Full Committee Hearing - Surface Mining Control and Reclamation Legislation

To receive testimony on S. 1701, a bill to amend the Surface Mining Control and Reclamation Act of 1977 to improve the reclamation of abandoned mines; and S. 961, a bill to amend the Surface Mining Control and Reclamation Act of 1977 to reauthorize and reform the Abandoned Mine Reclamation Program, and for other purposes.

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Witness Panel 1

Mr. Thomas Shope

Chief of Staff

Office of Fossil Energy, Department of Energy

Read statement

Witness Panel 1

Mr. Thomas Shope

STATEMENT OF
THOMAS D. SHOPE
CHIEF OF STAFF

OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT
U.S. DEPARTMENT OF THE INTERIOR

BEFORE THE

COMMITTEE ON ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE

On S. 1701 and S. 961

September 27, 2005

10:00 AM

Mister Chairman and members of the Committee, thank you for the opportunity to participate in this hearing and to discuss the important issues raised by the approaching expiration of the Office of Surface Mining Reclamation and Enforcement’s (OSM’s) authority to collect the Abandoned Mine Land (AML) fee. I would like to thank Senator Thomas for introducing his bill, S. 1701, as well as Senator Rockefeller for introducing his bill, S. 961. We applaud the efforts of these sponsors seeking to reauthorize OSM’s authority to collect the AML fee, set to expire on June 30, 2006, and to make positive changes to this important program. We look forward to working with the Senate on the important issues surrounding the collection and use of the AML fee.

As we enter the third year of this reauthorization effort, it is important to keep in mind that there are an estimated 3.5 million Americans who live less than one mile from a dangerous, high-priority abandoned mine site whose lives, health and safety are threatened daily by these sites. People are frequently injured and too often die as a result of the hazards of abandoned mine lands.

The Administration believes that the AML problem is a national problem that calls for a national solution. The Administration believes AML funding needs to be focused on the areas most damaged by this nation’s reliance on coal for industrial development and wartime production, long before the establishment of reclamation requirements in the Surface Mining Control and Reclamation Act of 1977 (SMCRA). We believe that shifting the program’s focus to historic production, which is directly related to the AML problems that currently exist in so many states, and distributing future fees based on need, offers a national solution for reducing the current, ongoing threats to the health and safety of millions of citizens living, working and recreating in our Nation’s coalfields.

The Administration supports the repayment of the unappropriated balances for certified states. However, we cannot support creating new mandatory spending programs with which to make such repayment. Moreover, while the allocation formula has improved, neither proposal would adequately expedite the cleanup of high priority lands, and therefore the Administration cannot support the allocation provisions as drafted. For the reasons noted here, we cannot support the bills as drafted; however, we would like to work with the Committee to reach an agreeable solution.

Background

Since the enactment of the SMCRA by Congress in 1977, the AML program has reclaimed thousands of dangerous sites left by abandoned coal mines, resulting in increased safety for millions of Americans. Specifically, more than 285,000 acres of abandoned coal mine sites have been reclaimed through $3.5 billion in grants to States and Tribes under the AML program. In addition, hazards associated with more than 27,000 open mine portals and shafts, 2.9 million feet of dangerous highwalls, and 16,000 acres of dangerous piles and embankments have been eliminated and the land has been reclaimed. Despite these impressive accomplishments, $3 billion in construction costs alone are needed to reclaim the high priority health and safety coal related problems remaining.

Even if we were to use all of the AML fees collected between now and June 30, 2006, the date the fee collection authority is scheduled to expire, as well as the unappropriated balance of $1.6 billion, we would still have insufficient funds to address the health and safety-related surface mining problems in part because of the fund’s current distribution formula. Even under a simple extension of the current law and the current distribution formula, it would take non-certified states an average of 47 more years to complete reclamation. In some cases, remediation could take nearly a century.

We do not believe the current allocation system will enable us to complete the job of reclamation in the most efficient way we believe Congress intended. We view the expiration of the current AML fee collection authority as an opportunity to reform the AML program and the distribution formula, and put it on track to finish the job of reclaiming abandoned coal mine problems.

SMCRA’s Fee Allocation Problem

SMCRA requires that all money collected from tonnage fees assessed against industry on current coal production ($0.35/surface mined ton; $0.15/deep mined ton; and $0.10/lignite) be deposited into one of several accounts established within the AML fund. Fifty percent (50%) of the fee income generated from current coal production in any one state is allocated to an account established for that state. Likewise, 50% of the fee income generated from current coal production on Indian lands is allocated to a separate account established for the tribe having jurisdiction over such Indian lands. The funds in these state or tribal share accounts can only be used to provide AML grant money to the state or tribe for which the account is established.

Twenty percent (20%) of the total fee income is allocated to the “Historic Production Account.” Each state or tribe is entitled to a percentage of the annual expenditure from this account in an amount equal to its percentage of the nation’s total historic coal production -- that is, coal produced prior to 1977. As is the case with state or tribal share money, each state or tribe must follow the priorities established in SMCRA in making spending decisions using money from the historic production account. However, unlike the allocation of state or tribal share money, once the state or tribe certifies that all abandoned coalmine sites have been reclaimed, it is no longer entitled to further allocations from the historic production account.

Ten percent (10%) of the total fee income is allocated to an account for use by the Department of Agriculture for administration and operation of its Rural Abandoned Mine Program (RAMP).

The remaining 20% of the total fee income is allocated to cover Federal operations, including the Federal Emergency Program, the Federal High-Priority Program, the Clean Streams Program, the Fee Compliance Program, and overall program administrative costs.

In the early years of Abandoned Mine Reclamation Program, most of the fees collected went directly to cleaning up abandoned coal mine sites. Some states and tribes with fewer abandoned coal mine sites finished their reclamation work relatively soon. However, under current law, those states and tribes are still entitled to receive half of the fees collected from coal companies operating in their states. In the early years of the program this didn’t cause a considerable problem, because the Eastern states, where 93% of the hazardous sites are located, were also the states where most of the coal was being mined and were, therefore, receiving the majority of the AML fees.

However, beginning in the 1980s, a shift occurred whereby the majority of the coal mined in this country began coming from mines in Western states. This shift revealed an inherent tension in the AML program which now allocates a large part of AML fees to states that have no abandoned coal mine sites left to clean up. By contrast, each year less and less money is being spent to reclaim the hundreds of dangerous, life-threatening sites. Currently, only 52 percent of the money is being used for the primary purpose for which it is collected – reclaiming high priority abandoned coal mine sites. That percentage will continue to decline each year unless the law is reauthorized and amended and the fundamental problem is corrected.

The Administration believes any legislation seeking to reauthorize the AML fee collection authority must reflect the following principles:

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

These principles recognize the need to strike a balance that addresses both the ongoing problems faced by states with high priority coal-related health and safety issues while not placing those states where the majority of fees are currently generated at a disadvantage. In light of those principles, we offer the following analysis of the key elements of the bills under consideration by this Committee.

Bill Analysis

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

Fee Allocations

Both S. 1701 and S. 961 would continue the current practice of allocating 50% of the fees collected in a state to that state or tribe’s “State-share” or “tribal-share” account, without regard to that state or tribe’s coal reclamation needs.

S. 1701 would add a new provision requiring that all aggregate unappropriated State-share and tribal-share balances (as of October 1, 2006) be returned to those States and Indian tribes between December 31, 2006 and December 31, 2010. The schedule and amount to be paid each year would be dependent upon the total State-share balance with larger balances requiring a longer payout period. These payments would not be subject to Congressional appropriation. While the Administration agrees with the principal of honoring the commitments made to states and tribes under the current law, and has proposed additional funding in its FY 2005 and FY 2006 budget to provide for, inter alia, the accelerated return of State-share, the Administration cannot support the proposed repayment plan including provisions for mandatory spending because it is not consistent with the Administration’s budget and program priorities.

Both S. 1701 and S. 961 would increase the percentage of funding that goes towards the historical production allocation, and thereby accelerate the cleanup of high priority sites, by discontinuing the RAMP allocation and increasing the historical production (that portion distributed based on need) allocation from 20% to 30% of the AML fee revenues.

The Administration supports the elimination of the AML allocation for the RAMP program and the reallocation of those fees for high priority needs

AML Reclamation Fee Rates/Length of Collection Period

S. 1701 modifies reclamation fee rates with stepped decreases through the life of the extension to September 30, 2016, a 10 year extension. An estimated total of $2.8 billion would be collected over the life of this proposed extension.

S. 961 maintains the fee rates currently established by law but extends the OSM’s authority to collect those fees through 2019, a 13 year extension. An estimated total of $4.4 billion would be collected over the life of this proposed extension.

As previously indicated, under the allocation structures of both proposals, at the fee rate and collection periods proposed, an insufficient amount of funds will be collected and available to finish the job of reclaiming the high priority health and safety coal sites on the current inventory.

United Mine Workers of America Combined Benefit Fund (CBF)

While providing health care benefits is not part of OSM’s mission, providing for the transfer of funds to the CBF, equivalent to the amount of interest earned on the AML fund, is an important obligation. Both S. 1701 and S. 961 honor the commitments made to the 16,500 unassigned beneficiaries of the CBF under current law by maintaining these transfers including the assignment of interest “stranded” from prior years. S. 1701 also adjusts the annual cap on transfers to the CBF from the amount of estimated AML fund interest earnings during the current fiscal year to the amount of interest actually earned during the prior fiscal year.

S. 961 expands the obligations of the interest transferred to include two additional UMWA plans. Interest would be made available for UMWA plans in the following order of priority: the CBF, the 1992 Plan, and the 1993 Plan. In addition, any unappropriated balance of the RAMP allocation would be available for these transfers, beginning with FY 2004. The Administration does not support paying benefits for additional beneficiaries, beyond the unassigned beneficiaries in the CBF, out of the AML fund.

Minimum Program Funding

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

Remining

Both bills take a positive step in reinstating remining incentives which have now expired. These incentives provide reduced revegetation responsibility periods for remining operations and an exemption from the permit block sanction for violations resulting from an unanticipated event or condition on lands eligible for remining. S. 1701 also authorizes the Secretary to adopt other remining incentives through the promulgation of regulations, thereby leveraging those funds to achieve more reclamation of abandoned mine lands and waters.

AML Reclamation Priority

Both bills impact a state’s or tribe’s autonomy to make expenditures from the AML fund on eligible lands and water for coal-related sites by altering the current priority structure. Both S. 1701 and S. 961 amend the current priority system to eliminate the general welfare component of priorities 1 and 2, leaving public health and safety as the principle elements of those priorities. S. 961 takes an additional step of requiring a scrub of the AML inventory to eliminate all general welfare entries since 1998. S. 1701 proposes adding environmental restoration of adjacent lands to the P1 category.

S. 1701 and S. 961 both require that priority 3 environmental work be undertaken only if it is incidental to a priority 1 or 2 project. Finally, S. 961 eliminates the P4 and P5 priorities, which relate to construction of public facilities and development of publicly owned land.

Both S. 1701 and S. 961 remove the existing 30 percent cap on the amount of a State’s allocation that may be used for replacement of water supplies adversely affected by past coal mining practices. Removing the cap is consistent with the goal of focusing fund expenditures on high-priority problems. The lack of potable water is one of the most serious problems resulting from past coal mining practices, particularly in Appalachia.

Acid Mine Drainage Set Aside

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

State Collection of AML Fees

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

Cost

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

Conclusion

The problems posed by mine sites that were either abandoned or inadequately reclaimed prior to the enactment of SMCRA do not lend themselves to easy, overnight solutions. To the contrary, these long-standing health and safety problems require legislation that strikes a balance by providing states and tribes with the funds needed to complete reclamation, while fulfilling the funding commitments made to states and tribes under SMCRA.

We believe the introduction of S. 1701 and S. 961 signal the continuation of constructive efforts and a productive debate to amend and reform OSM’s fee collection authority to fulfill the mandate of SMCRA to address these high priority healthy and safety concerns in a manner that directs the funds to the states and tribes where they are needed. As noted earlier, the current fee collection authority is scheduled to expire on June 30, 2006. There is much work to be done to ensure that reforming the AML fee collection authority, allocation formula, and other needed reforms become a reality. We recognize that these issues can be contentious, but we are eager to continue working through these issues with the Committee. We look forward to an open and productive dialogue to amend and reform OSM’s fee collection authority to fulfill the mandate of SMCRA to address these high priority healthy and safety concerns in a manner that directs the funds to the states and tribes where they are needed.

We thank the Committee for this opportunity to present the Administration’s views on these important legislative proposals and we look forward to working together as Congress continues consideration of these important measures.
Joe Shirley, Jr.

Mr.

Read statement

Witness Panel 1

Joe Shirley, Jr.


JOE SHIRLEY, JR.                           FRANK J. DAYISH, JR.
      President                                  Vice-President

THE NAVAJO NATION


Testimony of Joe Shirley, Jr
President of the Navajo Nation

Before the

Committee on Energy and Natural Resources Committee

United States Senate

Concerning the
Reauthorization of the Surface Mining Control and Reclamation Act of 1977

September 27, 2005

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

The Navajo Nation Position in Brief
In recognizing the importance of the reauthorization of SMCRA to the Navajo people, the Intergovernmental Relations Committee of the Navajo Nation Council approved a resolution asking Congress to:
1. Increase, or at least continue, the allocation of the reclamation fee collected annually to the Tribes under §402(g)(1)(B);
2. Promptly disburse the unappropriated AML Trust Fund balances of States and Tribes;
3. Extend the expiration date for the reclamation fee beyond September 2018;
4. Continue to allow the flexibility to allow certified States and Tribes to spend AML funds pursuant to the goals and objectives of SMCRA;
5. Allow the Navajo Nation the opportunity to apply for primacy under Title V, subject to applicable SMCRA regulations.

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

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

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

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

Primacy
Within Indian Country, there is no greater principal than that of sovereignty and self-determination. The ability of the Tribes to determine for ourselves what is best for our land and our people has been recognized repeatedly by the federal government. Congress too recognized this principal in 1977 during the consideration and passage of SMCRA. SMCRA allows States to apply for and receive the ability to regulate surface mining activities on State and Federal lands in §503. While Congress seems to have been unsure of how best to allow Tribes to apply for and receive primacy over mining activities, it directed the Secretary to consult with Indian Tribes and conduct a study to determine how best to facilitate the granting of primacy over Tribal lands. The purpose of this study was to propose legislation that would authorize Tribes to apply for and receive primacy to assume the regulatory duties over the administration and enforcement of surface mining on Indian lands in a manner to similar to that of States.
In the ensuing 28 years, the Secretary has failed to propose legislation that would allow Native Nations to assume primacy as directed by Congress. The Navajo Nation has worked extensively with the Department of Interior to facilitate this proposed legislation.
• 1982: OSM entered into a Cooperative Agreement with the Navajo, Crow, and Hopi Tribes, funding them to conduct several activities, including developing Tribal regulations on surface mining that are necessary prerequisites for assuming Tribal primacy;
• 1984: DOI provided a report to Congress which recommended Tribes be allowed to obtain approval of either partial or full regulatory programs;
• 1984: Congress passed Public Law 100-71 on Tribal Primacy authorizing the AML programs for the Navajo, Hopi, and Crow Tribes without first obtaining regulatory programs;
• 1986: The Government Accounting Office recommended to the House Committee on Interior and Insular Affairs that regulatory capabilities of Tribes to assume primacy should be assessed;
• 1987: OSM responds to the Committee with a report assessing the readiness of the three Tribes to assume primacy. OSM stated that the Navajo Nation was the most qualified Tribal entity to assume primacy for control of the surface coal mine reclamation.
• 1989: Funding for the Title V program under the Cooperative Agreement with OSM ceased in 1989, because DOI abandoned the pursuance of Tribal primacy legislation;
• 1992: Congress passed the Energy Policy Act, which amended Section 710 of SMCRA and provided for annual coal grants to four coal-owning Tribes. House Report No. 102-474(viii) p. 2313, reveals the intent behind Title XXV, §2514 of the Energy Policy Act of 1992, which amended §710 of SMCRA:
  “This section provides that the Navajo, Hopi, Northern Cheyenne, and Crow Tribes will be
eligible for funding to operate Tribal offices of surface coal mining regulation. Each of these
  Tribes have significant coal resources located on their reservations. Funding for these
offices will allow for the development of Tribal regulations and provide Tribal employment
and training in the area of mining and mineral resource regulation. The Committee intends
these offices to work cooperatively with the Office of Surface Mining Reclamation and
Enforcement of the Department of Interior in all matters relating to surface mining activities
  on Indian lands. The Committee intends this section to provide each of the Tribes with the
  ability to be more involved and gain expertise in the regulatory activities regarding surface
mining operations on Indian lands. This section is not intended to alter, expand, or diminish
the current regulatory jurisdiction of these Tribes over all lands within the exterior
boundaries of their reservations.”
• 1996: After four years, DOI finally provided limited funding to the coal owning Tribes in accordance with the Congressional amendment to §710.
The Navajo Nation has cooperated with OSM and we believe we have the necessary expertise to assume full primacy over all regulatory and inspection aspects of surface mining on the Navajo Nation. Despite having 28 years to make their recommendations, OSM has failed to introduce or advocate on behalf of Tribal primacy legislation. Congress has had the Secretary’s recommendations regarding Tribal primacy for 18 years; however, OSM is not authorized to accept applications for primacy until authorized by Congress.
Twenty-four coal mining States have obtained primacy from OSM for the authority to regulate, inspect, and enforce surface coal mining within those states since 1977. The Navajo Nation has the ability and the experience to assume authority over the regulation and enforcement of coal mining on Navajo land. While the Navajo Nation understands that there may be some jurisdictional question that require Tribes and OSM to continue to work together to address, the Navajo Nation requests simply that Congress allow Tribes the opportunity to apply for Tribal primacy and become eligible to receive 100% of the cost associated with the approved program. The Navajo Nation believes it can regulate and inspect existing mining operations in a timely and efficient manner. OSM cannot respond to inspection requests and managerial duties in an expeditious manner because the three nearest offices are in Denver, Colorado, Farmington, New Mexico, and Albuquerque, New Mexico. The Navajo Nation can respond and oversee the operations of Navajo mines quickly and responsibly, with less cost to the federal government. Therefore, we urge this Committee to adopt language that would authorize the application and granting of primacy to Native Nations.
The following is proposal language that would satisfy this requirement. We are aware that there have been several other proposals that would also allow the Navajo Nation to apply for primacy. The Navajo Nation would work with any potential sponsor to facilitate this change.
Section 710 (J)
“Notwithstanding any other provision of this section, Indian Tribes may be considered as states under Sections 503 and 504, and apply for and receive primacy under the provision of 504(e). Grants for developing, administering, and enforcing Tribal programs shall be provided in accordance with the provisions of Section 705, except that Tribes shall be eligible for 100% of the cost of developing, administering, and enforcing the approved program.”

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

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

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

Mr.

Read statement

Witness Panel 1

Evan Green

Notes for Oral Testimony to Senate Energy Committee

Good Morning Mr. Chairman. My name is Evan Green. I am the Administrator of the Abandoned Mine Land Division of the Wyoming Department of Environmental Quality. I am here to testify on behalf of the State of Wyoming on the reauthorization of Abandoned Mine Land Reclamation fee. I wish to thank Chairman Domenici and the members of the Senate Energy and Natural Resources Committee for inviting the State of Wyoming to present our views on this important issue.
I would first like to recognize the hard work by members of Congress, by the Office of Surface Mining, and by the AML states and Tribes in attempting to craft a reauthorization proposal that will be fair to all entities with an interest in the outcome of this deliberation. My thanks also go to your individual staffs for their assistance in what is a long and tedious process reflecting the passion of all those who have a stake in the outcome of these deliberations.
As to the specific bills before you today, Wyoming supports the reauthorization concepts contained in Senate Bill S.1701 offered by Senator Thomas, yet we have serious concerns with several provisions of S.961 sponsored by Senator Rockefeller.

Wyoming’s Position

The interests of the nation’s most productive coal producing state with respect to S.1701 are:
• A prompt release of Wyoming=s share of the AML Trust Fund. S.1701 provides for payout of these funds over a 5-year period and this schedule is acceptable.
• A fair share of future AML revenues returned to the State with the flexibility to use these funds to address the impacts of mineral development. S.1701 meets this criterion.
• A reduced fee structure that lowers the tax burden on Wyoming coal producers. S.1701 provides a phased fee reduction over the course of the program extension.
• The option allowing states to collect the reclamation fee.

This being said, Wyoming also requests that some areas not addressed in S.1701 be brought forward. We fear that their exclusion would have a significant negative impact on the bill’s odds of passing. Such issues include funding of the Combined Benefit Fund.
As to S.961, Wyoming cannot agree to provisions which do not address the State’s needs, which include:

• Wyoming's coal producers would pay almost $2 billion in reclamation fees over the term of the extension, but the state would continue to receive only 25-30% of collections we have received in the past. Escalating construction costs, inflation, and a lack of interest on the fund depreciate the real value of Wyoming=s share.
• SMCRA promised 50% return and that promise must be honored.
• Wyoming's trust fund of $450 million would not be returned.
• There is no commitment that Wyoming, or other states, will receive trust fund balances in future years.
• Wyoming would remain subject to the limitations on project prioritization currently in SMCRA. As a certified state, Wyoming should have the authority to decide how to spend the funds generated by our coal producers.

Wyoming’s Track Record

Wyoming’s record of administering its AML program demonstrates our commitment to the program and its application.
• Wyoming coal producers have paid $2 billion dollars in fees and have received only 25% in return.
• Wyoming has used AML funds efficiently. We maintain a 95% obligation rate. Administrative costs are less than 5%.
• Wyoming has closed 1,300 hazardous mine openings, reclaimed over 30,000 acres of disturbed land, and abated or controlled 22 mine fires. Thirty five miles of hazardous highwalls have been reduced to safer slopes, and over $115 million have been spent to mitigate and prevent coal mine subsidence.

Work Remaining
• Wyoming’s continuing inventory of historic mining districts has identified 393 additional coal sites and over 650 non-coal sites. Costs of mine fire control and responses to ongoing subsidence and emergency situations are not included in this total and are expected to continue.
• Mining activities have impacted every one of Wyoming’s 23 counties. Many communities continue to suffer the direct effects mineral extraction and the boom and bust nature of the State’s economy. Infrastructure projects such as public water systems, hospitals, health clinics and other projects addressing public health and safety will continue to be a priority.

All of the States and Tribes have continuing reclamation needs under the legitimate and original purposes of SMCRA. Wyoming believes that the reauthorization discussion should honor the Government’s commitment to return the States and Tribes share of the AML trust fund, and that all participating States and Tribes should be fairly treated by reauthorization legislation.
I refer you to the written testimony submitted by Wyoming, and thank you for the opportunity to present this information for your consideration. I would be honored to answer any questions the Committee may have.
Steve Hohmann

Mr.

Read statement

Witness Panel 1

Steve Hohmann

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

On Behalf of
The National Association of Abandoned Mine Land Programs
and
The Interstate Mining Compact Commission

Concerning Pending Legislation re the
Abandoned Mine Lands Program

Before the

Senate Energy and Natural Resources Committee

September 27, 2005
Statement of Steve Hohmann, Director, Division of Abandoned Mine Lands, Kentucky Department for Natural Resources

Good morning, Mr. Chairman. My name is Steve Hohmann and I am Director of the
Division of Abandoned Mine Lands within the Kentucky Department for Natural Resources. I am appearing here today on behalf of the National Association of Abandoned Mine Land Programs (NAAMLP) and the Interstate Mining Compact Commission (IMCC). The NAAMLP consists of 30 states and Indian tribes with a history of coal mining and coal mine related hazards. These states and tribes are responsible for 99.5% of the Nation’s coal production. All of the states and tribes within the Association administer AML programs funded and overseen by the Office of Surface Mining (OSM). I am also representing IMCC, an organization of 21 states throughout the country that together produce some 60% of the Nation’s coal as well as important noncoal minerals. Each IMCC member state has active coal mining operations as well as numerous abandoned mine lands within its borders and is responsible for regulating those operations and addressing mining-related environmental issues, including the remediation of abandoned mines.     I am pleased to appear before the Committee to discuss pending legislation that addresses the future of the Abandoned Mine Reclamation Program, which is established under Title IV of the Surface Mining Control and Reclamation Act of 1977 (SMCRA). In particular, I would like to address the views of the states and tribes regarding several reauthorization issues including the future collection of AML fees from coal producers, adequate funding for our abandoned mine land programs, and related legislative adjustments to Title IV of SMCRA.

Mr.Chairman, all parties affected by AML reauthorization agree that, during the past quarter of a century, significant and remarkable work has been accomplished pursuant to the abandoned mine lands program under SMCRA. Much of this work has been documented by the states and tribes and by OSM in various publications, especially during the past few years, including the twentieth anniversary report of OSM and a corresponding report by the states and tribes. In addition, OSM’s Abandoned Mine Land Inventory System (AMLIS) provides a fairly accurate accounting of the work undertaken by most of the states and tribes over the life of the AML program and also provides an indication of what is left to be done.

My comments today are intended to be representative of where I believe the states and tribes are coming from when we look to the future of the AML program. We strongly feel that the future of the AML program should continue to focus on the underlying principles and priorities upon which SMCRA was founded – protection of the public health and safety, environmental restoration, and economic development in the coalfields of America. Over the past 25 years, tens of thousands of acres of mined land have been reclaimed, thousands of mine openings have been closed, and safeguards for people, property and the environment have been put in place. Based on information maintained by OSM’s Division of Reclamation Support, as of June 30, 2005, the states and tribes have obligated 96% of all AML funds received. Also, based on information maintained by OSM in its Abandoned Mine Land Inventory System (AMLIS), as of June 30, 2005, $1.9 billion worth of priority 1 and 2 coal-related problems have been funded and reclaimed. Another $354 million worth of priority 3 problems have been funded or completed (many in conjunction with a priority 1 or 2 project) and $398 million worth of noncoal problems have been funded or reclaimed.

It should be noted that any monetary figures related to the amount of AML work accomplished to date are based on OSM calculations used for purposes of recording funded and completed AML projects in AMLIS. What they do not reflect, however, is the fact that a significant amount of money is spent by the states and tribes for related project and construction costs that do not find their way into the AMLIS figures based on how those numbers have been traditionally calculated by OSM. These costs (which amount to hundreds of millions of dollars for all states and tribes) include engineering, aerial surveys, realty work, inspections, and equipment – all of which are part of the normal, routine project/construction costs incurred as part of not only AML work, but of any construction-related projects. There is no dispute between OSM and the states and tribes about the legitimacy or nature of these items being a part of the true cost of AML construction projects. In fact, OSM’s own Federal Assistance Manual for AML Projects recognizes these costs as “project and related construction costs”. As a result, the actual amount of money that has been spent by the states and tribes for construction or project costs is approximately $2.9 billion – $2.6 billion of which was for coal projects and $.3 billion for noncoal projects. Also, of the $3.4 billion provided to states and tribes in Title IV monies over the years, only $500 million has been spent on true administrative costs, which reflects a modest average of 15%.

I could provide numerous success stories from around the country where the states’ and tribes’ AML programs have saved lives and significantly improved the environment. Suffice it to say that the AML Trust Fund, and the work of the states and tribes pursuant to the distribution of moneys from the Fund, have played an important role in achieving the goals and objectives set forth by Congress when SMCRA was enacted – including protecting public health and safety, enhancing the environment, providing employment, and adding to the economies of communities impacted by past coal mining. We must remember that the AML program is first and foremost designed to protect public health and safety. Even though accomplishments in the inventory are reported in acreage for the sake of consistency, the bulk of state and tribal AML projects directly correct an AML feature that threatens someone’s personal safety or welfare. In fact, OSM is currently revamping the inventory to include data on health and safety features and the number of citizens safeguarded from the hazards associated with those features. While state and tribal AML programs do complete significant projects that benefit the environment, the primary focus has been on eliminating health and safety hazards first and the inventory of completed work reflects this fact.

What the inventory also reflects, at least to some degree, is the escalating cost of addressing these problems as they continue to go unattended due to insufficient appropriations from the Fund for state and tribal AML programs. Unaddressed sites tend to get worse over time, thus increasing reclamation costs. Inflation exacerbates these costs. The longer the reclamation is postponed, the less reclamation will be accomplished. The inventory is also dynamic, which we believe was anticipated from the inception of the program. The states and tribes are finding new high priority problems each year, especially as we see many of our urban areas grow closer to what were formerly rural abandoned minesites. New sites also continually manifest themselves due to time and weather. For instance, new mine subsidence events and landslides will develop and threaten homes, highways and the health and safety of coalfield residents. This underscores the need for continual inventory updates, as well as constant vigilance to protect citizens. In addition, as several states and tribes certify that their abandoned coal mine problems have been corrected, they are authorized to address the myriad health and safety problems that attend abandoned noncoal mines. In the end, the real cost of addressing priority 1 and 2 AML coal problems likely exceeds $6 billion. The cost of remediating all coal-related AML problems, including acid mine drainage (priority 3 sites), could be 5 to 10 times this amount and far exceeds available monies.

A word about the plight of those states that have traditionally been labeled as “minimum program” states due to their minimal coal production and thus minimal AML fee collection: the evolving inventory concerns mentioned previously, as well as the increasing cost of undertaking AML projects, are both exacerbated in these states. Do not be misled by the term “minimum” when we speak of these programs, since many of these states have not been minimally impacted by pre-SMCRA mining. The minimum program states struggle to simply maintain a cost-effective AML program with their most recent annual $1.5 million allocations, much less undertake AML projects that can approach one million dollars. Without the statutorily authorized amount of $2 million mandated by Congress in the 1990 amendments to Title IV of SMCRA, these states will continue to be forced to fund or even delay high priority projects over several years. Not only is this dangerous, it is not cost-effective. As your Committee considers amendments to Title IV of SMCRA, we urge you to resolve the dilemma faced by the minimum program states and to provide meaningful and immediate relief.

When considering the economic impacts of potential AML legislation, it should also be kept in mind that, since grants were first awarded to the states and tribes for AML reclamation, over $3 billion has been infused into the local economies of the coalfields. These are the same economies that have been at least partially depressed by the same abandoned mine land problems that the program is designed to correct. In fact, those dollars spent in economically depressed parts of the country could be considered part of an investment in redevelopment of those regions. The AML program translates into jobs, additional local taxes, and an increase in personal income for the Nation’s economy. For each $1 spent on construction, $1.23 returns to the Nation’s economy. For each $1 million in construction, 48.7 jobs are created (U.S. Forest Service IMPLAN, 1992 data for non-residential and oil and gas construction). The AML expenditures over the past 25 years have returned over $4 billion to the economy and have created some 150,000 jobs. While this is significant, much more growth could occur if the entire Fund was used for its intended purposes. For example, it is estimated that $300 million will be collected from AML receipts in FY 2006 (assuming no fee adjustment). If the federal government returned all $300 million to the local economies for abandoned mine land re-construction, almost 7,000 additional jobs could be created with an additional $175 million boost to coal region economies. In this manner, money would be going to work for the communities who are experiencing the consequences of pre-law mining practices as intended by SMCRA.

The ability of the states to accomplish the needed reclamation identified in current inventories is being constrained by the low level of funding for state and tribal AML programs. Since the mid-1980's, funding for state and tribal AML grants has been declining. For instance, in the FY 2006 budget, OSM proposed a decrease for the second year in a row for state and tribal AML grants. These grants are separate from moneys allocated to the states for the Appalachian Clean Streams Initiative (ACSI) and for state-administered emergency programs. The non-ACSI, non-emergency state and tribal AML grants are the lifeblood of state and tribal AML programs and represent the primary source of funding for the majority of priority 1 and 2 AML work that is undertaken each year. Over the past two fiscal years, and now again this year, we have seen a disturbing downward trend in these critical baseline grants: $142 million in FY 2004; $136 million in FY 2005; and now a proposed amount of $129 million for FY 2006. These numbers are based on an detailed analysis of information contained in OSM’s budget justification document.

We are losing ground, Mr. Chairman, in the battle to address high priority AML sites that threaten our citizens. It is essential that this trend be reversed immediately if we are to accomplish the goals and objectives of the AML program. We therefore request that, as a part of AML reauthorization, the Committee address the matter of increasing baseline state and tribal AML grants to a level that will support vibrant and effective programs. We believe this can best be achieved by taking the AML appropriation off-budget. We also urge the Committee to provide for the expeditious return of unappropriated state and tribal share balances so that additional moneys can be directed to high priority AML hazards and problems.

The future of the AML Fund and its potential impacts on the economy, public safety, the land, our Nation’s waters and the environment will depend upon how we manage the Fund and how we adjust the current provisions of SMCRA concerning the Fund. As we draw closer to the newest expiration date of June 30, 2006, we are again beginning to see various legislative proposals for how the Fund should be handled and how SMCRA should be amended.. The states and tribes, through IMCC, the National Association of Abandoned Mine Land Programs and the Western Governors Associations have over the past several years advanced proposed amendments to SMCRA that are few in number and scope and that reflect a minimalist approach to adjusting the existing language in SMCRA and to incorporate only those changes necessary to accomplish several key objectives. They are as follows:

• To extend fee collection authority to at least 2020 to allow enough time to collect sufficient money to address the significant AML problems that remain.

• To significantly increase annual allocations to states and tribes to address AML problems. This has been one of the greatest inhibitions to progress under Title IV of SMCRA in recent years and must be addressed if we are to enhance the ability of the states and tribes to get more work done on the ground within the program’s extended time frame.

• To confirm recent Congressional intent to eliminate the Rural Abandoned Mine Program (RAMP) under Title IV and to reallocate those moneys to the historic coal production share. While these moneys would be used primarily to address high priority coal related sites, the states and tribes may coordinate their efforts with the Natural Resources Conservation Service and the local soil and water conservation districts in an attempt to address their concerns as well.

• To assure adequate funding for minimum program (under-funded) states who have consistently received less than their promised share of funding over the past several years, thereby undermining the effectiveness of their AML programs.

• To address a few other select provisions of Title IV that will enhance the overall effectiveness of the AML program, including remining incentives, state set-aside programs, handling of liens, and enhancing the ability of states to undertake water line projects.

• Finally, to address how the accumulated, unappropriated state and tribal share balances in the Fund will be handled (assuming that the interest in the Fund is no longer needed to address shortfalls in the UMW Combined Benefit Fund), while at the same time assuring that an adequate state share continues for the balance of the program to insure that all states and tribes are well-positioned and funded to address existing AML problems.

The two bills that are the subject of today’s hearing address several of these concerns and, to that extent, are an excellent starting point toward AML reauthorization. In particular, S. 1701 introduced by Senator Thomas amends Title IV by extending fee collection until 2016; provides for a phased reduction of fees over that same period of time; eliminates RAMP and moves those allocated moneys to historic coal production; provides for a guaranteed annual minimum program allocation of $2 million; increases the acid mind drainage set-aside from 10 to 20 percent; insures repayment of unappropriated state and tribal share balances and does so off-budget; eliminates the problematic lien provision in Section 408; removes the 30 percent cap on water restoration projects; and provides for various remining incentives. The bill also provides a unique opportunity for states and tribes to collect AML fees on their own, returning to the federal government its 50 percent share, and requires all amendments to the AML inventory to be approved by the Secretary. Finally the bill adjusts the priority scheme under section 403 by eliminating the “general welfare” clause and allowing priority 3 projects concerning environmental impacts to be addressed only in conjunction with a priority 1 or 2 project.

S. 961, introduced by Senator Rockefeller, addresses some of these same provisions in Title IV, but extends fee collection to 2019; maintains the AMD set aside at 10 percent; eliminates priorities 4 and 5 in section 403; allows the Secretary to initiate certification under Section 411 on his/her own volition; and provides for a scrub of the AML inventory to eliminate general welfare sites that were added after 1998. Both bills address the Combined Benefit Fund (CBF) for retired mine workers, including making the full amount of interest generated on the AML Fund available for CBF purposes and freeing up stranded interest in the AML Fund for purposes of CBF. S. 961 would also make the unappropriated RAMP share balance available for the CBF.

In general, Mr. Chairman, we can support most of the provisions in both of these bills. As a bottom line, we believe it is essential that expedited action be taken by Congress to preserve and ideally enhance this vital program. In this regard, if there are opportunities to amend these bills, we have a few suggestions. First, we do not believe it is necessary to adjust the current priority scheme in section 403 to eliminate the “general welfare” provision or priorities 4 and 5. To our knowledge, there is no evidence of abuse or inappropriate action by the states or tribes regarding our selection of worthy AML projects over the past 27 years of the program. OSM, who is responsible for conducting annual oversight of our programs, has reviewed our project selection and has consistently lauded us for the effective and efficient use of our AML funds and for the legitimacy and value of the projects we choose to undertake. However, to the extent that Congress believes that the priority system must be adjusted in some way, we believe it would then be appropriate to increase the acid mine drainage (AMD) set-aside program from10 percent to ideally 30 percent.

Second, in terms of reducing AML fees as proposed in S. 1701, we do not believe such a reduction is necessary, particularly in light of the fact that there have never been any adjustments in the fee for inflation over the past 27 years. However, if Congress believes that a reduction in the fee is necessary, it is critical to extend fee collection to at least 2020 to allow enough time to collect sufficient money to address the significant AML problems that remain in the inventory.

Finally, we trust that any moneys diverted for use by the Combined Benefit Fund (CBF) will be limited to interest on the AML Trust Fund only, and not to the principal. We believe it is essential that the principal in the Fund be maintained for its intended purposes. To do otherwise would be to subvert the entire premise of Title IV and to undermine the original intentions of SMCRA’s framers.

Mr. Chairman, it is obvious from an assessment of the current inventory of priority 1 and 2 sites that there will not be enough money in the AML Trust Fund to address all of these sites before fee collection is set to expire in June of 2006. It is even more obvious that, regardless of what the unappropriated balance in the Fund is (currently $1.8 billion) and what future fee collections will add to that balance over the next year, current Congressional appropriations for state and tribal AML program grants are woefully inadequate and are not keeping pace with our ability and desire to address the backlog of old as well as continually developing high priority AML problems. We are therefore faced with a significant challenge over the next few months — and that is to reconcile all of the various interests and concerns attending the administration of the AML program under Title IV of SMCRA in a way that assures the continuing integrity, credibility and effectiveness of this successful and meaningful program under SMCRA.


The states, through their associations, welcome the opportunity to work with your Committee, Mr. Chairman, and other affected parties to address the myriad issues that attend the future ability of the AML Fund to address the needs of coalfield citizens Our overriding concerns can be summarized as follows:

· Adequate, equitable, and stable long-term funding must be provided to the states and tribes on an annual basis that will allow the states and tribes to address the AML problems their citizens are experiencing and to implement their respective AML programs to provide the services intended by SMCRA.

· The unexpended state share balance in the AML Trust Fund should be distributed to all the states and tribes as expeditiously as possible so states and tribes can address existing AML problems before inflationary impacts result in more costly reclamation and thus less reclamation.

· Funding for the “minimum program” states must be restored to the statutorily authorized amount of not less than $2 million annually.

· Any adjustment to the AML program should not inhibit or impair remining opportunities or incentives.

· Any adjustments to the existing system of priorities under Title IV must consider the impacts to existing state set-aide programs and to current state efforts to remediate acid mine drainage.

· Any adjustments to the current certification process should not inhibit the ability of the states and tribes to address high priority noncoal projects.

· Any review or adjustments to the current AML inventory should account for past discrepancies and provide for the inclusion of legitimate new sites.

· Any adjustments to Title IV of SMCRA must be presented and considered in a judicious and productive environment that allows for all affected parties’ concerns to be heard and addressed, including coalfield residents who are directly affected by AML dangers. The restoration of these citizens’ communities is also being impacted by delays in returning the unappropriated state and tribal share balances. In this regard, it should be kept in mind that any legislative adjustments which have the result of significantly undermining state AML funding or the efficacy of state AML programs could lead state legislatures to seriously reconsider SMCRA primacy entirely – both Title IV and Title V. This very scenario was contemplated by the framers of SMCRA who structured the Act so that the Title IV AML program would serve as an incentive for states to adopt and implement Title V regulatory programs. Should the AML “carrot” be chopped up, the desire to maintain Title V primacy could be seriously re-thought by some state legislatures, particularly during difficult budget times, thus placing OSM in the undesirable position of having to run these programs at a significantly increased cost to the federal government. Hence the importance of assuring that the current state share provisions in SMCRA are held harmless in any proposed restructuring of the current allocation formula.

We appreciate the opportunity to present this testimony today, Mr. Chairman, and look forward to working with you in the future. I would be happy to answer any questions you may have or to provide follow up answers at a later time.

Witness Panel 2

Lorraine Lewis

Ms.

Read statement

Witness Panel 2

Lorraine Lewis


Testimony of Lorraine Lewis,
Executive Director, UMWA Health and Retirement Funds

Committee on Energy & Natural Resources
United States Senate

September 27, 2005

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

The Plans and the Populations They Serve.

The three plans are continuations of the health benefit plans that were first provided to coal miner retirees and their families pursuant to an agreement between the Mine Workers Union and the Federal government in 1946 when President Truman seized the nations’ coal mines to resolve a nationwide strike. Retiree health care was continued through collective bargaining in the industry from that time until passage of the Coal Act in 1992 and beyond. Historically, the Mine Workers have accepted lower wages and more modest pensions in exchange for more complete health care coverage. See Coal Commission Report (The Secretary of Labor’s Advisory Commission on United Mine Workers of America Retiree Health Benefits, November 1990) pages 32-41, 48-50. The beneficiaries of the plans reside primarily in the coal fields of Appalachia and are generally at the lower end of the economic ladder. For example, a coal miner’s widow typical of the beneficiaries of the Combined Benefit Fund receives a pension from the UMWA 1950 Pension Plan of $155 per month.

According to the results of a 2004 study conducted by Mercer Human Resources Consulting, the beneficiary population served by the UMWA Funds bears a burden of illness 35% percent greater than the average for the general Medicare population. On a series of biannual surveys conducted by the UMWA Funds, over 50% percent of the responding beneficiaries reported their health as “fair” or “poor” as distinguished from the other available categories of “excellent,” “very good,” or “good.” The GAO Report, “Retired Coal Miners Health Benefit Funds Financial Challenges Continue” of April 2002 (page 18) reached a similar conclusion.

Managed Care and Cost Containment Programs.

Over a number of years, the plans have developed aggressive, successful managed care and cost containment programs. The Mercer study reported that the cost of health care for the plans was significantly less, by seven percent, than the level to be expected for the burden of illness found in the population.

These programs include contracts with hospitals and other providers to pay at Medicare levels for the plans’ Medicare and non-Medicare eligible beneficiaries and the establishment of a network of durable medical equipment providers with bargained lower costs. Costs in the plans’ prescription drug benefit programs are managed by use of co-pay incentives to promote use of mail-order drugs, requirements for use of generics when available in the absence of medical necessity for brand name drugs, and a preferred product program encouraging use of less expensive therapeutic equivalents in important drug classes. The plans also employ expert medical management teams to ensure the most effective courses of treatment, especially for beneficiaries with a high burden of chronic illness, and these services help to reduce hospital admissions and save costs over the long term. A more complete description of the UMWA Funds managed care and cost containment programs is found in Appendix A.

ERISA Governed Health Care Plans.

All three of these health plans are employee welfare benefit plans within the meaning of the Employee Retirement Income Security Act of 1974 (“ERISA”). As ERISA fiduciaries, the Trustees do not advocate any particular legislative proposal. Since Congress first considered the Coal Industry Retiree Health Benefit Act of 1992, however, the Trustees have recognized all efforts by members of Congress to resolve the problems of continuing the promised health care for retired coal miners and their dependents as constructive, and, in the interest of the plans’ participants and beneficiaries, they have made staff available to respond to requests for information that might be relevant to these considerations.

Each of the plans is a separate employee benefit plan under ERISA, each with its own population of beneficiaries, separate funding mechanism and plan of benefits, and each with its own board of trustees. The Coal Act requires the Combined Fund Trustees, to the maximum extent feasible using available plan resources, to maintain the level of benefits provided by the predecessor plans in 1992, and the Act requires the 1992 Benefit Plan to guarantee this same level of benefits.

Pursuant to the Taft Hartley Act, an equal number of trustees are appointed by the UMWA and by employers who support the plans. While some individual trustees serve on more than one of the plans, the board of each plan is required by ERISA to use that plan’s assets in accordance with the written plan documents and exclusively for the plan’s beneficiaries. Consistent with these requirements, however, these plans derive certain advantages from receiving joint administrative services pursuant to agreements with the UMWA 1974 Pension Trust for shared office space and staff services.

Contracts with Service Providers, Department of Labor and Medicare.

The three plans also pool their bargaining power to jointly enter into contracts with a medical claims processor, a pharmacy benefit manager, a medical management vendor, and a network of cooperating health care providers. Significantly, the three plans also jointly contract with the Medicare program and with the Department of Labor’s Black Lung program to provide federally funded benefits to their beneficiaries.

Since 1990, the Funds’ health care plans’ contract with the Medicare program has taken the form of a demonstration project under which the Funds have received capitation payments in exchange for providing Medicare Part B benefits to Medicare eligible beneficiaries. Since 1997, the demonstration contract has included a risk sharing arrangement covering services delivered to eligible beneficiaries under Medicare Part A. Beginning in 2001, as part of the continuing demonstration project under contract with the Medicare program, the Funds have conducted a prescription drug demonstration under which the UMWA Funds three health plans operate a pilot program designed to help physicians improve the quality and effectiveness of prescription drug therapy provided to elderly chronically ill beneficiaries who receive their care under fee-for-service arrangements. In exchange, the Centers for Medicare and Medicaid Services (“CMS”) pays a portion of the cost of providing prescription drugs to Medicare eligible beneficiaries under the UMWA Funds’ plans of benefits. The plans have applied for renewal of the demonstration project and on September 20, 2005, CMS announced that the demonstration would be extended to September 30, 2007. While some terms remain to be worked out with CMS, the figures in Appendix B take this renewal of the prescription drug demonstration into account.

The Combined Benefit Fund.

The Coal Act directed the merger of two existing collectively bargained health benefit plans, the UMWA 1950 and 1974 Benefit Plans, to form the UMWA Combined Benefit Fund to cover only those beneficiaries already covered by those two plans on July 20, 1992.   This closed the Combined Fund population to new retirees. This population was then approximately 108,000. Reduced by mortality, this population is now approximately 37,000, composed of approximately 8,500 retired mine workers and 28,500 dependents, of whom approximately 22,000 are widows of mine workers. Combined Fund beneficiaries are elderly, their median age is 81. Their median household income, based on a survey done in 2000, was $17,076. Approximately 94% of this population is Medicare-eligible.

The Coal Act requires the Combined Fund to have seven trustees. Two are appointed by the UMWA. There are two management-appointed trustees, one appointed by the Bituminous Coal Operators Association (“BCOA”), and the other appointed by the three operators who, among those that did not sign the 1988 National Bituminous Coal Wage Agreement, have the largest number of beneficiaries assigned to them. The three remaining “neutral” trustees are appointed by the other four.

Under the Coal Act, the Social Security Administration (“SSA”) assigns Combined Fund beneficiaries to coal industry operators who signed Coal Wage Agreements with the UMWA and employed the retired miners who were, or whose widows were, primary beneficiaries of the 1950 or 1974 Benefit Plan at the time of the Coal Act’s enactment. Assigned operators are required to pay premiums for each assigned beneficiary in accordance with a premium rate set by the SSA pursuant to a formula set out in the Act. They also pay a proportionate share of death benefit premiums and of premiums for unassigned beneficiaries.

Unassigned beneficiaries.

Unassigned beneficiaries are those whose employers have gone out of business. There has been a steady shift within the Combined Fund’s population from assigned beneficiaries to unassigned beneficiaries as operators have ceased business activity, with this shift increasing due to recent steel industry bankruptcies and the Horizon Natural Resources bankruptcy. In 2005 the average unassigned population has been approximately 16,700.

To avoid as much as possible the requirement that operators pay for expenses of beneficiaries who did not work for them, the Coal Act required that the beneficiaries themselves contribute $210 million from the UMWA 1950 Pension Plan, the plan that provided most of their pensions, primarily to cover unassigned beneficiaries’ expenses during the first three plan years of the Combined Fund’s operations. Beginning October 1, 1995, the Coal Act and the corresponding 1992 amendments to the Surface Mining Control and Reclamation Act (“SMCRA”) provide for an annual transfer to the CBF of the interest earned by the Abandoned Mine Lands Reclamation Fund (“the AML Fund”) to cover unassigned expenses. Transfers occur in years when fees are required to be paid to the AML Fund. This requirement, set by the 1992 amendments to expire on September 30, 2004, has been extended, most recently to June 30, 2006 by this year’s Interior Department Appropriation Act. The SMCRA also provides the Secretary of the Interior with rulemaking authority to establish additional fee requirements beyond the expiration date sufficient to continue the program of annual transfers to the Combined Benefit Fund.

Financial difficulty and the risk of reducing benefits.

Since 1999, for two primary reasons, the Combined Fund has faced the prospect of deficits and the risk of reducing benefits. First, the premium rate increases prescribed by the Coal Act have not kept pace with the increases in health care costs, especially the costs of prescription drugs and the increase in utilization of health care as the population ages toward the end of life. Second, a long-running litigation between operators and the Social Security Administration and the Combined Fund Trustees regarding the Coal Act’s premium rate formula has reduced or threatened to reduce the premiums paid by assigned operators by ten percent. To avoid the need for reducing benefits, Congress has on three occasions enacted special appropriations from interest earned by the AML Fund to be transferred to the Combined Fund. The amounts of these appropriations were: in 1999, $68 million; in 2001, $53 million; and in 2003, $34 million.

Most recently, on August 12, 2005, the U.S. District Court for Maryland ruled in favor of the operators in a phase of the ongoing premium rate litigation, requiring the Social Security Administration to re-establish lower rates for all operators. The Trustees of the Combined Fund have appealed this decision to the Fourth Circuit.

Through July 31, 2005, the Combined Fund had received from assigned operators and related persons $72,544,000 in payment of premium differential assessments at rates set by the Social Security Commissioner pursuant to the Commissioner’s June 10, 2003, Premium Decision that has now been set aside by the Maryland District Court. Based upon cash flow projections, the Funds’ Comptroller has calculated that, assuming return of this differential premium amount in the form of credits against the monthly premium obligations of assigned operators who made premium differential payments, and assuming an extension of the Combined Fund’s Medicare Prescription Drug Demonstration Project that has recently been announced, at an estimated funding level of $73,391,417 for plan year 2006 and $65,643,862 for plan year 2007, disbursements for medical benefits, death benefits and administrative costs will exceed cash on hand and receipts from income in the month of August 2007. At that point, the Combined Fund will be in a “cash negative” position. The Combined Fund Trustees have decided that, if such a cash negative position is reached, they must reduce benefits and they would be required to advise beneficiaries of such reductions some number of months in advance of such action.

Appendix B sets out projected total population and unassigned population, as well as projected year ending fund balances and annual deficits in the Combined Fund.

The 1992 Benefit Plan.

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

The median age of the 1992 Plans’ beneficiary population is 72. This population’s median household income, based on a 2000 survey, was $19,800, and approximately 80% of the population is eligible for Medicare.

Orphan retirees and their health care costs.

The 1992 Plan is a continuation, mandated by statute, of the industry’s undertaking to provide health benefits to retirees known as “orphans,” those whose industry employers have gone out of business leaving the retiree and dependent family members without an employer to sponsor their benefits. They correspond to the unassigned beneficiaries in the Combined Fund.

Funding of 1992 Plan is through “per-beneficiary premiums” required to be paid by last signatory employers to whom retiree and beneficiaries may be attributed and by “prefunding premiums” paid by 1988 Agreement operators. Because most of the Plan’s population cannot be attributed to any employer that is still in business, most of the Plan’s expenses are paid by the operators who pay prefunding premiums. The prefunding premium cost is therefore equivalent to the cost of orphan retirees and beneficiaries in the 1992 Plan, and this is a cost paid by operators who did not employ any of the orphan miners in question. The amount of prefunding premium paid by each 1988 Agreement operator is determined by the number of retiree beneficiaries the operator has covered by its single employer health plan mandated to be continued by section 9711 of the Coal Act. (Hence the term “9711 plan.”) In addition, operators who provide single employer 9711 plans must post security with the 1992 Plan to pay for three years of benefits in case the 1992 Plan must take over their obligation to provide benefits.

The 1992 Plan’s population was expected to grow as normal attrition of some industry employers occurred. Unfortunately the orphan population of the 1992 Plan has jumped up dramatically since 2002, because of the major steel industry bankruptcies and the Horizon Natural Resources bankruptcy. For 2002, the 1992 Plan’s average population over the year was 6,432; for 2005 the Plan’s average population is 11,392. If there are no more substantial shifts of retiree populations to the 1992 Plan from failing operators, the population is expected to gradually decline through mortality. The prefunding premium cost, the cost of orphan retiree health care, however, is expected to climb sharply because the security bond posted by a substantial failing steel industry operator will have been exhausted and because of the persistent rise in health care costs, especially the costs of prescription drugs.   Thus the orphan retiree health cost of the 1992 Plan is expected to rise from around $16 million this year to $26 million next year, reach approximately $60 million in the last three years of this decade and continue to rise thereafter.

Appendix B sets out the current and projected population and the current and projected costs of providing benefits to orphan in the 1992 Plan.

The 1993 Benefit Plan.

Through collective bargaining the UMWA and BCOA have created the UMWA 1993 Benefit Plan to continue the industry’s undertaking to provide health care to orphan retirees, covering those who retired after the September 30, 1994 cut-off date for coverage under the 1992 Benefit Plan. The plan has strict rules requiring that, before retirees and their dependents are eligible, their last signatory employer must have had an obligation to contribute to the 1993 Plan and actually have contributed. Funding for the 1993 Plan has come from employers’ contributions based on hours worked in the mines, currently $0.50 per hour, and also from annual $2000 premiums, and in 2005 a separate one time $3000 premium.

The 1993 Plan’s population has a median age of 59 and had a median household income of $19,056, based on a survey in 2000. Approximately 38% of this population is Medicare eligible.

Escalating population and costs; the risk of reducing benefits.

Like the 1992 Plan, a moderate rate of growth in the population of the 1993 Plan was expected, and like the 1992 Plan, this expectation has been upset by recent bankruptcies in the steel industry and especially by the Horizon Natural Resources bankruptcy, causing the population to double, from less than 3,500 to approximately 7,000 in the last two years.

Because of this increased population and the increased health care costs, the 1993 Plan faces the risk of reducing benefits. The Plan’s governing documents provide that, if at specified periodic valuations the value of the Plan’s net assets available for plan benefits fall below $2 million, the Trustees are required to reduce benefits sufficiently to achieve solvency by the end of the current Coal Wage Agreement, December 31, 2006. Current actuarial projections indicate that this threshold may be reached in early 2006.

Appendix B sets out the projected population and the projected year ending balances and annual deficits for the 1993 Plan.

Oversight.

As ERISA plans, all three of the plans must be administered by boards of trustees who must comply with the fiduciary requirements of ERISA, including avoiding prohibited transactions, prudent asset management and administration for the exclusive benefit of participants and beneficiaries. Trustees may be held personally liable for any breaches of these duties. Each plan must submit an annual report to the Secretary of Labor (Form 5500), that must include the report of an independent auditor on the annual financial statement of the plan.

In addition to the requirement of an annual audited financial report, the three plans must submit an annual cost report to the Medicare program under the Medicare contract, and this report is also subject to an annual audit.

The Combined Fund is subject to an annual review by its independent auditors of its transactions with the Office of Surface Mining regarding transfers from the AML Fund, and this transfer program has also been audited by the Department of Interior’s Inspector General.

Finally, because of continuing interest by the Congress, the Government Accountability Office has conducted reviews on several occasions, most recently in 2002.

I would be pleased to respond to any questions the members may have.
Charles Gauvin

Mr.

Read statement

Witness Panel 2

Charles Gauvin

Statement of Charles Gauvin
President and CEO
Trout Unlimited
On
S. 1701 and S. 961
Before
Committee on Energy and Natural Resources
U.S. Senate
September 27, 2005

Mr. Chairman, Members of the Committee, I appreciate the opportunity to appear today to discuss two bills currently before the Committee, S. 1701 and S. 961, both of which would reauthorize and amend the Abandoned Mine Reclamation Fund (AML Fund) created by the Surface Mining Control and Reclamation Act (SMCRA). TU commends you for holding the hearing in order to move forward on reauthorizing this important program, which is set to expire in 2006.

TU is a national fisheries conservation group dedicated to the protection and restoration of our nation’s trout and salmon resources, and the watersheds that sustain those resources. TU has over 144,000 members in more than 400 chapters in 35 states. TU members generally are trout and salmon anglers who voluntarily contribute substantial amounts of their personal time and resources to aquatic habitat protection and restoration efforts. TU chapters invested over 460,000 hours of volunteer time into trout and salmon conservation in 2004.

Over the past several years, TU volunteers and staff have worked with a wide variety of federal, state, and local partners to restore watersheds degraded by abandoned mines and other past management practices. These efforts have taken place in many states including New York, Pennsylvania, Idaho, Montana, New Mexico, and Vermont. Given our experience, one point is crystal clear: long term reauthorization of, and increased funding for the AML fund will provide necessary additional money and resources for watershed restoration. Funding these efforts will have a positive impact on public health and safety as well as the environment.

Enacted into law in 1977, SMCRA gives the Office of Surface Mining (OSM) authority to regulate coal mining and to collect fees from coal companies to create the AML Fund. The funds are used by the states and OSM to reclaim coal mining sites. The law protects our Nation’s people and resources by improving the health of watersheds that are affected by current and past mining practices. Completed reclamation projects conducted as a result of the law have improved the quality of tens of thousands of people’s lives, restored water quality, and improved fishing and hunting.

Reauthorization of the AML Fund is about fulfilling a promise made to protect Americans living in the coal fields from serious safety and environmental hazards. After implementing the program for 27 years, an estimated 7,000 mine sites remain unreclaimed. According to OSM, about 3.5 million people live less than one mile from
abandoned coal mines. Addressing the public safety risks posed by unreclaimed high walls, burning slag piles, and gaping holes in the ground has been, and should remain, the highest priority of the program.

In addressing reclamation of abandoned coal mines, ecological restoration should not be pitted against public health. They are largely overlapping. Both improve the quality of life and both improve the health of public watersheds. TU and its members know about water and watersheds, and we are here today because too many of the nation’s streams run orange because of pollution from abandoned mines. The states and OSM estimate that thousands of miles of Appalachian mountain streams are damaged by acid mine drainage from abandoned coal mines. It is one of the nation’s largest remaining water quality problems.

The work we are doing benefits more than just trout streams. Because trout are the keystone predator in ecosystems, they are a critical barometer of water quality and overall ecological health. Bottom line, if the water is clean enough for trout, the water is clean enough for people.

The good news is that, although the problem is vast, practical solutions exist to fix it. TU, OSM and states are working together to address acid mine drainage problems. But the job is far from finished. We urge the Committee to move expeditiously to enact the reauthorization including increased funds for restoration of watersheds damaged by pollution from abandoned coal mines.

Acid drainage flowing from abandoned coal mines has left some streams devoid of any life. EPA has singled out drainage from abandoned coal mines as the number one water quality problem in the Appalachian mountain region. Much of the problem originated years ago from coal production that helped build America and fueled our war efforts during World Wars I and II.

Acid drainage is water containing acidity, iron, manganese, aluminum, and other metals. It is caused by exposing coal and bedrock high in pyrite (iron-sulfide) to oxygen and moisture as a result of surface or underground mining operations. If produced in sufficient quantity, iron hydroxide and sulfuric acid may contaminate surface and groundwater.

In an effort to demonstrate how practical solutions could be applied to an otherwise daunting task, TU, OSM, Pennsylvania, and private funders have spent more than $2 million to date cleaning up acid mine drainage pollution in the lower part of the Kettle Creek watershed in north-central Pennsylvania. We estimate that an additional $8 million will be needed to complete the acid mine drainage cleanup on Kettle Creek.

TU and others are now looking to replicate our success in the larger watershed into which Kettle Creek flows, the West Branch of the Susquehanna River, possibly the most polluted large river in America. Approximately 150 miles of the mainstem and more than 500 miles of coldwater tributaries have been rendered essentially lifeless due
to toxic concentrations of metals and acidity from acid mine drainage. Overall, 72 percent of the 7,000 square-mile West Branch basin is affected by acid mine drainage—the source for 96 percent of the pollution in the West Branch watershed.

The West Branch restoration work is modeled on the methods that TU and its partners have developed on the Kettle Creek watershed and the benefits of eliminating acid mine drainage in the area are numerous. For example, the potential for fishery restoration on all of the degraded streams is phenomenal because most of them are potential trout streams.

Other benefits from abandoned mine restoration include increased property values and quality of life for those living in the area, improved hunting opportunities, and job creation. Pennsylvania estimates that for every million dollars spent on abandoned mine land restoration construction contracts, about 27 people are employed directly or indirectly. Similarly, in testimony submitted to the Committee last year, the State of New Mexico noted that AML projects are a source of jobs for New Mexicans and stated that, “all construction work is performed by private contractors, almost all of whom are based in New Mexico.”

In sum, on the West Branch, as in many other places, the technology to fix the problem is available. States, communities, and conservation groups have the will. All that is needed is a stable source of funding to contribute towards the overall cost.

The AML Fund currently provides some limited but extremely useful funds for cleaning up polluted water. More and stable funding is needed. TU is familiar with two ways in which the AML Fund provides resources for cleanups:
•OSM’s Clean Streams Initiative, currently funded at $10 million annually, derived from the federal share of the AML Fund, and
•Decisions made by individual states to allocate some of the funding they receive through the AML Fund to cleanup programs.

Started in 1994, the Clean Streams Initiative focuses on eliminating abandoned coal mine drainage and aspires to be a true citizen-government-industry partnership bringing together a unique combination of manpower, funding, and expertise. The initiative has so far funded 77 projects in 10 states, combining the skills of university researchers, coal industry figures, citizen groups, the business community, conservationists, and local, state, and federal representatives. The initiative has proven to be a particularly effective method of empowering volunteer-led restoration work.

The science and effectiveness of the cleanups paid for, in part, by the AML Fund, are improving every year. Methods of water treatment used to eliminate acid drainage from abandoned underground mines can be grouped into two types. The most common method is chemical treatment. Called active treatment because it requires constant maintenance, this method usually involves neutralizing acid-polluted water with hydrated lime or crushed limestone. This treatment reduces acidity and significantly decreases iron and other metals. However, it is expensive to construct and operate and is considered a temporary measure because the acid drainage problem has not been permanently eliminated.

The second treatment method is called biological, or passive control. This technology involves the construction of a treatment system that is permanent and requires little or no maintenance. Passive control measures involve the use of anoxic drains, limestone rock channels, alkaline recharge of ground water, and diversion of drainage through man-made wetlands or other settling structures. Passive treatment systems are relatively inexpensive to construct and have been very successful on small discharges of acid drainage, such as those on the Kettle Creek watershed.

TU has worked with state agencies and OSM on cleanup projects in a number of eastern states. Highlights include the following:

Kettle Creek, Pennsylvania

The AML Fund has provided several hundred thousand dollars to restore Kettle Creek. TU and its partners have made significant progress during the past five years in efforts to abate acid mine drainage in the lower Kettle Creek watershed. Our Lower Kettle Creek Restoration Plan provides the overall blueprint that guides the assessment and remediation activities, and this plan is being supplemented with data from airborne remote sensing surveys conducted by the U.S. Department of Energy National Energy Technology Laboratory. These surveys used thermal infrared and helicopter-mounted electromagnetic technologies to identify the acid mine drainage problems and to target key areas for remediation work.

Two on-the-ground projects have already been completed as a direct result of the Lower Kettle Creek Restoration Plan and several more are currently underway. The ultimate goal of our project work is to reclaim 17 miles of trout stream. The completed projects will restore native brook trout populations, create a new recreational fishery, expand the local economy that depends on outdoor recreation and tourism, improve water quality in local communities, and contribute to the overall restoration of the West Branch of the Susquehanna as it flows downstream to the Chesapeake Bay.

Coal Creek, Tennessee

In east Tennessee, TU’s Clinch River chapter is working closely with the community of Briceville to clean up acid mine drainage in Coal Creek, a tributary of the Clinch River. After addressing chronic flooding and stream bank erosion problems that plagued the community for decades, the chapter is turning its attention toward the creation of four new wetlands near abandoned mine sites. The wetlands will filter out the majority of pollutants, including acid and heavy metals, such as iron, which currently pollute Coal Creek. But in order to initiate construction, our local volunteers are depending upon funding from the Clean Streams Initiative.

Rock Creek, Kentucky

In Kentucky, TU is working with OSM, state water and fisheries agencies, and the U.S. Forest Service to restore Rock Creek in the Daniel Boone National Forest. Although parts of the creek are healthy and provide fine trout fishing, some stretches are badly damaged by acid mine drainage from abandoned coal mines. TU and its partner agencies are removing coal mine refuse from the banks of one stretch of the creek, and are implementing passive liming and treatment of other acid-impaired stretches, in a large-scale effort to restore this key tributary of the Cumberland River.

As you consider the two bills, we recommend the following:

Retain flexibility in existing law’s priorities. S. 961 eliminates the “general welfare” provision of both priories 1 and 2. TU has no intention of advocating any changes in the public health and safety priorities of the existing law. However, the large need for cleaning up water pollution caused by abandoned coal mines, and the great benefits to communities and states derived there from, leads TU to be a strong advocate of retaining the current priorities.

Although S. 1701 also eliminates the “general welfare” provision of priorities 1 and 2, it does allow land, water and environmental restoration on land that is adjacent to a priority 1 site to be treated as priority 1. Moreover, we recognize and appreciate the fact that S. 1701 increases the allowable percentage, from 10% to 20%, of funds that states can set aside for acid mine drainage. While this language definitely helps, we prefer to retain the “general welfare” provisions in priorities 1 and 2 so that states can retain the full range of existing options in determining how to best prioritize the needs of communities.

S. 961 requires the Secretary to review all amendments to the AML inventory made after 1998 and remove sites that rely upon the general welfare standard. We disagree with this provision and, as mentioned above, recommend that general welfare projects in priority 1 and priority 2 continue to be funded.

Extend the authorization to 25 years. Everyone agrees that we need to “finish the job” of making communities safer and cleaner. S. 1701 would only ensure the viability of the AML Fund for 10 years and S. 961 extends the authority for 13 years. Most experts agree that given the complicated nature of the remaining challenges, a horizon of 25 years is more likely needed to complete the tasks before us. Reauthorization legislation should extend the life of the fund for the same time frame.

Maintain existing fee levels. S. 1701 reduces the existing fee levels which we feel is inappropriate given the overarching objective of putting money on the ground to complete projects. We recognize and appreciate that S. 1701 contains fee reductions that are less than those contained in the bill introduced by Senator Thomas during the 108th Congress. However, we respectfully request that the Committee retain the current fee structure as S. 961 does.

Provide mandatory funding and increase available funding for the Clean Streams Initiative. S. 1701 requires that OSM provide the existing balance of the state-share and tribal-share allocations to the states and tribes through mandatory payments not subject to the appropriations process. We agree with the concept of making AML funding mandatory because if our goal is to “finish the job,” we should get on with it. Currently, more than $6 billion is needed to fix high priority public health hazards associated with abandoned coal mines. To clean up water and watersheds, a total of $15 billion is needed. Despite this need, more than $1.5 billion that has been collected remains unspent. Therefore, TU encourages the Committee to make the entire AML Fund off-budget and not subject to the annual appropriations process.

Moreover, we recommend that you dedicate $25 million annually from the off-budget Reclamation Fund to the Clean Streams Initiative. Specifically, we urge you to gradually increase funding for the Clean Streams Initiative from its current $10 million level up to $25 million annually over the 25 year authorization.

Consider authorizing a similar reclamation fund for cleaning up abandoned hardrock mine pollution in the western United States. Although a few western states, such as Wyoming, use some of their AML Fund allocations for non-coal mine abandoned hardrock sites, the need for restoration of these sites far outstrips available resources. In the West, it is not a matter of finishing the job of cleaning up abandoned hardrock mining sites, it is imperative to get started.

It is estimated that more than 500,000 abandoned hardrock mine sites litter the western landscape. According to EPA, abandoned mines affect the health of 40% of western headwater streams. This pollution threatens coldwater fisheries, contaminates drinking water for millions living downstream, and jeopardizes local economies. We recommend that the Committee take a serious look at the problem and start developing a legislative solution to establish a fund for cleaning up abandoned hardrock mines.

As a first step, we recommend you authorize and fund a west-wide inventory of abandoned hardrock mines. Upon completion of such an inventory, interested parties will be better able to assess and prioritize cleanup projects.

To conclude, thank you for your leadership and commitment to reaching consensus on a long-term reauthorization of the AML Fund. TU pledges to work with the Committee to help craft appropriate amendments and move a bill to the Senate floor expeditiously.
David Finkenbinder

Mr.

Read statement

Witness Panel 2

David Finkenbinder

Testimony of
David Finkenbinder
Vice President Congressional Affairs
National Mining Association
On Behalf of the National Mining Association
Before the
Committee on Energy and Natural Resources
Of the
U.S. Senate
September 26, 2005
Mr. Chairman, members of the Committee, on behalf of the National Mining Association,
I want to express our appreciation for this opportunity to comment on the administration and
performance of the Abandoned Mined Land (AML) Program established under the Surface
Mining Control and Reclamation Act of 1977.
The AML Program was established with the principal objective to restore unreclaimed
lands mined for coal prior to August 3, 1977 that pose threats to the public health and safety.
The AML fee paid on each ton of coal produced and sold to fund the program was authorized
initially until 1992, but has been extended twice. With the current authorization scheduled to
expire on June 30, 2006, there will undoubtedly be many viewpoints expressed today about the
remaining requirements and the need to extend the fee to support those requirements. In this
regard, Mr. Chairman, NMA has no position on the Coal Act or issues surrounding the
reauthorization of the AML, but offers some observations about the history of the program, and
presents various considerations to assist you and your colleagues in making public policy
decisions about the program’s future.
Revenues and Expenditures
Since 1978, the coal industry has contributed more than $7.5 billion to the AML Fund.
The Office of Surface Mining (OSM) reports that as of September 30, 2002 about $1.62 billion
of the high priority (Priority 1 & 2) abandoned coal mined lands inventory has been reclaimed.
Another $320 million has been used to reclaim priority 3 coal sites, and $285 million for noncoal
projects. Appropriations from the AML Fund for this period totaled about $5.7 billion. In
other words, less than forty per cent of all the money appropriated is finding its way to on-theground
reclamation of the inventory of coal and non-coal projects. Placed in the context of the
high priority coal inventory—the principal mission of the program—less than thirty cents of
every dollar appropriated from the AML Fund reaches that objective.
Progress and Expectations
In 1986, the National Academy of Sciences (NAS) performed a mid-term review of the
AML program. See National Academy of Sciences, Abandoned Mined Lands: A Mid-Course
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Review of the National Reclamation Program for Coal (1986). At that time, the NAS projected
that by the expiration of the AML fee in 1992, total revenue for the program would reach about
$3.3 billion. As it turns out, the projection was close to the mark with actual receipts reaching
slightly more than $3.2 billion. NAS also found at that time that most States expressed
confidence that they would complete reclamation of their priority 1 and 2 inventory of projects
by 1992. Id. at 65. It was this confidence that resulted in the States’ view that in the meantime
they should reclaim lower priorities even before they complete the two top priorities. Id. This
approach apparently had some merit since as NAS projected all the states, except six, would
have enough funds from their state share alone to reclaim priority 1 and 2 projects with an
estimated cost of about $811 million. Moreover, the total state share alone appeared to be
adequate to reclaim all priorities at an estimated cost of about $1.7 billion. Id. at 154-55. In
short, at the time of the mid-term review of the program more than ample funds appeared to be
available to address not only the high priority coal inventory, but the other priorities as well.
By 1992, $870 million of the high priority coal inventory had been reclaimed. But now
the target had moved, and OSM reported that the remaining high priority coal inventory was $2.6
billion—almost three times the inventory reported in 1986. Since then, it appears that things
have actually regressed. Since 1998, it appears that for each dollar of high priority inventory
reclaimed, two dollars are added as unfunded high priorities. Now the high priority coal
inventory is almost $3 billion. And, after $5.7 billion in appropriations from the AML Fund, only
$1.62 billion of the high priority coal inventory has been reclaimed. Continuing business as usual
would mean that it will require at least $9 billion to reclaim the current $3 billion high priority
coal inventory.
Structural Impediments to Success
Twenty five years, two AML fee extensions, and almost $6 billion later, you will hear
that the “job is not finished.” You will also hear various viewpoints on why that is the case. We
believe the answer largely lies with structural impediments in the current law related to grant
formulas, competing program demands that all conspire to thwart cost-effective achievement of
the program’s principal purpose, and revenue allocation.
The AML Program has been called upon to serve many different demands. It has also
been designed to serve those demands through multiple delivery mechanisms. We have Federal
programs and State programs. And, within each of those we have special programs, such as the
Rural Abandoned Mine Program, Emergency Programs, Appalachian Clean Streams Initiatives,
various State Set-Aside Programs, and Technology Development and Transfer Programs. All of
these programs compete for funds under various priorities and funding formulas. The first two
priorities which comprise the program’s core objective relate to restoring abandoned coal mined
lands that pose dangers to the public health and safety. There is no overarching requirement that
funds be directed toward the high priority coal inventory. Indeed, it appears that these other
programs operate as exit ramps to divert funds away from the high priority inventory. And, all
of these programs carry with them extensive federal and state administrative costs.
According to the OSM white paper, "The Job's Not Finished", around 1989 the
3
demographics of coal production changed and an imbalance developed between fund availability
and needs. As a result, the statutory allocation formula for AML revenue precludes the use of a
substantial portion of the industry’s AML fees for the high priority coal inventory. Half of all
fees paid on coal production in a state are earmarked for AML use in that state regardless of the
remaining high priority coal AML needs. During the early years of the program, this allocation
structure posed little consequence for assuring that AML fees were available for high priority
coal inventory. As coal production increased in the West with a relatively smaller coal AML
inventory, a larger proportion of AML fee revenue became unavailable for high priority coal
projects in other regions with a larger share of the high priority needs. OSM’s recent white paper
explains the consequences of this imbalance. For the first 15 years of the program, 95% of all
state grants were used for high priority coal projects. However, over the past 10 years, only 64%
have been used for the program’s core objective. And, this percentage will continue to decline
absent changes to the law.
Considerations Going Forward
By the time the current fee authorization expires next year, the coal industry will have
paid $8 billion in AML fees. Simple math tells us that this sum should have been sufficient to
complete both the already reclaimed and current high priority coal inventory with $3 billion to
spare. Will it require $9 billion—perhaps more—to complete the current high priority coal
inventory? The answer will depend upon choices made about whether and how the program is
reauthorized. We set forth below several of the questions faced in dealing with the current
program structure and requirements. Not surprisingly, each constituency will have different
answers and preferences.
1. Multiple Delivery Mechanisms and Programs
Do we need—can we afford—the multiple delivery mechanisms and subprograms that
divert funds away from the high priority coal inventory? RAMP is a prime example of this
diversion. The program competes with state needs and has not been funded since 1996.
Nonetheless, 10% of all AML fees paid annually are still allocated to RAMP which as of last
year had accumulated $331 million which cannot be used for other purposes unless expressly
reprogrammed by Congress. Emergency Programs also present a duplicative system with some
states assuming the responsibility, while 9 states—two of which have the most emergencies—
declining to assume that responsibility as part of their approved AML programs. States still use
a provision of the law added in 1990 that allows funds to be set-aside in anticipation of the fee
expiring in 1995. There is something wrong with the concept of setting aside industry AML fees
for future use, and then calling for the industry to keep paying because the job is not yet finished.
2. Fund Allocation and Distribution
Should the current allocation and distribution formula be replaced with a system that
directs AML fee revenues to areas with the greatest need in terms of remaining high priority coal
inventory? OSM’s white paper indicates that the historic production (pre-1977) is a close
surrogate for where the high priority coal inventory sites are located. If such a change is made,
4
what happens to the current allocations? States that have completed their high priority coal
inventory may feel that they should receive some portion or all of the unexpended balances in
their accounts. Distribution of those amounts will affect funding requirements. For example, the
unexpended state share for the certified states comprises 30% of the unappropriated AML
balance. The allocation and distribution issues present the most fundamental question: Does
coal AML remain a national problem that still requires of a national solution? If so, should the
solution be administered in a manner more fitting and efficient for a national problem?
3. Adhering to Priorities
What good are priorities if there are so many and there is not an overarching requirement
to abide by them? Presently, the law sets out no less than five priorities ranging from the
protection of the public health and safety from extreme dangers posed by abandoned coal mined
lands to the development of land. There is no requirement that AML fees be used first for the top
priority before moving on to lower priorities. In at least two states, the amount of AML fees used
to reclaim priority 3 areas either approximate or exceed the amounts spent to reclaim priority 1
and 2 areas. In each case, the amounts spent in these states for priority 3 projects would have
been more than enough to finish their current unreclaimed priority 1 and 2 inventories.
4. The Inventory
Does the high priority coal inventory serve as a benchmark for measuring progress and
success? Each time it appears the goal becomes closer, the goal line is moved further away. In
1998, the remaining high priority coal inventory was less than $2.5 billion. In 1999, the
inventory swelled by an additional $3 billion as a result of a state—which already accounted for
one-third of the inventory—moving up lower priorities to the priority 1 and 2 inventory. But
even when that inexplicable swelling is removed, the inventory appears to grow by about $2 for
every $1 dollar of high priority coal reclamation. To some, the inventory has transformed itself
from a management tool to a funding gimmick in order to establish the AML program as a
permanent fixture. Some suggest that the inventory should be frozen to avoid this temptation
and provide focus and discipline for future expenditures.
5. Administrative Costs
How much do we need to spend in order to spend? A General Accounting Office (GAO)
report found that between 1985-1990 $360 million, or 28%, of the $1.3 billion spent during that
period was used for Federal and State administrative expenses. General Accounting Office,
Surface Mining: Management of the Abandoned Mine Land Fund (July 1991). But even this
amount may understate the percentage of funds used for administration since, as GAO noted,
some States incorporate administrative expenses into their construction grants that are counted as
reclamation project costs. As for Federal expenses, GAO reported that during that period OSM
spent $137 million for administration while using about $100 million for reclamation projects.
We are not aware of any single source of information tracking the amount of AML fees used for
administration. But piecing together various sources related to AML program performance
suggests that over $1 billion has been spent to administer the program.
5
6. The AML Fee
What should the levels of the fee be and how much more can or should the coal industry
pay into the AML fund? The job may not be finished, but the lack of AML fees is not the
reason.
Mr. Chairman, thank you again for the opportunity to present NMA's observations on the
history of the AML program. We hope the various considerations will assist you and your
Subcommittee as you address the public policy decisions regarding the coal AML program.
Daniel Kane

Mr.

Read statement

Witness Panel 2

Daniel Kane

Statement of Daniel J. Kane,
International Secretary-Treasurer
United Mine Workers of America
before the
Committee on Energy and Natural Resources
United States Senate
Re-Authorizing the
Abandoned Mine Lands Program
September 27, 2005
Mr. Chairman, members of the Committee, I am Daniel J. Kane, International Secretary-
Treasurer of the United Mine Workers of America (UMWA). The UMWA is a labor union that
has represented the interests of coal miners and other workers in the United States and Canada
for more than 115 years. We appreciate the opportunity to appear before the Committee to
discuss the Abandoned Mine Land Reclamation Fund (AML Fund) and its vital relationship to
the UMWA Health Funds. Representing people who live and work in the nation’s coal fields,
the UMWA has a strong interest in both the reclamation of abandoned mine lands and the
preservation of health care for UMWA retirees who worked hard all their lives to provide the
nation with energy. We strongly support the extension of the AML program in a way that
accomplishes both these goals.
The UMWA supports the goals of the Surface Mining Act and the Abandoned Mine
Lands program. When enacting the Surface Mining Control and Reclamation Act of 1977
(SMCRA), Congress found that "surface and underground coal mining operations affect
interstate commerce, contribute to the economic well-being, security, and general welfare of the
Nation and should be conducted in an environmentally sound manner." That statement is as true
today as it was in 1977. Coal mining contributes significantly to our national economy by
providing the fuel for over half of our nation's electricity generation. Coal miners are proud to
play their part in supplying our nation with domestically-produced, cost-effective, reliable
energy. We also live in the communities most affected by coal mining and support the intent of
Congress that coal mining must be conducted in an environmentally sound manner.
2
The AML program, financed by production fees levied on the coal industry, was designed
to provide the means to reclaim lands that had been mined in previous years and abandoned
before reclamation had been done. The law was amended in 1991 to permit the investment of
monies held in the AML Fund to earn interest. In 1992, the Energy Policy Act extended the
AML fees until 2004 and authorized the use of AML interest to pay for the cost of benefits for
certain eligible retirees under the Coal Act. Congress has further extended the authority of OSM
to collect AML fees through June 2006.
The UMWA believes that when Congress authorized the use of AML interest to finance
the cost of health care for retired coal miner, it was a logical extension of the original intent of
Congress when the AML Fund was established. Congress joined these two programs together
for a specific reason–they both represent legacy costs of the coal industry that compelled a
national response. When Congress created the AML Fund in 1977, it found that abandoned mine
lands imposed "social and economic costs on residents in nearby and adjoining areas." When
Congress enacted the Coal Act in 1992, it also was attempting to avoid unacceptable social and
economic costs associated with the loss of health benefits for retired coal miners and widows.
The UMWA Combined Benefit Fund (CBF) was created by Congress to provide health
benefits to retired coal miners and their widows. Today, the Combined Benefit Fund provides
health benefits to nearly 37,000 elderly beneficiaries who reside in nearly every state in the
nation. The average age of the CBF beneficiary population is about 80 years, about two-thirds of
them are widows and their total estimated annual health cost is about $360 million. Congress
intended for the financial mechanisms it put in place to provide self-sustaining financing of the
cost of those benefits. However, rapidly rising health costs, a series of adverse court decisions,
bankruptcies of major contributing employers (particularly in the steel industry), and low interest
earnings at the AML Fund have eroded those financing mechanisms and placed the CBF in
financial jeopardy.
Bankruptcies in the coal and steel industries have also added thousands of new orphan
retirees to the UMWA 1992 Benefit Fund and the UMWA 1993 Benefit Fund, placing serious
strains on the financial operations of those two plans. For example, the bankruptcy of Bethlehem
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Steel in 2003 added nearly 4,000 new beneficiaries to the 1992 and 1993 Funds. Last year’s
bankruptcy of Horizon Natural Resources added about 1,500 new beneficiaries to the UMWA
1992 Fund and about 2,200 new beneficiaries to the UMWA 1993 Fund. These two
bankruptcies alone added about 7,000 beneficiaries to the 1992 and 1993 Funds, more than 35%
of the total population of the two funds. These continuing financial difficulties highlight the
need for Congress to enact Coal Act reforms as part of its AML re-authorization.
Congress has intervened three times since 1999 to shore up the financial condition of the
CBF through emergency appropriations of interest money from the AML Fund. In December
1999, Congress provided $68 million to cover shortfalls in CBF premiums. In October 2000,
Congress appropriated up to $96.8 million to cover deficits in the CBF’s net assets through
August 31, 2001. And most recently, in January 2003, Congress appropriated $34 million from
the AML interest account to the Combined Benefit Fund. In addition, the UMWA Funds and the
Center for Medicare and Medicaid Services (CMS) expanded their existing nationwide, risksharing
Medicare Demonstration project in January 2001 to include a new prescription drug
component. That project was scheduled to run until mid-2004, and to reimburse the Funds for
27% of its Medicare prescription drug expenditures. It is a pilot project designed to demonstrate
the efficacy of providing prescription drugs under Medicare, a timely project that we believe will
prove useful to CMS and Congress as prescription drug coverage expands to the Medicare
population.
With bi-partisan support from members of Congress, CMS announced an extension of the
prescription drug demonstration program in early 2004 that extended the program until
September 30, 2005. I am pleased to report that Secretary Michael Leavitt recently announced a
further extension of the prescription drug demonstration until September 30, 2007. This
demonstration extension is certainly welcome news; however, is does not alter the fact that there
is a pressing need for a long-term solution to the financial problems of the UMWA health care
funds.
The need for a long-term solution for the financial problems of the UMWA health care
funds coincides with the need to re-authorize the AML Fund. We believe the re-authorization
4
effort can, and should, meet four broad policy objectives:
• Provide sufficient duration and level of tax to fund the reclamation needs;
• Focus on Priority 1 and 2 public health and safety projects;
• Resolve the long-standing dispute between states and OSM over the state share of
collections; and,
• Provide long-term financial solvency for the UMWA health care funds.
Mr. Chairman, opponents periodically allege that the benefits provided by the UMWA
Funds are too generous and should be cut. While the costs to the beneficiary tend to be lower
than some plans, the benefits are not substantially more generous than other plans in comparable
industries. The GAO compared the UMWA Funds benefits to retiree plans in manufacturing
covering union and salaried retirees in 2002 and found that “many features of the Fund’s health
plans are similar to those offered in the comparison plans. In particular, the Funds’ coverage
for hospital and physician services, which account for the majority of health care spending, is
comparable to the coverage provided by the other plans.”
Everyone should keep in mind that these retirees have made significant financial
contributions to their health care, to the tune of $210 million that was transferred from their
pension plan pursuant to the Coal Act. In addition over the years, miners traded lower wages and
lower pensions for the promise of retiree health care. The average pension for a 1950 pensioner
is $375 per month and their widows receive $155 per month in pension benefits. For the 1974
Plan retirees, the average pension is $532 per month while the average surviving spouse benefit
is $373 per month. Thus, they do not have the financial ability to bear the kinds of co-payments
that some retirees pay. To renege on the historic bargain they made over many decades to accept
lower wages and pensions for this health care package would be a cruel and crushing economic
blow.
5
In addition, this is an aged, fragile population that is sicker than the average Medicare
population. A study performed by Mercer Human Resources Consulting found this population to
have a 35% greater burden of illness compared to the Medicare population. Cutting the level of
benefits for a population such as this would be a cruel response to the continuing financial crisis.
Two bills have been introduced in the Senate dealing with AML reauthorization–S. 961
by Senator Rockefeller and S. 1701 by Senator Thomas. Both bills would extend the AML fee
collection (through 2019 and 2016, respectively) and provide continued AML interest transfers to
the Combined Benefit Fund. Recognizing the growing orphan problem, S. 961 would also
permit transfers to support orphan retirees in the 1992 and 1993 plans. While we appreciate both
these efforts, we must recognize that they do not represent the long term financial solution that
many have called for. In order to come up with a long term solution, the UMWA has been
working with a coalition of Coal Act/AML stakeholders to devise legislation that is a modified
version of S. 961 that would satisfy the needs of all parties, including the “reachback” companies
and the “final judgment” companies. Representatives Cubin and Rahall made an effort to attach
the legislation to the Energy bill during the House-Senate Energy Conference, but the effort
failed partly because of confusion about the AML provisions of the bill. Since that time, many of
those who opposed that effort are now supporting the coalition effort. The proposed legislation,
known as the Cubin-Peterson-Rahall compromise, would:
1) Extend the AML program for 15 years and reduce the fees from 35¢ to 28¢ per ton for
surface mined coal, from 15¢ to 12¢ for underground coal and from 10¢ to 8¢ per ton for lignite.
States will automatically receive their share of AML funding on an ongoing basis.
2) Provide that the unallocated federal share of moneys that are paid to the U. S. Treasury
under the Mineral Leasing Act after date of enactment shall be used to make payments to states
and tribes of their unappropriated balance of state share collections.
3) Amend SMCRA to provide for annual transfers of AML Fund interest (including
stranded interest and unappropriated RAMP funds) each year to the CBF, 1992, and 1993 Funds
to pay health benefits of orphan beneficiaries and cover any deficits.
6
4) Provide that transfers to the 1993 Plan are limited to the cost of providing benefits to
orphan beneficiaries as of December 31, 2005.
5) Beginning in January 1, 2006 sufficient federal on-shore mineral leasing and royalty
revenues will be used as needed to pay for:
a. Health care costs of orphan retirees in CBF, 1992 and 1993 Funds.
b. Health care costs of CBF retirees attributable to the “reachback” companies.
c. Payment to “Final Judgment” companies equal to unreimbursed premiums (plus
interest) paid to the Combined Benefit Fund.
To the extent such proceeds are insufficient, ongoing orphan obligations will be met from
general funds as a mandatory appropriation.
6) Modify SMCRA allocation formulas to provide that states with higher reclamation
obligations such as Pennsylvania, Kentucky and West Virginia, receive higher allocations.
7) Provide that “minimum program” states will receive $3.0 million per year.
This legislation has garnered support from the various stakeholders in the AML/retiree
health care debate. It is a carefully crafted compromise and we believe it is worthy of support
from this committee.
GAO Study
In 2002, the U.S. Government Accountability Office (GAO) issued a report on the Coal
Act entitled “Retired Coal Miners’ Health Benefit Funds: Financial Challenges Continue.”
While the report was issued three years ago, its conclusions are still pertinent today. Among the
7
findings of the GAO were that:
• the Combined Benefit Fund faces continuing financial challenges which have
been exacerbated by various adverse court decisions that have reduced the per
beneficiary premiums paid to the CBF and relieved some companies of
responsibility for paying for their beneficiaries;
• CBF beneficiaries traded lower pensions over the years for the promise of their
health benefits and have engaged in considerable cost sharing by contributing
$210 million of their pension assets to help finance the CBF;
• the benefits provided to Coal Act beneficiaries are generally comparable to
coverage provided by major manufacturing companies and companies with
unionized work forces;
• CBF beneficiaries tend to be sicker, and therefore use more health care, than the
average Medicare population; and
• the CBF trustees have adopted numerous managed care initiatives and have a
history of achieving savings against their Medicare targets in demonstration
projects, thus saving money not only for the Funds but for Medicare and the U.S.
Treasury.
The GAO report clearly supports the positions the UMWA has advocated before
Congress and the need for additional legislation. A promise made in the White House in 1946
was subsequently reaffirmed in 1992. Congress intended the Coal Act to be self-sustaining and
self-financing, but various court decisions have eroded that financing. There is no question that
this is an elderly, frail population that is sicker than the general Medicare population and
deserves the benefits they were promised. There is also no question that the Funds have
aggressively managed the benefit plans and instituted state-of-the-art managed care programs that
aim to improve the quality of care and reduce costs. Unfortunately, there is also no question that
8
the nation’s promise to retired coal miners will be violated if we do not enact a long-term
financial solution to the coal industry retiree health care funding crisis.
This is a unique population and a unique situation. We are unaware of any other instance
in which a major industry-wide health and welfare plan in the private sector was created in a
contract between the federal government and the workers. All three branches of our government
have played substantial roles in creating, shaping and determining the fate of the UMWA Funds.
The Government Accountability Office clearly laid out the financial difficulties facing the Funds
and more recent actuarial projections show that Congress must act in order to shore up the
financial structure. Again, we encourage members of Congress to enact legislation modeled on
the coalition bill crafted by Representatives Cubin, Rahall and Peterson.
The UMWA Health and Retirement Funds and the U.S. Government
The UMWA Health and Retirement Funds (the Funds) was created in 1946 in a contract
between the United Mine Workers of America and the federal government during a time of
government seizure of the mines. The contract was signed in the White House with President
Harry Truman witnessing the historic occasion.
The UMWA first began proposing a health and welfare fund for coal miners in the late-
1930s but met strident opposition from the coal industry. During World War II, the federal
government urged the union to postpone its demands to ensure coal production for the war effort.
When the National Bituminous Wage Conference convened in early 1946, immediately
following the end of the war, a health and welfare fund for miners was the union's top priority.
The operators rejected the proposal and miners walked off the job on April 1, 1946. Negotiations
under the auspices of the U.S. Department of Labor continued sporadically through April. On
May 10, 1946, President Truman summoned John L. Lewis and the operators to the White
House. The stalemate appeared to break when the White House announced an agreement in
principle on a health and welfare fund.
Despite the White House announcement, the coal operators still refused to agree to the
9
creation of a medical fund. Another conference at the White House failed to forge an agreement
and the negotiations again collapsed. Faced with the prospect of a long strike that could hamper
post-war economic recovery, President Truman issued an Executive Order directing the Secretary
of the Interior to take possession of all bituminous coal mines in the United States and to
negotiate with the union "appropriate changes in the terms and conditions of employment."
Secretary of the Interior Julius Krug seized the mines the next day. Negotiations between
representatives of the UMWA and the federal government continued, first at the Interior
Department and then at the White House, with President Truman participating in several
conferences.
After a week of negotiations, the historic Krug-Lewis agreement was announced and the
strike ended. It created a welfare and retirement fund to make payments to miners and their
dependents and survivors in cases of sickness, permanent disability, death or retirement, and
other welfare purposes determined by the trustees. The fund was to be managed by three
trustees, one to be appointed by the federal government, one by the UMWA and the third to be
chosen by the other two. Financing for the new fund was to be derived from a royalty of 5 cents
per ton of coal produced.
The Krug-Lewis agreement also created a separate medical and hospital fund to be
managed by trustees appointed by the UMWA. The purpose of the fund was to provide for
medical, hospital, and related services for the miners and their dependents. The Krug-Lewis
agreement also committed the federal government to undertake "a comprehensive survey and
study of the hospital and medical facilities, medical treatment, sanitary and housing conditions in
coal mining areas." The expressed purpose was to determine what improvements were necessary
to bring coal field communities in conformity with "recognized American standards."
To conduct the study, the Secretary chose Rear Admiral Joel T. Boone of the U.S. Navy
Medical Corps. Government medical specialists spent nearly a year exploring the existing
medical care system in the nation's coal fields. Their report, "A Medical Survey of the
Bituminous Coal Industry," found that in coal field communities, "provisions range from
excellent, on a par with America's most progressive communities, to very poor, their tolerance a
10
disgrace to a nation to which the world looks for pattern and guidance." The survey team
discovered that "three-fourths of the hospitals are inadequate with regard to one or more of the
following: surgical rooms, delivery rooms, labor rooms, nurseries and x-ray facilities." The study
concluded that "the present practice of medicine in the coal fields on a contract basis cannot be
supported. They are synonymous with many abuses. They are undesirable and in many instances
deplorable."
Thus the Boone report not only confirmed earlier reports of conditions in the coal mining
communities, but also established a strong federal government interest in correcting
long-standing inadequacies in medical care delivery. Perhaps most important, it provided a road
map for the newly created UMWA Fund to begin the process of reform.
The Funds established ten regional offices throughout the coal fields with the direction to
make arrangements with local doctors and hospitals for the provision of "the highest standard of
medical service at the lowest possible cost." One of the first programs initiated by the Funds was
a rehabilitation program for severely disabled miners. Under this program, more than 1,200
severely disabled miners were rehabilitated. The Funds searched the coal fields to locate
disabled miners and sent them to the finest rehabilitation centers in the United States. At those
centers, they received the best treatment that modern medicine and surgery had to offer, including
artificial limbs and extensive physical therapy to teach them how to walk again. After a period of
physical restoration, the miners received occupational therapy so they could provide for their
families.
The Funds also made great strides in improving overall medical care in coal mining
communities, especially in Appalachia where the greatest inadequacies existed. Recognizing the
need for modern hospital and clinic facilities, the Funds constructed ten hospitals in Kentucky,
Virginia and West Virginia. The hospitals, known as Miners Memorial Hospitals, provided
intern and residency programs and training for professional and practical nurses. Thus, because
of the Funds, young doctors were drawn to areas of the country that were sorely lacking in
medical professionals. A 1978 Presidential Coal Commission found that medical care in the coal
field communities had greatly improved, not only for miners but for the entire community, as a
11
result of the UMWA Funds. "Conditions since the Boone Report have changed dramatically,
largely because of the miners and their Union--but also because of the Federal Government,
State, and coal companies." The Commission concluded that "both union and non-union miners
have gained better health care from the systems developed for the UMWA."
The Coal Commission
In the 1980s, medical benefits for retired miners became a sorely disputed issue between
labor and management, as companies sought to avoid their obligations to retirees and dump those
obligations onto the UMWA Funds, thereby shifting their costs to other signatory employers.
Courts had issued conflicting decisions in the 1980s, holding that retiree health benefits were
indeed benefits for life, but allowing individual employers to evade the obligation to fund those
benefits. The issue came to a critical impasse in 1989 during the UMWA-Pittston Company
negotiations. Pittston had refused to continue participation in the UMWA Funds, while the union
insisted that Pittston had an obligation to the retirees.
Once again the government intervened in a coal industry dispute over health benefits for
miners. Secretary of Labor Elizabeth Dole appointed a special "super-mediator," Bill Usery, also
a former Secretary of Labor. Ultimately the parties, with the assistance of Usery and Secretary
Dole, came to an agreement. As part of that agreement, Secretary Dole announced the formation
of an Advisory Commission on United Mine Workers of America Retiree Health Benefits, which
became known as the "Coal Commission." The commission, including representatives from the
coal industry, coal labor, the health insurance industry, the medical profession, academia, and the
government, made recommendations in 1990 to the Secretary and the Congress for a
comprehensive resolution of the crisis facing the UMWA Funds. The recommendation was
based on a simple, yet powerful, finding of the commission:
"Retired miners have legitimate expectations of health care benefits for life; that was the
promise they received during their working lives, and that is how they planned their
retirement years. That commitment should be honored."
12
The underlying Coal Commission recommendation was that every company should pay
for its own retirees. The Commission recommended that Congress enact federal legislation that
would place a statutory obligation on current and former signatories to the National Bituminous
Coal Wage Agreement (NBCWA) to pay for the health care of their former employees. The
Commission recommended that mechanisms be enacted that would prevent employers from
"dumping" their retiree health care obligations on the UMWA Funds. Finally, the Commission
urged Congress to provide an alternative means of financing the cost of "orphan retirees" whose
companies no longer existed.
The Coal Act
Recognizing the crisis that was unfolding in the nation’s coal fields, Congress acted on
the Coal Commission's recommendations. The original bill introduced by Senator Rockefeller
sought to impose a statutory obligation on current and former signatories to pay for the cost of
their retirees in the UMWA Funds, require them to maintain their individual employer plans for
retired miners, and levy a small tax on all coal production to pay for the cost of orphan retirees.
Although the bill was passed by both houses of Congress, it was vetoed as part of the Tax
Fairness and Economic Growth Act of 1992.
In the legislative debate that followed, much of the underlying structure of the Coal
Commission's recommendations was maintained, but there was strong opposition to a general
coal tax to finance orphan retirees. A compromise was developed that would finance orphans
through the use of interest on monies held in the Abandoned Mine Lands (AML) fund. In
addition, the Union accepted a legislative compromise that included the transfer of $210 million
of pension assets from the UMWA 1950 Pension Plan. With these compromises in place, the
legislation was passed by Congress and signed into law by President Bush as part of the Energy
Policy Act.
Under the Coal Act, two new statutory funds were created--the UMWA Combined
Benefit Fund (CBF) and the UMWA 1992 Benefit Fund. The former UMWA 1950 and 1974
Benefit Funds were merged into the Combined Fund, which was charged with providing health
13
care and death benefits to retirees who were receiving benefits from the UMWA 1950 and 1974
Benefit Plans on or before July 20, 1992. The CBF was essentially closed to new beneficiaries.
The Coal Act also mandated that employers who were maintaining employer benefit plans under
UMWA contracts at the time of passage would be required to continue those plans under Section
9711 of the Coal Act. Section 9711 was enacted to prevent future "dumping" of retiree health
care obligations by companies that remain in business. To provide for future orphans not eligible
for benefits from the CBF, Congress established the UMWA 1992 Benefit Fund to provide
health care to miners who retired prior to October 1, 1994 and whose employers are no longer
providing benefits under their 9711 plans.
The CBF is financed by per-beneficiary premiums paid by employers with retirees in the
fund. The premium is set by the Social Security Administration and is escalated each year by the
medical component of the Consumer Price Index. Interest earned by the AML Fund is made
available to finance the cost of orphan retirees. The remainder of CBF income derives from
Medicare capitation and risk sharing arrangements, DOL Black Lung payments, investment
income and miscellaneous court settlements. The benefits for orphans covered by the UMWA
1992 Fund are financed solely by operators that were signatory to the NBCWA of 1988.
In passing the Coal Act, Congress recognized the legitimacy of the Coal Commission's
finding that "retired miners are entitled to the health care benefits that were promised and
guaranteed them." Congress specifically had three policy purposes in mind in passing the Coal
Act:
"(1) to remedy problems with the provision and funding of health care benefits with
respect to the beneficiaries of multiemployer benefit plans that provide health care
benefits to retirees in the coal industry;
(2) to allow for sufficient operating assets for such plans; and
(3) to provide for the continuation of a privately financed self-sufficient program for the
delivery of health care benefits to the beneficiaries of such plans.''
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Without question, Congress intended that the Coal Act should provide "sufficient
operating assets" to ensure the continuation of health care to retired coal miners. However, the
financial mechanisms have been eroded and have placed the Coal Act in continuing financial
crises.
Recent Court Decisions
The 2002 GAO study found that a number of court decisions have eroded the financial
condition of the Combined Fund–and the legal onslaught on the Coal Act continues. While
Congress clearly intended that the Coal Act be financially self-sustaining, various court decisions
have undercut Congressional intent. A 1995 decision by a federal court in Alabama in NCA v.
Chater overturned the premium determination by the Social Security Administration (SSA) and
reduced the premium paid by employers by about 10%. Over time, the effect of this decision was
to remove hundreds of millions of dollars from the financing structure of the Coal Act. A 1999
decision by the same court ordered the CBF to return about $40 million in contributions to the
employers, representing the difference between the original SSA premium rate actually paid and
the rate established in NCA. The trustees of the CBF filed suit against the Social Security
Administration in the District of Columbia in an attempt to set aside the NCA decision. In late-
2002, the D.C. Court struck down the Social Security Administration’s nationwide application of
the NCA decision and ordered SSA to report to the Court what premium rate should apply to
companies not covered by the NCA decision. In June 2003, SSA notified the Court it would
apply a higher premium to companies not covered by the earlier decision. However, while most
companies were paying the higher rate under protest, over 200 companies filed suit seeking to
overturn the higher rate. In August 2005, the United States District Court for the District of
Maryland issued a ruling in favor of the companies and enjoining the CBF from applying the
higher rate. If the CBF ultimately loses the premium rate case, it will have to reimburse the
operators for about $72 million in higher premiums that were collected prior to the court ruling.
In 1998, the Supreme Court rendered a decision in Eastern Enterprises that struck down
the obligation to contribute to the CBF for companies that were signatory to earlier NBCWAs but
did not sign the 1974 or later contracts. Those employers were relieved of their contribution
15
obligations in the future and the Combined Fund returned millions of dollars in prior
contributions. Most of these retirees are now part of the unassigned beneficiary pool whose
benefits are funded from other sources. Since that time, a number of other companies who
signed the 1974 or later NBCWAs have also attempted to convince the courts that they, too,
should be relieved of their responsibility. Most of these cases have now completed their appeals
process, with the courts holding that the companies cannot walk away from their Coal Act
obligations.
The cumulative effect of these court decisions threatened a repetition of the problems and
re-creation of the crisis of the 1980s that led to the creation of the Coal Act, meaning employers
have been relieved of liability for their retirees and revenues have been significantly reduced
from the employers that remain obligated. Compounding the revenue loss stemming from these
court decisions is the fact that the escalator used to adjust the premium for inflation (the medical
component of the Consumer Price Index) is inadequate to measure the health care cost increases
in a closed group of aging beneficiaries who experience annual increases in utilization. The
combination of escalating medical costs, loss of income, an increasing orphan population and an
inadequate escalator have led to a continuing financial crisis for Coal Act beneficiaries.
I mentioned earlier the bankruptcies of a number of steel companies that had retirees
covered by the Coal Act. Recent bankruptcies at LTV, Bethlehem Steel and other steel
companies have further reduced the premiums paid to the CBF, increased orphan costs for the
AML fund, and added thousands of 9711 plan beneficiaries to the 1992 Plan. The Horizon
bankruptcy in 2004 greatly increased the populations of the 1992 and 1993 Benefit Funds. The
growth in the orphan population has forced a dwindling number of employers to fund a growing
burden of health care expenses for retirees who did not work for them. The magnitude of these
bankruptcies, which we believe that Congress did not anticipate when it passed the Coal Act, has
exacerbated the problems of the UMWA Funds and reinforce the call for a long-term solution.
Now Is The Time For A Long-term Solution
Mr. Chairman, there is a growing bi-partisan consensus that Congress needs to forge a
16
long-term solution to the coal industry retiree health care financial crisis. Over their working
lives, these retirees traded lower wages and pensions for the promise of retiree health care that
began in the White House in 1946. In 1992, they willingly contributed $210 million of their
pension money to ensure that the promise would be kept. Everything that this nation has asked
of them–in war and in peace–they have done. They are part of what has come to be called the
“Greatest Generation” and deservedly so. They have certainly kept their end of the bargain that
was struck with President Truman. But now they find that the promise they worked for and
depended on is in jeopardy of being broken. We must stand up and say that this promise will be
kept.
Mr. Chairman, we thank you for the opportunity to add our support to the effort to reauthorize
the AML program and to provide a long-term solution to the financial problems of the
UMWA Funds. I would be happy to answer any questions you may have.
Andrew McElwaine

Mr.

Read statement

Witness Panel 2

Andrew McElwaine

"Reauthorization of the Federal Abandoned Mine

Reclamation Fund"

Testimony of

Andrew S. McElwaine,

President and CEO of the Pennsylvania Environmental Council

Before the

U.S. Senate Environment and Natural Resources Committee

September 27, 2005

Introduction

Mr. Chairman and members of the Committee, thank you for inviting

me to participate in today’s hearing. My name is Andrew McElwaine and I am

President and CEO of the Pennsylvania Environmental Council, a statewide

non-profit group that has offices throughout the state.

I am testifying on behalf of the Pennsylvania Abandoned Mine Land

Campaign, a coalition of over 200 Pennsylvania conservation groups,

including 150 watershed organizations from all Commonwealth coalfield

counties. Over the last two years, we have also worked with community

leaders from ten states in an effort to formulate recommendations that have the

broadest base of support.

I want to reiterate our profound appreciation for your interest in

working for an effective AML reauthorization. To be successful, the AMLF

reauthorization must combine necessary, predictable, mandatory funding

without compromising existing environmental laws.

It is essential to our state and others that the federal government extend

and reform the abandoned mine land reclamation program as I will describe in

my testimony. And of course an AMLF program that works to protect

communities and restore environments also produces jobs and creates

economic opportunities.

We hope that our expressions of support and caution, aimed at helping

you arrive at an agreement that truly works for communities in Pennsylvania

and the other coal producing states, can help you resolve outstanding issues

within the next few days.

History

Pennsylvania has the most abandoned mine land sites in the nation and

has been a leader in improving the quality of its environment after many years

of mismanagement.

In 1968, Pennsylvania passed the Land and Water Conservation and

Reclamation Act, a major initiative to address abandoned mine reclamation.

This act spurred Operation Scarlift, which was instituted to clean up the

damage caused by abandoned mines. It used a total of $141,000,000 to

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complete 500 stream pollution abatement projects, extinguish 75 fires, remove 150 areas of

subsidence, and prevent air pollution at 30 sites of burning refuse banks.

Since that time, Pennsylvania has initiated several other programs that have provided

state funding for abandoned mine reclamation. Most recently, under Governor Ridge in 1999,

the state created its Growing Greener program which made available a substantial portion of

$500 million for reclamation and stream clean ups. In July of this year, Governor Rendell

signed into law Growing Greener II, which provides $625 million for stream clean ups and

other environmental improvements. At least $60 million will be available specifically for

AML related impacts.

Pennsylvania has also pursued an aggressive remining program, where the state has

formed partnerships with the private operators and citizen groups to maximize the use of

AML funds. DEP estimates that $950 million in federal and state money has been spent in

Pennsylvania to deal with abandoned mine problems. As indicated earlier, a substantial

portion of that funding came from state sources. We have adopted a strategic approach that

identifies those sites that are most dangerous or having the greatest environmental impact and

target our resources accordingly.

Remaining Environmental Problems

Despite our successes, significant environmental problems related to past mining

practices remain. The National Abandoned Mine Land Inventory lists for Pennsylvania over

$1 billion of Priority 1 and 2 sites. These numbers were calculated in the early 1980’s, nearly

a quarter century ago, and have not been adjusted for inflation.

These estimates reflect real problems. According to the US Department of Interior’s

Office of Surface Mining (OSM), since 1999, more than 40 people have drowned in mining

pits and quarries. At least 15 deaths, and many more injuries, have occurred during the same

time period in falls and ATV rollovers at quarries and pits. In the last year Pennsylvania saw

five more fatalities related to AML sites. Abandoned mine sites have left extensive dangerous

highwalls, open pits, coal refuse spoil piles, old mine openings, and more than 3,000 miles of

streams polluted by abandoned mine drainage. Past coal mining practices have led to erosion,

landslides, polluted water supplies, destruction of fish and wildlife habitat, and an overall

reduction in natural beauty.

The OSM reports that over 3.6 million people in the United States live within one mile

of Priority 1 & 2 Sites. More than half, just over 1.6 million of those listed, live in

Pennsylvania. (See Appendix A, which is taken from as white paper prepared on this topic by

OSM in 2003). People continue to die, local economies are stymied, and ongoing

environmental degradation is obvious to even casual observers. As is reflected in Appendix

B, over 184,000 acres in our state still need to be reclaimed. And, Pennsylvania is not alone;

other states face similar ongoing problems.

Overview of What We Seek:

Provided below are provisions that were crafted over a two year period in a

collaboration of coalfield community leaders from ten states:

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· Funding for water (Abandoned Mine Drainage): Abandoned mines leak acidic,

alkaline, and metal-contaminated water, polluting public water supplies, destroying

fish and wildlife habitat, depressing local economies, and threatening human health

and safety. Pennsylvania is representative of eastern coal states with abandoned mine

drainage (AMD) problems, and abandoned mine drainage is the largest contributor to

water quality impairment in the Commonwealth. Over 3,000 miles of Pennsylvania’s

streams are impaired by AMD. It is critical that abandoned mine drainage

problems continue to be eligible for funding.

· Keep priorities 1, 2, and 3: Three priority areas are eligible for funding to correct

adverse effects of coal mining practices under Title IV. Priority 1 provides for the

protection of public health, safety, general welfare, and property from extreme danger.

Priority 2 provides for the protection of public health, safety, and general welfare.

Priority 3 provides for the restoration of degraded land and water resources and the

environment. States need to retain the discretion to use their allocations from the Fund

for projects falling into any of the three priorities. The current priorities should be

maintained, including the ability to fund water-related projects under Priorities 2

and 3.

· Full allocation to states of future fees: As of June 30, 2005, the Fund has an

unappropriated balance of over $1.7 billion. The state share of this balance is

approximately $1.1 billion. (Pennsylvania maintains the fourth highest balance at

$58.4 million.) Future collections to the Fund should be fully allocated for their

intended purpose of cleaning up abandoned mine problems.

· Encourage redevelopment of abandoned mine lands: As abandoned mine lands

are reclaimed, they offer potential locations for economic development projects. By

developing and marketing abandoned mine lands that would normally struggle to

attract new investment, these "grayfields" can be turned into regional benefits by

creating economic opportunities, preventing sprawl, and conserving open space and

natural resources. For example, government facilities could be encouraged to locate

on these sites rather than on previously undeveloped green spaces. States should be

able to use Title IV funds in ways that promote reclamation, leverage private

investment, and, where it is appropriate, encourage redevelopment.

· Reformulation: Many states that fueled the coal boom in the early and middle part of

the last century currently have low coal production, yet they have the largest legacy of

adverse mining impacts from before 1977. Currently, the federal share of collected

monies is allocated based on 40% for current production, 40% on historic production,

and 20% to the Rural Abandoned Mine Land Program (RAMP). It has been damaging

to coalfield communities that RAMP has not been funded in the last eight fiscal years.

If RAMP is retained, then it should be funded through same off-budget structure as the

rest of the AML program. This will allow states with the most pre-1977 problems to

correct them much more quickly. The allocation formula should be changed to

60% historic and 40% current production.

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· Take the program off-budget: Each fiscal year, the President and Congress must

appropriate monies from the fund as part of the federal budget process As a result,

the Fund is subject to political pressures and fiscal pressures from other federal

programs. The fees collected to the fund should be returned to states and tribes

without the need for appropriation each year, thus ensuring that the funds will be

used for their intended purposes. This would enable states to better plan strategic

multi-year AML reclamation projects.

· Increase the minimum program funding to $4 million: States which have

significant AML problems, but which have small AML programs, are supposed to be

guaranteed minimum funding of their programs by statutory mandate. Since 1990,

this funding has been set at $2 million. In many years, minimum program states have

received significantly less. Increasing this amount would help make up for past underfunding

and ensure that states with significant AML problems but low production

would be able to continue running effective programs. This potentially effects eleven

states. Annual funding for minimum program states should be raised to $4

million.

· Non-primacy states should get a guaranteed minimum: States which do not have

their own coal regulatory programs are not eligible for a 50% share of funds collected

in the state or funding based on historic production. Federally managed (non-primacy

states) programs should be guaranteed minimum program funding if they demonstrate

the ability to operate an effective abandoned mine reclamation program. This would

enable a state like Tennessee to mitigate the damage in one decade instead of four.

· Maintain transfer of interest to the Combined Benefit Fund: Interest generated on

the Abandoned Mine Reclamation Fund is currently transferred to the Combined

Benefit Fund to defray health care costs for retired miners and their dependents whose

companies have gone bankrupt or are no longer in business. The CBF pays for health

care expenses remaining after Medicare and Medicaid reimbursement and pays for

prescription drugs. The transfer of interest to the Combined Benefit Fund should

continue with no fee reduction.

· Extend the end date: The scope of the abandoned mine problem continues to outpace

available resources. Based on current funding levels, projected future production, and

estimated costs of cleaning up inventoried sites, it will at least 15 years, potentially

more than 20 years to address abandoned mine problems. Extending the program 20

years would honor the intentions of the original law to unburden communities plagued

by unreclaimed coal mines. The program should be extended until at least 2025.

Essential Provisions:

There are a number of provisions that my organization and the Pennsylvania coalition

believe are essential for AML reauthorization to protect coalfield communities and restore

damaged natural resources. First and foremost, we need to remember that this program was

originally created to address the significant environmental problems facing Pennsylvania and

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other states. We should not lose sight of this, so we believe that reauthorization legislation

should do the following:

1. Off-budget mandatory assured funding of AML programs in historic production states.

2. The environmental provisions included in HR2721 should be incorporated within any

AML reauthorization legislation:

a. Minimum program states should receive $4million/year for the length of the

program;

b. Mandatory payments to states should be made within 30 days of collection,

and no less frequently than semi-annually;

c. Allow full state discretion in utilization of state set-aside funds, with state setaside

funds increased from the current 10% to 30%;

d. Preserve Priorities 1, 2 and 3 -- essential for water quality restoration;

e. Remining: PEC supports remining because there have been many successful

projects, though we understand that it remains controversial within some

coalfield communities. In appendix C, we outline some of the conditions that

the coalition with which we are involved believes should accompany a

remining program.

3. Keep AML reclamation fees at current levels with the current structure. In 1977, no

inflation factor was built into the fee, so while the costs of AML reclamation have

gone up significantly over the past 28 years, the fees have remained unchanged, and

now represent a much small fraction of both the cost of coal and the cost of

reclamation. Even with the fee unchanged, the program is not likely to collect enough

money to complete AML restoration within 15 years.

4. AML Reauthorization period should be no less than 15 years, 20 is needed, because in

past years so little AML money has been made available, so the restoration intended

by Congress has not actually been funded.

5. AML reauthorization legislation should specify that the source of funding for AML

programs should be AML reclamation fees

Conclusion

The legacy of past mining practices is still evident on the landscape and in the waters

of Pennsylvania and other states. It adversely impacts our safety, environmental quality,

economic viability, and overall quality of life. We have made progress, but our work is not

done. It is essential to our state and others that the federal government extend and reform the

abandoned mine land reclamation program. Our coalition believes strongly that the final

legislation should include the provisions that I have listed above. Our communities and

environmental quality depend on your action.

Again, thank you inviting me to testify. I am available to answer questions.

Hearings and Business Meetings

Archived Webcast

Witness Panel 1

Mr. Thomas Shope

Joe Shirley, Jr.

Evan Green

Steve Hohmann

Witness Panel 2

Lorraine Lewis

Charles Gauvin

David Finkenbinder

Daniel Kane

Andrew McElwaine