Mind Boggling Mine Bonding

By Cindy Rank

In the May 2020 issue of The Highlands Voice and again in June we talked a lot about chickens coming home to roost, how the bonding program in West Virginia has been inadequate from the get-go when it was first approved in the early 1980s and how it has only gone from bad to worse over the years with WV Department of Environmental Protection (WVDEP) merely tweaking it in response to public pressure and, more often than not, lawsuits.

Well, there’s no question that those chickens are quickly flocking to the doors of regulatory agencies all across states where coal mining has been the bread and butter of economies large and small.

Here in WV, as recently as March, WVDEP filed an emergency motion in Kanawha Circuit Court to force the coal company ERP Environmental Fund into receivership.  WVDEP documents submitted to support that action clearly indicated that the agency fears the ERP fiasco will lead to the ruination of the bond fund/pool despite a rosier picture painted by a December, 2019 Special Reclamation Advisory Council report.

The Federal Surface Mine Control and Reclamation Act (SMCRA) requires states to “promptly notify the Office of Surface Mining (OSMRE) of any significant events or proposed changes which affect the implementation, administration or enforcement of the approved State program. At a minimum, notification shall be required for…(6) Significant changes in funding or budgeting relative to the approved program.”

West Virginia never notified OSMRE of its dire assessment of the Bond fund upon the failure of ERP. In fact, the agency’s response to a Notice of Intent to sue (NOI) for its failure to notify OSMRE, it denied that solvency was an issue.

West Virginia Highlands Conservancy (WVHC) Ohio Valley Environmental Coalition and Sierra Club sent the Notice of Intent on May 8th and have followed up with an official Complaint on July 9, 2020 when neither the state or federal agency had diligently pursued actions to address the violations alleged in the notice letter.

Citing not only the recent ERP situation but also several other threatened insolvencies including Murray Energy, Revelation Energy, and Southeastern Land – companies that hold dozens of permits and whose bonds are woefully inadequate to cover the cost of land reclamation and water treatment, our Complaint asserts the current bonding program is in deep doo-doo.

Even the Special Receiver appointed via WVDEP’s state court action indicated ERP funds are not sufficient for reclamation needed at their mine sites.

Unfortunately, as ERP abandoned its responsibilities, operation also ceased at several of the company’s selenium treatment systems that were installed as a result of court orders we had won in previous lawsuits.

Of course, no one should have the impression that West Virginia is alone in this morass of inadequate bonding programs.  There are at least six nearby states that have adopted a pooling system as part of their coal mine bonding programs. And all of these states are experiencing problems similar to that of West Virginia.

 An interesting article in the July 24, 2020 issue of the Virginia Mercury describes some of the difficulties that state acknowledged years ago. (https://www.virginiamercury.com/2020/07/24/coal-is-in-crisis-can-virginias-pool-bond-system-handle-the-collapse/)

“The program has sufficient resources to withstand the forfeiture of one or two smaller permits,” wrote actuaries in a 2012 report commissioned by Virginia’s Department of Mines, Minerals and Energy. “The more significant risk to the Fund is from the exposure to companies with multiple permits and possibly from larger parent companies should they forfeit multiple permits simultaneously.”

Favored by the mining industry, the bond pool system allows a company to put up a smaller bond that would partially cover reclamation costs as long as it also paid into a pool of funds that the state could draw from in the event that a mine failed.

“When SMCRA was passed, the system made sense” said Joe Pizarchik, who between 2009 and 2017 served as the longest-running director of the U.S. Office of Surface Mining and Reclamation “we didn’t have the consolidation and the huge monolithic companies that we have now.” In the Appalachian basin, which has long been home to a patchwork of mines — unlike the larger but less numerous operations found in the West — the bond pool seemed to offer a solution that put less pressure on business while spreading risk out.

Still, said Pizarchik, the longer state governments and regulators delay in grappling with the problem, “the more severe and dangerous it becomes.”

“Eventually these bond pools are going to fail,” he said. “And when they fail, the state and federal government will probably be sued, and … then the state will have to come up with the money to complete reclamation.”