Hearings and Business Meetings

SD-366 Energy Committee Hearing Room 10:00 AM

Steve Hohmann



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

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


 Concerning Pending Legislation re the
 Abandoned Mine Lands Program


 Before the

 Senate Energy and Natural Resources Committee


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

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

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

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

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

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

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

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

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

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

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

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

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

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

• To confirm recent Congressional intent to eliminate the Rural Abandoned Mine Program (RAMP) under Title IV and to reallocate those moneys to the historic coal production share.  While these moneys would be used primarily to address high priority coal related sites, the states and tribes may coordinate their efforts with the Natural Resources Conservation Service and the local soil and water conservation districts in an attempt to address their concerns as well.
• To assure adequate funding for minimum program (under-funded) states who have consistently received less than their promised share of funding over the past several years, thereby undermining the effectiveness of their AML programs.

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

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

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

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

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

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

 Finally, we trust that any moneys diverted for use by the Combined Benefit Fund (CBF) will be limited to interest on the AML Trust Fund only, and not to the principal.  We believe it is essential that the principal in the Fund be maintained for its intended purposes.  To do otherwise would be to subvert the entire premise of Title IV and to undermine the original intentions of SMCRA’s framers. 
 Mr. Chairman, it is obvious from an assessment of the current inventory of priority 1 and 2 sites that there will not be enough money in the AML Trust Fund to address all of these sites before fee collection is set to expire in June of 2006.  It is even more obvious that, regardless of what the unappropriated balance in the Fund is (currently $1.8 billion) and what future fee collections will add to that balance over the next year, current Congressional appropriations for state and tribal AML program grants are woefully inadequate and are not keeping pace with our ability and desire to address the backlog of old as well as continually developing high priority AML problems.  We are therefore faced with a significant challenge over the next few months — and that is to reconcile all of the various interests and concerns attending the administration of the AML program under Title IV of SMCRA in a way that assures the continuing integrity, credibility and effectiveness of this successful and meaningful program under SMCRA.

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

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

· The unexpended state share balance in the AML Trust Fund should be distributed to all the states and tribes as expeditiously as possible so states and tribes can address existing AML problems before inflationary impacts result in more costly reclamation and thus less reclamation.
· Funding for the “minimum program” states must be restored to the statutorily authorized amount of not less than $2 million annually.

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

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

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

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

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