OSM NEWS U. S. Department of the Interior Office of Surface Mining Editor's Note: Jerry Childress (202) 208-7941 EMBARGOED FOR RELEASE Mike Gauldin (202) 208-2565 UNTIL 2:00 P.M. JUNE 29, 2001 OSM NOTIFIES WEST VIRGINIA IMPROVEMENTS MUST BE MADE IN ITS BONDING PROGRAM The U.S. Office of Surface Mining (OSM) today notified West Virginia that it must meet specific requirements and a timetable to bring its bonding program for coal mining permits up to adequate standards or face institution of a partial Federal program to administer that portion of the State's program. Federal regulations require that to be issued a state permit to mine coal, an operator must submit a reclamation plan and post a bond equal to the cost of reclaiming the land after mining is completed. States may adopt an alternative bonding system (ABS), but the system is required to have sufficient funds to complete the reclamation plan if the permittee defaults. The ABS must also provide a substantial economic incentive for the permittee to perform the reclamation. In a letter to Michael O. Callaghan, Secretary of the West Virginia Department of Environmental Protection (DEP), Acting OSM Director Glenda Owens today initiated action that would enable the Secretary of the Interior to partially withdraw State program approval and implement a partial Federal regulatory program if the State does not implement required reforms by the end of the 2002 legislative session. Owens also declined a request by Callaghan for an extension of time before initiating the process. "Regrettably...West Virginia has failed to maintain the adequacy of the ABS that we approved under section 509(c) of the (Surface Mining Control and Reclamation) Act," said Owens. "Because of the lengthy history of these problems and lack of success of earlier resolution efforts, we cannot grant your request for an extension." Owens said the DEP must: o submit to the West Virginia Legislative Rulemaking Review Committee by July 27, 2001, regulatory initiatives to address the State's bonding deficiencies; o simultaneously submit to OSM a copy of these initiatives and any necessary statutory proposals along with a timetable for enactment; and o provide to OSM, within 45 days after the close of the 2002 legislative session, final enacted legislation, signed by the Governor, that fully resolves all outstanding problems with the State's ABS. A joint OSM/State study published in July 2000 estimates the State would need more than 20 years to fund and complete land reclamation on the backlog of existing permits for which bonds have been forfeited. Yearly expenditures to treat water at a small number of forfeiture sites are the primary factor responsible for reducing funds available for this land reclamation. Since that study, an additional 100 bond forfeiture permits with untreated discharges have been documented. OSM estimates the treatment costs for all discharges on forfeited permits will exceed $5 million in annual operating costs and require an additional $16 million in one- time construction costs for treatment facilities. The current bonding system is not adequate to cover these costs. The State's bonding program also does not account for the potential costs for long-term water treatment associated with any future forfeitures. There are more than 350 current permits where operators are treating water. If all these permits were forfeited, the total cost for treatment would be approximately $25 million per year. The State has, since last fall, initiated several preliminary measures to address these problems, including: preparation of an inventory of sites with pollutional discharges; contracting for a study of the feasibility of establishing a trust fund for treatment needs; and proposing bond adjustment measures intended to ensure that the existing ABS reclamation deficit does not become worse. "I realize that these bonding issues predate your appointment as Secretary," Owens wrote to Callaghan. "While much progress has been made in the past year, we share a duty to the people of West Virginia to ensure that sites covered by the ABS are reclaimed in accordance with regulatory program requirements and that any pollutional discharges from those sites are treated in accordance with applicable standards. I hope that we will be able to resolve these issues in a manner that maintains full State primacy for the regulation of surface coal mining and reclamation operations in West Virginia." -OSM- June 29, 2001 Michael O. Callaghan, Secretary West Virginia Department of Environmental Protection 10 McJunkin Road Nitro, West Virginia 25143 Dear Secretary Callaghan: Under 30 CFR 733.12(b), I have an obligation to notify you if I have reason to believe that West Virginia is not effectively implementing, administering, maintaining or enforcing any part of its regulatory program approved under the Surface Mining Control and Reclamation Act of 1977 (SMCRA or the Act). Regrettably, that situation now exists because West Virginia has failed to maintain the adequacy of its alternative bonding system (ABS), which we approved under section 509(c) of the Act. The Federal regulations at 30 CFR 800.11(e) specify that an ABS must (1) have sufficient funds available to complete the reclamation plan for any areas which may be in default at any time, and (2) provide a substantial economic incentive for the permittee to perform the reclamation. Section 22-3-11(c)(2) of the West Virginia Code contains a substantively identical provision. We conditionally approved West Virginia's ABS on January 21, 1981, followed by full approval on March 1, 1983. By letter dated October 1, 1991, we notified the State that a program amendment was necessary because the ABS no longer met the criteria of 30 CFR 800.11(e). Our analysis identified a $6.2 million shortfall in land reclamation needs and a complete lack of funding for abatement or treatment of pollutional discharges from bond forfeiture sites. In 1993, the State submitted program amendments that partially satisfied our concerns. However, we determined that the program amendments would not fully eliminate the ABS reclamation deficit. Accordingly, on October 4, 1995, we required that West Virginia further amend its program. A joint OSM/State study, begun in October 1996 and published in June 1999, estimates that the State will need more than 20 years to fund and complete land reclamation on the backlog of existing bond forfeiture permits. Yearly expenditures to treat water at a small number of bond forfeiture sites are the primary factor responsible for reducing funds available for land reclamation. We have now jointly documented that there are more than 100 additional bond forfeiture sites with untreated pollutional discharges. OSM estimates that the treatment costs for all discharges on forfeited permits will exceed $5 million in annual operating costs and require an additional $16 million in one-time construction costs for treatment facilities. The current bonding system is inadequate to cover these costs. Furthermore, the State's bonding program does not account for the potential costs for long-term water treatment associated with any future forfeitures. There are more than 350 non-forfeited permits where the operators are treating water. If all these permits were forfeited, the total cost for treatment would be approximately $25 million per year. I am encouraged by the fact that you have recently taken or initiated several preliminary measures to address these problems. These measures include preparation of an inventory of active and forfeited sites with pollutional discharges, a contractual study of the feasibility of establishing a trust fund for treatment needs and proposed bond adjustment measures intended to ensure that the existing ABS reclamation deficit does not become worse. Also, by letter dated April 18, 2001, you outlined several additional legislative and regulatory remedies that you plan to pursue. You also requested an extension of existing timetables for resolution of the outstanding issues. Because of the lengthy history of these problems and lack of success of earlier resolution efforts, we are unable, under 30 CFR 732.17(f)(2), to grant your request for a further extension. To ensure final resolution of these longstanding issues, I am initiating action under 30 CFR 733.12(b). Should you fail to take adequate remedial measures, I intend to recommend that the Secretary of the Interior partially withdraw State program approval and implement a partial Federal regulatory program. The rules governing the process under 30 CFR Part 733 provide you an opportunity to pursue appropriate corrective measures. Accordingly, the State must: o submit to the West Virginia Legislative Rulemaking Review Committee by July 27, 2001, the regulatory initiatives you propose to address these problems; o simultaneously submit a copy of these regulatory initiatives and any necessary statutory proprsals to OSM's Charleston Field Office, along with a timetable for enactment; and o within 45 days after the close of the 2002 legislative session, provide the Charleston Field Office with final enacted legislation signed by the Governor that fully resolves all outstanding problems with the ABS. My staff is available to assist you with these efforts. Under 30 CFR 733.12(c), you are entitled to an informal conference to discuss either the facts supporting the assertions contained in this letter, or the timeframe for initiating and completing the necessary remedial measures. You may request a conference no later than August 13, 2001. As provided in 30 CFR 733.12(d) and (e), after the conclusion of the conference or expiration of the time allowed to request a conference, whichever is later, I will reevaluate whether OSM still has reason to believe that West Virginia is not adequately implementing, administering, maintaining or enforcing the bonding provisions of its approved program. If such a basis still exists, I will notify both you and the public and schedule a public hearing to obtain input from other parties. Following the hearing, should I find that the State has failed to take appropriate remedial action, I plan to recommend to the Secretary of the Interior the actions appropriate and necessary to ensure that surface coal mining operations in West Virginia are bonded consistent with SMCRA and its implementing regulations. I realize that these bonding issues predate your appointment as Secretary. While much progress has been made in the past year, we share a duty to the people of West Virginia to ensure that sites covered by the ABS are reclaimed in accordance with regulatory program requirements and that any pollutional discharges from those sites are treated in accordance with applicable standards. I hope that we will be able to resolve these issues in a manner that maintains full State primacy for the regulation of surface coal mining and reclamation operations in West Virginia. Please contact me or Allen D. Klein, Regional Director, Appalachian Regional Coordinating Center, if you need clarification of the issues raised in this letter. You may contact Roger Calhoun, OSM's Charleston Field Office Director, and his staff for any specific assistance you require. Sincerely, /s/ Glenda Owens Acting Director