Coal Tattoo

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It’s been a while since we checked in on the status of West Virginia’s Special Reclamation Fund, the pot of money that’s supposed to ensure mines abandoned by operators since passage of the 1977 federal strip mine law are properly reclaimed. Given the ongoing downward spiral of the nation’s coal industry, there have been several recent media accounts about potential problems, given huge reclamation liabilities of several major coal producers (see here, here and here).

So, on Thursday morning, I decided to drop by the regular meeting of the state Department of Environmental Protection’s Special Reclamation Fund Advisory Council, a panel formed to keep an eye on the SRF and make sure it’s adequately funded. (By the way, I posted a copy of the fund’s most recent annual report here, for anyone who is interested)

The first thing on the agenda was a presentation from DEP officials that, in some ways, boils down to the agency’s continued unhappiness with having to live with court rulings that require pollution discharge permits for the SRF’s water treatment sites that have point-source discharges (see here and here for background on that).  DEP officials believe that these permits and their associated pollution limits aren’t really doing much to improve watershed-wide water quality, especially in areas affected by acid mine drainage.  Agency officials believe other approaches might do more good, and use money more wisely.

Maybe they’re right about that. But there’s the little issue of the Clean Water Act, and its mandate that no pollution discharges be allowed without permits. Nobody from DEP who attended Thursday’s meeting could really explain exactly how they could avoid the point source permits and still comply with the law.

Anyway, I think the big story at the SRF Advisory Council meeting was really discussion of this new letter to DEP Secretary Randy Huffman from Roger Calhoun, director of the Charleston field office of the federal Office of Surface Mining Reclamation and Enforcement:

In short, OSMRE is getting increasing worried, given the current state of the Appalachian coal industry, about what would happen should a major operator go belly up. Roger described this state of affairs as “precarious” and outlined the financial (and environmental) risks the state faces from what he described as “unusual reclamation liabilities that may be more costly” that what regulators have faced in the past:

— Several companies within the state have or are proposing to construct selenium treatment systems. The cost to install one of these systems can range from [a] few million dollars to $50 million. The annual operating and maintenance costs of these selenium treatment systems can run from several million dollars depending on the amount of water to be treated. As you know, many of these selenium treatment systems are in the experimental stage, and their effectiveness is still not proven.

There is a pipeline and reverse osmosis plant in Mannington, West Virginia, which was completed in March 2013, and treats pre-treated water from five active and inactive underground mines. The reserve osmosis plant removes chlorides and total dissolved solids from the mine water. The plant, which can treat up to 3,500 gallons per minute, together with the pipeline, cost approximately $200 million to construct and has an operating and maintenance cost of several million per year.

— OSMRE recently released two reports (Fairmont and the North Branch of the Potomac mine pools) indicating hydrologic connections among underground mines that require extensive pumping and treatment to prevent pollution to major river systems. Other such systems exist within West Virginia that have not been studied. The construction and annual maintenance costs of these treatment facilities are largely unknown to regulators at this point.

— Stream loss, due to subsidence by underground mining, is another issue that has received little attention in the past during actuarial reviews. However, the cost to restore a stream and to replace the aquatic life therein once water loss has occurred can be expensive and difficult to achieve.

The letter concluded:

When projecting future liabilities about the Special Reclamation Fund in the past, actuarial firms have relied heavily on historic bond forfeiture data. Although they exist, we do not believe the issues described above have been factored into their assumptions or projections. This is primarily because some are relatively new issues or they were not fully recognized as being potential liabilities in the past. Therefore, I recommend that you bring these issues to the Advisory Council and request that they be presented to the actuarial firm for consideration during the upcoming actuarial study.