Surface Coal Mining: Financial Assurances for, and Long-Term Oversight of, Mines with Valley Fills in Four Appalachian States
Released: 2010-02-16T00:00:00

Letter

Background

The central Appalachian coal region plays a large part in supplying the country with its energy needs. Specifically, in 2008, West Virginia and Kentucky were the second- and third-largest coal-producing states in the nation—behind Wyoming—and accounted for more than 76 percent of the coal produced from surface mines in Appalachia. West Virginia produced about 69 million tons of coal from surface mines, while Kentucky produced about 51 million tons. Virginia produced close to 9 million tons and Tennessee less than 2 million tons from surface mines in 2008, respectively.

SMCRA Regulates Surface Coal Mining Operations and Requires Financial Assurances

SMCRA requires mine operators to obtain a permit before starting to mine. The permit process requires operators to submit detailed plans describing the extent of proposed mining operations, how reclamation on the mine site will be achieved, and the estimated per-acre cost of reclamation. 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. (See app. II for selected details about these key reclamation standards.) In general, an operator must reclaim the land to a use it was capable of supporting before mining or an alternative post-mining land use that the regulatory authority deems higher or better than the pre-mining land use. Additionally, although the operator is generally required to redeposit spoil on the mine site so that it approximates the original contour of the site, the operator may in certain circumstances receive a variance to this general requirement and leave the land flat or gently rolling. In addition, a mountaintop removal operation is one that, by definition, will not restore the area to its approximate original contour. However, only specific types of post-mining land uses—including industrial, commercial, agricultural, residential, or public uses—are allowed for mountaintop removal operations.

SMCRA requires the operator to submit a bond in an amount sufficient to ensure that adequate funds will be available for the regulatory authority— either OSM or a state with primacy—to complete the reclamation if the operator does not do so. The bond provisions of SMCRA apply generally to all types of coal mines and do not include any requirements that are specific to mines with valley fills. However, the bond amount for a particular site cannot be less than $10,000 and must also be sufficient to ensure the completion of the reclamation plan for that particular site if the work had to be completed by the regulatory authority in the event of forfeiture. In this report, we refer to a bond that is equal to the expected cost to reclaim the entire site as a “full-cost bond.” OSM has prepared guidance for mine operators on how to calculate their bond amounts to capture the likely costs of reclamation. Bond amounts can be adjusted as the size of the permit area or the projected cost of reclamation changes. When all reclamation standards identified in SMCRA and the operator’s permit—including compliance with water quality standards—have been met, the bond is completely “released” to the operator.

The OSM regulations implementing SMCRA recognize three major types of bonds: corporate surety bonds, collateral bonds, and self-bonds.

A surety bond is a bond in which a surety company guarantees the performance of the permittee’s obligation to reclaim the mine site. If the mining company 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 securities deposited directly with the regulatory authority.

A self-bond is a bond in which the permittee guarantees its own performance with or without separate surety. Self-bonds are available only to operators who meet certain financial conditions. To remain qualified for self-bonding, operators must, among other requirements, maintain a net worth of at least $10 million, possess fixed assets in the United States of at least $20 million, and have an “A” or higher bond rating.

SMCRA also authorizes states to enact an OSM-approved alternative to a full-cost bonding system as long 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 bond—e.g., a surety bond or collateral bond—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. Funds are placed within a pool and can be used to reclaim sites that participants in the alternative bonding system do not reclaim. Under OSM regulations, all alternative bonding systems must 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.

Once bonds have been completely released to a mine operator, the relevant regulatory authority may terminate its jurisdiction under SMCRA. However, the regulatory authority may also revoke an operator’s permit if the operator fails to comply with the permit’s provisions. Under those circumstances, the operator may forfeit the bond to the regulatory authority. The regulatory authority then becomes responsible for reclaiming the land to the reclamation standards found in the operator’s permit. If the amount forfeited is insufficient to pay for the full cost of reclamation, the operator remains liable for remaining costs. The regulatory authority may complete reclamation and may sue the operator to recover additional expenses. Failure to complete reclamation has other serious consequences for mine operators—SMCRA prohibits applicants from obtaining future SMCRA permits if they have unabated violations of law or regulations applicable to surface mining; state regulations specifically note that bond forfeitures based on violations that are not subsequently corrected disqualify operators from obtaining future permits.

Clean Water Act Provisions Also Regulate Aspects of Surface Coal Mining Operations

The objective of the Clean Water Act is to restore and maintain the chemical, physical, and biological integrity of the nation’s waters. Section 404 of the act allows the Corps to issue permits for the discharge of material, including fill material, into waters of the United States at specified disposal sites. Such permits are needed for the construction of a valley fill. Section 404(c) authorizes EPA to deny or restrict the use of any disposal site where it finds that the discharge will have unacceptable adverse effects. Mining companies may be able to construct valley fills under one of two types of permits issued by the Corps. First, the mining company may be authorized to construct a valley fill under the Corps’ “nationwide permit” for surface coal mining. A nationwide permit provides coverage for substantially similar activities that are expected to cause only minimal adverse environmental effects on an individual and cumulative basis. Second, the Corps may issue an “individual permit.” Individual permits are issued on a case-by-case basis for activities that are expected to have more than a minimal impact. Before issuing an individual permit, the Corps must evaluate the operator’s proposed activity for several factors, including, but not limited to, its effects on environmental values—such as fish, wildlife, and water quality—and safety issues, as well as any proposed mitigation for the project.

Under guidelines prepared by the EPA Administrator and the Secretary of the Army acting through the Chief of Engineers, pursuant to section 404, the Corps may issue permits to discharge fill material, if, at a minimum, compliance with the guidelines is demonstrated. One aspect of compliance is that the discharge does not cause or contribute to “significant degradation” of waters of the United States. Under these guidelines, an operator would not be permitted to discharge fill materials into waters of the United States if there is a practicable alternative to such a discharge and would be required to minimize discharges that cannot be avoided. If such discharges are unavoidable, the Corps can require as a condition of the permit that the operator compensate for the loss or degradation of regulated waters. In the case of valley fills that bury streams, such compensatory mitigation could involve (1) creating a new stream, (2) enhancing a degraded stream, or (3) preserving an existing stream. The mitigation work may be done within the permitted area (on-site) or outside of the permitted area (off-site). Mitigation may be performed by the mine operator or a third party, such as a public or nonprofit entity, under agreement with the Corps.

The Corps’ Clean Water Act implementing regulations and related policies authorize the Corps’ district engineers to require financial assurances when approving section 404 permits in order to ensure a high level of confidence that compensatory mitigation will be successfully completed. The Corps allows financial assurances to be in the form of bonds, escrow accounts, casualty insurance, letters of credit, legislative appropriations for government sponsored projects, or other appropriate instruments, subject to the approval of the district engineer. If assurances are required, district engineers are to determine the amount based on factors such as the size and complexity of the compensatory mitigation project, the likelihood of success, the past performance of the project sponsor, and any other factors they deem appropriate. Also, Corps district engineers must release financial assurances once they determine that the operator has demonstrated that a compensatory mitigation project has successfully met its performance standards. Typically, the monitoring period to assess the success of a compensatory mitigation project is 5 years but this period may be extended for projects that take longer, such as stream restoration.

The Corps’ authority to require financial assurances to ensure compensatory mitigation differs from the authority that mining agencies have under SMCRA to require bonds for mine reclamation.

While SMCRA explicitly calls for mining agencies to require all operators to provide bonds, the Corps’ Clean Water Act regulations authorize district engineers to decide whether financial assurances are necessary on a permit-by-permit basis. The district engineer may determine that financial assurances are not necessary for a specific project if an alternate mechanism is available to ensure a high level of confidence that the compensatory mitigation will be provided and maintained.

While SMCRA authorizes mining agencies to directly hold and use financial assurances to ensure the required reclamation is completed if the operator defaults on its reclamation obligations, the Corps does not have statutory authority under the Clean Water Act to do so. In light of that limitation, the Corps’ regulations and policies stipulate that if a district engineer does choose to require financial assurances, those assurances must be payable to a third party—such as a governmental or nongovernmental environmental management organization—that will agree to hold the funds and complete the mitigation in accordance with the Corps’ instructions if the operator defaults on its obligations.

In addition to needing a Clean Water Act section 404 permit to construct a valley fill, mine operators need to obtain a National Pollutant Discharge Elimination System, or section 402, permit if they discharge pollutants from industrial point sources. Point sources are discrete conveyances such as pipes. Section 402 permits, generally administered by the states under EPA-approved programs, include limits on the amount of pollutants—such as suspended solids—that mines can directly discharge into bodies of water. Surface coal mines contain sediment ponds and drainage ditches that collect runoff from all disturbed areas, including water from the base or perimeter of valley fills or other locations that may then flow into a stream. These flows may need to comply with point source pollutant limitations specified in a section 402 permit. Section 402 permits also require that mine operators submit periodic discharge monitoring reports to the regulatory authority, which is typically a state agency. A mine operator cannot obtain the release of its SMCRA bond if the land is contributing suspended solids and other pollutants, in excess of applicable state effluent limitations, to stream flow or runoff outside the SMCRA permit approved area.

Under SMCRA and the Clean Water Act, Agencies Have Approved Permits for Mines with Thousands of Valley Fills in Central Appalachia

The regulatory authorities in the four states we reviewed have collectively authorized thousands of valley fills since the enactment of SMCRA in 1977. Although the total number of valley fills approved since 1977 is uncertain, data we collected from OSM, Kentucky, Virginia, and West Virginia show that at least 2,343 valley fills have been authorized since January 2000. Specifically, Kentucky authorized 1,488 valley fills through July 30, 2008; Tennessee authorized 17 valley fills through December 31, 2008; Virginia authorized 327 valley fills through August 17, 2009; and West Virginia authorized 511 valley fills through July 30, 2008.

Notably, approval of a valley fill does not necessarily mean that it will be constructed. For example, according to Virginia state officials, of the 327 valley fills approved between January 2000 and August 2009, 97 were completed, 103 were under construction, 90 were not started, and 37 were “not needed and/or not constructed.”

While OSM and state mining agencies have been approving SMCRA permits with valley fills since the late 1970s, the Corps did not begin to consistently require section 404 permits for valley fills until the spring of 2002, when the Corps and EPA jointly issued regulations revising the definition of fill material. Prior to this revision, the Corps interpreted excess spoil to be a “waste” regulated under section 402 of the Clean Water Act rather than a fill material regulated under section 404.

The Corps could not readily provide us with data on the total number of section 404 permits it has issued for valley fills, the number of operators it has required to complete mitigation for valley fills, the types of mitigation called for, or the status of mitigation projects. The Corps did provide us electronic data showing that in the four states we reviewed it approved 378 Nationwide Permit 21 permits from March 2002 through December 2008 and 171 individual permits for surface coal mining operations from March 2002 through September 2009. However, its database does not contain information on how many of those permits were for valley fills. In addition, its electronic database indicated that only 57 of the nationwide permits required compensatory mitigation projects; Corps officials believed that number to be understated because the database is not complete. Although not captured in its electronic database, the information on valley fills and required compensatory mitigation projects is more completely documented in the Corps’ paper permit files, according to agency officials.

Mining Agencies and the Corps Use Different Approaches to Financial Assurances for Reclamation and Mitigation

The four states in our review use different approaches to fulfill SMCRA’s requirement that mine operators provide adequate financial assurances for completing reclamation. These states primarily vary in whether they require mine operators to fulfill their financial assurance obligation strictly through a full-cost bond or whether they allow operators to use alternative bonding systems that combine bonds, taxes on coal production, and other sources of funding. The Corps has not used its discretionary authority to require surface coal mine operators in the four states to provide financial assurances for mitigation work required as part of their section 404 permit, according to Corps officials. Furthermore, Corps officials said the Corps has relied on other permit conditions for assurance that mitigation will be satisfactorily completed.

State Mining Agencies’ Approaches to Financial Assurances Vary

The three states with primacy that we examined—West Virginia, Virginia, and Kentucky—have financial assurance programs that differ from each other and from the federal program that OSM administers in Tennessee. Each of the three states has received approval from OSM to use an alternative bonding system, although they do so to varying degrees.

West Virginia requires that all operators participate in a bond pool.

Virginia relies primarily on a bond pool but also uses a full-cost bonding system.

Kentucky relies primarily on a full-cost bonding system but also uses a bond pool.

Tennessee uses a full-cost bonding system.

West Virginia

All mine operators must participate in the state’s alternative bond system. The state has limited the site-specific per-acre bond to between $1,000 and $5,000. The state also collects a tax on each ton of coal produced. The current tax is 14.4 cents per ton of clean coal produced. The state deposits those funds into a Special Reclamation Fund and a Special Reclamation Water Trust Fund. As of June 2008, the combined balance for the two funds was $46.9 million. The state can use these funds to reclaim lands that were permitted and abandoned after August 3, 1977, for which there is not enough bond amount to cover reclamation.

The West Virginia legislature created an advisory council in 2001 to ensure the effective, efficient, and financially stable operation of the Special Reclamation Fund. The advisory council is required to report to the legislature every year on the financial condition of the fund. Furthermore, the West Virginia Department of Environmental Protection is required to conduct formal actuarial studies every 2 years and conduct informal reviews annually on the Special Reclamation Fund and Special Reclamation Water Trust Fund. In January 2009, recognizing that the tax rate was scheduled to drop from 14.4 cents per ton to 7 cents later that year, the advisory council recommended that the state legislature adjust the tax rate to 13 cents per ton for at least a 5-year period or provide for additional funding needed to ensure solvency. While the council concluded that the fund was solvent as of January 2009, it stated that, based upon projections in the 2008 actuarial study and with only the known revenue sources at that time, the fund balance would be negative by 2015. In April 2009, the state legislature set the tax rate at 14.4 cents per ton, effective July 1, 2009; called for a review of the tax every 2 years to determine whether it should be continued; and stipulated that the tax could not be reduced until the funds have sufficient monies to carry out required reclamation.

Virginia

Virginia offers the option of a bond pool to operators who meet eligibility criteria; other operators must post a full-cost bond. As of October 2009, the majority of active surface mine permits were covered by the bond pool. According to officials from the Virginia Department of Mines, Minerals and Energy, as of October 13, 2009, there were 148 active surface mine permits in the bond pool and 18 surface mines covered by full-cost bonding. The total bonded amount in the bond pool was about $143 million, while the total for full-cost bonding was about $14 million. An operator must be able to demonstrate at least 3 consecutive years of compliance under Virginia’s Coal Surface Mining and Coal Reclamation Act or any other comparable state or federal act to participate in the bond pool. Once in the pool, an operator cannot opt out. Operators in the pool must pay an entrance fee of $1,000 when the total balance of the pool is determined to be greater than $2 million; the entrance fee increases to $5,000 if the total fund balance falls below $1.75 million, and remains at $5,000 until the balance again exceeds $2 million. A fee of $1,000 is required of all operators in the pool when the permit is renewed. Participants in the bond pool also furnish a bond of $1,500 or $3,000 per acre, depending on when the permit was issued. Regardless of acreage, bonds for operations entering the fund on or after July 1, 1991, must be at least $100,000. If forfeiture occurs, the state may, after using the available bond monies, use the bond pool funds as necessary to complete reclamation liabilities for the permit area.

To oversee the bond pool’s general operations, the Virginia legislature created a reclamation fund advisory board that meets at least twice each year to make recommendations to the director of the Department of Mines, Minerals and Energy. The advisory board must also report to the director and to the governor on the pool’s financial status and recommend to the director any new or amended regulations for administering or operating the pool. According to the department, the advisory board concluded in August 2009 that the fund was solvent.

Kentucky

Kentucky offers mine operators who meet eligibility criteria the option of participating in a bond pool, but the vast majority of operators provide full-cost bonds. According to the most recently available state data, as of May 2007, only 65 permits were covered by the bond pool. As of June 30, 2009, OSM data showed that there were a total of 893 permits for surface mining in Kentucky. To participate in the bond pool, state regulations require that an operator have an acceptable or better history of compliance with the state’s mining regulations, among other criteria. The cost of membership ranges from $1,000 to $2,500 and depends on a member’s performance record. In addition, participants must obtain a bond that ranges from $500 to $2,000 per acre, depending on the performance rating of the member. Finally, members pay a 5 cent per-ton fee for surface-mined coal. When the Kentucky Bond Pool Fund reaches $17.4 million, the assessment of tonnage fees is to be suspended for all members who have made 36 or more monthly payments to the fund. If the fund level drops to $12.3 million, the tonnage fee requirement will be reinstated for all members. The funds in the pool are available only for reclamation costs at sites operated by members of the pool. Bond pool members’ per-acre bonds are fully released at the completion of the initial phase of reclamation. After the initial phase, a permit is covered only by the bond pool.

In Kentucky, the law requires a review of the actuarial soundness of the bond pool every 3 years. The last Kentucky actuarial study, which evaluated the pool as of May 31, 2007, concluded that the fund, with a balance of $19.7 million, was solvent and that it had been building its assets at a faster pace than the increase in its outstanding liabilities. As an indication of the pool’s financial soundness, the study noted, the pool could survive the failure of its two largest members. The study concluded that the fund’s soundness had improved because its liability was more evenly spread among its members. The study recommended that the state continue the 5 cent per ton fee for surface coal mines and limit the maximum amount of bond funds held for any member operator to $6 million, or about 30 percent of the total bond pool. According to the state’s bond pool administrator, the pool has continued the 5 cent per ton fee as recommended. He also said there has never been a member of the bond pool to have bonds in excess of $4 to $5 million because the program primarily offers bonding assistance to small coal operators.

Tennessee

Tennessee is the only one of the four states we reviewed to use a full-cost bond system exclusively. As of September 30, 2008, the state had 15 active surface coal mines. OSM held bonds totaling about $17.8 million for those 15 mines. In 2007 OSM revised its regulations for Tennessee to address concerns that full-cost bonds were not adequate to handle the problem of post-mining acid- or toxic-mine drainage. Specifically, the new regulations provide a mechanism in Tennessee to allow operators to establish a trust fund or annuity to cover the cost of postmining pollution discharges in lieu of a performance bond. OSM’s policy in Tennessee is to assume that post-mining pollution discharges will need to be treated for at least 75 years, barring evidence to the contrary. When OSM established the trust fund and annuity options in Tennessee, it stated that a system that provides an income stream may be better suited than full-cost bonds to ensure the long-term treatment of postmining pollution discharges. According to OSM, surety bonds, the most common form of a full-cost bond, are especially ill-suited for this purpose because surety companies normally do not underwrite a bond when there is no expectation of release of liability. The addition of this authority in Tennessee builds upon the experience of Pennsylvania, which had already established a process for accepting trust funds or annuities to pay for postmining discharges.

OSM Oversees State Bonding Programs and Has Made Bonding a National Priority for the 2010 Evaluation Year

In October 2009, the acting director of OSM announced that OSM was making bonding a national priority of its 2010 annual evaluation of state mining programs. Specifically, the acting director instructed regional and field office directors to evaluate how states are complying with their own regulations for determining required bond amounts. The instructions further stated that the evaluations should assess whether (1) the states’ methods of determining bond amounts ensure that adequate funds are available to the state in the event that the operator forfeits its bond, (2) the bond calculation methods include a mechanism to adjust bond amounts or provide other financial assurance to cover the cost of unanticipated long- term postmining pollutional discharges that develop after permit approval, and (3) the state re-evaluates the bond amount each time a permit is revised or renewed. According to an OSM official in the Appalachian Regional Office, OSM chose bonding as a national priority after surveying managers and staff for their oversight priorities. OSM’s November 2009 work plan calls for OSM to examine a sample of forfeited sites to determine whether adequate bonds were posted and whether the sites were reclaimed as proposed in their reclamation plans. For those sites covered in part or in total by a full-cost bond, OSM plans to use its directive on bond calculation as a basis for evaluating the adequacy of bonds. OSM plans to finalize a report on its findings by September 1, 2010.

In addition, OSM announced in November 2009 that it was considering rulemaking to address concerns related to bonding programs. One of OSM’s concerns is that mine operators do not always apply for bond release in a timely manner, particularly for phases II and III. OSM noted that there is no legal requirement that operators apply for bond release in a timely manner and identified several options for improving timeliness. Another concern of OSM was that the data needed to assess the success of reclamation has not been adequate. To improve data quality, OSM is considering requiring operators to submit an annual status report to the regulatory authority with information on areas that are permitted, bonded, disturbed, backfilled and graded, newly planted, and that have reached one or more of the phases of bond release.

While OSM has made bonding an oversight priority for 2010 and is considering related rulemaking options, it has reported on various aspects of state bonding programs in prior annual evaluations. For example, in its 2009 evaluation year report on West Virginia, OSM reported that it did not appear that the state was meeting requirements for inspections at bond forfeiture sites. OSM estimated that the state had completed about 55 percent of the required inspections at bond forfeiture sites. In its 2009 report on Virginia, OSM reported that it had reviewed a sample of operators that applied for phase III bond release during the year and found that on-the-ground reclamation had been successful. In its 2009 report on Kentucky, OSM provided information on the number of forfeited permits at which reclamation was complete or underway. OSM has reported on the states’ bonding programs in other evaluations, but it was not within the scope of our review to assess the effectiveness of those programs.

The Corps Has Not Required Financial Assurances for Valley Fill Permits in the Four States but Has Relied on Other Mechanisms

The Corps has not required operators with section 404 permits for mines with valley fills to provide financial assurances to ensure mitigation is completed, according to officials in the five district offices that approve permits in the four states we reviewed. Corps officials said they have not required financial assurances for the following reasons: The agency does not have statutory authority to directly hold and use performance bonds to ensure that mitigation is completed. Officials said that if they did require financial assurances, an operator would need to identify a third party to hold the assurances and complete the mitigation if the operator does not. Some Corps officials said, however, that few third parties with the ability to conduct stream restoration have been available.

The mine operators have had sufficient capital to complete required mitigation or have demonstrated their ability to successfully complete other mitigation work.

It is assumed that mine operators will comply with compensatory mitigation requirements without financial assurances.

The operators’ approved mitigation projects are not yet complete and therefore the Corps has no evidence that these projects will be unsuccessful.

Corps officials told us the Corps has relied on mechanisms other than financial assurances to ensure that mitigation associated with valley fill permits will be satisfactorily completed. Specifically, one mechanism may require the operator, under the terms of its permit, to prepare an adaptive management plan. Such a plan would identify alternative mitigation actions the operator would take in the event that elements of the original plan did not succeed. In addition to an adaptive management plan, the Corps may require a permit to include a contingency plan that identifies acceptable alternative compensatory mitigation should the approved mitigation project fail. A contingency plan could require that the operator purchase mitigation credits from an in-lieu-fee program if the planned mitigation does not succeed.

Some Corps officials also told us that the SMCRA bond could be used to cover the mitigation required under section 404, but others disagreed. According to a Norfolk, Virginia district Corps official, when off-site mitigation is part of the 404 permit, the Virginia state mining agency will expand the area covered by the SMCRA bond beyond the mine area to include land on which the 404 mitigation is to be done. The Norfolk, Virginia district official stated that this practice is consistent with the Corps’ 2004 mitigation policy for surface mining operations. This policy encourages district engineers to coordinate with state or OSM staff and the mining operators to incorporate required SMCRA features—such as drainage ditches and sediment ponds—into section 404 compensatory mitigation plans. On the other hand, Corps officials in Huntington, West Virginia, said they consider the SMCRA bond as a financial assurance only for mitigation projects done on the surface mine site. In further contrast, a Corps district official we spoke with in Louisville, Kentucky, does not consider the SMCRA bond to be an assurance for on-site section 404 mitigation because the goals of reclamation and mitigation are not always the same. According to Corps headquarters officials, the district offices have the discretion to decide if SMCRA mitigation projects qualify as section 404 mitigation. Officials from OSM’s Appalachian region and field offices agreed that on-site section 404 compensatory mitigation can be incorporated as a special condition of the surface mining reclamation plan in a SMCRA permit.

Federal and State Agencies Are Not Required to Monitor Former Mine Sites but Have Conducted Some Analyses of Environmental Impacts

OSM, the states’ mining or environmental agencies, EPA, and the Corps are not required to monitor former mountaintop mines with valley fills for long-term environmental degradation after reclamation and mitigation are complete and financial assurances have been released. While the agencies are not required to collect post-reclamation monitoring data, several have analyzed conditions near reclaimed mine sites with valley fills and found that (1) reforestation efforts at some reclaimed surface coal mine sites needed improvement, (2) some surface coal mine sites have contaminated streams and harmed aquatic organisms, (3) a link exists between valley fills and changes to water flow, and (4) mine operators have not always returned mine sites to their approximate original contour when required to do so under SMCRA. Several federal and state agencies have taken some actions to respond to these findings.

Additional Monitoring after Releasing Financial Assurances Is Not Required or Needed, According to Many Agency Officials

Federal and state agencies in the four Appalachian states we reviewed are not required by SMCRA or the Clean Water Act to monitor mine sites with valley fills or associated mitigation sites after they have determined that reclamation and mitigation are complete. Most officials we interviewed at the federal and state mining and environmental protection agencies in the four states we reviewed said post-reclamation or post-mitigation monitoring is not needed, with officials from several agencies explaining that the laws or their implementing regulations require adequate monitoring before an agency can determine that either reclamation or mitigation is complete. For example, in order to obtain bond release under SMCRA, mine operators must be able to demonstrate to agency inspectors that revegetation, water quality, and other standards are being met. Generally, this period is 5 years after the last reclamation activity. Officials from EPA and the state departments of environmental protection also told us that they do not monitor mine sites for water pollution discharges after they have been reclaimed. In order to achieve bond release, according to OSM and state officials, the operator typically removes and reclaims all sediment ponds that are subject to section 402 discharge permits and must demonstrate that discharge limits have not been exceeded for a year. Therefore, once the bond has been released, officials would no longer have a reason to monitor the site for section 402 permit violations. Officials from two Corps districts said that the Corps’ requirement that the operator monitor and report on mitigation sites for 5 to 10 years before the Corps will determine that the mitigation is complete is sufficient. In addition, officials from three Corps district offices told us that because they did not begin to consistently issue section 404 permits for valley fills until 2002, few mitigation projects have been in place long enough to have been completed and thus are not available for post-mitigation review.

While the agency officials we spoke with generally said that additional monitoring is not necessary after reclamation and mitigation are complete, there were some that said that additional monitoring is needed to evaluate the long-term effectiveness of those activities. Specifically, officials from EPA’s Office of Water and region 3 and 4 offices said that they believe monitoring has not been adequate to document the success of section 404 mitigation projects. Officials from the U.S. Geological Survey Water Science Center in West Virginia told us that additional long-term monitoring is needed to collect data on a range of issues, including water contamination, flooding, and land stability.

Agencies Have Conducted Some Studies, which Show Long-Term Impacts from Valley Fills, and Taken Some Actions

Several agencies have conducted or funded studies that show some evidence of the effect of environmental changes associated with mountaintop mines with valley fills after reclamation. The majority of the studies that agencies referred us to were done as part of the 2003 draft multiagency programmatic environmental impact statement (PEIS) on mountaintop mining and valley fills. Among the concerns raised by these studies were reforestation efforts, effects of mining on aquatic organisms, relations between valley fills and floods, and reclamation to the approximate original contour. Several agencies have taken actions in response to some of these concerns, such as promoting new reforestation methods.

OSM and State Mining Agency Studies Found that Reforestation Efforts at Reclaimed Mine Sites Needed Improvement

OSM and state mining agencies have found that reclamation efforts on mountaintop mines and valley fill sites could be improved to yield more successful reforestation. For example, the 2003 draft PEIS noted that previously forested mountaintop mine sites were more likely to have been revegetated with grasses than with trees. One PEIS study compared revegetation at a sample of southern West Virginia mountaintop removal and valley fill mining sites with adjacent unmined sites; the revegetation had occurred from 8 to 26 years prior to the study, and therefore the operators probably had their bonds released. According to the study, poor vegetation development with time was typical of the reclaimed sites, with significantly lower tree diversity on the mined sites than in adjacent forests. The study found that its data and other published studies supported the conclusion that mining reclamation procedures limit the overall ecological health and inhibit the desired growth of native tree and shrub species on the site. With regard to the study in the draft PEIS, OSM officials told us that SMCRA permits do not always call for reforestation. For example, a mine site might be approved for reclamation as pasture or commercial development. Therefore, reclaimed mine sites may not need to become forested to meet SMRCA requirements.

In June 2008, OSM issued a policy directive to promote the reestablishment of forest land where existing forests had been removed by surface mining. In its directive, and in related advisory documents, OSM noted that past reclamation and revegetation efforts had not been fully successful and had led to low rates of tree survival and growth, forest fragmentation, reduced carbon sequestration, loss of wildlife habitat and forest products, and increased potential for floods. To reverse this trend, the directive encourages, but does not require, the widespread and routine planting of native, high-value trees that should help restore the uses and ecosystems provided by forests prior to mining. The directive also encourages mine operators to avoid compacting the top 4 feet of soil on reclaimed mine sites in order to promote water infiltration and tree growth. The OSM directive is part of a broader effort known as the Appalachian Regional Reforestation Initiative—formed in 2004 by federal and state agencies, the coal industry, environmental organizations, and others in the Appalachian region—to promote improved reforestation techniques on surface-mined lands. Officials from Kentucky, Virginia, and West Virginia told us that the OSM initiative built upon changes in reforestation policy or regulation at the state level. According to an OSM Appalachian Region official, while he believes that the use of these techniques is increasing, he also said that reliable data showing the acres of mined land planted using these techniques are not available. According to this official, OSM is working with participants in the reforestation initiative on methods for assessing success.

Federal Agencies Have Found That Contaminants from Mine Sites, Including Reclaimed Sites with Valley Fills, Have Harmed Aquatic Organisms

According to the 2003 draft PEIS, approximately 1,200 miles of headwater streams within the boundaries of mining permits (or 2 percent of the streams in the central Appalachian study area) were directly affected by mountaintop mining and valley fills. For example, streams below valley fills were characterized by contaminants discharged from mine sites as well as less diverse and more pollutant-tolerant aquatic invertebrates and fish. Furthermore, in some locations, streams where mountaintop mines and valley fills exist, concentrations of selenium, a potentially toxic element that accumulates in aquatic organisms, were found to exceed standards.

In 2008, EPA scientists reported that aquatic life downstream from 27 active and reclaimed mountaintop mines with valley fills showed subtle to severe effects compared with aquatic life downstream in similar, but unmined, West Virginia watersheds. More specifically, the authors compared three reclaimed mine sites with three unmined sites over a period of 6 to 7 years. According to the study, two of the three reclaimed mine sites showed further degradation of aquatic organisms over the period while the third showed some improvement, but in each case the three reclaimed sites were impaired compared with the unmined sites.

EPA has cited the 2008 study, as well as other analyses, in recent actions that it has taken on section 404 permits for valley fills. In September 2009, EPA announced its plan for the “enhanced coordinated review” of 79 section 404 permit applications for surface mines with valley fills pending with the Corps. In making its announcement, EPA stated, among other things, that on the basis of the scientific literature, its field experience, and available project information, it was concerned that the mitigation proposed may not be sufficient to replace lost aquatic resources. On the other hand, Corps officials told us that they believe that the scientific literature EPA referred to is not complete; specifically, that it lacks adequate site-specific analysis.

Also in September 2009, EPA asked the Corps to reconsider a section 404 permit that it issued in 2007 for the Spruce No. 1 mine in West Virginia with planned valley fills that, if built, would fill more than 8 miles of headwater streams. EPA expressed concerns that the Corps decision to issue the permit did not reflect studies showing that impairments from surface coal mining are persistent over time and cannot be easily mitigated or removed. EPA also raised specific concerns about the mitigation plan in the issued permit, including the planned use of drainage ditches—such as might be constructed at the perimeter of valley fills—as compensatory stream channels. EPA said that it has consistently objected to the use of these ditches as compensation for lost headwater stream channels and requested that the Corps re-evaluate the mitigation plan to ensure that it achieves functional replacement of lost aquatic resources. On September 30, 2009, the Corps’ district engineer in Huntington, West Virginia, responded to EPA, noting that the decision to issue the permit had followed extensive coordination with EPA for nearly 10 years concerning the project’s scope, alternatives, and compensatory mitigation and included the preparation of an Environmental Impact Statement. Furthermore, the district engineer said that there were no factors at that time that compelled him to consider suspending, modifying, or revoking the permit. However, EPA’s acting regional administrator for Region 3 wrote to the Corps on October 16, 2009, that additional modifications would need to be made if the permit were to comply with the Clean Water Act and the regulations implementing the act.

EPA is preparing additional analysis of the impacts of mountaintop mining sites, including reclaimed sites, on water quality and aquatic life. EPA’s Office of Research and Development plans to release for public comment a draft assessment in early 2010 that evaluates restoration and recovery methods that mining companies use to address the ecological impacts associated with mountaintop mining and valley fills. EPA plans to prepare the assessment with advice from an expert panel chartered under the Federal Advisory Committee Act.

Federal Agencies and the State of West Virginia Have Drawn a Link between Valley Fills and Changes to Water Flow

Federal and state agencies examining the impact of mountaintop mines with valley fills have found that in streams downstream from these sites, low flows are usually increased and storm flows are sometimes increased. For example, according to the 2003 draft PEIS, streams in watersheds below valley fills tended to have greater base flows. Streams with fills were generally less likely to experience increases in peak flow than unmined areas during most storms. However, they were more likely to experience increases in peak flow during more intense rainfall events. Consequently, the draft PEIS concluded that water flows may increase below valley fills, but that the effects are site-specific. This conclusion was derived, at least in part, from studies by the U.S. Geological Survey, which compared changes in water flow in watersheds with valley fills (some of which had been reclaimed) with watersheds without valley fills.

In addition, the state of West Virginia has examined the extent to which mining activities may have contributed to flooding associated with a particular storm event. On July 8, 2001, the southern portion of West Virginia experienced a major rainstorm that produced disastrous flooding. This flooding damaged or destroyed hundreds of homes and many businesses. Most of the affected counties are in the heart of West Virginia’s southern coalfields and have extensive underground and surface mining activities. Logging is also prevalent in this region. In response to public concerns, the governor created a Flood Investigation Advisory Committee and a Flood Analysis Technical Team to focus specifically on the impacts of the mining and logging industry on the July 8th flooding.

The team compared two watersheds with extensive mining (and logging) activities, including valley fills, with a third watershed with no such activities. In general, according to the team, the contributions of mining and logging to increased water flow were relatively small when compared to the total stream flow volumes. It concluded, however, that mining and logging influenced the studied watersheds by increasing surface water runoff and the resulting stream flows at various evaluation points. Consequently, the flood analysis technical team recommended that, among other things, the state revise its regulations to prohibit any increase in surface water discharge over pre-mining conditions and modify certain requirements for valley fill construction. In 2003, the state received OSM’s approval to revise its mining regulations to require that permit applications contain a storm water runoff analysis and that the worst case during mining and post-mining evaluations must show no net increase in peak runoff compared with the pre-mining evaluation. According to the Secretary of the West Virginia Department of Environmental Protection, the state has also modified its valley fill construction rules to further ensure no flooding potential in times of short, intense runoff from flash storms. These modifications include engineering requirements to help ensure the stability of the valley fill.

OSM Has Studied Operators’ Reclamation of Mountaintops to Approximate Original Contour

Returning spoil material to a mined out area in order to approximate the original contour and elevation of the mountain helps to reduce the amount of excess spoil that otherwise might be placed in a valley fill. As we reported in December 2009, most operators in West Virginia and Kentucky have not requested a variance from this requirement. However, according to OSM studies in 1999 and 2001 of West Virginia and Kentucky’s implementation of the approximate original contour standard, some reclaimed sites where the operator was supposed to return the land to approximate original contour differed little from sites that had been granted variances. OSM also reported in 1999 that most mountaintop removal projects in Virginia were reclaimed to a configuration closely resembling the approximate original contour, even when the state had granted a variance to the operator. Following those findings, the states issued new guidance on how to achieve approximate original contour. In 2007 and 2008, OSM reviewed the effectiveness of the states’ new contour policies and procedures; the results of those reviews were not available as of November 2009. In October 2009, OSM’s acting director instructed the field offices to assess all the states’ implementation of approximate original contour standards starting in 2010.

Federal Laws May Be Available Under Limited Circumstances to Address Long-term Environmental Problems Associated with Valley Fills but Have Rarely or Never Been Needed or Used, According to Agency Officials

Several federal laws may be available, under limited circumstances, to address environmental problems associated with mountaintop mines with valley fills after SMCRA or Clean Water Act financial assurances have expired, but these have rarely been needed or used, according to federal and state officials. We selected four federal laws for analysis in this regard: SMCRA; the Clean Water Act; the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), also commonly known as Superfund; and the Resource Conservation and Recovery Act (RCRA).

SMCRA Provides Limited Authority to Address Environmental Problems at Former Mine Sites after Bond Release

OSM and state mining agencies can use additional SMCRA provisions under two limited sets of circumstances to address environmental problems at former mine sites. First, SMCRA regulations require a mining agency to reassert jurisdiction over a mine site after a bond release if it can demonstrate that the release was based on the operator’s fraud, collusion, or misrepresentation of a material fact. According to OSM, reassertion of jurisdiction could involve reopening the permit and requiring a new bond. However, OSM and state officials reported to us that they have rarely needed to use this authority. For example, OSM told us that it had reasserted jurisdiction on one post-bond release site in West Virginia that was discharging pollution after the agency successfully argued in court that the company had misrepresented material facts when the bond was released.

Second, SMCRA authorizes OSM and approved states to use funds from OSM’s Abandoned Mine Land Fund to reclaim some sites. SMCRA established the fund to reclaim certain sites mined prior to SMCRA’s passage in 1977. However, amendments to SMCRA have made these funds available for additional projects. Specifically, OSM and primacy states can use these funds to reclaim sites for which any bond or other source of funds is insufficient for reclamation when (1) mining occurred between the enactment of SMCRA and OSM approval of a state program or (2) mining occurred between the enactment of SMCRA and its amendment in 1990 and the mine operator’s surety has become insolvent. Moreover, these funds must be used to rectify situations posing extreme danger or adverse effects to public health and safety before they are used to restore environmental resources. Funds for carrying out these purposes are generated by a tax on coal production and may also be generated by penalties assessed for violations of SMCRA. OSM officials told us that each year a small amount of civil penalty money is available for any state that requests it, on a competitive basis for site reclamation and that the agency has used these funds in the past for as many as four inadequately reclaimed mine sites each year.

The Clean Water Act Authorizes EPA or State Water Quality Regulators to Require a Permit for Discharges from Former Surface Mines

Two provisions of the Clean Water Act authorize EPA or state water quality regulators to address or monitor water quality issues associated with former mine sites. First, the act authorizes EPA or EPA-authorized states to regulate discharges of pollutants from point sources by issuing and enforcing National Pollutant Discharge Elimination System section 402 permits that include limits on discharges of specific pollutants. According to EPA officials, a point source at a mining site could be, for example, a ditch draining a sediment pond at the base of a valley fill. Mine operators typically remove such point sources prior to receiving full bond release. However, in some circumstances, sediment ponds and associated drainage ditches may be authorized to remain on site if provisions for ongoing maintenance of the pond are made. If, after bond release, conditions at the former mine site change so that pollutants are being discharged from a point source, the party responsible for maintaining the point source—which could be the former mine operator or the landowner of the mine site—would have to obtain a section 402 permit and would be subject to applicable pollutant discharge limitations. EPA officials emphasized that a point source may remain after bond release and that the requirement to maintain a permit for any such remaining point source would be indefinite. However, state officials told us that they have rarely, if ever, needed to use this Clean Water Act authority to require a new permit for a point source at a surface coal mine.

Second, the Clean Water Act requires states to identify impaired waters and to develop “total maximum daily loads” (TMDLs) for impaired waters. States may be able to use information on impaired waters to indirectly mitigate latent pollution associated with former surface coal mine sites. Specifically, if the state determines that a water body is impaired, it must eventually develop, for each pollutant causing an impairment, a TMDL—the amount of the pollutant that the water body can receive, taking into account seasonal variations and a margin of safety, and still meet the water quality standard applicable to that body of water. To implement a TMDL, states allocate pollutant loadings among specific sources, such as mines, and incorporate the loads into the state’s water quality management plans and section 402 permits. Thus, if a proposed mine would cause a body of water to exceed its TMDL for a given pollutant, the state may, among other things, impose stricter discharge limits in that site’s section 402 permit in order to achieve water quality standards. In addition, the Corps and EPA may use the information on impaired waters in considering whether a section 404 permit for a valley fill operation should be issued. For example, in raising concerns regarding the Corps’ permit for the Spruce No. 1 mine in West Virginia in 2007, EPA cited the existence of a TMDL in the mine’s watershed; EPA’s decision as to whether to veto this permit was pending as of October 2009.

The states we reviewed have identified mining as a general cause of impairment for certain bodies of water, but they have not attributed such impairments to specific mine sites. For example, West Virginia’s 2006 Water Quality Assessment Report identified coal mining as a probable source of impairments for about 4,066 miles of streams in the state, but did not identify specific mining permits as a source.

CERCLA May Authorize EPA to Respond to Pollution from Former Mines

CERCLA, commonly known as Superfund, authorizes, but does not require, EPA to respond to the release or threatened release of hazardous substances from a former surface coal mine. Whether a particular release from a former mine constitutes a hazardous substance must be determined on a case-by-case basis. Some of the pollutants commonly associated with coal or coal mining, such as selenium, are considered hazardous substances under CERCLA. CERCLA allows the government to collect the costs of mitigating or cleaning up these substances from responsible parties. However, EPA officials said that the agency has not used CERCLA authority to respond to mine pollution released from a former surface coal mine site. EPA has noted that coal contains trace amounts of hazardous substances, but that such amounts as may be released over time from a former surface mine might not rise to the level that would trigger an EPA response.

EPA is Considering Regulating Coal Combustion Residue at Surface Mines under RCRA

As currently implemented, the hazardous waste provisions of RCRA would not generally be available to address environmental issues at former surface coal mines because many of the wastes associated with the extraction, processing, and combustion of coal have been exempted from the definition of hazardous waste. However, concern over one particular coal by-product, coal combustion residue, may lead to regulation of the material as a hazardous waste in the future. Coal combustion residue—the material that is left once coal has been burned, as in a power plant—is sometimes placed on surface mines to abate acid mine drainage. According to OSM, the residue may also be used to enhance soil, seal and encapsulate material, and backfill mine sites. If coal combustion residue were deemed a hazardous waste, surface mines receiving such materials might be subjected to RCRA’s hazardous waste provisions and could be forced to address releases of hazardous wastes. Currently, EPA is developing regulations on managing coal combustion residue, including those managed in surface impoundments, such as one that failed in Tennessee in December 2008. EPA is considering a number of approaches for regulating coal combustion residue, including using the solid waste provisions of RCRA, or a combination of the solid and hazardous waste provisions of RCRA.

Agency Comments and Our Evaluation

We provided a draft of this report to the Department of the Interior, the Department of Defense, and the Environmental Protection Agency for review and comment. We also provided a draft of this report to the Kentucky Department for Natural Resources; the Virginia Department of Mines, Minerals and Energy; and the West Virginia Department of Environmental Protection. The three federal agencies generally agreed with our findings, while the three state agencies were critical of what they perceived to be the message of the report.

The Department of the Interior said that it believed the report is an informative and fair characterization of the federal and state program requirements under SMCRA pertaining to financial assurances in the four states we reviewed. The Department of Defense said that, in general, it believed the report is informative and provides a good discussion of the issues involved in financial assurances for surface coal mining in Appalachia. The Environmental Protection Agency noted that the report provides a factual presentation of issues associated with the review and regulation of surface coal mining practices. The agency also noted that the data presented in this and a December 2009 GAO report provide helpful context for federal and state agencies as they continue to work together to address both the near- and long-term consequences of surface coal mining activities on the environment, water quality, and Appalachian coalfield communities.

The three state agencies’ comments were critical of the draft report. For example, Kentucky commented that it believed the report is overly broad in its generalized statements, that terms and phrases are used interchangeably so as to confuse the issues, and that the report is written in a manner to misrepresent and sensationalize the issues. We do not agree that the report misrepresents or sensationalizes the issues, and have reviewed our use of terms—such as mountaintop mining, mountaintop removal mining, valley fills, and hollow fills—to ensure that they are used consistently and appropriately throughout the report.

Virginia commented that the report appears to be based on an assumption that there are post-bond release pollution discharges below valley fills, and that it was concerned with our use of an EPA study (by Pond, Passmore, et al.) to support the point that such discharges may occur. The state also noted that pollution problems that may occur are likely to be site-specific. We disagree with Virginia’s characterization of our report because we did not assume that there are post-bond release pollution discharges below valley fills. In fact, our report notes that there is little monitoring of sites after bond release, thereby making it difficult to assess post-bond release conditions. Nevertheless, we recognize in the report that there is some evidence, including in the EPA study, that such problems may occur. We agree that problems, if they occur, are likely to be site-specific.

West Virginia noted that all coal mines—not just Appalachian mines with valley fills—are subject to SMCRA and the Clean Water Act. The state also commented that the report seemed to imply that there is a bonding or financial assurance problem in the four Appalachian states we reviewed and that surface coal mines with valley fills are the only mines that have the potential to cause environmental harm. West Virginia also commented that the report implied that the monitoring period before bond release should be longer. While we recognize that other types of coal mining are subject to these laws and may affect the environment, our report focused on surface coal mining with valley fills. The four states we reviewed have more than 98 percent of the recently approved valley fills across the country. In addition, our report contained no conclusions about the adequacy of the bonding programs in the four states or the length of the monitoring period; instead, we attempted to present information on the requirements of the relevant laws. Although West Virginia commented that the report did not give full credit to the state for improvements it has made in reforestation, approximate original contour, and surface water runoff practices, it did not provide any additional information to support these statements. The report does provide information on actions taken by the state in these areas.

We present the agencies’ letters containing their general comments, along with our responses to them, as necessary, in appendixes III through VIII. The agencies, with the exception of EPA, also provided technical comments that we incorporated into the report, as appropriate.

As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution for 30 days from the report date. At that time, we will send copies of this report to interested congressional committees, the Secretaries of the Interior and Defense, and the Administrator of the Environmental Protection Agency. The report will also be available at no charge on the GAO Web site at http://www.gao.gov.

If you or your staffs have any questions about this report, please contact me at (202) 512-3841 or mittala@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix IX.

Appendix I: Objectives, Scope, and Methodology

This appendix details the methods we used to examine (1) the approaches the Office of Surface Mining (OSM), the states we reviewed, and the Army Corps of Engineers (Corps) have taken to obtain financial assurances for surface coal mines with valley fills; (2) the extent to which federal and state agencies monitor and evaluate these mines after reclamation and mitigation are complete; and (3) the federal laws agencies may use, and have used, to address any latent environmental problems associated with these mines that may occur after Surface Mining Control and Reclamation Act (SMCRA) or Clean Water Act financial assurances have expired.

This report focused on the four Appalachian states of Kentucky, Tennessee, Virginia, and West Virginia because these areas account for more than 83 percent of the surface coal production in Appalachia and more than 98 percent of recently approved valley fills across the country. The data on coal production is from the Energy Information Administration and can be found at http://www.eis.doe.gov/cneaf/coal/page/arc/table1.html. The data on valley fills are based on permits approved from October 1, 2001, through June 30, 2005, as reported in Department of Interior, Office of Surface Mining Reclamation and Enforcement, Environmental Impact Statement: Proposed Revisions to the Permanent Program Regulations Implementing the Surface Mining Control and Reclamation Act of 1977 Concerning the Creation and Disposal of Excess Spoil and Coal Mine Waste and Stream Buffer Zones, OSM-EIS-34 (2008). We also gathered background data on valley fills approved in the four states from January 1, 2000, through various dates in mid-2008 to mid-2009. The data from Kentucky and West Virginia are drawn from GAO-10-21, Surface Coal Mining: Characteristics of Mining in Mountainous Areas of Kentucky and West Virginia. Neither Virginia nor Tennessee maintained valley fill data in electronic form. State officials provided fill data for Virginia and OSM officials provided fill data for Tennessee by reviewing hardcopy permits issued since 2000. We interviewed state and OSM officials about the reliability of the data they provided and compared their results to OSM’s 2008 environmental impact statement on excess spoil and stream buffer zones. We determined the data were sufficiently reliable for our purposes.

To address each of the objectives, we obtained documents from and interviewed officials at several federal and state agencies. These included officials in the Department of the Interior’s OSM in (1) headquarters; (2) Appalachian Regional Office in Pittsburgh, Pennsylvania; and (3) field offices in Lexington, Kentucky; Knoxville, Tennessee; Charleston, West Virginia; and Big Stone Gap, Virginia. The OSM field office in Knoxville manages the mining program in Tennessee. We also interviewed and obtained information from officials in the Environmental Protection Agency (EPA) headquarters and regional offices in Philadelphia, Pennsylvania (Region 3) and Atlanta, Georgia (Region 4); officials in the U.S. Geological Survey; and officials in the Corps of Engineers headquarters and district offices in Louisville, Kentucky; Pittsburgh, Pennsylvania; Nashville, Tennessee; Norfolk, Virginia, and Huntington, West Virginia. Those five district offices are responsible for issuing and enforcing the Clean Water Act section 404 permits to surface mines in the states of Kentucky, Tennessee, Virginia, and West Virginia. Moreover, we interviewed and obtained information from the following state agencies in the four states we reviewed: the Kentucky Department for Natural Resources; Kentucky Division of Water; Tennessee Department of Environment and Conservation; Virginia Department of Mines, Minerals and Energy; Virginia Department of Environmental Quality; and West Virginia Department of Environmental Protection.

To describe the approaches OSM, the states, and the Corps have taken to obtain financial assurances for surface coal mines with valley fills, we reviewed relevant sections of SMCRA and OSM’s implementing regulations and policy guidance to identify national requirements for financial assurances associated with surface mining reclamation. We also reviewed state mining laws in the three states that have primacy for administering SMCRA—Kentucky, Virginia, and West Virginia—as well as those states’ mining agency implementing regulations and policy guidance, to identify the states’ approaches to financial assurances for surface mining reclamation established in accordance with the federal standards. We also spoke with officials from OSM headquarters, the Appalachian Regional Office, and field offices, as well as officials from the state mining agencies in Kentucky, Virginia, and West Virginia. We spoke with officials from the OSM field office in Knoxville to discuss financial assurances in Tennessee because these officials manage the mining program in that state. We also reviewed section 404 of the Clean Water Act and the Corps’ implementing regulations and policy guidance to identify requirements and policy for financial assurances associated with compensatory mitigation projects. In addition, we contacted Corps officials in the headquarters and the five district offices to identify the extent to which the Corps has included financial assurance requirements in permits it has issued to surface mines for valley fills. We also interviewed officials from the EPA to identify their role and responsibility for overseeing section 404 permits.

To examine the extent to which federal and state agencies monitor and evaluate surface coal mines with valley fills after reclamation and mitigation are complete, we obtained information from and interviewed officials in OSM’s Appalachian Regional Office and field offices, as well as state officials at the mining agencies in Kentucky, Virginia, and West Virginia to identify any routine monitoring and “one-time” evaluations that these agencies have done of mine sites to assess the long-term environmental impact of the reclamation after the SMCRA reclamation bonds have been released. We also interviewed and obtained information from officials in the Corps’ five district offices to identify any routine monitoring the Corps has done of mitigation projects after determining that operators have completed their mitigation obligations or any specific studies of completed surface coal mine mitigation projects. In addition, we interviewed and obtained information from officials in EPA’s Office of Water in headquarters and regions 3 and 4; the U.S. Geological Survey; and state water quality regulators in Kentucky, Tennessee, Virginia, and West Virginia regarding any monitoring or evaluation of the long-term environmental impact of former surface mines with valley fills. Among the 11 federal and state agencies that we interviewed, none replied that they had done routine monitoring of this nature, and most replied that they had not done any “one-time” studies. The few agencies that replied they had done one-time studies referred us primarily to studies completed as part of the 2003 draft multiagency programmatic environmental impact statement (PEIS). OSM’s 2008 final environmental impact statement on proposed regulations for excess spoil management also generally cited the 2003 draft PEIS as a source of information on the environmental impacts of valley fills. The federal and state agencies that collaborated on the draft PEIS conducted or funded more than 30 studies of the impacts of mountaintop mining and associated valley fills and used them as support for evaluating the impacts of various programmatic alternatives. With these facts in mind, we relied heavily on the conclusions that the authors of the draft PEIS drew concerning a number of environmental impacts, including reforestation, water quality and impacts on aquatic organisms, and water flow. We also cited more recent studies provided to us by agency officials, such as a 2008 study by EPA Region 3 on water quality and aquatic organisms near valley fills. Also, during the course of our review, we learned from OSM officials about OSM’s evaluation of mine operators’ compliance with approximate original contour policies in Kentucky, Virginia, and West Virginia. We reported the results of those evaluations because of their relevance to the construction of valley fills.

To examine the federal laws agencies may use, and have used, to address any latent environmental problems associated with surface mines with valley fills that may occur after SMCRA or Clean Water Act financial assurances have expired, we analyzed SMCRA and the Clean Water Act and identified provisions that provide mining agencies and water quality regulators authority to address environmental problems on a former mine site after SCMRA bonds have been released. We also interviewed officials from OSM, state mining agencies, and state water quality regulators in the four states we reviewed to learn the extent to which these authorities have been used in the past to address any environmental problems that may have occurred on or caused by a former mine site with valley fills. In addition, we analyzed two other federal environmental laws—the Comprehensive Environmental Response Compensation and Liability Act (CERCLA, also known as Superfund) and the Resource Conservation and Recovery Act (RCRA)—to identify provisions that may authorize or require EPA to address environmental problems that may occur on or be caused by a former surface mine after bonds have been released. We interviewed officials from EPA’s Office of Solid Waste and Emergency Response to learn if CERCLA had been used in the past in that context. We also we reviewed an EPA regulatory determination published in 2000 on whether regulation of coal combustion residue was warranted under the hazardous substance provisions of RCRA.

We conducted this engagement from October 2008 to January 2010 in accordance with all sections of GAO’s Quality Assurance Framework that are relevant to our objectives. The framework requires that we plan and perform the engagement to obtain sufficient and appropriate evidence to meet our stated objectives and to discuss any limitations in our work. We believe that the information and data obtained, and the analysis conducted, provide a reasonable basis for any findings and conclusions in this report.

Appendix II: Selected Surface Mining Control and Reclamation Act Reclamation Standards

The Surface Mining Control and Reclamation Act (SMCRA) requires that mined land be reclaimed consistent with environmental performance standards, including making the land available for post-mining uses. The SMCRA permit process requires operators to submit detailed plans describing the extent of the proposed mining operations and how reclamation will be achieved. In reclaiming the land, operators must comply with regulatory standards that govern, among other things, the final contour of the reclaimed area, the revegetation of reclaimed mine sites, and the quality of water leaving the mine site. This appendix describes these key reclamation standards.

Standards for Approximate Original Contour

In general, mountaintop mine operators are required to return mine sites to their approximate original contour (AOC) unless the operator receives a variance from the regulatory authority. This means that the surface configuration achieved by backfilling and grading of the mined area must closely resemble the general surface configuration of the land prior to mining and blend into and complement the drainage pattern of the surrounding terrain, with all highwalls and spoil piles eliminated.

The Office of Surface Mining (OSM) and the states may grant a variance from the requirement to return the site to AOC—meaning that the land would be left relatively flat—in certain circumstances, including those in which the operator can demonstrate that the site will be suitable for certain post-mining land uses. According to OSM, these variances present an opportunity to create relatively flat, flood-free land capable of supporting economic development. In our recent report on trends in mountaintop mining, we reported that variances from the AOC requirement have been relatively rare in Kentucky and West Virginia.

A purpose of SMCRA is to assure that adequate procedures are undertaken to reclaim surface areas as contemporaneously as possible with the surface coal mining operations. OSM and the states require that backfilling and grading begin within a certain number of days after coal removal in a particular area.

Standards for Revegetation

OSM and state law and regulations for mine reclamation also address how sites are to be revegetated after they have been backfilled and graded. To obtain bond release under SMCRA, mine operators must show successful revegetation 5 full years after the last year of augmented seeding, fertilizing, irrigation, or other work. What is planted depends on the approved post-mining land use, such as forestry or hayland and pasture.

State regulations set forth different requirements for factors including plant species, variety, density, and coverage for different post-mining land uses. The states have standards for the extent of vegetation that must be initially planted and how much must survive in order to receive bond release. For example, West Virginia’s regulations call for mines sites with a forest land post-mining land use to be planted with at least 500 woody plants per acre. This is to include at least 350 trees and 150 shrubs. The state specifies that a least 5 species of trees be used, including at least 3 higher value hardwoods such as oak, ash, or maple. The state also specifies a minimum success standard of at least 450 trees and shrubs per acre and a 70-percent ground cover.

Standards for Water Quality

SMCRA requires that mine operators’ bonds be of an amount sufficient to ensure the completion of the site’s reclamation plan by the regulatory authority, which includes compliance with water quality standards. These standards include those established by EPA or the states under the Clean Water Act and referenced by SMCRA. Each reclamation plan is to include a detailed description of the measures to be taken during the mining and reclamation process to ensure the protection of the quality of surface and ground water systems, both on- and off-site, from adverse effects of the mining and reclamation process. OSM has stated that a reclamation bond may not be released where active or passive water treatment systems are being used to achieve compliance with applicable standards.

SMCRA regulations contain specific water protection requirements. The regulations include requirements 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. The hydrologic balance requirements include standards for water quality and effluent limitations, sediment control, siltation and discharge structures, and activities in or adjacent to perennial or intermittent streams. Permit applicants must submit a probable hydrologic consequences determination with their permit application as well as a hydrologic reclamation plan indicating how any probable hydrologic consequences will be prevented or remediated, including how the general hydrologic balance requirements will be met. In addition, the regulations that address backfilling and grading require operators to cover acid- or toxic-forming materials with a minimum of 4 feet of nontoxic material, or treat the material to neutralize its toxicity in order to prevent water pollution. With regard to excess spoil used as fill material, the regulations require that leachate and surface runoff from the fill will not degrade surface or ground waters or exceed effluent limitations set for iron, manganese, total suspended solids, and pH. The regulations also require that slopes be protected to minimize surface erosion at the site and that the fill be designed using recognized professional standards, certified by a registered professional engineer, and approved by the regulatory authority.

Appendix III: Comments from the Department of the Interior

Appendix IV: Comments from the Department of Defense

The following are GAO’s comments on the letter dated December 15, 2009, from the Assistant Secretary of the Army, Civil Works.

GAO Comments

1. While we appreciate the Army Corps of Engineers’ (Corps) sensitivity to the litigation associated with the Spruce mine, we do not feel that any change to our report is warranted. We do not specifically discuss the litigation, which was brought by environmental groups against the Corps, but rather an ancillary conflict between the Corps and the Environmental Protection Agency (EPA). Our brief discussion of the matter presents both sides of the conflict between EPA and the Corps using the agencies’ own words sourced wholly from publicly available documents and refrains from making any conclusions as to the merits of the case. 2. We disagree with the Corps’ comment that a discussion of projects subject to the enhanced coordination procedure and the Spruce mine are irrelevant to the objectives of our study. Both of these points are relevant to our second objective, which asks us to describe the extent to which federal and state agencies monitor and evaluate the impacts of surface coal mining activities. Both the enhanced coordination procedure and the Spruce mine case provide examples of how federal regulators are using studies that we discuss in the report. Therefore, we did not revise the report in response to this comment.

Appendix V: Comments from the Environmental Protection Agency

Appendix VI: Comments from the Kentucky Department for Natural Resources

The following are GAO’s comments on the letter dated December 17, 2009, from the Commissioner, Department for Natural Resources.

GAO Comments

1. We do not agree that the report misrepresents or sensationalizes the issues; however, we do agree that it is important to be accurate and use correct terminology. Throughout the report we have strived to be accurate and have been careful to consistently and accurately use terms and phrases that are commonly used in regulation or the coal mining literature. In its comment, the state did not provide specific examples of what it believes are inaccurate facts or inappropriate terms. However, subsequent comments from the state referred to our use of the terms mountaintop mining, mountaintop removal mining, valley fills, and hollow fills. We have reviewed our use of these terms throughout the report to ensure that they are used consistently and appropriately. 2. The state is referring to our practice of holding “exit conferences” near the end of our review. Our policy is to provide the agencies with relevant program responsibilities—typically federal agencies but in this case a state agency—with excerpted material from the draft report. We call this document a “statement of facts.” The purpose of the exit conference is to obtain the agency’s input regarding the accuracy of the facts presented. The purpose is not to obtain comments on the entire draft report; that step comes later in the process. Therefore, the statement of facts that we sent to Kentucky contained information describing laws, policies, and conditions that pertained directly to the state. We understand that agencies are likely to have additional comments on the full draft report—as Kentucky did in this instance—but also believe that our process of holding exit conferences to discuss the statement of facts followed by a request for formal comments on the full report is a transparent one. 3. We understand that Kentucky’s regulations define both hollow fills and valley fills, but not all states make this distinction in practice. Federal and state regulations identify different types of fills, including valley fills, head-of-hollow fills, and durable rock fills. These definitions differ in their characteristics, including placement, slope, and material composition. For ease of reading, we refer to all types of fills as valley fills in this report. The term valley fill is not meant to indicate the size of a particular fill or the type of stream affected—ephemeral, intermittent, or perennial. 4. We agree with the state’s specific comment and have clarified the report accordingly. In our discussion of post-mining land use requirements, we are referring specifically to mountaintop removal, one type of mountaintop mining. For further clarity, we have added a footnote that compares the requirements for mountaintop removal to those for steep slope mining, another kind of mountaintop mining. Throughout the rest of the report, however, we continue to use the term mountaintop mining to refer generally to all types of coal mining in mountainous areas. This usage is consistent with our previous report mentioned by the state (GAO-10-21) that was also recently reviewed by state officials. This usage is also consistent with the Environmental Protection Agency’s (EPA) 2003 draft Programmatic Environmental Impact Statement on Mountaintop Mining/Valley Fills in Appalachia. 5. We agree that not all fills approved are ultimately constructed, and make that point in the report. However, we do not believe that our report overstates the miles of buried streams and did not modify the report in response to this comment. The sources for the data that we include in the report are the 2003 draft Programmatic Environmental Impact Statement on mountaintop mining and valley fills and the Office of Surface Mining’s 2008 final environmental impact statement on excess spoil and the stream buffer zone. For example, the 2003 draft statement reported that 724 miles of streams were “directly impacted by valley fills (i.e., covered by fill).” 6. We disagree with the comment. While we understand that some state regulations require termination of jurisdiction at bond release, the federal regulations only state that the relevant regulatory authority may terminate its jurisdiction under the Surface Mining Control and Reclamation Act (SMCRA) at bond release. Therefore, we have not revised the report in response to the comment. 7. We disagree with the comment. SMCRA does not specifically prohibit applicants from obtaining future SMCRA permits if they have previous bond forfeitures. SMCRA generally prohibits applicants from obtaining future permits if they have unabated violations. However, in response to the comment, we have added detail on the state regulations, which do specifically note that bond forfeiture based on violations that are not subsequently corrected disqualify operators from obtaining future permits. 8. We did not modify the report in response to this comment because the background section of the report does include data on the differences in recent surface coal mine production in the four states. Specifically, the report notes that Kentucky produced about 51 million tons while Tennessee produced less than 2 million tons in 2008. 9. This paragraph summarizes the section that follows, and we do not agree that an editorial change is needed. We believe that our description of the Army Corps of Engineers’ practices is accurate on the basis of information obtained from that agency. 10. The citations on which the findings are based are provided later in the body of the report. We did not add citations to this summary paragraph. However, we have deleted the word “tentative” from our discussion of impacts on water flows. We believe that the documents we cite, along with comments we received from the Department of the Interior, support our characterization in the final draft of the report. 11. We do not agree that the EPA statements are largely editorial and made no change to them. We believe that the EPA and U.S. Geological Survey statements on inadequate monitoring are as germane to the purpose of the report as the statements from state agency officials, who believe monitoring is adequate. 12. We have clarified the footnote to indicate that the mix of amphibian and reptile populations was affected by the presence of mining. 13. We have not modified our characterization of the West Virginia Flood Advisory Technical Task Force report because we believe it is an accurate summary of the task force report. However, we have modified the report to include Kentucky’s comment on its regulations related to flood analysis and avoidance. 14. We have added this information to footnote 57.

Appendix VII: Comments from the Virginia Department of Mines, Minerals and Energy

The following are GAO’s comments on the letter dated December 22, 2009, from the Director, Department of Mines, Minerals and Energy.

GAO Comments

1. We do not assume that post-bond release pollution discharges occur below valley fills. In addition to the Pond-Passmore study, our draft report cited the 2003 draft Programmatic Environmental Impact Statement, which concluded that streams below mountaintop mines with valley fills were characterized by contamination. We agree that the contamination may not necessarily have been post-bond release, and we agree that contamination problems are likely to be site specific, when they occur. We did not revise the report in response to this comment. 2. The focus of this report was surface coal mining and not all activities that may affect water quality. Therefore, while we agree that other land disturbing activities may affect water quality in watersheds with mining, we have not included a discussion of those activities. 3. Points relating to hydrologic balance, such as effluent limitations, are discussed throughout the report in general terms and more specifically in Appendix II. We have added more detail on hydrologic balance requirements to Appendix II in response to this comment. This material is included in the appendix because, while we understand that adherence to regulations designed to protect the hydrologic balance of the mine site during the mining operation may help to minimize water quality issues after bond release, we were asked to discuss mechanisms available to address environmental problems after bond release, when the Surface Mining Control and Reclamation Act’s hydrologic balance requirements would no longer apply. 4. We have not modified the report in response to the state’s comment because we did not analyze the use of passive wetlands, or other methods, for treating water after bond release. 5. The state is correct that the 2003 draft programmatic environmental impact statement was finalized in October 2005, and we have revised footnote 2 to make that clear. The final version of the statement incorporated the 2003 draft statement by reference. However, the 2005 final statement did not contain all of the material found in the draft statement. For example, studies of the impacts of mountaintop mining were in the appendixes of the 2003 draft, but not the 2005 final statement. Therefore, we believe that it is preferable to refer the readers of our report to the 2003 draft statement instead of the 2005 final statement.

Appendix VIII: Comments from the West Virginia Department of Environmental Protection

The following are GAO’s comments on the letter dated December 22, 2009, from the Deputy Director, Division of Mining and Reclamation.

GAO Comments

1. We agree that mining nationwide has similar potential to impact the environment. We also agree that the Surface Mining Control and Reclamation Act requires financial assurances in all states. However, we were asked to examine financial assurances and activities related to monitoring at coal mines with valley fills. The four states we reviewed have the vast majority of coal mines with valley fills. Therefore, we did not revise the report in response to this comment. 2. Our report notes that the state has made changes to its policies and practices related to reforestation, approximate original contour, and surface water runoff. We did not revise the report in response to this comment. 3. It is correct that we are not making any recommendations regarding the length of the monitoring period before bond release. Our report notes that most, but not all, agencies we contacted, believe that monitoring is adequate. At the same time, there is evidence from some monitoring that environmental problems may occur after bonds have been released. We did not revise the report in response to this comment.

Appendix IX: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, Robin Nazzaro (Director), Andrea Wamstad Brown (Assistant Director), Sherry McDonald (Assistant Director); Ross Campbell, Antoinette Capaccio, Brian Friedman, Brandon Haller, Carol Hernstadt Shulman, and Desiree Thorp made key contributions to this report. Josey Ballenger, Charlie Egan, Carol Kolarik, and Rebecca Shea also contributed to this report.