Senators question Interior Secretary on coal bonding issue

U.S. Senator Maria Cantwell, D-Wash., ranking member of the Senate Energy and Natural Resources Committee, on Feb. 23 questioned Interior Secretary Sally Jewell about self-bonding of coal companies and reforms to the federal coal leasing program.

Jewell that day testified before the committee regarding the Interior Department’s budget request for Fiscal Year 2017.

In the 1970s, Congress passed legislation requiring coal companies to ensure that they could cover the cost of reclamation. That law provided the Interior Department and its Office of Surface Mining with the option to allow coal companies to waive out of this requirement and to “self-bond,” or assure the agency that they have sufficient funds themselves to cover reclamation costs.

With several large coal companies filing for bankruptcy lately, like Alpha Natural Resources and Arch Coal, Cantwell said it is increasingly likely that companies will be unable to cover their reclamation costs and shift their risks to the taxpayers. Cantwell urged that the Interior Department end the practice of self-bonding. Cantwell stated that similar steps have been taking in hardrock (non-coal) mining to end the practice of self-bonding.

Cantwell also said she supports “taking a long-term, forward-looking approach to responsible energy development on public lands, and their related climate effects,” as the Interior Department is doing. Jewell in January required Interior’s Bureau of Land management to undertake a Programmatic Environmental Impact Statement for the coal leasing program that considers the climate impacts of burning coal mined from federal lands.

During the hearing, several Republicans expressed concern about the pause on new leasing activities during this environmental review process, but Cantwell responded that five previous administrations – including four Republican administrations – had put in place leasing moratoria in the past.

Sen. John Barrasso, R-Wyo. who represents the nation’s largest coal-producing state, questioned Jewell at the hearing, stating: “Madame Secretary, over the last year, you have repeatedly questioned whether American taxpayers are receiving a fair return on coal leased by the federal government.  Your agency is now in the process of considering whether to increase royalty rates on coal. And I’m having a difficult time understanding why the agency is taking this step because over the last three years, the demand for federal coal has collapsed.  Since 2012, the amount of coal that the federal government has leased is down 95 percent. So that amount is down by 95 percent and prior to coming to the Department of Interior, you served as the Chief Executive Officer of REI, a retailer of sporting goods.  I know you are familiar with basic economics. Economics 101 says you shouldn’t raise prices on a product when demand for that product is collapsing. So given that demand for federal coal is down by 95 percent, do you really believe it is reasonable to increase the royalty rates on coal?”

Barrasso added: “But doesn’t it seem to you that if the demand goes to zero, that the revenue coming in is going to go to zero as well for the government? So in fact you’re actually going to get less revenue, higher royalty rates are going to reduce demand. The revenue generated from coal is going to continue to go down.  I mean this is why the environmentalists have aggressively lobbied you to raise royalty rates on coal—to kill coal. They know it will kill coal production. So if you’re really willing to be honest with Congress, you’d admit that here today.”

Sen. Steve Daines, R-Montana, who represents another major coal-producing state, said: “In Montana, we do see the moratorium on coal leasing as a direct assault on our state. Our state relies on production of coal, including federal coal, to support our state’s essential services. Coal production creates good-paying union and tribal jobs and affordable electricity prices. Yet, this administration seems committed to taking that lifeline away – combined with the EPA Power Plan, and now with this moratorium on the coal leasing program it’s creating a significant problem for Montana – in fact, a crisis.”

Excerpts from Jewell’s written testimony about budget proposals related to coal include:

  • POWER+ Accelerate AML Distribution for Mine Cleanup and Economic Recovery – “The budget proposes to allocate a portion of the remaining unappropriated balance of the Abandoned Mine Lands Fund to target the cleanup and redevelopment of AML sites and AML coal mine polluted waters in a manner that facilitates sustainable revitalization in economically depressed coalfield communities. The proposal will provide $1.0 billion over five years to States based on AML program and economic eligibility factors—such as the unemployment rate of coal mining regions—and remaining priority coal problems, including abandoned mine drainage, where reclamation linked to job creating economic development strategies will help revitalize impacted communities.”
  • United Mineworkers of America Pension Reform – “The budget proposes to better provide for retired coal miners and their families by revising the formula for general fund payments to the 1993 UMWA Health Benefit Plan. The new formula will consider all beneficiaries enrolled in the plan as of enactment, as well as those retirees whose health benefits were denied or reduced as the result of a bituminous coal industry bankruptcy proceeding commenced in 2012. Additionally, the proposal will transfer funds through the Pension Benefit Guaranty Corporation to the trustees of the 1974 UMWA Pension Plan to ensure the plan’s long-term solvency. The plan, which covers more than 100,000 mineworkers, is underfunded and approaching insolvency. The new formula will provide an additional $375.0 million to the UMWA in 2017 and $4.2 billion over 10 years.”
  • Return Coal Abandoned Mine Land Reclamation Fees to Historic Levels – “The budget proposes legislation to modify the 2006 amendments to the Surface Mining Control and Reclamation Act, which lowered the per-ton coal fee companies pay into the AML Fund. The proposal would return the current fee of 28 cents per ton of surface mined coal to 35 cents a ton, the same level companies paid prior to the 2006 fee reduction. The additional revenue, estimated at $258 million over ten years, will be used to reclaim high priority abandoned coal mines and reduce a portion of the estimated $6.0 billion needed to address remaining dangerous coal AML sites nationwide.”
  • Office of Surface Mining Reclamation and Enforcement Budget – “The 2017 budget request is $157.9 million, $82.6 million below the 2016 enacted level. The 2017 budget for Regulation and Technology is $127.6 million, $4.3 million above 2016. The request includes $10.5 million, $1.8 million above 2016, to improve implementation of existing laws and support State and tribal programs. The 2017 budget includes $65.5 million for State and Tribal regulatory grants, this level of funding supports State requirements. The budget includes program increases of $2.5 million to advance the Bureau’s GeoMine Project; $1.2 million for applied science to conduct studies to advance technologies and practices specific to coal mined sites for more comprehensive ecosystem restoration; $1.0 million to expand the use of reforestation techniques in coal mine reclamation and provide opportunities for youth and community engagement; $2.3 million to support Technical Assistance; and $1.6 million for National Environment Policy Act compliance document preparation, legal review, and program monitoring. The 2017 budget for the Abandoned Mine Reclamation Fund is $30.4 million, $86.9 million below 2016. The 2016 enacted level included a $90.0 million increase for grants to three States for the reclamation of abandoned mine lands in conjunction with economic and community development activities. The 2017 budget proposes a broader legislative effort to support reclamation and economic and community development as part of the Administration’s POWER+ Plan. POWER + would provide $200 million per year to target the cleanup and redevelopment of AML sites and AML coal mine polluted waters in a manner that facilitates sustainable revitalization in economically depressed coalfield communities. The budget includes a $1.5 million program increase for technical assistance to States, Tribes, and communities to address AML technological advances and issues for AML site reclamation. The budget also includes program increases of $525,000 for applied science studies pertaining to abandoned mines, $799,000 to enhance and expedite current OSMRE efforts in digitizing underground mine maps, and $287,000 for support within the Office of the Solicitor.”
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.