COAL MINE 

RECLAMATION

Federal and State 

Agencies Face 

Challenges in 

Managing Billions in 

Financial Assurances

Report to Congressional Requesters

March 2018

GAO-18-305

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-18-305, a report to 

congressional requesters

March 2018

COAL MINE RECLAMATION

Federal and State Agencies Face Challenges in 

Managing Billions in Financial Assurances

What GAO Found

State agencies and the Department of the Interior’s Office of Surface Mining 

Reclamation and Enforcement (OSMRE) reported holding approximately 

$10.2 billion in surety bonds (guaranteed by a third party), collateral bonds

(guaranteed by a tangible asset, such as a certificate of deposit), and self-bonds

(guaranteed on the basis of a coal operator’s own finances) as financial 

assurances for coal mine reclamation. 

Amount of Financial Assurances Held in 2017, by Type, for Reclaiming Coal Mines in States 

and on Indian Tribal Lands with Active Coal Mining

OSMRE and state agencies face several challenges in managing financial 

assurances, according to the stakeholders GAO interviewed. Specifically, 

• Obtaining additional financial assurances from operators for unanticipated 

reclamation costs, such as long-term treatment for water pollution, can be 

difficult.

• Determining the financial stability of surety companies has been challenging

in certain instances.

• Self-bonding presents a risk to the government because it is difficult to 

(1) ascertain the financial health of an operator, (2) determine whether the 

operator qualifies for self-bonding, and (3) obtain a replacement for existing

self-bonds when an operator no longer qualifies. In addition, some 

stakeholders said that the risk from self-bonding is greater now than when 

the practice was first authorized under the Surface Mining Control and 

Reclamation Act (SMCRA).

GAO’s previous work examining environmental cleanup found that the financial 

risk to government and the amount of oversight needed for self-bonds are

relatively high compared to other forms of financial assurances. GAO also 

previously reviewed federal financial assurance requirements for various energy 

and mineral extraction sectors and found that coal mining is the only one where 

self-bonding was allowed. However, because SMCRA explicitly allows states to 

decide whether to accept self-bonds, eliminating the risk that self-bonds pose to 

the federal government and states would require SMCRA be amended.

View GAO-18-305. For more information, 

contact Anne-Marie Fennell at (202) 512-3841 

or fennella@gao.gov.

Why GAO Did This Study

Coal accounts for 17 percent of 

domestic energy production. SMCRA 

requires coal mine operators to reclaim 

lands that were disturbed during 

mining and to submit a financial 

assurance in an amount sufficient to 

ensure that adequate funds will be 

available to complete reclamation if the

operator does not do so. Recent coal 

company bankruptcies have drawn 

attention to whether financial 

assurances obtained by OSMRE and 

state agencies will be adequate to 

reclaim land once coal mining 

operations have ceased.

GAO was asked to review 

management of financial assurances 

for coal mine reclamation. This report 

describes, among other things, the 

amounts and types of financial 

assurances held for coal mine 

reclamation in 2017 and the challenges 

that OSMRE and state agencies face 

in managing these financial 

assurances. GAO collected and 

analyzed data from OSMRE and 

23 state agencies; reviewed federal 

laws, regulations, and directives; and 

interviewed OSMRE and state agency 

officials and representatives from 

organizations associated with the 

mining and financial assurance 

industries and environmental 

organizations.

What GAO Recommends

GAO recommends that Congress 

consider amending SMCRA to 

eliminate self-bonding. Interior neither 

agreed nor disagreed with GAO’s 

recommendation.
Page i GAO-18-305 Coal Mine Reclamation

Letter 1

Background 5

State Regulatory Authorities and OSMRE Reported Holding $10.2 

Billion in Various Types of Financial Assurances 10

About Half of the States Reported at Least One Forfeited 

Financial Assurance 13

OSMRE Has Taken a Variety of Steps Related to Oversight of 

Financial Assurances 14

OSMRE and State Regulatory Authorities Face a Number of 

Challenges in Managing Financial Assurances 19

Conclusions 26

Matter for Congressional Consideration 27

Agency Comments 27

Appendix I Characteristics of States GAO Selected for 

Review to Obtain Additional Information regarding 

OSMRE Oversight 29

Appendix II GAO Contact and Staff Acknowledgments 30

Tables

Table 1: Amount of Financial Assurances Held in 2017, by Type 

and State, for Reclaiming Coal Mines in States and on 

Indian Tribal Lands with Active Coal Mining 11

Table 2: Characteristics of States GAO Selected for Review to 

Obtain Additional Information regarding the Office of 

Surface Mining and Reclamation’s (OSMRE) Oversight 29

Figure

Figure 1: Amount of Financial Assurances Held in 2017, by Type, 

for Reclaiming Coal Mines in States and on Indian Tribal 

Lands with Active Coal Mining 10

Contents
Page ii GAO-18-305 Coal Mine Reclamation

Abbreviations

OSMRE Office of Surface Mining Reclamation and 

Enforcement

SMCRA Surface Mining Control and Reclamation Act

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Page 1 GAO-18-305 Coal Mine Reclamation

441 G St. N.W.

Washington, DC 20548

March 6, 2018

Congressional Requesters

Coal accounted for approximately 17 percent of domestic energy 

production in 2016, and extracting this resource requires disturbing the 

land, potentially affecting vegetation, wildlife, and water quality, among 

other things.1 Under the Surface Mining Control and Reclamation Act 

(SMCRA), operators of coal mines on federal and nonfederal lands in the 

United States are required to reclaim mined lands—for example, by 

regrading and replanting the area.2 To help ensure that reclamation 

occurs, SMCRA requires an operator to submit a financial assurance 

(e.g., a bond) in an amount sufficient to ensure that adequate funds will 

be available for the regulatory authority—either the Department of the 

Interior’s Office of Surface Mining Reclamation and Enforcement 

(OSMRE) or an approved state regulatory authority—to complete 

required reclamation if the operator does not do so.3 If specific conditions 

are met, SMCRA allows states to let an operator guarantee the cost for 

reclaiming a mine on the basis of its own finances, a practice known as 

self-bonding, rather than by securing a bond through another company or 

providing collateral, such as cash, letters of credit, or real property.

Three of the largest coal mining companies in the United States filed for 

bankruptcy in 2015 and 2016. This drew attention to whether financial 

assurances obtained by OSMRE and approved state regulatory 

authorities will be adequate to reclaim land once coal mining operations 

have ceased, particularly in cases where operators had used self-bonds 

 1

Coal was the energy source for approximately 30 percent of electricity production in the 

United States in 2016.

2

Surface Mining Control and Reclamation Act of 1977, Pub. L. No. 95-87, 91 Stat. 445 

(codified as amended at 30 U.S.C. §§ 1201-1328 (2017)). SMCRA’s reclamation 

requirements apply to surface coal mines, surface effects of underground coal mines, and 

other coal mining related structures (e.g., roads). For simplicity, we refer to these as 

surface effects of coal mining. Also, in this report, “reclaim” and “reclamation” refer to any 

activity required to return a site to the state it was in before mining occurred.

3

States and Indian tribes can submit a program to implement SMCRA to OSMRE for 

approval. A state or Indian tribe with an approved program is said to have “primacy” for 

that program. In 2017, 24 states had primacy, 23 of which had active coal mining. OSMRE 

directly implements SMCRA in states and for Indian tribes that do not have primacy. Two 

non-primacy states (Tennessee and Washington) and four Indian tribes had active coal 

mining that OSMRE manages.

Letter
Page 2 GAO-18-305 Coal Mine Reclamation

as their financial assurance. In August 2016, citing the recent 

bankruptcies, lower market demand for coal, and the potential for more 

market downturn, OSMRE issued a policy advisory to states suggesting, 

among other things, that states take steps to assess whether operators 

currently using self-bonds continue to qualify to do so and that states not 

accept new self-bonds.4 Moreover, in September 2016, in response to a 

petition seeking revisions to its self-bonding regulations, OSMRE stated 

that it planned to examine changes to its bonding regulations that would, 

among other things, help ensure the completion of the reclamation plan if 

the regulatory authority has to perform the work in the event the operator 

does not do so.5

You asked us to review OSMRE’s oversight of financial assurances for 

coal mine reclamation. This report examines (1) the amounts and types of 

financial assurances held for coal mine reclamation, (2) the extent to 

which financial assurances to reclaim coal mines were forfeited from July

2007 through June 2016, (3) how OSMRE oversees financial assurances 

for coal mine reclamation, and (4) any challenges that OSMRE and 

approved state regulatory authorities face in managing financial 

assurances for coal mine reclamation.

To determine (1) the amounts and types of financial assurances held for 

coal mine reclamation and (2) the extent to which financial assurances to 

reclaim coal mines have been forfeited, we developed a data collection 

instrument and sent it to the relevant state regulatory authority for the 

23 primacy states that OSMRE identified as having active coal mining in 

2017. We also sent it to OSMRE to request data for the 2 states and four 

Indian tribes with active coal mining where it directly manages the coal 

program. In developing the instrument, we discussed available data with 

OSMRE and state regulatory authority officials and with a representative 

of the Interstate Mining Compact Commission, a multistate governmental 

agency representing state mining regulatory authorities. All 23 states we 

contacted and OSMRE responded to our data collection instrument. For 

financial assurances forfeited, the data reported includes forfeitures that 

 4

Office of Surface Mining Reclamation and Enforcement, Policy Advisory: Self-Bonding 

(Washington, D.C.: Aug. 5, 2016).

5

Petition to Initiate Rulemaking; Ensuring That Companies With a History of Financial 

Insolvency, and Their Subsidiary Companies, Are Not Allowed To Self-Bond Coal Mining 

Operations, 81 Fed. Reg. 61,612 (Sept. 7, 2016). 
Page 3 GAO-18-305 Coal Mine Reclamation

occurred from July 2007 through June 2016.6 We discussed with state 

and OSMRE officials how the data were collected and maintained and 

determined that the data were sufficiently reliable for our purposes.

To determine how OSMRE oversees financial assurances for coal mine 

reclamation, we analyzed SMCRA, federal regulations, and OSMRE 

directives. Specifically, we reviewed directives pertaining to OSMRE’s 

oversight of state and tribal programs, its inspections of mines in both 

primacy and nonprimacy states, and a handbook on the calculation of the 

amount of financial assurance that OSMRE and primacy states obtain.7

We also reviewed agency documents, including the 2010 National Priority 

Review that examined how financial assurance amounts were calculated, 

and interviewed OSMRE officials from its headquarters and its three 

regional offices.8 We selected a nonprobability sample of 7 states—

Illinois, Kentucky, Montana, Pennsylvania, Tennessee, West Virginia, and 

Wyoming—to examine OSMRE’s oversight activities in more detail. We 

generally selected states that produced the most coal in 2015 (the most 

recent data at the time we began our review), according to the U.S. 

Energy Information Administration. We also selected states to achieve 

some variation in factors such as geographic location, the dominant type 

of coal mining conducted (e.g., surface or underground mining), whether 

the state had primacy, and whether the state allowed self-bonding (see 

app. I). Because this is a nonprobability sample, the oversight activities in 

the 7 states are not generalizable to all 25 primacy and nonprimacy states 

with active coal mining but provide illustrative examples. For each of the 

7 states, we reviewed agency documents, including OSMRE’s annual 

evaluation of the state’s program, agreements between OSMRE and the 

state regulatory authority specifying oversight steps OSMRE would take, 

and in some cases OSMRE and state documents related to OSMRE’s 

determination that a state was not implementing its primacy program as 

required. We also interviewed OSMRE field office officials responsible for 

 6

States and OSMRE generally report coal mining data according to the evaluation year, 

which runs from July 1 to June 30 of the following year.

7

Office of Surface Mining Reclamation and Enforcement, Oversight of State and Tribal 

Regulatory Programs, REG-8 (Washington, D.C.: Jan. 31, 2011); Completion and 

Processing of Mine Site Inspection Federal Program and Mine Site Evaluation State 

Program Report Forms, INE-23 (Washington, D.C.: Dec. 28, 1998); and Handbook for 

Calculation of Reclamation Bond Amounts, TSR-1 (Washington, D.C.: Apr. 5, 2000).

8

Office of Surface Mining Reclamation and Enforcement, 2010 National Priority Review: 

State Calculation of Required Bond Amounts (Washington, D.C.: Feb. 11, 2011).
Page 4 GAO-18-305 Coal Mine Reclamation

these 7 states and, for primacy states, officials from the state regulatory 

authority.

To obtain additional perspectives on OSMRE’s oversight of financial 

assurances, we interviewed the following parties: officials from the 

Interstate Mining Compact Commission, officials from the National 

Association of Insurance Commissioners, and representatives from two 

organizations associated with the mining and financial assurances 

industries (the National Mining Association and The Surety and Fidelity 

Association of America) and from two environmental nongovernmental 

organizations (the Natural Resources Defense Council and the Western 

Organization of Resource Councils) actively involved with these issues. 

These organizations were identified through our research as well as by 

other stakeholders as potentially having relevant perspectives and 

information to share with regard to financial assurances for coal mine 

reclamation.

To identify any challenges that OSMRE and approved state regulatory 

authorities face in managing financial assurances for coal mine 

reclamation, we interviewed the federal and state officials and industry 

and environmental nongovernmental organization representatives 

identified above. Interview questions were designed to elicit officials’ and 

representatives’ views on any challenges facing OSMRE and state 

regulatory authorities and potential actions to address those challenges. 

We also asked about any actions OSMRE has taken or could take to 

address the challenges identified. We included those challenges that 

were identified by at least 4 of the 13 parties we interviewed.9 Not all 

parties we interviewed commented on every challenge identified.

We conducted this performance audit from January 2017 to March 2018 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 9

The 13 parties are OSMRE; the state regulatory authorities of Illinois, Kentucky, 

Montana, Pennsylvania, West Virginia, and Wyoming; the Interstate Mining Compact 

Commission; the National Association of Insurance Commissioners; the National Mining 

Association; the Natural Resources Defense Council; The Surety and Fidelity Association 

of America; and the Western Organization of Resource Councils.
Page 5 GAO-18-305 Coal Mine Reclamation

Coal accounted for 17 percent of energy production (30 percent of 

electricity production) in the United States in 2016.10 To generate this 

energy, approximately 730 million tons of coal were mined domestically in 

2016, according to the U.S. Energy Information Administration, 

approximately 40 percent of which was produced on federal lands. As of 

2016, state regulatory authorities and OSMRE had received financial 

assurances associated with coal mines that had been permitted to disturb 

approximately 2.3 million acres, according to OSMRE data.

Coal is mined in two different ways: surface mining and underground 

mining. In surface coal mining, before the underlying coal can be 

extracted, the land is cleared of forests and other vegetation and topsoil is 

removed and stored for later use. Explosives or other techniques are then 

used to break up the overlying solid rock, creating dislodged earth, rock, 

and other materials known as spoil. Surface coal mines can cover an 

area of many square miles. In underground coal mining, tunnels are dug 

to access coal that is too deep for surface mining methods. In some 

cases, underground coal mines are designed to leave sufficient coal in 

the mine to support the overlying surface, and in other cases, they are 

designed to extract higher quantities of coal that results in subsidence of 

the overlying surface as mining progresses. 

In addition to disturbing the land surface, coal mining can affect water 

quality, according to the Environmental Protection Agency, the National 

Academies, and others. For example, mining can increase sediments in 

rivers or streams, which may negatively affect aquatic species. Moreover, 

mining can expose minerals and heavy metals to air and water, leading to 

a condition known as acid mine drainage, which can lead to long-term 

water pollution and harm some fish and wildlife species. Mining can also 

lower the water table or change surface drainage patterns.

The surface effects of coal mining in the United States are regulated 

under SMCRA, which also created OSMRE to administer the act. SMCRA 

allows an individual state or Indian tribe to develop its own program to 

implement the act if the Secretary of the Interior finds that the program is 

 10U.S. Energy Information Administration, Monthly Energy Review, DOE/EIA0035(2017/11) (Washington, D.C.: Nov. 21, 2017).

Background

Regulation of Coal Mining
Page 6 GAO-18-305 Coal Mine Reclamation

in accordance with federal law.11 A state with an approved program is 

said to have “primacy” for that program. To obtain primacy, a state or 

Indian tribe submits to the Secretary of the Interior for approval a program 

that demonstrates that the state or tribe has the capability of carrying out 

the requirements of SMCRA. The program must demonstrate that the 

state or Indian tribe has, among other things, a law that provides for the 

regulation of the surface effects of coal mining and reclamation in 

accordance with the requirements of SMCRA, and a regulatory authority 

with sufficient personnel and funding to do so. Of the 25 states and four 

Indian tribes that OSMRE identified as having active coal mining in 2017, 

23 states had primacy, and OSMRE manages the coal program in 

2 states and for the four Indian tribes.12

SMCRA requires a mine operator to obtain a permit before starting to 

mine.13 The permit process requires operators to submit plans describing 

the extent of proposed mining operations and how and on what timeline 

the mine sites will be reclaimed. In general, an operator must reclaim the 

land to a use it was capable of supporting before mining or to an 

alternative postmining land use that OSMRE or the state regulatory 

authority deems higher or better than the premining land use. In 

reclaiming the mine site, operators must comply with regulatory standards 

that govern, among other things, how the reclaimed area is regraded, 

replanting of the site, and the quality of water flowing from the site. 

Specifically:

• Operators are generally required to return mine sites to their 

approximate original contour unless the operator receives a variance 

from the regulatory authority. To return to this contour, the surface 

configuration achieved by backfilling and grading of the mined area 

must closely resemble the general surface configuration of the land 

 11SMCRA states that “because of the diversity in terrain, climate, biologic, chemical, and 

other physical conditions in areas subject to mining operations, the primary governmental 

responsibility for developing, authorizing, issuing, and enforcing regulations for surface 

mining and reclamation operations subject to this act should rest with the States.”

30 U.S.C. § 1201(f) (2017).

12OSMRE implements SMCRA in Tennessee and Washington and for the Crow, Hopi, 

Navajo, and Ute Mountain Ute Indian tribes.

13In this report, we refer to permittees and operators as operators. The permittee is the 

person or entity that holds the permit and is legally responsible for the permit, whereas the 

operator is the person or entity that conducts coal removal operations. The permittee and 

the operator may or may not be the same person or entity.
Page 7 GAO-18-305 Coal Mine Reclamation

before mining and blend into and complement the drainage pattern of 

the surrounding terrain, with all highwalls and spoil piles eliminated.14

• Operators are required to demonstrate successful revegetation of the 

mine site for 5 years (in locations that receive more than 26 inches of 

rain annually) or 10 years (in drier areas). States have requirements 

for what vegetation may be planted depending on the approved 

postmining land use. For example, West Virginia’s regulations call for 

sites with a postmining land use of forest land to be planted with at 

least 500 woody plants per acre. The state specifies that at least five 

species of trees be used, including at least three of the species being 

higher value hardwoods, such as oak, ash, or maple.

• SMCRA requires that financial assurances be sufficient to ensure 

reclamation compliant with water quality standards, including those 

established by the Environmental Protection Agency or the states 

under the Clean Water Act.15 SMCRA’s implementing regulations also 

contain additional water protection requirements. For example, the 

regulations require that all surface mining and reclamation activities 

be conducted to minimize disturbance of the hydrologic balance within 

the permit and adjacent areas and to prevent material damage to the 

hydrologic balance outside the permit area.16

The federal government also enacted SMCRA, in part, to implement an 

abandoned mine land program to promote the reclamation of mined areas 

left without adequate reclamation prior to 1977, when SMCRA was 

enacted, and that continue to substantially degrade the quality of the 

environment, prevent or damage the beneficial use of land or water 

resources, or endanger the health or safety of the public.17 Specifically, 

 14A highwall is a cliff of exposed rock left after a surface mining operation has cut into the 

landscape. A spoil pile consists of rock and other excavated material that is produced by 

mining.

15The Clean Water Act is codified at 33 U.S.C. 1251-1388 (2017). For more information 

on the role the Clean Water Act plays in the regulation of the surface effects of coal 

mining, see GAO, Surface Coal Mining: Financial Assurances for, and Long-Term 

Oversight of, Mines with Valley Fills in Four Appalachian States, GAO-10-206 

(Washington, D.C.: Jan. 14, 2010).

16Hydrologic balance means the relationship between the quality and quantity of water 

inflow to, water outflow from, and water storage in a hydrologic unit, such as a drainage 

basin, aquifer, soil zone, lake, or reservoir. 30 C.F.R. §701.5 (2017).

17To finance reclamation of abandoned mine sites, the legislation established an 

Abandoned Mine Reclamation Fund, funded in part by fees on coal production. 

Abandoned mine reclamation funds are distributed annually to states with approved 

reclamation programs. 
Page 8 GAO-18-305 Coal Mine Reclamation

Congress found that a substantial number of acres of land throughout the 

United States had been disturbed by surface and underground coal 

mining on which little or no reclamation was conducted. Further, it found 

that the impacts from these unreclaimed lands imposed social and 

economic costs on residents in nearby areas as well as impaired

environmental quality. Since the abandoned mine land program was 

created, approximately $3.9 billion has been spent to reclaim abandoned 

mine lands, and there is at least $10.2 billion in remaining reclamation 

costs for coal mines abandoned prior to 1977, as of September 30, 2017, 

according to OSMRE.

SMCRA generally requires operators to submit a financial assurance in 

an amount sufficient to ensure that adequate funds will be available for 

OSMRE or the state regulatory authority to complete the reclamation if 

the operator does not do so. The amount of financial assurance required 

is determined by the regulatory authority—OSMRE or the state—and is 

based on its calculation of the estimated cost to complete the reclamation 

plan it approved as part of the mining permit.18 Financial assurance 

amounts can be adjusted as the size of the permit area or the projected 

cost of reclamation changes.

SMCRA also authorizes states to enact an OSMRE-approved alternative 

bonding system as long as the alternative achieves the same objectives. 

One kind of alternative bonding system is known as a bond pool. Under 

this type of system, the operator may post a financial assurance for an 

amount determined by multiplying the number of acres in the permit area 

by a per-acre assessment. The per-acre assessment may vary depending 

on the site-specific characteristics of the planned mining operation and 

the operator’s history of compliance with state regulations. However, the 

per-acre bond amount may be less than the estimated cost of 

reclamation. To supplement the per-acre bond, the operator generally 

must pay a fee for each ton of mined coal and may also be required to 

pay other types of fees. These funds are pooled and can be used to 

reclaim sites that participants in the alternative bonding system do not 

reclaim. Under OSMRE regulations, all alternative bonding systems must 

 18When OSMRE is the regulatory authority, agency officials said they use a handbook for 

calculating financial assurance amounts. See Office of Surface Mining Reclamation and 

Enforcement, Handbook for Calculation of Reclamation Bond Amounts. Primacy states 

can choose to use the handbook but are not required to do so and can also develop their 

own approaches to calculating the amount required.

Financial Assurances for 

Reclamation
Page 9 GAO-18-305 Coal Mine Reclamation

provide a substantial economic incentive for the operator to comply with 

reclamation requirements and must ensure that the regulatory authority 

has adequate resources to complete the reclamation plan for any sites 

that may be in default at any time.19

OSMRE regulations implementing SMCRA recognize three major types of 

financial assurances: surety bonds, collateral bonds, and self-bonds.

• A surety bond is a bond in which the operator pays a surety company 

to guarantee the operator’s obligation to reclaim the mine site. If the 

operator does not reclaim the site, the surety company must pay the 

bond amount to the regulatory authority, or the regulatory authority 

may allow the surety company to perform the reclamation instead of 

paying the bond amount.

• Collateral bonds include cash; certificates of deposit; liens on real 

estate; letters of credit; federal, state, or municipal bonds; and 

investment-grade rated securities deposited directly with the 

regulatory authority.

• A self-bond is a bond in which the operator promises to pay 

reclamation costs itself. Self-bonds are available only to operators 

with a history of financial solvency and continuous operation. To 

remain qualified for self-bonding, operators must, among other 

requirements, do one of the following: have an “A” or higher bond 

rating, maintain a net worth of at least $10 million, or possess fixed 

assets in the United States of at least $20 million. In addition, the total 

amount of self-bonds any single operator can provide shall not exceed 

25 percent of its tangible net worth in the United States. Primacy 

states have the discretion on whether to accept self-bonds.

 19The regulations do not define “substantial economic incentive.”
Page 10 GAO-18-305 Coal Mine Reclamation

State regulatory authorities and OSMRE reported holding a total of 

approximately $10.2 billion in surety bonds, collateral bonds, and selfbonds as financial assurances for coal mine reclamation in 2017.20 Of the 

total amount of financial assurances, approximately 76 percent 

($7.8 billion) were in the form of surety bonds, 12 percent ($1.2 billion) in 

collateral bonds, and 12 percent ($1.2 billion) in self-bonds (see fig. 1).

Figure 1: Amount of Financial Assurances Held in 2017, by Type, for Reclaiming 

Coal Mines in States and on Indian Tribal Lands with Active Coal Mining

Twenty-four states reported holding surety bonds, 20 states reported 

holding collateral bonds, and 8 states reported holding self-bonds (see 

table 1).21 In addition, OSMRE officials identified 6 states—Indiana, 

Kentucky, Maryland, Ohio, Virginia, and West Virginia—that have also 

established alternative bonding systems, such as bond pools. In a state 

with a bond pool, the operator may generally post a financial assurance 

for less than the full estimated cost of reclamation; in addition, the 

operator must pay into a bond pool.22 The pooled funds can be used to 

 20The states and OSMRE provided the data to us from May to August 2017; however, 

because the states and OSMRE vary in how often they update their respective databases, 

the effective date the data reflect ranges from March to August 2017.

21We previously examined federal requirements for financial assurances for surface 

effects of coal mining, hardrock mining, onshore oil and gas extraction, and wind and solar 

energy development, and found that of these mining and energy development activities, 

coal mining was the only one where self-bonding was allowed under federal requirements. 

See GAO, Financial Assurances for Reclamation: Federal Regulations and Policies for 

Selected Mining and Energy Development Activities, GAO-17-207R (Washington, D.C.: 

Dec. 16, 2016).

22In Maryland, operators must post a financial assurance for the full estimated cost of 

reclamation. The state’s bond pool serves as a supplement to be used if bond funds are 

otherwise not sufficient for reclamation.

State Regulatory 

Authorities and 

OSMRE Reported 

Holding $10.2 Billion 

in Various Types of 

Financial Assurances
Page 11 GAO-18-305 Coal Mine Reclamation

supplement forfeited financial assurances to reclaim sites that operators 

participating in the bond pool do not reclaim.

Table 1: Amount of Financial Assurances Held in 2017, by Type and State, for Reclaiming Coal Mines in States and on Indian 

Tribal Lands with Active Coal Mining

State or Indian tribe

Type of financial assurance (dollars)

Surety bond Collateral bond Total (dollars) a Self-bondb

Alabama 221,323,000 18,602,000 0 239,925,000 

Alaska 261,000 6,000,000 9,617,000 15,878,000 

Arkansas 1,126,000 1,330,000 0 2,456,000 

Colorado 94,890,000 5,196,000 91,318,000 191,404,000 

Crow 39,613,000 1,703,000 0 41,316,000 

Hopi 0 0 0 0

Illinois 386,522,000 10,244,000 0 396,765,000 

Indianac 215,444,000 2,351,000 0 217,795,000 

Kansas 0 2,953,000 0 2,953,000 

Kentuckyc 885,992,000 39,414,000 0 925,406,000 

Louisiana 156,834,000 0 0 156,834,000 

Marylandc 18,659,000 4,027,000 0 22,685,000 

Mississippi 53,824,000 0 0 53,824,000 

Missouri 636,000 2,985,000 7,266,000 10,887,000 

Montana 470,903,000 1,753,000 0 472,656,000 

Navajo 643,562,000 0 0 643,562,000 

New Mexico 287,066,000 0 0 287,066,000 

North Dakota 100,322,000 21,247,000 211,230,000 332,799,000 

Ohioc 58,465,000 3,874,000 0 62,339,000 

Oklahoma 16,534,000 4,899,000 0 21,433,000 

Pennsylvania 976,693,000 60,739,000 0 1,037,431,000 

Tennessee 44,426,000 3,661,000 0 48,087,000 

Texas 193,980,000 996,950,000 249,700,000 1,440,630,000 

Utah 57,886,000 6,754,000 0 64,640,000 

Ute Mountain Ute 16,704,000 10,000 0 16,714,000 

Virginiac 235,312,000 3,531,000 24,964,000 263,807,000 

Washington 139,295,000 6,200,000 0 145,495,000 
Page 12 GAO-18-305 Coal Mine Reclamation

State or Indian tribe

Type of financial assurance (dollars)

Surety bond Collateral bond Total (dollars) a Self-bondb

West Virginiac 801,910,000 29,108,000 140,116,000 971,135,000 

Wyoming 1,641,061,000 4,512,000 425,947,000 2,071,520,000 

Total 7,759,244,000 1,238,041,000 1,160,158,000 10,157,443,000 

Sources: GAO analysis of information provided by state regulatory authorities and the Office of Surface Mining Reclamation and Enforcement. | GAO-18-305

Notes: The effective date the data reflect ranges from March to August 2017 and varies by state and 

Indian tribe. Financial assurance amounts are rounded to the nearest $1,000. Totals may not add due 

to rounding.

a

Collateral bonds include cash; certificates of deposit; liens on real estate; letters of credit; federal, 

state, or municipal bonds; and investment-grade rated securities deposited directly with the regulatory 

authority.

b

Self-bonds are bonds for which the operator guarantees reclamation costs on the basis of its own 

finances rather than by securing a bond through another company or providing collateral.

c

State also has established an alternative bonding system, such as a bond pool. A bond pool 

supplements financial assurances that are posted for less than the full estimated cost of reclamation.
Page 13 GAO-18-305 Coal Mine Reclamation

States and OSMRE reported that operators forfeited more than 

450 financial assurances for reclaiming coal mines between July 2007 

and June 2016,23 with 13 of the 25 states reporting at least one 

forfeiture.24 States and OSMRE reported that the amount of financial 

assurance forfeited was sufficient to cover the cost of required 

reclamation in about 52 percent of the cases and did not cover the cost of 

required reclamation in about 22 percent of the cases.25 In the remainder 

of the cases (26 percent), the state or OSMRE reported that it had not yet 

determined if the financial assurance amount covered the reclamation 

costs that it was intended to cover. State and OSMRE officials said that it 

can take many years to fully reclaim a site and that it may take time for 

them to identify the extent of reclamation needed and to determine if the 

amount of financial assurance forfeited was sufficient to cover 

reclamation costs.

State and OSMRE officials said there were several reasons why the 

amount of financial assurance obtained might not be sufficient to cover 

reclamation costs. For example, officials said the amount of financial 

assurance might not be sufficient if an operator mined in a manner 

inconsistent with the approved mining plan upon which the amount of 

financial assurance was calculated or if mining activity resulted in water 

pollution that was not considered when the amount of financial assurance 

was calculated. In cases where the amount of financial assurance does 

not cover the cost of reclamation, the operator remains responsible for 

 23Financial assurance forfeiture occurs when a mine operator does not fully reclaim an 

area disturbed by mining in accordance with its permit and the regulatory authority collects 

the financial assurance to pay for reclamation. In some cases, an operator provided more 

than one financial assurance for a single coal mine; therefore, the number of financial 

assurances forfeited is higher than the number of mines where a forfeiture occurred.

States and OSMRE generally report coal mining data according to the evaluation year, 

which runs from July 1 to June 30 of the following year.

24Most of the financial assurances forfeited come from mining operations in 3 states—

Kentucky, Pennsylvania, and West Virginia. State officials cited several reasons why 

these states had the most forfeitures. For example, these states had a large number of 

mines, including smaller mines whose operators may have fewer financial resources. 

OSMRE did not report any forfeitures on Indian tribal lands for the four tribes with active 

coal mining programs.

25These percentages exclude forfeitures involving alternative bonding systems, such as 

bond pools, where the amount of financial assurance an operator provides is not intended 

to cover the full estimated cost of reclamation. For cases in which the states and OSMRE 

reported that the financial assurance forfeited did not cover the cost of reclamation, we did 

not collect additional information.

About Half of the 

States Reported at 

Least One Forfeited 

Financial Assurance
Page 14 GAO-18-305 Coal Mine Reclamation

reclaiming the mine site. However, OSMRE officials said that in those 

cases where the operator may be experiencing financial difficulties, it 

might be difficult for the states or OSMRE to compel the operator to 

complete the reclamation or provide additional funds to do so without 

having the operator go out of business or into bankruptcy. If the operator 

does not reclaim the site, the regulatory authority must use the forfeited 

financial assurance to do so. If the forfeited funds are not adequate, the 

site may not be fully reclaimed unless the regulatory authority either 

successfully sues the operator for more funds or provides any additional 

funds needed for reclamation. One other source of funds states can use 

to reclaim forfeited mines is civil penalties that the United States 

government collects from operators that violate conditions of their mining 

permits.26 OSMRE obligated approximately $2.8 million in civil penalties 

from fiscal years 2012 through 2017 for states to use to perform 

reclamation in cases where the financial assurance was not sufficient, 

according to agency officials.

OSMRE has taken steps—including periodically reviewing financial 

assurance amounts, inspecting mine sites, and reviewing state programs 

that implement SMCRA—to oversee financial assurances and aspects of 

the mining and reclamation process that can affect whether the amount of 

financial assurances obtained will cover the cost of required reclamation.

SMCRA requires OSMRE or the primacy state regulatory authority to 

calculate the amount of financial assurance required for each mine and to 

adjust the amount when the area requiring bond coverage increases or 

decreases or when the cost of future reclamation changes. OSMRE 

officials and state regulatory authority officials from four of the six states 

we interviewed said they generally review the amount of financial 

assurance at least every 2 1/2 years or when the mining plan has been 

modified in a way that may affect the amount of financial assurance 

 26Civil penalties are available to the extent authorized in the applicable annual 

appropriations act or other relevant statute. 30 C.F.R. § 845.21(a) (2017).

OSMRE Has Taken a 

Variety of Steps 

Related to Oversight 

of Financial 

Assurances

OSMRE and State 

Regulators Periodically 

Review Financial 

Assurance Amounts
Page 15 GAO-18-305 Coal Mine Reclamation

required.27 Such periodic reviews are in part to help ensure that OSMRE 

and state regulatory authorities continue to hold an amount sufficient to 

complete required reclamation as conditions change. These reviews can 

lead to OSMRE or the state regulatory authority changing the amount of 

financial assurance required for a mine. For example:

• A state regulatory authority official in Utah said that the regulatory 

authority reviewed an existing mine permit in 2014, which led to it 

recalculating the estimated cost of reclamation on the basis of current 

costs. The state regulatory authority requested that the operator 

provide a financial assurance to cover the difference (approximately 

$195,000), in addition to the $445,000 financial assurance already in 

place. However, the official said that the operator—which had stopped 

mining the site in 2012 and filed for bankruptcy in 2013—did not 

provide the additional financial assurance amount. As a result, in 2017 

the state regulatory authority collected the financial assurance that 

was in place (i.e., the operator forfeited its assurance). The official 

said in December 2017 that the state regulatory authority is 

determining the steps it will take to reclaim the site and expects that 

the forfeited amount will be sufficient to cover reclamation costs.

• OSMRE officials said that the agency reviewed a permit for a mine on 

Navajo tribal lands and determined that it needed to ask the operator 

to provide an additional financial assurance in the amount of 

$5.7 million. The increase was due to inflation and to include certain 

costs, such as the cost of mobilizing equipment needed for 

reclamation, that had inadvertently been excluded from the earlier 

calculation of the financial assurance required.28 The officials said that 

the operator provided the additional financial assurance amount.

• State regulatory authority officials in Wyoming said they review 

financial assurance amounts annually, and in 2017 they reduced the 

financial assurance for one mine by almost $35 million because of a 

 27According to OSMRE officials, financial assurance amounts are generally calculated at 

permit issuance and mid-point review, and most permits cover 5 years. Wyoming state 

regulatory authority officials said that they review financial assurance amounts annually. 

Pennsylvania state regulatory officials said that in their state, the review of the financial 

assurance calculation occurs at permit renewal, which happens after 5 years, and is 

optional during the mid-point review. 

28The operator did not include these costs in the calculation of estimated reclamation 

costs that it submitted to OSMRE and OSMRE did not initially identify the oversight, 

according to OSMRE officials.
Page 16 GAO-18-305 Coal Mine Reclamation

substantial decline in fuel costs and the mine’s ability to share the cost 

of needed reclamation equipment with a neighboring mine.

SMCRA requires OSMRE to make an average of at least one complete 

inspection per calendar quarter and one partial inspection per month for 

each active permit for which it is the regulatory authority to ensure that 

mines are in compliance with SMCRA and federal regulations.29

Complete inspections cover all inspection elements in OSMRE’s directive, 

while partial inspections may instead focus on issues that most frequently 

result in violations or a specific topic identified for oversight, according to 

OSMRE officials. In addition, OSMRE’s directive instructs the agency to 

inspect a sample of mines annually in states that have primacy to monitor 

and evaluate approved state programs’ compliance with SMCRA. The 

total number of inspections OSMRE is directed to conduct in primacy 

states is based on the number of inspectable units in each state.30

Complete inspections are to be done on 33 percent of those sites 

selected for inspection.31 Overall, OSMRE completed more inspections in 

primacy states than directed each year for evaluation years 2013 through 

2016, according to agency data.32 For example, in evaluation year 2016, 

OSMRE’s directive called for it to conduct 1,225 inspections and OSMRE 

completed 1,388.

As part of a complete inspection, OSMRE confirms that the operator is 

following the mining and reclamation plans to assure that the amount of 

financial assurance in place is adequate, according to OSMRE officials. If 

 29In primacy states, the state regulatory authority is also required to make an average of 

one complete inspection per calendar quarter and one partial inspection per month for all 

active permits. 

30OSMRE’s directive instructs the agency to determine the number of oversight 

inspections OSMRE conducts in primacy states on the basis of the number of “inspectable 

units” in each state. For example, for states with fewer than 5 inspectable units, OSMRE is 

required to inspect at least 1 of them annually, whereas for states with between 5 and 

1,000 units, OSMRE is required to inspect at least 25 percent of them annually. An 

inspectable unit is a surface coal mining and reclamation operation or a coal exploration 

operation for which an inspection obligation exists under 30 C.F.R. § 840.11(a)-(c) or 

under section 842.11(c). An inspectable unit may consist of an individual permit or a 

consolidation of several permits issued to the same permittee but which for all practical 

purposes constitutes the same surface coal mining and reclamation operation.

31For the remaining inspections, OSMRE can conduct a complete or partial inspection.

32This refers to the total number of inspections OSMRE was directed to conduct 

nationwide. In some cases, OSMRE did not conduct the directed number of inspections in 

a particular state in a given year. 

OSMRE Inspects Mine 

Sites
Page 17 GAO-18-305 Coal Mine Reclamation

a violation is identified during an inspection, SMCRA requires OSMRE to 

issue a ten-day notice to the state regulatory authority or an immediate 

cessation order to the operator.33 If the violation increases the estimated 

cost of reclamation (e.g., if the operator disturbed more land than it was 

approved for) or an adequate financial assurance had not been collected, 

OSMRE or the state regulatory authority can request that the operator 

provide an additional financial assurance. For example:

• OSMRE issued a ten-day notice to the Pennsylvania regulatory 

authority in 2015 because a water treatment system for a mine in that 

state did not have a financial assurance. According to OSMRE 

officials, the state regulatory authority took appropriate action to 

resolve the situation by issuing an order for the operator to post a 

financial assurance within 7 days.

• During an inspection of a mine in Tennessee, a nonprimacy state, 

OSMRE determined that the operator had not correctly reclaimed a 

portion of the mine because the slope of the regraded area was too 

steep, according to an OSMRE official. For the reclamation work that 

would be needed to regrade that area, OSMRE determined that the 

operator needed to provide an additional financial assurance of 

$272,000.

Under SMCRA, OSMRE is required to evaluate each primacy state’s coal 

program annually to ensure that it complies with SMCRA. SMCRA 

includes a requirement that the regulatory authority secure necessary 

financial assurances to assure the reclamation of each permitted mine 

site. While OSMRE’s directive on oversight of state and tribal regulatory 

programs does not instruct the agency to review state regulatory authority 

calculations of financial assurance amounts, it instructs OSMRE to focus 

on the state programs’ success in achieving the overall purposes of 

SMCRA. For example, OSMRE, in conducting its oversight, is to evaluate

the states’ effectiveness in successfully reclaiming lands affected by 

mining and in avoiding negative effects outside of areas authorized for 

 33OSMRE issues a ten-day notice to a state regulatory authority when, on the basis of an 

inspection, it determines that a violation exists or when it otherwise has reason to believe 

a violation exists (e.g., because it has received information regarding a violation from the 

public). Upon receiving such a notice, the state regulatory authority has 10 days to 

respond to OSMRE indicating whether, in its determination, a violation occurred and, if so, 

the state’s intended response. OSMRE issues a cessation order to an operator if a 

condition creates an imminent danger to the health or safety of the public or is causing or 

can reasonably be expected to cause significant, imminent environmental harm.

OSMRE Reviews State 

Coal Programs
Page 18 GAO-18-305 Coal Mine Reclamation

mining activities.34 If OSMRE’s review of a state program identifies an 

issue that could result in the state not effectively implementing, 

administering, enforcing, or maintaining all or any portion of its approved 

coal program, OSMRE can work with the state regulatory authority to 

develop an action plan to correct the issue. If a state regulatory authority 

does not take the necessary corrective action, OSMRE may begin the 

process of withdrawing approval for a part or all of the state’s primacy.35

In addition to annually evaluating state programs, OSMRE can conduct 

national or regional reviews on specific topics. For example, OSMRE 

conducted a national review in 2010 that examined how state regulatory 

authorities calculated the required amount of financial assurances for coal 

mine reclamation.36 The review examined financial assurance practices in 

23 states and reported that on the basis of the sample of mining permits 

reviewed, OSMRE was unable to determine if the amount of financial 

assurances was adequate for at least one of the permits it reviewed in 

10 of the 23 states. Among the potential issues OSMRE identified were 

errors in the methods state regulatory authorities used to calculate 

financial assurance amounts and insufficient information in the 

reclamation plan upon which to calculate reclamation costs.

OSMRE has worked with the 10 state regulatory authorities to address 

the financial assurance issues identified in the 2010 review. For example, 

OSMRE’s review found that the regulatory authority in Pennsylvania did 

not secure sufficient financial assurances to complete reclamation plans, 

in part because amounts were not calculated based on the actual sizes of 

the areas excavated for mining. In August 2014, OSMRE and 

Pennsylvania’s regulatory authority agreed to an action plan to ensure 

that the financial assurances for all active and new permits would be 

calculated using the actual sizes of the excavated areas. According to an 

OSMRE official, as of February 2017, the state regulatory authority had 

 34Office of Surface Mining Reclamation and Enforcement, Oversight of State and Tribal 

Regulatory Programs.

35An OSMRE directive defines an action plan as a detailed schedule of specific measures 

to be taken to resolve an issue identified during OSMRE’s oversight of a state coal 

program that could result in a failure by the state to effectively implement, administer, 

enforce, or maintain all or any portion of its approved program. Office of Surface Mining 

Reclamation and Enforcement, Corrective Actions for Regulatory Program Problems and 

Action Plans, REG-23 (Washington, D.C.: Jan. 31, 2011).

36Office of Surface Mining Reclamation and Enforcement, 2010 National Priority Review. 

OSMRE’s Acting Director requested this review in 2009. 
Page 19 GAO-18-305 Coal Mine Reclamation

recalculated the financial assurance amount for all mines and had 

secured the additional financial assurances needed from operators of all 

but two of the mines. State officials said in October 2017 that they were 

continuing to work to obtain the assurances required for the two mines.

OSMRE’s 2010 review also found that financial assurances in Kentucky 

were not always sufficient to cover required reclamation costs, in part 

because the method Kentucky’s regulatory authority used to calculate 

financial assurance amounts did not factor in all costs, such as the cost of 

moving equipment to and from the reclamation site. In February 2011, 

OSMRE and Kentucky’s regulatory authority signed an action plan 

identifying steps needed to address the issues OSMRE had identified. 

However, in May 2012, OSMRE determined that the state regulatory 

authority’s proposed changes to its method for calculating financial 

assurance amounts was an improvement but would not result in the 

authority obtaining sufficient funds to cover required reclamation. As a 

result, OSMRE initiated the process of revoking Kentucky’s primacy for 

this aspect of its program. In response, Kentucky implemented 

regulations to increase the minimum financial assurance required. The 

regulations also required the state regulatory authority to evaluate 

financial assurance amounts every 2 years to determine whether they 

need to be increased, among other things. The state regulatory authority 

sent a set of program amendments to OSMRE designed to address the 

identified deficiencies, some of which OSMRE is currently reviewing.

OSMRE and state regulatory authorities face a number of challenges in 

managing financial assurances for coal mine reclamation—including 

those related to self-bonding, unanticipated reclamation costs, and the 

financial stability of surety companies—according to federal and selected 

state regulatory authority officials, representatives from organizations 

associated with the mining and financial assurance industries, and 

representatives from environmental nongovernmental organizations 

whom we interviewed.37

 37Challenges included were identified by at least four parties we interviewed. Not all 

parties we interviewed commented on every challenge identified.

OSMRE and State 

Regulatory Authorities 

Face a Number of 

Challenges in 

Managing Financial 

Assurances
Page 20 GAO-18-305 Coal Mine Reclamation

Challenges facing OSMRE and state regulatory authorities related to selfbonding include the following:

• Not knowing the complete financial health of an operator. The 

information federal regulations require operators to provide to 

regulatory authorities may provide an incomplete picture of the 

financial health of an operator, according to some parties we 

interviewed.38 For example, the financial information that operators 

provide reflects their past financial health, which may not reflect the 

operators’ current financial position, according to OSMRE’s response 

to the 2016 petition seeking revisions to its self-bonding regulations.39

In addition, if an operator applying for a self-bond is a subsidiary of 

another company, the operator is not required by regulation to submit 

information on the financial health of its parent company. While the 

operator applying may have sufficient financial assets to qualify for 

self-bonding, if its parent company experiences financial difficulties, 

the operator’s assets may be drawn on to meet the parent’s 

obligations, which could worsen the financial health of the self-bonded 

operator. In addition, according to OSMRE officials, even if OSMRE or 

a state regulatory authority were to become aware that an operator’s 

parent company was at financial risk, it would be difficult for the 

agency to deny the operator’s request for a self-bond because 

eligibility is specific to the entity applying for the self-bond, according 

to regulations.

OSMRE could change its self-bonding regulations to require more 

information, according to OSMRE officials. However, the financial 

relationships between parent and subsidiary companies have become 

increasingly complex, making it difficult to ascertain an operator’s 

financial health on the basis of information reported in company 

financial and accounting documents, according to officials. When 

OSMRE first approved its self-bonding regulations in 1983, it noted 

that it was attempting to provide rules that would allow self-bonding 

without necessitating regulatory authorities to employ financial experts 

to determine which companies should be allowed to self-bond. 

However, according to OSMRE officials, financial expertise is now 

often needed to evaluate the current complex financial structures of 

 38In this report, “some” refers to statements made by three or more parties.

3981 Fed. Reg. 61,612 (Sept. 7, 2016). Following a review of department actions that 

could affect domestic energy production, Interior announced in October 2017 that it would 

reconsider the need for and scope of potential changes to its bonding regulations.

Regulatory Authorities 

Face Several Challenges 

Associated with SelfBonding
Page 21 GAO-18-305 Coal Mine Reclamation

large coal companies, which was not envisioned when the regulations 

were developed.

• Difficulty in determining whether an operator qualifies for selfbonding. The regulatory authority in a given state may not be aware 

that an operator had self-bonded in other states, making it difficult for 

the agency to determine whether the operator qualifies for selfbonding, according to some parties we interviewed. Operators are 

only allowed to self-bond for up to 25 percent of their net worth in the 

United States, according to regulations. Regulatory authority 

decisions on accepting self-bonds generally focus on assessing 

activities occurring in a specific state, not nationwide, according to the 

Interstate Mining Compact Commission.40 As a result, the state 

regulatory authority or OSMRE may know whether an operator has 

applied for self-bonds in other states that if approved would exceed 

25 percent of its net worth in total.

• Difficulty in replacing existing self-bonds with other assurances 

if needed. OSMRE and state regulatory authorities may find it difficult 

to get operators to replace existing self-bonds with another type of 

financial assurance when needed, according to some parties we 

interviewed. If an operator no longer qualifies for self-bonding (e.g., if 

it has declared bankruptcy), federal regulations require it to either 

replace self-bonds with other types of financial assurances or stop 

mining and reclaim the site. In either case, however, some parties 

noted that such actions could lead to a worsening of the operator’s 

financial condition, which could make it less likely that the operator will 

successfully reclaim the site.

Some parties we interviewed have noted that regulatory authorities 

may be reluctant to direct the operator to replace a self-bond with 

another type of financial assurance and may instead allow the 

operator to keep mining so that any generated revenue could help the 

operator reclaim the site. For example, in 2015 the Wyoming 

regulatory authority determined that an operator no longer qualified for 

self-bonding and ordered it to replace a $411 million self-bond. 

However, the operator entered into bankruptcy without having 

replaced the self-bond. In this case, the state regulatory authority 

determined that reclamation was more likely to occur if the operator 

continued mining and allowed the operator to do so without a valid 

 40Gregory E. Conrad, Interstate Mining Compact Commission, “Mine Reclamation 

Bonding – from Dilemma to Crisis to Reinvention: What’s a State Regulator to Do?” (paper 

presented at the Energy and Mineral Law Foundation Winter Workshop on Energy Law, 

February 2014).
Page 22 GAO-18-305 Coal Mine Reclamation

financial assurance.41 The operator replaced its self-bond as a part of 

its bankruptcy settlement approximately 17 months after the state 

regulatory authority’s order to replace the self-bond, according to 

OSMRE officials. However, if a self-bonded operator were to enter 

bankruptcy and did not secure a financial assurance to replace the 

self-bond or complete the required reclamation, the state regulatory 

authority would have to work through the bankruptcy proceedings to 

obtain funds for reclamation, according to OSMRE’s preamble to its 

1983 self-bonding regulations.42 As a result, the state may recover 

only some, or possibly none, of the funds promised through the selfbond, and the cost of reclamation could fall on taxpayers.

• Difficulty in managing the risk associated with self-bonding. The 

risk associated with self-bonding is greater now than when the 

practice was first authorized under SMCRA, according to some 

parties we interviewed. According to SMCRA, the purpose of financial 

assurances is to ensure that regulatory authorities have sufficient 

funds to complete required reclamation if the operator does not do so. 

While SMCRA allows self-bonding in certain circumstances, when 

OSMRE first approved its self-bonding regulations, the agency did so 

noting that at the time there were companies financially sound enough 

that the probability of bankruptcy was small. Furthermore, the 

regulations stated that the intent was to avoid, to the extent 

reasonably possible, the acceptance of a self-bond from a company 

that would enter bankruptcy.43 However, as previously mentioned, 

three of the largest coal companies in the United States declared 

bankruptcy in 2015 and 2016, and these companies held 

approximately $2 billion in self-bonds at the time, according to an 

 41Wyoming entered into a voluntary agreement with the operator under which the state 

would gain a $61 million “superpriority” claim in case of liquidation in exchange for a 

promise to stay any enforcement action regarding self-bonding until the reorganization of 

the operator’s debts could be finalized. A superpriority claim gives a creditor a priority 

claim over other creditors in bankruptcy proceedings, increasing the likelihood that they 

would obtain the claim if the company is unable to emerge from bankruptcy.

42Bond and Insurance Requirements for Surface Coal Mining and Reclamation Operations 

Under Regulatory Programs; Self Bonding, 48 Fed. Reg. 36,418 (Aug.10, 1983).

4348 Fed. Reg. 36,418 (Aug.10, 1983). 
Page 23 GAO-18-305 Coal Mine Reclamation

OSMRE August 2016 policy advisory, making it a very different risk 

landscape than originally envisioned.44

Following these bankruptcies—and recognizing that the coal industry was 

likely to continue to face economic challenges for several more years—

OSMRE initiated steps in 2016 to reexamine the role of self-bonding for 

coal mine reclamation. Specifically, as previously mentioned, OSMRE 

issued a policy advisory in August 2016 noting that given these 

circumstances, state regulatory authorities should exercise their 

discretion under SMCRA and not accept new or additional self-bonds for 

any permit until coal production and consumption market conditions reach 

equilibrium. OSMRE has reported that it is not likely for that to occur until 

at least 2021.45 OSMRE also announced in September 2016 that the 

agency planned to examine changes to its bonding regulations that 

would, among other things, help ensure that reclamation is completed if a 

self-bonded operator does not do so.46 However, following a review of 

department actions that could affect domestic energy production, Interior 

announced in October 2017 that it was reconsidering the need for and 

scope of potential changes to its bonding regulations.47 OSMRE officials 

said that they did not have a timeline for finalizing a decision on potential 

changes in its bonding regulations. In addition, OSMRE rescinded its 

August 2016 policy advisory that states take steps to assess whether 

operators currently using self-bonds can still quality to do so and that 

states not accept any new self-bonds.48

Similar issues involving bankruptcies of hardrock mining operators led the 

Bureau of Land Management to implement regulations in 2001 

 44Office of Surface Mining Reclamation and Enforcement, Policy Advisory: Self-Bonding. 

According to an Interior October 2017 review, the three companies have completed their 

plans for Chapter 11 bankruptcy reorganization, and either have or are expected to 

replace all self-bonds with other forms of financial assurances. See Department of the 

Interior, Review of the Department of the Interior Actions that Potentially Burden Domestic 

Energy (Washington, D.C.: Oct. 24, 2017).

45Office of Surface Mining Reclamation and Enforcement, Policy Advisory: Self-Bonding. 

46OSMRE announced this step in response to a petition from a nongovernmental 

organization asking the agency to revise its self-bonding regulations. 81 Fed. Reg. 61,612 

(Sept. 7, 2016).

47Department of the Interior, Review of the Department of the Interior Actions that 

Potentially Burden Domestic Energy. This review was directed by Executive Order 13783.

48Interior rescinded this policy advisory in response to Executive Order 13783.
Page 24 GAO-18-305 Coal Mine Reclamation

eliminating the use of self-bonding for hardrock mining.49 In doing so, the 

Bureau of Land Management determined that a self-bond is less secure 

than other types of financial assurances, especially in cases where 

commodity prices fluctuate. The agency also noted that operators that 

would otherwise be eligible to self-bond should not have a significant 

problem obtaining another type of financial assurance. In our previous 

work examining other types of environmental cleanup, we found that the 

financial risk to the government and the amount of oversight needed for 

self-bonds are relatively high compared to other forms of financial 

assurances.50 Furthermore, we also previously reviewed federal financial 

assurance requirements for coal mining, hardrock mining, onshore oil and 

gas extraction, and wind and solar energy production and found that of 

these activities coal mining is the only one where self-bonding was 

allowed.51 Because SMCRA explicitly allows states to decide whether to 

accept self-bonds, eliminating the risk that self-bonding poses to the 

federal government and states would require that SMCRA be amended.52

Unanticipated reclamation costs, such as those related to long-term 

treatment for water pollution, may arise late in a mine’s projected lifespan, 

and the operator may not have the financial means to cover the additional 

costs, according to OSMRE officials. Under SMCRA, OSMRE and state 

regulatory authorities are not to approve a permit for a coal mine if the 

regulatory authority expects the mine to result in long-term water 

pollution. As a result, since long-term water pollution is not anticipated to 

occur, the cost of addressing it would not be included in the initial 

financial assurance that the operator provides. If the regulatory authority 

 49Under U.S. mining laws, minerals are classified as locatable, leasable, or saleable. 

Locatable minerals—often referred to as hardrock minerals—include, for example, copper, 

lead, magnesium, gold, silver, and uranium. For more information on financial assurances 

for hardrock mining, see GAO, Hardrock Mining: BLM Needs to Better Manage Financial 

Assurances to Guarantee Coverage of Reclamation Costs, GAO-05-377 (Washington, 

D.C.: June 20, 2005). 

50GAO, Environmental Liabilities: EPA Should Do More to Ensure That Liable Parties 

Meet Their Cleanup Obligations, GAO-05-658 (Washington, D.C.: Aug. 17, 2005). 

51GAO-17-207R. 

52Some states have used their discretion under SMCRA to take steps to restrict selfbonding. For example, Virginia no longer accepts self-bonds because the practice created 

a risk that the cost of reclamation could pass onto the tax payers should an operator 

default. In addition, Wyoming is considering changing its regulations to make the criteria to 

qualify for self-bonding more stringent.

Obtaining Additional 

Financial Assurances for 

Unanticipated 

Reclamation Can Be 

Difficult
Page 25 GAO-18-305 Coal Mine Reclamation

later determines that long-term water treatment is needed, the regulatory 

authority must adjust the amount of financial assurance that the operator 

is required to provide.

Some parties we interviewed have also noted that the costs and duration 

of long-term water treatment are not well defined and that surety bonds 

are not well-suited to provide assurance for such indefinite long-term 

costs. For example, according to the Interstate Mining Compact 

Commission, surety bonds are designed for shorter-term, defined 

obligations that have a high certainty for bond release following the 

completion of reclamation. To help address this challenge, some states 

have established, or allowed operators to establish, trust funds to help 

cover such unanticipated reclamation costs. For example, West Virginia 

established a fund, primarily supported through a tax on the amount of 

coal mined, to operate water treatment systems on forfeited sites. West 

Virginia’s regulatory authority is also working to evaluate permits for sites 

with water pollution to estimate water treatment costs within the state 

more precisely. Similarly, Pennsylvania allows operators to establish trust 

funds that are maintained by foundations and monitored by the state 

regulatory authority and are intended to ensure that there are sufficient 

funds to cover the costs of long-term water treatment, according to state 

regulatory authority officials. In addition, the OSMRE-run coal program in 

Tennessee allows trust funds for water treatment, in part because an 

assurance system that provides an income stream may be better suited 

to ensuring the treatment of long-term water pollution than conventional 

financial assurances, according to an OSMRE notice in the Federal 

Register.

53

 53Tennessee Federal Regulatory Program, 72 Fed. Reg. 9,616 (Mar. 2, 2007). 
Page 26 GAO-18-305 Coal Mine Reclamation

The utility of surety bonds in providing a financial assurance depends on 

the surety company’s ability to pay the amount pledged if the operator 

forfeits. OSMRE regulations require that a surety company be licensed to 

do business in the state where a mine is located.54 Some parties we 

interviewed noted that surety companies have declared bankruptcy or 

experienced financial difficulties in the past and could experience similar 

difficulties in the future. In addition, two states reported recent issues 

related to surety companies. For example, state regulatory authority 

officials in Alabama said that a surety company that had provided surety 

bonds totaling $760,000 for four mines in that state had gone bankrupt or 

was insolvent. As of May 2017, the state had collected only $127,000. 

Similarly, state regulatory authority officials in Alaska said that as of 

August 2017, the state had not collected any part of a forfeited $150,000 

surety bond because the surety company had gone bankrupt. In our 

previous work examining other types of environmental cleanup, we have 

found that the financial risk to the government and the amount of 

oversight needed for surety bonds are relatively low to moderate 

compared to other forms of financial assurances.55

Billions have been spent to reclaim mines abandoned prior to the financial

assurance requirements SMCRA put in place, and billions more remain. 

Under SMCRA, self-bonding is allowed for coal mine operators with a 

history of financial solvency and continuous operation—the only type of 

energy production or mineral extraction activity we have reviewed for 

which this is allowed. Bankruptcies of coal mine operators in 2015 and 

2016 have highlighted risks that OSMRE and state regulatory authorities 

face in managing self-bonding—a risk that may be greater today than 

when self-bonding was first authorized under SMCRA. If a self-bonded 

operator were to enter bankruptcy and does not provide a different type of 

financial assurance or complete the required reclamation, the regulatory 

authority and the taxpayer potentially assume the risk of paying for the 

reclamation. Although OSMRE said it would examine changes to its selfbonding regulations following recent bankruptcies, Interior recently said 

that it is reconsidering the need to do so. Because SMCRA explicitly 

allows states to decide whether to accept self-bonds, eliminating the risk 

 5430 C.F.R. § 800.20 (2017). Acceptable surety companies include those that are listed in 

the Department of the Treasury’s Listing of Certified Companies (Circular 570).

55GAO-05-658.

Determining the Financial 

Stability of Surety 

Companies Has Been 

Challenging in Certain 

Instances

Conclusions
Page 27 GAO-18-305 Coal Mine Reclamation

that self-bonding poses would require amending SMCRA. Until such a 

change is made, the government will remain potentially at financial risk for 

future reclamation costs resulting from coal mines with unsecured 

financial assurances.

Congress should consider amending SMCRA to eliminate the use of selfbonding as a type of financial assurance for coal mine reclamation. 

(Matter for Consideration 1)

We provided a draft of this report to the Department of the Interior for 

review and comment. Interior did not provide written comments on our 

findings and matter for congressional consideration. OSMRE provided 

technical comments in an e-mail, which we incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the appropriate 

congressional committees, the Secretary of the Interior, the Acting 

Director of OSMRE, and other interested parties. In addition, the report 

will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions, please contact Anne-Marie 

Fennell at (202) 512-3841 or fennella@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. Major contributors to this report are listed in 

appendix II.

Anne-Marie Fennell

Director

Natural Resources and Environment

Matter for 

Congressional 

Consideration

Agency Comments
Page 28 GAO-18-305 Coal Mine Reclamation

List of Requesters

The Honorable Maria Cantwell

Ranking Member

Committee on Energy and Natural Resources

United States Senate

The Honorable Raúl M. Grijalva

Ranking Member

Committee on Natural Resources

House of Representatives

The Honorable Alan S. Lowenthal

Ranking Member

Subcommittee on Energy and Mineral Resources

Committee on Natural Resources

House of Representatives

The Honorable Richard J. Durbin

United States Senate

The Honorable Matt Cartwright

House of Representatives

The Honorable Debbie Dingell

House of Representatives
Appendix I: Characteristics of States GAO 

Selected for Review to Obtain Additional 

Information regarding OSMRE Oversight

Page 29 GAO-18-305 Coal Mine Reclamation

We selected a nonprobability sample of states to examine the Office of 

Surface Mining Reclamation and Enforcement’s (OSMRE) oversight 

activities in more detail. We generally selected states that produced the 

most coal in 2015 but also selected states in order to achieve some 

variation in factors such as geographic location, the dominant type of coal 

mining conducted (e.g., surface or underground mining), whether the 

state had primacy, and whether the state allowed self-bonding (see 

table 2).

Table 2: Characteristics of States GAO Selected for Review to Obtain Additional Information regarding the Office of Surface 

Mining and Reclamation’s (OSMRE) Oversight

State

Coal produced 

in 2015 

(in thousands 

of tons)a OSMRE 

region

Dominant type 

of coal mining 

conductedb Primacy or 

nonprimacyc Allows selfbonding

Illinois 56,101 Mid-Continentd Underground Primacy Yes

Kentucky 61,425 Appalachiane Underground Primacy No

Montana 41,864 Westernf Surface Primacy No

Pennsylvania 50,031 Appalachian Underground Primacy Yes

Tennessee 897 Appalachian Underground Nonprimacy Yes

West Virginia 95,633 Appalachian Underground Primacy Yes

Wyoming 375,773 Western Surface Primacy Yes

Source: GAO analysis of U.S. Energy Information Administration, OSMRE, and Interstate Mining Compact Commission data and state and federal regulations. | GAO-18-305

a

As reported by the U.S. Energy Information Administration. Together, these states represent more 

than 75 percent of coal mined in the United States in 2015.

b

Based on the amount of coal produced in 2015.

c

States and Indian tribes can submit a program to implement the Surface Mining Control and 

Reclamation Act to OSMRE for approval. A state or Indian tribe with an approved program is said to 

have “primacy” for that program.

d

The Mid-Continent Region comprises Alabama, Arkansas, Illinois, Indiana, Iowa, Kansas, Louisiana, 

Mississippi, Missouri, Oklahoma, and Texas.

e

The Appalachian Region comprises Georgia, Kentucky, Maryland, Massachusetts, Michigan, North 

Carolina, Ohio, Pennsylvania, Rhode Island, Tennessee, Virginia, and West Virginia.

f

The Western Region comprises Alaska, Arizona, California, Colorado, Crow Tribe, Hopi Tribe, Idaho, 

Montana, Navajo Nation, New Mexico, North Dakota, Oregon, South Dakota, Utah, Ute Mountain Ute 

Tribe, Washington, and Wyoming.

Appendix I: Characteristics of States GAO 

Selected for Review to Obtain Additional 

Information regarding OSMRE Oversight
Appendix II: GAO Contact and Staff 

Acknowledgments

Page 30 GAO-18-305 Coal Mine Reclamation

Anne-Marie Fennell, (202) 512-3841 or fennella@gao.gov

In addition to the contact named above, Elizabeth Erdmann (Assistant 

Director), Antoinette Capaccio, Jonathan Dent, Cynthia Grant, Marya 

Link, Anne Rhodes-Kline, Sheryl Stein, Guiovany Venegas, and Jack 

Wang made key contributions to this report.

Appendix II: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(101326)
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