With over 173,000 acres of unreclaimed mine land in West Virginia, the reclamation process is essential.
More importantly, it is owed to the communities who suffered the negative environmental effects of coal mining. Reclaiming abandoned mines helps improve water quality, revitalize landscapes and create jobs and economic development in coal communities.
And it is not just a good idea, it is the law. The federal Surface Mine Control and Reclamation Act requires the coal companies that profit from the coal pay the cost of reclaiming the land.
Because reclamation occurs after all the profit is taken from a mine, the Reclamation Act requires coal operators to post a bond adequate to cover the cost of reclamation.
In West Virginia, however, the required bond does not cover the cost of reclamation. To cover the shortfall, a “special reclamation fund” was created to cover the cost of reclamation for sites that went bankrupt or forfeited their bonds. The special fund is financed by a tax of 27.9-cents-per-ton of coal mined. As less coal is mined here, reclamation liabilities far exceed the money available in the special fund.
The underbonding of West Virginia reclamation sites and the pending bankruptcy of the special reclamation fund could end up costing state taxpayers hundreds of millions of dollars, even up to $1 billion. So, if mine land reclamation is vital, why is the state of West Virginia putting the reclamation costs on taxpayers and not the coal companies themselves?
In March 2022, the Legislature passed Senate Bill 1, which creates a mining mutual insurance company to provide bonds to failing coal companies that can not otherwise get insured through the private sector. The Legislature provided $50 million in taxpayer money for the new insurance company. This initial earmark is just the beginning in what could be a long-term taxpayer bailout of the coal industry.
As the state faces a continuing economic decline of the coal industry, SB 1 opens the doors to placing this cost on the taxpayer. This is not a viable solution.
A 2021 legislative audit report on the special reclamation fund identified hundreds of millions of dollars in reclamation liabilities. The report showed that the cost of reclamation exceeds $6,000 per acre and the average bond set by the West Virginia Department of Environmental Protection is only $2,882 per acre.
Only 7.6% of total reclamation liabilities is covered by forfeited bonds. Over 90% of reclamation liabilities is covered by the 27.9-cents-per-ton reclamation tax. As mining continues to decline, there will be less money coming and higher reclamation costs.
The report also showed that we have over $500 million in at-risk bonds, but only $190 million in state reclamation funds. Five bonding companies hold 91% of the state’s coal mining reclamation bonds, and 67% of mining bonds are held by a single company in West Virginia, Indemnity National Insurance Co.
The 2021 legislative audit report recommended that bonding rates be increased and limits be imposed on insurer risk or taxpayer liability, but SB 1 did not incorporate any of those recommendations.
The Legislature must raise bond limits for mining bonds and require more stringent bonding authority. A properly regulated free market, with mining companies paying the true cost of their business, would take the liability away from the taxpayers.
