted that the Federal rules do not expressly include site-specific 
trust funds or annuities in the Federal collateral bonding regulations 
at 30 CFR 800.21. However, with the safeguards that were included in 
the State's provision, it appeared that trust funds and annuities 
presented no greater risks than those inherent in those forms of 
collateral bonding expressly named in 30 CFR 800.21. Therefore, we 
concluded that the addition of Subsection (f) of Pennsylvania's 
regulations would not render the Pennsylvania program less effective 
than 30 CFR 800.21 in meeting the bonding requirements of Section 509 
of SMCRA. 70 FR at 25474.
    While we have approved Pennsylvania's allowance of trust funds as a 
form of collateral bond, the Federal regulations at 30 CFR 800.11(e) 
provide another option for approving trust funds and annuities. Those 
regulations implement the provision in section 509(c) of SMCRA, 30 
U.S.C. 1259(c), authorizing OSM and the States to establish an 
``alternative system that will achieve the objectives and purposes of 
the bonding program pursuant to this section.'' The regulations at 30 
CFR 800.11(e) require that those alternative systems ``(1) * * * assure 
that the regulatory authority will have available sufficient money to 
complete the reclamation plan for any areas which may be in default at 
any time;'' and ``(2) * * * provide a substantial economic incentive 
for the permittee to comply with all reclamation provisions.'' As we 
noted in our decision approving trust funds as a form of an ABS in 
Tennessee, a fully-funded trust or annuity would satisfy the first 
criterion, while the permittee's obligation to provide the monies 
needed to establish a trust fund or annuity and the express terms of 
the trust would satisfy the second criterion. 72 FR 9616, 9618-9 (March 
2, 2007).
    We find that trust funds may serve as alternative funding 
mechanisms intended to assure long-term treatment of pollutional 
discharges. A fully-funded trust, i.e., one that generates sufficient 
interest to pay for the costs of establishing a treatment facility, as 
well as the costs of treating pollutional discharges in perpetuity, is 
consistent with, and therefore no less effective than, the Federal 
regulations at 30 CFR 800.11(e). Section 4(d.2) of PASMCRA, and the use 
of site-specific trust funds as alternative bonding financial 
mechanisms, are hereby approved. We find, however, that specific 
approval of the underlying financial components Pennsylvania has used 
or is currently using to develop treatment trusts is not necessary. 
That is, we make no findings with respect to explicit portfolio 
mixtures, volatility rates, inflation rates, the 11.1% expected rate of 
return, or other financial parameters Pennsylvania now considers, such 
as specific recapitalization schedules, site maintenance costs, or the 
use of the AMDTreat program.
    We have concluded that the implementation of treatment trusts 
allows program managers to have a degree of flexibility that may not be 
afforded if specific percentages, rates, or schedules are formally 
incorporated into the approved State program. Those flexibilities 
require ongoing analyses and adjustments to reclamation cost parameters 
such as those for fuel, materials, supplies, equipment rates, and 
dozens of other cost components. The State has provided a mechanism, in 
the form of annual evaluations of the trust funds, for determining when 
any such adjustments must be made. (See the program amendment, 
Attachment 7, ``Postmining Treatment Trust Consent Order and 
Agreement'', paragraph 8.) (Administrative Record No. PA 802.43)
    We have accorded similar flexibility to Pennsylvania with respect 
to setting and adjusting site-specific bond rates where conventional 
types of bonding instruments, such as surety bonds, are used. The PADEP 
uses bond rate guidelines to set the appropriate amounts of these site-
specific bonds. We have not required these guidelines, nor any changes 
thereto, to be submitted as amendments to the State program.
    Our approach to both treatment trust fund calculations and bond 
rate guidelines is consistent with the Federal regulations at 30 CFR 
800.14 (determination of bond amount) and 800.15 (adjustment of 
amount). Neither of these provisions spells out the precise parameters 
for calculation of the original bond amount or for periodic adjustments 
of the bond amount. Rather, those decisions are to be made by the 
regulatory authority.
    We are approving treatment trust funds as alternative bonding 
mechanisms. However, until PADEP makes a complete formal finding that 
sites originally permitted under the former ABS are now adequately 
bonded by a fully-funded trust, monies from the RFO&M Account must 
remain available for the costs of discharge treatment at those sites in 
the event of bond forfeiture. We will continue to monitor,

[[Page 48535]]

on an annual basis, the reclamation fee adjustment scheme approved in 
Part A, above, and its ability to provide revenues for existing and 
potential ABS legacy sites.
    Finally, we maintain oversight over the use of treatment trusts 
under the approved Pennsylvania program. Should the State improperly 
find a trust to be fully funded, and, as a result, declare the site to 
no longer be covered by the RFO&M Account in case of forfeiture, we 
have the ability to require the State to take appropriate action.

Part D. Demonstration of Sufficient Funding for Outstanding Land 
Reclamation at Primacy ABS Forfeiture Sites

    An analysis by the PADEP of the existing land reclamation at ABS 
forfeiture sites was initially prepared in a February 2000 report 
titled Assessment of Pennsylvania's Bonding Program for Primacy Coal 
Mining Permits. Based on the report's conclusions, the PADEP requested 
that the Pennsylvania legislature appropriate general revenue funds to 
provide the additional money needed to complete the land reclamation of 
ABS forfeiture sites. In 2001, the General Assembly appropriated 
$5,500,000 to be used solely for the costs of land reclamation at ABS 
forfeiture sites (the ``ABS Closeout Funds''). See Act of June 22, 2001 
(P.L. 979, No. 6A), known as the ``General Appropriation Act of 2001,'' 
at Section 213. PADEP indicates that it has used the ABS Closeout Funds 
to complete land reclamation for some of the ABS forfeiture sites. At 
the time of submission of this amendment, there was $4,431,088 
remaining in ABS Close-Out Funds. In 2007-08, the PADEP prepared an 
updated list of primacy ABS bond forfeiture sites with outstanding land 
reclamation. It also prepared a detailed analysis of the current costs 
to complete all outstanding land reclamation at these sites and 
provided an estimated total cost to complete the land reclamation for 
all primacy ABS bond forfeiture sites of $7,946,890.
    The PADEP indicates that, in addition to the $4,431,088 remaining 
from the $5.5 million legislative appropriation, it has sufficient 
other funds on hand to cover all land reclamation costs on ABS 
forfeiture sites. The Released Bond Account monies must be used for 
such reclamation; also, there is a Restricted Bond Account, from which 
monies can be made available and placed into the Released Bond Account. 
The Released Bond Account is composed of monies from forfeited bonds 
that have been ``released'' for use on sites other than the ones for 
which the monies were originally dedicated. Once released, the funds 
may be used to reclaim any primacy bond forfeiture site, and are thus 
available for land reclamation at these forfeited sites. As of the date 
of submission of this amendment, there was $2,800,000 in the Released 
Bond Account.
    The Restricted Bond Account is composed of monies from bonds that 
were forfeited. This money must be used to reclaim the site for which 
the bond is posted, unless the PADEP determines that those monies are 
no longer needed to reclaim that site, in which case, those monies may 
be transferred from the Restricted Bond Account to the Released Bond 
Account. (See the ABS Bond Forfeiture Sites Land Reclamation Status 
Report, July 2008, p. 15, included as part of Attachment 8 to the State 
program amendment.) As of the date of submission of this amendment, 
there was $1,716,974 in the Restricted Bond Account. In addition, there 
was $68,319 in forfeited, but not yet collected, bond money for one 
site.
    Finally, $20,844 was used from another account, called the General 
Operations Account, to accomplish land reclamation. This expenditure 
lowered the land reclamation liability total from $7,946,890 to 
$7,926,046. To cover this land reclamation liability, Pennsylvania has 
available a total of $9,016,381 in funds that it is authorized and 
required to expend for reclamation. (As noted below, not all of the 
$2,800,000 in the Released Bond Account will be needed for land 
reclamation. The remainder, approximately $1,100,000, will be available 
and used for the construction of treatment facilities at ABS legacy 
sites.) There are also funds available in several other accounts in the 
SMCR Fund. Where funds are not legally restricted solely for use in 
reclaiming ABS forfeiture sites, the PADEP has identified monies which 
it is authorized by law to spend for this purpose. (See ABS Financial 
Summary, July 2008, included as part of Attachment 10 to the State 
program amendment.) For these reasons, the PADEP submits that it has 
sufficient funds available to complete the outstanding land reclamation 
for the ABS forfeiture sites at any time, as required by the Third 
Circuit's decision interpreting 30 CFR 800.11(e)(1).
    Finding: We find that PADEP has demonstrated the availability of 
sufficient funds to address the outstanding land reclamation costs, as 
determined by PADEP, at ABS forfeiture sites as of the date of 
submission of this amendment. The ABS Closeout Funds were specifically 
appropriated to be used for land reclamation on primacy forfeiture 
sites. Funds in the Restricted Bond Account and the Released Bond 
Account identified for use in addressing the outstanding land 
reclamation are required to be used for reclamation under the State 
program at 25 Pa. Code 86.187 and 86.190. OSM finds that collectively, 
these funds represent the legally enforceable commitment envisioned by 
the court in order to demonstrate the availability of sufficient 
funding for the completion of the land reclamation at ABS forfeiture 
sites. In addition, we note that the General Operations Account within 
the SMCR Fund can be used for land reclamation as provided at 52 P.S. 
Section 1396.18. PADEP has indicated that this account has an 
unreserved balance of approximately $14.4 million. If additional funds 
should be required to address land reclamation needs, this account 
within the SMCR contains funding that could be committed to meet those 
needs. As such, Pennsylvania has adequate funding to complete land 
reclamation on all forfeited sites that were originally permitted and 
bonded under its ABS.
    Therefore, OSM is approving the demonstration of sufficient funding 
regarding reclamation of all outstanding land reclamation at the 
primacy ABS forfeiture sites.

Part E. Demonstration of Sufficient Funding for Construction of All 
Necessary Discharge Treatment Facilities at the Primacy ABS Forfeiture 
Sites

    Pennsylvania submitted information to demonstrate that it has 
sufficient funding to complete any initial treatment facility 
construction at primacy ABS forfeiture sites. An evaluation of all the 
primacy ABS forfeited discharge sites was completed by PADEP to project 
the costs of treating the discharges. Post-mining treatment costs were 
evaluated in three categories: (i) Initial facility construction costs; 
(ii) the annual operation and maintenance cost; and (iii) 
recapitalization costs. Initial facility construction costs cover all 
of the costs to get a treatment system up and running, such as facility 
design costs and construction.
    The PADEP calculated that, as of July 2008, the total capital cost 
to construct all necessary discharge-treatment facilities for the 
primacy ABS forfeiture discharge sites is $2,073,104. The PADEP 
indicates that it has taken a conservative approach to this cost 
calculation.
    To address this aspect of the ABS legacy, the PADEP must assure 
that it has the funds to meet this obligation. The PADEP indicates that 
it currently

[[Page 48536]]

has funds on hand that are available to cover the approximately 
$2,100,000 total capital cost to construct the necessary treatment 
facilities for the primacy ABS forfeiture discharge sites. In this 
submission, Pennsylvania has committed to using the approximately $1.1 
million of the funds in the Released Bond Account to address the 
reclamation liability for the ABS legacy sites. (The $1.1 million 
represents the remainder of the total of $2.8 million in the Released 
Bond Account, after approximately $1.7 million from this account is 
used to complete land reclamation at ABS forfeiture sites.) As noted, 
the PADEP has indicated that there is $14.4 million in its SMCR Fund, 
General Operations Account. These monies may be used for reclamation 
purposes as well as general administrative costs. See 52 P.S. Section 
1396.18. (See ABS Financial Summary, July 2008, included as part of 
Attachment 10 to the State program amendment, Administrative Record No. 
PA 802.43) As indicated, PADEP has committed to using money from the 
General Operations Account to cover the additional $1 million needed 
for treatment facility construction costs. Thus, PADEP submits that it 
has available, at any time, sufficient money to construct the necessary 
discharge-treatment facilities for all the ABS legacy sites, as 
required by 30 CFR Section 800.11(e)(1).
    Finding: We find that PADEP has demonstrated the availability of 
sufficient funds to address the capital costs, as determined by PADEP, 
of constructing all known discharge treatment facilities at ABS legacy 
sites as of the date of submission of this amendment. Specifically, the 
Released Bond Account funds identified for use in the SMCR Fund are 
required to be used for reclamation (including construction of 
treatment facilities) by the approved State program at 25 Pa. Code 
86.187 and 86.190, thereby providing the legally enforceable commitment 
required by Kempthorne.
    Further, the General Operations Account within the SMCR Fund can be 
used for reclamation (including construction of treatment facilities) 
as provided at 52 P.S. Section 1396.18. These additional funds should 
be sufficient to cover the remaining costs for the construction of 
treatment facilities, and Pennsylvania's submission indicates that 
these monies will be used for that purpose.
    Therefore, because the PADEP will use the monies from the Released 
Bond Account and the General Operations Account, when needed, to pay 
the costs of construction of discharge-treatment facilities, OSM is 
approving the demonstration of sufficient funding regarding 
construction of all necessary discharge-treatment facilities at the 
primacy ABS forfeiture sites.
Summary of OSM's Findings on Pennsylvania's Program Amendment 
Submission
    With regard to the treatment of post-mining discharges, we are 
approving the following parts and provisions of the submission in 
accordance with the requirements of 30 CFR 800.11(e):
    (1) Those regulations that provide an adjustable source of revenue 
dedicated to treatment and that can ensure adequate funds to treat 
discharges at the ABS legacy sites (those forfeited ABS sites requiring 
treatment of post-mining pollutional discharges that did not have 
sufficient bond or a fully funded treatment trust to cover costs of 
treating the discharge) and provide for the establishment of an 
alternative permanent funding source to treat post-mining pollutional 
discharges that is based on specific criteria and approved by OSM;
    (2) Pennsylvania's demonstration of sufficient funding for the 
construction of all necessary discharge treatment facilities at ABS 
forfeiture sites; and
    (3) Pennsylvania's use of treatment trusts as an alternative 
bonding system, intended to make available sufficient funds to complete 
the treatment of post-mining pollutional discharges.
    With regard to the land reclamation at sites that were originally 
permitted under the ABS, we are approving the following parts/
provisions of the submission in accordance with the requirements of 30 
CFR 800.11(e):
    (1) Pennsylvania's use of the Conversion Assistance Program, which 
provided financial guarantees for land reclamation to qualified 
permittees that converted to the conventional bonding system, thereby 
avoiding bond forfeiture; and
    (2) Pennsylvania's demonstration of sufficient funding for the 
sites that were originally bonded under the ABS, but forfeited at the 
time of dissolution.
    However, we find that Pennsylvania has not demonstrated sufficient 
funding for sites that were bonded under the former ABS and not 
forfeited, but have the potential to be liabilities under the ABS 
because the operators may not be able to obtain full-cost, site-
specific bonds that are adequate to cover all reclamation costs on 
those sites. Several sites were actively permitted at the time of the 
ABS dissolution, but were not adequately covered by conventional bond 
or other funding mechanism subsequent to the conversion. Two such sites 
remain. PADEP has not identified a source of money that can be used to 
reclaim these two sites in the event of bond forfeiture.
    We acknowledge the significant progress that Pennsylvania has made 
in addressing the reclamation liabilities of those sites originally 
covered under the ABS. However, because Pennsylvania's program 
amendment submission does not assure, with respect to these two 
currently permitted sites, that sufficient money is available to 
complete reclamation plans in the event of forfeiture, OSM cannot 
approve that aspect of Pennsylvania's program amendment.
    Required Amendment: As a result of Pennsylvania's failure to assure 
that outstanding land reclamation liabilities at these two sites are 
fully funded, OSM is revising the required amendment at 30 CFR 
938.16(h) to require Pennsylvania to ensure that its program provides 
suitable, enforceable funding mechanisms that are sufficient to 
guarantee coverage of the full cost of land reclamation at all sites 
originally permitted and bonded under the ABS.

IV. Summary and Disposition of Comments

    We received comments from four entities: The Mining and Reclamation 
Advisory Board (Administrative Record No. PA 802.56), the United States 
Environmental Protection Agency (Administrative Record No. PA 802.58), 
the Pennsylvania Coal Association (Administrative Record No. PA 
802.59), and PennFuture (Administrative Record No. PA 802.60). Two 
other Federal agencies responded with no comment (U.S. Fish and 
Wildlife Services, Administrative Record No. PA 802.52, and the U.S. 
Department of Labor, Administrative Record No. PA 802.54). Since 
PennFuture submitted the majority of the comments received, we will 
address those comments first and the other entities' comments 
following.
    PennFuture submitted ten general comments with numerous specific 
comments that support its general comments. We will address these 
specific comments where we determine that the topic had not already 
been addressed in our response to one of the general comments.
    Generally, PennFuture contends that the program amendment does not 
guarantee the reclamation of all existing and potential ``ABS legacy 
sites.'' PennFuture has indicated that the mechanisms presented in the 
ABS program amendment have moved or will move Pennsylvania's regulatory 
program closer to the objective, but they do not fully satisfy the 
outstanding

[[Page 48537]]

requirements of the Part 732 Notice and 30 CFR 800.11(e) and 938.16(h), 
as interpreted in Kempthorne. For the reasons set forth in our findings 
above, and in our responses to comments below, we disagree with this 
assertion in large part, though we are revising the required amendment 
at 30 CFR 938.16(h) to require Pennsylvania to ensure that its program 
provides suitable, enforceable funding mechanisms, that are sufficient 
to guarantee coverage of the full cost of land reclamation at all sites 
originally permitted and bonded under the ABS
    The comments and our responses to them follow.
    1. The ABS Program Amendment correctly recognizes that the 
reclamation of all existing and potential ``ABS Legacy Sites'' must be 
guaranteed.
    Response: We agree, and have found that the State program amendment 
satisfies this obligation.
    2. OSM has the discretion to approve parts of the ABS Program 
Amendment while disapproving others, and has the authority to place 
conditions on any approval or partial approval of the ABS Program 
Amendment.
    Pennsylvania is seeking approval of this program amendment 
submission as a complete package, in accordance with 30 CFR 732.17(h) 
and the part 732 Notices. PennFuture states that nothing in the phrase 
``shall approve or disapprove the amendment request'' in 30 CFR 
732.17(h)(7) prevents OSM from approving certain provisions in a 
program amendment package while disapproving others. PennFuture 
indicates that OSM has the discretion to approve parts of the ABS 
Program Amendment while disapproving others, and has the authority to 
place conditions on any approval or partial approval of the ABS Program 
Amendment.
    Response: We agree that there is nothing in 30 CFR 732.17(h) that 
prevents OSM from approving certain provisions in a program amendment, 
while disapproving others. We also agree that we have the authority to 
qualify our approval or partial approval of any program amendment, or 
to require additional amendments to the State program.
    3. In taking action on the ABS Program Amendment, OSM may consider 
only the ABS Program Amendment and its attachments, along with any 
comments and supporting information submitted in response to the 
proposed amendment.
    PennFuture notes that the ABS Program Amendment purports to 
incorporate by reference the entire, 82-page Program Enhancements 
Document (PED) that was transmitted to OSM on June 5, 2003. PennFuture 
further states that the PED is five years old, is inconsistent with the 
ABS Program Amendment, and that the program amendment does not appear 
to cite or to rely on any specific data, guidance documents, or 
passages of the PED. Finally, PennFuture states that OSM may consider 
only the ABS Program Amendment and its attachments, along with any 
comments and supporting information submitted in response to the 
proposed amendment. It further stated that if Pennsylvania is allowed 
to incorporate the PED by reference, it would incorporate its July 2003 
comments by reference.
    PennFuture also noted that Pennsylvania submitted to OSM a report 
on the progress recently made on the ABS primacy bond forfeitures, 
including a January 2009 update of the July 2008 version of the Trust 
Fund/Bond Agreement Summary Report, but that the State made it clear 
that the updated submission is neither a program amendment nor a 
revision to the program amendment. Therefore, according to PennFuture, 
the January 15, 2009, submission should not be considered by OSM in 
deciding on the ABS Program Amendment, nor should it be included in the 
administrative record in this proceeding. If, however, OSM intends to 
consider that new information or to include it in the administrative 
record of this proceeding, PennFuture contends that it must give it and 
the public an opportunity to comment on any such submission.
    Response: We agree that the program amendment does not appear to 
cite or to rely on any specific data, guidance documents, or passages 
of the Program Enhancement Document submission. Neither the Program 
Enhancement Document nor the updates to the Trust Fund/Bond Agreement 
Summary Report were considered during this review.
    4. There is no distinction between an ``alternative bonding 
system'' approved under Section 509(c) of SMCRA and an ``alternative 
system'' approved under Section 509(c) of SMCRA.
    As noted in the program amendment submission, Pennsylvania seeks 
approval of its use of Conversion Assistance Guarantees and mine 
drainage treatment trust funds as ``alternative systems'' under Section 
509(c) of SMCRA. Pennsylvania contends that there is a significant 
distinction between an alternative bonding system and ``alternative 
system'' under section 509(c).
    In its submission, Pennsylvania cites 30 CFR 732.15(b)(6), which 
provides that the Secretary of the Interior may not approve a State 
regulatory program unless he finds that the provisions of the State 
program ``implement, administer, and enforce a system of performance 
bonds and liability insurance, or other equivalent guarantees, 
consistent with the requirements of subchapter J of this chapter.'' 
Pennsylvania asserts that the Conversion Assistance Program and mine 
drainage treatment trust funds are equivalent to or better than 
conventional bonds and may be approved under Sec.  732.15(b) as an 
``alternative system or other equivalent guarantee.''
    PennFuture commented that there is no distinction between an 
``alternative bonding system'' approved under Section 509(c) of SMCRA 
and an ``alternative system'' approved under Section 509(c) of SMCRA. 
The authorization of an ``alternative system'' in Section 509(c) of 
SMCRA is implemented through OSM's regulation governing ``alternative 
bonding systems'' at 30 CFR 800.11(e). It cited OSM's ``authoritative 
interpretation, originally codified through notice and comment 
rulemaking at 30 CFR 806.11(c) and currently codified through notice 
and comment rulemaking at 30 CFR 800.11(e), [that] an `alternative 
system that will achieve the objectives and purposes of the bonding 
program' within the meaning of section 509(c) of SMCRA, 30 U.S.C. 
1259(c), is an alternative bonding system.' '' It further cited 
rulemaking language that it believes supports its position that OSM 
sees no distinction between an alternative system and alternative 
bonding system.
    The last clause of Sec.  732.15(b)(6) limits OSM's discretion by 
tethering it to the substantive standards in 30 CFR Chapter VII, 
subchapter J, which today consists entirely of Part 800. The only 
provisions of 30 CFR part 800 implementing section 509(c)'s 
authorization to approve an ``alternative system that will achieve the 
objectives of the bonding program under this section'' 30 U.S.C. 
1259(c) is the regulation authorizing the approval of ``alternative 
bonding systems,'' 30 CFR 800.11(e).
    The criteria for approval or disapproval of State programs in 30 
CFR 732.15(b)(6) do not make 30 CFR 800.11(e) inapplicable to an 
alternative reclamation guarantee proposed for approval under section 
509(c) of SMCRA. To the contrary, in order to be consistent with the 
requirements of subchapter J of this chapter, 30 CFR 732.15(b)(6), any 
reclamation guarantee proposed for approval as an ``alternative 
system'' under section 509(c) of SMCRA

[[Page 48538]]

must satisfy the requirements for ``alternative bonding systems'' 
codified in subchapter J at 30 CFR 800.11(e).
    Response: We agree that the authorization of an ``alternative 
system'' in section 509(c) of SMCRA is implemented through OSM's 
regulation governing ``alternative bonding systems'' at 30 CFR 
800.11(e). Therefore, we regard both the Conversion Assistance Program 
and mine drainage treatment trust funds as alternative bonding systems.
    5. OSM should approve Pennsylvania's Conversion Assistance Program 
as an alternative bonding system under section 509(c) of SMCRA and 30 
CFR 800.11(e).
    Response: OSM agrees, and is approving the Conversion Assistance 
Program as an alternative bonding system under section 509(c) of SMCRA 
and 30 CFR 800.11(e).
    6. OSM should partially disapprove and partially approve, with 
conditions, Pennsylvania's use of mine drainage treatment trusts as an 
alternative bonding system under section 509(c) of SMCRA and 30 CFR 
800.11(e).
    We received extensive comments from PennFuture expressing concerns 
relative to the treatment trust approach proposed by Pennsylvania. 
PennFuture commented, generally, that OSM's evaluation of 
Pennsylvania's request for approval of trust funds as an alternate 
system and our determination of whether the Part 732 Notice and the 
required amendment at 30 CFR 938.16(h) have been satisfied, must be 
based upon a realistic scenario in which there is no financially 
responsible party available to bear higher than expected treatment 
costs or to supplement the trust corpus in order to restore it to a 
perpetually sustainable level. PennFuture's comments promote the 
importance of establishing a sustainable primary target valuation for 
each trust that will provide a revenue stream sufficient to provide the 
necessary AMD treatment.
    In support of its comment, PennFuture sets forth the following 
deficiencies it alleges exist with respect to treatment trust amount 
calculations. According to PennFuture, each of these deficiencies, by 
itself, precludes OSM from determining that either the 1991 732 Letter 
or the required amendment codified at 30 CFR 938.16(h) can be removed.
    First, PennFuture asserted that the assumed investment portfolios 
for many existing trust funds are more aggressive than the actual 
investment portfolios, which tend to be more conservative. Because of 
this discrepancy, operators are allowed to fund the trusts with less 
money than will be needed for full funding, since the assumed 
aggressive investment strategies do not match the actual, more 
conservative investment mixes. PennFuture demanded that OSM codify a 
required amendment requiring Pennsylvania:

    (1) To assume a rate of return corresponding to the most 
conservative investment portfolio the trustee reasonably may be 
expected to hold when calculating the initial amount of mine 
drainage treatment trust funds;
    (2) To review the investment portfolio of existing treatment 
trusts, and, for those trusts for which the actual investment 
portfolio allocation deviates materially from the portfolio assumed 
when calculating the initial amount of the trust, to recalculate the 
amount of the trust using the expected rate of return for the actual 
investment portfolio; and
    (3) Where the recalculated amount is higher than the original 
calculation, to either: (a) Require the mine operator to make up any 
deficiency in the trust amount; or (b) where the deficiency cannot 
be eliminated because no viable responsible party remains available, 
provide an enforceable, supplemental mechanism that, together with 
the site-specific trust, firmly guarantees that sufficient funding 
will be available to treat the discharge in perpetuity.

    We note that PennFuture does not define what it means by a 
``material'' deviation between the assumed and actual investment 
portfolio.
    Second, PennFuture contended that mine drainage treatment trust 
funds have low tolerance for risk, primarily because it provides the 
only source of funding for its intended service, i.e., the payment of 
treatment costs at specific sites, often in perpetuity. According to 
PennFuture, Pennsylvania's decision to authorize trust investment mixes 
of 80% stocks and 20% bonds is entirely too aggressive to accommodate 
the extremely low risk tolerances inherent in these funding mechanisms. 
Instead, Pennsylvania should authorize only low risk investment mixes 
that do not exceed the 5.25% expected annual rate of return on 
investment bonds. Of course, limiting the investments to those with 
more conservative expected rates of return will require the operator to 
invest more money into the trust at the outset. PennFuture demanded 
that OSM codify a required amendment requiring Pennsylvania:

    (1) To assume a rate of return on the trust's investment 
portfolio no greater than 5.25% in calculating the amount of any 
mine drainage treatment trust fund; and (2) to recalculate, using a 
gross rate of return no greater than 5.25%, the amount of any 
existing treatment trust for which the gross rate of return on the 
investment portfolio assumed in the calculation of the initial trust 
amount exceeded 5.25%, and to either (a) require the operator to 
make up any deficiency in the trust amount; or (b) where a 
deficiency cannot be eliminated because no viable responsible party 
remains available, provide an enforceable, supplemental mechanism 
that, together with the site-specific trust, firmly guarantees that 
sufficient funding will be available to treat the discharge in 
perpetuity.

    Third, PennFuture commented that the assumed 11.1% rate of return 
on the equities portion of its authorized mine drainage treatment trust 
fund investment mixes is excessively optimistic, and results in 
unacceptably low initial trust fund investments. PennFuture illustrated 
what it believes to be the significance of the rate of return 
assumption by showing the significant difference between the initial 
trust investment for an assumed 11.1% rate of return on equities vs. 
lower assumed rates of return. PennFuture's expert, Dr. Small, 
recommended an assumed rate of return of no greater than 6% on 
equities. PennFuture claimed that Pennsylvania's mine drainage 
treatment trusts are ``doomed to insolvency from the outset by the 
unrealistic [assumed] rate of return.'' Finally, PennFuture asserted 
that Pennsylvania's volatility multiplier of 1.16% does not adequately 
account for the trust fund portfolio's market risk. Therefore, 
PennFuture demanded that OSM expressly disapprove the portion of the 
amendment that would allow the State to assume a gross rate of return 
of 11.1% on equity investments, and that it codify a required amendment 
requiring Pennsylvania:

    (1) To assume a gross rate of return on equities no higher than 
6% in calculating the amount of any mine drainage treatment trust 
fund; and (2) to recalculate, using a gross rate of return on 
equities no greater than 6%, the amount of any existing treatment 
trust for which the gross rate of return on equities assumed in the 
calculation of the initial trust amount exceeded 6% and to either: 
(a) Require the operator to make up any deficiency in the trust 
amount; or (b) where the deficiency cannot be eliminated because no 
viable responsible party remains available, provide an enforceable, 
supplemental mechanism that, together with the site-specific trust, 
firmly guarantees that sufficient funding will be available to treat 
the discharge in perpetuity.

    Fourth, PennFuture argued that limiting the period used for 
calculating recapitalization costs for treatment facilities to 75 years 
``is unwarranted, unsupported by any information in the ABS Program 
Amendment submission, and results in trust fund amounts below the 
amount needed to provide a full cost guarantee of perpetual 
treatment.'' Rather, PennFuture maintained that the only way to capture 
the full present

[[Page 48539]]

value of all recapitalization costs is to use a calculation period of 
infinite duration. Therefore, PennFuture demanded that OSM ``expressly 
disapprove the portion of the ABS Program Amendment that would allow 
Pennsylvania to limit the calculation of the present value of the 
recapitalization costs to 75 years'', and to codify a required 
amendment requiring Pennsylvania:

    (1) To use a calculation period of infinite duration that 
captures the full present value of all recapitalization costs when 
calculating the amount of a mine drainage treatment trust fund; and 
(2) to recalculate the amount of existing treatment trusts using a 
calculation period of infinite duration that captures the full 
present value of all recapitalization costs and to either: (a) 
Require the operator to make up any deficiency in the trust amount; 
or (b) where the deficiency cannot be eliminated because no viable 
responsible party remains available, provide an enforceable, 
supplemental mechanism that, together with the site-specific trust, 
firmly guarantees that sufficient funding will be available to treat 
the discharge in perpetuity.

    Fifth, PennFuture contended that mine drainage treatment trust 
funds fail to account for the risk of premature system failure. 
Therefore, according to PennFuture, the trust funds are not full-cost, 
perpetual guarantees. Accounting for this risk would require that 
additional, up front monies be invested by the operators into the trust 
funds. Therefore, PennFuture demanded that OSM codify a required 
amendment requiring Pennsylvania:

    (1) To fully account for the risk of premature failure of the 
treatment system or its components when calculating the amount of 
mine drainage treatment trust funds; [and] (2) to recalculate the 
amount of any existing treatment trust where a material risk of 
premature failure of the treatment system or its components exists, 
and to either: (a) Require the operator to make up any deficiency in 
the trust amount; or (b) where the deficiency cannot be eliminated 
because no viable responsible party remains available, provide an 
enforceable, supplemental mechanism that, together with the site-
specific trust, firmly guarantees that sufficient funding will be 
available to treat the discharge in perpetuity.

    We note that PennFuture does not define what it means by a 
``material risk of premature failure.''
    Sixth, PennFuture maintained that the mine drainage treatment 
trusts do not account for costs of complying with the National 
Pollutant Discharge Elimination System (NPDES) program; as such, 
PennFuture contended the trusts ``are not full-cost, perpetual 
treatment guarantees.'' Of course, initial trust investment amounts may 
need to be higher in order to account for NPDES requirements. 
Therefore, PennFuture demanded that OSM codify a required amendment 
requiring Pennsylvania:

    (1) To fully account for all costs of complying with the NPDES 
requirements when calculating the amount of mine drainage treatment 
trust funds; and (2) to recalculate the amount of any existing 
treatment trust where compliance with the NPDES requirements would 
materially increase the costs that must be covered by the trust, and 
to either: (a) Require the operator to make up any deficiency in the 
trust amount; or (b) where the deficiency cannot be eliminated 
because no viable responsible party remains available, provide an 
enforceable, supplemental mechanism that, together with the site-
specific trust, firmly guarantees that sufficient funding will be 
available to treat the discharge in perpetuity.

    We note that PennFuture does not define the phrase ``materially 
increase the costs that must be covered by the trust.''
    Response: For the reasons discussed below, we decline to impose any 
of the above-referenced demanded required amendments. Likewise, we 
decline to disapprove the provisions for which PennFuture demanded 
disapproval.
    When we conducted our programmatic reviews in the late 1980s and 
began identifying shortcomings in the Pennsylvania bonding system, 
there existed no site-specific financial vehicle able to provide a 
revenue stream for long-term reclamation needs like a pollutional 
discharge. Pennsylvania's treatment trust efforts since the passage of 
Pennsylvania Act 173 in 1992 were creative and relied on flexibility 
within the developmental environment. Ultimately, their efforts 
provided both the vehicle and structure of a financial mechanism that 
can serve as an alternate to traditional conventional bonds or a State-
wide bond pool. The treatment trust approach of making revenues 
available on an ongoing basis through interest payments on investments 
is an important leap forward in the search for a stable and self-
sustaining source of funds for long-term reclamation costs. Our 
implementation of treatment trusts in the Federal program in Tennessee 
relied heavily on the techniques and experiences of Pennsylvania 
program officials. Our decision to approve treatment trusts as part of 
the Tennessee Federal program reflects our conclusion that it is 
important to maintain flexibility in the program so that the treatment 
trusts approach can undergo necessary refinements and respond to 
changing economic conditions.
    As discussed under our findings, we are approving treatment trusts 
as an alternative bonding system under SMCRA section 509(c) and 30 CFR 
800.11(e). Our approval confers on Pennsylvania the authority to 
implement enforceable trust agreements for long-term treatment of acid 
mine drainage in lieu of a conventional bond. In addition, and as 
discussed in our findings, we are not providing specific approval of 
the underlying financial components Pennsylvania has used or is 
currently using to develop treatment trusts. Similarly, we are not 
requiring that Pennsylvania incorporate into mine drainage treatment 
trust funds any explicit portfolio mixtures, volatility rates, specific 
cushions against premature failure, rates of return, recapitalization 
calculations, or inflation rates. Furthermore, we are not approving or 
disapproving other financial parameters Pennsylvania now considers, 
such as site maintenance costs, or the use of the AMDTreat program. We 
have concluded that the implementation of treatment trusts requires 
program managers to have a degree of flexibility that may not be 
afforded when specific percentages, rates, or schedules are imposed 
through a formal amendment structure of 30 CFR Part 732. As a parallel, 
State regulatory programs are responsible for managing bond rate 
guidelines for surface mine reclamation on an annual basis. Those 
responsibilities require ongoing analyses and revisions to reclamation 
cost parameters such as those for fuel, materials, supplies, equipment 
rates, and dozens of other cost components. We believe that treatment 
trusts will also need routine periodic revisions that will be hindered 
if revisions are subject to the formal program amendment process.
    PennFuture's assertion that existing and future trust portfolios 
are not being managed or may not be performing consistent with the 
projections used to set the primary target valuation is an important 
comment and potential cause for concern. However, the potential for 
disparity between trust target assumptions and actual trust performance 
further convinces us not to impose rigid financial parameters such as 
rates of return. Rather, we are even more convinced of the importance 
of preserving programmatic flexibility so that Pennsylvania can revisit 
trusts on a periodic basis to revise and refine trust parameters, 
including the financial components and the primary target valuation, 
within the authority of its approved program. Pennsylvania could have 
adopted investment strategies in line with PennFuture's demands; had it 
done so, we almost certainly would have approved the use of trust 
funds, just as we are approving them in this

[[Page 48540]]

rulemaking. However, we believe the mechanics of trust fund structures 
are best left to the PADEP, which has an incentive to ensure that the 
funds do not fail. The annual evaluations, which may result in 
adjustments to the mine drainage treatment trust fund target amounts, 
are one such assurance against failure. (See Attachment 7, ``Postmining 
Treatment Trust Consent Order and Agreement'', paragraph 8.)
    The PennFuture comments also highlight the importance of 
maintaining clarity in our decision consistent with the decision in 
Kempthorne. In our findings section, we approved the use of treatment 
trusts as an alternative bonding system under SMCRA section 509(c) and 
30 CFR 800.11(e).
    Nonetheless, and as provided for under our finding, unless and 
until Pennsylvania demonstrates the financial adequacy of a trust 
supporting a qualifying ABS discharge, that discharge will still be 
subject to the requirements imposed on an ABS legacy site. Our 
clarification is consistent with the holding in Kempthorne that 
conversion from the old ABS only takes effect when the complete 
reclamation costs are fully covered by the CBS bonds (or in this case, 
a treatment trust). Under our decision, Pennsylvania must successfully 
demonstrate adequate coverage by a treatment trust for any ABS 
discharge it wishes to remove from coverage under the definition of ABS 
legacy sites in Chapter 86.
    Our decision also reflects our implementation of the Kempthorne 
court's direction that OSM supervision be present until full guarantees 
of reclamation are in place. Moreover, and as discussed in our finding 
above, we conclude that the regulatory revisions to Chapter 86 put into 
place a revenue source that accommodates changes in ABS legacy sites 
treatment costs through annual reviews and adjustments to the 
reclamation fee. PADEP also provided information indicating that the 
proposed annual revenues could be adjusted as necessary to cover all 
ABS discharge costs, including those with partially funded trusts (see 
amendment submission: Evaluation of Potential Primacy ABS Discharge 
Sites).
    Other Permit Costs: PennFuture asserts the following: Pennsylvania 
fails to account for the additional costs of complying with the NPDES 
requirements at ABS legacy sites. PADEP generally does not require its 
Bureau of Abandoned Mine Reclamation (BAMR) to get NPDES permits for 
bond forfeiture discharge sites where BAMR takes over operation and 
maintenance of the treatment systems. Likewise, where the mine operator 
has wound up affairs or otherwise is not in control of the mine site, 
PADEP generally does not require either the trustee or the trustee's 
contractor to hold NPDES permits for treatment trust discharge sites. 
PennFuture suggests that OSM should direct PADEP to provide the number 
of the current NPDES permit and its expiration date for each treatment 
trust sites. But, PennFuture contends, largely because Pennsylvania has 
improperly assumed away the NPDES requirements for most treatment 
trusts and bond forfeiture sites, the amendment fails to address any 
added costs those requirements might impose. Pennsylvania's failure to 
account in the calculation of the initial amount of a site-specific 
mine drainage treatment trust for any additional costs associated with 
compliance with the NPDES requirements produces a trust that does not 
fully guarantee the treatment of the covered charges in perpetuity, and 
therefore fails ``to assure the completion of the reclamation plan if 
the work had to be performed by the regulatory authority in the event 
of a forfeiture,'' 30 U.S.C. 1259(a), and to assure that the regulatory 
authority will have available sufficient money to complete.
    Next, PennFuture asserts that section 509(c) and 30 CFR 800.11(e) 
prohibits OSM from approving the use of treatment trusts unless these 
additional costs are properly taken into account in all of the 
scenarios in which Pennsylvania uses trust funds. Moreover, unless the 
treatment trust fully accounts for and guarantees the coverage of these 
additional costs, Pennsylvania's implementation of them does not 
satisfy the requirements of the Part 732 Notice and 30 CFR 938.16(h), 
because trust fund sites that were bonded under the ABS will continue 
to lack the full and firm reclamation guarantees demanded by 
Kempthorne.
    Response: With regard to NPDES permit costs, approval of this 
alternative system does not alter existing responsibilities of 
permittees to address any other Federal or State agency requirements 
relating to treatment of post-mining pollutional discharges. In the 
event the party responsible for abating or treating a discharge is 
required to obtain an NPDES permit pursuant to the CWA in order to 
operate and maintain treatment facilities at ABS legacy sites, then the 
costs associated with obtaining such permits and treating to the 
required effluent limits must be absorbed by the treatment trust. These 
costs, if and when they are required, should be incorporated into any 
calculations regarding the amount of funds needed to fully fund a 
trust.
    Pennsylvania states that once a trust has been established and 
fully funded, the reclamation bonds for the site may be released. In 
addition, after the trust is fully funded, the permittee can, at the 
discretion of the Department, be reimbursed at the end of each year, 
based on the calculated costs of treatment for that year's costs.
    PennFuture states that OSM must make clear that any mine for which 
a treatment trust is established continues to be regulated under Title 
V of SMCRA and the approved State regulatory program. In partially 
approving Pennsylvania's use of trust funds, OSM should make clear that 
until PADEP has granted final release of the section 509(c) trust fund, 
the mine remains a permitted mining operation within the jurisdiction 
of the State regulatory authority and the oversight jurisdiction of OSM 
under Title V of SMCRA. OSM should do so by disapproving the amendment 
to the extent it would allow full and final bond release for the entire 
mine site upon the funding of a mine drainage treatment trust fund, and 
by conditioning partial approval of Pennsylvania's use of trust funds 
under section 509(c) on Pennsylvania's retaining regulatory 
jurisdiction under the approved State program so long as mine drainage 
treatment operations continue at a trust fund site.
    Response: PennFuture raised this concern during the rulemaking that 
resulted in our approval of Pennsylvania's use of treatment trust funds 
and annuities as collateral bonds. 70 FR 25472, 25487 (May 13, 2005). 
PennFuture was concerned that use of a financial guarantee (such as a 
trust fund established to treat acid mine drainage) would lead to bond 
release and therefore termination of the regulatory authority's 
jurisdiction over a mine site. PennFuture commented that the Federal 
regulations allow release of a bond upon its replacement with another 
bond that provides equivalent coverage, but this substitution does not 
constitute a bond release. PennFuture also noted that an existing bond 
could be released upon establishment of a trust fund or other adequate 
financial guarantee of perpetual treatment, but that the substitute 
guarantee must be treated as the equivalent of a performance bond under 
section 509 of SMCRA. Section 509 does not allow bond release and the 
termination of jurisdiction over a site where mine drainage treatment 
operations are occurring.
    The Federal regulations do not allow full bond release until all 
requirements of the State program and the permit have been met. 
Additionally, Pennsylvania's regulations at 25 Pa.

[[Page 48541]]

Code 86.151(j) provides that release of bonds does not alleviate the 
operator's responsibility to treat discharge of mine drainage emanating 
from, or hydrologically connected to, the site to the standards in the 
permit, PASMCRA, the Clean Stream Law, the Federal Water Pollution 
Control Act (or Clean Water Act) and the rules and regulations 
thereunder. We construe the references to ``release of bonds'' in 
section 86.151(j) to mean the replacement of the original bond by 
another bond, whether it be a trust fund or other financial instrument 
used as a collateral bond, that will cover the area and cost of 
treatment facilities.
    When a trust fund or annuity is in place and fully funded, the 
regulatory authority may approve release under 30 CFR 800.40(c)(3) of 
conventional bonds posted for a permit or permit increment, provided 
that, apart from the pollutional discharge and associated treatment 
facilities, the area fully meets all applicable reclamation 
requirements and the trust fund or annuity is sufficient for treatment 
of pollutional discharges and reclamation of all areas involved in such 
treatment. The portion of the permit required for post-mining water 
treatment must remain bonded. The trust fund or annuity may serve as 
that bond. In addition, Pennsylvania may not terminate its regulatory 
jurisdiction over any bonded area, including a water treatment facility 
bonded by a trust fund or another financial mechanism. We do not expect 
any issues to arise pertaining to termination of jurisdiction, however, 
since Pennsylvania's program lacks a provision allowing termination of 
jurisdiction under any circumstances.
    7. OSM must codify enforceable conditions requiring the completion 
of land reclamation at primacy ABS bond forfeiture sites and the 
construction of mine drainage treatment systems at ABS Legacy Sites by 
specified deadlines.
    Pennsylvania stated in its submission that it is committed to 
completing the arrangements for land reclamation at the ABS sites 
within the next couple of years and the PADEP has the funds available 
to perform the work.
    PennFuture contends that OSM must codify enforceable conditions 
requiring the completion of land reclamation at primacy ABS bond 
forfeiture sites and the construction of mine drainage treatment 
systems at ABS legacy sites by specified deadlines. PennFuture contends 
that the Department's commitment is not enforceable. As a result, OSM 
must supply the enforceability by codifying enforceable obligations at 
30 CFR 938.16 for Pennsylvania to complete the outstanding land 
reclamation and mine drainage treatment system construction work at 
primacy ABS bond forfeiture sites. PennFuture agrees with Pennsylvania 
that a site-by-site schedule with individual completion deadlines for 
each mine is unnecessary. Given the extraordinary, decades-long delays 
in reclamation or mine drainage treatment at some PA ABS bond 
forfeiture sites, however, PennFuture asserts that definitive and 
enforceable overall deadlines for the completion of the land 
reclamation and treatment system construction works are essential.
    PennFuture recommends that OSM codify conditions at 30 CFR 938.16 
requiring Pennsylvania to complete the construction of mine drainage 
treatment systems at all ABS legacy sites and the land reclamation at 
all primacy ABS bond forfeiture sites within one year following the 
effective date of OSM's final rule, subject to an exception for sites 
where Pennsylvania is unable to complete the necessary work by the 
deadline because of forces beyond Pennsylvania's control.
    Response: It would be ideal if necessary land reclamation and water 
treatment projects at bond forfeiture sites could be completed by the 
deadline recommended by PennFuture. However, logistical and contractual 
limitations mean that it would be extremely difficult, if not 
impossible, to reclaim all the land that needs to be reclaimed and 
treat all the water that needs to be treated within one year of the 
effective date of this final rule. To accomplish the necessary land 
reclamation and water treatment, the State will need time to develop 
specifications, bid and award contracts, secure necessary easements and 
permits, and design and construct needed treatment facilities. For 
purposes of this rulemaking, we do not believe that it is necessary to 
impose deadlines for completion of sites. However, progress on the 
completion of sites is a topic that may be reviewed during oversight 
activities to assure that the regulatory authority is carrying out its 
activities in accordance with the provisions of its approved program.
    8. OSM must disapprove the use of a consent order and agreement in 
lieu of an approved Section 509 reclamation guarantee, and must 
prohibit the proposed redesignation of the existing reclamation fee 
account until full-cost land reclamation guarantees are posted for the 
two mines covered by consent orders and agreements.
    PennFuture contends that OSM must disapprove the use of a consent 
order and agreement in lieu of an approved section 509 reclamation 
guarantee. PennFuture also states that the amendment does not claim 
that Pennsylvania has sufficient money available in the SMCR Fund or 
elsewhere to cover the much larger shortfall for the LCN site, which 
includes a post-mining discharge that has been included on PA's list of 
potential ABS legacy sites. Although the amendment avoids stating the 
dollar amount by which the LCN site is underbonded, the $7 million in 
reclamation guarantees posted for the LCN site was more than $8.9 
million below the estimated liability for land reclamation alone. Thus, 
according to PennFuture, the available monies cover only 44% of the 
estimated land reclamation liability.
    PennFuture notes that Pennsylvania wants OSM to treat a consent 
order and agreement as satisfying Section 509 of SMCRA. But, PennFuture 
contends, as a matter of law, a consent order and agreement is not a 
section 509 performance bond or alternative bonding system. PennFuture 
asserts that section 509 of SMCRA can be satisfied only by approved 
reclamation guarantees that meet or exceed the amount of outstanding 
reclamation liability, not by an agreement to bring it about in the 
future.
    PennFuture further asserts that OSM may not consider the Part 732 
Notice and required amendment at Sec.  938.16(h) to be fully satisfied 
until all land reclamation liabilities at the LCN and CCI sites are 
guaranteed by financial guarantee mechanisms approved under section 509 
of SMCRA.
    Finally, PennFuture states that OSM must require that, before PADEP 
can limit the use of the reclamation fees to paying the costs 
associated with treating post-mining pollutional discharges at ABS 
legacy sites, PADEP must guarantee that all land reclamation 
liabilities at the LCN and CCI sites are fully funded.
    Response: As we note in Part B of the findings, a CO&A does not 
constitute the guarantee of sufficient funding to pay for reclamation, 
as required under section 509 of SMCRA. Accordingly, we found that 
Pennsylvania will not have fully satisfied the requirements of 30 CFR 
800.11(e) until all land reclamation liabilities at the LCN and CCI 
sites are guaranteed to be fully funded. We are thus revising the 
required amendment at 30 CFR 938.16(h) to require Pennsylvania to 
ensure that its program provides suitable, enforceable funding 
mechanisms that are sufficient to guarantee coverage of the full cost 
of land reclamation at all sites originally permitted and bonded under 
the ABS. Because we are taking this action, it is not necessary to 
prohibit Pennsylvania

[[Page 48542]]

from using its RFO&M Account for water treatment only on ABS legacy 
sites.
    9. The ABS Program Amendment does not fully satisfy the Part 732 
Notice and 30 CFR 938.16(h) because it does not demonstrate that the 
two new trust accounts provide the firm guarantee of perpetual 
treatment at all existing and potential ABS Legacy Sites required by 
Kempthorne.
    Pennsylvania stated that the RFO&M Account is designed to go into 
operation immediately and to continue to serve as the only funding 
mechanism until it is merged into the two accounts which are set up to 
operate in series and are part of a system that is intended to cover 
the costs of mine drainage treatment at ABS legacy sites after 
treatment systems are initially installed using other funds. The Legacy 
Account, which, having been found ``actuarially sound'' by PADEP, then 
takes over forever as the sole mechanism providing for mine drainage 
treatment at the ABS legacy sites. Pennsylvania concluded that it has 
established an enforceable regulatory mechanism which will generate 
sufficient funds to cover the total annual O&M and recapitalization 
costs for the ABS legacy sites (and has also accounted for the 
potential ABS legacy sites.
    PennFuture contends, however, that the amendment does not fully 
satisfy the Part 732 Notice and Sec.  938.16(h) because it does not 
demonstrate that the two new trust accounts provide the firm guarantee 
of perpetual treatment at all existing and potential ABS legacy sites. 
PennFuture adds that information presented in the amendment at most 
shows that the system described in Part 5 of the amendment may work for 
the very near term. Under Kempthorne, however, the assurance required 
to satisfy Sec.  800.11(e) must extend indefinitely beyond the next few 
years.
    Specifically, PennFuture contends that:
    Inventory: The program amendment fails to account for several mines 
that appear to be ABS legacy sites or potential ABS legacy sites. In 
particular, it provided examples of sites that were in the mine 
drainage inventory, but not listed as existing or potential ABS legacy 
sites, sites that were reclassified from ``primacy'' to ``pre-
primacy,'' and sites for which removal from the mine drainage inventory 
is not justified by the documentation provided by OSM.
    Reclamation Fee O&M Account: Because the ABS Program Amendment does 
not demonstrate that the Legacy Account will ever be ``actuarially 
sound,'' it must demonstrate that the RFO&M Account guarantees the 
treatment of all discharges at ABS legacy sites in perpetuity.
    The $3.7 million in the SMCR Fund's existing reclamation fee 
account remains encumbered and unavailable for the payment of mine 
drainage treatment costs at the ABS legacy sites until all land 
reclamation obligations at the LCN and CCI sites are fully guaranteed 
by financial guarantee mechanisms approved under section 509 of SMCRA. 
Only if the $9 million reclamation obligation of the existing 
reclamation fee account is covered by full cost bonds or some other 
approved financial guarantee mechanism may OSM approve restricting the 
$3.7 million to the purpose of paying for mine drainage treatment at 
ABS legacy sites through the redesignation of the existing reclamation 
fee account as the RFO&M Account.
    Only the revenue streams that must be deposited in the RFO&M 
Account may be considered in analyzing the capability of the account to 
provide the required guarantee of perpetual discharge treatment.
    The ABS Program Amendment fails to guarantee that all 
recapitalization cost at ABS legacy sites are covered in perpetuity. 
PennFuture opposes limiting the calculation period for recapitalization 
costs to 75 years, for the same reasons it opposed the 75 year 
recapitalization cost calculation period for site-specific mine 
drainage treatment trust funds.
    The ABS Program Amendment does not address recapitalization costs 
at potential ABS legacy sites. These costs must be addressed, and their 
present value must be based on a period of infinite duration.
    The ABS Program Amendment's use of annualized recapitalization cost 
figures in the analysis of the RFO&M Account is improper and 
misleading. Because the PADEP does not contain an enforceable 
commitment for PADEP to collect and set aside funds to cover 
recapitalization costs in future years, the analysis of the RFO&M 
Account should not be premised on such a ``set-aside.'' Moreover, PADEP 
should not assume that an equivalent amount of recapitalization costs 
will be spent each year, when it knows that will not be the case. 
Instead, the analysis of the RFO&M Account should be based on the 
irregular, discontinuous pattern of recap costs revealed by the 
Federation's ``ABS Legacy Recap Cost Pattern (rev 2009).''
    The ABS Program Amendment fails to account for the additional costs 
of complying with the NPDES requirements at ABS legacy sites.
    The ABS Program Amendment fails to demonstrate that the RFO&M 
Account and associated mechanisms guarantee the perpetual treatment of 
all discharges at the existing ABS legacy sites. Instead, the analysis 
of the account is limited and exclusively near-term in scope. 
Pennsylvania has failed to demonstrate that potentially dramatic 
increases in the reclamation fee will not reduce the number of acres 
subject to the fee to the point that revenues will be insufficient to 
cover treatment costs. PennFuture insists that the analysis of the 
account must project the costs and revenues for the entire period in 
which the account may have to remain in operation. PennFuture's 
analysis of the condition of the account over a 75-year period show 
increasing burdens that the PADEP has failed to demonstrate what the 
account can bear.
    The ABS Program Amendment fails to demonstrate that the RFO&M 
Account and associated mechanisms guarantee the perpetual treatment of 
all discharges at the potential ABS legacy sites. While the PADEP 
accounts for a ``worst-case scenario'' in which every potential ABS 
legacy site forfeits in a single year, it applies its analysis only to 
Year 1; in subsequent years, the needed additional revenues would be 
higher. In addition, and as noted above, the analysis does not account 
for recapitalization costs at these newly forfeited sites, but is 
limited to O&M costs.
    Next, the amount of existing, site-specific bond money is 
overstated, because some of that money is needed for land reclamation 
on the LCN site. Finally, the site-specific bond monies would not be 
available anyway, because the proposed regulations require that such 
monies be deposited into the ABS Legacy Account, where they cannot be 
used until that account is declared to be actuarially sound. As with 
the ABS legacy sites, the analysis of the impact of future forfeitures 
of potential ABS legacy sites is short-sighted, and fails to 
demonstrate that the RFO&M Account will withstand the increased burdens 
that it may be required to bear.
    Therefore, PennFuture demands that OSM condition its approval of 
the proposed regulations on Pennsylvania:

    (1) Identifying the maximum period the RFO&M Account may be in 
operation, and providing information sufficient to demonstrate that 
the RFO&M Account and its ancillary mechanisms will assure treatment 
of all discharges from the ABS legacy sites for the entire, maximum 
period the account may be in operation; and, (2) including in the 
information submitted, and accounting for: (a) The recapitalization 
costs for the potential ABS legacy sites; b) the full, perpetual 
recapitalization costs for both existing and potential ABS legacy 
sites by using a calculation period of infinite duration that 
captures the full present value of all

[[Page 48543]]

recapitalization costs; and c) any additional treatment costs at the 
ABS legacy sites resulting from compliance with the requirements of 
the NPDES program.

    ABS Legacy Account (Legacy Account): PennFuture demands that OSM 
codify a required amendment, requiring that before the Legacy Account 
may be found ``actuarially sound,'' all of the conditions identified in 
PennFuture's comments pertaining to site-specific trust funds for sites 
originally bonded under the ABS must be satisfied. In addition, 
PennFuture contends that the ABS Program Amendment fails to demonstrate 
that the Legacy Account guarantees the perpetual treatment of all 
discharges at the ABS legacy sites. This demonstration is critical, 
PennFuture argues, because once the determination of actuarial 
soundness is made, it applies for eternity; that is, there is no 
provision in the proposed regulations for reviving the reclamation fee, 
or tapping another source of revenue, to cover treatment and 
recapitalization costs in the event the ABS Legacy Account ceases to be 
``actuarially sound.'' PennFuture recommends that the determination of 
actuarial soundness be made by an actuary.
    For all of these reasons, PennFuture demands that OSM condition its 
partial approval of the proposed regulations on Pennsylvania:

    (1) Basing the calculation of the initial, ``actuarially sound'' 
funding level of the Legacy Account on an expected gross rate of 
return on the Legacy Account's asset portfolio no greater than 
5.25%; (2) basing the calculation of the initial, ``actuarially 
sound'' funding level of the Legacy Account on the full present 
value of all future recapitalization costs for the ABS legacy sites, 
determined by using a calculation period of infinite duration; (3) 
accounting for the risk of premature failure of the mine drainage 
treatment systems and components of the ABS legacy sites in 
determining the initial, ``actuarially sound'' funding level of the 
Legacy Account; and, (4) accounting for all costs of complying with 
the NPDES requirements at ABS legacy sites in determining the 
initial, ``actuarially sound'' funding level of the Legacy Account.

    Summary: OSM must impose conditions on its approval that are 
necessary to ensure that the new accounts and related mechanisms 
provide the firm guarantee of perpetual treatment. Until those 
conditions are satisfied, OSM may not grant full approval of Part 5 of 
the amendment or terminate the 732 Notice and Sec.  938.16(h) as being 
fully satisfied.
    Because Pennsylvania can neither guarantee nor predict when the 
Legacy Account will become actuarially sound, the worse-case scenario 
in this regard is one in which the Legacy Account never attains 
actuarial soundness, and the RFO&M Account serves forever as the 
repository of funds for covering all treatment expenses at the ABS 
legacy sites. As a result, the amendment must demonstrate that the 
RFO&M Account and its ancillary mechanisms, even though intended to 
serve as only a temporary vehicle for administering the funds for 
discharge treatment at ABS legacy sites, nevertheless are capable of 
handling a worse-case scenario under which they must administer those 
funds permanently.
    Given the lack of any proof that the Legacy Account will become 
actuarially sound and take over for the RFO&M Account anytime soon (or 
ever), the long-term sufficiency of the RFO&M Account, its capability 
to provide the firm financial guarantees demanded by Kempthorne must be 
proven by presentation and analysis of long-term projections.
    Response:
    Inventory: PennFuture commented on the inventory of ABS discharge 
sites PADEP submitted in support of the program amendment and stated 
that the ABS Program Amendment comes up short in its listing of and 
accounting for existing and potential ABS legacy sites. To support its 
comment, PennFuture discussed eight individual sites it thought should 
be included on the inventory list and said that it has questions 
concerning the classification of additional sites.
    We disagree with PennFuture's implication that OSM is prohibited 
from removing the 1991 732 letter and the required amendment at 30 CFR 
938.16(h) until there is an undisputed listing of ABS legacy sites and 
discharges. We conclude it is unnecessary to delay our consideration of 
the proposed modifications to the Pennsylvania program until OSM, 
PADEP, and PennFuture agree on a final list. As proposed, the PADEP 
amendment would establish an ABS legacy sites definition that clearly 
requires treatment of any discharge on a site bonded under the ABS, 
regardless of past, current, or future status on the MDI ABS Sites 
database. In addition, the proposed amendment would create a revenue 
source that, through annual reviews and adjustments to the reclamation 
fee, accommodates changes in ABS treatment costs, including changes in 
the number of qualifying sites or discharges (see program amendment 
submission Appendix 12).
    The tracking of the MDI ABS Sites is the responsibility of PADEP 
and the current database is cooperatively maintained by OSM and PADEP 
to facilitate the reclamation of AMD and other pollutional discharges 
on sites that operated under the ABS. As essential as the MDI ABS Sites 
database is to OSM and PADEP, it is merely a program management tool 
and does not in itself determine whether a particular site is an ``ABS 
Legacy Site.'' For this reason, we are not approving or disapproving 
the MDI ABS Sites database in this rulemaking. Because the database is 
not, per se, a component of the Pennsylvania regulatory program, any 
changes to the database do not need to be submitted to OSM as program 
amendments. Requiring database changes to be submitted as program 
amendments is not only unnecessary, but could also seriously delay or 
hinder PADEP efforts to complete required reclamation.
    Our view is based upon an acceptance that the information on the 
MDI ABS Sites database will change as sites are reviewed and better 
information is collected. We believe such an approach is essential. 
Information on ABS sites is constantly being collected as treatment 
techniques and estimates are being refined. Since its inception in 
1999, the database has been modified to include improved water quality 
information and to add ABS sites that were thought to qualify. OSM and 
PADEP have also had occasion to reclassify sites that no longer appear 
to represent an ABS treatment liability. Even with modifications being 
made over the last nine to ten years, the number of ABS discharges has 
remained relatively constant at approximately 100 discharges. OSM 
believes an active database management process is the best tool and 
approach for moving forward with reclamation while guaranteeing 
treatment of discharges on all qualifying sites.
    In closing, we are not modifying our decision based upon 
PennFuture's comments concerning eight specific sites and its 
indication that it may have questions concerning additional sites. We 
conclude that delaying our decision on this program amendment until 
there is an undisputed list between OSM, PADEP, and PennFuture is 
unnecessary. If a site meets the definition of an ``ABS Legacy Site,'' 
the old ABS, as modified in this amendment, remains responsible for the 
treatment of that site, regardless of whether it is on the MDI ABS 
Sites database. We encourage PennFuture and any other interested 
parties with important information concerning ABS site eligibility and 
treatment to contact PADEP and provide it with sufficient details to 
conduct an investigation.
    RFO&M Account: Section 86.17 (Reclamation Fee) was significantly

[[Page 48544]]

revised by Pennsylvania. Under the proposed revisions, the reclamation 
fee amount must be set to guarantee that sufficient revenue is 
generated to both cover the ongoing and projected O&M costs. In 
addition, the fee must provide sufficient revenues to maintain, on a 
State fiscal year basis, a minimum account balance to protect against 
unforeseen cost increases. To accomplish these tasks, section 86.17 
relies on the new definitions in section 86.1 (Definitions) and 
restrictions on the use of the funds under section 86.187 (Use of 
Money). Section 86.17(e) establishes, collects, and deposits an 
adjustable reclamation fee (currently $100) into the RFO&M Account. 
Through defined procedural steps, Pennsylvania proposed annual 
assessments of the account balance, expected revenues, and anticipated 
costs. Pennsylvania proposed an adjustable fee sufficient to pay for 
the operation and maintenance costs of AMD treatment, including 
recapitalization costs and to maintain a $3 million minimum balance in 
the O&M Trust Account.
    Pennsylvania significantly revised section 86.187 (Use of Money) to 
address how funds collected under section 86.17(e) would be dedicated 
to AMD treatment on ABS legacy sites. Pennsylvania's submission also 
makes available monies collected from civil penalties assessed by the 
Department under the Surface Mining Conservation and Reclamation Act. 
Under the proposed amendment, Pennsylvania must deposit into the O&M 
Trust Account all civil penalty collections up to $500,000 in a fiscal 
year, minus a small percentage that are required for deposit into the 
Pennsylvania Environmental Education Fund. While section 86.187(a) also 
allows, at the discretion of the Department, the deposit interest on 
other monies in the SMCR Fund, appropriations, donations, or fees 
collected from operators participating in the Conversion Assistance 
Program, the reclamation fees and civil penalties represent the only 
mandatory sources of funding. To provide a perspective on current 
revenues from mandatory and other sources, Pennsylvania submitted a 
document titled ABS Financial Summary July 2008. The summary describes 
various accounts in the SMCR Fund, available monies, interest, civil 
penalty collections, and miscellaneous sources.
    Pennsylvania's proposed amendment includes discussions of AMD 
treatment costs on sites defined as ABS legacy sites at the time of the 
submission to OSM. The Primacy ABS Bond Forfeiture Discharge Sites 
Status Report for July 2008 provides the forfeited primacy permits 
bonded under the ABS with site-specific costs for treatment facility 
construction, annual operation and maintenance costs (O&M), 
recapitalization costs (system rehabilitation/replacement), and the 
status of the site. The report provides that, as of July 2008, the 
annual estimated O&M cost for all sites was approximately $1.35 
million. Pennsylvania's proposed approach also considers annualized 
recapitalization cost estimates.
    Pennsylvania's submission provides recapitalization costs for each 
year, continuing up to year 75 and estimates that for the first ten 
years recapitalization costs slowly escalate from approximately 
$230,000 to $302,000. Because Pennsylvania's submission proposes that 
recapitalization costs will be addressed on a ``pay-as-you-go'' 
approach, the maximum potential treatment outlay for year one is 
estimated to be approximately $1,580,000.
    ABS legacy site treatment through the new adjustable trust account 
is dependent on the expenditure of approximately $2.07 million to 
construct treatment facilities. To develop the $2.07 million estimate, 
Pennsylvania reviewed existing ABS legacy sites and identified 67 
discharges where systems are lacking or in need of substantive 
refurbishing. The funding aspects of treatment facility construction 
are discussed in several locations in Pennsylvania's submission. In ABS 
Program Amendment Part 4 (Section B), Pennsylvania describes ABS legacy 
site treatment facility construction, provides the number of sites that 
have functioning treatment systems, and provides the $2.07 million 
estimate. The narrative also commits to funding the facility 
construction effort with $1.1 million from the Released Bond Account 
and the remaining amount from the General Operations Account under the 
Department's SMCR Fund. In addition to the analysis and commitment of 
funding under ABS Program Amendment Part 4, Pennsylvania submitted 
further support information under two additional documents; the Primacy 
ABS Bond Forfeiture Discharge Sites Status Report for July 2008 and the 
ABS Financial Summary for July 2008. These support documents identify 
specific site treatment facility construction estimates and confirm 
fund amounts under the General Operations Account and the Released Bond 
Account.
    We acknowledge that the revenues collected from reclamation fees 
($190,125) and from civil penalties ($225,400.75) in 2007-2008 are less 
than the $1,580,000 maximum potential treatment outlay for year one. 
Nonetheless, the actual amount of money needed for treatment during 
year one will be significantly lower than the $1.58 million maximum, 
because that maximum amount is based on an assumption that all 
treatment facilities will have been constructed and be ready to start 
treating discharges at the beginning of year one. Actually, though, 
Pennsylvania must still complete construction of 67 facilities needed 
to treat mine drainage on ABS legacy sites. Disbursements from the O&M 
Trust Account cannot occur until the facility is constructed. At this 
time, we have no estimate on the degree to which disbursements from the 
O&M Trust Account will be postponed; however, we anticipate that it 
will be at least several years based upon discussions under ABS Program 
Amendment Part 4. In the event that treatment facility construction is 
accelerated and occurs sooner than anticipated, the O&M Trust Account 
has a balance of $3,699,896.50 to cover additional treatment outlays 
until the fee can be adjusted in the following year.
    Pennsylvania also submitted information on the financial risk 
associated with active coal mine sites that were originally under the 
ABS but, at the time of the submission, had no fully funded mechanism 
for treatment of AMD. These sites are viewed as a potential financial 
burden on the O&M Trust Account because in the event of forfeiture, 
their treatment costs must be covered. For the 44 sites that met the 
potential risk scenario, Pennsylvania estimated that $1,450,000 
represented a conservative AMD treatment estimate. Pennsylvania further 
provided that the risk to the O&M Account is minimized because some 
sites have bond exceeding the amount necessary for a site specific 
treatment trust. We accept Pennsylvania's conclusion that the risk of 
increased costs to the O&M Trust Account has been addressed. We agree 
that it is unrealistic to assume that all 44 sites would default in the 
same year. We also observe that the O&M Trust Account balance of $3.7 
million and the adjustable fee process are available to address short-
term and long-term increases in treatment costs.
    As previously discussed in our finding at Part A, concerning the 
proposed regulatory changes to establish a legally enforceable means of 
funding the O&M and recapitalization costs for the ABS legacy sites, 
OSM recognizes that Pennsylvania has provided an alternate system that 
provides sufficient

[[Page 48545]]

funding to treat AMD pollution originating from a defined set of bond 
forfeiture sites (ABS legacy sites). In addition we found that the 
reclamation fee can be adjusted to accommodate all increases and 
decreases in treatment obligations, and that these provisions 
constitute an enforceable commitment by Pennsylvania to provide the 
funding needed to construct treatment facilities.
    ABS Legacy Account: Pennsylvania also proposed an alternate funding 
source under Sec.  86.17(e)(6) called the ABS Legacy Account that, when 
actuarially sound, could supersede the RFO&M Account as the source of 
funding for AMD treatment on the ABS legacy sites. Pennsylvania 
proposed specific conditions at section 86.17(e)(6)(i) through (iii) 
for determining when the ABS Legacy Account is financially capable of 
covering the annual operation and maintenance costs for treating post-
mining pollutional discharges at the ABS legacy sites.
    As previously discussed in our finding at Part A regarding this 
account, OSM did not consider this revenue to be a component of the 
funding required to meet any of the needs for treatment of the ABS 
legacy sites. Our approval of the language establishing this account, 
and the transfer of monies into the account is limited in that the ABS 
Legacy Account, and monies contained within the account, cannot be used 
until certain conditions are met. At that time, OSM can revisit any 
issue with regard to the solvency of this fund and the appropriateness 
of terminating the reclamation fee (or alternate revenue source).
    We decline to impose any of the conditions on our approval of these 
two accounts demanded by PennFuture. We believe formal imposition of 
these conditions upon the State's approved program is unduly 
burdensome; it is also unnecessary, given the plain language of the 
regulations, which requires adjustment of the reclamation fee to 
account for any increased costs, and a demonstration of actuarial 
soundness, a defined term, for the ABS Legacy Account prior to 
termination of the reclamation fee. Pennsylvania's willingness, and its 
ability, to raise the needed additional monies through reclamation fee 
increases will be continually evaluated by OSM through its oversight 
authority. In short, the regulations create the mandate to fully fund 
discharge treatment costs for all existing and potential ABS legacy 
sites in perpetuity. The burden of ensuring the fulfillment of that 
mandate falls squarely on the PADEP, and indirectly on OSM, through 
oversight. With the commitment already set forth in the regulations, 
additional conditions are simply not needed, at this time. Therefore, 
we decline to impose them.
    10. OSM should defer ruling on the proposal to allow funding of the 
RFO&M Account and Legacy Account through ``appropriations'' and funding 
sources that are not specifically identified in the ABS Program 
Amendment.
    PennFuture contends that one of SMCRA's bedrock principles is cost 
internalization; that is, the statute in general, and its bonding 
requirements in particular, require that the costs of reclaiming 
surface mining sites, including the costs of discharge treatment at 
those sites, must be borne by the coal industry, and not by the public. 
Thus, PennFuture concludes, OSM should not approve proposed regulatory 
language that would allow the PADEP to deposit into the RFO&M Account 
or Legacy Account: (1) ``appropriations * * *.'' 25 Pa. Code 
86.187(a)(1)(iii), 86.187(a)(2)(i); (2) fees for Conversion Assistance 
Program guarantees, until a statutory change removing the restriction 
on the use of those funds is submitted as a program amendment; (3) 
``other monies'' from sources not specifically listed in 25 Pa. Code 
86.187(a)(1)(iii) and (a)(2)(i), until the specific sources of funding 
are identified and submitted for approval as a program amendment; or 
(4) the ``permanent alternative funding sources for the RFO&M Account, 
25 Pa. Code 86.17(e)(3), (e)(3)(i), (e)(3(ii), until the specific 
alternative source is identified, Pennsylvania submits the source as a 
State program amendment and OSM approves the source as a replacement 
for the reclamation fee. PennFuture thus asserts OSM should defer 
ruling on these provisions in this rulemaking for the substantive 
reason that the money purported to be authorized therein, with the 
exception of fees for Conversion Assistance Program guarantees, may 
come from outside the coal industry, and therefore violate the 
principle of cost internalization. PennFuture further asserts that OSM 
should also defer its decision on all of the above provisions, 
including the use of fees from Conversion Assistance Program 
guarantees, for a procedural reason: neither PennFuture nor any other 
interested party may provide meaningful comment on the provisions until 
they are submitted to OSM through the formal program amendment process. 
Moreover, and in the same vein, PennFuture contends that OSM cannot 
properly rule on the consistency of these provisions with the 
requirements of SMCRA and the Federal implementing regulations until 
they are squarely presented to it as State program amendments.
    Response: For the reasons set forth above in Part A of our 
findings, we are approving the regulatory provisions cited by 
PennFuture here. However, any ``alternative permanent funding source'' 
that would be proposed to substitute for the reclamation fee must first 
be submitted to us for review and may not be used to pay treatment 
costs on ABS legacy sites until we either approve the amendment, or 
decide that the mechanism need not be treated as a program amendment 
requiring our approval. Nothing in SMCRA or its implementing 
regulations explicitly prohibits the use of ``other sources'' of money, 
such as appropriations, to pay for reclamation of forfeited sites. If 
any such ``other sources'' are deposited into either the RFO&M Account 
or the Legacy Account, we will determine whether a program amendment is 
required before PADEP may use those monies. Further, the transfer of 
fees from Conversion Assistance guarantees into the RFO&M Account must 
be authorized by State law. Therefore, no such transfers may take place 
until Pennsylvania enacts the necessary statutory revision, submits it 
to us, and we approve it.

Other Comments

The Pennsylvania Coal Association (PCA)
    The PCA commented that it supported approval of the program 
amendment. In its comments the PCA indicated its agreement to continue 
paying the $100 per acre reclamation fee for pollutional discharges for 
which its members have no liability. This approval was conditioned on 
continuing efforts to find a permanent alternate source of funding to 
address such pollution.
The Mining and Reclamation Advisory Board (MRAB)
    The MRAB commented generally on the process that resulted in the 
regulations recommended by the Board, as submitted in the program 
amendment. MRAB commented in support of OSM's approval of the 
amendment.

Federal Agency Comments

Mine Safety and Health Administration (MSHA)
    MSHA indicated it had no comments or concerns regarding the 
proposed amendment.

[[Page 48546]]

U.S. Fish and Wildlife Service
    The USFWS indicated it had no comments on the proposed amendment.
U.S. Environmental Protection Agency
    The USEPA noted that all discharges of water from areas disturbed 
by surface mining shall be made in compliance with all applicable State 
and Federal water quality laws and regulations and with the effluent 
limitations for coal mining promulgated by USEPA as set forth at 40 CFR 
Part 434.
    USEPA indicated that implementation of the State's regulations, 
including the proposed amendments, must comply with the CWA, the 
regulations implementing NPDES, and other relevant environmental 
statutes and regulations. EPA further noted that SMCRA and its 
implementing regulations, including PADEP's proposed amendments, do not 
supersede, modify, amend or repeal the CWA and its implementing 
regulations.
    In other words, the EPA stated, `` * * * any discharges associated 
with ABS legacy surface mining operations must comply with the CWA.''
    Response: OSM agrees that approval of this amendment does not alter 
the State's or a permittee's responsibility for compliance with any 
applicable provisions of the CWA. Specifically, approval of this 
amendment does not alter existing or future responsibilities of the 
State or a permittee to address any other Federal or State agency 
requirements relating to treatment of post-mining pollutional 
discharges.

V. OSM's Decision

    Based on the above findings, we are partially approving the 
Pennsylvania program amendment sent to us on August 1, 2008, 
(Administrative Record No. PA 802.43). To implement this decision, we 
are amending the Federal regulations at 30 CFR Part 938 which codify 
decisions concerning the Pennsylvania program. Pursuant to 5 U.S.C. 
553(d)(3), an agency may, upon a showing of good cause, waive the 30 
day delay of the effective date of a substantive rule following 
publication in the Federal Register, thereby making the final rule 
effective immediately.
    We find that good causes exist under 5 U.S.C. 553(d)(3) to make 
this final rule effective immediately. Because Section 503(a) of SMCRA 
requires that the State's program demonstrate that the State has the 
capability of carrying out the provisions of the Act and meeting its 
purposes, making this regulation effective immediately will expedite 
that process.
    Specifically, waiving the 30 day period after publication will 
allow Pennsylvania to immediately implement these new provisions that 
are designed to bring more financial resources to bear toward the 
abatement of water pollution on permitted and abandoned mine sites in 
the State. Improved water quality will thus inure more quickly to the 
benefit of the citizens of the Commonwealth of Pennsylvania. Therefore, 
under 5 U.S.C. 553(d)(3), this rule will be effective immediately.
    In addition, for the reason set forth in our findings, we are 
revising the required amendment at 30 CFR 938.16(h) to require 
Pennsylvania, within the time provided therein, to ensure that its 
program provides suitable, enforceable funding mechanisms that are 
sufficient to guarantee coverage of the full cost of land reclamation 
at all sites originally permitted and bonded under the ABS. 
Satisfaction of the revised required program amendment at 30 CFR 
938.16(h) will likewise constitute satisfaction of the remaining 
requirements of the October 1, 1991, 732 letter.

VI. Procedural Determinations

Executive Order 12630--Takings

    This rule does not have takings implications. This determination is 
based on the analysis performed for the counterpart Federal regulation.

Executive Order 12866--Regulatory Planning and Review

    This rule is exempted from review by the Office of Management and 
Budget under Executive Order 12866.

Executive Order 12988--Civil Justice Reform

    The Department of the Interior has conducted the reviews required 
by Section 3 of Executive Order 12988 and has determined that this rule 
meets the applicable standards of Subsections (a) and (b) of that 
section. However, these standards are not applicable to the actual 
language of State regulatory programs and program amendments because 
each program is drafted and promulgated by a specific State, not by 
OSM. Under Sections 503 and 505 of SMCRA (30 U.S.C. 1253 and 1255) and 
the Federal regulations at 30 CFR 730.11, 732.15, and 732.17(h)(10), 
decisions on proposed State regulatory programs and program amendments 
submitted by the States must be based solely on a determination of 
whether the submittal is consistent with SMCRA and its implementing 
Federal regulations and whether the other requirements of 30 CFR Parts 
730, 731, and 732 have been met.

Executive Order 13132--Federalism

    This rule does not have Federalism implications. SMCRA delineates 
the roles of the Federal and State governments with regard to the 
regulation of surface coal mining and reclamation operations. One of 
the purposes of SMCRA is to ``establish a nationwide program to protect 
society and the environment from the adverse effects of surface coal 
mining operations.'' Section 503(a)(1) of SMCRA requires that State 
laws regulating surface coal mining and reclamation operations be ``in 
accordance with'' the requirements of SMCRA, and section 503(a)(7) 
requires that State programs contain rules and regulations ``consistent 
with'' regulations issued by the Secretary pursuant to SMCRA.

Executive Order 13175--Consultation and Coordination With Indian Tribal 
Government

    In accordance with Executive Order 13175, we have evaluated the 
potential effects of this rule on Federally-recognized Indian Tribes 
and have determined that the rule does not have substantial direct 
effects on one or more Indian Tribes, on the relationship between the 
Federal Government and Indian Tribes, or on the distribution of power 
and responsibilities between the Federal Government and Indian Tribes. 
The basis for this determination is that our decision is on a State 
Regulatory program and does not involve a Federal Regulation involving 
Indian Lands.

Executive Order 13211--Regulations That Significantly Affect the 
Supply, Distribution, or Use of Energy

    On May 18, 2001, the President issued Executive Order 13211 which 
requires agencies to prepare a Statement of Energy Effects for a rule 
that is (1) considered significant under Executive Order 12866, and (2) 
likely to have a significant adverse effect on the supply, 
distribution, or use of energy. Because this rule is exempt from review 
under Executive Order 12866 and is not expected to have a significant 
adverse effect on the supply, distribution, or use of energy, a 
Statement of Energy Effects is not required.

National Environmental Policy Act

    This rule does not require an environmental impact statement 
because section 702(d) of SMCRA (30 U.S.C. 1292(d)) provides that 
agency decisions on proposed State regulatory program provisions do not 
constitute major Federal actions within the meaning of section 
102(2)(C) of the National Environmental Policy Act (42 U.S.C. 
4332(2)(C)).

[[Page 48547]]

Paperwork Reduction Act

    This rule does not contain information collection requirements that 
require approval by OMB under the Paperwork Reduction Act (44 U.S.C. 
3507 et seq.).

Regulatory Flexibility Act

    The Department of the Interior certifies that this rule will not 
have a significant economic impact on a substantial number of small 
entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). 
The State submittal, which is the subject of this rule, is based upon 
counterpart Federal regulations for which an economic analysis was 
prepared and certification made that such regulations would not have a 
significant economic effect upon a substantial number of small 
entities. In making the determination as to whether this rule would 
have a significant economic impact, the Department relied upon data and 
assumptions for the counterpart Federal regulations.

Small Business Regulatory Enforcement Fairness Act

    This rule is not a major rule under 5 U.S.C. 804(2), the Small 
Business Regulatory Enforcement Fairness Act. This rule: (a) Does not 
have an annual effect on the economy of $100 million; (b) will not 
cause a major increase in costs or prices for consumers, individual 
industries, Federal, State, or local government agencies, or geographic 
regions; and (c) does not have significant adverse effects on 
competition, employment, investment, productivity, innovation, or the 
ability of U.S.-based enterprises to compete with foreign-based 
enterprises. This determination is based upon the fact that the 
Pennsylvania submittal, which is the subject of this rule, is based 
upon counterpart Federal regulations for which an analysis was prepared 
and a determination made that the Federal regulation was not considered 
a major rule.

Unfunded Mandates

    This rule will not impose an unfunded mandate on State, local, or 
Tribal governments or the private sector of $100 million or more in any 
given year. This determination is based upon the fact that the 
Pennsylvania submittal, which is the subject of this rule, is based 
upon counterpart Federal regulations for which an analysis was prepared 
and a determination made that the Federal regulation did not impose an 
unfunded mandate.

List of Subjects in 30 CFR Part 938

    Intergovernmental relations, Surface mining, Underground mining.

    Dated: June 22, 2010.
Thomas D. Shope,
Regional Director, Appalachian Region.

0
For the reasons set out in the preamble, 30 CFR Part 938 is amended as 
set forth below:

PART 938--PENNSYLVANIA

0
1. The authority citation for Part 938 continues to read as follows:

    Authority: 30 U.S.C. 1201 et seq.


0
2. Section 938.15 is amended by adding a new entry to the table in 
chronological order by ``Date of final publication'' to read as 
follows:


Sec.  938.15  Approval of Pennsylvania regulatory program amendments.

* * * * *

----------------------------------------------------------------------------------------------------------------
                                            Date of final
  Original amendment submission date         publication                      Citation/description
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
August 1, 2008.......................  August 10, 2010........  52 P.S. 1396.4(d.2); 25 Pa. Code 86.1, 86.17(e),
                                                                 86.187(a); The Conversion Assistance Program;
                                                                 Trust Funds as an Alternative Bonding System
                                                                 (ABS); Demonstration of Sufficient Funding for
                                                                 Outstanding Land Reclamation at Primacy ABS
                                                                 Forfeiture Sites; and, Demonstration of
                                                                 Sufficient Funding for Construction of All
                                                                 Necessary Discharge Treatment Facilities at the
                                                                 ABS Forfeiture Sites.
----------------------------------------------------------------------------------------------------------------


0
3. Section 938.16 is amended by revising paragraph (h) to read as 
follows:


Sec.  938.16  Required regulatory program amendments.

* * * * *
    (h) No later than October 12, 2010, Pennsylvania must submit either 
a proposed amendment or a description of an amendment to be proposed, 
together with a timetable for adoption, to ensure that its program 
provides suitable, enforceable funding mechanisms, that are sufficient 
to guarantee coverage of the full cost of land reclamation at all sites 
originally permitted and bonded under the ABS.
* * * * *

[FR Doc. 2010-19276 Filed 8-9-10; 8:45 am]
BILLING CODE 4310-05-P