STATEMENT OF JEFFREY D. JARRETT, DIRECTOR
OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT
U.S. DEPARTMENT OF THE INTERIOR
BEFORE THE
SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES 
COMMITTEE ON RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ON H.R. 3778 AND H.R. 3796
MARCH 30, 2004

Madam Chairman and members of the Subcommittee, thank you for the opportunity to participate in this 
hearing and to discuss the important issues raised by the approaching expiration of the Office of Surface 
Mining Reclamation and Enforcement's (OSM's) authority to collect the Abandoned Mine Land (AML) 
fee. 

In particular, I would like to thank Representative Peterson for introducing the Administration's bill, 
H.R. 3778. The Administration's bill seeks to reauthorize OSM's authority to collect the AML fee, set to 
expire on September 30, 2004, and to make positive changes to get this important program back on 
track. 

I would also like to thank you, Madam Chairman, and Representative Rahall for introducing your bill, 
H.R. 3796. We look forward to working with the Congress to reach agreement on the important issues 
surrounding the collection and use of the AML fee.

The Administration believes that the problem of Abandoned Mine Lands is a national problem that 
requires a national solution. 

In the years since it was enacted in 1977, the AML program has been responsible for significant 
reclamation of abandoned coal mine sites and for improving and protecting the lives, health and safety 
of Americans living in the coalfields.  However, that job is not finished. Moreover, an inherent conflict 
in the way the AML program operates makes it unlikely that the current system is even capable of 
finishing the job within the lifetime of anyone living in the coalfields today.

H.R. 3778, the Administration's legislative proposal, will focus more AML funding on the areas most 
damaged by this nation's reliance on coal for industrial development and wartime production, long 
before the establishment of reclamation requirements in the Surface Mining Control and Reclamation 
Act of 1977 (SMCRA).   

Shifting the program's resources based on historic production will allow us to spend the money where 
the problems exist.  By distributing future fees based on need, the Administration's proposal will 
provide a national solution for reducing the current, ongoing threats to the health and safety of millions 
of citizens living, working and recreating in our Nation's coalfields.  

We cannot support the provisions in H.R. 3796 that call for additional funding because they are 
inconsistent with the Administration's budget and program priorities.  Neither can we support the 
allocation provisions because they do not further the goal of expediting cleanup as quickly as those 
provisions contained in H.R. 3778.  In addition, the Administration cannot support creating new 
mandatory spending programs or allocate funds designated for AML cleanup for other purposes.


Background

The Surface Mining Control and Reclamation Act (SMCRA) was enacted by Congress in 1977. Since 
then, the Abandoned Mine Land program has reclaimed thousands of dangerous sites left by abandoned 
coal mines, resulting in increased safety for millions of Americans.  Specifically, more than 260,000 
acres of abandoned coal mine sites have been reclaimed through $3.4 billion in grants to States and 
Tribes under the AML program.  In addition, hazards associated with more than 27,000 open mine 
portals and shafts, 2.9 million feet of dangerous highwalls, and 16,000 acres of dangerous piles and 
embankments have been eliminated and the land has been reclaimed.  Despite these impressive 
accomplishments, $3 billion worth of high priority health and safety problems remain to be reclaimed.   
Even if all collected AML fees and the unappropriated balances of $1.5 billion were used, we would still 
have insufficient funds to address the health and safety-related coal mining problems because of the 
fund's current distribution formula.  Moreover, under the current distribution formula, it would take an 
average of 47 more years to complete reclamation.  As a result, dangerous sites would continue to be a 
threat to life and health for almost another half century.  In some cases, remediation would take nearly a 
century.  

The current allocation system makes it impossible to complete the job of reclamation in the way that 
Congress intended.  The September 30th expiration of the current AML fee collection authority is our 
opportunity to reform that authority and the distribution formula, and put it on track to finish the job of 
reclaiming abandoned coal mine problems.


SMCRA's Fee Allocation Problem

SMCRA requires that all money collected from tonnage fees assessed against industry on current coal 
production ($0.35/surface mined ton; $0.15/deep mined ton; and $0.10/lignite) be deposited into one of 
several accounts established within the AML fund.  Fifty percent (50%) of the fee income generated 
from current coal production in any one state is allocated to an account established for that state.  
Likewise, 50% of the fee income generated from current coal production on Indian lands is allocated to 
a separate account established for the tribe having jurisdiction over such Indian lands.  The funds in 
these state or tribal share accounts can only be used to provide AML grant money to the state or tribe for 
which the account is established.

Twenty percent (20%) of the total fee income is allocated to the "Historic Production Account."  Each 
state or tribe is entitled to a percentage of the annual expenditure from this account in an amount equal 
to its percentage of the nation's total historic coal production -- that is, coal produced prior to 1977.  As 
is the case with state or tribal share money, each state or tribe must follow the priorities established in 
SMCRA in making spending decisions using money from the historic production account.  However, 
unlike the allocation of state or tribal share money, once the state or tribe certifies that all abandoned 
coalmine sites have been reclaimed, it is no longer entitled to further allocations from the historic 
production account.

Ten percent (10%) of the total fee income is allocated to an account for use by the Department of 
Agriculture for administration and operation of its Rural Abandoned Mine Program (RAMP).  

The remaining 20% of the total fee income is allocated to cover Federal operations, including the 
Federal Emergency Program, the Federal high-priority reclamation program, the Clean Streams 
Program, the fee compliance program, and overall program administrative costs.

In the early years of AML program, most of the fees collected went directly to cleaning up abandoned 
coal mine sites.  Some states and tribes with fewer abandoned coal mine sites finished their reclamation 
work relatively soon. However, under current law, those states and tribes are still entitled to receive half 
of the fees collected from coal companies operating in their states.  In the early years of the program this 
didn't cause a considerable problem, because the Eastern states, where 93% hazardous sites are located, 
were also the states where most of the coal was being mined and were, therefore, receiving the majority 
of the AML fees.

However, beginning in the 1980s, a shift occurred whereby the majority of the coal mined in this 
country began coming from mines in Western states.  This shift resulted in the allocation of a large part 
of AML fees to states that have no abandoned coal mine sites left to clean up.  As a result, each year less 
and less money is being spent to reclaim the hundreds of dangerous, life-threatening sites.  Currently, 
only 52% of the money appropriated each year is being used for the primary purpose for which is it 
collected - reclaiming high priority abandoned coal mine sites. That percentage will continue to decline 
each year unless the law is reauthorized and amended to correct this fundamental problem.

The Administration has proposed legislation that accomplishes four primary objectives:

o Extend the authorization of fee collection authority while balancing the interests of all coal 
states and focusing on the need to accelerate the cleanup of dangerous abandoned coal mines 
by directing funds to the highest priority areas so that reclamation can occur at a faster rate, 
thereby removing the risks to those who live, work and recreate in the coalfields as soon as 
possible;

o Honor the commitments made to states and tribes under the current law; 

o Provide additional funding for the 17,000 unassigned beneficiaries of the United Mine 
Workers of America Combined Benefit Fund (CBF) while protecting the integrity of the 
AML fund; and, 

o Provide for enhancements, efficiencies and the effective use of funds.

These objectives recognize the need to strike a balance that addresses both the ongoing problems faced 
by states with high priority coal-related health and safety issues while not placing those states where the 
majority of fees are currently generated at a disadvantage.  
Bill Analysis

A. Changes to the Allocation Formula

HR 3778 would change the current statutory allocation of fee collection which is progressively directing 
funds away from the most serious coal-related problem sites.  All future AML fee collections, plus the 
existing unappropriated balance in the RAMP account, will be directed into a new single account.  
Grants to non-certified states or tribes (those states and tribes that still have unreclaimed coal problems) 
will be distributed from that single account based upon historic production, which is directly related to 
the magnitude of the AML problems.  As a result of these modifications, H.R. 3778 completes the 
reclamation of the highest priority work while avoiding $3.2 billion in collections that would have been 
necessary under current law to achieve the same result.  At the same time, H.R. 3778 will remove more 
people at risk from the dangers of health and safety coal sites (142,000 per year or an increase of 87%).

H.R. 3778 provides that no non-certified state or tribe could receive an annual allocation that would 
exceed 25 percent of the total amount appropriated for those grants each year.  This provision would 
ensure that no one State receives too high a percentage of the grants in any one year.  Any State whose 
allocation would otherwise exceed this cap would recoup the difference in the program's latter years as 
other States and tribes complete their high-priority coal-related projects and are no longer eligible for 
future grants.

Existing state and tribal share accounts will not receive any additional fees collected after September 30, 
2004.  The current unappropriated balance in the state and tribal share accounts will be distributed in one 
of two ways, depending on certification status:  Certified states and tribes would receive the current 
unappropriated balances in their accounts on an accelerated basis in payments spread over ten years (FY 
2005-2014), subject to appropriation.  There would be no restrictions on how these monies are spent, 
apart from a requirement that they be used to address in a timely fashion any newly discovered problems 
related to abandoned coal mines.  Non-certified states and tribes will receive their unappropriated 
balances in annual grants based upon historic production.  If a non-certified state or tribe completes its 
abandoned coal mine reclamation before exhausting the balance in its state share account, it will receive 
the remaining balance of state share funds in equal annual payments through FY 2014.  Non-certified 
states and tribes that exhaust their unappropriated state share balances before completing their 
abandoned coal mine reclamation will continue to receive annual grants from the newly-created single 
account in amounts determined by their historic coal production. 

In contrast to the Administration's proposal, H.R. 3796 would continue to allocate 50% of the fees 
collected to state or tribal share accounts regardless of whether the state or tribe has any unreclaimed 
high priority coal-related AML problems.  In addition, if a certified state has public domain lands 
available for leasing, H.R. 3796 would amend current law to transfer revenues generated by the Mineral 
Leasing Act that currently go to the Treasury, in amount equal to the existing unappropriated balance of 
that state's State-share account. An amount equivalent to the amount provided to the state from Mineral 
Leasing Act revenues would then be debited from that state's State-share account and reassigned to the 
historic production.  As a result, certified states and tribes with leasable public domain lands would 
receive their current unappropriated State- share balance as well as an amount equivalent to their 50% 
State-share distribution going forward.  These mandatory payments of approximately $1 billion over ten 
years would neither be subject to Congressional appropriation nor contribute to our broader objective of 
AML reform.  

B. Elimination of AML funding for the RAMP Program  

H.R. 3778 amends SMCRA to remove the existing authorization of expenditures from the AML fund for 
the Rural Abandoned Mine Program (RAMP) under the jurisdiction of the Secretary of Agriculture.  No 
funds have been appropriated for this program, which reclaimed lower priority abandoned mine land 
(AML) sites, since FY 1995.  Elimination of this authorization would facilitate the redirection of AML 
fund expenditures to high-priority sites.  Accumulated unappropriated balances in the RAMP account 
would be made available for reclamation of high-priority coal-related sites.  

H.R. 3796 also endorses eliminating future allocations to the RAMP fund.  However, it would reassign 
those funds to offsetting any deficit in the net assets of the United Mine Workers of America Combined 
Benefit Fund, rather than making those funds available for its intended purpose of AML reclamation. 

C. AML Reclamation Fee Rates 

H.R. 3778 extends reclamation fee collection for 14 years and modifies reclamation fee rates in an effort 
to closely match anticipated appropriations from the AML fund with anticipated revenues during that 
time.  The proposed changes would maintain the current fee structure while uniformly reducing the fee 
rates by 15 percent for the five years beginning with FY 2005, 20 percent for the next five years, and 25 
percent for the remaining years through September 30, 2018.  Those rates are based on an analysis of 
coal production trends and the resultant impacts on reclamation fee receipts.  The Administration's 
proposed uniform graduated fee reductions make the program revenue neutral and possibly have the 
added benefit of resulting in lower costs to consumers.  The new expiration date reflects the time 
required to collect revenues sufficient to reclaim all outstanding currently inventoried coal-related health 
and safety problem sites within 25 years.  Finally, existing language requiring the Secretary to establish 
a new fee rate after September 30, 2004 based on CBF transfer requirements would be removed.  

H.R. 3796 proposes to extend the fee collection authority for 15 years to 2019.  H.R. 3796 also proposes 
to lower the reclamation fee rates by 7 cents per ton for surface mined coal, 3 cents per ton for 
underground mined coal, and 2 cents per ton for lignite.  This is a reduction overall of 20 percent.  
However, since reclamation would take significantly longer than under H.R. 3778, fee collection 
authority would need to be reauthorized again to raise sufficient revenue to eliminate the AML 
inventory.  

D.   United Mine Workers of America Combined Benefit Fund (CBF)

In the Energy Policy Act of 1992, Congress established the United Mine Workers of America Combined 
Benefit Fund (CBF). The CBF provides health care and death benefits to certain retired union coal 
miners and their dependents and survivors. Approximately 40,000 of the CBF's beneficiaries have been 
"assigned" to responsible mining companies. These companies pay a yearly premium into the CBF on 
behalf of each of their assigned beneficiaries. However, approximately 17,000 additional beneficiaries 
cannot be assigned to any company because neither the original employer nor any other responsible 
company remains in existence.
Under the law creating the CBF, premiums for unassigned beneficiaries are to be assessed equally 
against all of the companies participating in the CBF. To reduce the financial burden on the industry, 
however, Congress mandated the transfer of interest earned on the AML fund to the CBF to defray the 
cost of health care benefits for these unassigned beneficiaries.  Historically, these interest transfers have 
met nearly all of the CBF's unassigned beneficiary premiums. It is our understanding that, until recently, 
no mining companies have had to pay unassigned beneficiary premiums since the CBF was created.

The transfer provision in SMCRA has been interpreted to permit a yearly transfer from the AML Fund 
to the CBF of up to, but not more than, $70 million per year. H.R. 3778 amends SMCRA by adding a 
new provision that governs transfers from the fund to the CBF for health benefits for unassigned 
beneficiaries.  The Administration's bill would replace and improve upon the existing provisions in 
SMCRA by removing the $70 million per year cap, and by making interest credited to the account in 
prior years available.  These measures would protect the integrity of the AML fund while providing 
additional monies to meet CBF needs for unassigned beneficiaries.

H.R. 3796 would require transfer of all interest projected to be "earned and paid to the Combined Fund" 
each fiscal year.  We believe that the authors meant to refer to interest earned and paid to the AML fund, 
not the Combined Fund.  If so, H.R. 3796 would remove the $70 million cap on annual transfers.  It also 
would expand the allowable uses of the transfers to include payment of any deficit in the net assets of 
the CBF, not just expenditures for health care benefits for unassigned beneficiaries.  Both the stranded 
interest and the unappropriated balance of the Rural Abandoned Mine Program (RAMP) allocation 
(currently approximately $302 million) would be available for transfer to the CBF in FY 2004 and future 
years.  This transfer language appears to strike the provision in existing law that limits transfers to the 
amount needed to cover specific CBF expenditures.  H.R. 3796 seemingly requires the transfer of all 
interest and other available funds without limitation.

E. Minimum Program Funding

H.R. 3778 provides that no State or tribe with high-priority problem sites would receive an annual 
allocation of less than $2 million.  This provision would ensure that States and tribes will receive an 
amount conducive to the operation of a viable reclamation program.  

H.R. 3796 requires a minimum annual grant of $2 million for all states and tribes regardless of their 
certification status.  Any shortfalls in appropriations for this purpose are to be made up from the Federal 
share account.  It also adds Tennessee as a minimum state, without regard to the existing SMCRA 
requirement for a state to maintain an active regulatory (Title V) program before it is entitled to receive 
AML grants.  

F. Remining

Both bills extend the remining incentives existing in current law, which provide reduced revegetation 
responsibility periods for remining operations and an exemption from the permit block sanction for 
violations resulting from an unanticipated event or condition on lands eligible for remining.  H.R. 3778 
makes these incentives permanent by removing the expiration date while H.R. 3796 extends the 
expiration date to 2019.  Additionally, H.R. 3778 authorizes the Secretary to adopt other remining 
incentives through the promulgation of regulations, thereby leveraging those funds to achieve more 
reclamation of abandoned mine lands and waters. H.R. 3796 does not provide for the creation of 
additional remining incentives.

G. AML Reclamation Priority 

H.R. 3778 preserves the autonomy of the states and tribes by maintaining the current priority structure 
and requires that expenditures from the AML fund on eligible lands and water for coal-related sites 
reflect the listed priorities in the order stated.  H.R. 3778 focuses on collecting enough money to provide 
each state or tribe with sufficient funds to complete its highest priority AML sites.  The Administration's 
bill will accomplish these objectives by providing funds for all States and tribes to finish in less time 
than under a continuation of the current program: on average 22 years sooner, but in many cases, 
decades sooner.    

H.R. 3796 amends the priority system to eliminate the general welfare component of priorities 1 and 2, 
leaving public health and safety as the only elements of those priorities.  H.R. 3796 also requires that 
priority 3 work be undertaken only in conjunction with a priority 1 or 2 project; eliminates priority 4 
(public facilities); and eliminates priority 5 (development of publicly owned land).  Finally, for State- 
share and historic production grants to non-certified States, H.R. 3796 requires strict adherence to the 
revised priority rankings.  

Both H.R. 3778 and H.R. 3796 remove the existing 30 percent cap on the amount of a State's allocation 
that may be used for replacement of water supplies adversely affected by past coal mining practices.  
This change is consistent with our goal of focusing fund expenditures on high-priority problems.  The 
lack of potable water is one of the most serious problems resulting from past coal mining practices, 
particularly in Appalachia.

H. Emergency Reclamation Program

H.R. 3778 proposes amending the emergency reclamation program for abandoned mine land problems 
that present a danger too great to delay reclamation until funds are available under the standard grant 
application and award process.  H.R. 3778 would revise this section by authorizing the Secretary to 
adopt regulations requiring States to assume responsibility for the emergency reclamation program.  
This change would promote efficiency and eliminate a redundancy in that potential emergencies would 
be investigated only by the State, not by both the OSM and the State, as occurs under the current 
program.  

H.R. 3796 does not alter the existing emergency reclamation program structure.

I. Reclamation Set-Aside Programs

H.R. 3778 revises future reclamation set-aside program provisions to specify that expenditures from 
funds set aside under this program may not begin until the State or tribe is no longer eligible to receive 
an allocation from AML grant appropriations under SMCRA.  The revised date in the Administration's 
proposal is more consistent with the purpose of this set-aside, which is to provide States and tribes with 
a source of funding to address abandoned mine land problems that remain or arise after funds are no 
longer available under SMCRA.  

H.R. 3796 removes the authorization for this set-aside.

Both bills provide that states and tribes can set-aside up to 10% of their historic production grant funds 
in an interest-bearing trust fund for comprehensive abatement and treatment of acid mine drainage in 
qualified hydrologic units.  Both bills provide for simplification and streamlining of the requirements for 
the acid mine drainage treatment trust fund set-aside program, including removal of the requirement for 
Secretarial review and approval of individual treatment plans.  

J. Completion of Coal Reclamation - Certification

H.R. 3778 establishes the conditions under which a State or tribe may certify that it has completed all 
coal-related reclamation of eligible lands and waters.  Under the existing provisions, the State or tribe 
would then be eligible to spend its State share allocation on sites impacted by mining for minerals other 
than coal.  The draft bill would amend this section by revising SMCRA to clarify that certification 
means that all coal-related high priority health, safety and environment reclamation has been achieved.  
This subsection previously did not specify which priorities must have been met.  H.R. 3778 also allows 
the Secretary to make the certification for a State or tribe in which all coal-related reclamation work has 
been completed. 

We are aware of recent information regarding the current status of coal reclamation in Wyoming.  I have 
asked my office to review this information and to report back to me so that we can determine what 
affect, if any, this may have on the reauthorization proposals.

H.R. 3796 maintains current certification procedures.

K. Black Lung Excise Tax Collection and Auditing

H.R. 3778 authorizes the expenditures for collection and audit of the black lung excise tax.  This 
revision would synchronize collections and allow OSM auditors to conduct audits of black lung excise 
tax payments at the same time as they audit payment of reclamation fees under SMCRA.  It would 
promote governmental efficiency, eliminate redundancies, and reduce the reporting and record keeping 
burden on industry.  

H.R. 3796 does not contain a similar provision.


Conclusion

The problems posed by mine sites that were either abandoned or inadequately reclaimed prior to the 
enactment of SMCRA do not lend themselves to easy, overnight solutions.  To the contrary, these long-
standing health and safety problems require legislation that strikes a balance by providing states and 
tribes with the funds needed to complete reclamation, while fulfilling the funding commitments made to 
states and tribes under SMCRA.  This is the inherent tension that currently exists in SMCRA.  We look 
forward to an open and a productive debate to amend and reform OSM's fee collection authority to 
fulfill the mandate of SMCRA to address these high priority healthy and safety concerns in a manner 
that directs the funds to the states and tribes where they are needed.  As noted earlier, the current fee 
collection authority is scheduled to expire in just over six months, on September 30, 2004.  There is 
much work to be done to ensure that reforming the AML fee collection authority, allocation formula, 
and other needed reforms become a reality.    We believe that H.R. 3778 addresses these problems in a 
manner that is fair to all States and supports the Administration's budget and program priorities.  

We stand ready to assist the Committee.  We thank the Committee for this opportunity to present the 
Administration's views on these important legislative proposals and we look forward to working 
together as Congress continues consideration of these important measures.