With Coal In Decline, How Will We Pay To Reclaim Abandoned Mine Lands?

Posted on Mon 04/20/2020 by

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By Duggan Flanakin ~

While Congress has focused much of its attention of late on saving the nation from the COVID 19 virus, other critically important legislation has languished in committee. One of those bills, H.R. 4248, is bipartisan legislation, passed via voice vote in the U.S. House on January 15 but not yet taken up by the Senate, that would reauthorize through September 30, 2036, the 1977 Surface Mining Control and Reclamation Act (SMCRA), which sunsets in 2021.

A key element of this legislation is the reauthorization of Abandoned Mine Land (AML) fund, which pays for the cleanup of mine lands abandoned prior to 1977, and which was amended in 1990 to allow funds to reclaim mines abandoned after 1977. The fund is currently financed by fees of 28 cents per ton for surface mined coal, 12 cents per ton for coal mined underground, and 8 cents per ton for lignite. The current fees are 20 percent lower than when the program was first authorized in 1977.

Under the law, 80 percent of AML fees are distributed to states with an approved reclamation program (Pennsylvania and Wyoming get the lion’s share, followed by West Virginia, Kentucky, and Illinois). The other 20 percent goes to the Office of Surface Mining Reclamation and Enforcement (OSMRE) for responding to emergencies such as landslides, land subsidence, and fires, and to carry out high-priority cleanups in states without approved programs. States with approved programs can also use AML funds to establish programs to insure homeowners against land subsidence caused by underground mining.

But here’s the rub.

The emergence of cheap natural gas, combined with environmentalist zeal to move “Beyond Coal,” has significantly reduced domestic use of coal. Coal production in the U.S. has dropped from 636.7 million metric tons (Mmt oil equivalent) in 2006, when the SMCRA was last reauthorized, to just 400.7 Mmt in 2018. That’s a 37 percent decline. Coal exports, too, are falling, with projections that 2020 thermal coal exports will be 18.6 million metric tons lower than in 2018 to just 35.5 million metric tons.

As coal production falls, so do fees paid to the abandoned mine land program. OSMRE Acting Director Lanny Erdos reports that the fund collected $155 million from a fee on coal production in 2019, versus $184 million in 2018. That’s about half of what the OSMRE was collecting a decade ago.

According to the OSMRE, the mining industry has paid about $9.82 billion in fees to fund the AML program and distributed $5.75 billion in grants to states and tribes. Another $1.77 billion has gone for operating expenses and AML emergencies, leaving over $2.3 billion unappropriated. Since 1990, this unappropriated balance has been invested in U.S. Treasury Securities and earned $1.5 billion in interest. And since 1996, almost all of this interest has helped fund health care plans for members of the United Mine Workers of America.

But OSMRE estimates that another $10.1 billion is needed to finish its job. Do the math. Even if the AML fund continues to receive $150 million a year (doubtful with coal production continuing its free fall), only $2.25 billion would be collected over the 15-year life of the reauthorization. Add in the unappropriated balance at you are still $5.5 billion short.

This begs the question: Is the plan to leave half of the unremediated sites as is or to do halfway jobs in cleaning up all of these sites? Or does Congress have a separate plan for coming up with the rest of the money needed to finish the job?

While Congress’s only change to the AML fees has been to lower them, the environmental group Appalachian Voices has proposed that this massive shortfall can be erased through doubling the AML fees through the year 2050 – to 55 cents for surface mined coal, 24 cents for underground coal, and 16 cents for lignite.

This, along with spending the entirety of the current unappropriated balance, would cover the $10.6 billion Appalachian Voices says is needed at the minimum to complete the cleanup program. But even doubling the AML fees, by Appalachian Voices’ accounting, would leave nothing left to cover any ongoing support for the UMWA health care and retirement funds.

Worse, Newsweek reported last October that 11 major coal companies filed for bankruptcy during the past 3 years, leaving wide open the possibility that sufficient fees might never be collected. Compounding the problem, several west coast cities and the entire state of Washington have made coal exports more difficult and more costly, including by blocking plans for coal-export terminals (citing health concerns and pollution risks).

These actions prompted the states of Utah, Montana, and Wyoming to file suit, claiming the bans violate the Interstate Commerce clause of the U.S. Constitution. Nearly all of Utah’s coal is shipped to Japan (whose reliance on coal has increased since the Fukushima nuclear incident) through the port of Richmond, California, whose city council voted for a total ban on coal handling and storage.

Rep. Matt Cartwright (D, PA), lead author of H.R. 4248, says that millions of Americans live less than a mile from an abandoned coal mine. Abandoned mine sites in many cases are contaminating local water supplies, polluting soils, killing wildlife, and sickening humans – and in some cases tempting risk seekers who are injured or even killed while (likely) trespassing.

Maybe there is a better way to approach the cleanup of abandoned mine lands – one that more economically utilizes available resources.

Jonathan Wood, an environmental attorney with the Pacific Legal Foundation and Research Fellow at the Property and Environment Research Center (PERC), has argued that federal regulation complicates abandoned mine cleanups by providing a powerful disincentive for states, local governments, and private groups to assist in the federal effort to clean up the mines.

As Wood explains, environmental regulations make even parties working to clean up these mine sites liable for the sites’ environmental impacts, meaning that no amount of care will protect Good Samaritans from liability should their cleanup efforts fail to end pollution entirely or should a tragic accident occur.

Wood suggests that federal policies should not just protect Good Samaritans from liability but should also actively reward efforts that aid in mine cleanups. Mitigating adverse environmental impacts from defunct mines benefits the federal government and the states and localities, downstream property owners, public land recreationists, conservationists, and everyone.

In Wood’s view, an incentive framework that harnesses markets and allows Good Samaritans to capture a share of the benefits could lead to faster, cheaper cleanups though innovative solutions. Replacing regulatory disincentives with positive incentives could dramatically lower the costs of abandoned mine cleanup as well.

That’s a far better solution than relying on an industry being choked to death by competition for cheaper fuels and by the Beyond Coal movement. Declining coal production levels almost guarantee that the forecast revenues from merely extending the current AML fees or even doubling them will not raise the revenues projected by federal lawmakers.

Duggan Flanakin is the Director of Policy Research at the Committee For A Constructive Tomorrow. A former Senior Fellow with the Texas Public Policy Foundations, Mr. Flanakin authored definitive works on the creation of the Texas Commission on Environmental Quality and on environmental education in Texas.

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