[Final Evaluation Report on State Operated Coal Regulatory Programs Office of Surface Mining Reclamation and Enforcement (Report No. S-IN-OSM-0087-2003)]
[From the U.S. Government Printing Office, www.gpo.gov]

Title: Final Evaluation Report on State Operated Coal Regulatory
       Programs Office of Surface Mining Reclamation and Enforcement
       (Report No. S-IN-OSM-0087-2003) 



Date: October 27, 2004

****************************************DISCLAIMER***************************** 
This file contains an ASCII representation of an OIG report. No attempt has been made to display graphic images or illustrations. Some tables may be included, but may not resemble those in the printed version. A printed copy of this report may be obtained by referring to the PDF file or by calling the Office of Inspector General, Division of Acquisition and Management Operations at (202) 219-3841. 
*********************************************************************************







October 27, 2004

Memorandum

To:		Director - Office of Surface Mining Reclamation and Enforcement

From:		William J. Dolan, Jr.
		Regional Audit Manager, Eastern Region

Subject:	Final Evaluation Report on State Operated Coal Regulatory Programs
Office of Surface Mining Reclamation and Enforcement (Report No. S-IN-OSM-0087-2003)

      This report presents the results of our evaluation of the Office of Surface Mining Reclamation and Enforcementï¿½s (OSM) State Operated Coal Regulatory Programs.  Our review focused on the adequacy of inspection and bond release activities, potential cost savings, and OSMï¿½s fiscal year 2002 Government Performance and Results Act (GPRA) performance measures.

      We concluded that the processes for performing surface mining inspections and bond releases were in compliance with the Surface Mining Control and Reclamation Act (SMCRA) and OSM regulations for the four states included in our evaluation.  We also identified potential cost savings and needed improvements in OSMï¿½s development of and reporting on GPRA performance measures.

      The Director of OSM responded to the draft report and its six recommendations on September 17, 2004.  Based on his response and additional information subsequently provided, we consider two recommendations resolved and implemented, two recommendations resolved but not implemented, and two recommendations unresolved. 

      The legislation, as amended, creating the Office of Inspector General, (5 U.S.C. App. 3) requires semiannual reporting to Congress on all reports issued, actions taken to implement recommendations, and recommendations that have not been implemented.
      
      Please provide a response to this report by December 15, 2004.  The response should provide information requested in Appendix 5 and should be addressed to Roger LaRouche, Assistant Inspector General for Audits, Office of Inspector General (MSï¿½5341-MIB).
      We appreciate the cooperation we received from OSM staff during our evaluation.  If you have any questions regarding this report, please contact me at (703) 487-8011.

Attachment

cc:	Assistant Secretary - Land and Minerals Management
      Audit Liaison Officer - Land and Minerals Management
      Audit Liaison Officer - Office of Surface Mining Reclamation and Enforcement
      Focus Leader - Management Control and Audit Follow-up, Office of Financial 
    Management (Electronic Copy)



EXECUTIVE SUMMARY
State Operated Coal Regulatory Programs
Office of Surface Mining



Background and Objectives
The Office of Surface Mining Reclamation and Enforcement (OSM) is the primary Federal agency for carrying out the mandates of the Surface Mining Control and Reclamation Act (SMCRA) of 1977.1  Under SMCRA, OSM is responsible for protecting society and the environment from the adverse effects of surface coal mining operations.

The regulation of surface mining is primarily achieved through grants and cooperative agreements with states and Indian Tribes.  OSM has an oversight role in the 24 states with approved state regulatory programs and funds 50 percent of these programs.  OSM also serves as the regulatory authority for coal mining and reclamation operations in 12 other states.

Our review focused on the adequacy of inspection and bond release activities, potential regulatory program cost savings, and OSMï¿½s Government Performance and Results Act (GPRA) performance measures.



Results in Brief
We concluded that the processes for performing surface mining inspections and bond releases were in compliance with SMCRA and OSM regulations for the four states included in our evaluation.  Also, we concluded that current OSM regulations may require excessive inspections of low-risk mining sites.  With respect to OSMï¿½s GPRA reporting, the measure on the amount of bond release acreage is not appropriate because it is not under the control of OSM managers and is output oriented.  In addition, we identified weaknesses in the data collection and verification processes.  We made six recommendations to the Director of the Office of Surface Mining Reclamation and Enforcement to improve the mine inspection process and GPRA reporting.



Agency Response and Office of Inspector General Reply
Based on OSMï¿½s response to our draft report, we consider two recommendations resolved and implemented, two recommendations resolved but not implemented, and two recommendations unresolved. 








TABLE OF CONTENTS




Page

Introduction 		1
	Background 		1
	Objectives and Scope 		2

Results of Evaluation 		3

Overview 		3

Inspection and Bond Release Activities 
are Adequate 		3

Potential Cost Savings 		4
	The Regulatory Environment 		4
	Matching Regulatory Resources to Risk 		5
	Identifying Low-Risk Permits 		7
	Cost Savings Analysis 		7
	Suggestions for Reducing Costs 		8

Compliance with Government Performance 
and Results Act (GPRA) 		9
	Goal Appropriateness 		9
	Data Collection Weaknesses 		9
	Lack of Data Verification 		10

Recommendations 		11

Agency Response and Office of 
Inspector General Reply 		11

Appendices

1.	Evaluation Scope and Prior Audit Coverage 		14
2.	Methodology 		15
3.	Sites Visited and Outside Contacts 		17
4.	Agency Response to Draft Report 		18
5.	Status of Audit Recommendations 		26

Figure 1 - Non-Compliance Rate 1978-2002 		5

Table 1 - Potential Cost Savings for Low-Risk Permits 		8
Abbreviations

GPRA 	Government Performance and Results Act
OMB 	Office of Management and Budget
OSM 	Office of Surface Mining Reclamation
 and Enforcement
PART 	Program Assessment Review Tool
SMCRA 	Surface Mining Control and Reclamation Act

Cover Photographs Credit
Active coal mining and reclaimed mining at the Catenary Mines, Cabin Creek, West Virginia, on September 11, 2003. OIG photo.










INTRODUCTION



Background
Under the authority of the Surface Mining Control and Reclamation Act (SMCRA) of 1977, the Office of Surface Mining Reclamation and Enforcement (OSM) is responsible for reclaiming and restoring land and water degraded by pre-SMCRA mining, minimizing off-site impacts during current mining operations (since 1977), and ensuring that land is restored to beneficial use after mining has ceased.

The regulation of surface mining is primarily carried out through grants and cooperative agreements with states.  Currently, 24 states have ï¿½primacy,ï¿½ or approved state regulatory programs, which include key elements such as permitting and bonding requirements, performance standards for mining operations, mine inspection and enforcement requirements, and procedures for designating lands as unsuitable for mining.  In primacy states, OSMï¿½s mission is one of oversight, back-up enforcement authority, and programmatic and technical assistance.  OSM grants finance 50 percent of the cost of state regulatory programs.  In the 12 states without primacy or cooperative agreements to regulate mining on Federal lands, OSM serves as the regulatory authority for coal mining and reclamation operations.

Nationwide, state and Federal program inspectors performed 88,778 inspections on 8,970 inspectable units in 2002.  During these reviews, they wrote 3,961 notices of violation and 322 cessation orders.  In addition, OSM conducted 2,297 oversight inspections in the 24 primacy states in 2002, usually with state inspectors, writing 19 notices of violation and 4 cessation orders.




Under its mission goal of environmental protection, OSM has two long-term Government Performance and Results Act (GPRA) goals related to the state regulatory program:  (1) to increase the percentage of sites free of off-site impacts and 
(2) to increase the number of acres released from Phase III bonds.2

Objectives and Scope
We performed evaluation work in three primacy states - Kentucky, Pennsylvania, and West Virginia - and Tennessee, which is a Federal program state.  Kentucky, Pennsylvania, and West Virginia were selected for review because they have the most inspectable units of the 24 primacy states.  These three states receive 57 percent of OSM regulatory grant funds and have 74 percent of all inspectable units.  Tennessee was selected because its regulatory program is managed by OSM.  Our evaluation focused on the adequacy of inspection and bond release activities, potential cost savings, and OSMï¿½s GPRA performance measures.  The evaluation was conducted between July and November of 2003 and focused primarily on surface mining regulatory activities in 2001 and 2002.  We concluded our work at the end of the survey phase because we determined that the continuation of the evaluation would not identify any additional weaknesses.  The Appendices contain detailed information on the scope and prior audit coverage, methodology, sites visited and outside contacts consulted during our evaluation.










RESULTS OF EVALUATION



Overview
We concluded that the state processes for performing surface mining inspections and bond releases were in compliance with SMCRA and OSM regulations.  However, we believe that current OSM regulations may result in unnecessary expenditures by both the states and OSM because they require excessive inspections for low-risk mining permits.

In addition, we identified weaknesses in OSMï¿½s GPRA reporting.  The measure on the amount of bond release acreage is not appropriate because it is not under the control of OSM managers and is output oriented.  Also, decision makers may not be provided accurate data because the methods used to collect off-mine site impact data for two of the states are deficient, and because OSM does not verify data provided by the states.



Inspection and Bond Release Activities are Adequate
SMCRA requires that the regulatory authority perform inspections averaging not less than one partial3 inspection per month and one complete inspection per quarter for the surface coal mining and reclamation operation covered by each permit.  OSM regulations implementing SMCRA make a distinction between requirements for active operations and inactive operations.  The inspection requirement for active operations is a minimum of four quarterly complete inspections and eight monthly partial inspections per year.  The minimum requirement at inactive operations is four complete inspections and as many partial inspections as necessary.  Abandoned mines must be inspected a minimum of once a year.

Based on our evaluation of inspection documents and discussions with surface mining inspectors and managers, we found that the surface mining inspection processes in the four states were adequate.  We reviewed permit files and/or queried state databases for 49 permits4 for fiscal years 2001 and 2002 to determine if the states performed the required number, type, and frequency of inspections.  We concluded



that the four states were in compliance with SMCRA and OSM inspection requirements.

SMCRA requires surface mining operators to post bonds to cover the cost of reclaiming the site in the event of forfeiture by the operator.  The bond is returned or released to the operator by the regulatory authority in three stages as the reclamation progresses.  Based on our evaluation and the lack of evidence of any off-site impacts from sites that have been fully reclaimed, we concluded that the bond release processes in the four states were also adequate.

Potential Cost Savings
We determined that OSM and the state regulatory authorities could be conducting excessive inspections of low-risk surface mining permits.  SMCRA and OSM regulations require a certain number of inspections on every permit, without consideration of the risk of adverse effects posed by the permit.  As a result, the four states we reviewed may be spending as much as $1.57 million each year on low-risk inspections, which could be put to better use.  State and OSM staff also provided us with several other cost saving suggestions.



The Regulatory Environment
SMCRA was passed in 1977 as the result of Congressional concerns about the adverse effects of surface mining including erosion and landslides, flooding, water pollution, fish and wildlife habitat destruction, impaired natural beauty, damaged private property, and safety hazards.  However, as noted in OSMï¿½s 2002 annual report, 25 years after the passage of SMCRA, land reclamation and environmental protection have become routine parts of the coal mining process.  The success of OSM and the state regulatory authorities in bringing the surface mining industry into compliance with SMCRA is illustrated in Figure 1 by the decrease in the rate of violations between 1978 and 2002.





Of the approximately 91,000 inspections performed in 2002 by OSM and the states, 95 percent did not result in a notice of violation or a cessation order.  In addition, almost 93 percent of surface mining permits had no off-site impacts5 in 2002.  Despite this high level of compliance, regulatory authorities have not decreased the level of inspections since the Act was first passed 25 years ago.


Matching Regulatory Resources to Risk
We believe there is potential for reducing the number of inspections at three types of low-risk operations - those that have received their Phase I and Phase II bond releases and abandoned sites.  We concur with most state and OSM personnel we spoke with who believed that 12 annual inspections were necessary on sites where active mining or reclamation was taking place.  Some of them did agree, however, that there were instances in which the current inspection requirements were higher than necessary for some sites.

At the end of Phase I, the operator has completed the backfilling, re-grading, and drainage control for a bonded area according to the reclamation plan, and the regulatory authority has inspected the work and approved the bond release.  At that time, 60 percent of bond fees can be released to the permit holder.  Most of the remaining reclamation efforts involve re-establishing vegetation on the site.  However, OSM regulations still classify post-Phase I bond release sites as active, and they must be inspected 12 times a year; the same frequency as sites where heavy equipment is operating or blasting is occurring.

We believe there is potential to reduce the number of inspections for many of these post-Phase I release sites.  This reduced number of inspections would reflect the reduced risk the regulatory authority recognized when it released 60 percent of the bond money.  We found that regulations in two of the states reviewed, Kentucky and West Virginia, do in fact categorize post-Phase I release sites as inactive, and the states only require four complete inspections per year on these sites.  No partial inspections are required.  OSM has approved these deviations as equivalent to its own regulations.

We suggest OSM consider reducing the number of inspections in this category for the other coal producing states.  For example, four complete inspections per year for permits which have received a Phase I bond release and are identified by the regulatory authority as low-risk should be adequate.

According to OSM regulations, permits with a Phase II bond release are classified as inactive and receive four complete inspections per year.  In this phase, the regulatory authorities are waiting to ensure the surface of the land is stable and vegetation is re-established before the remainder of the bond can be released.  We suggest OSM consider reducing the number of inspections in this category.  For example, two complete inspections per year for permits identified by the regulatory authority as low-risk may be adequate.

Finally, some of the permits classified as abandoned have been in that status for several years and natural vegetative processes have stabilized the surface disturbances.  Apparently, there is no OSM procedure for removing these types of sites from the inventory and OSM and State authorities continue to perform required annual inspections.  For example, this was a problem in the state of Tennessee where several OSM staff suggested cost savings could be achieved by eliminating unnecessary inspections for abandoned sites.  We suggest OSM consider eliminating the annual inspections for low-risk abandoned sites and developing procedures for removing them from the inspection inventory.

Identifying Low-Risk Permits
Currently, OSM and the state regulatory authorities do not use risk assessment because the inspection regulations treat all permits equally, without regard for their safety or environmental records.  Still, in some cases, OSM and state regulatory authorities do indirectly consider risk. OSM regulations give limited consideration to risk factors by making a distinction between active and inactive operations.  We were also told that permits with problems might be inspected more often than the minimum requirements.  In addition, OSM managers mentioned that they have performed special studies in cooperation with the states that often looked at high-risk areas, such as blasting and impoundments.6

However, this indirect consideration of risk does not focus inspection resources on those permits that pose the greatest potential threat to public safety or the environment.  OSM should consider using risk assessment to reduce the number of inspections they perform because their regulatory program statistics show that since 1998 approximately 93 percent of surface mining permits have been free of off-site impacts and 95 percent of all inspections did not result in violations.

OSM and state regulatory authorities already have the experience and expertise to identify which permits pose the least risk and, therefore, could receive fewer inspections.  In addition to operational status, OSM authorities could consider factors such as enforcement history (including off-site impacts), citizen complaints, the presence of large impoundments, water quality issues, and whether the operation involves primarily underground or surface mining.

Cost Savings Analysis
We estimated that the four states could save $1.57 million a year by reducing the number of inspections performed on low-risk Phase II permits7 from twelve to four, on low-risk Phase III permits8 from four to two, and eliminating approximately half of all inspections on Tennesseeï¿½s low-risk abandoned permits.  The methodology used to calculate cost savings is described in Appendix 2.

Table 1 - Potential Cost Savings for Low-Risk Permits


State
Number of Permits in
Percent (%) Low-Risk
Savings from Fewer Inspections
Overall Savings

Phase II
Phase III
Abandoned

Phase II
Phase III
Abandoned

Kentucky
380
87

90
0*
$  93,960

$     93,960
Pennsylvania
274
535

90
$591,840
$577,800

$1,169,640
Tennessee
35
34
174
90
$  75,600
$  36,720
$46,980**
$   159,300
West Virginia
309
141

90
0*
$152,280

$   152,280
Total Savings




$667,440
$860,760
$46,980
$1,575,180
*Phase II permits in Kentucky and West Virginia already receive only four complete inspections per year.
**To be conservative, we reduced the number by of low-risk permits by 45 percent to do the abandoned mine calculations.



To achieve these savings OSM may need to revise the definition of an active permit in its regulations to reduce the number of required inspections on low-risk permits.  For example, Phase II permits could be reclassified as inactive because active mining is completed, they have been approved for Phase I bond release, and as a result, their risk is decreased.



Suggestions for Reducing Costs
During our evaluation, we interviewed OSM and state inspectors and managers with firsthand knowledge of the regulatory program.  Based on their experience, they provided us with the following suggestions for reducing costs:

* Increasing the use of helicopter over-flights for partial inspections
* Using digital cameras to decrease film developing costs for inspection photos
* Eliminating unnecessary analysis criteria for lab samples
* Simplifying grant requirements (possibly have 3-year grants instead of 1-year)
* Implementing electronic permitting
* Decreasing OSM inspections because they duplicate state work
* Reducing travel costs by bringing OSM trainers to the states rather than transporting inspectors to out-of-state classes
* Improving quality of underground mapping

Compliance with Government Performance and Results Act (GPRA)
OSM has two regulatory program performance measures:  acres of Phase III bond releases and percentage of sites free of off-site impacts.  We concluded that the bond release measure is not appropriate because it is not under the control of OSM or state managers and, it is output rather than outcome oriented.  Although we found the off-site impacts measure is appropriate, we identified some weaknesses in the GPRA data collection and verification processes for both measures.  Decision makers may not be provided accurate performance data because the methods used to collect off-site impact data for two of the states visited are deficient and because OSM does not verify performance data provided by the states.  In addition, procedures developed to comply with January 2003 guidance from the Department should ensure that both staff and managers are held accountable for data accuracy.



Goal Appropriateness
OSMï¿½s measure for acres of Phase III bond release is not appropriate because neither OSM nor the state regulatory authorities control when these acres are released.  Mining operators actually determine the timing of bond releases through their applications to the regulatory authority.

Prior to our evaluation, OMBï¿½s 2003 PART Evaluation9 also determined that both of OSMï¿½s regulatory performance measures were output rather than outcome oriented.  OSM managers told us the bureau was working on revising these measures.  A better outcome measure would demonstrate the success of the states and OSM in ensuring that reclaimed surface mines are returned to their pre-mining use and are free of post-reclamation adverse effects.


Data Collection Weaknesses
Although we did not test OSMï¿½s GPRA data for errors, we did identify problems with the methodology used to collect the off-site impact data, which could result in inaccuracies.  OSM obtained most of its off-site impact and bond release performance data from the states.  In Pennsylvania and Kentucky, the OSM field offices review the state inspection reports to determine if a violation resulted in an off-site impact or how severe the impact was.  We believe these determinations should be made by the state inspector, who actually observes site conditions.  For instance, in the state of West Virginia, the state and OSM have a performance work plan agreement for the state to provide the off-site impact data to OSM annually.

The data collection methods used by OSM in Pennsylvania and Kentucky need to be improved to ensure accurate performance data.  In Pennsylvania, the annual performance data for off-site impacts is projected based on OSMï¿½s review of 6 months of the state inspection reportsï¿½ data.  Kentucky only reports off-site impacts resolved through enforcement action to OSM.  As a result, GPRA data may be understated if those impacts are not resolved by the end of the reporting year.

In addition, OSM did not adequately disclose in 2002 that the performance data reported for GPRA was primarily obtained from the states.  Also, OSM did not assess or identify possible limitations with the statesï¿½ data.


Lack of Data Verification
Our discussions with OSM field office personnel indicated that there were no processes in place to verify GPRA performance data in 2002.  In compliance with guidance on performance data verification received from DOI in January 2003, OSM developed a Validation and Verification Assessment Form.  This form is a checklist with 26 items to be completed by a senior OSM official.  However, the departmental guidance emphasizes that both staff and management must take accountability for data accuracy.  To ensure accuracy, performance data should be verified from the bottom-up by staff most familiar with day-to-day program activities.

OSM also needs adequate procedures to accumulate sufficient information to support the data included in the bureau GPRA report.  Field offices should maintain a list of the GPRA accomplishments reported, which would allow the states, regional and national offices to match and verify the performance data.  For example, we found that bond release acreage provided by the state offices in Pennsylvania and West Virginia did not match the acreage in the GPRA report.





RECOMMENDATIONS




We recommend that the Director:

1. Consider using risk assessment to determine if the inspection frequency on post-Phase I and Phase II bond release and abandoned permits could be reduced.

2. Consider the feasibility of implementing cost saving suggestions provided by OSM and state inspectors and mangers.

3. Revise the bond release GPRA measure to ensure it is outcome-based to the extent possible and is under the control of OSM or state managers.

4. Ensure that performance agreements with primacy states address how data will be collected and provided to OSM on all off-site impacts that are identified on state inspections.

5. Ensure there is adequate disclosure of the sources and limitations of GPRA performance data.

6. Establish procedures to ensure that accountability for the accuracy of the performance data is shared by both staff and management.

Agency Response and Office of Inspector General Reply
OSMï¿½s responses to the draft report and our replies are summarized below.  

Regarding Recommendation 1, OSM did not concur and stated that it would not be prudent to revise Federal rules to further reduce inspection frequency for inactive or abandoned sites.  The response noted; however, that there is some flexibility on the part of the individual States to reduce inspection frequency.  Also, OSM indicated that risk-based assessment is already built into the inspection process.  Finally, OSM did not believe that our forecast of cost savings will occur.

While OSM disagreed with Recommendation 1, it did not provide detailed support for its positions.  As OSM and the states performed approximately 86,000 inspections in FY 2002 that did not result in a notification of violation or a cessation order, we request that OSM submit additional support for its position that it would not be prudent to reduce inspection frequency.  We have classified the Recommendation as unresolved and request that OSM provide additional information regarding its position on this matter.  

OSM considered the cost savings suggestions in Recommendation 2 in their response, and so we classified the Recommendation as resolved and implemented.

OSM did not concur with Recommendation 3, maintaining that the bond release measure is outcome-based and shows program results as intended by GPRA.  Both the OIG and OMB have determined that the number of acres released from Phase III bonds is an output, not outcome measure.  We believe itï¿½s an output because it measures an activity rather than effect, benefits, or results.  We also note that OSM managers and staff identified the measure as problematic because they lacked control over bond releases.  We have asked OSM to reconsider its non-concurrence with our Recommendation related to this measure.

OSM did not concur with the original Recommendation 4.  Subsequently, we discussed this Recommendation with an OSM official and agreed on effective alternative action.  We revised the Recommendation based on OSMï¿½s agreement to  ensure that state performance agreements address how data will be collected and provided to OSM on all off-site impacts that are identified during state inspections.  We consider this Recommendation resolved, but not implemented until OSM makes the appropriate changes to state performance agreements.  The officials responsible for implementation are OSM Regional Directors Brent Wahlquist, Charles Sandberg, and Al Klein.  The target implementation date is June 30, 2005. 

OSM concurred with Recommendation 5. In addition, OSM provided us with an excerpt from their 2005 budget justification/2003 performance report, which disclosed that OSM obtains their performance information from the states.  We consider the Recommendation resolved and implemented.


OSM also concurred with Recommendation 6.  In response to Recommendation 6, OSM also agreed to develop procedures to ensure that data verification and validation is conducted at both staff and management levels and is identified in future documents.  These actions, when implemented, would resolve our concerns about data collection weaknesses, disclosure of data sources, and lack of data verification.  The official responsible for implementation is Ruth Stokes, Chief, Office of Planning, Analysis and Budget.  The target implementation date is June 30, 2005. 



Recommendation 1

















Recommendation 2



Recommendation 3











Recommendation 4













Recommendation 5






Recommendation 6

























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Appendix 1
Evaluation Scope and Prior Audit Coverage



Evaluation Scope 
We performed evaluation work in three primacy states--Kentucky, Pennsylvania, and West Virginia--and Tennessee, which is a Federal program state.  We conducted the evaluation between July and November of 2003 and focused primarily on surface mining regulatory activities in 2001 and 2002.

We conducted our work in accordance with the Presidentï¿½s Council on Integrity and Efficiencyï¿½s Quality Standards for Inspections.  We included such tests of records and other procedures that were considered necessary under the circumstances.  We concluded our work at the end of the survey phase because we determined that the continuation of the evaluation would not identify any additional weaknesses.  Therefore, the scope of the work was limited to those procedures performed during the survey phase.  As a result, our review of management controls and testing of state inspections was limited.

Prior Audit Coverage
During the past 10 years, neither the General Accounting Office nor the Office of Inspector General has issued any reports on the state operated coal regulatory program.


























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Appendix 2
Page 1 of 2
Methodology




During the evaluation, we obtained and reviewed inspection and bond release flowcharts and process narratives and SMCRA and OSM regulatory requirements.  In addition, we reviewed OSM budget justifications and the 2001 and 2002 OSM annual state evaluations for the four states.  We also had discussions with state and OSM inspectors and managers, as well as industry and environmental and citizensï¿½ group representatives, and observed on-site surface mining inspections in West Virginia and Tennessee.

To ensure compliance with SMCRA and OSM regulatory requirements by OSM and the primacy states, we randomly selected a small number of permits from each of the four states (49 total) and tested the inspection records to verify that the correct number, type, and frequency of inspections had been performed in 2001 and 2002.  For Phase III bond releases, we reviewed 2002 inspection records and citizen complaints, when possible, to confirm that there were no problems in the year the bond was released.

To calculate the estimated savings from reducing the number of inspections on low-risk sites we performed the following steps:

* Calculated an estimate of the cost of an inspection in the four states by dividing the 2002 budget for inspections and enforcement by the number of inspections performed in 2002.10  We used $600 as an average cost of a complete inspection, or $300 for a partial inspection.

* Assumed that 90 percent of the sites in Phase II and Phase III could be classified as low-risk.




Appendix 2
Page 2 of 2


* For Phase II units, multiplied the number of low-risk sites by $2,400 ($300 per inspection X 8 partial inspections) to determine the cost savings from reducing the number of required inspections from eight partial and four complete to just four complete.

* For Phase III units, multiplied the number of low-risk sites by $1,200 ($600 per inspection X 2 complete inspections) to determine the cost savings from reducing the number of required inspections from four complete to just two complete.

* For abandoned units, multiplied the number of low-risk sites by $600 ($600 per inspection X 1 complete inspection) to determine the cost savings from reducing the number of required inspections from one complete to zero complete inspections for low-risk abandoned permits in Tennessee. 11

We did not test the accuracy of GPRA data reported because the evaluation was concluded at the end of survey.  We did, however, interview state and OSM staff to determine if the data collection methods used were reasonable.









Appendix 3
Sites Visited and Outside Contacts



Sites Visited
We visited and/or contacted the following OSM and State Offices:


Office
	Location

OSM Headquarters Office
OSM Appalachian Regional
  Office
OSM State Office
OSM State Office
OSM State Office
OSM State Office
OSM Field Office
Kentucky State Office
Pennsylvania State Office
West Virginia State Office
Cambria District Office
Washington, DC

Pittsburgh, PA
Lexington, KY
Harrisburg, PA
Knoxville, TN
Charleston, WV
Johnstown, PA
Frankfort, KY
Harrisburg, PA
Nitro, WV
Ebensburg, PA


Outside Contacts
Kentucky Coal Association
Kentucky Resources Council
Tri-State Citizens Mining Network, Pennsylvania
Save Our Cumberland Mountains, Tennessee
Tennessee Coal Association
West Virginia Highland Conservancy
West Virginia Coal Association

























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Appendix 4














	


Appendix 5
Status of Audit Recommendations




Recommendation
Status
Action Required



2 and 5
Resolved and implemented.
No further action is required.



4 and 6
Resolved; not implemented.
No further response to the Office of Inspector General is required.  The recommendation will be referred to the Assistant Secretary for Policy, Management and Budget for tracking of implementation.



1 and 3
Unresolved
Reconsider and provide a response that states concurrence or non-concurrence with the recommendation.  If concurrence, provide a corrective action plan that includes the estimated target date and titles of officials responsible for implementation.
























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1 Public Law 95-87
2 The Phase III bond release occurs when a site has been completely reclaimed and the remaining bond has been returned to the operator.
3 A partial inspection is an on-site or aerial review of compliance with only some of the permit conditions and requirements.  A complete inspection is an on-site review of compliance with all permit conditions and requirements within the entire area disturbed or affected by the surface coal mining and reclamation operations.
4 In 2002, the four states had a total of 6,995 permits.
5 An off-site impact is anything resulting from a surface coal mining and reclamation activity or operation that causes a negative effect on people, land, water, structures, or other resources outside the permitted area.
6 Impoundments are any water, sediment, slurry, or other liquid or semi-liquid holding structures and depressions, either naturally formed or artificially built.
7 A Phase II permit has received its Phase I bond release but has not completed sufficient reclamation to receive its Phase II release.  
8 A Phase III permit has received its Phase II bond release but all the requirements of a Phase III release have not yet been met.
9 The purpose of OMBï¿½s Program Assessment Rating Tool (PART) is to systematically measure program performance and results.  PART uses the framework established in GPRA of long-term outcome goals supported by annual performance goals.
10 We assumed that two partial inspections were equal to one complete inspection.
11 To be conservative, we reduced the number by of low-risk sites by half (45 percent) to do the abandoned mine calculations.
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