Background

Note before you read:  The accompanying story is only the latest chapter in a controversy that has been going on since dinosaurs roamed the earth, more or less.  For decades the West Virginia Highlands Conservancy has been saying that the system West Virginia uses to assure that coal mines are reclaimed is inadequate.  The Highlands Voice has had several stories describing the system.  If you already know how it works, skip this story.

The 1977 Surface Mining Control and Reclamation Act (SMCRA) included provisions that required companies to post a bond sufficient to complete reclamation if the company couldn’t or wouldn’t meet reclamation obligations. 

West Virginia met this requirement through an ‘alternative bonding system.’  Under this system, companies would post a flat per acre fee which was designed to be relatively low.  The bonds were always designed to be inadequate to do the reclamation.  At least in theory, these inadequate bonds would be sufficient because West Virginia had its Special Reclamation Fund.  All coal companies would pay into this fund based upon the tons of coal they produced.  If a company went under or disappeared, the Department of Environmental Protection could forfeit the inadequate bond and then take whatever it needed from the Special Reclamation Fund to pay the rest of the cost of reclamation.

For example, consider a company that had posted a $5,000 per acre bond, disappeared and left unfinished reclamation work that would take $8,000 per acre.  The Department of Environmental Protection would forfeit the $5,000 per acre bond and then take the additional $3,000 per acre from the Special Reclamation Fund.

This system only worked in theory.  In actual practice, the rate at which companies pay into the Special Reclamation Fund has always been too low to fund all the reclamation at bond forfeiture sites. 

The Department of Environmental Protection has made it possible for the Special Reclamation Fund to limp along using various techniques.  Sometimes it would do inadequate or incomplete reclamation.  Occasionally it would stretch out the Fund’s obligations by pretending that a mine was only temporarily idle instead of deserted and ready for reclamation, paid for by the Fund.  Mostly they kept their fingers crossed that they wouldn’t have to make several large payments from the Fund at the same time.

The spectre that has always hung over the Special Reclamation Fund is the possibility that a big operation will fail and the Fund will have to reclaim several large mines.  So long as the mines the Department of Environmental Protection was reclaiming were small, it could juggle its obligations, delay some reclamation, etc. and keep the Fund going.  If big mines started to go belly up, no amount of juggling could cover the Fund’s insolvency.

Now that is happening.  The accompanying story is about the Department of Environmental Protection’s actions to deal with a large mining company going belly up and whether those actions are adequate.

By John McFerrin

            The United States District Court for the Southern District of West Virginia has refused to dismiss an action by the West Virginia Highlands Conservancy, the Sierra Club, and the Ohio Valley Environmental Coalition that alleges that the West Virginia Department of Environmental Protection failed to notify the federal Office of Surface Mining of changes in the system that West Virginia uses to pay for the reclamation of mines whose owners or operators can’t or won’t do so.

            In isolation, this sounds technical and boring.  Technical and boring as it sounds it is important because it is another chapter in an ongoing effort to answer this question:  now that the coal industry is declining, how are we to pay for the environmental messes left behind?

How is the coal industry regulated

            The federal Surface Coal Mining and Reclamation Act establishes standards for all parts of coal mining, including mining practices, reclamation once the mine is over, and a bonding system for paying for any reclamation that is not completed.  

States have the option of either sitting back and letting the federal Office of Surface Mining regulate mining in their state or coming up with their own regulatory program.  West Virginia chose to enact its own program and, in 1981, it was approved by the Office of Surface Mining as being as effective as the federal program.  Once this happens, the Office of Surface Mining is just supposed to provide oversight, making sure that West Virginia is carrying out its regulatory program.

The duty that is relevant in this case is that West Virginia has an obligation to tell the Office of Surface Mining when it makes a change in its program.  This makes it possible for the Office of Surface Mining to provide proper oversight.

What happened here

            The story really starts decades ago when West Virginia adopted a policy of requiring inadequate performance bonds and not making sure that its Special Reclamation Fund was properly funded.  See the accompanying Background story for more about that.

            The more immediate start was in March, 2020, when the West Virginia Department of Environmental Protection determined that it had to do something about ERP Environmental Inc.’s operations.  Its concerns were justified.  At the time ERP had over one hundred mining permits issued by the Department of Environmental Protection.  It had laid off all of its employees.  Since 2015 the Department had issued has issued 160 notices of violation against ERP, 118 failure to abate cessation orders, and 41 orders to show cause why relevant ERP permits should not be revoked.  This is all according to evidence presented by the Department.  For a little more insight into how ERP got into this mess, see the story “Bonding: Are the chickens finally coming home to roost?” in the May, 2020, issue of The Highlands Voice.

            Fixing this mess would not be cheap.  The Department estimated that it would take $230 million to do the reclamation.  In theory, at least, this sum could be paid by the performance bonds that ERP had posted.  If that was not enough, the Special Reclamation Fund would pick up the rest.

            Unfortunately, the bonding and Special Reclamation Fund only work in theory.  ERP only had $115 million in bonds. 

            In the Department’s judgment, forfeiting all $115 million in bonds all at once might overwhelm the insurers who issued them.  Imposing the remaining liability on the Special Reclamation Fund would swamp the Fund.  Even if the Fund had enough money (which it doesn’t) it doesn’t have the staff or resources to oversee a reclamation operation of this size.

            This left the Department with a difficulty:  huge reclamation responsibilities, not enough money, and a system that was supposed to take care of such a situation incapable of doing so. It responded by asking a court to appoint a receiver to take over ERP’s operations and do what it could to spend money and clean up ERP’s mess.

            This is where the West Virginia Highlands Conservancy, the Sierra Club, and the Ohio Valley Environmental Coalition come in.  West Virginia’s mine regulatory program was approved the federal Office of Surface Mining.  The way the groups saw it, this new approach to funding reclamation was not at all what the Office of Surface Mining approved.  West Virginia has an obligation to tell the Office of Surface Mining when it made a change to its program, something it had not done.  For more background, leading up to the decision that is the focus of this story, see the August, 2020, issue of The Highlands Voice.

            The groups sued the West Virginia Department of Environmental Protection, seeking to require that it inform the Office of Surface Mining of this change in its regulatory program.  Formally informing the Office of Surface Mining would probably result in its participation in the overall effort to fix this problem.  The Department responded by moving to dismiss, arguing for various technical reasons that the suit was improper.

            In what just happened, the District Court denied the motion to dismiss.  This means that the suit can go forward and the parties can delve more deeply into the problems with the Special Reclamation Fund.

This is not like some courtroom dramas where there is a decision, things are resolved, everybody cheers, and that’s that.  We are barely past the opening credits in a drama tentatively entitled How Do We Make Up for Years of Neglect of the Financial Obligations of the Mining Industry and Who Will Be Left Holding the Bag if We Don’t?   Most disaster movies have short, punchy titles: Twister, Armageddon, Contagion, San Andreas, Titanic…  If this drama is ever to make it to the big screen it will need a better title.

            Punchy title or not, this drama will continue to play out.  Stay tuned.