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After a 75-minute floor debate, the West Virginia House of Delegates passed a bill Friday that would set up a mining mutual insurance company with $50 million in taxpayer money to provide alternative bonding for coal mine operators.

Led in sponsorship by Senate President Craig Blair, R-Berkeley, Senate Bill 1 would create a private, nonstock mining mutual insurance company to attempt to protect the state’s mine cleanup fund, the Special Reclamation Fund, from further financial strain.

Blair has argued that the bill would help guard against a potential spike in bankruptcies that leave the fund — and state taxpayers — on the hook for coal companies’ unfulfilled mine reclamation obligations.

But opponents of the bill on the House floor Friday argued the bill would unfairly burden taxpayers while failing to address long-term issues behind potential state reclamation liabilities that eventually could cost the state billions of dollars.

The House approved SB 1 in a 61-36 vote.

Delegate Evan Hansen, D-Monongalia, predicted the company would attract high-risk companies that have struggled to secure bonds elsewhere, increasing the likelihood that the state would have to contribute more taxpayer money to the fund.

SB 1 states that the company would start up with $50 million in funds specified by the Department of Environmental Protection.

But DEP officials have said throughout SB 1’s movement toward passage that the agency does not have the funding the legislation calls for to launch the insurance company.

The budget bill passed by the Senate Friday includes a $50 million transfer from surplus monies in the state’s general revenue fund to a fund for the mining mutual insurance company.

The House in a 77-23 vote rejected an amendment offered by Hansen that would have required that company funds used by mine operators be paid back to the state.

The $50 million deposit would be considered a noninterest loan in SB 1 as passed by the House. House Energy and Manufacturing Committee counsel Robert Akers previously said the state would be paid back in reduced reclamation liabilities rather than money given that the $50 million “shall be paid back as credits as reclamation activities are accomplished.”

But champions of the bill argued that bill references to funds to be used as a “surplus note” meant the money must be repaid.

The bill drew criticism from some delegates for allowing the company to sell insurance bonds outside to mine operators outside of West Virginia.

“[That’s] $50 million of taxpayer money that theoretically could be used only for mine situations outside the state of West Virginia,” Garcia said.

The bill’s backers said the new company would be similar to medical malpractice and workers’ compensation mutual insurance companies the state established in the 2000s.

Assistant Majority Whip Larry Pack, R-Kanawha, took issue with that comparison.

“These bonds are priced based on your financial solvency,” Pack said. “ … That’s not how the medical malpractice market works. It’s not how the workers’ comp market works.”

Opponents of the bill voiced concerns that the mining mutual insurance company would destabilize the private bond market, potentially making it harder rather than easier to for companies to obtain bonds.

Much of the floor debate over Senate Bill 1 focused on a report released in June by the West Virginia Legislative Auditor’s Office Post Audit Division that warned that state mine cleanup funds are nearing insolvency.

SB 1 does not implement any of the report’s recommendations for shoring up the state’s mine cleanup funding.

The report noted past annual reports from the state Special Reclamation Fund Advisory Council suggesting that the Legislature form a panel to examine elements of state code resulting in “uncontrolled” mine reclamation liabilities.

The audit report found state lawmakers and environmental regulators risk letting West Virginia’s mining reclamation program slip into insolvency through gaping holes in statutory and permitting oversight.

The state’s current per acre coal mining reclamation bond limits may not be enough to guarantee the solvency of the state’s mining reclamation program, the report said.

Rising reclamation costs have devalued permit bonds since the current bonding limits were established by state code in 2001, the report observes, while the cost of reclamation has increased significantly.

Bonds are set between $1,000 and $5,000 per acre.

A study released by the environmental nonprofit Appalachian Voices last year estimated between 31% and 49% of West Virginia’s total reclamation liability is covered by bonds, projecting the state’s total liability could soar as high as $3.56 billion.

But the study defers to the June audit report, which offered the even more daunting estimate that bonds cover only 10% of reclamation costs in West Virginia.

Speaking in favor of the bill, Assistant Majority Whip Daniel Linville, R-Cabell, read a passage from last year’s audit report noting that one company, Indemnity National Insurance Company, holds 67% of the state’s coal mining reclamation bonds alone at $620 million.

“The reality is that we have a significantly larger than $50 million liability,” Linville said.

Linville alluded to the Department of Environmental Protection’s admission in a lawsuit that it filed in March 2020 in Kanawha County Circuit Court against ERP Environmental Fund Inc., a coal mining company, that assuming responsibility for reclaiming and remediating all of ERP’s mining sites could potentially overwhelm the state’s special reclamation fund both financially and administratively.

The department reported that the costs of reclaiming and remediating ERP’s sites totaled more than $230 million. ERP laid off all its employees and management as of March 2020 and ceased operations, leaving its mining sites abandoned and public health and safety threatened, according to the department’s lawsuit to appoint a special receiver to assume ERP’s responsibilities.

The bill now goes back before the House for concurrence after the bill underwent minor changes in the House.

Mike Tony covers energy and the environment. He can be reached at 304-348-1236 or Follow

@Mike__Tony on Twitter.

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