Facing Federal Action, Kentucky Moves to Increase Reclamation Bonds for Surface Mines

Coal companies will have to pay more to mine coal in Kentucky under new regulationsissued by the Energy and Environment cabinet. The state took action after the federal government threatened to take over the state's surface mining program.When companies begin mining, they're required to give the state a bond that will only be returned if the company reclaims—or restores—the land. If the company doesn't act or goes bankrupt, the state uses the bond to restore the land itself.But Kentucky’s bond amounts haven’t increased in more than twenty years, and the federal government said the funds were inadequate for the work that needed to be done. Office of Surface Mining Director Joe Pizarchiksent the state a letter last week, threatening to take over the state surface mining program if the bond rates weren't increased.OSM spokesman Chris Holmes says an increase is crucial, because reclamation costs have risen with inflation. Without an increase in the bonds, Kentucky wouldn’t be able to reclaim the land as the law requires.“And if that were to happen, someone would have to pick up the bill and the people picking up the bill would be Kentuckians,” Holmes said. “So that is why we are encouraging Kentucky to find a Kentucky solution.”Since 1996, OSM has identified 266 permits that have been forfeited, meaning the too-small bonds will be used to do what they can to reclaim those mine sites.Kentucky Commissioner of Natural Resources Steve Hohmann says the state is aware of the problem and has been working for the past several years with coal companies, regulators and environmental groups to put together a compromise. The emergency regulations will address the federal concerns for now, and Hohmann says the state will pursue a more permanent solution.“We think we have a plan in place to address the deficiencies that OSM has noted in their letter,” Hohmann said. “We think that we have a good plan going forward and that we will bring this to a resolution in a timely manner.”OSM has taken the initial steps to revoke a state’s primacy over surface mining before, though it’s rare. Neighboring West Virginia and Ohio have received similar threats in the past, but both states resolved their issues to avoid a federal takeover of the program.Under the emergency regulations—which went into effect immediately—the minimum bond will rise from $10,000 to $75,000.Kentucky Coal Association President Bill Bissett says it’s too soon to tell how the regulations will affect the coal industry, but they’ll learn to work with the new rules. He says he thinks the issue will ultimately be taken up in the General Assembly.“I think at the end of the day you’re going to see some kind of new legislation involving a playing field for bonding for surface mining in Kentucky that sort of makes sense to everyone,” Bissett said. “And that’s going to require, I think, approval from the governor and everyone else.”Tom FitzGerald of the Kentucky Resources Council says the emergency regulations are one step in the right direction. But one facet that worries him is that the regulations don’t immediately affect current mines. Mines that are in operation and underbonded won’t be re-assessed for bonds until they undergo a midterm review or seek a permit renewal.