OSM grants interim approval of reclamation fund tax hike in West Virginia

The U.S. Office of Surface Mining is proposing to approve a change in West Virginia’s often controversial reclamation funding program, a program that is designed to pick up excess mine site reclamation costs when a coal operator goes bankrupt or in another way leaves behind a mess that its own reclamation bonds don’t completely cover.

OSM said in a July 11 Federal Register notice that it is approving, on an interim basis, an amendment to the West Virginia regulatory program under the Surface Mining Control and Reclamation Act of 1977 (SMCRA). West Virginia revised its Surface Coal Mining and Reclamation Act (WVSCMRA) to effect changes concerning the special reclamation tax and apportionment of this tax. This amendment is intended to increase and extend the special reclamation tax. Also, a specific portion of this tax will be allocated to the Special Reclamation Water Trust Fund for the purpose of designing, constructing and maintaining water treatment systems on forfeited mine sites.

“We are approving the reinstatement of the special reclamation tax, its increase to twenty seven and nine-tenths cents per ton of clean coal mined, as well fifteen cents of the amount collected allocated for deposit to the Special Reclamation Water Trust Fund,” said OSM. The tax is on current coal production in West Virginia, with the money going into what amounts to an insurance pool that will cover any operator that goes out of business and lacked enough private reclamation bonding insurance to cover the total reclamation costs.

This interim rule approval is effective July 11. OSM will accept written comments until Aug. 10.

These changes are contained in the state legislature’s Enrolled Senate Bill 579, which implements actuarial recommendations relating to the continuing fiscal viability of the Special Reclamation Fund. It increases the amount of the special reclamation tax to 27.9 cents per ton of clean coal mined. The former, now-being-replaced special reclamation tax, effective as of July 1, 2009, required 14.4 cents per ton of clean coal mined. Critics have often contended this reclamation fund isn’t big enough to take care of all possible needs.

Historically, although not codified, the West Virginia Department of Environmental Protection allocated three cents per ton of clean coal mined to finance the Special Reclamation Water Trust Fund, resulting in a severely underfunded account. It is forecasted that the imposition of the new 15 cents per ton allocation contained in Senate Bill 579 will ease the strain placed on the Fund.

OSM said its interim approval is provided that the special reclamation tax may not be reduced until the Special Reclamation Fund and the Special Reclamation Water Trust Fund have enough money to meet reclamation responsibilities. Since these revisions increase revenues to the state’s alternative bonding system, OSM found that they do not render the state’s program less effective than federal regulations. Following its review of the comments received, OSM will issue a final rule. OSM said interim approval is appropriate now, without public comment, because it would delay the start of the collection of the extra tax money. The revised state law that mandates this tax became effective July 1.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.