West Virginia environmental regulators have proposed a change to their financially strained mine reclamation program as required by the feds after the state failed to ensure accurate estimations of all outstanding reclamation obligations on active permits.
The West Virginia Department of Environmental Protection’s proposal is to develop and maintain a database to track existing reclamation liabilities, including water treatment. The information would be updated at a frequency that actuarial studies are informed by current data, according to the proposal.
The proposal comes after the Office of Surface Mining Reclamation and Enforcement in August instructed the agency to submit an amendment to its reclamation program within 60 days.
Glenda Owens, the office’s deputy director, said in an Aug. 23 letter to DEP Secretary Harold Ward that the office had determined through a joint review with the department that the program “has not taken sufficient steps” to make sure it’s estimating reclamation obligations correctly.
Ward submitted the proposed change in an Oct. 18 letter to Owens in which he said that his agency must first seek approval for the proposal from the Governor’s Office. Upon approval, Ward said, the program amendment will be introduced as a bill in the state Legislature when the 2022 legislative session begins on Jan. 12.
Ward noted in the letter that Owens had asked his agency to propose a plan of action and timetable to get the needed information and make a demonstration regarding reclamation liabilities, the interrelation between penal bonds and the solvency of the state’s financial assurance program.
“WVDEP is currently working with staff from OSMRE to address these very topics,” Ward wrote, adding that a work plan had been drafted and the DEP’s proposed edits were under the federal office’s review.
OSMRE spokesman Francis Piccoli said Friday that the office has received a description of an amendment with a timetable for enactment consistent with established state procedures.
Piccoli declined to comment further, noting that the matter is still a subject of litigation.
Owens had noted in her Aug. 23 letter to Ward that such a failure could lead to unfunded environmental liabilities not discovered until after a permittee forfeiture. Owens cited a report released in June by the West Virginia Legislative Auditor’s Office Post Audit Division that warned state mine cleanup funds are nearing insolvency.
The Post Audit Division report found the department has failed to comply with state and federal law in reclamation program oversight, resulting in missed opportunities to financially shore up a program that will need hundreds of millions of dollars to reclaim permit sites under federal regulations.
Liabilities for permits issued before July 2019 will total nearly $500 million over the next 20 years, according to an actuary for the state’s reclamation fund advisory council. That council was itself created two decades ago in response to the OSMRE threatening a partial takeover of the state’s reclamation program over liability estimation concerns.
State code already requires the DEP to conduct formal actuarial studies every two years and conduct informal reviews annually on its Special Reclamation Fund and Special Reclamation Water Trust Fund.
The former fund is supported mainly by a 27.9-cent tax on every short ton of coal produced in the state. The latter fund was created in 2008 to ensure a dependable source of capital to reclaim and restore water treatment systems on forfeited sites.
But state environmental regulators aren’t doing enough to hold coal companies accountable for reclamation liabilities, according to auditors.
Coal companies holding inactive permits are required to maintain bonds equal to estimated reclamation costs, but the DEP doesn’t enforce the stipulation, according to auditors. The agency accepts awards that reduce coal companies’ bonding amounts at the reclamation fund’s expense. The DEP also has ignored its own policy by approving permit applications for companies with reclamation tax delinquencies, auditors said.
Current bond limits aren’t enough to cover the escalating cost of reclamation, placing state reclamation funding at risk of insolvency, the audit said. There is no sign of contingency plans if funds become insolvent, according to the audit.
Insolvency could result in the OSMRE revoking its approval for West Virginia to adjust its surface coal mining program and pass state-specific legislation, the audit cautioned.
Both the OSMRE and the DEP have moved toward greater oversight of West Virginia’s mine reclamation program after lawsuits from environmental groups.
The OSMRE’s August letter to the DEP followed a federal lawsuit that the Ohio Valley Environmental Coalition, the West Virginia Highlands Conservancy and the Sierra Club filed in May saying the office had failed to require more stringent requirements for the state’s program that would ensure coal companies fully fund reclamation bonds.
The still unresolved lawsuit alleges that the federal office should have taken action toward stronger requirements for the program after the DEP notified the office of a significant change in the state’s reclamation program in December.
The DEP did so after the same three environmental groups sued the agency in federal court in July 2020, arguing that the agency should have informed the OSMRE that some permit holders had or would become insolvent after the agency reported the costs of reclaiming and remediating sites left behind by a shuttered coal company totaled more than $230 million.
In March 2020, the department sued in Kanawha County Circuit Court to appoint a special receiver to assume the responsibilities of ERP Environmental Fund Inc., a company that acquired more than 100 mining permits after Patriot Coal Corp.’s bankruptcy in 2015.
ERP laid off all its employees and management, as of March 2020, and ceased operations, according to the department’s motion.
The agency said in its circuit court lawsuit that the state Special Reclamation Fund would assume responsibility for reclaiming and remediating all of ERP’s mining sites, the environmental groups’ complaint says. That could potentially “overwhelm the fund both financially and administratively,” with many of ERP’s sites “expected to begin to threaten imminent and identifiable harm to the environment and the public health and safety,” according to the complaint.
The three environmentalist groups dropped their lawsuit on Dec. 31, a day after the department notified the OSMRE of a “significant event” affecting the implementation or enforcement of its bonding program, as required by federal law, related to the ERP insolvency.
The Sierra Club made it clear in a statement Tuesday that it isn’t satisfied with the DEP’s response.
“The DEP’s response to OSMRE makes clear that the agency is continuing in its refusal to recognize the threat to communities posed by unreclaimed coal mines and the lack of adequate funding in the Special Reclamation Fund bond pool,” Jim Kotcon, conservation chair of the West Virginia chapter of the Sierra Club, said in a statement. “The lack of detail in DEP’s submission does not give us confidence that it will meet SMCRA’s requirements or address the longstanding deficiency in the Special Reclamation Fund.”
West Virginia, Kentucky, Ohio and Virginia allow state pool bonds in which mining permittees have permit-specific bonds but also pay fees into a state pool, holding permit-specific bonds at a lower amount than would be required by the full-cost bonding required in states like Alabama, Pennsylvania and Tennessee.
The database that the DEP has proposed to the OSMRE would track reclamation liabilities at all coal mining operations in the state that were permitted after Aug. 3, 1977, the date that the Surface Mining Reclamation and Enforcement Act became law. The legislation established a regulatory program to ensure that surface coal mining operations initiated or in existence after that date are reclaimed properly.
Matthew Hepler, environmental scientist with Appalachian Voices, an environmental group not involved in the lawsuits, welcomed the DEP’s proposal.
Hepler said that, while it has been relatively easy to get bonding information from the state permitting office, it has been more difficult to get reliable permit-specific data on actual mine reclamation liability.
“[T]his proposed program change will help address that and provide clarity on the status of the West Virginia bonding program,” Hepler said in an email.
But Hepler called the state of reclamation bonding in West Virginia “dismal.”
“The alternative bonding systems, such as pool bonding, were designed for individual mine failures and not the stress of an entire declining industry,” Hepler said.