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88-532 PS 2003

‘‘THE ABANDONED MINE LANDS 

PROGRAM’’

OVERSIGHT HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND 

MINERAL RESOURCES

OF THE

COMMITTEE ON RESOURCES 

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

Thursday, July 24, 2003

Serial No. 108-47

Printed for the use of the Committee on Resources

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

or 

Committee address: http://resourcescommittee.house.gov 

(II)

COMMITTEE ON RESOURCES 

RICHARD W. POMBO, California, Chairman 

NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska 

W.J. ‘‘Billy’’ Tauzin, Louisiana 

Jim Saxton, New Jersey 

Elton Gallegly, California 

John J. Duncan, Jr., Tennessee 

Wayne T. Gilchrest, Maryland 

Ken Calvert, California 

Scott McInnis, Colorado 

Barbara Cubin, Wyoming 

George Radanovich, California 

Walter B. Jones, Jr., North Carolina 

Chris Cannon, Utah 

John E. Peterson, Pennsylvania 

Jim Gibbons, Nevada, 

Vice Chairman 

Mark E. Souder, Indiana 

Greg Walden, Oregon 

Thomas G. Tancredo, Colorado 

J.D. Hayworth, Arizona 

Tom Osborne, Nebraska 

Jeff Flake, Arizona 

Dennis R. Rehberg, Montana 

Rick Renzi, Arizona 

Tom Cole, Oklahoma 

Stevan Pearce, New Mexico 

Rob Bishop, Utah 

Devin Nunes, California 

Randy Neugebauer, Texas 

Dale E. Kildee, Michigan 

Eni F.H. Faleomavaega, American Samoa 

Neil Abercrombie, Hawaii 

Solomon P. Ortiz, Texas 

Frank Pallone, Jr., New Jersey 

Calvin M. Dooley, California 

Donna M. Christensen, Virgin Islands 

Ron Kind, Wisconsin 

Jay Inslee, Washington 

Grace F. Napolitano, California 

Tom Udall, New Mexico 

Mark Udall, Colorado 

Anı ́bal Acevedo-Vila ́, Puerto Rico 

Brad Carson, Oklahoma 

Rau ́l M. Grijalva, Arizona 

Dennis A. Cardoza, California 

Madeleine Z. Bordallo, Guam 

George Miller, California 

Edward J. Markey, Massachusetts 

Rube ́n Hinojosa, Texas 

Ciro D. Rodriguez, Texas 

Joe Baca, California 

Betty McCollum, Minnesota

Steven J. Ding, Chief of Staff 

Lisa Pittman, Chief Counsel 

James H. Zoia, Democrat Staff Director 

Jeffrey P. Petrich, Democrat Chief Counsel 

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES 

BARBARA CUBIN, Wyoming, Chairman 

RON KIND, Wisconsin, Ranking Democrat Member

W.J. ‘‘Billy’’ Tauzin, Louisiana 

Chris Cannon, Utah 

Jim Gibbons, Nevada 

Mark E. Souder, Indiana 

Dennis R. Rehberg, Montana 

Tom Cole, Oklahoma 

Stevan Pearce, New Mexico 

Rob Bishop, Utah 

Devin Nunes, California 

Randy Neugebauer, Texas 

Richard W. Pombo, California, ex officio 

Eni F.H. Faleomavaega, American Samoa 

Solomon P. Ortiz, Texas 

Grace F. Napolitano, California 

Tom Udall, New Mexico 

Brad Carson, Oklahoma 

Edward J. Markey, Massachusetts 

VACANCY 

VACANCY 

Nick J. Rahall II, West Virginia, ex officio 

(III)

C O N T E N T S 

Page

Hearing held on July 24, 2003 ............................................................................... 1

Statement of Members: 

Cubin, Hon. Barbara, a Representative in Congress from the State of 

Wyoming ........................................................................................................ 1

Prepared statement of ............................................................................... 3

Holden, Hon. Tim, a Representative in Congress from the State of 

Pennsylvania ................................................................................................. 6

Prepared statement of ............................................................................... 8

Kanjorski, Hon. Paul, a Representative in Congress from the State of 

Pennsylvania ................................................................................................. 9

Prepared statement of ............................................................................... 10

Rahall, Nick J., II, a Representative in Congress from the State of 

West Virginia ................................................................................................ 5

Statement of Witnesses: 

Balk, Murray J., Chief, Surface Mining Section, Kansas Department of 

Health and Environment .............................................................................. 49

Prepared statement of ............................................................................... 51

Finkenbinder, David O., Vice President, Congressional Affairs, National 

Mining Association ........................................................................................ 65

Prepared statement of ............................................................................... 66

Jarrett, Jeffrey D., Director, Office of Surface Mining Reclamation and 

Enforcement, U.S. Department of the Interior ........................................... 18

Prepared statement of ............................................................................... 21

Laffere, David L., Kansas City Power and Light Company .......................... 58

Prepared statement of ............................................................................... 59

Loomis, Marion, Executive Director, Wyoming Mining Association ............ 61

Prepared statement of ............................................................................... 62

Masterson, John A., Counsel to The Honorable David D. Freudenthal, 

Governor, State of Wyoming ........................................................................ 45

Prepared statement of ............................................................................... 46

Roberts, Cecil E., President, United Mine Workers of America ................... 36

Prepared statement of ............................................................................... 38

Young, David M., President, Bituminous Coal Operators’ Association ....... 69

Prepared statement of ............................................................................... 71

Additional materials supplied: 

Donnelly, Daniel K., Ph.D., Director, Center for Environmental Research 

and Education, Duquesne University, Letter submitted for the record ... 73

Grote, Thomas F., Director, Kiski Basin Initiatives, Letter submitted 

for the record ................................................................................................. 76

McGinty, Kathleen A., Secretary, Pennsylvania Department of 

Environmental Protection, Letter submitted for the record by The 

Honorable Paul Kanjorski ............................................................................ 13

National Association of Realtors Appraisal Institute, Letter submitted 

for the record by The Honorable Paul Kanjorski ....................................... 15

Western Coal Traffic League, Statement submitted for the record ............. 78

(1)

OVERSIGHT HEARING ON ‘‘THE ABANDONED 

MINE LANDS PROGRAM’’

Thursday, July 24, 2003

U.S. House of Representatives 

Subcommittee on Energy and Mineral Resources 

Committee on Resources 

Washington, DC 

The Subcommittee met, pursuant to call, at 2:05 p.m., in room 

1334, Longworth House Office Building, Hon. Barbara Cubin, 

[Chairman of the Subcommittee] presiding. 

Present: Representatives Cubin, Rahall and Neugebauer. 

Mrs. CUBIN. The oversight hearing by the Subcommittee on 

Energy and Mineral Resources will come to order. This Subcommittee is meeting today to hear testimony on the Abandoned 

Mine Lands Act. Under Committee Rule 4(g) the Chairman and the 

Ranking Minority Member can make opening statements, and then 

if any other members come, they can have their statements included in the record. 

STATEMENT OF THE HON. BARBARA CUBIN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF 

WYOMING 

Mrs. CUBIN. The Subcommittee meets today to focus on problems 

within the Abandoned Mine Lands Program. When Congress 

passed the Surface Mining Control and Reclamation Act of 1977, 

or SMCRA, it recognized that the Federal Government had an obligation to clean up years of lax regulation of coal mining operations 

and direct the reclamation of abandoned coal mines around the Nation. 

To fund this reclamation effort it established a fee on coal production, to be collected by the Office of Surface Mining, in the 

amount of 35 cents per ton for surface mined coal, 15 cents per ton 

for underground mined coal, and 10 cents per ton of lignite. In 

1977, western coal mines were just beginning to establish themselves, and western politicians wanted to ensure that a portion of 

the AML fees went back to the states from which they were collected. 

A compromise was reached by which 50 percent of the share 

would be returned to the state of origin and the other 50 percent 

would be disbursed by the Federal Government based on historic 

2

coal production and other Federal priorities. Oh, how I wish that 

were the case today. 

Almost $6 billion has been collected for the program since its inception, with just about $3.2 billion of that intended for reclamation projects. The program was initially meant to take only about 

12 years to complete, but despite the enormous amount of money 

that has already been collected, it is estimated that it will take at 

least an additional $6 billion and anywhere from 12 to 100 years 

to complete work on priority one and priority two sites. 

As we look to authorize the AML program, we must ensure that 

our cleanup efforts are reasonable and efficient so that we don’t 

just keep throwing good money after bad. 

The largest problem we face is that the money being collected is 

not being appropriated back to the states and to the AML program 

as it should be. The original 1977 statute made a commitment that 

half of the money would be returned to the states from where they 

were collected. 

The House and Senate appropriators have not been applying the 

funds to the states nor to the projects that need to be funded. In 

fact, a little over half of the funds are being appropriated. Year 

after year Congress has failed to live up to its promises and states 

like Wyoming and West Virginia are suffering the consequences. 

Wyoming’s unappropriated State balance alone is now $375 million, and the total unappropriated State balance nationwide is as 

high as $971 million. This is a huge sum of money that could be 

put to legitimate reclamation needs. 

As we look to reauthorize this program we need to find a solution 

to this appropriations problem, and compel Congress and the administration to live up to their commitments and return the 50 percent state share balances to the states where they were collected. 

When the AML fund was first started the vast majority of coal 

production was in the east where most of the reclamation work 

now needs to be done. Over the past couple of decades though, coal 

production has migrated west. Wyoming-mined coal currently pays 

for over 40 percent of the entire AML program. Wyoming money 

is being used to clean up eastern problems. Future funding of the 

AML program must ensure that one region of the country does not 

pay for a disproportionate share of the reclamation work from another region and from a different era. 

Further, the law was amended in 1992 to use a portion of the 

interest earned by the AML fund to support the combined benefits 

fund that pays for unassigned beneficiaries or retired mine workers 

whose former companies are no longer in business and no longer 

pay for their health care premiums. 

Rising prescription drug costs, lower interest rates and an increasing pool of unassigned beneficiaries are stretching the combined benefits fund to its limits. We need to address how we can 

continue to adequately fund the health care benefits of these retired mine workers. That is something we must do. 

I know many of you here today have a strong interest in this 

area, and I believe I speak for the entire Subcommittee when I say 

that we are going to do our very best to find a solution to this 

portion of the problem. 

3

I believe the CBF obligation and our debt to those workers who 

toiled in the mines and mills and helped us power to victory in 

World War II and beyond is a national responsibility, not one that 

should be heaped upon the shoulders of Wyoming and a limited 

number of other coal-producing states. If it is a national problem, 

it needs a national solution, not one that is supported by the AML 

fund alone. 

I also believe that we can bring additional money into the system 

through the issuance of Government backed bonds, as Mr. 

Kanjorski has proposed in his bill, which I have signed on as a cosponsor. Not only do we need to repay the states for the money 

that they have paid into the fund, we also ought to provide them 

with additional tools to address their health and environment concerns. 

We have before us today representatives of the broad stakeholder 

interest in the AML fund. We will hear many different perspectives 

and priorities about reauthorization of SMCRA. I want us to take 

in each of these perspectives and begin to build a consensus on 

some key issued regarding reauthorization. This is a very complex 

and often contentious issue, but it is an issue that is important to 

all of us, and we owe the American people a rational and commonsense solution. 

Reauthorization of the AML fund should be about keeping promises. We need to keep our promises to the retired mine workers so 

that their health benefits are secure. We need to keep our promises 

to those regions of the country that have been promised reclamation of their abandoned coal mine sites, and we need to keep our 

promise to the states that have paid into the AML fund. 

I look forward to working with Mr. Rahall and other members 

of the minority, with the administration, the states, and all of the 

various stakeholders to find a solution that is good for the Nation, 

good for our environment, and keeps our promises to the American 

people. 

Finally, I would like to welcome Marion Loomis, who is President 

of the Wyoming Mining Association, as well as John Masterson, 

counsel to Governor Freudenthal of Wyoming. They both do a good 

job for our home State. Mr. Loomis has been working with me since 

I was in the State legislature and we have been friends for a long 

time. I look forward to hearing from them on this issue. 

I would like to welcome all of our witnesses today, and I look forward to hearing their testimony. 

[The prepared statement of Mrs. Cubin follows:]

Statement of The Honorable Barbara Cubin, Chairman,

Subcommittee on Energy and Mineral Resources 

The Subcommittee meets today to focus on problems within the Abandoned Mine 

Land Program. When Congress passed the Surface Mining Control & Reclamation 

Act of 1977, or SMCRA, it recognized that the Federal Government had an obligation to clean up years of lax regulation of coal mining operations and direct the reclamation of abandoned coal mines around the nation. 

To fund this reclamation effort it established a fee on coal production, to be collected by the Office of Surface Mining, in the amount of 35 cents for per ton for 

surface mined coal, 15 cents per ton for underground mined coal, and 10 cents per 

ton of lignite. In 1977, western coal mines were just beginning to establish themselves and western politicians wanted to ensure that a portion of the AML fees went 

back to the states from which they were collected. 

4

A compromise was reached by which 50 percent of the share would be returned 

to the state of origin, and the other 50 percent would be disbursed by the Federal 

Government based on historic coal production and other Federal priorities. Oh, how 

I wish that was the case today. Almost $6 billion has been collected for the program since its inception, with about $3.2 billion of that intended for reclamation projects. The program was initially meant to take only about 12 years to complete. But, despite the enormous 

amount of money already collected, it is estimated that it will take at least an additional $6 billion and anywhere from 12 to 100 years to complete work on priority 

one and two sites. 

As we look to re-authorize the AML program, we must ensure that our clean up 

efforts are reasonable and efficient so that we don’t just keep throwing good money 

after bad. 

The largest problem we face is that the money being collected is not being appropriated back to the states and to the AML program as it should be. The original 

1977 statute made a commitment that half of the money would be returned to the 

states from where they were collected. 

The House and Senate Appropriators have not been applying the funds to the 

states nor to the projects that need to be funded. In fact, little over half of the funds 

are being appropriated. Year after year, Congress has failed to live up to its promises, and states like Wyoming are suffering the consequences. Wyoming’s unappropriated state balance alone is now $375 million dollars and the total unappropriated state balance nationwide is as high as $971 million. This is 

a huge sum of money that could be put to legitimate reclamation needs. 

As we look to re-authorize this program, we need to find a solution to this appropriations problem and compel the Congress and Administration live up to their commitments to return the 50% state share balances to the states where they were collected. 

When the AML program was started, the vast majority of coal production was in 

the East where most of the reclamation work needs to be done. Over the past couple 

of decades, though, coal production has migrated West. Wyoming mined coal currently pays for over 40% of the AML program. Wyoming money is being used to 

clean up Eastern problems. Future funding of the AML program must ensure that 

one region of the country does not pay for a disproportionate share of the reclamation work in another region from a different era. 

Further, the law was amended in 1992 to use a portion of the interest earned by 

the AML fund to support the Combined Benefits Fund that pays for unassigned 

beneficiaries—retired mineworkers whose former companies are no longer in business and no longer pay for their health care premiums. 

Rising prescription drug costs, lower interest rates and an increasing pool of unassigned beneficiaries are stretching the Combined Benefits Fund to its limits. We 

need to address how we can continue to adequately fund the health care benefits 

of these retired mine workers. I know many of you are here today have a strong 

interest in this area, and I believe I speak for the entire Subcommittee when I say 

that we are going to do our best to find a solution to this portion of the problem. 

I believe the CBF obligation and our debt to those workers who toiled in the 

mines and mills and helped power us to victory in World War II and beyond is a 

national responsibility, not one that should be heaped upon the shoulders of Wyoming and a limited number of other coal-producing states. If it’s a national problem 

it needs a national solution, not one supported by the AML fund alone. 

I also believe that we can bring additional money into the system through the 

issuance of government-backed bonds as Mr. Kanjorski has proposed in his bill, 

which I have signed on to as a co-sponsor. Not only do we need to repay states for 

the money they paid into the fund, we also ought to provide them with additional 

tools to address their health and environmental concerns. 

We have before us today representatives of the broad stakeholder interests in the 

AML fund. We will hear many different perspectives and priorities about re-authorization of SMCRA. I want us to take in each of these perspectives and begin to build 

consensus on some key issues regarding re-authorization. This is a very complex 

and often contentious issue, but it is an issue that is important to all of us and we 

owe the American people a rational and common-sense solution. 

Reauthorization of the AML Fund should be about keeping promises. We need to 

keep our promises to the retired mine workers so that their health benefits are secure. We need to keep our promises to those regions of the country that have been 

promised reclamation of their abandoned coal mine sites. And we need to keep our 

promise to the states that have paid into the AML fund. 

I look forward to working with Mr. Rahall, with other members of the minority, 

with the Administration, the states and all of the various stakeholders to find a soVerDate 0ct 09 2002 08:55 Nov 12, 2003 Jkt 087420 PO 00000 Frm 00008 Fmt 6633 Sfmt 6621 J:\DOCS\88532.TXT HRESOUR1 PsN: KATHY
5

lution that is good for the Nation, good for our environment and keeps our promises 

to the American people. 

Finally, I would like to welcome Marion Loomis, President of the Wyoming Mining 

Association, as well as John Masterson, Counsel to Governor Freudenthal of Wyoming. They both do a good job for our home state, and I look forward to working 

with them on this issue. 

I would also like to welcome all our witnesses testimony today, and look forward 

to hearing their testimony. 

Mrs. CUBIN. I ask unanimous consent that the gentleman from 

Texas, Mr. Neugebauer be allowed to participate in the hearing 

today. Is there any objection? 

Hearing none, so ordered, and you may be seated at the dais. 

I would like to recognize Mr. Rahall for his opening comments. 

STATEMENT OF THE HON. NICK J. RAHALL, II, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF 

WEST VIRGINIA 

Mr. RAHALL. Thank you, Madam Chair. I appreciate very much 

your having this hearing today. 

In regard to your opening comments, there was very little if anything with which I disagreed, and I found it to be rewarding to 

work with you over a number of years, not only on this issue but 

a number of issues that have come before our Resources Committee, and this is a challenge that is before us. We shall meet this 

challenge and continue to resolve it, try to resolve it in an equitable fashion and in a way that you said so very well, keeps a 

promise to our coal miners and keeps a promise to the coal fields 

of this Nation. 

This is an important program, the Abandoned Mine Reclamation 

Program. It is one which I played a small role in devising and in 

nurturing these long years since 1977. That was my first year in 

Congress. This particular legislation was the first legislation upon 

which I served on a Conference Committee in my tenure in this 

body. It was there that hot August day, August 4th, 1977 in the 

Rose Garden of the White House, standing behind Jimmy Carter 

when he signed this legislation into law, with both industry and 

environmentalists in attendance for that bill-signing ceremony. 

This hearing I am sure will involve discussions involving statistics, formulas and investment strategies, which is all fine and appropriate, but I fear we may be missing the real point. 

Many years ago it struck me what the issue is really about, and 

that is the courage, the conviction of the people of the Appalachian 

region and indeed those in our coal fields throughout this great Nation. It is about the sacrifices made by our people and of our land 

in an effort to produce the coal which ignited the industrial revolution, made this Nation the great superpower that it is, and which 

today fires the technological revolution by being the fuel which generates over one half of our electricity. 

But make no mistake about it, with that coal production came 

a legacy, a legacy of shattered landscapes and shattered lives. Restitution, I would submit, must be made. The wrongs of the past 

have begun to be corrected, but the job is by no means completed. 

Today then, with the same conviction as we embarked upon in 

the aftermath of the Buffalo Creek disaster in ’72, I join those who 

6

call upon this Congress to fulfill the promise made in that landmark ’77 legislation to reclaim Appalachia, to restore her lands and 

waters and to bring them back to productive uses by reauthorizing 

the Abandoned Mine Reclamation program, to reclaim those shattered landscapes, many of which pose a threat to human health 

and safety. 

Today then, with the same conviction a former generation 

showed in places like Blair Mountain in 1921 or more modern 

times such as the 1989 labor dispute with Pittston Coal in the Virginia and West Virginia coal fields, with that same conviction I join 

those who call upon this Congress to keep the promise made by the 

Federal Government to our Nation’s coal miners by moving upon 

remedial legislation to salvage the health care of some 50,000 retired coal miners and their dependents, to reclaim lives, many of 

which have been shattered by Black Lung Disease, now that they 

are in their hour of need. This is the restitution about which I 

speak. 

We as a Nation owe it to them to move on legislation to finish 

the job of reclaiming all remaining high-priority abandoned coal 

mine sites, and we owe it to them not to abandon the coal miner 

while engaged in that pursuit. The eyes of the coal field communities and coal mining families are upon us this day. 

So to this gentleman from West Virginia this is a matter of justice. It is a matter of human dignity. It is a matter of respect. It 

is one which I shall never flag nor fail in efforts to accomplish. 

I appreciate your help in this effort, Madam Chair. Thank you. 

Mrs. CUBIN. Thank you, Mr. Rahall. Certainly we share the same 

goals in our efforts here. 

You heard the buzzers go off. Unfortunately, we have a series of 

votes that will last about 2 hours. I really regret that. The best 

that we can do I think is just go ahead and recess now. Mr. Holden 

and Mr. Kanjorski, do you want to go ahead and do your 5 minutes 

testimony or would you rather come back? 

Mr. KANJORSKI. I would rather come back. 

Mrs. CUBIN. All right. 

Mr. HOLDEN. Madam Chairwoman, if I could briefly summarize 

my testimony, because I have a Conference Committee meeting in 

2 hours when you are going to reconvene. 

Mrs. CUBIN. That would be great. The Chair recognizes Mr. 

Holden. 

STATEMENT OF HON. TIM HOLDEN, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF PENNSYLVANIA 

Mr. HOLDEN. Thank you, Madam Chairwoman and Mr. Rahall. 

Thank you for allowing me to participate in this hearing today and 

to testify about this problem that we are facing in many areas 

across the country, our abandoned mine land reclamation. 

Madam Chairwoman, as you mentioned, and Mr. Rahall mentioned in your opening remarks, this is a problem that needs to be 

addressed, that the formula is flawed, that the appropriators are 

not using the funds for its intended purposes and that is true in 

many areas of the country, but it is certainly true in the Commonwealth of Pennsylvania. 

7

The Commonwealth of Pennsylvania has a several billion dollar 

problem with abandoned mine reclamation and acid mine drainage 

that is strangling our ability to clean up our environment and to 

attract industry into the coal regions of Pennsylvania, particularly 

the anthracite coal regions of Pennsylvania, where Mr. Kanjorski 

and I are proud to reside and to represent the good hard-working 

descendants of the people who really worked to fuel the industrial 

revolution in this country and to give us the resources to win World 

War II. 

As a result, Madam Chairwoman, as you mentioned in your 

opening remarks, in the last several decades the production of coal 

in this country, whether you get the resources or whether the 

Federal Government gets the resources to address this problem, 

has shifted to the west, and as a result of that, our production is 

at an all-time low, and based on a formula, that is not being administered that Congress intended since 1977, and based on the 

lower production that has occurred in the anthracite coal fields, we 

are faced with a situation where we have over a billion dollars in 

problem areas that need to be cleaned up. The Commonwealth of 

Pennsylvania received approximately $25 million a year from the 

fund. The anthracite region receives about 25 percent of that. You 

do not have to be a graduate of the Wharton School to figure out 

how long it would take to clean up the abandoned mine problems 

that we face in the anthracite coal region. 

I realize that balance needs to be worked out here, that the west, 

particularly Wyoming, is doing an awful lot of the production right 

now, as you mentioned, Madam Chairwoman, 40 percent. But those 

of us feel that we paid the price and that our ancestors paid the 

price, and we are left with the scars. 

So as we move forward on this problem, we hope that you realize 

there needs to be balance, and that those of us in Pennsylvania 

and West Virginia, Kentucky, and Southern Illinois, we have problems too that need to be addressed. We look forward to working 

with you to try to find a balanced solution. 

My good friend and colleague, Mr. Kanjorski, has a plan that he 

has proposed and introduce, which I support, and I will allow him 

to elaborate on when you reconvene in a few hours, that talks 

about a bonding issue that might be a way to find a solution to this 

to be balanced and fair. I know, Madam Chairwoman, you and Mr. 

Rahall will take a very close look at that, and I thank you for doing 

that. 

Finally, as Mr. Rahall said in his opening remarks, we must not 

also be concerned with abandoned mine lands. We cannot abandon 

our miners. This Committee and this Congress, particularly 

through the leadership of Mr. Rahall, has stepped up to the plate 

and addressed the health and welfare needs of miners, particularly 

in the bituminous fields of this country, and I applaud their efforts. 

But those of us who represent the anthracite fields also have a 

concern that we ask you to consider. Our pension funds for the anthracite regions are all but in default. Our coal miners have seen 

their pensions go from $90 a month, which is nothing, to $30 a 

month that they receive in their pension plan. This is something 

that is underfunded. The production in the anthracite field is at an 

all-time low, as I mentioned. A compromise that could be worked 

8

out with industry and with United Mine Workers seems to be not 

achievable because of the low production. So I ask again, as you review not only the abandoned mine land issue, that when you review what needs to be done with the health and welfare, you take 

an opportunity to look at the serious problem that the anthracite 

coal miners are facing, the retirees, when they have their pensions 

reduced to $30 a month. 

I thank you for the opportunity to present this testimony. 

[The prepared statement of Mr. Holden follows:]

Statement of The Honorable Tim Holden, a Representative in Congress 

from the State of Pennsylvania 

Thank you Ms. Chairman, members of the Committee for holding this hearing 

today. I appreciate the opportunity to testify about the importance of the abandoned 

mine reclamation fund. This fund is the major source of Federal funding for mine 

reclamation, and while it’s important we reauthorize it, we must also correct the 

imbalanced distribution of funds back to the states. 

Since 1977, the fund has helped improve the quality of life in and around the coal 

regions. The Surface Mining Control and Reclamation Act (SMCRA) created the 

Abandoned Mine Reclamation Fund and granted the Office of Surface Mining (OSM) 

the authority to collect fees. Income to the fund is generated by today’s mine operators on every ton of coal they mine—ranging from 10 to 35 cents a ton. The program 

has collected almost $7 billion over the past 26 years. Pennsylvania receives an average $25 million each year to address a $4.6 billion problem; over $1 billion alone 

is needed for the anthracite region. At that rate, it will take 200 years to fix the 

most serious problems. 

We have successfully used the fund to clean up toxic mine water, put out mine 

fires, and eliminate other abandoned mine hazards, but much work remains to be 

done. The primary goal of the program was to fund projects on a priority basis; however, the current formula holds us back from doing so. Almost 80% of at risk areas 

have not been safeguarded. The main problem is the majority of grants distributed 

to states are based on current rather than historic production; those who produce 

the most coal are receiving the most money. When the program began in 1977 that 

seemed fair to most Eastern states since production was high enough to guarantee 

that states would receive enough money to tackle abandoned mine problems. However, coal production has rapidly shifted westward leaving approximately 94% of 

abandoned mine problems behind. 

Pennsylvania has produced more coal than any other state and consequently, is 

home to 1,700 abandoned mines. Statewide, these mines encompass more than 

189,000 acres, are distributed in 10 of 19 congressional districts, 44 out of 67 counties, and in 1/5 of our municipalities. In my district alone, Schuylkill and Dauphin 

counties total nearly 25,000 acres. There are 47 coal fires in the state (17 in the 

anthracite region) and over 3,100 miles of stream affected by abandoned mine drainage. To date Pennsylvania has received $587million of which $275 million has been 

spent in our anthracite district- we have some fundamental problems with the way 

this formula is written. 

Reauthorization presents us with an opportunity to get back to the objective—reduce the health and safety hazards posed by abandoned mines. We should adjust 

how the fee is collected and direct resources to where the problems are. Right now 

there is unspent funds in the trust and some of the money allocated to states is 

being used for projects other than coal. 

Much has changed in past 25 years and the current structure is no longer capable 

of moving us in the right direction. Reclaiming our abandoned mine legacy requires 

multiple tools. My colleague, Representative Kanjorski has been working on this 

issue for some time and has introduced H.R. 419 to move us forward. Similarly, 

Pennsylvania taxpayers have been doing their share to help shoulder the burden of 

cleaning up our abandoned mine lands. But we cannot do it alone. 

Public health and welfare, restoration of the land, and cleaning of polluted 

streams requires modification and reauthorization of the program. At the same 

time, we need to ensure that funds can continue to be used to address the problem 

of abandoned mine drainage. Failure to act keeps us from achieving total program 

success. 

9

Mrs. CUBIN. Thank you, Congressman Holden. I don’t disagree 

with you that your ancestors suffered a lot and gave a lot, and this 

problem is a national problem, and it requires a national solution. 

In saying that, I just feel that one State shouldn’t bear 40 percent 

of a national solution, and absolutely this Subcommittee won’t pass 

out any legislation that doesn’t take care of the retired miners and 

their benefits. 

I don’t have any questions for Mr. Holden. 

Mr. Rahall? 

Mr. RAHALL. No questions, Madam Chair. I understand Mr. 

Kanjorski wants to come back. 

Mr. KANJORSKI. I could give my statement now. 

Mrs. CUBIN. That would be great. 

STATEMENT OF HON. PAUL KANJORSKI, A REPRESENTATIVE 

IN CONGRESS FROM THE STATE OF PENNSYLVANIA 

Mr. KANJORSKI. Madam Chairman and Mr. Rahall, my good 

friend, I am not going to go over a lot of what Tim has talked 

about. 

Pennsylvania has a particular problem. It has 250,000 acres of 

mine-scarred land. It has 100 million cubic feet of burning coal 

refuse, and it has 3,000 miles of contaminated streams. The problem in Pennsylvania is represented in 44 of the 67 counties, or twothirds of the Commonwealth have these problems. 

To date we have had reclamation work, and the abandoned mine 

program has helped, but in a State the size with the proportions 

and the problems that we have, it is anticipated that even if all the 

funds received were paid out on the proportions they are presently 

allocated, it would take more than 200 years to meet the priority 

one and priority two problems. I am an optimist, but I do not think 

we are going to be around that long, and I am sure we are going 

to lose the great assistance of Mr. Rahall sometime during that 

200-year period. 

So what I have looked at is that we really cannot authorize funds 

that long and provide appropriation that long. 

What we should do is step back and look at this as a national 

problem. It affects 126 congressional districts in the United States. 

It is literally millions of acres of land and problems and streams 

that are polluted. Rather than trying to put this on the back of the 

existing coal mining industry, a good portion of which comes from 

Madam Chairman’s State; these companies had nothing to do with 

this—they were not even in business when our problems existed 

pre to 1977. Then the next solution could be, should we look at the 

people in those locales to do something about it? 

The fact of the matter is most of this devastation goes back generations, and the existing populations of these areas, one, are used 

to them; they don’t really see the deterioration and the ravages; 

two, they have never gained anything from them; if you will study 

the population dynamics of the area you will find that they are 

generally an elderly population area, heavily senior citizens, who, 

the last thing that they need is a local tax burden to try and solve 

a problem. So it is not going to be done on a local level. 

On a State level, it is bifurcated insofar as major population centers such as Philadelphia, Pittsburgh in Pennsylvania, have very 

10

little identity with the coal fields of Pennsylvania and can put 

blinders on, and I think that is true to a lot of coal-mining States. 

So what I did is I accepted the proposition that Mr. Holden 

made, that this was to fuel the American industrial revolution and 

the energy this country needed. That is why we suffer these ravages which are sins of more than a century. It should take the entire base of the United States to help pay for the problem. Now, 

we are not going to get that in authorization or appropriated funds, 

but we can accomplish it if we pass a bill which authorizes tax 

credits to be sold on tax credit bonds to the existing market, that 

in lieu of paying interest on the bond issue, the buyer of the bond 

issue would have the right to take a tax deduction. 

By doing that we could assemble a fund of money over the next 

30 years of more than $20 billion— 

Mrs. CUBIN. Mr. Kanjorski, would you mind coming back, because I do have a series of questions that I would like to ask you 

about your bonding proposal? 

Mr. KANJORSKI. Absolutely. 

Mrs. CUBIN. Have you completed enough testimony that we can 

go vote now? 

Mr. KANJORSKI. We can now. 

Mrs. CUBIN. Because I really do have some questions. 

Mr. KANJORSKI. Very good. 

[The prepared statement of Mr. Kanjorski follows:]

Statement of The Honorable Paul E. Kanjorski, a Representative in 

Congress from the State of Pennsylvania 

Ms. Chairwoman, I welcome this opportunity to testify before you on an issue that 

has long been of particular concern to me and to the citizens of Pennsylvania whom 

I represent: reclamation of abandoned mine lands. 

Pennsylvania has historically been one of the country’s largest coal producing 

states. Coal mined in Pennsylvania fueled the industrial revolution and two world 

wars. However, much of this mining was done prior to 1977 when the Surface Mining Control and Reclamation Act was passed. Especially in the anthracite region of 

eastern Pennsylvania, most of these coal mines are no longer producing and the 

companies that mined the land are long gone. 

As a result, Pennsylvania has over 250,000 acres of abandoned mine lands, 100 

million cubic feet of burning coal refuse and 2,500 miles of contaminated streams 

and rivers. These problems affect 36 of Pennsylvania’s 67 counties. Pennsylvania’s 

Department of Environmental Protection (DEP) estimates that it would cost approximately $4.6 billion to reclaim Pennsylvania’s Priority 1 and Priority 2 sites. 

Priority 1 areas are those that pose an extreme threat to the health and safety of 

residents and Priority 2 sites are those which may have adverse effects on public 

health, safety and general welfare. In addition, DEP estimates it would cost $15 billion to clean up all of Pennsylvania’s abandoned mine lands and to clean all of 

Pennsylvania’s contaminated waterways. 

Areas suffering from abandoned mine problems are often economically depressed. 

These environmental problems retard development because companies are hesitant 

to move into locations where black culm banks consisting of coal waste litter the 

area and streams run orange with the mineral discharge from the abandoned mines. 

Instead, pristine lands are developed, often at the expense of conservation efforts 

or recreational needs, rather than degraded sites, many of which are often located 

in population center with extensive infrastructure likes roads and sewers in place. 

The continued presence of devastated land negatively impacts a community’s 

attractiveness and viability, decreases nearby property values, and prevents the development of the community’s tax base. Economic development leaders in my district tell me that often, corporate executives have considered moving into my district 

but after seeing the nearby mine lands, they instead choose to move into areas with 

fewer environmental problems. 

In addition, these former mine lands are safety hazards. Currently, there are 47 

mine fires burning in Pennsylvania. Just last week I learned of a surface mine fire 

11

in my district that was started when a culm bank caught fire from a burning trash 

pile. This is most unfortunate because many of these fires could be prevented if 

proper reclamation activities where undertaken. 

Beyond the environmental concerns, failure to address this devastation amounts 

to a public health problem. For instance, the Office of Surface Mining (OSM) 

estimates that in Pennsylvania alone over 1.6 million people are potentially at risk 

from mine hazards. OSM defines a person as being at risk if they reside within one 

mile of a Priority 1 or Priority 2 site. Every year dozens of people are either injured 

or killed by exploring or playing in abandoned mines. By reclaiming these abandoned mines, many of these accidents could be prevented. 

Unfortunately, an appropriate amount of funding is not being allocated for the 

purpose of reclaiming these mine lands and contaminated waters. Currently, the 

Abandoned Mine Land program is the only source of Federal money available for 

reclaiming abandoned mine lands. While the AML Fund provides much-needed resources for redeveloping devastated coal mining land areas, these funds have proven 

inadequate to address the huge amount of health, safety and environmental problems of abandoned mine land areas. 

The AML fund generally only addresses Priority 1 and Priority 2 problems. In addition, the AML fund only cleans the areas to the point where they are no longer 

a health and safety threat. The program does not restore the land to the point 

where it can be reused for development purposes. In 2002, Pennsylvania only received $24.7 million from the Abandoned Mine Land 

Fund. With the current rate at which the AML program is working, it is estimated 

that it will take over 200 years for all of the nation’s abandoned coal land areas 

and contaminated streams and rivers to be reclaimed. Areas affected by minescarred lands cannot afford to wait that long. 

That is why I introduced the Abandoned Mine Land Area Redevelopment Act earlier this year. This bill, H.R. 419, would create special tax credit bonds for the reclamation of abandoned mine lands. These bonds, entitled ‘‘Qualified Abandoned 

Mine Land Area Redevelopment Bonds,’’ are similar in structure to the Qualified 

Zone Academy Bonds enacted in 1997 for school construction. 

The tax credit system established by this legislation would enable regional organizations, non-profit organizations, or state and local governments to create a comprehensive plan for reclamation and redevelopment of an abandoned mine land 

area. The interested party would then submit the plan to EPA for approval. Upon 

approval, the organization would issue a bond to a qualified purchaser who would 

receive a tax credit in lieu of interest. A portion of the proceeds of the sale of the 

bond would be put into a sinking fund. At the end of thirty years, the term of the 

bond would be fulfilled and would be returned to the purchaser. The remainder of 

the proceeds from the sale of the bonds would then be used to implement a comprehensive reclamation and redevelopment plan. 

According to the Joint Committee on Taxation, the estimated cost of the legislation for the first ten years is $7 billion. This cost represents the amount in lost revenue to the Federal Government. Therefore, at a cost of less than $1 billion per year 

we could reclaim all of the abandoned mine lands in the country. This proposed system would allow communities afflicted by abandoned coal lands to design, undertake 

and oversee their specific clean up efforts without reliance on Federal appropriations and direction from government officials completely removed from the region 

and the problem. 

In my district, a local non-profit organization, the Earth Conservancy, provides a 

blueprint for other community organizations interested in undertaking reclamation 

projects. The Earth Conservancy was created for the purpose of purchasing and reclaiming about 17,000 acres of former coal land. The organization hired a worldclass planner to help design their reclamation plan and created a 40-person board 

with representatives from the community, including business, environmental and 

tourism leaders. The organization held monthly public meetings for a year to gain 

insight and input from the community to determine the best uses for the land. Finally, the Earth Conservancy completed their plan, which included keeping twothirds of the land as green space. To date, the Earth Conservancy has reclaimed 

over 800 acres of abandoned mine land. 

My bill would complement the current AML program by empowering communities 

to manage their own reclamation efforts with more flexible dollars which could be 

used to reclaim the degraded land and water which does not meet the stringent requirements of Priority 1 and 2 classification. The assurance of guaranteed long-term 

funds allows more comprehensive reclamation so that regions can be remediated holistically. 

This program would spur economic development in America’s coal regions by making more land ready each year for reuse and development. That is why the National 

12

Association of Realtors and the Appraisal Institute recently sent me a letter in support of this legislation. The National Association of Realtors (NAR) and the Appraisal Institute support this bill because the clean up of old mine sites is crucial 

to the growth of the nearby communities. In addition, they recognize that the clean 

up activities themselves will provide jobs in areas where new opportunity is needed. 

As you may know, the National Association of Realtors has been instrumental in 

advocating important economic development legislation and I appreciate their support of this matter. 

Therefore, because of this proposal’s potential to address problems of environmental degradation due to mining practices, I urge the Committee to consider including my legislation in the overall reauthorization of the Surface Mining Control 

and Redevelopment Act (SMCRA). I feel that by including this language, the goal 

of reclaiming our Nation’s abandoned coal lands and cleaning the resulting contaminated waterways can be met in this generation. It is important that these areas be 

cleaned now so that the future generations are not affected by this environmental 

degradation. 

In addition, I encourage the Committee to keep the needs of Pennsylvania in mind 

when reauthorizing this bill to ensure that the areas that fueled our Nation’s industrial revolution continue to receive a fair amount of funding from the AML Fund. 

I also urge the Committee to consider ways to ensure that a larger portion of the 

fund is used for reclamation of these areas and less is lost due to administrative 

fees. 

Finally, I encourage the Committee to consider the comments from the Secretary 

of the Pennsylvania Department of Environmental Protection. I am submitting into 

the record her letter that outlines the needs of Pennsylvania and the steps which 

should be taken in reauthorization of the Surface Mining Control and Reclamation 

Act. 

Thank you for the opportunity to testify and I appreciate your consideration of 

my remarks. 

[Letters submitted for the record by Mr. Kanjorski follow:]

13


88532.012
14


88532.013
15

Mrs. CUBIN. We will recess until 4 o’clock. 

[Recess.] 

Mrs. CUBIN. The Subcommittee will please come to order. I would 

like to thank you for coming back, Congressman Kanjorski, and I 

just have a few questions for you. 

As you know, I am a cosponsor of your bill, and I like the notion 

of bringing additional money in for reclamation, and especially 

with the focus on local control. The projects addressed in your bill 

would be more detailed than those that are funded by the AML 

today. How do you envision AML Area of Redevelopment Act working in tandem with the priorities of the AML program? 

Mr. KANJORSKI. Well, I think it is the very essence of the difference that we have to strike. First of all, let me say that I support the refunding and reauthorization of the abandoned mine land 

program. However, if you work with that program and with the administrators of that program, I think they are all frustrated because it only addresses Priority One and Priority Two questions. 

There are limitations of the use of money of how even the recycled 

or reclaimed land can be used. The purpose of my bill is to put a 

challenge to local communities, authorities, regional areas, to look 

at the holistic approach to land reclamation and water cleanup, 


88532.011
16

and to know for certain that once they develop a plan or scheme 

that will take 20 or 30 years to complete, the funds will be in place 

and of a known quantity, so that they can proceed with great efficiency to accomplish the totality of the problem. 

What we have now under the abandoned mine money is that we 

run into situations that, one, the money gets diverted for special 

purposes, for instance, mine fires, and as a matter of fact I have 

a photo to show you here that is very representative of my area, 

where just no more than a year ago, suddenly there is this huge 

mine fire. As you can see, it is a coal bank that has probably 10 

to 20 million tons of carbonous material. It was set on fire on the 

surface because of waste product being dumped there, and was 

caused by either spontaneous combustion or mischievous combustion, we don’t know. That mine fire took probably a year to extinguish at a cost of several millions of dollars, which were diverted 

funds really from these projects that wouldn’t go for reclamation. 

When we get all done, we still have the same coal bank there, we 

still have the same disaster there, and we have no reusable land. 

Whereas, if we take two, 3 years in every year to study in totality 

the land reclamation—and take the example of Eastern Pennsylvania that Mr. Holden referred to, the anthracite region. We conceptualize that we have about 110,000 acres located in some 14 

counties. We will do a comprehensive watershed study, and it falls 

into several watersheds, the Susquehanna or Chesapeake and the 

Delaware. So the entire area has to be mapped out with a GIS system. We have already started to implement that sort of thing. 

What that means is we will not only clean up the land at a significantly reduced cost, because on average the Abandoned Mine 

Land Program spends about 34 percent on engineering costs. By 

the effective use of GIS system design for reclamation we have 

some detailed information that suggests that we can drop that figure by at least half, if not around 12 percent. That is a significant 

savings and hundreds of millions of dollars just in an area like 

mine. Across the country it represents billions of dollars in saving. 

Two, you will do it in a prioritized way. Because you are going 

to clean up the land and the water, rather than starting where the 

rivers get polluted to do some reconstruction work, you are going 

to start and look at the outlying tributaries that flow through land 

that has to be reclaimed an in fact reclaim that land. Second, when 

you reclaim that land you are not going to do it in accordance with 

the standards today. First and second priority under the Abandoned Mine Land Program doesn’t allow for compaction, for instance. So that if you have a huge hole— 

Mrs. CUBIN. Doesn’t allow for what? 

Mr. KANJORSKI. Compaction of the land. So that if you have a 

huge void of 100 million cubic yards, you fill it in at a tremendous 

cost, but if while you were filling it in you compact it at four 6-

foot levels, that land immediately becomes reusable for industrial, 

commercial or real value. If you just fill it in and allow nature to 

compact, it can’t be used for 50 or 100 years. 

Then when we finally get done and we fill these holes in, we only 

require a half inch to an inch of topsoil on top, enough to grow 

grass. Well, quite frankly, all of Eastern United States, particularly 

Pennsylvania, has a history of one of the finest hardwood areas of 

17

the country. For those purposes we should study that and try, in 

the development of our comprehensive plan, to those areas that can 

sustain hardwood forests, make sure there is enough under-soil to 

facilitate the regrowth of the natural forest there. We are doing 

this for all time immemorial really. 

Now, the final real benefit of this type of program, particularly 

in the eastern fields of the United States, if you look at land that 

was to be reclaimed—can we have that one site—if you reclaim this 

land, you will find if you study the land and the map of the land, 

most of the mining lands in the Eastern United States and eastern 

Pennsylvania are right where the dense populations live, right 

where the railroads, highways and utilities exist. So you take a reclamation area such as this, you recover it and compact it and make 

it immediately recyclable and reusable for, for instance, an industrial park. That way, when you need a thousand-acre industrial 

park, you don’t have to go out and get pristine farmland and convert it to an industrial park and then have the Commonwealth and 

the Federal Government pick up all the expense attendant to putting in highways, utilities and other infrastructure. In fact, you are 

right in a site where all of those things exist now, interstate highways, utilities, all the structures are there, so that you are recapturing some of the infrastructure money that we don’t get counted 

in through the cost of land reclamation and the value of land reclamation. When you get all done, you have taken and recycled the 

land for all of its purposes. 

If you do this holistically, comprehensively, you will reclaim the 

land and you will, by formula, you will reclaim the acid mine 

drains. Let’s show the Chairman what a good nice fishing stream 

in northeastern Pennsylvania looks like. I hope you can see it from 

there. It will have at least a dozen or two tires, and it has an orange, beautiful orange shade to it, even though it is water, it is 

also orange in color range here. We find that acid mine drainage. 

All the water that lands on the surface of this untreated, unclean 

land, exacerbates the sulfurs and the irons that are there, drains 

them into the creeks, eventually drains them into the major rivers. 

In our area it is the Susquehanna River, and then drains that river 

down into the Chesapeake Bay about 150 miles south, giving us 

the distinct honor, to 20-mile stretch of the Susquehanna River 

that is encompassed with a major part of this surface mining problem is the major polluter, manmade polluter of the Chesapeake 

Bay. We are spending hundreds of millions of dollars to clean up 

the Chesapeake Bay, and nobody is walking upstream 150 miles 

and saying, gee, if we spent several hundred millions of dollars to 

clean up the land, it would clean up the water, and therefore we 

would have a clean amount of water flowing into the Chesapeake 

rather than the largest amount of pollution flowing into the Bay. 

So I am asking the Committee to sit back and say, look, let us 

recognize authorizing the abandoned mine program or even expanding it, unless it is done with absolute continuity of funding—

and that we cannot guarantee because it is an appropriation 

process—when environmental interests and pressure groups are 

hot, the money is there. When we run into deficit and the monies 

are needed for other things, they are traded off for other things. We 

18

know that is going to happen. We are in that process right now of 

getting little of our money back. 

If we do it through the tax credit bond issue, when we put our 

comprehensive program to clean up 110,000 acres of the anthracite 

fields, we will have driven a comprehensive program to clean up all 

the land, clean up all of the water, put in the infrastructure necessary for it to develop. With one full swoop with an expenditure 

of, in that area, $2 billion over 30 years, we never have to come 

back, and we have literally returned the land to usability as it was 

prior to mining practices. If we take that example and apply it 

across the country, that can happen in every area. What we have 

already started in our area is a organization we started about 10 

years ago called the Earth Conservancy, where we acquired 17,000 

acres of mine lands. Over the last 10 years we have designed, studied the reclamation of it, and started to reclaim the land ourselves, 

and we find out that we make reclamation of land there almost 

costing nothing, because what we are able to do is plan the cost of 

returning the land and reclaiming it, and also getting some of the 

product value out of the materials that are on the land. 

When you work in that multi-faceted way, holistically, it is 

cheaper, more efficient, more effective, and the beginning and the 

end are both seen. 

Mrs. CUBIN. Thank you very much. 

Do you have any questions, Mr. Rahall? 

Mr. RAHALL. No questions. 

Mrs. CUBIN. Thank you very much, Congressman Kanjorski, and 

as we move forward we certainly will take all of this into consideration. Thank you. 

Mr. KANJORSKI. Thank you, Madam Chairman. 

Mrs. CUBIN. Now I would like to call the next panel for their testimony. We just have one person. Jeff Jarrett, the Director of the 

Office of Surface Mining. 

Mr. Jarrett, it is the policy of the Committee this year to swear 

in the witnesses, so if you wouldn’t mind to stand and raise your 

right hand. 

[Witness sworn.] 

Mrs. CUBIN. Thank you for being with us today. Please accept my 

sincere apology for keeping you waiting for 2 hours. We have important business going on, but we are having trouble getting there. 

So I would like to recognize you for 5 minutes, and look forward 

to your testimony. 

STATEMENT OF JEFFREY D. JARRETT, DIRECTOR, OFFICE OF 

SURFACE MINING RECLAMATION AND ENFORCEMENT, U.S. 

DEPARTMENT OF THE INTERIOR 

Mr. JARRETT. Thank you, Madam Chairwoman, and distinguished members of the Subcommittee. Thank you for the opportunity to participate in this hearing and to discuss the important 

issue raised by the approaching expiration of OSM’s authority to 

collect abandoned mine land fee. 

As you know, our fee collection authority is scheduled to expire 

in September 2004. Unfortunately, despite the many accomplishments of this program, the job isn’t finished. More than $3 billion 

worth of priority one and two, health and safety coal problems still 

19

remain. We have another $3.6 billion worth of identified priority 

two coal problems affecting the general welfare of individuals in 

the coal fields and numerous lower priority environmental coal-related problems. 

Even if we use all the collections received between now and September 30th of 2004 when the fee will expire, the unappropriated 

balance of $1.5 billion, we will still be left with about $1.8 billion 

worth of health and safety-related problems as well as the other 

general welfare and environmental problems. 

With today’s ever-expanding communities, these sites are not all 

in some out-of-the-way corner of the map. A recent study conducted 

by OSM estimated that 3-1/2 million Americans live less than one 

mile from a priority one or priority two health and safety hazard 

created by abandoned coal mines. 

In order to finish the job Congress gave us to abate the health, 

safety and environmental problems left behind by mining that occurred before SMCRA was passed, the Bush administration fully 

supports the reauthorization of the AML fee collection authority. 

For some time now I have been discussing reauthorization with 

a broad range of stakeholders. Those I have talked with agree that 

abating AML hazards is a job that needs to be done, so there is 

substantial agreement that the AML fee collection authority should 

be reauthorized. There is also substantial demand that fundamental changes be made to the existing structure of the program. 

The universe of proposed modifications differ as much as the stakeholders who support them. Nevertheless, there are themes that 

have emerged from our discussions in which I am confident you 

will have to grapple with as you craft legislation to finish the job. 

The first and clearest theme to emerge was the call for the wise, 

efficient and effective use of AML funds collected. We took a pretty 

hard look at how we might be able to accomplish more reclamation 

with the funds being allocated, and we devised several promising 

program enhancements, such as providing AML fee credits and 

bond credits for remaining sites, requiring State programs to operate their own AML emergency program, redistributing RAMP 

funds to the State grant program and avoiding administrative duplication with respect to accounting and fee collection activities. All 

of these enhancements are aimed at leveraging the dollars available to this program. 

When we looked closely at the program we found a fundamental 

imbalance or tension between the goals established by SMCRA and 

the way funds from the AML program are required to be allocated 

by SMCRA itself. I am convinced that the ability of the AML program to meet its primary objective of abating AML problems on a 

priority basis is being hindered by our statutory allocation formula, 

which results in a progressive distribution of resources away from 

the most serious AML problems. 

The reason is quite simple. On a national average and over the 

life of the program, money must be allocated to States and tribes 

from the State share accounts and the historic production account 

at a ratio of 2-1/2 to 1, that is, only 29 percent of the total national 

grant amount is distributed among the States based on historic 

production which has a direct correlation to the magnitude of the 

AML problem. The majority of the grant dollars, 71 percent of the 

20

total amount, is distributed among the States and tribes based on 

fee income generated from each, even though there is no relationship between the State share portion of the grant and the magnitude of the AML problem. 

I would like to direct your attention to the flip chart to explain 

why the allocation formula has become even more counterproductive in recent years. 

Based on historic production records, we know that 94 percent of 

the AML problems are in the eastern United States. The chart 

shows how the fee income demographics have changed over time. 

The chart reflects the general shift in coal production from the east 

to the west, and more significantly, a shift in the east from surface 

mine production to deep mine production, which is assessed at the 

lower AML fee of 15 cents per ton. 

Over the past 25 years fee income has shifted away from the 

areas with high historic production and into areas where there are 

fewer or no remaining AML problems. Because 71 percent of the 

total grant dollars is based on current production, there has been 

a corresponding shift of AML resources away from the areas with 

the most significant AML problems. 

The statutory schedule for allocation of AML resources, together 

with the changing demographics, has some significant consequences to the program’s primary objective of abating AML problems on a priority basis. 

First, as you can see on the next chart, which shows how many 

years it will take for each State to complete its high-priority 

projects, it results in there being no parity among the States and 

tribes in terms of the rate of AML reclamation. Today some States 

have completed reclamation on all abandoned coal mine sites, while 

others are still decades away from completing the most critical 

high-priority sites. It is distressing that the same law that demand 

States abate AML hazards within their borders on a priority basis, 

also prevents us from abating AML hazards nationally on a priority basis. 

The second consequence of the allocation formula and the changing demographics is illustrated on the next chart, which shows the 

decline in AML grant dollars being spent on priority abandoned 

coal mine reclamation. As you can see, from 1977 through ’93, 

about 99 percent of the State grant dollars was used to reclaim 

abandoned coal mine sites. 95 percent of that was directed to highpriority work. From ’94 through 2002, only 64 percent was used for 

high-priority work. This trend will continue. I want to be clear 

right now that the States with remaining high-priority sites still 

spend the majority of their money abating those high-priority problems. In order to finish the job in an efficient and effective manner, 

we must take advantage of this opportunity to make some fundamental changes in the law, to redirect and refocus the AML program toward health and safety hazards. 

The next critical theme that must be addressed has to do with 

the current, unappropriated State share balances in the AML fund. 

Since the enactment of SMCRA, 50 percent of the funds collected 

from a State or tribe have been allocated to that State or tribe’s 

State share account, as has the balance of the income been allocated to other appropriate accounts. Because historically, annual 

21

appropriations have been less than fee income, choices had to be 

made regarding which accounts to make distributions from. The result is that the historic production account has been held at a level 

unappropriated balance, while the unappropriated balance in the 

State share accounts has been allowed to grow. As you can see in the next chart, nearly $1 billion in the State 

share accounts remains unappropriated and unavailable for use by 

the States. About 50 percent of that balance is owed to States that 

have certified completion of all abandoned coal mine sites. As we 

grapple with the issue of how to allocate fee income from future 

collections, we need to address the issue of the unappropriated 

State share balance from past collections. 

The final theme that is an important part of the reauthorization 

equation is OSM’s obligation under the law to transfer the interest 

from the AML fund to the United Mine Workers Combined Benefit 

Fund. I understand that you will be receiving testimony later today 

on the needs of the CBF, but in summary, I will say that the interest earnings from the AML fund are currently insufficient to meet 

the needs of the unassigned beneficiaries. The CBF has reported 

that the needs of the unassigned beneficiaries are estimated to 

peak for next year at $88 million. Earnings from the AML fund in 

2002 were only $42 million, and earning rates have declined substantially since that time. 

While providing health care benefits is not part of OSM’s mission, providing interest transfers to the Combined Benefit Fund is 

an important obligation. 

We will continue to work on administrative issues to increase the 

interest earnings at the same time as we work to resolve the issues 

associated with the allocation formula and the unappropriated 

State share balance, we must be mindful of the potential impact 

any decision will have on the AML balance, and thus on the available interest for transfer to the Combined Benefit Fund. 

I greatly appreciate the time and attention that has been committed to these important issues by members of this Subcommittee, 

and while there are no easy answers, I believe that we can find 

common ground that will result in an efficient and effective program that refocuses reclamation toward the highest priority work, 

but yet addresses other commitments and obligations. 

I look forward to continuing to work with you to develop legislation to reauthorize the AML fee and get this job finished. 

[The prepared statement of Mr. Jarrett follows:]

Statement of Jeffrey D. Jarrett, Director, Office of Surface Mining 

Reclamation and Enforcement, U.S. Department of the Interior 

Madam Chairman and distinguished members of the Subcommittee, 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) authority to collect the Abandoned Mine Land fee. 

More than 25 years ago Congress passed the Surface Mining Control and Reclamation Act (SMCRA). At that time, Congress created the OSM to enforce the Act 

and authorized it to collect AML fees to finance reclamation of abandoned mine 

lands. 

The record of accomplishments for this program is impressive. Since 1977, the 

AML program has been responsible for the reclamation of thousands of acres of 

abandoned mine sites and the elimination of serious threats to public health and 

safety. Our partners in reclamation, the primacy states and Indian tribes, have done 

an outstanding job of reclaiming lands and waters damaged by past mining 

22

practices. Because Congress enacted SMCRA and has supported the AML program, 

living and working in the coalfields is safer and healthier than ever. 

As you know, our fee collection authority is scheduled to expire in September 

2004. Unfortunately, despite the many accomplishments of this program, the job 

isn’t finished. 

More than $3 billion worth of listed health and safety coal problems still remain. We have another $3.6 billion worth of identified high priority coal problems affecting the general welfare of individuals in the coalfields and numerous lower priority 

environmental coal-related problems. 

Even if we use all collections received between now and September 30, 2004, when the fee will expire, as well as the unappropriated balance of $1.5 billion, we 

would still be left with approximately $1.8 billion worth of health and safety related 

problems as well as other general welfare and environmental coal-related problems. 

These are not merely ‘‘ugly landscapes’’ that need to be made more attractive. 

These are serious, life threatening, high-priority hazards that have been around for 

more than 26 years and haven’t yet been cleaned up. 

Here are some examples of the dangers posed by some of these sites: 

• April 2001—On an abandoned mine property in Harlan County, Kentucky, two 

juveniles were riding All-Terrain-Vehicles (ATV’s) down a steep unreclaimed 

and unstable grade when one lost control of his ATV, overturned, rolled approximately 40 feet to the bottom of an inclined area, and died from his injuries. 

• January 13, 1996—A college student in Colorado was lead by curiosity into an 

abandoned coal deep mine where he died from lack of oxygen. 

• At Pennsylvania’s Muddy Creek East Reclamation project, a site where mining 

ended in 1952 leaving dangerous highwalls, hazardous water bodies and spoil 

material, 10 recorded deaths occurred at the site until it was finally reclaimed 

in 1998. 

With today’s ever expanding communities, these sites are not all in some out of 

the way corner of the map. A recent study conducted by the OSM estimated that 

3.5 million Americans live less than one mile from health and safety hazards created by abandoned coal mines. 

If we are to finish the job Congress gave us to abate the health, safety and environmental problems left behind by mining that occurred before SMCRA was passed, 

it is imperative that we reauthorize the AML Fee collection authority. The Bush Administration fully supports the reauthorization of AML Fee collection authority. 

For some time now I’ve been discussing reauthorization of SMCRA with members 

of Congress, coal industry representatives, state reclamation officials, and environmentalists. Those I have talked with agree that abating AML hazards is a job that 

needs to be done. Accordingly, there is substantial agreement that the AML Fee collection authority should be reauthorized. Many people also agree that fundamental 

changes must be made to the existing structure of the program. The universe of proposed modifications differs as widely as the stakeholders who support them. Nevertheless, common themes have emerged from my discussions. These themes present 

issues that Congress will confront as it crafts legislation to complete the cleanup 

and reclamation work begun under SMCRA. 

The Allocation Problem 

The clearest and most high priority theme to emerge from my discussions is the 

call for the wise, efficient, and effective use of the AML funds collected. We looked 

at how we might be able to accomplish more reclamation with the funds being allocated and we devised several promising program enhancements, including: AML fee 

credits for remining sites; bond credits for remining sites; requiring state programs 

to operate their own AML emergency programs; and avoiding administrative duplication with respect to accounting and fee collection. Each of these enhancements is 

aimed at leveraging the dollars available to this program. 

The reasons underlying why we are not accomplishing more with the funds being 

allocated are not related to malfeasance, misfeasance, or abuse of funds. Rather, 

there is a fundamental imbalance between the goals established by SMCRA and the 

way funds from the AML Program are required to be allocated under the Act. As 

a result, the ability of the AML Program to meet its primary objective of abating 

AML problems on a priority basis is being hindered by the statutory allocation formula, which results in a progressive distribution of resources away from the most 

serious AML problems. 

SMCRA requires that all money collected from tonnage fees assessed against industry on current coal production ($0.35/surface mined ton and $0.15/deep mined 

ton) be deposited into one of several accounts established within the AML fund. 

These accounts are discussed more fully below. Money in each of these accounts can 

be used only to accomplish the statutory purpose for which that account was 

23

established. Account funds that are not spent in any one year must remain in that 

account. Typically, money in one account cannot be transferred to another account 

or be used for any other purpose. 

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. 

The annual appropriated AML grants to states and tribes are derived from money 

from the state and tribal share accounts and money in the historic production accounts. On a national average, money is distributed to states and tribes from the 

state and tribal share accounts and the historic production account at a ratio of 2.5 

to 1. That is, 29% of the total national grant amount is distributed among the states 

and tribes based on historic production which has a direct correlation to the magnitude of the AML problem. The majority of the grant dollars, 71% of the total national grant amount, is distributed among the states and tribes based on income 

generated from each by current production. However, there is no relationship between the current production state or tribal share portion of the grant and the magnitude of the AML problem in that state or tribe. 

This statutory allocation schedule for AML resources has significant consequences 

to the overall program’s primary objective of abating AML problems on a priority 

basis. Specifically, there is no parity among the states and tribes in terms of the 

rate of AML reclamation. Today, some programs have completed reclamation on all 

of the abandoned coalmine sites or are working on low priority sites while others 

are still decades away from completing the most critical high-priority sites. 

This situation is dramatically illustrated in the attached chart which depicts one 

projection of how many years it will take for each state and tribe to complete its 

high-priority projects under the current allocation formula. It is clear that even 

though states and tribes substantially comply with the priority reclamation system 

established in SMCRA within their borders, there is no semblance to adherence to 

that priority system on a National basis. 

To understand the impact of the allocation system on the AML program, one must 

also understand the demographics of the AML problems and the changing demographics of AML fee income. Based on historic production records, we know that 

94% of the AML problems are in the eastern United States. The attached chart depicting the trends in AML fee collection shows how the fee income demographics 

have changed over time. The chart reflects the general shift in coal production from 

the East to the West. More significantly, it reflects a shift in the east from surface 

mine production to deep mine production, which is assessed at the lower AML fee 

of fifteen cents per ton. 

In the early years of the AML program, the fee income was generally aligned with 

the magnitude of AML problems—75% of the income was in the East where 94% 

of the AML problems existed, and 25% of the income was in the West where 6% 

of the AML problems existed. Correspondingly, the state and tribal share portions 

of the grants were generally being distributed in amounts roughly proportional to 

the AML problem, much like the historic production portion of the grants is intentionally distributed. Much was accomplished during those early years of the AML 

program. Over the past 25 years, fee income has shifted away from the areas with 

high historic production and into the areas where there are fewer or no remaining 

AML problems. Because 71% of the total grant dollars is based on current 

24

production, there has been a corresponding shift of AML resources away from the 

areas with the most significant AML problems. 

The chart depicting Reclamation Trends gives a clear picture of how all of these 

factors come together to impact the AML program’s ability to accomplish its primary 

objective. 

From the program’s inception in 1977 through 1993, about 99% of the state grant 

dollars was used to reclaim abandoned coalmine sites. Ninety-five percent (95%) of 

that money was used for high-priority AML reclamation. From 1994 through 2002, 

as current production shifted to regions with fewer AML problems, only 71% of the 

state grant dollars was used to reclaim abandoned coalmine sites, and only 64% was 

used for high-priority AML reclamation. This trend will continue into the future as 

more states that generate the fee income and are therefore entitled to higher percentages of the total grant dollars complete their high-priority AML work, but continue working on low-priority sites and other authorized projects. In order to finish 

the job in an efficient and effective manner, we must take advantage of this opportunity to make some fundamental changes in the law to redirect the focus of the 

AML program toward health and safety hazards. 

There are several other critical themes that are interwoven with the allocation 

issue that will also need to be addressed. 

Commitments made to states and Indian tribes under the current law 

Since the enactment of SMCRA, 50% of the funds collected from a state or tribe 

has been allocated to that state or tribe’s share account. A substantial portion of 

these accounts, however, has not been appropriated for the use of the states or 

tribes. Through the end of Fiscal Year 2002, $944,768,493 of state and tribal share 

accounts remains unappropriated. About one half of the unappropriated state and 

tribal share balances are owed to states and tribes that have certified completion 

of their abandoned mine sites. As we grapple with the issue of how to allocate fee 

income from future collections, we need to address how to deal with the unappropriated state and tribal share balances from past collections. 

Transfers to the United Mine Workers Combined Benefit Fund 

One final theme that is an important part of the reauthorization equation is the 

OSM’s obligation under the law to transfer the interest from the AML Fund to the 

United Mine Workers Combined Benefit Fund (CBF). I understand that you will be 

receiving testimony later today on the needs of the CBF for unassigned beneficiaries, a long-standing Federal responsibility. The interest earnings from the AML 

fund are currently insufficient to meet the needs of the CBF. For 2004, for example, 

the needs of the unassigned beneficiaries of the CBF are estimated to peak at $88 

million. Actual interest earnings from the AML fund for FY 2002 were only $43 million, and interest rates have declined since that time. 

It is important to note that, should the AML Fee collection authority not be reauthorized, § 402 (b) of SMCRA obligates the OSM to establish and collect a fee at a 

rate sufficient to continue to provide for interest income transfers to the CBF. While 

we are hopeful that the AML fee will be re-authorized, in order to have the necessary regulations in place should the authority expire, we would have to start a 

formal rule-making process later this year. Later this summer, I anticipate publishing an advance notice of a proposed rule-making to begin this process and to ensure that we can continue to fulfill our obligation to the CBF. 

This afternoon I have identified three themes that must be included in any 

SMCRA reauthorization proposal: addressing the allocation problem; addressing 

commitments made to states and tribes; and fulfilling obligations to the CBF. The 

difficult task for those who must develop proposals to address these themes is that 

all of the themes, and the stakeholders supporting them, are vying for the same 

available dollars. 

Conclusion 

I greatly appreciate the time and attention that has been committed to this important issue by members of this Subcommittee. While there are no easy answers, 

I believe that we can find common ground that will result in an efficient and effective program that refocuses reclamation towards the highest priority work, yet address our commitments and obligations under SMCRA. I look forward to continuing 

to work with you to develop legislation to reauthorize the AML fee and get this job 

done. I would be happy to answer any question you might have at this time.

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Mrs. CUBIN. Thank you very much. I will begin questioning. How 

do you propose that we address getting the State share balances 

returned to the States to which they are owed? 

Mr. JARRETT. I think the first thing we have to do is to quit 

digging in the hole and address the allocation problem. If we can 

adequately address the allocation problem we would then have to 


88532.010
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deal with a finite universe of unappropriated State share balance, 

which by next September will be a little over $1 million. For the 

noncertified States, I think the best way to deal with that is first 

of all to make future distributions based on the magnitude of the 

problems, in other words, tie them in directly to historic production. 

As we make those distributions to the noncertified States, we 

need to discount the historic production distributions by an amount 

equal to the State share distribution. Currently we make the distributions based on current production from the State share accounts and from the historic production account, but when we 

make the historic production distribution we are not allowed to 

take into consideration the amount of money that a State already 

received from the State share account. 

So even if there is sufficient money coming from the State share 

account, we would still have to give that State its share of the historic production account, even though it may not be needed. 

Finally, I think we would need to pay the residual State share 

balances first. If we do not, we will end up in the situation in the 

future where other States certify completion of their AML problems, and we will be left with unappropriated State share balances 

for those States that we will have to deal with. 

I think the certified States are a little bit more difficult to figure 

out how to get that money back to them. Clearly, we need to establish some schedule for payout to those certified States, and my personal feeling is that we really need to find some new dollars to 

meet that obligation; otherwise, we are going to be competing with 

the very same dollars that we think we need to address the highpriority problems that still remain in other States. 

Mrs. CUBIN. We all know the money has to be appropriated, and 

as you suggested, there are competing needs, and, you know, the 

possibility of getting the money appropriated through Congress 

depends in large part on the administration and on the 

administration’s—the extent to which the administration will bring 

pressure on the Congress to get it done. Do you think the administration has the will to support an off-budget solution to the State 

share? 

Mr. JARRETT. As I am sure you know, generally, we oppose any 

mandatory appropriations, so there is a very high bar that has to 

be hurdled before— 

Mrs. CUBIN. I am not necessarily speaking of unappropriated 

funds. I personally kind of oppose that, too. But—well, go ahead. 

Mr. JARRETT. Well, I guess what I’d say is that while as a general matter the administration opposes any mandatory appropriation, I think we’re trying to deal with a very difficult issue. I think 

there are cases that could be made to support putting additional 

money into resolving this particular problem. So I guess my commitment would be that any mandatory appropriation or off-budget 

proposal, I would give very serious consideration to that proposal. 

If that entire package resolved the issues that we’re all trying to 

grapple with on this reauthorization package, then I would certainly want to vet that proposal with senior managers within the 

Department of Interior and OMB. 

32

Mrs. CUBIN. Does the administration have any suggestions where 

the money outside the AML Fund should come from? 

Mr. JARRETT. You mean to pay off the certified States or to pay 

the unappropriated State share balance? 

Mrs. CUBIN. Yes, that and continue, for example, the CBF and 

the other problems associated with the AML. 

Mr. JARRETT. Yes, I mean, this, maybe again, may sound a little 

bit crazy, but what we need is cash, not funds. We have the 

funds—the money has been credited to the AML Fund. What we 

don’t have is the actual cash to— 

Mrs. CUBIN. Then let me restate my question. Does the administration have any ideas where we can get the cash to take care of 

paying the certified States their share and the CBF problem? 

Mr. JARRETT. I do not have any specific ideas. I can tell you that 

I have been working very hard within the Department and with 

OMB. We have found a little bit of money, but not enough yet, and 

we’re continuing to look. I’m continuing to look for more money. 

Mrs. CUBIN. Does the administration think that the coal sold 

in—or considering the certified States, that the coal sold in those 

States continue to be assessed at the same fee when virtually all 

the reclamation will take place somewhere else? 

Mr. JARRETT. You mean the coal sold or the coal mined? 

Mrs. CUBIN. The fee. 

Mr. JARRETT. The fee’s based on production. 

Mrs. CUBIN. That is right, the fee is based on production. Should 

the coal sold in those States continue to be assessed at the same 

fee as coal produced in non-certified States? 

Mr. JARRETT. Coal produced... 

Mrs. CUBIN. At the same rate, let me say that. 

Mr. JARRETT. Yes, I could craft an argument for or against such 

a proposal, but, quite frankly, I’m a little bit troubled by that proposition. So maybe what we really need to do is take a step back 

and put this problem in perspective. 

For 200 years this country mined coal, and we know most of that 

coal was mined east of the Mississippi River. And that was very 

cheap coal, and all Americans benefited from that very cheap coal. 

Not just the people who lived in Pennsylvania or the people who 

lived in West Virginia, but people across this country benefited 

from that coal. That cheap coal was used to build steel, to build the 

bridges to get to the West, if you will. And I know we’ve had these 

arguments in the past about who should pay for it. But because we 

all benefited, I think that the price that we’re now paying to clean 

up from the aftermath of 200 years’ worth of mining also needs to 

be paid for by all Americans. And the real question that we’re grappling with is: What’s the best vehicle to allow all Americans to pay 

for— 

Mrs. CUBIN. So when you say all Americans, it wouldn’t mean 

that one State pay 40 percent. 

Mr. JARRETT. I think we have to take a look at who is really paying. You’re going to hear testimony later today from a utility. I believe that that utility company will testify that the 35 cents is embedded, if you will, in the price that they have to pay for that coal, 

and that it is further—those costs are passed on to the consumers. 

33

Mrs. CUBIN. But that isn’t answering my question. That isn’t 

answering my question. I agree with you this is a problem that 

requires a national solution. But the amount of money that is paid 

into the AML, 40 percent of it comes from one State. That doesn’t 

sound like a national solution to me. That sounds like the burden 

is being carried by one State. 

Mr. JARRETT. I understand that it looks that way. I guess what 

I’m saying, though, is that it is not—and in the case of Wyoming, 

it is not the administration in Wyoming who is paying that fee, or 

those operators who are mining in Wyoming paying— 

Mrs. CUBIN. But Wyoming is not getting its share. We don’t need 

to argue about this. 

Mr. JARRETT. Yes. I’m just saying— 

Mrs. CUBIN. But Wyoming isn’t getting its money, and, you 

know, if you want to make the point that it is a national problem 

and all Americans need to be part of the solution, then the 490,000 

people that live in Wyoming should not be burdened with the majority or a disproportionate share. Would you agree with that? 

Mr. JARRETT. I believe that I do not want to be in the business 

of collecting a fee in Wyoming, the State share portion, and then 

turning around and giving that same amount of money back to the 

State of Wyoming so that they can use it on something that has 

nothing to do with the Abandoned Mine Land Program. We 

shouldn’t be collecting it in the first place. 

But the point I’m trying to make is that I think that same argument can be made in virtually all of the States, whether they’re 

certified or not. And I guess I question whether or not certification 

is a good criteria to determine what AML fee rates ought to be. 

So I guess, you know, I mean, I think it would be worth pursuing 

the idea of eliminating State share contributions nationwide and 

then look at the contributions to the Federal pot of money that gets 

distributed based on need and adjust that rate to whatever level 

it needs to be so that we can get the job finished in a reasonable 

period of time. 

Mrs. CUBIN. Well, I have to suggest that I don’t even necessarily 

think that the coal industry, whether it is Western coal or Eastern 

coal, having agreed on the fact that we think this is a national 

problem, that it should necessarily be the coal industry alone that 

is responsible for cleaning up a national problem that is, like you 

said, 100 or 200 years old. I don’t see the rationale of why the coal 

industry should be paying the whole burden for a national problem, 

Eastern or Western coal. 

Mr. JARRETT. I guess what I’m saying is I would agree with that. 

I think the operators in Wyoming are no more or less responsible 

for the problems than the operators in West Virginia are responsible for the problems. And they’re no more or less responsible than 

anyone else who lives in this country. 

Mrs. CUBIN. And I think that is our challenge, to try to come up 

with something that is fair, that is more equitable than what we 

have now. I think we all agree on that. 

How do you propose that we provide money to the CBF in the 

future? 

34

Mr. JARRETT. Well, I don’t know that the interest earnings from 

the AML Fund can satisfy all of the needs for the unassigned beneficiaries— 

Mrs. CUBIN. It can’t. We know it can’t. 

Mr. JARRETT. —in the Combined Benefit Fund, and that seems 

to me that it is a problem. It is a longstanding commitment of the 

Federal Government to take care of that need, but the interest 

earnings from the AML Fund we know aren’t going to be sufficient 

to do that. It’s a problem that is begging another solution. 

Mrs. CUBIN. And do you intend to come up with any suggestions 

for that solution? 

Mr. JARRETT. We are not working on any solutions outside the 

context of the Abandoned Mine Land problem. My obligation is to 

do the very best I can in getting—making the interest transfers to 

the Combined Benefit Fund, but, you know, that is not an OSM 

program. We’re not in the business of providing health care benefits. 

Mrs. CUBIN. So, to your knowledge, is anyone in the administration looking for a way—because we know there is not enough 

money to fund CBF. Is anyone in the administration looking for a 

way to find money to fund that? 

Mr. JARRETT. Not to my knowledge. 

Mrs. CUBIN. OK. Thank you. 

The AML Fund is currently receiving interest at a little over 1 

percent. Is there any way to increase the interest that we earn on 

that fund? Once again, I realize that that is not your job to invest 

those funds. 

Mr. JARRETT. Well, it’s not—it’s the Treasury’s job to invest those 

funds, but I do have a lot to say about how those investments are 

going to work. It’s my responsibility to report to the Secretary of 

Treasury the amount of monies that I will need for immediate 

withdrawal and the amount of monies that can be invested for the 

longer term. 

When I started in this job, I found that OSM was using some assumptions about what monies might be needed for immediate withdrawal that I do not agree with. That was actually pointed out to 

me by the United Mine Workers. The bottom line is OSM was 

working on some assumptions that said, you know, it might just be 

possible that we’ll wake up tomorrow morning and find that some 

judge or Congress has ordered us to write a check for the entire 

$1.5 billion unappropriated in the fund; therefore, we have to keep 

those investments very liquid so that we don’t end up being in violation of anti-deficiency laws. 

Those assumptions I have changed, and we probably don’t need 

to get into the new assumptions that we have established, but we 

do have new assumptions that we’re working on right now. The two 

obstacles to actually making those investments are, No. 1, one of 

market timing. You’re correct, we’re making about 1.2 percent on 

our money right now, and I could probably double that amount by 

tying that money up in, say, a 4- or 5-year investment. But we believe, based on OMB projections, that if we wait until next year, 

we will be able to make substantially more than that. And while 

that’s a sacrifice for this year, in the long run we think we can 

maximize our investments by not tying up large blocks of money 

35

at 2 percent when, if we wait just a little bit, we can tie it up at 

3.5 or 4.5 percent. 

The other obstacle that we have right now is, while it has been 

strongly suggested to me that I should assume that the AML fee 

collection authority will be reauthorized, I should, therefore, tell 

Treasury that I have blocks of money available for long-term investments that, in fact, I don’t have yet because I’m not willing to 

assume that we’re going to have reauthorization of this fee collection authority. 

So once we get reauthorization behind us, that will free up some 

rather substantial blocks of money and make that available for 

longer-term investments. 

Mrs. CUBIN. One last question. What is your position on the 

Kanjorski bill that would allow Government-backed bonds to fund 

additional reclamation by the States? 

Mr. JARRETT. To the best of my knowledge, that bill has not been 

vetted with OMB. I have personally read that bill and analyzed it 

somewhat. I’m in favor of any program that will bring additional 

resources to the problem of Abandoned Mine Lands. What I particularly like about the Kanjorski bill is—and he said it when he 

testified better than I can, but the AML program has a focus on 

the Priority 1 and 2 sites. The Kanjorski proposal would actually 

bring some money to those sites, but in some of the lower environmental problems as well, it takes a more comprehensive approach 

to resolving the problem than what we have the ability to do in the 

AML program. And what I find particularly attractive about that 

proposal is that it doesn’t just deal with taking care of the environmental problems, but it actually promotes some economic development in some otherwise depressed communities. 

Mrs. CUBIN. Thank you. 

Mr. Rahall? 

Mr. RAHALL. Thank you, Madam Chair. As we are so late in this 

hearing today and I know several have waited a long time, I am 

going to be very brief. 

First, just a simple statement, Director Jarrett. I have been here 

a number of years and seen a number of Directors of OSM come 

and go, and I think one fact is pretty simple over those years: I 

don’t envy your job. 

With that, I do have two or three questions, all of which involve 

more technical facts and figures, which can just as easily be answered in writing. And I would ask unanimous consent that I submit those questions for the record and you respond to them in writing. 

Mrs. CUBIN. Without objection. 

Thank you very much, Mr. Jarrett. Also, I am sure other members of the Subcommittee will have some questions that they will 

send to you in writing, and the record will be held open for 10 days. 

Thank you very much for your valuable testimony. 

Mr. JARRETT. Thank you. 

Mrs. CUBIN. Now I would like to call the third panel forward: 

Cecil E. Roberts, president of the United Mine Workers of America; 

John Masterson, Counsel to the Governor of Wyoming; Murray 

Balk, Chief, Surface Mining Section of the Kansas Department of 

36

Health and Environment, Interstate Mining Compact Commission. 

If you would take your place at the table? 

Mr. RAHALL. Madam Chair, I would like to have the courtesy of 

introducing members from my home State of West Virginia at this 

point. I appreciate your giving me that opportunity. 

The first person I want to introduce is the first person on this 

panel, Mr. Cecil Roberts, who is the president of the greatest union 

on the face of the Earth, United Mine Workers of America. He is 

a sixth-generation coal miner and hails from my home State of 

West Virginia from a community called Cabin Creek, where he visits quite often and where his parents currently reside. He embodies 

the values which have made the Mine Workers the greatest union 

on the face of the Earth, and that is and has been the fact that 

he is in the forefront of fighting for the rights of his members, improving their working conditions, their general welfare, their 

health care, and their benefits. And I am proud that Cecil Roberts 

is a West Virginian, and I am proud myself to be an honorary 

member of the United Mine Workers of America. 

The second individual I will introduce is on the next panel and 

is still in the audience, but I would just like to introduce him at 

this time, and that is Dave Young, with the BCOA. The Bituminous Coal Operators Association has a long and storied past, but 

it essentially comprised of unionized coal companies for the purpose 

of negotiating labor agreements with the mine workers. Dave also 

hails from my home State of West Virginia, coming from our State 

capital, Charleston. And, frankly, under his leadership, BCOA has 

in my view put on a more human face, and it has exhibited a greater degree of sensitivity under Dave Young’s Chairmanship. 

The BCOA in the past, for example, would never have asked to 

testify at a hearing of this nature, and Dave is not only here today 

to testify but has been here all afternoon and listening to the testimony, and we certainly appreciate him as well. 

Thank you, Madam Chair. 

Mrs. CUBIN. Thank you. And it is my honor to introduce John 

Masterson, who is representing the Governor of Wyoming, Dave 

Freudenthal. 

Now, if you wouldn’t mind to stand to be sworn in. 

[Witnesses sworn.] 

Mrs. CUBIN. I would like to begin by recognizing Mr. Roberts. 

STATEMENT OF CECIL E. ROBERTS, PRESIDENT,

UNITED MINE WORKERS OF AMERICA 

Mr. ROBERTS. Thank you very much, Madam Chair. I want to 

first of all thank you for allowing us to be here today and for holding this hearing. We’ve had this opportunity to meet on your Subcommittee the last time, in the year 2000, when 12,000 of us came 

up to the Capitol grounds and had a very spirited rally with respect to preserving the health care of—at that time it was in the 

neighborhood of 60,000 beneficiaries. Today I come to speak for 

46,000 beneficiaries of the Combined Benefit Fund, the average age 

being 80. 

I want to thank my dear friend, if I may, Congressman Rahall, 

and he is a dear friend of mine, but, more importantly, he is a dear 

friend of all coal miners in southern West Virginia and, indeed, 

37

this Nation and all working-class people, for that matter. He has 

fought for my health and safety as well as health care for our members for many, many years, and we appreciate that very much, 

Congressman Rahall. 

Mrs. CUBIN. And, Mr. Roberts, I can tell you that I absolutely 

agree, and I admire Mr. Rahall for that commitment. 

Mr. ROBERTS. We also come today—we didn’t bring 12,000, but 

we did bring about 10 pensioners from northern West Virginia, who 

are in the back to my immediate—over my left shoulder, and from 

Pennsylvania, who are very much concerned about preserving these 

health care benefits. 

We have submitted written testimony, but I would take a few 

moments to try to summarize this issue, if I might. 

The U.S. Government has been involved in providing health care 

to coal miners since 1946, when there was a dispute between the 

United Mine Workers and the coal operators, and the Federal Government seized the coal mines in 1946, and the first contract between the union and anyone providing for pensions and health care 

was with the Federal Government, not with the coal industry. So 

the Government made a promise back in 1946 to the people we’re 

talking about today. 

The second time that I recall that the Federal Government made 

a promise and a commitment and a finding to coal miners and 

their beneficiaries was immediately after and during the 1989 

lengthy Pittston Coal strike, when then-President Bush appointed 

through then-Secretary of Labor Elizabeth Dole, now Senator Elizabeth Dole from North Carolina, to get involved in this problem, 

and she helped resolve that strike. That continued the health care 

benefits and the pension benefits for 1,600 Pittston beneficiaries. 

She went on to appoint Bill Usery, a former Secretary of Labor 

under Richard Nixon, to chair what was known then as a coal commission in some circles and the Dole Commission in other circles. 

It was chaired by former Secretary of Labor Usery, and on that 

Committee you had coal operators, you had union representatives, 

and you had business people throughout the United States, particularly from the coal regions. And they found at that time that 

indeed the U.S. Government had promised coal miners back in 

1946 and continued that promise up until 1992 at that time lifetime health care. They recommended that Congress act, and 

Congress did in 1992, passing what has become well known as the 

Coal Act. 

In that Coal Act, there was a funding mechanism established by 

Congress, and Congress felt at the time that they would never, 

ever have to deal with the issue again. However, the constitutionality of the Coal Act was challenged on over 60 occurrences, 

and each time the Federal Government prevailed or the funds prevailed. 

This issue has been taken to the United States Supreme Court 

about four times, and the Supreme Court has found indeed that 

this Act is constitutional. 

However, we come with a crisis looming as we gather here today, 

and I must urge on Congress today how important it is to act, and 

act soon. The Combined Benefit Fund is currently running a deficit 

of about $10 million. At the end of the fiscal year, which will be 

38

October 1st, that deficit will be $40 million. If funding is not appropriated between now and the 1st of next year, a very severe benefit 

cut will have to take place, in the neighborhood of 40 percent by 

some analysis. 

These promises were made to these coal miners and their beneficiaries. Most of these people now are widows of former miners 

who made this country, as many have said, the greatest generation 

on Earth, which I happen to agree with. 

We recommend about three to four things for you to consider, 

Madam Chairman. 

First of all, we support Congressman Rahall and Congressman 

Ney’s bipartisan effort to see that these benefits are not cut with 

the passage of CARE 21. Two years ago this passed the House. It 

did not pass the Senate. Dealing with the issue about the interest 

rate, which has created a severe problem, currently the U.S. Government allows what is known as par value specials in some of 

their funds, such as Social Security. The Congress could authorize 

the Treasury to place these investments in par value specials 

which would triple the interest rate that is currently being provided, which would go a long ways to resolving this problem. 

Third, we would encourage a debate to begin soon on reauthorization of the AML fee, and I assume that’s somewhat what we’re 

doing today. But this is a bipartisan approach that has been proposed by Congressman Rahall and Congressman Ney. This would 

allow benefits to continue. 

One of the things I would stress, Madam Chairman, is there’s 

stranded interest money that is there now that cannot be used to 

pay these benefits because of a technicality. We urge Congress to 

pass CARE 21, which would allow the utilization of that stranded 

interest money to pay these benefits so that these people, average 

age 80, some as old as 100, would continue to receive their benefits 

that this Government, the greatest Government on Earth, the 

greatest Nation on Earth, can keep their promises that they made 

in 1946. 

Thank you very much, Madam Chairman. 

[The prepared statement of Mr. Roberts follows:]

Statement of Cecil E. Roberts, President,

United Mine Workers of America 

Madam Chairman, members of the Subcommittee, I am Cecil E. Roberts, President 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 and their families in the United States and Canada for over 113 years. We appreciate the opportunity to appear before the Subcommittee once again to discuss the Abandoned 

Mine Land Reclamation Fund (AML Fund) and its relationship to the UMWA Combined Benefit Fund (CBF). 

Madam Chairman, I would like to spend my time today talking about the continuing financial crisis at the UMWA Combined Benefit Fund. The 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 about 46,000 elderly 

beneficiaries who reside in every state in the nation, including significant numbers 

who are constituents of members of this Subcommittee. The average age of the CBF 

beneficiary population is nearly 80 years, about two-thirds of them are widows and 

their total estimated health cost for the current fiscal year is $362 million. Congress 

intended for the financial mechanisms it put in place to provide for self-sufficient 

financing of the cost of those benefits. However, rapidly rising health costs and a 

series of adverse court decisions have eroded those financing mechanisms and 

placed the CBF in financial jeopardy. More recently the bankruptcies of several 

39

major steel companies that had significant numbers of Coal Act retirees have added 

to the financial distress of the CBF. 

Congress has intervened three times in the past four years 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 any deficit 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 

Health Care Financing Administration (now the Center for Medicare and Medicaid 

Services) expanded their existing nationwide, risk-sharing Medicare Demonstration 

project in January 2001 to include a new prescription drug component. That project 

runs for three years, until mid-2004, and reimburses 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 the government as it seeks to expand prescription drug 

coverage to the Medicare population. 

But despite these efforts by Congress and the Executive Branch, the CBF still 

faces a financial crisis. Net assets have declined since the last emergency appropriation was enacted; as of May 31, 2003, the CBF had a net asset deficit of $7.8 million. We expect to end the fiscal year on September 30, 2003 with a net asset deficit 

of about $40 million. There is an urgent need for additional revenue to prevent a 

disastrous cut in benefits to this fragile population. Indeed, the CBF estimates that 

absent additional appropriations from Congress, the CBF will exhaust its cash early 

next year. 

In order to avoid a catastrophic cut in benefits, the UMWA strongly urges 

Congress to: • enact H.R. 313, the Coal Accountability and Retired Employee Act for the 21st 

Century (CARE 21); • authorize the AML fund to invest in Treasury par value specials; • begin serious debate on reauthorization of the AML fee, currently scheduled to 

expire September 30, 2004. 

The UMWA strongly supports H.R. 313, a bill with broad bi-partisan support, 

sponsored by Congressmen Nick Rahall and Bob Ney. As you know, CARE 21 was 

passed by the full House of Representatives last fall, but the Senate did not complete action on the bill. If enacted, CARE 21 would authorize the use of stranded 

AML interest money to cover future net asset deficits in the CBF. The Rahall/Ney 

proposal does not affect the principal in the AML account. 

The UMWA supports this legislative effort because we know that a promise was 

made by the Federal Government and by the coal industry that these retirees would 

have lifetime health benefits. Today we need the help of Congress to ensure that 

the promise is kept. We are not alone in urging Congress to act. As I advised the 

Subcommittee three years ago, a number of state legislatures in coal field states 

(Alabama, Illinois, Indiana, Kentucky, Pennsylvania and West Virginia), along with 

dozens of county and city governments, have adopted resolutions urging Congress 

and the Administration to ensure that retired miners continue to receive the health 

benefits they were promised. These state and local political authorities know how 

important the UMWA Funds is to their state’s medical infrastructure and how necessary the health benefits are to the retirees and their families. 

These Coal Act beneficiaries have supported this nation in war and in peace, and 

today ask for simple fairness and the keeping of a simple promise. As you consider 

legislative amendments dealing with the Office of Surface Mining and the AML 

Fund, I ask that you keep the retired miners and their widows in mind. I can think 

of no higher purpose for monies collected from the coal industry than to ensure that 

America’s retired miners not be abandoned. 

A second recommendation is that Congress authorize the AML fund to invest in 

par value specials. One problem that has exacerbated the CBF financial woes is that 

very low interest rates have significantly reduced the interest earned on the AML 

fund. For example, last September, the CBF billed AML $78.6 million for the current fiscal year; AML transferred only $56.1 million. This year, interest earned at 

AML is expected to be in the range of about $25 million, far short of CBF needs. 

The AML funds essentially are invested at overnight interest rates, rather than in 

long term government bonds. We have urged OSM officials to move out further on 

the yield curve to earn greater interest. They argue that they must maintain the 

fund at maximum liquidity because Congress could appropriate some or all of the 

AML principal at any time. One way to remain liquid while earning greater interest 

is through the use of Treasury par value specials, nonmarketable Treasury securities that can be redeemed at any time at their face, or ‘‘par’’ value. They are a preVerDate 0ct 09 2002 08:55 Nov 12, 2003 Jkt 087420 PO 00000 Frm 00043 Fmt 6633 Sfmt 6621 J:\DOCS\88532.TXT HRESOUR1 PsN: KATHY
40

ferred investment vehicle, offered only to certain government trust funds, such as 

Social Security, Medicare, the Railroad Retirement fund and the Civil Service Retirement fund, because they essentially are short term securities that earn long 

term rates. We believe that it would be appropriate for Congress to authorize the 

use of par value specials at the AML fund. 

Our third recommendation is that Congress begin the debate on reauthorization 

of the AML fee, currently set to expire September 30, 2004. Congress established 

the AML Fund as part of the Surface Mining Control and Reclamation Act of 1977 

(SMCRA). The fund, 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. 

Madam Chairman, let me state clearly that the UMWA supports the goals of the 

Surface Mining Act and the Abandoned Mine Lands program. In enacting 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 mining and support the intent of Congress that coal mining 

must be conducted in an environmentally sound manner. 

The UMWA believes that when Congress authorized the use of AML interest to 

finance the cost of benefits for retired coal miners under the Coal Act, that it was 

a logical extension of the original intention of Congress when the AML Fund was 

created. When Congress created the AML Fund in 1977, it found that un-reclaimed, 

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 had in 

mind how to avoid unacceptable social and economic costs associated with the loss 

of health benefits for retired coal miners and widows. 

Recent GAO Study 

Last year the U.S. General Accounting Office (GAO) issued its most recent report 

that supports the CBF’s need for financial support. In August the GAO issued a report on the Coal Act funds entitled ‘‘Retired Coal Miners’ Health Benefit Funds: Financial Challenges Continue.’’ The report was an outgrowth of Senate Finance Committee consideration of legislation to provide transfers of monies from the U.S. 

Treasury to the CBF in 2000. 

Among the findings of the GAO were that: 

• the 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; 

• 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; 

• the 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 their demonstration projects, thus saving money not only for the Funds but for Medicare and 

the U.S. Treasury. 

The most recent GAO report, and GAO’s earlier reports on the CBF, clearly supports the positions we have taken before this Subcommittee and the Congress. A 

promise made in the White House in 1946 was reaffirmed in 1992. Congress intended the Coal Act to be self-sustaining and self-financing, but subsequent 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. Indeed, we estiVerDate 0ct 09 2002 08:55 Nov 12, 2003 Jkt 087420 PO 00000 Frm 00044 Fmt 6633 Sfmt 6621 J:\DOCS\88532.TXT HRESOUR1 PsN: KATHY
41

mate that the Funds programs have saved approximately $100 million in the last 

four years as a result of its risk-sharing agreements, with about $70 million of the 

savings returned to Medicare and about $30 million going to the Funds. Unfortunately, there is also no question that the nation’s commitment to appropriate health 

care for retired coal miners will be violated if the CBF does not receive additional 

funds. 

This is a unique population and a unique situation. I am unaware of any other 

case 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 General Accounting 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 H.R. 313, or CARE 21 and to 

authorize the use of par value specials by the AML fund. 

Madam Chairman, I mentioned that the UMWA Funds was a unique institution 

with a unique history of government involvement. I would like to review briefly the 

highlights of that history. 

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 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 disgrace to a nation to which the world looks for 

42

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 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 

Medical benefits for retired miners became a sorely disputed issue between labor 

and management in the 1980s, 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 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.’’

The underlying 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 

43

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, required them 

to maintain their individual employer plans for retired miners, and imposed 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 the Congress and signed 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 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 

because they have gone out of business. I mentioned earlier the bankruptcies of a 

number of steel companies that had retirees covered by the Coal Act. Bankruptcies 

at LTV, Bethlehem Steel, National Steel and other steel companies have 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 Combined Fund is financed by a per-beneficiary premium 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 UMWA 1992 Fund is financed solely by operators that were signatory 

to the NBCWA of 1988. In the fiscal period 2000-2002, premium income paid by employers to the CBF averaged $91.8 million per year, or 26.3% of total income and 

the AML transfers averaged $108.3 million, or 31.1%. The AML figure includes annual transfers and emergency Congressional appropriations. The remainder of CBF 

income derives from Medicare capitation and risk sharing arrangements, DOL Black 

Lung payments, investment income and miscellaneous court settlements. 

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.’’

Without question Congress intended that the Coal Act should provide ‘‘sufficient 

operating assets’’ to ensure the continuation of health care to retired coal miners. 

So what went wrong? How is it that a decade after passing the Coal Act we find 

ourselves in a continuing financial crisis? 

44

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 is 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, SSA notified the Court that it would 

apply a higher premium to companies not covered by the earlier decision. However, 

over 200 companies have filed another action in Alabama asking to avoid paying the 

higher rate. 

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 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. I am pleased to report that 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. 

More recently, a court decision in Dixie Fuels ruled that original determinations 

of responsible operator status could not be made by the Social Security Administration after October 1, 1993. If this ruling had been applied nationwide, it would have 

relieved a number of operators of the responsibility to pay for their retirees and create more orphans that would have to be financed from the AML Fund. There was 

a split in interpretation of this issue between the circuit courts of appeals, with the 

6th Circuit ruling that SSA improperly made assignments after October 1993 and 

the 3rd and 4th Circuits ruling that such assignments were not improper. The Supreme Court granted review in these cases and ruled in Barnhart v. Peabody that 

the October 1, 1993 statutory date was intended by Congress to spur SSA to action, 

but did not relieve operators of their responsibility if assignments were made after 

that date. 

The cumulative effect of these court decisions threatened a repetition of the problems and recreation of the crisis of the 1980s that led to the creation of the Coal 

Act—employers are being relieved of liability for their retirees and revenues are 

being 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 loss of income and an inadequate escalator have led to an imminent 

financial crisis for the Combined Fund and its beneficiaries. 

The Financial Crisis Must Be Averted 

Madame Chairman, Congress must act now to avoid a disastrous loss of benefits 

for this fragile population. Over their working lives, they 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 in that assessment I wholeheartedly concur. 

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. 

45

We can do so by enacting the CARE 21 proposal that has been introduced by Congressmen Rahall and Ney with bipartisan support. We urge members to co-sponsor 

H.R. 313 and to actively seek its enactment in the House of Representatives. 

Madam Chairman, I thank you for the opportunity to address the Subcommittee 

today. I would be happy to answer any questions you may have. 

Mrs. CUBIN. Thank you, Mr. Roberts. 

I would now like to recognize Mr. Masterson. 

STATEMENT OF JOHN A. MASTERSON, COUNSEL TO THE 

GOVERNOR OF WYOMING 

Mr. MASTERSON. Thank you, Madam Chair. May it please the 

Committee, my name is John Masterson. I’m here today on behalf 

of Governor Freudenthal, the Governor of Wyoming. I’m his legal 

counsel and also the Federal-State relations coordinator for the 

State of Wyoming. 

I want to thank the Committee for considering the perspective of 

the coal-producing States, and I want to state that the Governor 

of Wyoming, from his perspective we are ready, willing, and able 

to meet anytime and anywhere to help resolve these issues, to discuss them, and to try to be of assistance to this Committee in resolving these issues. 

If I may also, Madam Chair, I’d like to thank your staff and the 

staff of this Committee for their help as well. They’ve been very 

helpful on short notice to try to give me some semblance of organization. So I thank them for that. 

Madam Chair, as the hour is late, I’ll cut to the proverbial chase. 

Wyoming’s biggest issue is the failure of the Federal Government 

to remit 50 percent or the State share of monies to the State of Wyoming. For example, as we indicate in our written testimony, the 

State has received only 29 percent of its fees collected since the approval of Wyoming’s reclamation plan in 1983. In 2002, for example, Wyoming producers paid in over $126 million, yet Wyoming’s 

AML program received only $28 million in distributions. That’s approximately 23 percent of money Wyoming contributed when under 

law, and from my reading of the law, we are entitled to half of that. In addition, the AML Trust Fund now contains almost $1.5 billion, of which $972 million is the States and tribals share. By law, 

that money should be distributed back to the States and its share, 

not because we demand it, not because we claim it, but because it 

must be distributed under the statutes and the CFRs. 

In sum, through fiscal year 2002, Wyoming coal companies have paid over $1.63 billion into the fund, and less than 30 percent of 

those collections have been returned to the State of Wyoming. That 

approximates about $468 million, leaving a balance of over $374 

million of Wyoming’s State share residing in the AML Fund. 

The State of Wyoming recognizes the obligations to the Combined Benefit Funds. We recognize that these promises must be 

kept, and we encourage this Committee to come up with solutions 

to that. And we agree that those funds should be—could be preserved and should be paid out as the promises were made. 

I would note that Wyoming has seen an increasing number of 

hazardous incidents. We do have our own interest in Priority 1 and 

Priority 2 sites. Our internal inventory has about $50 million in remaining P1 and P2 sites, in coal-based sites, and there are an addiVerDate 0ct 09 2002 08:55 Nov 12, 2003 Jkt 087420 PO 00000 Frm 00049 Fmt 6633 Sfmt 6602 J:\DOCS\88532.TXT HRESOUR1 PsN: KATHY
46

tional approximately 1,200 projects that would involve AML funds 

and need those funds. 

Our proposal, Madam Chair, is set forth, and I’ll just summarize 

it briefly. 

First of all, it would be to make a fact-based determination of the 

appropriate level of tax to be charged on surface, underground, and 

lignite coal. We believe that these rates were arbitrarily set 26 

years ago when this fund was established, and substantial changes 

in technology and the mining industry lead us to the belief that 

those fees need to be reassessed and re-established. 

Again, accept that the Combined Benefit Fund commitment 

needs to go forward. We would recommend adjusting the allocation 

formula to increase allocations to certified States, such as Wyoming, while diverting all available excess, including RAMP funds 

and those associated with belt-tightening at OSM, to solve historical coal problems. 

The final issue that we have is the request that, in addition, 

going forward Wyoming again receive its share of AML monies. 

There is a substantial amount of funds there that we believe we 

are entitled to. We would recommend some other issues. In our 

written testimony, we state that our recommendation would be to 

eliminate the Rural Abandoned Mine Program. We have heard 

anecdotally that approximately 25 percent of OSM’s money goes toward administration. If true, we believe that that’s probably in excess of what it should be. Wyoming’s administration costs on AML 

is approximately 3.5 to 4.5 percent of the amount of money it receives. 

We would recommend the creation of an independent funding 

source for the CBF shortfall, and we would also recommend that 

the AML take its distribution—or its appropriations off-budget. 

Thank you for your time, Madam Chair. 

[The prepared statement of Mr. Masterson follows:]

Statement of John A. Masterson, Counsel to

The Honorable David D. Freudenthal, Governor, State of Wyoming 

INTRODUCTION 

Good morning, Madam Chairwoman. My name is John A. Masterson, and I am 

the legal counsel to Governor David D. Freudenthal of the State of Wyoming. I have 

been invited here today to speak briefly on the reauthorization of the Surface Mining Control and Reclamation Act (SMCRA) and the Abandoned Mineral Lands 

Fund, from the perspective of Wyoming, our nation’s largest producer of coal and, 

therefore, the nation’s largest source of AML funds. I commend you for your willingness to hear from representatives of coal-producing states about this important 

issue. We stand ready to work with Congress in addressing the shortcomings of 

SMCRA and the need to distribute AML funds. On behalf of Governor Freudenthal, 

I wish to thank the members of the Subcommittee on Energy and Mineral Resources 

of the House Committee on Resources and Chairwoman Barbara Cubin for inviting 

the State of Wyoming to testify at this hearing today. 

HISTORY 

When the Surface Mining Control and Reclamation Act was enacted in 1977, it 

included a fee on coal production. Proceeds from the fee were placed in the Abandoned Mine Land (AML) fund. By law, one-half of the fees collected in each state 

or on tribal lands were to be returned to the state or tribe of origin. The other half 

of the collections were to be spent at the discretion of the Secretary of the Interior 

to address reclamation issues of national importance. All AML expenditures, including state and tribal shares and the OSM’s allocation, are subject to the Federal 

budgeting process and annual appropriation by Congress. 

47

Despite the bill’s intent and the clear mandate of law, Congress has never appropriated to states and tribes the 50% of fee collections guaranteed in the law. Wyoming, for example, has received only 29% of fees collected in our state since the approval of Wyoming’s reclamation plan in 1983. This refusal of the Federal Government to discharge its obligations to the states is of grave concern to Wyoming. 

In addition to the failure to allocate these funds, the unappropriated pool of 

money became an irresistible source of substantial interest income. As a result, 

SMCRA was amended by the Coal Act of 1992 to allocate that interest to mitigate 

deficits in the United Mine Workers Combined Benefit Fund (CBF). This diversion 

of interest deprives the states and tribes of an additional $70 million in annual revenue that could have been used to remediate the public safety hazards of 

unreclaimed mine sites. The potential to add additional beneficiaries to CBF coverage is another concern to Wyoming, as it would further reduce the pool of funds 

available to meet the original intent of SMCRA. 

We are very concerned that Wyoming’s coal producers will be asked to bear the 

largest burden of AML fee collections without the return of an equitable portion of 

those funds to Wyoming. In 2002, Wyoming producers paid in over $126 million; yet, 

Wyoming’s AML program received only $28 million in distributions. That’s only 23% 

of the money Wyoming contributed, while other states have received 40%, 50% and 

even over 100% of their contributions. 

Appropriations from Congress to address AML problems in Wyoming and other 

coal states are constrained by budget ceilings established by Office of Management 

and Budget. Annual AML distributions to states and tribes have never reached the 

50% of AML fee collections mandated by Congress in SMCRA. As a result, the AML 

Trust Fund now contains almost $1.5 billion, of which $972 million is the states’ 

share balance, which by law should have been distributed to AML states and tribes. 

Through Fiscal Year 2002, Wyoming coal companies have paid over $1.637 billion 

into the fund. Less than 30% of these collections have returned to the State. Wyoming has received only $468.5 million in annual allocations. Over $374 million of 

Wyoming’s state share resides in the AML fund. This money—now idle in the 

Federal account—could be put to productive use reclaiming hazardous mine sites 

and mitigating the deleterious effects of mining and mineral processing activities in 

Wyoming communities. 

OBLIGATIONS TO COMBINED BENEFITS FUND 

The 1992 Coal Act shifted the AML Trust Fund interest away from reclamation 

and towards the social needs of United Mine Workers’ dependents and the desires 

of the bituminous coal operators by subsidizing shortfalls in the Combined Benefits 

Fund (CBF). These social priorities have steered AML funds away from the needs 

of states and tribes, especially those states that produce the lion’s share of the Nation’s coal. Wyoming is here today to remind you of the obligations of law adopted 

as part of SMCRA in 1977. States and tribes are to receive one-half of AML fee collections within their borders. The Federal Government has not lived up to this law, 

and appears to be moving even further from its original commitments under pressure from smaller, perhaps more vocal, constituencies. 

Wyoming recognizes the Federal Government’s obligations to the Combined 

Benefit Fund and accepts that the promises made to the miners who produced the 

energy to fuel America’s industrial development must be kept. Wyoming encourages 

Congress to consider creative alternative funding mechanisms which would sever 

CBF dependency from AML revenues and allow those funds to be applied to the priorities established by Congress. The United Mine Workers Combined Benefits Fund 

is a health care problem that should not be resolved in the context of the AML fund 

debate. If the CBF funding remains a part of the AML obligations, then Wyoming 

suggests that the unpaid Trust Fund balance due the states be used to fund the 

required benefits going forward. 

WYOMING PRIORITIES AND REMAINING WORK 

Wyoming still has a substantial inventory of Priority 1 and Priority 2 coal and 

noncoal sites that must be reclaimed to ensure a safe environment for Wyoming citizens. The reclamation of highwalls, pits, mine openings, coal fires, subsidence features and other hazards must be addressed. Wyoming’s history of coal production, 

first to fuel the transcontinental railroad and later for power generation, has left 

a legacy of underground coal mines and future hazards. Each year, Wyoming sees 

an increasing number of hazardous subsidence features in schoolyards, fairgrounds, 

public recreation areas, and close by public roads, railroads and power transmission 

lines. These features will be a danger to Wyoming citizens and visitors to our state 

for years to come. Funds must be available into the future to address these inevitable hazards. 

48

While a ‘‘certified’’ state, Wyoming has eligible mine-related hazards awaiting rec- lamation. Wyoming’s internal inventory has about $50 million in remaining P1 and 

P2 coal sites and $60 million in remaining non-coal sites. There are an additional 

1,200 projects that will be added to our inventory as soon as the cost estimates are 

completed. Community infrastructure work also remains a significant problem facing our state. 

In addition, Wyoming vast coal reserves are constantly threatened by mine fires 

and coal seam fires. One grass fire in 2002 ignited 56 coal seam fires on Federal, 

state, and private land in one Wyoming county. The Bureau of Land Management 

and private landowners have repeatedly requested assistance from Wyoming AML 

to suppress in situ coal seam fires. The prolonged drought in Western states means 

that Wyoming will see continued multiple occurrences of mine fires and in situ seam 

fires. Wyoming AML is currently monitoring two dozen mine fires in various areas 

of the state, including one within a few hundred yards of a residential and commercial area of the Town of Kemmerer. While the cost of containment of these fires cannot be accurately determined, estimates range from $1 million to $10 million per 

fire. 

WYOMING’S PROPOSAL 

Wyoming has reviewed the various proposals to amend SMCRA to extend fee collections and modify program guidelines and conditions. As of today, none of these 

alternatives has been introduced in Congress. Rather than respond to the proposals 

of other interests, allow us to candidly state Wyoming’s concerns for you. 

Frankly, Wyoming’s interests would be best be served by termination of the reclamation fee. The advantages to Wyoming’s economy of allowing the fee to expire 

outweigh benefits derived from the distribution of AML funds. This is especially 

true since Congress has not appropriated the 50% share promised in SMCRA and 

shows no inclination to release Wyoming’s share of the AML trust fund. In our view, 

extending this tax also amounts to the continuation of a selective tax on a single 

industry and the citizens consuming energy from this industry. The problem this tax 

is designed to address—abandoned mine lands from prior generations—is a national 

legacy and should be remedied by the expenditure of general revenues rather than 

a selective tax. 

Wyoming recognizes, however, the unfortunate reality that this tax will be extended in some form. Therefore, we ask you consider the following as you move forward: 

• Make a fact-based determination of the appropriate level of tax to be charged 

on surface, underground, and lignite coal. Evaluate the respective rates with a 

view towards lessening the overall tax burden, as well the particular tax burden, inflicted upon Wyoming’s coal industry. Rates were arbitrarily set at the 

time the tax was established, and in the 26 years since, substantial changes in 

production economics, technology and demand require a factual investigation to 

equalize the fees. 

• Accept that the Combined Benefit Fund commitment must be honored, and develop an alternative funding mechanism that does not divert future AML funds 

to this purpose. 

• Adjust the allocation formula to increase allocations to certified states (like Wyoming) while diverting all available excess (including RAMP and some belt 

tightening at OSM) to historical coal problems. This concept is further discussed 

below. 

• Take AML distributions off budget to avoid the limitations imposed on AML appropriations by the Federal budgeting process. This would provide flexibility to 

shift increasing amounts to eastern states with the greatest need. 

• Reduce restrictions on certified states to address non-coal and infrastructure 

needs in communities impacted by mining practices. Certified states should 

have the ability to budget the expenditure of AML funds generated in their 

states based on priorities established by the State, not the Federal Government. 

• The monies previously collected and owed to the states must be paid according 

to law. Wyoming has been repeatedly advised that OSM cannot pay the states 

the money owed under the current tax because ‘‘the money doesn’t exist.’’ This 

position is not only contrary to Federal law requiring the redistribution of the 

states’ shares, but minimizes the reality that these funds represent reclamation, 

jobs and public health and welfare in our state. These taxes were real when 

they were collected and are not a simple accounting item. 

• Similarly, Wyoming must receive its share of AML monies going forward. These 

funds must no longer be subject to convenience or legislative whim. Congress 

has stated that this problem is significant enough to justify congressional action 

and a Federal tax. If the problem is indeed this serious, and if we are to mainVerDate 0ct 09 2002 08:55 Nov 12, 2003 Jkt 087420 PO 00000 Frm 00052 Fmt 6633 Sfmt 6621 J:\DOCS\88532.TXT HRESOUR1 PsN: KATHY
49

tain credibility in addressing it, then the problem is too serious to allow funds 

collected for the states and owed the states to go unallocated. 

ADDRESSING HISTORICAL COAL NEEDS 

Wyoming recognizes that Eastern states—Pennsylvania, West Virginia, 

Kentucky—have substantial remaining historical Priority 1 and 2 coal sites that 

must be addressed with the proceeds from the reclamation fee. Wyoming believes 

that a fair and equitable distribution of those funds can satisfy reasonable needs 

for all states participating in the program established by Title IV of SMCRA. We 

would suggest the following steps: • Eliminate the Rural Abandoned Mine Program (RAMP) and dedicate that 10% 

of future collections to historical coal sites using existing distribution formulas. 

This reallocation would make an additional $28 million available annually to 

distribute for historical coal problems. 

• Tighten belts at OSM. OSM has proposed to transfer certain functions such as 

the Emergency Program to the AML States. A reduction of the OSM share of 

collections from 20% to 15% would add $14.4 million annually to the amount 

available to historic coal states. 

• Create an independent funding source for CBF shortfalls. Reducing CBF demands on AML Trust Fund interest could make $20 million to 30 million available annually. 

• Take some portion of AML appropriations off budget. AML distributions to 

states and tribes have been limited by Office of Management and Budget agency budget ceilings. Current appropriations to all states and tribes have been 

about $165 million per year, and it will be difficult to exceed this total amount 

unless an off-budget compromise is made. 

SUMMARY AND CONCLUSIONS 

Wyoming has long suffered the severe impacts of fluctuations in the State’s extractive mineral-based economy. Wyoming’s historical role as a major energy producer for the nation will continue to have negative effects on Wyoming citizens for 

generations to come. Coal mine subsidence, coal fires, highwalls, pits, bogs, and 

mine openings will always be a fact of life in Wyoming. 

Further, public facilities in mining-impacted Wyoming communities—schools, 

transportation, water systems, sewage systems, emergency service delivery, medical 

facilities and other community infrastructure—will continue to suffer from the traditional ‘‘boom and bust’’ economic cycle that is endemic to the natural resource-based 

economy found not only in Wyoming but also in the eastern states with high historical coal production. Any reduction in AML revenue, especially coupled with the continued burden of the AML tax on the State’s coal producers, is an unacceptable combination that will prove detrimental to Wyoming’s economy and its citizens. Our 

state needs, in fact, requires, either relief from the fee or a guarantee that the State 

will receive an increased share of future AML revenues. 

Wyoming respectfully requests that we be included in future discussions regarding AML fund extensions. Wyoming is America’s largest coal-producing state and 

has a long history of coal production to meet the nation’s industrial needs. Since 

the construction of the transcontinental railroad in the early 1860’s, and into the 

foreseeable future, Wyoming will be a vital source of natural resources for our country. We are proud of our role in the economy, industry and environment of the 

United States, but we cannot forget that, in this issue, our quality of life, safety, 

environment and health are at stake. 

Wyoming thanks the Subcommittee on Energy and Mineral Resources of the 

House Committee on Resources and its Chairwoman, Barbara Cubin, for the opportunity to present this testimony today. 

Mrs. CUBIN. Thank you very much, Mr. Masterson. 

I now recognize Murray Balk. 

STATEMENT OF MURRAY J. BALK, CHIEF, SURFACE MINING 

SECTION, KANSAS DEPARTMENT OF HEALTH AND ENVIRONMENT, ON BEHALF OF THE NATIONAL ASSOCIATION OF 

ABANDONED MINE LAND PROGRAMS AND THE INTERSTATE 

MINING COMPACT COMMISSION 

Mr. BALK. Good afternoon, Madam Chairwoman. My name is 

Murray Balk, and I’m the chief of the Surface Mining Section, KanVerDate 0ct 09 2002 08:55 Nov 12, 2003 Jkt 087420 PO 00000 Frm 00053 Fmt 6633 Sfmt 6602 J:\DOCS\88532.TXT HRESOUR1 PsN: KATHY
50

sas Department of Health and Environment. I’m appearing today 

on behalf of the National Association of Abandoned Mine Land Programs and the Interstate Mining Compact Commission. 

All the States and tribes within the association and all the States 

within the IMCC administer AML programs funded and oversighted by the Office of Surface Mining. I am pleased to appear before the Subcommittee to discuss the future of the Abandoned Mine 

Land Program. In particular, I would like to address the views of 

the States regarding the future collections of AML fees, adequate 

funding for Abandoned Mine Land Programs, and related legislative adjustments to Title IV of SMCRA. 

As we draw closer to the September 30, 2004, expiration date, we 

are beginning to see more proposals on how SMCRA should be 

amended, if at all. The States through the IMCC, the association, 

and the Western Governors’ Association have recently advanced 

several proposed amendments to SMCRA. We are looking at only 

those changes necessary to accomplish several key objectives. 

These objectives are as follows: 

First, to extend fee collection authority for an additional 12 years 

until September 30, 2016. 

To adjust the procedure by which States and tribes receive their 

annual allocations of monies to address AML problems. 

To confirm recent congressional intention to eliminate the Rural 

Abandoned Mine Land Program and to reallocate those monies to 

the historic coal production share. 

To assure adequate funding for minimum program States. 

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 perform 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. 

Over the next few months, we must reconcile all the various interests and concerns attendant to the administration of the AML 

Program in a way that assures the continuing integrity, credibility, 

and effectiveness of this successful and meaningful program. The 

States and tribes through their associations welcome the opportunity to work with your Subcommittee and further affected parties 

to address the issues that attend the future of the AML Program. 

Our overriding concerns can be summarized as follows: 

The first concern would be that adequate and stable funding 

must be provided to the States and tribes on an annual basis. 

Next, the unexpended State share balance in the AML Trust 

Fund should be distributed to all the States and tribes. 

States and tribes until Title IV of SMCRA should remain the primary delivery mechanism for AML monies based on their demonstrated history of effective and efficient program implementation. 

The States have over 25 years of experience in this area and have 

demonstrated their expertise and efficiency in running these programs. We, therefore, advocate a continuing significant and meaningful State and tribal lead with regard to both SMCRA and other 

AML-related programs. 

51

Another concern is funding for the ‘‘minimum program’’ States. 

It needs to 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 re-mining opportunities or incentives. 

The sixth concern we have is that any adjustments to the existing system of priorities under Title IV must consider the impacts 

to existing State set-aside programs and to current State efforts to 

remediate acid mine drainage. 

The seventh concern is that any adjustments to the current certification process should not inhibit the ability of States to address 

high-priority non-coal projects. 

The eighth concern is that any review or adjustments to the current AML inventory should account for past discrepancies and provide for the inclusion of legitimate new sites. 

Finally, 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. 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 capabilities of State AML Programs could lead State legislatures to seriously reconsider SMCRA 

primacy entirely—both for Title IV and Title V. 

Madam Chairman, at this time I would ask that the briefing 

book prepared by the IMCC and the National Association of Abandoned Mine Land Programs be placed in the record, with your permission. 

Mrs. CUBIN. Without objection, so ordered. 

[NOTE: The briefing book has been retained in the Committee’s 

official files.] 

Mr. BALK. We appreciate the opportunity to present this testimony today, Madam Chairwoman, and look forward to working 

with you in the future. I would be happy to answer any questions 

you have or provide follow-up answers at a later time. 

Thank you. 

[The prepared statement of Mr. Balk follows:]

Statement of Murray J. Balk, Chief, Surface Mining Section, Kansas 

Department of Health and Environment, on behalf of The National 

Association of Abandoned Mine Land Programs and The Interstate 

Mining Compact Commission 

Good morning, Madam Chairwoman. My name is Murray Balk and I am Chief 

of the Surface Mining Section within the Kansas Department of Health and Environment. 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 oversighted by the Office of 

Surface Mining (OSM). I am also representing IMCC, an organization of 20 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 Subcommittee to discuss 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 

52

the views of the states and tribes under SMCRA regarding 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. 

Last year, Madam Chairwoman, we celebrated the 25th anniversary of the Surface Mining Control and Reclamation Act. 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 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 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 in its Abandoned Mine Land 

Inventory System (AMLIS), as of September 30, 2002, the states and tribes have 

obligated 94% of all AML funds received and $1.7 billion worth of priority 1 and 

2 coal-related problems have been reclaimed. Another $319 million worth of priority 

3 problems have been funded or completed (many in conjunction with a priority 1 

or 2 project) and $309 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 $2.8 

billion—$2.5 billion of which was for coal projects and $.3 billion for noncoal 

projects. Also, of the $3.3 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. In fact, we presented an overview of several recent AML projects at 

a Congressional staff briefing that was held in April of this year, and I would like 

to submit a copy of those materials for the record. 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. OSM will 

likely provide the Subcommittee with an update from AMLIS which shows our 

progress to date in addressing these problems. When you review the AML progress 

report, please 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. 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 

53

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 approaches $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. For example, Kansas alone has nearly $200 million of priority 1 and 2 AML 

problems that remain unreclaimed. 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 Subcommittee 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, such as Appalachia, 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 24 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 $285 million will be collected from AML receipts in FY 2003. The Administration has proposed to return 

approximately half of that to the states. However, if the Federal Government returned all $285 million to the local economies for abandoned mine land re-construction, almost 7,000 additional jobs could be created with an additional $174 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 AML programs. Since the mid-1980’s, funding for state AML grants has been declining. In 

recent years, we have seen the President’s budget propose significant reductions for 

state AML grants, which Congress has ultimately (and thankfully) restored. This 

year, we have seen a continued attempt to decrease the AML funding level once 

again—without justification or rational explanation. While we are well aware of the 

Administration’s efforts to reduce the overall budget in order to meet other priorities 

related to Homeland Security and the War on Terrorism, holding onto AML money 

that is already statutorily dedicated to provide local improvements to health, safety, 

the environment, local economies and job opportunities seems to be counterproductive to ‘‘homeland security’’. 

54

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 September 30, 2004 expiration date, we are beginning to see more proposals for how the Fund should be handled and how SMCRA 

should be amended, if at all. The states and tribes, through IMCC, the National Association of Abandoned Mine Land Programs and the Western Governors Association have recently advanced several 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 for an additional 12 years until September 30, 

2016, which should be sufficient to address the majority of high priority coal 

health and safety problems throughout the country. • To adjust the procedure by which states and tribes receive their annual allocations of moneys 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 extended time frame of 12 years. Accordingly, the states and tribes recommend taking their portion of the AML allocation off-budget so that they are able to count on certain, consistent funding from 

year to year, thereby allowing them to more effectively and efficiently plan and 

deliver their services. • 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. 

Madam Chairwoman, 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 2004. It 

is even more obvious that, regardless of what the unappropriated balance in the 

Fund is (currently $1.7 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 

Subcommittee, Madam Chairwoman, 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 and stable 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. 

• States and tribes under Title IV of SMCRA should remain the primary delivery 

mechanism for AML moneys based on their demonstrated history of effective 

and efficient program implementation. In this regard, the states and tribes have 

55

concerns about the proliferation of several recent programs throughout the 

Federal Government (Bureau of Land Management, National Park Service, Forest Service, Environmental Protection Agency, Bureau of Reclamation, U.S. 

Army Corps of Engineers, to name a few) that are aimed at addressing abandoned mine lands—at both coal and noncoal sites. While we support additional 

Federal dollars from all sources that will assist with the clean up of abandoned 

mined lands, we want to guard against competing programs diluting the overall 

pool of funds available for service delivery through state and tribal programs. 

We have worked cooperatively with many of these Federal agencies in the past 

on AML initiatives and we believe it is critical that we continue to achieve maximum cooperation and coordination, thus assuring efficient use of limited resources. The states and tribes have over 25 years of experience in this area and 

have demonstrated their expertise and efficiency in running these programs. We 

therefore advocate a continuing significant and meaningful state/tribal lead 

with regard to both SMCRA and other AML related programs. • Funding for the ‘‘minimum program’’ states must be restored to the statutorily 

authorized amount of not less than $2 million annually and these states be 

made whole for past under-allocations. 

• 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 and who have been adversely impacted by the unappropriated balance that delays further restoration of their communities. 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. 

We appreciate the opportunity to present this testimony today, Madam Chairwoman, 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. 

Mrs. CUBIN. Thank you very much. 

I will be brief since the hour is late. I wanted to ask Mr. 

Masterson a few questions. 

Do you have any thoughts on how we can change or does the 

Governor on how we can change the fee levels for coal that you addressed in your testimony? For example, would a Btu-based assessment be more appropriate, do you think? 

Mr. MASTERSON. The evaluation that we have done to this point 

indicates that we would be interested in—yes, we think a Btubased tax would be more appropriate. What shape it takes, what 

rates they take, is something that, you know, remains to be seen. 

But, in principle, yes, we have no problem with the Btu-based tax. 

Mrs. CUBIN. Do you have any thoughts or suggestions about 

where we can find additional funding for the CBF? 

Mr. MASTERSON. I do not. I’m aware that the proposals to bond 

it are out there. I am aware investments similar to the type of a 

56

railroad retirement fund allowing investments to be made to 

better—to receive more income and interest off those accounts are 

out there. I have, candidly, not had the time to examine those, and 

I am not aware of the bottom line or what significance those would 

have. I’m sorry. 

Mrs. CUBIN. Thank you. You mentioned that Wyoming has about $50 million in Priority 

1 and Priority 2 sites that is still wanting. Are those new sites? 

Mr. MASTERSON. Their sites are constantly reappearing. I’m not 

sure that they’re new insofar as when they were created. I’ll give 

you an example. 

Last week, the Department of Environmental Quality received a 

report about a sinkhole near the town of Hanna. That was a brandnew site that we were not aware of. It turned out that the sinkhole 

is near a county road underneath a power transmission line, and 

it appears to be the result of an underground mine, probably 75, 

80 years old. 

So a number of them have been inventoried, and we do have a 

list of those sites if you would like me to provide them to you, but 

there are constantly—there are new sites being added as they appear. 

Mrs. CUBIN. Yes, I would appreciate it if you would supply that 

to the Committee. 

How quickly do you think, if you had the $50 million available, 

that the sites could be cleaned up? Do you have an estimate? 

Mr. MASTERSON. I am advised, Madam Chair, by John Corra, Co-r-r-a, who’s the head of the Wyoming Department of Environmental Quality, that at this time Wyoming is capable of spending 

approximately $25 million a year in reclaiming these sites. It’s difficult to give an answer, but if I had to give one, that’s the figure 

that we can spend in a year. But, you know, technical problems 

and the difficulties of reclaiming those sites may prevent other 

problems. I would imagine—and it’s simply a guess—5 to 10 years 

if the funds were available. 

Mrs. CUBIN. Thank you very much. 

Mr. MASTERSON. Thank you, ma’am. 

Mrs. CUBIN. Mr. Rahall? 

Mr. RAHALL. Thank you, Madam Chair. I thank each of the panelists for their testimony here today, and, Cecil, for your very compelling testimony. 

As you know and you have stated in both your summary statement and in your detailed submittal for the Committee, we have 

been focusing on the financial crisis faced by the CBF, and the 

record is clear Congress established the program. There is a 

Federal commitment here going back to 1947, as you said. And we 

have on several occasions passed emergency funding measures for 

it, and obviously we have a commitment to it. The record is very 

clear. 

So while focusing on the CBF, I kind of, I guess, found that 

something else creeped up on me, and that is all the steel companies that have been going bankrupt, and that has created, of 

course, a new class of orphan beneficiaries, some 5,000 strong. 

I would appreciate it if you would just relay to the Subcommittee 

the distinction between the CBF and the 1992 plan, whether you 

57

believe Congress has a responsibility to it, and any suggestions you 

might have for coming up with solutions to the problems. 

Mr. ROBERTS. Yes, the Coal Act that was passed in 1992 spoke 

to two different funds. One we just discussed with respect to the 

CBF, which has drawn the most attention over the years because 

of the age of this population. But Congress also spoke with the understanding that some of the people who were made this promise 

were still working at the time that Congress acted in 1992. So 

Congress established a cutoff date of October 1st of 1994, about 2 

years after the passage of the act, saying that if anyone would retire by that date, they would still be covered by the Coal Act. However, the coal companies had to be the primary provider of that 

medical care, with the understanding that some of these companies 

may have already gone out of business or actually could go out of 

business in the future. And what has happened with respect to a 

number of steel companies, the most recent one Bethlehem Steel—

I have a great interest in that one because my father worked for 

Beth. Energy all of his life. Well, all of his life he worked at the 

same company that ended up being owned by Bethlehem Steel. 

They just recently—there’s been something in the headlines—cut 

off 90,000 beneficiaries’ health care to the Steelworkers Union. 

What happens if you work for one of these companies and you 

retired before October 1st of 1994 and they were providing your 

benefits, if the company happens to go out of business, then you 

are transferred, if you’re a pensioner, over to what is known as the 

1992 Benefit Plan. And that is paid for by assessing the coal industry that was signatory to a contract in 1988 or later. What this has 

done is created quite a burden on those operators, some of which 

are now in Wyoming, by the way, like Peabody and Arch in particular. They have had to come up with—well, they haven’t yet, but 

they will have to come up with money by about 2005 to help pay 

for these particular groups of orphans. 

That number will be limited because you have to have retired by 

October 1st of 1994, but as Nick—excuse me, Congressman Rahall 

has pointed out, there’s about 5,000 of these people that have 

been—will be seeking coverage and are getting coverage from the 

1992 benefit. My mom and dad, for example, about 2 months ago 

they were transferred from Bethlehem’s health care over to the 

1992 plan. My dad is a World War II veteran, was working in the 

coal mines in 1946, and before that, his father, who, unfortunately, 

was killed in a coal mine. 

So there is a long history here, and my dad is 87, for example, 

my mother is 84. So they’re right in this class of elderly people, but 

they fall into the 1992 benefit plan, and we’re going to have a funding crisis with respect to that by 2005. 

Mrs. CUBIN. I thank the panel for their testimony and for answering the questions, and once again apologize for delaying you 

for so long. Thank you, Mr. Masterson. I hope I have a chance to 

visit with you later, but if you have to run, that is fine. 

Mr. MASTERSON. I’ll be available, Madam Chair, if you would 

like. Thank you. 

Mrs. CUBIN. Thank you. 

Mrs. CUBIN. I would like to call the next panel forward, please: 

Marion Loomis, the Executive Director of the Wyoming Mining 

58

Association; David O. Finkenbinder, Vice President of Congressional Affairs of the National Mining Association; Dave Young, Bituminous Coal Operators Association; and David Laffere of Kansas 

City Power and Light. 

Don’t sit down. I would like to swear the panel in. 

[Witnesses sworn.] 

Mrs. CUBIN. I understand Mr. Laffere has a plane to catch, and 

since we have delayed you long enough, I would like to recognize 

you for your testimony first. 

STATEMENT OF DAVID L. LAFFERE,

KANSAS CITY POWER AND LIGHT COMPANY 

Mr. LAFFERE. I do, and I appreciate your efforts to work with me 

on this. 

Good afternoon, Madam Chairwoman and members of the Subcommittee. My name is David L. Laffere. I’m supervisor for Fuel 

Logistics for Kansas City Power and Light Company, where I’m involved in the planning and purchase of fossil fuels, including coal, 

for KCPL’s electric generating units. I appreciate this opportunity 

to appear before you this afternoon to discuss the Abandoned Mine 

Lands Program administered by the Department of the Interior’s 

Office of Surface Mining, Reclamation and Enforcement, or the 

OSM. 

Since my full statement will be made part of the record, I will 

be brief in my oral remarks and attempt to answer any questions 

you may have. 

Kansas Power and Light is a wholly owned subsidiary of Great 

Plains Energy. We’re on the New York Stock Exchange, and we’re 

headquartered in Kansas City, Missouri. We operate four baseload 

generating stations that consume roughly 12 million tons of lowsulfur coal each year, and we purchase that coal from your State 

of Wyoming, Madam Chairwoman. 

The reason for KCPL and other utilities that use Powder River 

Basin coal that we’re interested in the reauthorization of the AML 

Program is because AML fees are embedded costs of each ton of 

coal that we purchase. The AML fee, therefore, is an inherent cost 

of electricity that we provide to our residential, commercial, and industrial customers. And to the extent that we can manage our fuel 

expenses to reduce our costs, we can pass those savings on to our 

customers. 

The AML fee accounts for roughly 5 to 8 percent of our cost of 

coal that we purchase from Wyoming each year. Last year, we 

spent roughly $70 million on coal purchases and $4 million of that 

went toward AML fees. 

Since the inception of the SMCRA, the cost of coal we purchase 

for our baseload units has included nearly $80 million in AML fees. 

So we care a great deal about the AML program and whether the 

AML fee system is reauthorized in its present form. 

From a national perspective, the AML fee touches millions of 

households because it contributes to the cost of the energy that we 

consume. It is an appropriate subject to consider in the context of 

a national energy policy. 

We appreciate your holding this hearing, Madam Chairwoman, 

and hope that it will lead to a thorough examination of the AML 

59

Program and the AML fees that are imposed on Wyoming coal production. As a utility that takes great pride in its commitment to 

the environment and offering low-cost and reliable electricity service, we believe this hearing offers a great opportunity for Congress 

to examine whether the AML fees can be reduced for consumers of 

coal, especially on production in States where all or most outstanding priority reclamation needs have been addressed, such as 

in Wyoming. If it can, millions of energy consumers across the Nation will be the beneficiaries. 

Thank you. 

[The prepared statement of Mr. Laffere follows:]

Statement of David L. Laffere, Kansas City Power & Light Company 

Good afternoon Madam Chairwoman and Members of the Subcommittee. My 

name is David L. Laffere, and I am Supervisor, Fuel Logistics, for the Kansas City 

Power & Light Company (KCP&L), where I am involved in the planning and purchase of fossil fuels, including coal, for KCP&L’s electric generating units. I appreciate the opportunity to appear before you this afternoon to discuss the Abandoned 

Mine Lands (AML) program administered by the Department of the Interior’s Office 

of Surface Mining, Reclamation and Enforcement, or OSM. 

KCP&L is a wholly owned subsidiary of Great Plains Energy, Inc. (NYSE: GXP), 

headquartered in Kansas City, Missouri. KCP&L generates and supplies power to 

more than a million residents in a 24-county, 4,600 square mile service area in 

western Missouri and eastern Kansas. To meet our generation needs, KCP&L relies 

upon four wholly or partly owned coal-fired generating facilities, which represent 

approximately 75 percent of our system generation. Collectively, these four plants 

consume approximately 12 million tons of low-sulfur western coal each year. 

The AML program is of considerable interest to KCP&L because abandoned mine 

land reclamation fees paid into the program are an embedded cost of each ton of 

coal we purchase and consume and, as a result, inherent in the cost of the electricity 

we provide to our residential, commercial and industrial customers. The same is 

true of other fees and assessments imposed by states and the Federal Government, 

like the black lung fee, a state severance or ad valorem tax, and the Federal coal 

production royalty itself. All of these levies are part of the overall cost structure of 

KCP&L’s fuel, and each is ultimately borne by our customers. 

Of the price we pay for each ton of Powder River Basin coal we purchase, the 

AML fee accounts for roughly 5 to 8 percent. In 2002, KCP&L spent roughly $70 

million on coal to supply the requirements of our four large base load generating 

stations, and paid roughly $4 million in AML fees on that coal. Historically, the cost 

of coal for these stations has included nearly $80 million in AML fees since the inception of the AML program. 

So, for a small- to medium-sized company that has built its reputation on providing low-cost and reliable electricity service for the last 120 years, the cost to 

KCP&L of the AML program is an important issue. I suspect, Madam Chairwoman, 

it is an important issue to virtually every other coal-fired utility, whether large or 

small, or whether investor-, cooperatively, or publicly owned. 

In addition, the AML program is important from an energy and environmental 

standpoint. Since coal accounts for more than half the electricity generated in this 

country, public policy affecting coal consumption for energy generation is an important energy issue that could affect the lives of everyone. Because of its abundance 

and improvements in productivity and emissions control technologies, coal will play 

an important role in our overall national energy policy for a long time to come. 

Madam Chairwoman, we appreciate the fact that your Subcommittee is looking 

into the AML program, hopefully with an eye toward improving it. The Surface Mining Control and Reclamation Act, or SMCRA, was enacted to address historically 

unreclaimed surface coal mines in existence in 1977 and to ensure that future surface coal mining operations would be fully reclaimed to protect the environment and 

public safety. In order to fund remediation of past coal mining activity, the Act imposed a fee of $0.35 per ton of surface mined coal, $0.15 per ton for underground 

coal, and $0.10 per ton for lignite. 

At the time of SMCRA’s enactment, the majority of coal production and abandoned mine sites were in the east. As a result, AML fees were proportionately distributed on the basis of production and need. In the quarter century since enactment of SMCRA, however, there have been a number of significant achievements 

60

in mined land restoration and remediation. Others better qualified than I can speak 

to the accomplishments of OSM in administering the Surface Mining Act. 

One thing that occurred that Congress may not have foreseen when it passed the 

Act, Madam Chairwoman, and that we did not foresee was an enormous surge in 

coal production in the west. There are a number of reasons for this, but there is 

one conclusion that is inescapable: the Clean Air Act’s provisions requiring air quality emissions standards for coal-fired power plants have had a major impact on fuels 

markets. Signed into law within a week of SMCRA were the Clean Air Act Amendments of 1977. Thirteen years later came the Clear Air Act Amendments of 1990. 

Together, these two important environmental laws helped spur a dramatic shift in 

U.S. coal production. 

To illustrate the point from KCP&L’s perspective: in 1977, our coal-fired generating units consumed 3.7 million tons of Midwestern bituminous coal and only 1.4 

million tons of western coal, all surface mined. In 2002, our coal-fired generating 

fleet consumed only 398,000 tons of Midwestern bituminous coal and 11.7 million 

tons of western coal. KCP&L’s shift in fuel purchases was brought about in part by 

Federal Clean Air Act rules requiring reductions in emissions of sulfur dioxide. 

Since switching to Wyoming coal in the late 1980s, KCP&L has grown its electricity 

generation to meet growing demand, reduced its overall air emissions, and continued to provide low-cost energy for our customers. 

Nationally, the trend in coal production has been significant. In 1977, western 

coal represented 23.5 percent of total U.S. production (164 millions west; 533 tons 

east). In 2002, western coal represented half of total U.S. production (551 million 

tons west; 543 million tons east). 

A major part of the surge in western coal production came in Wyoming, which 

is now the largest coal producing state in the country and the source of almost all 

of our coal. (KCP&L still blends small amounts of locally produced coal with Powder 

River Basin coal). Overall, western states account for almost two-thirds of the AML 

fees generated by coal mining, while one-third comes from the east. Wyoming is the 

largest source of AML fees, accounting for 44 percent of all fees collected. Yet a disproportionately large number of AML priorities remain in the east. 

AML fees have helped address the priority coal and non-coal sites in Wyoming, 

and current bonding requirements now necessitate contemporaneous reclamation of 

coal-mined lands. Notwithstanding the fact that Wyoming’s historic reclamation 

needs have been addressed and that current reclamation occurs almost in ‘‘real 

time,’’ KCP&L and all other Wyoming coal consumers continue to pay the full $0.35 

AML fee for surface-mined subbituminous coal. We urge Congress to examine this 

issue because we believe, as do other companies and organizations, that Wyoming’s 

AML collections are disproportionate to its receipts. We understand that Wyoming 

producers have paid more than $360 million in AML fees that have not been returned to the state. That means consumers like KCP&L and our electric customers 

are paying more than we need to for our energy. It also means that other consumers 

of Wyoming coal are paying more for their energy than they should. 

More importantly, however, we believe that the AML fee collected on Wyoming 

coal has served its purpose. While we appreciate the fact that there is a valid public 

purpose to be served by applying AML fees to priority reclamation needs—wherever 

found—we maintain that Wyoming coal consumers like KCP&L and our customers 

bear a disproportionate part of the fee. In our view, since Wyoming’s coal and noncoal reclamation needs have been addressed, we believe Congress should consider 

whether a reduction in, if not a complete elimination of, the AML fee on Wyoming 

production is in order. 

Since the Department of Energy’s Energy Information Administration projects 

more than 25 percent growth in western coal production and a one-third increase 

in Powder River Basin production in the coming decade, while production elsewhere 

will remain relatively flat, we believe it is particularly appropriate for Congress to 

address the inequities in the AML fee program before the program is reauthorized. 

We do not believe the current imbalance of benefits and burdens associated with 

AML fees generated in Wyoming should be perpetuated. We urge the Subcommittee 

to examine ways to rectify the inequities in the AML fee collection and distribution 

systems and to develop a more equitable way to address the remaining reclamation 

priorities under SMCRA. 

We would welcome the opportunity to work with the Subcommittee, OSM and others interested parties to address the AML fee in the reauthorizing process, and we 

thank you for the opportunity to express our views at this hearing. I would be 

pleased to attempt to answer any questions you may have. 

61

Mrs. CUBIN. Thank you. And please feel free whenever you need 

to take leave. 

Mr. LAFFERE. I appreciate that. 

Mrs. CUBIN. Now I would like to recognize Marion Loomis and 

welcome you to Washington. Good to see you. 

STATEMENT OF MARION LOOMIS, EXECUTIVE DIRECTOR,

WYOMING MINING ASSOCIATION 

Mr. LOOMIS. Thank you, Madam Chairman. It’s a pleasure to be 

here. 

Madam Chairman and members of the Committee, I’m Marion 

Loomis. I’m the Executive Director of the Wyoming Mining Association. As the Nation’s largest coal-producing State, I’m pleased to 

provide this testimony on the reauthorization of the Abandoned 

Mine Land Fund. I think we provide a unique perspective in that 

the State of Wyoming has certified that their priority coal reclamation sites have been completed and the fact that we pay a disproportionate and, we feel, unfair share of the AML funds based 

on volume and percentage of price. We did hear that there may be 

some additional sites that have been identified in Wyoming, but for 

the most part, most of the Priority 1 and 2 sites have been addressed. 

Since the inception of the Abandoned Mine Land Reclamation Fund in 1977, Wyoming producers have paid $1.63 billion into the 

AML Fund. That has already been discussed. In 2002, the 17 active 

mines paid over $126 million into the fund but receives only $28 

million. That has also been discussed. It might interest the Committee to know that Wyoming mines now produce over 11 tons of 

coal per second, 24 hours per day, 365 days a year. And we have 

the reserves to continue to do that for the next 100 years. So we 

hope to be a major part of this Nation’s energy base for many years 

to come. 

In June of this year, the WMA Board of Directors adopted a 

Statement of Position on the reauthorization of the AML fee. A 

copy of that statement is attached for your information, or at least 

I hope it was. It was mailed in to the Committee. 

The position states essentially that we strongly oppose reauthorization of the AML fee unless the following occurs: a fundamental 

reform of the AML Program, including significant reductions and 

streamlining of the administrative processes; a significant reduction in the AML fee; and a return of the State share accrued 

through September 30, 2004, over some defined period of time. 

In evaluating the AML Program, it is clearly evident that unless 

there is a fundamental change in how the program is administered, 

this program will be a never-ending bottomless pit. Since 1977, the 

AML has generated over $6 billion in fees to address about a $6 

billion program. After 25 years, there still remains $3.5 billion in 

reclamation work to be done. 

We have talked about the administration fees. We think that’s a 

major concern and would hope that if it is reauthorized, that something be done to try to control the administrative costs. 

Based on the past history, if nothing is done to rectify the problem, the program would require another $10 billion to fix a $3 billion program. We think that’s unacceptable. 

62

The OSM has stated that, ‘‘Based on historic production records, 

we know that 94 percent of the AML problems are in the Eastern 

United States.’’ They also say that 71 percent of those sites are in 

Pennsylvania, West Virginia, and Kentucky. 

Because most of it is based on current production, we feel that 

there is a corresponding shift of resources away from those States 

and to Wyoming. OSM has already identified that and discussed it. 

I’m trying to paraphrase here as fast as I can, Madam Chairman. 

But a great deal of the money has come from Wyoming, and we 

hope that the AML Program recognizes that the Wyoming coal industry has provided such a huge increase in influx of revenues over 

the past 25 years. And it’s unfortunate that more of the priority 

coal reclamation projects haven’t been addressed. 

In general terms, the original intent of the program was that 50 

percent of the AML fees were to be returned to the State. That 

hasn’t been done. It’s been talked about. But one of the areas we 

hope that you would take a look at is the fairness issue. And if you 

look at it as a percentage of sale price, we feel it’s patently unfair. 

I conducted a survey of our coal membership to quantify the total 

payments to governments, and the results are in here, and they go 

through the various taxes. But in 2002, the total taxes paid to Government was $939 million. The average selling price of coal in 1992 

in Wyoming was $5.90. That represents a 42-percent—those taxes 

and royalties represent 42 percent of the sales price of Wyoming 

coal. That does not include any Federal income tax. The AML fee 

is almost 6 percent of the sales price. If the sales price goes down 

and is lowered, then it even—it could get up as high as 10 percent. 

So we would encourage, Madam Chairman, that something fundamental is done to—if the AML Fund is reauthorized, that there 

be some fundamental reform, that the price be adjusted. You’ve 

talked about Btu, maybe a percentage of the sales price, and we 

would hope that those monies that are owed to the States, including Wyoming, would be returned. 

Thank you, Madam Chairman. You have the full written report, 

and I’ll be glad to try to answer any questions I can. 

[The prepared statement of Mr. Loomis follows:]

Statement of Marion Loomis, Wyoming Mining Association 

Madam Chairman and members of the Committee my name is Marion Loomis 

and I am the Executive Director of the Wyoming Mining Association (WMA). As the 

nation’s largest coal-producing state, I am pleased to provide this testimony on the 

reauthorization of the Abandoned Mine Land Fund. We provide a unique perspective in that the State of Wyoming has certified that their priority coal reclamation 

sites have been completed, and the fact that we pay a disproportionate, and unfair, 

share of the AML funds based on volume and percentage of price. 

Since the inception of the Abandoned Mine Land Reclamation fund in 1977, Wyoming producers have paid $1.63 billion into the AML fund. In 2002 alone the 17 

active mines paid over $126 million into the fund, but Wyoming only received $28 

million from the fund. Since inception of the fund, Wyoming has received $455.8 

million dollars or about 28% of the total fees collected from Wyoming producers. It 

might interest the Committee to know that Wyoming mines now produce over 11 

tons of coal per second, 24 hours per day, and 365 days per year. We have the reserves to continue at this rate of production for over 130 years. 

In June of this year, the WMA Board of Directors adopted a Statement of Position 

on the reauthorization of the AML fee. A copy of that Statement is attached for your 

information. In summary, the WMA’s position is that we strongly oppose any reauthorization of the AML fee unless the following occurs: 

63

• A fundamental reform of the AML program, including significant reductions 

and streamlining of administrative processes. 

• A significant reduction in the AML fee. 

• A return of the State Share accrued through September 30, 2004 over a defined 

period of time. 

Need For Program Reform 

In evaluating the AML program it is clearly evident that unless there is a fundamental change in the how the program is administered, this program will be a 

never-ending bottomless pit. Since 1977, the AML has generated over $6 billion in 

fees to address about a $6 billion AML problem (Priority 1 and 2 sites). Surprisingly, after more than 25 years, there remains over $3.5 billion in reclamation work 

left to do. Only about 36% of the total dollars generated have actually been used 

to perform reclamation work. Another 25% has gone to administration. The remainder of the fees has either gone to non-priority projects or is being held in trust ($1.4 

billion). Based upon past history, if nothing is done to rectify this problem the program will require another $10 billion to fix a $3 billion problem. This is simply unacceptable. 

Fees Need To Be Significantly Reduced 

OSM has stated that ‘‘Based on historic production records we know that 94% of 

the AML problems are in the eastern United States’’ [but there has been a] general 

shift in coal production from the east to the west, and more significantly a shift in 

the east from surface mine production to deep mine production which is assessed 

at the lower AML fee of fifteen cents per ton.’’ In fact, OSM notes that nearly 71% 

($2.7 billion) of the remaining estimated AML reclamation costs reside in Pennsylvania, West Virginia and Kentucky. OSM further states, ‘‘Over the past 25 years, 

fee income has shifted away from the areas with high historic production and into 

the areas where there are fewer or no remaining AML problems. Because 71% of 

the total grant dollars is based on current production, there has been a corresponding shift of AML resources away from the areas with the most significant 

AML problems.’’

OSM has correctly identified that coal production has shifted to surface mines in 

the west, particularly Wyoming, and to underground mining in the east. This means 

that based on volume, Wyoming coal producers bear a much greater burden for the 

AML program than any other coal-producing region, while having little to no 

reclamation liability. The AML program should be grateful that the Wyoming coal 

industry has provided such an influx of revenues over the past 25 years. It is 

unfortunate that more priority coal reclamation projects haven’t been addressed.

64

In general terms, the original intent of the program was that 50% of the AML 

fees were to be returned to the State of origin to conduct reclamation work. The remaining 50% was to be distributed according to high priority areas. OSM has noted 

the difficulty they have had being tied to the complex formula that dictates how the 

remaining (non-state) 50% share is to be distributed. It has also been noted that 

the 50% State share has not been distributed as well. It is simply an issue of fairness that once a State certifies completion of reclamation work, that the AML fee 

should be significantly reduced. 

Another way to look at the fairness issue is based upon percentage of sales price. 

I conducted a survey of our coal membership to quantify the total payment to governments. The results are summarized in the following table, and the numbers are 

simply staggering.

The $2.52 paid to the state and Federal Government is a huge percentage of the 

sales price of a ton of coal in Wyoming. In 2002, the average statewide selling price 


88532.001 88532.002
65

for a ton of coal was $5.90, so 42% of the sales price was made up of payments to 

governments. These numbers do not include any Federal income tax. The AML fee 

is almost 6% of the sales price, which is significantly higher than any other coal 

producing state. In some years when coal prices are down, the AML fee can approach 10% of the sales price for some lower Btu PRB coals. In contrast, AML fees 

on a surface mined ton of coal selling at $25 per ton (which is common in the Midwest and eastern United States) is only 1.4% (or less if the sales price is higher). 

The disparity in volume and percentage of sales price is simply not fair, and needs 

to be rectified. Current law states that the AML fee is $0.35 per ton of surface 

mined coal or 10% of sales price. The percentage of sales price could be adjusted 

so that all surface mined coals (eastern, Midwestern and western) are equalized. 

State Shares 

WMA supports the State of Wyoming’s position to return its State share over a 

defined period of time. However, we have also heard the discussions that the State 

of Wyoming would receive their State share balance as of September 30, 2004 over 

a 10-year period. In exchange, the AML fee would be extended at current rates to 

some uncertain date in the future. Again, this is an issue of fairness, and this approach is patently unfair. An analogy would be that a bank would say that ‘‘we’re 

going to hand out your savings account over the next 10 years; in exchange, you 

are going to offset your income over the same period of time.’’ Again, we support 

the State of Wyoming’s position to recoup their State share over a defined period 

of time, but this has to be accompanied by a significant reduction in the AML fee 

moving into the future. 

Summary 

As discussed earlier in my testimony, the WMA’s position is that we strongly 

oppose any reauthorization of the AML fee unless there is: 

• A fundamental reform of the AML program, including significant reductions 

and streamlining of administrative processes. 

• A significant reduction in the AML fee. 

• A return of the State Share accrued through September 30, 2004 over a defined 

period of time. 

Madam Chairman, thank you for the opportunity to present the Wyoming Mining 

Association’s position on this most important topic. 

Mrs. CUBIN. Thank you, and it will be entered in the record. 

I’m just notified we have 11 votes coming up at about any time. 

The last time I think we had seven votes that took 2 hours, or six. 

So we really—if I cut you short, please understand. I just want to 

get all the testimony in, and your entire testimony will be in the 

record. 

Now I would like to recognize David Finkenbinder with the National Mining Association. 

STATEMENT OF DAVID FINKENBINDER, VICE PRESIDENT, 

CONGRESSIONAL AFFAIRS, NATIONAL MINING ASSOCIATION 

Mr. FINKENBINDER. Thank you, Madam Chairman. I intend to 

make a short statement even shorter right now. 

I appreciate the opportunity to testify before the Subcommittee 

on behalf of the National Mining Association. Since 1998, the coal 

industry has contributed $6 million to the AML Fund. There’s been 

about $2 billion spent for underground coal and non-coal reclamation. The appropriations to the fund have been about $4.4 million. 

Essentially about one-third of the appropriated dollars from the 

AML Fund went to the reclamation of 1 and 2 sites. 

In 1986, as a quick history, the National Academy of Sciences did 

a mid-term report on the situation of the fund, and at that time, 

most States expressed confidence they would have completed their 

reclamation of high-priority inventory by 1992 at a cost of $811 

million. By 1992, $868 million of high-priority sites had been 

66

reclaimed, and the benchmark had been moved up to $2.3 billion 

of remaining inventory. In short, every time the reclamation’s accomplished, the goal is moved back. 

National Mining thinks that there are some issues that need to 

be addressed in the course of the reauthorization discussions, some 

considerations that need to be taken into account, I should say. 

The questions include: Do we need and can we afford the multiple delivery mechanism and subprograms such as RAMP, the 

emergency program? And do the provisions—and States still use 

provisions of law added in 1990 for funds to be set aside in anticipation of the fee expiring in 1995. 

Should the current allocation and distribution formula be replaced with a system that directs AML fees to areas with the greatest needs in terms of remaining high-priority? That, of course, begs 

the question that has been brought: What do we do about the allocation and distribution that is already on the books? Most importantly, it forces us to ask: Does the AML remain a national problem that still requires a national solution? If so, should the solution 

be administered in a manner more fitting and efficient for a national problem? 

Presently, the law sets out no less than five priorities, and there 

is no requirement that AML fees be used for top priorities. What 

good are priorities if they’re not going to be abided by? 

Does the inventory serve as a benchmark for measuring success? 

As we said, each time the goal is met, the goal line is moved back. 

Has the inventory become a funding device used to establish a 

permanent AML Program rather than a management tool? 

And administrative costs, which virtually everyone has talked 

about, in 1991, there was a GAO report that found that between 

1985 and 1990, 28 percent of the $1.3 billion spent for that period 

was used for Federal and State administrative expenses. 

What should the levels of the fee be? And how much can and 

should the coal industry be asked to pay into the AML Fund? The 

job may not be finished, but the lack of AML fees is not the reason. 

In the 1970’s, coal prices were forecasted to be $50 a ton. In 1982, 

the average price of coal nationwide, in current terms, was $27.25. 

In 2001, the average price of coal was about $17 a ton. The flat 

fee—I never should have written that. Every time the coal prices 

drop, there is a de facto tax increase. 

Madam 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 colleagues as you address the public policy decisions regarding the 

coal AML Program. 

Thank you very much. 

[The prepared statement of Mr. Finkenbinder follows:]

Statement of David Finkenbinder, Vice President Congressional Affairs, 

National Mining Association, on behalf of the National Mining Association 

Madam 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 

67

to fund the program was authorized initially until 1992, but has been extended 

twice. With the current authorization scheduled to expire on September 30, 2004, 

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, Madam Chairman, we respond to your invitation to testify by providing 

some observations about the history of the program, and offer 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 almost $6 billion to the AML Fund. 

The Office of Surface Mining (OSM) reports that as of September 30, 2002 about 

$1.66 billion of the high priority (Priority 1 & 2) abandoned coal mined lands inventory has been reclaimed. Another $195 million has been used to reclaim priority 3 

coal sites, and $238 million for non-coal projects. Appropriations from the AML 

Fund for this period totaled about $4.4 billion. In other words, less than half of all 

the money appropriated is finding its way to on-the-ground 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—about one of every three dollars 

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 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 

$4.4 billion in appropriations from the AML Fund, only $1.66 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 

68

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 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 $6.5 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 $2 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 now has $274 million allocated to that account which cannot 

be used for other purposes. 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, 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 

69

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 continues 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 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. 

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. In the meantime, the AML fee has become an increasing burden on the industry which has experienced declining prices in the market. While 

the amount the coal industry receives for each ton of coal it sells has declined precipitously, annual AML fee revenue continues to increases substantially with the 

rise in coal production. This is because the AML fee rates remain constant for each 

ton of coal. When the AML fee was being debated in the late 1970s, coal prices were 

forecasted to exceed $50/ton, and it was believed that the AML fee would be a nominal tax, at most. In 1982, the average price of coal nationwide in current terms was 

$27.25/ton. In 2001, the average price of coal was about $10 less per ton. 

Madame 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. 

Mrs. CUBIN. Thank you. 

And I now hear the buzzers, but we—‘‘buzzards,’’ I guess I 

should call them. We do have time to recognize Mr. Young for his 

testimony. 

STATEMENT OF DAVID M. YOUNG, PRESIDENT,

BITUMINOUS COAL OPERATORS’ ASSOCIATION 

Mr. YOUNG. Thank you, Madam Chairman. Good afternoon. I am 

Dave Young, president of the Bituminous Coal Operators Association. I have submitted my testimony for the record and will summarize it for you as quickly as possible. 

I want to express my appreciation to the Committee for conducting this hearing. It gives the BCOA and other interested parties the opportunity to comment on the current operation of the 

Abandoned Mine Land Program and to make recommendations regarding reauthorization of the AML Program. 

70

We believe the program should be refined so that needed reclamation can be completed and the crucial role of protecting retiree 

orphan health benefits is maintained. 

Congress enacted the Coal Act in 1992, but the Federal Government has a long history of involvement with the coal miners’ benefits. When a national coal strike occurred in 1946, President Truman issued an Executive order seizing all bituminous coal mines 

and ordering the Department of Interior to negotiate appropriate 

changes in the terms and conditions of employment of the miners. 

The Secretary of the Department of Interior negotiated a settlement, which ended the strike and created a new benefit fund for 

coal miners. 

One of the congressional findings in enacting the 1992 Coal Act 

was that ‘‘...it is necessary to modify the current private health 

care benefit plan structure for retirees in the coal...to stabilize plan 

funding and allow for the provision of health care benefits to such 

retirees.’’ In passing the Coal Act, Congress sought to stabilize plan 

funding by limiting benefit eligibility to a specifically identifiable 

group of approximately 175,000 beneficiaries. That number has 

since declined to about 100,000. 

The Combined Benefit Fund was established to provide benefits 

to miners who retired before July 20, 1992. Funding for the Combined Fund was based on premiums charged to identified former 

employers and AML interest for orphan miners whose former employers were no longer in business. 

The Coal Act also created the 1992 Fund to provide for orphan 

retiree health care benefits for employees who retired by September 30, 1994, and who are not eligible for the Combined Benefit 

Fund. Coal companies are required to pay for benefits of their own 

employees who retired during this period. However, in the case of 

a complete bankruptcy, where the company is no longer in business, these retirees become 1992 Fund orphans with no Federally 

subsidized orphan payment plan. Thus, the long-term financing for 

the health care is uncertain. 

From 1993 through today, this funding system has generally 

been able to provide the retiree health care benefits to every covered beneficiary, but to do so, Congress has appropriated funds to 

cover Combined Benefit Fund deficits in several years from reserved interest in the AML Trust Fund. 

Today, however, both orphan financing mechanisms are in trouble. This situation has been hastened by the significant steel industry bankruptcies that have moved 10,000 beneficiaries into the orphan category. The current mismatch in orphan financing is expected to require a 40-percent benefit cut in the Combined Benefit 

Fund and create severe problems in the 1992 Fund. Both the Combined Benefit Fund and the 1992 Fund orphan financing mechanisms must be overhauled if the Coal Act’s goal of providing health 

care benefits to these retirees is to be maintained. 

Until recently, the AML interest had been large enough to cover 

the Combined Benefit orphan expenses. It is important to note that 

this interest is earned from an almost $2 billion balance in the 

AML Fund that was created and is supported solely by coal industry contributions. Between 1996 and 2002, Combined Benefit Fund 

orphan expenses ranged between $47 and $68 million, and AML 

71

interest was generally adequate on an annual basis to cover these 

expenses. Indeed, as recently as fiscal year 2001, the AML Fund’s 

interest return exceeded $100 million annually. However, these returns were not the result of an explicit long-term investment strategy. In fact, these returns temporarily masked the lack of any investment strategy by the Department of Interior that should have 

taken into account the annual minimum needs of the Combined 

Fund. As interest rates have continued to fall, the Department of 

Interior’s response has been to seek the lowest possible overnight 

rate of return, which has created a needless and permanent deficit 

mismatch between the AML interest income and orphan expenses 

of $70 million per year. 

As the Resource Committee takes up the reauthorization of the 

AML Program, the BCOA recommends the adoption of the following key measures: 

First, the AML Program should be reauthorized and the fee extended in order to complete reclamation work and to adequately 

fund all Coal Act obligations. 

Two, use of the AML interest generated by the AML Trust Fund 

should be made available to cover expenses of all Coal Act orphan 

beneficiaries. 

Three, Congress should direct the Department of Interior to 

achieve an investment return sufficient to cover the Combined Benefit Fund and the 1992 Fund needs. 

And, last, the $115 million in stranded AML interest should be 

made available immediately to offset losses to the Department of 

Interior’s investment policy and to prevent a Combined Benefit 

Fund benefit cut. 

Thank you for this opportunity. 

[The prepared statement of Mr. Young follows:]

Statement of David M. Young, President,

Bituminous Coal Operators’ Association 

Good afternoon, my name is Dave Young and I am President of the Bituminous 

Coal Operators’ Association (BCOA). The BCOA represents its members in collective 

bargaining with the United Mine Workers of America. BCOA is a settlor of various 

multi-employer Funds including those established by the Coal Industry Retiree 

Health Benefits Act of 1992 (‘‘Coal Act’’). BCOA also represents its members before 

Congress and the Executive Branch on retiree health and pensions issues and coal 

mine health and safety. 

I want to express my appreciation to the Committee for conducting this hearing. 

It gives the BCOA and other interested parties the opportunity to comment on the 

current operation of the Abandoned Mine Land (‘‘AML’’) Program and to make recommendations regarding reauthorization of the AML Program. Our member companies have a keen interest in the operation of the Program. We believe the Program 

should be refined so that needed reclamation can be completed and the crucial role 

in protecting retiree orphan health benefits is maintained. 

Congress enacted the Coal Act in 1992, but the Federal Government has a long 

history of involvement in coal miners’ benefits. When a national coal strike occurred 

in 1946, President Truman issued an Executive Order seizing all bituminous coal 

mines and ordering the Department of Interior to negotiate ‘‘appropriate changes in 

the terms and conditions of employment’’ of the miners. The Secretary of the Department of the Interior negotiated a settlement, which ended the strike and created a new benefit fund for coal miners. 

One of the Congressional findings in enacting the 1992 Coal Act was ‘‘...it is necessary to modify the current private health care benefit plan structure for retirees 

in the coal industry...to stabilize plan funding and allow for the provision of health 

care benefits to such retirees.’’ In passing the Coal Act, Congress sought to stabilize 

plan funding by limiting benefit eligibility to a specifically identifiable group of approximately 175,000 beneficiaries. That number has since declined to about 100,000. 

72

The Combined Benefit Fund (‘‘CBF’’) was established to provide benefits to miners 

who retired before July 20, 1992. Funding for the Combined Benefit Fund was based 

on premiums charged to identified former employers and AML interest for ‘‘orphan’’ 

miners whose former employers were no longer in business. 

The Coal Act also created the 1992 Fund to provide for ‘‘orphan’’ retiree health 

care benefits for employees who retired by September 30, 1994 and who are not eligible for the Combined Benefit Fund. Coal companies are required to pay for benefits of their own employees who retired during this period. However in the case of 

a complete bankruptcy, where the company is no longer in business, these retirees 

become 1992 Fund ‘‘orphans’’ with no Federally subsidized orphan payment plan. 

Thus, the long-term financing for the health care is uncertain. 

From 1993 through today, this funding system has generally been able to provide 

the retiree health care benefits to every covered beneficiary but, to do so, Congress 

has appropriated funds to cover Combined Benefit Fund deficits in several years 

from reserved interest in the AML Trust Fund. 

Today, however, both orphan-financing mechanisms are in trouble. This situation 

has been hastened by the significant steel industry bankruptcies that have moved 

10,000 beneficiaries into the orphan category. The current mismatch in orphan financing is expected to require a 40% benefit cut in the Combined Benefit Fund and 

create severe problems in the 1992 Fund. Both the Combined Fund and 1992 Fund 

orphan financing mechanism must be overhauled if the Coal Act’s goal of providing 

health care benefits to these retirees is to be maintained. 

Combined Fund Orphan Expense 

Until recently, AML annual interest had been large enough to cover the Combined 

Benefit Fund’s ‘‘orphan’’ expenses. It is important to note that this interest is earned 

from an almost $2 billion balance in the AML Fund that was created and is supported solely by coal industry contributions. Between 1996 and 2002, Combined 

Benefit Fund orphan expense ranged between $47 and $68 million and AML interest was generally adequate on an annual basis to cover these expenses. Indeed as 

recently as FY-2001, the AML Fund’s interest return exceeded $100 million annually. However, these returns were not the result of an explicit long-term investment 

strategy. In fact, these returns temporarily masked the lack of any investment strategy by the Department of the Interior that should have taken into account the annual minimum needs of the Combined Fund. As interest rates have continued to 

fall, the Department of Interior’s response has been to seek the lowest possible overnight rate of return, which has created a needless and permanent deficit mismatch 

between AML interest income and orphan expenses of $70 million per year. 

1992 Fund Orphan Expenses 

When the Coal Act was debated the funding of the 1992 Fund appeared to be relatively manageable. However, this circumstance has changed dramatically with the 

recent bankruptcies in the steel industry. LTV, Bethlehem Steel and National Steel 

each filed for Chapter 7 bankruptcy adding a total of approximately 5,000 orphan 

beneficiaries in the 1992 Fund. One other major contributor to this Fund is in Chapter 11 and the outcome of that bankruptcy proceeding is uncertain at this time. 

Collectively these four companies alone account for 8,500 beneficiaries and $43 

million per year in added expenses to the 1992 Fund, more than doubling the current population (while simultaneously reducing the contribution funding base). No 

one contemplated at the time of the enactment of the Coal Act that there would be 

bankruptcies of this magnitude and the dumping of thousands of ‘‘orphan’’ retirees 

into the 1992 Fund. 

This combination of AML Trust Fund investment policies and steel industry bankruptcies has resulted in inequitable burdens and, therefore, requires a fresh approach if Coal Act’s goals are to be maintained. Congress was correct to make AML 

interest an integral part of the original solution. Reauthorization of the AML Program provides the opportunity to complete the job begun in 1992. 

As the Resources Committee takes up reauthorization of the AML Program, the 

BCOA recommends the adoption of the following key measures: 

1. The AML Program should be reauthorized and the fee extended in order to 

complete reclamation work and to adequately fund all Coal Act obligations. 

2. Use of the AML interest generated by the AML Trust Fund should be made 

available to cover expenses of all Coal Act orphan beneficiaries. 

3. Congress should direct the Department of Interior to achieve an investment return sufficient to cover the Combined Benefit Fund and 1992 Fund needs. 

4. The $115 million in ‘‘stranded’’ AML interest should be made available immediately to offset losses due to Department of Interior’s investment policy and 

to prevent a Combined Benefit Fund benefit cut. 

73

This combination of measures addresses the immediate short-term needs of the 

Combined Benefit Fund and will provide long-term stability to the Coal Act Funds 

consistent with the original intent of the Coal Act. 

Thank you for this opportunity to testify. 

Mrs. CUBIN. Thank you. 

I do have questions for members of the panel, but considering the 

circumstances that I do need to go over to the floor, I will submit 

those in writing. 

Oh, wait a second. 

More updates. At any rate, I will submit questions in writing to 

you. The hearing record will be open for 10 days, and hopefully you 

will be able to make those responses in that time. 

I sincerely thank you for spending your whole afternoon with us, 

and your testimony has been very valuable. Obviously this is a big 

job. There are a lot of considerations and more needs than dollars. 

So we will just do the best we can. I know that we will come out 

with a product that will meet the fundamental needs that we have. 

So since there is no further business in front of the Committee, 

the Subcommittee is now adjourned. 

[Whereupon, at 5:40 p.m., the Subcommittee was adjourned.]

[The following information was submitted for the record:] 

• Donnelly, Daniel K., Ph.D., Director, Center for Environmental 

Research and Education, Duquesne University, Letter 

submitted for the record 

• Grote, Thomas F., Director, Kiski Basin Initiatives, Letter 

submitted for the record 

[A letter submitted for the record by Mr. Donnelly follows:]

DUQUESNE UNIVERSITY

BAYER SCHOOL OF NATURAL AND ENVIRONMENTAL SCIENCES

332 FISHER HALLITTSBURGH, PA 15282

CENTER FOR ENVIRONMENTAL RESEARCH AND EDUCATION

PHONE (412) 396-4367

FAX (412) 396-4092

INTERNET: DONNELLY@DUQ.EDU

JULY 25, 2003

The Honorable Barbara Cubin 

Chair 

Subcommittee on Energy and Mineral Resources 

1626 Longworth House Office Building 

Washington, D.C. 20515

Dear Representative Cubin,

Modification and reauthorization of the Abandoned Mine Reclamation Fund are 

important to protect our communities and families from hazards posed by coalmines 

abandoned before 1977. Dangerous shafts, mountains of black waste, polluted waters, and depressed economies afflict one-half of the citizens of the United States 

The Abandoned Mine Reclamation Fund is the primary source of money available 

to fix these problems. We have successfully used the fund to clean up toxic mine 

water, extinguish mine fires, and eliminate other dangerous abandoned mine hazards. 

74

Unregulated coalmines abandoned before the Federal Surface Mining Control and 

Reclamation Act of 1977 (SMCRA) resulted in a legacy of environmental damage. 

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. Statewide, 44 of Pennsylvania’s 67 

counties are directly affected by abandoned mines that encompass over 189,000 

acres. Abandoned mine drainage (AMD) is the largest contributor to water quality 

impairment in the Commonwealth. According to the Pennsylvania Department of 

Environmental Protection, over 3,000 miles of the Commonwealth’s streams are impaired by AMD. 

The price tag for cleaning up Pennsylvania’s abandoned mine legacy has been estimated to be as high as $15 billion. Pennsylvania has committed substantial state 

and private dollars and countless hours of professional and volunteer time to addressing the abandoned mine problems. As you know, Congressman Kanjorski has 

introduced legislation to supplement existing reclamation programs and to further 

help reclaim our abandoned mine legacy. The Commonwealth receives about $25 

million per year from the Abandoned Mine Reclamation Fund. But the reclamation 

job before us is too large for any one program or one level of government to address 

on its own. There is much work left to be done. 

Finish the Job 

The Abandoned Mine Reclamation Fund program is not currently structured to 

efficiently and effectively complete the job of reclaiming coal mine lands abandoned 

before 1977. The states that fueled the coal boom in the early and middle part of 

this century and helped fight two World Wars currently have low coal production 

relative to their western counterparts, yet they have the largest legacy of adverse 

mining impacts from before 1977. The majority of grants distributed to the states 

are based on current rather than historic production. When the program began in 

1977, production in the eastern states was high enough to ensure that our states 

received a proportion of the funds that roughly aligned with the extent of our problems. Since then, production has shifted away from the states—including Pennsylvania—with high historic production and 94% of the abandoned mine land problems. 

OSM Director Jeff Jarrett captured the essence of the problem in a recent white 

paper entitled The Job’s Not Finished in which he points out that ‘‘there is a direct 

correlation between a state or tribe’s historic production and the magnitude of its 

AML problem...there is no relationship between the current production state share 

portion of the grant and the magnitude of the AML problem in that state or tribe.’’

The formula should be changed to direct resources from the fund to states based 

upon historic production. This will correct existing imbalances, direct resources to 

where the problems are, and allow states with the most pre-1977 problems to finish 

the job of reclaiming our abandoned mine legacy. 

Funding for Abandoned Mine Drainage 

Abandoned mine drainage pollutes public water supplies, destroys fish and wildlife habitat, depresses local economies, and threatens human health and safety. 

Pennsylvania is representative of eastern coal states with abandoned mine drainage 

problems. AMD is our largest source of water quality impairment. 

The Pennsylvania Fish and Boat Commission once estimated that the Commonwealth suffers almost $70 million per year in lost recreational and fishing opportunities due to abandoned mine drainage. These waters are too polluted to allow fishing, boating, and other water-based recreation. 

It is critical that abandoned mine drainage problems continue to be eligible for 

funding to protect the health of our citizens and visitors, improve our economy, and 

sustain our future. 

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 

have 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 waterrelated projects under Priorities 2 and 3. 

75

Maintain the Combined Benefit Fund 

Interest generated on the Abandoned Mine Reclamation Fund is currently transferred to the Combined Benefit Fund (CBF) 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. There are approximately 

60,000 beneficiaries, whose average age is 78 years old. This eases the burden on 

mining companies. If the Abandoned Mine Reclamation Fund is not reauthorized, 

a new fee will need to be levied to cover these benefits. 

The transfer of interest to the Combined Benefit Fund should continue. At the 

same time, the funds should be invested in a way that maximizes returns whenever 

possible. 

Leverage the Dollars 

Currently, most of the resources allocated under this program are not permitted 

to be matched with other Federal dollars. This is an onerous requirement that inhibits the ability of states to efficiently solve local problems. 

Funds allocated under this program should be ‘‘matchable’’ with Federal, state, 

local, and private dollars to maximize resources and encourage partnerships. 

As abandoned mine lands are reclaimed, they offer potential locations for economic development projects. According to the Association of General Contractors, 59 

jobs are created for every $1 million spent on construction activities. 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 the funds in ways that promote reclamation, leverage 

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

Increase the Minimum Program Funding 

States which have significant abandoned mine problems, but which have small 

state 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 under-funding and ensure that states with 

large abandoned mine problems but low production would be able to continue running effective programs. This potentially affects eleven states. 

Annual funding for minimum program states should be raised to $4 million to reduce the time needed to finish addressing their abandoned mine problems. 

Full allocation to states of future fees 

As of June 30, 2003, the fund has an unappropriated balance of nearly $1.5 billion. The state share of this balance is almost $972 million. Pennsylvania maintains 

the third highest balance at over $54.7 million. These funds are not being used for 

their intended purposes while our abandoned mine problems persist. 

Future collections to the fund should be fully allocated for their intended purposes 

of cleaning up abandoned mine problems and reducing the time necessary to meet 

the goals of SMCRA. 

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 take at least 25 years to address abandoned mine problems. Extending the program 25 years would honor the intentions 

of the original law to unburden communities plagued by unreclaimed coalmines. 

The program should be extended until at least 2029. 

Public health and welfare, restoration of the land, and cleaning of polluted 

streams requires congressional action. Failure to act continues a cycle of depressed 

economies and unemployment while exposing our communities and families to 

health and safety hazards. Please act now to modify and reauthorize the Abandoned 

Mine Reclamation Fund to finish the job of reclaiming our abandoned mine legacy.

76

RESPECTFULLY SUBMITTED,

DANIEL K. DONNELLY, PH.D., DIRECTOR

CENTER FOR ENVIRONMENTAL RESEARCH AND EDUCATION

[A letter submitted for the record by Mr. Grote follows:]

THOMAS F. GROTE KISKI BASIN INITIATIVES

DIRECTOR 501 15TH STREET, SUITE B

WINDBER, PA 15963

814-467-0836

JULY 29, 2003

The Honorable Barbara Cubin 

Chair 

Subcommittee on Energy and Mineral Resources 

1626 Longworth House 

Office Building 

Washington, D.C. 20515

Dear Representative Cubin:

Modification and reauthorization of the Abandoned Mine Reclamation Fund are 

important to protect our communities and families from hazards posed by coal 

mines abandoned before 1977. Dangerous shafts, mountains of black waste, polluted 

waters, and depressed economies afflict one-half of the citizens of the United States 

The Abandoned Mine Reclamation Fund is the primary source of money available 

to fix these problems. We have successfully used the fund to clean up toxic mine 

water, extinguish mine fires, and eliminate other dangerous abandoned mine hazards. 

Unregulated coal mines abandoned before the Federal Surface Mining Control and 

Reclamation Act of 1977 (SMCRA) resulted in a legacy of environmental damage. 

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. Statewide, 44 of Pennsylvania’s 67 

counties are directly affected by abandoned mines that encompass over 189,000 

acres. Abandoned mine drainage (AMD) is the largest contributor to water quality 

impairment in the Commonwealth. According to the Pennsylvania Department of 

Environmental Protection, over 3,000 miles of the Commonwealth’s streams are impaired by AMD. 

The price tag for cleaning up Pennsylvania’s abandoned mine legacy has been estimated to be as high as $15 billion. Pennsylvania has committed substantial state 

and private dollars and countless hours of professional and volunteer time to addressing the abandoned mine problems. As you know, Congressman Kanjorski has 

introduced legislation to supplement existing reclamation programs and to further 

help reclaim our abandoned mine legacy. The Commonwealth receives about $25 

million per year from the Abandoned Mine Reclamation Fund. But the reclamation 

job before us is too large for any one program or one level of government to address 

on its own. There is much work left to be done. 

Finish the Job 

The Abandoned Mine Reclamation Fund program is not currently structured to 

efficiently and effectively complete the job of reclaiming coal mine lands abandoned 

before 1977. The states that fueled the coal boom in the early and middle part of 

this century and helped fight two World Wars currently have low coal production 

relative to their western counterparts, yet they have the largest legacy of adverse 

mining impacts from before 1977. The majority of grants distributed to the states 

are based on current rather than historic production. When the program began in 

1977, production in the eastern states was high enough to ensure that our states 

received a proportion of the funds that roughly aligned with the extent of our problems. Since then, production has shifted away from the states—including PennsylVerDate 0ct 09 2002 08:55 Nov 12, 2003 Jkt 087420 PO 00000 Frm 00080 Fmt 6633 Sfmt 6621 J:\DOCS\88532.TXT HRESOUR1 PsN: KATHY
77

vania—with high historic production and 94% of the abandoned mine land problems. 

OSM Director Jeff Jarrett captured the essence of the problem in a recent white 

paper entitled The Job’s Not Finished in which he points out that ‘‘there is a direct 

correlation between a state or tribe’s historic production and the magnitude of its 

AML problem...there is no relationship between the current production state share 

portion of the grant and the magnitude of the AML problem in that state or tribe.’’

The formula should be changed to direct resources from the fund to states based 

upon historic production. This will correct existing imbalances, direct resources to 

where the problems are, and allow states with the most pre-1977 problems to finish 

the job of reclaiming our abandoned mine legacy. 

Funding for Abandoned Mine Drainage 

Abandoned mine drainage pollutes public water supplies, destroys fish and wildlife habitat, depresses local economies, and threatens human health and safety. 

Pennsylvania is representative of eastern coal states with abandoned mine drainage 

problems. AMD is our largest source of water quality impairment. 

The Pennsylvania Fish and Boat Commission once estimated that the Common- wealth suffers almost $70 million per year in lost recreational and fishing opportunities due to abandoned mine drainage. These waters are too polluted to allow fishing, boating, and other water-based recreation. 

It is critical that abandoned mine drainage problems continue to be eligible for 

funding to protect the health of our citizens and visitors, improve our economy, and 

sustain our future. 

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 

have 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 waterrelated projects under Priorities 2 and 3. 

Maintain the Combined Benefit Fund 

Interest generated on the Abandoned Mine Reclamation Fund is currently transferred to the Combined Benefit Fund (CBF) 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. There are approximately 

60,000 beneficiaries, whose average age is 78 years old. This eases the burden on 

mining companies. If the Abandoned Mine Reclamation Fund is not reauthorized, 

a new fee will need to be levied to cover these benefits. 

The transfer of interest to the Combined Benefit Fund should continue. At the 

same time, the funds should be invested in a way that maximizes returns whenever 

possible. 

Leverage the Dollars 

Currently, most of the resources allocated under this program are not permitted 

to be matched with other Federal dollars. This is an onerous requirement that inhibits the ability of states to efficiently solve local problems. 

Funds allocated under this program should be ‘‘matchable’’ with Federal, state, 

local, and private dollars to maximize resources and encourage partnerships. 

As abandoned mine lands are reclaimed, they offer potential locations for economic development projects. According to the Association of General Contractors, 59 

jobs are created for every $1 million spent on construction activities. 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 the funds in ways that promote reclamation, leverage 

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

Increase the Minimum Program Funding 

States which have significant abandoned mine problems, but which have small 

state programs, are supposed to be guaranteed minimum funding of their programs 

78

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 under-funding and ensure that states with 

large abandoned mine problems but low production would be able to continue running effective programs. This potentially affects eleven states. 

Annual funding for minimum program states should be raised to $4 million to reduce the time needed to finish addressing their abandoned mine problems. 

Full allocation to states of future fees 

As of June 30, 2003, the fund has an unappropriated balance of nearly $1.5 billion. The state share of this balance is almost $972 million. Pennsylvania maintains 

the third highest balance at over $54.7 million. These funds are not being used for 

their intended purposes while our abandoned mine problems persist. 

Future collections to the fund should be fully allocated for their intended purposes 

of cleaning up abandoned mine problems and reducing the time necessary to meet 

the goals of SMCRA. 

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 take at least 25 years to address abandoned mine problems. Extending the program 25 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 2029. 

Public health and welfare, restoration of the land, and cleaning of polluted 

streams requires congressional action. Failure to act continues a cycle of depressed 

economies and unemployment while exposing our communities and families to 

health and safety hazards. Please act now to modify and reauthorize the Abandoned 

Mine Reclamation Fund to finish the job of reclaiming our abandoned mine legacy.

RESPECTFULLY SUBMITTED,

THOMAS F. GROTE, DIRECTOR

KISKI BASIN INITIATIVES

A statement submitted for the record by the Western Coal Traffic 

League follows:]

Statement of the Western Coal Traffic League 

Madam Chairwoman, Members of the Subcommittee: 

This statement is submitted on behalf of the Western Coal Traffic League 

(‘‘WCTL’’) to the Subcommittee on Energy and Mineral Resources on the issue of 

the Abandoned Mine Line (‘‘AML’’) program. WCTL respectfully requests that this 

statement be included as part of the Subcommittee hearing record. 

IDENTITY AND INTEREST 

WCTL is an association formed in 1976. Its membership is composed of electric 

utilities, located throughout a broad geographic spectrum in the West and Midwest, 

that purchase and consume coal mined west of the Mississippi River. WCTL members collectively consume more than 130 million tons of western coal annually, the 

vast majority of which is derived from the enormous, low-sulfur surface mine coal 

reserves of the Powder River Basin in northeastern Wyoming. A list of WCTL’s current members is appended as Attachment 1. The locations of the individual electric 

utility plants of WCTL’s members are displayed and listed on the map appended 

as Attachment 2. 

The AML program is funded from a fee collected on each ton of coal, including 

$0.35 per ton produced by surface mining, $0.15 per ton produced by underground 

mining, and $0.10 cents per ton from mined lignite. This fee is imbedded in the 

price of every ton of coal purchased by coal consumers. 

The AML program is of considerable interest to WCTL because the fees paid into 

the program are passed through by coal suppliers essentially as an added tax to individual electric utilities (who purchase the majority of the nation’s coal output) and 

ultimately to millions of business and residential electric utility customers as part 

79

of their monthly electric bills. Under the AML program, WCTL members collectively 

pay over $40 million in AML fees annually. 

WCTL’S POSITION ON THE AML PROGRAM 

The AML program was enacted over a quarter-of-a-century ago under the Surface 

Mining Control & Reclamation Act of 1977 (‘‘SMCRA’’) to address pre-1977 

unreclaimed abandoned mine facilities that were no longer assignable to any person 

for reclamation purposes. Over those 25 years, over $6.7 billion has been paid into 

the AML fund that has been passed-through to individual WCTL members and 

other coal consumers. 

Given the large AML expenditures made, the finite number of reclamation sites 

at issue as established by SMCRA, and the length of time the program has been 

in effect, one would have hoped that the program would be at or near its end by 

now. Unfortunately, that does not appear to be the case. While substantial cleanup efforts have occurred under the AML program, by all accounts, significant priority reclamation projects still remain in certain states. 

The AML fees paid by electric utility coal consumers are infused with public interest considerations as the fee ultimately has a direct bearing on electricity prices 

throughout a large portion of the nation. The active surface mines from which 

WCTL members purchase coal will never tap into the AML fund due to the reclamation and bonding requirements imposed by SMCRA. WCTL members are required 

to pay the AML fee, state severance taxes, county ad valorem taxes, and ‘‘Black 

Lung’’ taxes. Well over 30% of the current market mine price of Wyoming Powder 

River Basin coal is composed of such pass-through taxes and fees. 

WCTL recognizes that there may be a legitimate Federal need to continue to address remaining priority coal reclamation problems. At the same time, WCTL and 

its members have a responsibility to ensure that the program promptly achieves its 

intended purpose and does not continue in perpetuity. 

WCTL addresses below several significant issues in relation to the AML program 

which it believes the Congress should address as part of any AML reauthorization 

program. 

A. The AML Surplus 

The AML’s current surplus is over $1.4 billion, and there is no expected end in 

the imbalance in receipts versus disbursements that has resulted in this growing 

surplus. For example, the Office of Surface Mining (‘‘OSM’’) expects $380 million in 

AML receipts and interest collections for Fiscal Year 2004. The House and Senate 

Appropriations Committees each provide in their annual appropriations bills pending before the Congress less than $195 million in AML program appropriations for 

the year—a $185 million variance. The end result is that almost half of the anticipated fees and interest receipts in the year will be used for purposes other than 

mine reclamation activities. 

B. Regional Production Issues 

In enacting the AML program, Congress recognized that based on historic coal 

production, the crux of the AML problems were centered in the Appalachian region 

in the eastern United States. As reported by OSM, in the initial years of the AML 

program, approximately 75% of the AML income was derived from eastern states 

where 94% of AML problem sites existed, while 25% was from western states where 

6% of AML problem sites existed. Thus, the fee receipts from various coal producing 

regions was roughly proportionate to where the abandoned mine reclamation problems existed. 

Congress did not foresee at the time of the enactment of SMCRA the explosion 

of coal production experienced in the western United States since the early 1980s. 

As a result of this phenomenon, approximately 36% of AML fees are currently collected from eastern states ‘‘ where the majority of the remaining AML priority 

projects exist—and 64% is from western states. Wyoming coal consumers alone contributed approximately 44% of the total AML fees collected in 2002. 

In the next decade, the Energy Information Administration expects a 25%+ 

growth in western coal production (and 34% growth for the Wyoming Powder River 

Basin coal region), while it expects eastern coal production to essentially remain 

flat. The end result is that if the AML program continues in its existing form, these 

regional and state specific issues will be amplified each year well into the future. 

C. AML Fee Levels 

Under the AML program, surface-mined coal is being assessed $0.35 per ton—

over double and triple that being assessed on underground-mined coal and mined 

lignite, respectively. This fee structure may have made some sense in 1977, when 

most of the coal mined in the country was from eastern mines (a large percentage 

80

of which was underground mined coal) as a means of ensuring that the western 

mines (most of which are surface mines) were able to contribute a roughly proportionate share into the AML fund. However, the appropriateness of imposing a much 

higher fee on surface mined coal should be reexamined given changes in regional 

mine production since the enactment of SMCRA. 

D. State Share Issues 

Under SMCRA, 50% of funds collected annually from any state (or Indian land) 

are directed to go back to that state (the state share). The remaining fifty percent 

(the Federal share) is used to complete priority and other reclamation projects, and 

to pay collection, audit, and administrative costs. However, some western states 

typically receive AML distributions well-under 30% of the AML fees collected. For 

example, in 2002 Wyoming, by-far the largest coal producing state, received a total 

distribution (including Federal and state share) of $28.7 million—only about 23% of 

total AML fees collected in the state. The remaining $34 million due Wyoming 

under its state share was deposited into the general AML Trust Fund. 

In total, almost $1 billion in state share over-collections is currently deposited in 

the AML Fund (Wyoming’s share alone totals over $374 million). 

E. AML Project Prioritization 

Under current law, certain unreclaimed sites may present less urgent public safety or pollution threats, yet under the existing AML rules those project may still 

qualify for expensive reclamation projects. The program may also unnecessarily promote duplicative bureaucracies in affected states. 

CONCLUSION 

Madam Chairwoman, WCTL respectfully submits that the above-issues should be 

fully evaluated and addressed by the Subcommittee as part of the reauthorization 

process. WCTL desires to continue to work with the Subcommittee and participate 

with all interested AML program stakeholders in the AML reauthorization process. 

We greatly appreciate the opportunity to present our views, and we will be pleased 

to provide the Subcommittee with any additional information it may desire on any 

of the matters discussed in this statement. 

ATTACHMENT 1

WESTERN COAL TRAFFIC LEAGUE MEMBERS 

Alliant Energy 

Arizona Electric Power Cooperative, Inc. 

Associated Electric Cooperative, Inc. 

Center Point Energy 

Central Louisiana Electric Company, Inc. 

City of Austin, Texas 

City Public Service Board of San Antonio 

Kansas City Power & Light Company 

Lower Colorado River Authority 

MidAmerican Energy Company 

Minnesota Power 

Nebraska Public Power District 

NRG Power Marketing Inc. 

Omaha Public Power District 

Texas Municipal Power Agency 

Westar Energy 

Western Farmers Electric Cooperative 

Wisconsin Public Service Corporation 

Xcel Energy

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88532.003
82

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88532.004