RULES AND REGULATIONS
Title 25--ENVIRONMENTAL PROTECTION
ENVIRONMENTAL QUALITY BOARD
[ 25 PA. CODE CH. 86 ]
Coal Mine Reclamation Fees and Reclamation of Bond Forfeiture Sites
[38 Pa.B. 4742]
[Saturday, August 30, 2008]The Environmental Quality Board (Board) amends Chapter 86 (relating to surface and underground coal mining). The final-form rulemaking incorporates amendments necessary to bring the Commonwealth's regulatory program into conformance with Federal standards for State coal mining regulatory programs. The amendments address the coal mine reclamation fees paid by surface coal mine operators, the dedicated use of moneys for treatment of postmining pollutional discharges at certain mine sites, pertinent definitions and the requirements for reclamation of coal mine sites when the mine operator's bonds were forfeited by the Department of Environmental Protection (Department).
This final-form rulemaking was adopted by the Board at its meeting of April 15, 2008.
A. Effective Date
These amendments will go into effect upon publication in the Pennsylvania Bulletin as a final-form rulemaking.
B. Contact Persons
For further information contact Joseph G. Pizarchik, Director, Bureau of Mining and Reclamation, P. O. Box 8461, Rachel Carson State Office Building, Harrisburg, PA 17105-8461, (717) 787-5103, or Richard S. Morrison, Assistant Counsel, Bureau of Regulatory Counsel, P. O. Box 8464, Rachel Carson State Office Building, Harrisburg, PA 17105-8464, (717) 787-7060. Persons with a disability may use the AT&T Relay Service (800) 654-5988 (TDD users) or (800) 654-5988 (voice users). This final-form rulemaking is available on the Department's web site at www.depweb.state.pa.us.
C. Statutory Authority
The final-form rulemaking is adopted under the authority of sections 4(d) and (d.2) and 4.2(a) of the Surface Mining Conservation and Reclamation Act (PASMCRA) (52 P. S. §§ 1396.4(d) and (d.2) and 1396.4b(a)); section 7 of the Bituminous Mine Subsidence and Land Conservation Act (52 P. S. § 1406.7); section 5 of The Clean Streams Law (35 P. S. § 691.5); section 3.2 of the Coal Refuse Disposal Control Act (52 P. S. § 30.53b); section 1920-A of The Administrative Code of 1929 (71 P. S. § 510-20); and PA. CONST. ART. 1, § 27.
D. Background of the Amendments
This final-form rulemaking amends the regulations regarding the Commonwealth's obligation, under Federal law, to provide for the complete reclamation of a certain class of surface mine sites (the ABS Legacy Sites) and the postmining pollutional discharges on these sites. To bring its coal mining program into compliance with Federal law, the Department must assure that it always has sufficient money available to complete the reclamation of the ABS Legacy Sites, including paying the ongoing costs to treat the pollutional discharges at these sites in perpetuity. In related litigation, the United States Third Circuit Court of Appeals decided that the Commonwealth must demonstrate that it has sufficient funds, and determined that the Department must meet its obligation to assure sufficient funds for reclamation of these sites through legally enforceable means. These amendments are intended to satisfy the Commonwealth's obligations under Federal law by establishing an enforceable regulatory mechanism for generating funds adequate to cover the reclamation costs for all of the ABS Legacy Sites.
This final-form rulemaking establishes two accounts to manage the funds. The Reclamation Fee O&M Trust Account will be used to fund the operation and maintenance costs on an on-going basis. The final-form rulemaking also establishes a cash reserve within the Reclamation Fee O&M Trust Account to pay for unexpected treatment costs. The ABS Legacy Sites Trust Account will be used to fund the perpetual costs of treatment for the discharges at the ABS Legacy Sites. The regulations also identify the funding sources for the accounts and provides for adjustments to the reclamation fee to assure that sufficient funds are available for operation and maintenance. In addition, the regulations list the requirements for the account to be actuarially sound, which is when there is enough money in the accounts so that the interest will cover all of the costs.
Required Consistency of the Commonwealth's Mining Program with Federal Law
One of the fundamental purposes of the Federal Surface Mining Control and Reclamation Act of 1977 (30 U.S.C.A. §§ 1201--1328) (FSMCRA), is to establish a ''nationwide program to protect society and the environment from the adverse effects of surface coal mining operations.'' See 30 U.S.C. § 1202(a). The Federal statute authorizes the Secretary of the Interior, through the Federal Office of Surface Mining Reclamation and Enforcement (OSM), to administer the programs for controlling surface coal mining operations required by the FSMCRA and to promulgate regulations designed to realize the purposes of the FSMCRA. See 30 U.S.C.A. § 1211(c). These purposes include the reclamation of mined areas left without adequate reclamation and assuring that adequate procedures are undertaken to reclaim surface areas as contemporaneously as possible with the surface coal mining operations.
The FSMCRA allows a state to assume jurisdiction over the regulation of surface coal mining and reclamation operations if the state can administer that program according to Federal standards. See 30 U.S.C.A. § 1253. Once a state program is approved by OSM, the State achieves ''primacy'' over the regulation of its surface coal mining program under the FSMCRA. The Commonwealth achieved primacy in 1982. See 47 FR 33,050, 33,076 (July 30, 1982). To maintain its jurisdiction over regulation of coal surface mining activities, the Commonwealth must maintain a State program in accordance with the requirements of the FSMCRA. See 30 U.S.C.A. § 1253. State laws must be consistent with the provisions of the FSMCRA, 30 U.S.C.A. § 1255(a), and, in general, a state program must be at least as effective as the requirements in the FSMCRA. See 30 U.S.C.A. § 1255.
Conventional and Alternative Bonding Systems
The FSMCRA states a general requirement that before a coal mining permit is issued an operator must post a performance bond ''sufficient to assure completion of the reclamation plan if the work had to be performed by the regulatory authority.'' See 30 U.S.C.A. § 1259(a). The FSMCRA also allows OSM to approve as part of a state program an ''alternative bonding system that will achieve the objectives and purposes of the bonding program pursuant'' to section 509. See 30 U.S.C.A. § 1259(c). The PASMCRA similarly requires a surface coal mining permittee to file a bond with the Department prior to commencing surface mining operations. See 52 P. S. § 1396.4(d) regarding mining permit; reclamation plan; bond. The amount of the bond shall be ''based upon the total estimated cost to the Commonwealth of completing the approved reclamation plan, or in such other amount and form as may be established by the Department under regulations for an alternate coal bonding program which shall achieve the objectives and purposes of the bonding program.'' Id. Thus, under both the Commonwealth and pertinent Federal law, the Department has the authority to implement two types of bonding systems to provide financial assurance that surface coal mining operations are properly reclaimed. The two types are known as conventional and alternate bonding.
A conventional bonding system (CBS) requires that the mine operator post a site-specific bond sufficient in amount to assure completion of the mine site's reclamation plan if the work had to be performed by the Department in the event of a forfeiture. This system is often referred to as full-cost bonding because the amount of the bond is not discounted or intended to be supplemented by other funding sources. An alternate bonding system (ABS) is typically designed as a collective risk-spreading system that draws on other sources of funds for completing reclamation at individual mine sites where the operator has defaulted on its reclamation obligations and the bond for the site has been forfeited. With an ABS, a state can discount the amount of the required site-specific bond to an amount less than the full cost needed to complete reclamation of the mine site in the event of forfeiture. The individual permitted mining operators usually contribute to a reclamation fund administered by the regulatory authority (such as, through imposition of a standard fee), thus sharing the liability for the reclamation of forfeited sites and supplementing the discounted site-specific bonds.
From 1982 until 2001, the Commonwealth employed a bifurcated bond system: surface coal mines, coal refuse reprocessing operations and coal preparation plants were covered by an ABS, while underground coal mines and coal refuse disposal operations were covered by a CBS. The Commonwealth's ABS was intended to enable the Department to complete reclamation of forfeited mine sites notwithstanding that the actual cost of reclamation exceeded the amount of the individual bonds posted by the operator for a specific site. The Commonwealth's ABS consisted of a system in which various sources of revenue--that is, excess bond money from forfeited and reclaimed sites, license and permit fees, fines and civil penalties, and reclamation fees--were all placed into the Surface Mining Conservation and Reclamation Fund. See 52 P. S. § 1396.18(a) regarding Surface Mining Conservation and Reclamation Fund; Remining Environmental Enhancement Fund; Remining Financial Assurance Fund; and department authority for awarding of grant. Operators were required to postsite-specific bonds for surface mining operations covered by the ABS, but they were not required to post a bond sufficient in amount to cover the full cost of completing reclamation of the mine site. The money in the SMCR Fund was intended to cover the difference between the bond and the actual cost of reclamation.
The reclamation fee imposed by § 86.17(e) (relating to permit and reclamation fees) was paid by operators of permitted sites on a per-acre basis for each acre authorized in the surface mine operator's permit; the fee was originally assessed at $50 per acre but was raised to $100 per acre in 1993. As part of administering the Commonwealth's ABS, the reclamation fees and other moneys described previously have been deposited by the Department into the SMCR Fund and have been used to supplement site-specific bonds to cover the Department's full costs to reclaim mine sites if mine operators defaulted on their reclamation obligations.
Insolvency of this Commonwealth's ABS
Problems relating to the solvency of the Commonwealth's ABS were identified around 1990, and by early 1991 OSM began to exercise its oversight authority in an effort to bring the Commonwealth's ABS into compliance with applicable Federal standards. See 30 U.S.C.A. §§ 1253 and 1254; 30 CFR 732.17, 733.11 and 733.12 (relating to State program amendments; general requirements for maintaining State programs; and procedures for substituting Federal enforcement for State programs or to withdraw of State programs). In January 1991, OSM notified the Department that this Commonwealth's ABS must be modified to provide the resources needed to reclaim existing ABS forfeited sites within a reasonable time frame, and to ensure that future forfeiture sites would be reclaimed in a timely manner. Moreover, the ABS had to have sufficient funds to complete the reclamation plan approved in the surface mining permit. In May 1991, OSM codified a required program amendment directing the Commonwealth to submit information by November 1991 which demonstrated that the ABS was solvent. See 30 CFR 938.16(h). Specifically, OSM required the Commonwealth to either submit information demonstrating that the ABS ''can be operated in a manner that will meet the requirements of 30 CFR 800.11(e) (relating to requirement to file bond)'' or, to amend its program to be compliant with Federal standards. 56 FR 24,687, 24,719-21 (May 31, 1991).
In August 1991, the OSM's Harrisburg Field Office issued a report titled Pennsylvania Bond Program as an Alternative Bonding System. The 1991 report documented the Department's failure to adequately reclaim all forfeited ABS sites, primarily because the Department was not addressing postmining pollutional discharges at many of the sites. The report concluded that the ABS was insolvent because the Department did not have sufficient funds to complete the reclamation at all of the primacy ABS forfeiture sites.
In October 1991, OSM notified the Department, under 30 CFR 732.17, that for the Commonwealth to maintain jurisdiction of the regulatory program under the FSMCRA, the Department had to adopt changes to its ABS to address program deficiencies and outstanding reclamation on ABS forfeiture sites (the 30 CFR Part 732 notice (relating to procedures and criteria for approval or disapproval of State program submissions)). A 30 CFR 732 is a document in which the OSM notifies the State that its regulatory program must be amended to be in accordance with the FSMCRA and consistent with Federal regulations. A notification may be necessary as a result of Federal regulation changes, State or Federal court decisions, or problems identified during oversight or other program review processes. See Pennsylvania Fed'n of Sportsmen's Clubs v. Norton, 413 F. Supp. 2d 358, 364 (M.D. Pa. 2006). The 30 CFR Part 732 Notice stated, in part:
The specific event leading to this determination is an OSM Field Office evaluation of the adequacy of the Commonwealth's ABS. This evaluation identified unfunded reclamation liabilities (for backfilling, grading, and revegetation) in excess of 8 million dollars for current bond forfeiture sites alone. The review also found that the ABS is financially incapable of abating or permanently treating pollutional discharges from bond forfeitures. Even if no such discharges are created in the future, annual treatment costs for existing discharges are currently estimated at 1.3 million dollars.The 30 CFR Part 732 Notice concluded that the ABS was no longer in conformance with the FSMCRA and the Federal regulations, which mandate that an ABS ''must assure that the regulatory authority will have available sufficient money to complete the reclamation plan for any areas which may be in default at any time.'' See 30 CFR 800.11(e)(1).
Termination of ABS and Conversion of Surface Mines to a CBS
The Department undertook various efforts in response to the OSM's required program amendment and the 30 CFR Part 732 Notice (most of which need not be enumerated in this preamble), including an increase in amount of the per-acre reclamation fee from $50 to $100 per acre in 1993. Doubling the reclamation fee did not generate sufficient funds to eliminate the ABS deficit, and the Department concluded that if significant changes were not made the deficit would only get worse. The number of acres being permitted had been declining (with a corresponding reduction in income from the reclamation fee), and there was a significant number of underbonded ABS permits with postmining discharges. Recognizing that the ABS would never address the situation, the Department decided to terminate the ABS and to employ a full-cost bonding system for all of this Commonwealth's active mine sites. In 2001, the Department began converting active surface coal mining permits issued under the ABS to a CBS.
The conversion of the ABS permits to a CBS required a complex approach by the Department in coordination with the Legislature and the mining industry. The main components of the approach included the following. A comprehensive analysis by the Department of the existing ABS deficit for land reclamation was prepared in a February 2000 report titled Assessment of Pennsylvania's Bonding Program for Primacy Coal Mining Permits. Based on the report's conclusions, the General Assembly appropriated $5.5 million in 2001 to cover that land reclamation deficit. The Department developed a conversion assistance financial guarantee program by which the Department effectively operates as a surety and provides part of the bonding for conventional bonds, thus easing the transition for active operators to the CBS and thereby preventing bankruptcies or abandonment of sites, or both. In 2001, the General Assembly appropriated $7 million to underwrite the conversion assistance financial guarantee program. The Department developed a detailed conventional bonding guidance document that set forth the mechanics of the conventional bonding process for surface mining operations. The Department then implemented conventional bonding for all ABS actively-mined, permitted surface coal mine sites. A plan to address postmining pollutional discharges on the ABS forfeiture sites was formulated, resulting in the Program Enhancement Document and the Discharge Abatement Workplan. In August 2001, the ABS was formally terminated.
Related Litigation
In 1999, a citizens' suit was filed in the United States District Court for the Middle District of Pennsylvania by several citizen groups against the Department, OSM and the United States Department of the Interior. Pennsylvania Federation of Sportsmen's Clubs, Inc. et al. v. McGinty, et al., (No. 99-cv-1791). Plaintiffs alleged various deficiencies in the Commonwealth's bonding program related to the insolvency of the ABS and the Department's failure to reclaim all the ABS forfeiture discharge sites. Six of the eight counts against the Department were dismissed. The remaining two concerned the 30 CFR Part 732 Notice and required program amendment in 30 CFR 938.16(h) (relating to regulatory programs amendments). This lawsuit is currently pending before the United States District Court for the Middle District of Pennsylvania and has been stayed pending the final disposition of a related case in the same court called Pennsylvania Federation of Sportsmen's Clubs, Inc. et al. v. Kempthorne, et al., (No. 03-cv-0220). In June 2003, the OSM terminated the bonding program deficiency as it relates to the ABS, in part, as a result of the Department's conversion to the CBS and in response to a report prepared by the Department jointly with the OSM. The report is titled Pennsylvania Bonding System Program Enhancements and includes a discussion and analysis of the bond program enhancements undertaken to resolve inadequate bonding for the ABS. The Kempthorne case was filed in December 2003, by the same plaintiffs that filed the McGinty case, in response to the OSM's termination of the 30 CFR Part 732 Notice and its removal of the required program amendment in 30 CFR 938.16(h). The Kempthorne (previously called Norton) case names the United States Department of the Interior and the OSM as defendants; the Department intervened as a defendant in this litigation. See Pennsylvania Federation of Sportsmen's Clubs, Inc. et al. v. Norton, et al., 413 F. Supp. 2d 358 (M.D. Pa. 2006). In 2006, the U.S. District Court in Kempthorne granted the joint motion of the Federal defendants and the Department requesting dismissal of the case. Plaintiffs then appealed the decision to the United States Court of Appeals for the Third Circuit.
In the Kempthorne case, plaintiffs argued that it was a violation of section 509 of the FSMCRA (30 U.S.C. § 1259), and the regulations implementing the FSMCRA issued by the OSM--specifically 30 CFR 800.11(e)(1)--for the Department to terminate its ABS when it converted to a CBS in 2001. Plaintiffs also argued that, even if the ABS was lawfully terminated in 2001, the primacy ABS forfeited sites plus any additional sites whose reclamation costs are not fully covered by CBS bonds (together the ''ABS Legacy Sites''), remain subject to the requirements of 30 CFR 800.11(e)(1). As such, the Commonwealth remains obligated to provide for the complete reclamation and treatment of the ABS Legacy Sites and their pollutional discharges by assuring the Department has available sufficient money to complete reclamation for these sites at any time. See 30 CFR 800.11(e)(1).
On August 7, 2007, the Third Circuit decided the appeal and issued an opinion in which the court reversed, in part, the district court and remanded the case for further proceedings in accordance with the appellate decision. See Pennsylvania Federation of Sportsmen's Clubs, Inc. v. Kempthorne, 497 F.3d 337 (3d Cir. 2007). The Third Circuit decision in Kempthorne directly impacted the Department's decisions with respect to this final-form rulemaking because the Department had proposed to eliminate the per-acre reclamation fee in 25 Pa. Code § 86.17(e) in the proposed rulemaking. See 36 Pa.B. 4200, 4200-01 (August 5, 2006). The Court explained the pertinent issue as follows:
Although we have determined that Pennsylvania has effectively converted to a CBS and OSM did not abuse its discretion in approving that conversion, neither we nor OSM are yet out of the woods, so to speak. That is because we are still faced with the question of what obligations, if any, Pennsylvania has to ensure reclamation of sites forfeited before the conversion to a CBS began, plus any additional sites whose reclamation costs are still not fully covered by CBS bonds. To clarify, it is important we distinguish between the ABS as a bonding program, which no longer exists in Pennsylvania, and the particular mine sites bonded under that now defunct program. This distinction is a critical one as the conclusion that it is permissible under the ''[FSMCRA]'' for a State to dissolve its ABS program, in the manner Pennsylvania has, does not lead ineluctably to the conclusion that all liabilities accrued under that program are also automatically dissolved. In other words, there are still mining sites in Pennsylvania that were originally bonded under the ABS and forfeited prior to the CBS conversion. The question remains as to what obligations Pennsylvania has to provide for complete reclamation and treatment of these mining sites and their pollutional discharges.Kempthorne, 497 F.3d at 349-50.
The Third Circuit concluded that 30 CFR 800.11(e) continues to apply to the ABS Legacy Sites and ''that § 800.11(e) requires that Pennsylvania fulfill the obligations it voluntarily assumed to ensure that these sites are fully reclaimed.'' Kempthorne, 497 F.3d at 353. To meet the requirements of Federal law, a state's ABS ''must assure that the regulatory authority will have available sufficient money to complete the reclamation plan for any areas which may be in default at any time.'' See 30 CFR 800.11(e)(1). Thus, the Third Circuit ruled that the Commonwealth must assure that it will have sufficient money available at any time to complete the reclamation of all the ABS Legacy Sites, including the treatment of any postmining pollutional discharges at these sites. The Third Circuit Court also ruled that the Program Enhancement Document did not meet the Federal requirements because it was not a formal program amendment and was not legally enforceable. The Court reinstated the 30 CFR Part 732 Notice and the required program amendment in 30 CFR 938.16(h) and remanded the case to the District Court for further proceedings, see Kempthorne, 497 F.3d at 354-55. The related litigation has been temporarily stayed by the District Court pending the issuance of this final rulemaking. To comply with the Court's ruling, the Commonwealth must assess the extent of the liability associated with all of the ABS Legacy Sites, and must identify specific sources of dedicated revenue that will generate enough money to cover the costs of reclaiming these sites, specifically the ongoing costs for treating any pollutional discharges at these sites. The method for providing the revenue must be submitted to the OSM for approval as a formal program amendment which satisfies the 30 CFR Part 732 Notice and 30 CFR 938.16(h), and it must be legally enforceable.
Reclamation Obligations at the Primacy ABS Legacy Sites
As part of its development of this final-form rulemaking, the Department carefully examined the extent of the liability associated with all of the ABS Legacy Sites. The reclamation liability of the ABS Legacy Sites was divided into two categories: outstanding land reclamation; and the abatement or perpetual treatment of postmining pollutional discharges. In 2004, in an effort to improve the management of the reclamation of the ABS sites, the responsibility for coordinating the reclamation of primacy bond forfeiture sites was transferred from the Bureau of Abandoned Mine Reclamation to the Bureau of District Mining Operations. At that time, there were approximately 150 primacy ABS permits with outstanding reclamation obligations (land reclamation and postmining discharges).
Fifty-five ABS sites had land reclamation remaining to be completed as of November 2007. Of these 55, 23 have had the necessary arrangements made and are in the process of being reclaimed. All of the remaining primacy ABS sites with outstanding land reclamation have been identified and evaluated to determine the projected costs of completing this land reclamation. The estimated cost of the land reclamation for these remaining land-reclamation sites is approximately $7.8 million. As of November 2007, the ABS deficit closeout account balance was approximately $4.4 million. Forfeited bonds were collected for the land reclamation primacy ABS sites; there is approximately $1.9 million in collected bonds for these sites currently held in a restricted account in the SMCR Fund. The balance of about $1.5 million needed to complete the land reclamation at ABS Legacy Sites can be paid from other funds currently in the SMCR Fund, including excess bond money from other forfeited sites that have already been fully reclaimed and interest income on the SMCR Fund moneys. The Department has determined that it currently has sufficient money available in the SMCR Fund to complete all of the outstanding land reclamation at the ABS Legacy Sites. Nearly all of this money is already restricted by law for this purpose, and the Department expects that land reclamation at the ABS Legacy Sites will be completed within the next 2 years. Thus, the changes made for this final-form rulemaking do not address funding for land reclamation of ABS Legacy Sites.
The ABS Legacy Sites with discharges that need treatment include both the primacy ABS forfeited sites, plus any additional sites whose reclamation costs are not fully covered by CBS bonds when forfeited in the future. All of these sites remain subject to 30 CFR 800.11(e)(1). Establishing a final exact number of ABS Legacy Sites with pollutional discharges that will need treating is not yet possible, though the Department has identified and evaluated the primacy ABS discharges sites that have already had the bond forfeited.
There are 80 primacy ABS permits where the bonds were forfeited and there is a postmining discharge that requires continued treatment. Some of these permits contain multiple discharges. The population of the ABS forfeited postmining discharge sites has been evolving, and the Department has worked closely with the OSM to develop and maintain an accurate inventory of these discharges. In 2003, there were 99 discharges on the primacy ABS forfeiture discharge sites inventory. As of October 2007, there were 97 discharges, however, a significant number of discharges had been removed from the list and others added between 2003 and October 2007. An evaluation of the primacy ABS forfeited discharge sites was completed, to project the costs of treating the discharges at these sites. Postmining treatment costs are evaluated in three categories: (i) initial facility construction costs; (ii) the annual operation and maintenance cost; and (iii) recapitalization costs. Initial facility construction costs cover all of the costs to get a treatment system up and running such as facility design costs, property access and construction. The annual operation and maintenance costs include: the treatment chemicals as needed, water quality sampling, facility inspection, site maintenance and sludge removal and disposal. Recapitalization costs are the money that needs to be set aside to reconstruct a facility or replace major components of a treatment system. Of the 97 discharges on the ABS forfeiture discharge sites inventory, 30 have functioning passive treatment systems in place. Costs for treating all the 97 discharges at the primacy ABS forfeiture discharge sites were estimated using the water quality and quantity monitoring data for the discharges and the AMDTreat model developed by the OSM.
The initial cost to construct the necessary facilities for the primacy ABS forfeiture discharge sites is approximately $2.8 million. The Department currently has funds available to cover the cost to construct the necessary initial treatment facilities for the primacy ABS forfeiture discharge sites. There is approximately $2.5 million in the released bond account which may be used to pay the treatment facility construction costs. Money in the general operations account may be used for reclamation purposes as well as general administrative costs, and there is approximately $9.2 million currently held in the general operations account. Construction of these initial treatment facilities is expected to occur over the course of the next 2 to 3 years. Consequently, the changes made for this final-form rulemaking do not address the means for funding initial construction costs at the primacy ABS forfeiture discharge sites.
The total estimated annual operation and maintenance costs for the 80 primacy ABS forfeiture discharge sites and their 97 discharges, once construction of all the necessary treatment facilities has been completed, is approximately $1.2 million. These costs were also calculated using the AMDTreat model developed by the OSM. Currently, there is no established, legally-enforceable, means to generate the revenue to pay the annual operation and maintenance costs (including recapitalization costs) associated with the primacy ABS discharge sites. The changes made for this final-form rulemaking are intended to provide a legally enforceable mechanism for paying the costs of treating the discharges at the ABS Legacy Sites in perpetuity. The final-form rulemaking restructures the reclamation fee and dedicates other sources of funding for performing reclamation of the ABS Legacy Sites, including the interest earned by the reclamation fee moneys and civil penalties assessed under the PASMCRA. See Summary of Changes to the Proposed Rulemaking in Section E.
It is important to recognize that the ABS forfeiture discharge sites inventory will continue to have some sites added to the list. At the time of conversion to the CBS there were some surface coal mining sites, permitted under the primacy ABS, that were not being actively mined but had postmining pollutional discharges and the operators were continuing to treat the discharges. The bonds for these sites were not sufficient to cover the costs to perpetually treat the discharges. These sites remain part of the ABS legacy until the costs to treat the discharges in perpetuity are covered by fully-funded financial guarantees. At the time of conversion, additional bond needed to be posted, or fully-funded trusts established, for 270 treatment facilities to treat 400 existing postmining discharges at these sites. As of December 2007, operators had posted additional bonds, or established trust funds, through the execution of 72 agreements covering 174 discharge treatment facilities treating 244 discharges. Forty-four of the 72 agreements are for full-cost bonds totaling $109.1 million; 16 are fully-funded trusts totaling $45.5 million; 11 involve trusts being funded over time that will total $43.1 million when fully funded. Negotiations are currently ongoing for 22 agreements for 55 facilities and 59 discharges, with a total estimated financial obligation (bond or trust) of $57.8 million. It was expected that about 124 agreements would be needed to fund the entire set of 270 treatment facilities.
As of December 2007, there remained 45 primacy ABS permits with 85 postmining discharges where the permittee has yet to post a full-cost financial guarantee, but the bond currently posted for the site has not been forfeited. It is not possible to know how many of these 45 permits will ultimately be forfeited and added to the primacy ABS forfeiture discharge inventory. The operator may ultimately default on its obligation at some of these sites and the defaulted sites would become part of the ABS legacy for which the Department must assure long-term funding for discharge treatment. This final-form rulemaking addresses this uncertainty, in part, through a mechanism to adjust the amount of the reclamation fee, and by maintaining a $3,000,000 cash reserve in the Reclamation Fee O&M Trust Account. The Department determined the amount of the cash reserve by taking into account the expected annual operation and maintenance costs up until January 1, 2010 (when the fee can be adjusted). Another consideration was the cost to maintain treatment at ABS sites that may be forfeited. The conditions which must be met before the ABS Legacy Sites Trust Account is actuarially sound are intended to assure the generating of sufficient funds for the Department to pay the discharge treatment costs for the entire class of ABS Legacy Sites.
Available Revenue Sources for Reclamation of ABS Legacy Sites
As part of its development of this final-form rulemaking, the Department also examined existing funds and revenue sources available to pay for the required reclamation of primacy ABS forfeiture discharge sites. Funds which may be used for reclamation are currently held in the SMCR Fund and are tracked in various accounts. The available funds which may be used to help pay for treatment of discharges at ABS forfeiture sites include the money collected from bonds forfeited at ABS discharge sites and excess bond money in the released bond account. When a bond is forfeited and collected, the money is deposited in the restricted bond account. This money may only be used for reclamation activities for the permit for which it was posted, unless it is determined that the reclamation is unreasonable, unnecessary or impossible. If any of these restricted funds are not needed to reclaim the site for which they were posted, then they are transferred to the released bond account for use to complete other reclamation projects. See 52 P. S. § 1396.18(b). Money in the general operations account in the SMCR Fund may be used for reclamation, in addition to other purposes provided for in the PASMCRA. See 52 P. S. § 1396.18(a) and; § 86.187(a)(3) (relating to use of money).
Current revenue sources which may be used to pay the costs of treating the discharges at the ABS Legacy Sites were identified. These include the following: (i) revenue from the per-acre reclamation fee imposed by § 86.17(e); (ii) interest on funds held in the reclamation fee account; (iii) interest on funds held in the restricted bond account; (iv) interest on the other moneys held in the SMCR Fund such as moneys in the released bond account or the general operations account; and (v) civil penalties assessed under the PASMCRA. At the current rate of $100 per acre imposed on the operational area of the permit, the reclamation fee is expected to produce revenue of approximately $200,000 per year. The State Treasurer is responsible for the management of Commonwealth money and moneys in the SMCR Fund generate interest which is periodically paid into the fund. The interest income has been at an annual rate of about 5%. The amount collected for civil penalties assessed under the PASMCRA tends to fluctuate from year to year, however the average annual amount collected over the past 6 years has been approximately $300,000.
Public Response to Elimination of Reclamation Fee in Proposed Rulemaking and Public Involvement in Development of the Final-form Rulemaking
The proposed rulemaking was published at 36 Pa.B. 4200. Public comments were accepted from August 5, 2006, to September 5, 2006, and the comment period officially closed on November 5, 2006. The Department received extensive public comments regarding the proposed elimination of the reclamation fee imposed by § 86.17(e) and the Department's financial means for addressing the ABS Legacy Sites. The Department proposed to eliminate the reclamation fee for a variety of reasons: the ABS had been terminated in 2001; active mine sites permitted under the ABS had been converted to the CBS; operators are being required to post full-cost bonds for the costs to treat postmining pollutional discharges which had developed on active mine sites; the General Assembly had appropriated the money needed to complete the land reclamation of all of the ABS forfeited sites; and the discharges on the ABS forfeited sites were proposed to be addressed in accordance with the Program Enhancements Document. The public commentators objected to the proposed elimination of the reclamation fee for various reasons. The comments asserted that the Commonwealth had a legal obligation to adequately complete the reclamation of all ABS Legacy Sites, questioned the Department's financial capacity to do so without restructuring the current system, and recommended that the Department maintain the reclamation fee as part of a system for paying the ongoing operation and maintenance costs associated with treating postmining pollutional discharges at the ABS forfeiture sites in perpetuity. A summary of the comments and responses to the proposed rulemaking is set forth in Section F.
Following the close of the comment period on the proposed rulemaking, and prior to the appellate Court's decision in the related litigation, the Department presented this rulemaking to the MRAB at its January 25, 2007, meeting as a final-form without having made any changes to the proposed rulemaking. At the January 25, 2007, meeting, the MRAB was deadlocked in the vote on a motion to recommend that the Department proceed to final-form rulemaking and eliminate the reclamation fee. At that meeting, some of the MRAB members expressed the view that further progress in obtaining additional bond money for the primacy ABS discharge sites must be accomplished before the reclamation fee could be eliminated. After hearing the Department's report, the MRAB members opposed to moving forward with eliminating the reclamation fee stated that it was premature to eliminate the fee because the Department did not have sufficient funds on hand to cover the costs to treat the discharges at the ABS Legacy Sites.
The deadlock in the MRAB's vote, the views expressed by the MRAB members at the January 2007 meeting, the public comments on the proposed rulemaking, and ultimately the decision by the Third Circuit in Kempthorne discussed previously, resulted in the Department's reconsideration of the advisability of eliminating the reclamation fee as part of this rulemaking. In the wake of the August 2007 Court decision in Kempthorne, the Department sought the advice of the MRAB on how to proceed in response to that decision. A series of MRAB meetings were held specifically so that the Department could obtain advice and recommendations from the MRAB based upon: the Third Circuit court decision, the outstanding required program amendment and 30 CFR Part 732 Notice issued by the OSM, and the public comments on the proposed rulemaking. This issue was on the agenda at the meetings of the full MRAB on October 25, 2007, and the special meeting on November 29, 2007. In addition, the Regulation, Legislation and Technical Committee of the MRAB met on October 17, 2007, and November 15, 2007, solely to address this issue.
At its November 29, 2007, meeting, the MRAB unanimously recommended that the Department address the ABS Legacy Sites by means of the following components. First, the Department should retain the reclamation fee and should dedicate the money collected from imposition of the fee solely for the purpose of paying operation and maintenance costs for the discharges on the ABS Legacy Sites. Second, the amount of the reclamation fee should be maintained at its current rate of $100 for 2 years. After 2 years, it should be adjusted by operation of law to generate sufficient funds to pay operation and maintenance costs for discharges on the ABS Legacy Sites until a permanent alternate source of funding is found and the reclamation fee can be discontinued. Third, the Department should also dedicate money from certain other specific sources for use in paying operation and maintenance costs for ABS Legacy Sites. The MRAB suggested dedicating the moneys received from civil penalties collected under PASMCRA, a portion of the interest earned on other moneys held in the SMCR Fund (to be determined at the Department's discretion), and funds from certain other identified sources. Lastly, the MRAB requested that the Department present its annual review and proposed adjustment of the reclamation fee amount to the MRAB for review and comment in advance of the adjusted amount being published in the Pennsylvania Bulletin, and that the final-form rulemaking include a provision expressly noting that the Department's determination of the adjusted amount is appealable to the Environmental Hearing Board (EHB). The MRAB agreed with the Department's proposal to create a separate restricted ABS Legacy Sites Account which would hold the collected bonds on primacy ABS forfeited discharge sites and the interest generated by those funds.
The Department met informally with OSM between August 2007 and January 2008 to discuss compliance with the appellate court decision in Kempthorne, and the Department's response to the outstanding required program amendment in 30 CFR 938.16(h) and the 30 CFR Part 732 Notice issued by OSM and reinstated by the Court. On November 6, 2007, OSM provided some direction in a letter to the Department regarding its expectations for a program amendment to address the ABS deficiencies. The letter stated that the Department should focus its attention on ''developing an amendment that provides enforceable guarantees that satisfy the financial obligations prescribed by § 800.11(e) for those reclamation obligations not covered by full cost bonds.'' The November 6, 2007, letter from OSM also stated that ''the amendment needs to identify the specific revenue sources to be used, and include a requirement that the revenue generated be directed towards the reclamation of mine sites that were permitted after Pennsylvania obtained programmatic 'primacy' in 1982.''
The Department drafted changes to this final-form rulemaking in response to the MRAB and OSM recommendations, and to the public comments received on the proposed rulemaking. The Department then sought public comment on the changes being made between proposed and final-form rulemaking through an Advance Notice of Final Rulemaking (ANFR). On January 5, 2008, the ANFR was published in the Pennsylvania Bulletin seeking comments on the changes from proposed to final rulemaking and providing thirty days to submit such comments. See 38 Pa.B. 80 (January 5, 2008). A summary of the comments and responses to the ANFR is set forth in Section F.1.
At the MRAB meeting on January 10, 2008, members of the MRAB commented on the draft of the final-form rulemaking issued as part of the ANFR and suggested several changes to the draft. First, the MRAB recommended strengthening the text of the provisions establishing the Reclamation Fee O&M Account and ABS Legacy Sites Account to better prevent the funds in these accounts from being used for some purpose other than paying costs associated with the treatment of discharges on the ABS Legacy Sites. The MRAB did not think that the provisions limiting how the Department could use the money were a sufficient protection. Second, the MRAB asked that the $50 minimum amount set for the reclamation fee be removed from the draft issued with the ANFR. Third, they requested that only ''excess'' moneys in the Reclamation Fee O&M Account should be available for transfer to the ABS Legacy Sites Account. Finally, the MRAB recommended that a provision be added expressly stating that an alternate source of funding in lieu of the reclamation fee could be used if that alternate funding source was sufficient to maintain the $3 million balance and cover the annual costs of treating the discharges at all ABS Legacy Sites. The final-form rulemaking was formally presented for consideration by the MRAB at its meeting on January 10, 2008, at which time the Department requested the MRAB's approval of the final-form rulemaking. After making the recommendations for changes described previously, the MRAB voted unanimously to recommend this final-form rulemaking for approval. The Department incorporated changes in response to these MRAB recommendations into the final rulemaking.
The Department also met individually with representatives of the surface mining industry, OSM, and interested citizens groups to solicit comments on the final-form rulemaking as proposed in the ANFR. The amendments made to the reclamation fee section (§ 86.17(e)) and the use-of-money section (§ 86.187) in this final-form rulemaking respond to recommendations made by the MRAB, to public comments made in response to the ANFR, and to comments made by OSM, the regulated industry and interested citizens groups. See Summary of Changes to the Proposed Rulemaking in Section E.
Bond Forfeiture Program Corrections
The amendments to the bond forfeiture regulations in §§ 86.187(b)--86.190 will make these sections consistent with Federal regulations, and are necessary to satisfy conditions for maintaining primacy of the Commonwealth's regulatory program. OSM previously disapproved certain aspects of these regulations and required amendments to make the regulations as effective as Federal law. See 30 CFR 938.16(mm)--(qq) (required program amendments for Pennsylvania); 56 FR 55080 (October 24, 1991). These amendments will satisfy the requirements in 30 CFR 938.16(mm)--(qq). No changes were made to these bond-forfeiture amendments between proposed and final-form rulemaking.
E. Summary of Changes to the Proposed Rulemaking
The following sections have been revised or added in the final-form rulemaking.
§ 86.1. (definition of ''ABS Legacy Sites'')
The term ''ABS Legacy Sites'' has been added to the list of terms in § 86.1 (relating to definitions) because it is used throughout the amendments to §§ 86.17(e) and 86.187 made as part of this final-form rulemaking. The term ''ABS Legacy Sites'' connotes a certain class of surface coal mine sites which were permitted under the Department's primacy ABS. These sites have postmining pollutional discharges, the operator has defaulted on its obligation to adequately treat the discharges, and the operator's financial guarantee for reclamation is insufficient to cover the cost of treating the discharge in perpetuity. The Department's means for addressing reclamation of the ABS Legacy Sites, including the cost of treating the discharges in perpetuity, is the subject of the ruling of the Third Circuit Court of Appeals in the Kempthorne case discussed previously, and the focus of public comments on the proposed rulemaking. The cost of treating the discharges at these sites is being addressed by the amendments to §§ 86.17(e) and 86.187 made as part of this final-form rulemaking.
§ 86.1. (definition of ''operational area'')
The term ''operational area'' is being added to § 86.1 to help clarify the amendments to § 86.17(e) concerning the manner in which the reclamation fee is assessed in the context of a CBS. Following conversion to the CBS, the Department's practice has been to assess the per-acre reclamation fee on each acre of the approved operational area, as opposed to all acreage covered by the surface mining permit. Amendments to § 86.17(e) clarifying that the reclamation fee is assessed only for the operational area, and the definition for the term ''operational area,'' are being added in response to public comments regarding the Department's practice of assessing the reclamation fee and the textual ambiguities in § 86.17(e) created by the Department's conversion to the CBS.
§ 86.1. (definition of ''operation and maintenance costs'')
The term ''operation and maintenance costs'' is being added to § 86.1 to help clarify the amendments to §§ 86.17(e) and 86.187 concerning how certain moneys are to be used to treat discharges on a certain class of bond forfeiture sites--the ABS Legacy Sites. The definition for the term ''operation and maintenance costs'' is being added in response to public comments and comments of the MRAB.
§ 86.1. (definition of ''primacy alternate bonding system'')
The term ''primacy alternate bonding system'' is being added to § 86.1. The ABS Legacy Sites, which are the focus of the Kempthorne case and the public comments received in response to the proposed rulemaking, are a class of coal mine sites which were permitted under the ''primacy alternate bonding system'' and have certain additional characteristics described in the definition for ''ABS Legacy Sites.'' It is necessary to distinguish sites permitted under the Department's ABS from those converted to, or originally permitted under, the CBS to accurately identify the ABS Legacy Sites. It is also necessary to distinguish further between the ''primacy'' ABS and the alternate bonding system that was employed by this Commonwealth for surface coal mine sites prior to this Commonwealth obtaining primacy in July 1982, because the preprimacy ABS sites are not subject to the requirements of 30 CFR 800.11(e). This term and its definition are needed to accurately identify the class of mine sites being addressed by the amendments to §§ 86.17(e) and 86.187 made as part of this final-form rulemaking.
§ 86.1. (definition of ''recapitalization costs'')
The term ''recapitalization costs'' is being added to the list of terms in § 86.1. When calculating the costs to treat postmining pollutional discharges at mine sites in perpetuity, the Department must include an amount to cover the costs to replace discharge treatment facility components over time (as such components simply wear out or otherwise need to be replaced). It may also be cost effective to replace a particular treatment system with another system that costs substantially less to operate and maintain in the long run. This term is needed to assure that these specific equipment-replacement costs are identified as part of the ongoing costs for treating postmining discharges at the ABS Legacy Sites. Recapitalization costs are expressly included as part of the operation and maintenance costs for treating discharges at ABS Legacy Sites in changes being made to §§ 86.17(e) and 86.187.
§ 86.17(e). (reclamation fees)
The proposed rulemaking amended this subsection to discontinue collection of the per-acre reclamation fee for surface mining activities upon publication of the rulemaking as final in the Pennsylvania Bulletin. In response to public comments and the Third Circuit ruling in Kempthorne, and in accordance with the recommendation of the MRAB, the Department determined that the reclamation fee is an adjustable source of revenue that should be used to help cover the costs of treating discharges at the ABS Legacy Sites. Consequently, the Department decided not to repeal the reclamation fee as proposed. The final rulemaking retains the reclamation fee, and amends the text of § 86.17(e) to clarify the application of this subsection in the context of the CBS. The amended text clarifies that the fee is assessed for each acre of the approved operational area of the permit, reflecting the Department's current practice. The amendments that clarify the manner the reclamation fee is assessed were made in response to public comments concerning the Department's practice and the textual ambiguities in § 86.17(e) created by conversion to the conventional bonding system. Provisions in this subsection pertaining to deposit of the reclamation fee in the SMCR Fund and its use for reclaiming forfeited mine sites have been deleted and reworked into a new paragraph (1) which is being added in this final-form rulemaking. Finally, minor editorial changes were made by adding references to § 86.143 (relating to requirement to file a bond) and to the exception for remining areas provided in § 86.283(c) (relating to procedures).
§ 86.17(e)(1). (deposit and use of reclamation fees)
This provision, in conjunction with § 86.187(a)(1), establishes a separate subaccount within the SMCR Fund called the Reclamation Fee O&M Trust Account, and requires the Department to deposit all reclamation fees it collects into the Reclamation Fee O&M Trust Account. This subsection also requires that the Department use the reclamation fees only for the purpose of paying the costs associated with treating postmining pollutional discharges at ABS Legacy Sites. In addition, this paragraph requires that all interest earned on the moneys in the Reclamation Fee O&M Trust Account be deposited into the account and be used only to pay the costs associated with treating postmining pollutional discharges at ABS Legacy Sites. The name of this account reflects that it is a trust established by this rulemaking and that the funds contained in the account are held in trust by the Commonwealth for the benefit of the people to be used by the Commonwealth to treat postmining pollutional discharges at ABS Legacy Sites. In response to the public comments on the proposed rulemaking, and the Third Circuit ruling in Kempthorne, the Department determined that the reclamation fee is an adjustable source of revenue that should be used to help cover the costs of treating discharges at the ABS Legacy Sites. Moreover, to comply with the Court's ruling, the Department must identify and dedicate specified sources of revenue that will generate enough money to cover the costs for treating discharges at these sites. This subsection has been added to the final-form rulemaking as part of an enforceable regulatory mechanism for assuring that the Department always has sufficient funds to cover the costs of reclamation, including the costs of treating postmining pollutional discharges in perpetuity, at all the ABS Legacy Sites.
§ 86.17(e)(2). (preparation of fiscal-year report on Reclamation Fee O&M Trust Account)
This provision requires the Department to prepare a report after the end of each fiscal year containing financial analysis and projections of the revenues and expenditures of the Reclamation Fee O&M Trust Account. The report must be made available for review by the MRAB and the general public. This provision establishes a process by which the MRAB and the general public can examine the Department's expenditure of funds from the Reclamation Fee O&M Trust Account for the treatment of discharges at the ABS Legacy Sites, the amount of revenue deposited into the account during the prior fiscal year from the various dedicated revenue sources, and the projected expenditures and projected revenue. This provision will assist the OSM, the MRAB, affected persons in the industry, and interested members of the public, with their oversight of the Department's compliance with the requirements of 30 CFR 800.11(e) as applied to the ABS Legacy Sites, the Court ruling in Kempthorne, and the required program amendment in 30 CFR 938.16(h). The fiscal year-end report will also serve as the vehicle by which the Department will provide these same stakeholders with an opportunity to review and comment on the calculation of the amount of the reclamation fee under § 86.17(e)(3) and (4).
§ 86.17(e)(3). (amount of the reclamation fee)
The amount of the reclamation fee is currently set at $100 per acre. Section 86.17(e)(3) requires the fee amount to be maintained at $100 per acre until December 31, 2009. After this initial period at $100 per acre, the reclamation fee will be annually adjusted based on criteria specified in § 86.17(e)(3) and (4). Members of the regulated industry expressed their intention to seek the establishment of a permanent alternative funding source which could take the place of the reclamation fee by providing all the funds needed to pay the annual operation and maintenance costs for the ABS Legacy Sites. The MRAB recommended that the regulations include express provisions regarding the use of a permanent alternative funding source in lieu of the reclamation fee. In response to this recommendation of the MRAB and to comments made by the regulated industry on the ANFR, this section also includes provisions concerning the potential for a permanent alternative source of funding to be used in lieu of the reclamation fee--if that alternative funding source meets the conditions in § 86.17(e)(3)(i) and (ii). Section 86.17(e)(3) provides that the Department will begin annually adjusting the amount of the reclamation fee as of January 1, 2010, and will continue to do so, until either a permanent alternative funding source is established or the ABS Legacy Sites Trust Account becomes actuarially sound. Section 86.17(e)(3)(i) makes clear that the reclamation fee will be adjusted annually until the ABS Legacy Sites Trust Account is actuarially sound, unless a permanent alternative funding source in place of the reclamation fee is used to fund the Reclamation Fee O&M Trust Account. Section 86.17(e)(3)(ii) establishes the conditions that a permanent alternative funding source must meet before the reclamation fee could be discontinued and the permanent alternative source used in its stead. Such an alternative funding source must be permanent; must provide sufficient revenues to maintain a balance in the Reclamation Fee O&M Trust Account of at least $3,000,000; and, must provide sufficient revenue to pay the annual operation and maintenance costs for all the ABS Legacy Sites.
§ 86.17(e)(4). (amount of the reclamation fee)
The Department expects that the adjusted amount of the reclamation fee will become effective as of January 1, 2010, and will be similarly made effective on that date each year thereafter. Section 86.17(e)(3) sets the basic parameters for annually adjusting the amount of the reclamation fee, and § 86.17(e)(4) lists the specific factors to be used in the Department's calculation of the adjusted amount. Section 86.17(e)(3) requires that the reclamation fee be annually adjusted so as to ensure that there are sufficient revenues to maintain a balance of at least $3,000,000 in the Reclamation Fee O&M Trust Account. Following the close of the Commonwealth's 2008-09 fiscal year (in June 2009), the Department must prepare its year-end financial analysis of the Reclamation Fee O&M Trust Account under § 86.17(e)(2). The 2008-09 Fiscal-Year report must include the Department's calculation of the amount of the reclamation fee for the upcoming calendar year commencing on January 1, 2010. Section 86.17(e)(4) prescribes the factors to be used for making the calculation--essentially an analysis of the revenues and expenditures for the past year and projected revenues and expenditures for the current fiscal year.
The Department recognizes the reclamation fee as a flexible source of funding for the operation and maintenance costs associated with treating discharges at the ABS Legacy Sites. Section 86.17(e)(3) and (4) establishes a mechanism for annually adjusting the amount of the reclamation fee. The adjustment procedure is necessary to accommodate the fluctuations in the operation and maintenance costs for treating pollutional discharges at the ABS Legacy Sites that will occur over time. The adjustment procedure is also necessary to maintain a sufficient cushion in the Reclamation Fee O&M Trust Account to prevent pollution and assure that the Department has sufficient money at any time to treat the discharges at the ABS Legacy Sites. A flexible mechanism for adjusting the fee, up or down, will assure that the Department always has sufficient funds on hand to cover the costs of treating the discharges at all the ABS Legacy Sites--thereby enabling Pennsylvania's bonding program to meet the requirements of 30 CFR 800.11(e)--while simultaneously avoiding collection of excessive reclamation fee amounts from mine operators.
§ 86.17(e)(5). (publishing amount of the adjusted reclamation fee; calculation appealable)
Section 86.17(e)(5) is added to prescribe a procedure for the Department to publish the amount of the adjusted reclamation fee. The Department must review its calculation of the adjusted reclamation fee amount at a public meeting of the MRAB (most likely in October of each year), when the members of the MRAB, affected persons in the industry, and the general public, will have an opportunity to comment on the Department's financial report and its calculation of the adjusted amount of the fee. The Department will subsequently publish the adjusted amount of the reclamation fee in the Pennsylvania Bulletin, the adjusted amount to be effective upon publication. This provision also states that the Department's calculation of the adjusted reclamation fee is a final action appealable to the EHB, which the MRAB recommended be included as an express provision in the changes to the final-form rulemaking. Section 86.17(e)(5) balances the Department's need for a flexible mechanism to assure funding to treat discharges at the ABS Legacy Sites with the interests of the industry and the public in reviewing, commenting on, and challenging (before an independent forum) the Department's administration of the Reclamation Fee O&M Trust Account and the calculation of the new reclamation fee.
§ 86.17(e)(6). (conditions for ceasing collection of reclamation fee)
Section 86.17(e)(6) requires the Department to cease assessment and collection of the reclamation fee when the ABS Legacy Sites Trust Account, established under § 86.187(a)(i), is actuarially sound. The conditions which must be met for the ABS Legacy Sites Trust Account to become actuarially sound are prescribed here and in § 86.187(a)(2)(ii). The Department's current estimate of the annual operation and maintenance costs for treating the discharges at the ABS Legacy Sites is approximately $1.2 million. However, the ultimate annual amount for operation and maintenance costs may change significantly depending upon the number of additional underfunded sites which go into default and other relevant factors. When financial guarantees sufficient to cover reclamation costs have been approved for all mine sites permitted under the primacy ABS, no additional sites will need to be added to the class of ABS Legacy Sites. Once the Department completes construction of all necessary discharge treatment systems for all of the ABS Legacy Sites, the Department will ascertain the amount of annual operation and maintenance costs, including recapitalization costs, which will be necessary to treat the discharges at all of the ABS Legacy Sites. This provision allows the Department to cease collection of the reclamation fee when the ABS Legacy Sites Trust Account contains funds which generate interest at a rate sufficient to pay the annual operation and maintenance costs for treating postmining pollutional discharges at all the ABS Legacy Sites. At that point, the Department will always have sufficient funds on hand in the ABS Legacy Sites Account to cover the costs of treating the discharges at all the ABS Legacy Sites, and the Commonwealth will have met the requirements of 30 CFR 800.11(e) without the need for additional revenue from the reclamation fee.
§ 86.187(a)(1). (deposit of reclamation fee into Reclamation Fee O&M Trust Account)
This provision, in conjunction with § 86.17(e)(1), has been amended to establish a separate subaccount within the SMCR Fund called the Reclamation Fee O&M Trust Account, and to require that the reclamation fees collected by the Department under § 86.17(e) must be deposited into the Reclamation Fee O&M Trust Account. The provision also directs that the interest accrued on collected reclamation fees must be deposited into the Reclamation Fee O&M Trust Account. Section 86.187 (relating to use of money) specifies the purposes for which the Department must use moneys from fees, fines, penalties, bond forfeitures and other moneys received under PASMCRA, as well as interest earned on these moneys. By requiring through regulations that certain identified funding sources must be used to pay the costs of treating the discharges at the ABS Legacy Sites, the Department is establishing an enforceable regulatory mechanism for assuring that the Department always has sufficient funds to cover the costs of reclamation, including the costs of treating postmining pollutional discharges in perpetuity, at all the ABS Legacy Sites. The enforceable regulatory mechanism created by the amendments to the final-form rulemaking will enable the Commonwealth's bonding program to meet the requirements of 30 CFR 800.11(e).
§ 86.187(a)(1)(i). (deposit of civil penalties into Reclamation Fee O&M Trust Account)
Under section 18(a) of the PASMCRA, civil penalties collected under that statute may be used by the Department for reclamation of surface coal mine sites, restoration of water supplies affected by surface coal mining, or for any other conservation purposes provided by the PASMCRA. See 52 P. S. § 1396.18(a). The Department is thus authorized to use civil penalty moneys, as a supplement to forfeited bonds, for purposes of reclaiming the ABS Legacy Sites including treatment of postmining pollutional discharges at these sites. New § 86.187(a)(1)(i) will require the Department to deposit into the Reclamation Fee O&M Trust Account the moneys collected from civil penalties assessed under the PASMCRA, and to use those moneys deposited into the account to pay the costs associated with treating discharges at the ABS Legacy Sites. This provision responds to public comments on the proposed rulemaking regarding assurance of adequate funding to treat the discharges at the ABS Legacy Sites, as well as to the court ruling in the Kempthorne case regarding the obligation of the Department to meet the requirements of 30 CFR 800.11(e). To comply with the Court's ruling, the Department must identify and dedicate specified sources of revenue that combined will generate enough money to cover the costs for treating discharges at all the ABS Legacy Sites. This subsection identifies a source of revenue--civil penalties collected under the PASMCRA--and requires the Department to use this source of revenue to fund the discharge-treatment costs of the ABS Legacy Sites. As such, this provision is added to the final rulemaking as part of an enforceable regulatory mechanism for assuring that the Department always has sufficient funds to cover the costs of reclamation, including the costs of treating postmining pollutional discharges in perpetuity, at all the ABS Legacy Sites.
This provision recognizes that a percentage of the civil penalties collected must be allotted to the Environmental Education Fund by law. See 35 P. S. § 7528 regarding the environmental education fund. Section 86.187(a)(1)(i) also caps the amount of civil penalties that must be deposited into the Reclamation Fee O&M Account during a single fiscal year at $500,000. If the Department collects more than $500,000 in civil penalties during a fiscal year, § 86.187(a)(1)(i) gives the Department discretion to deposit the excess amount into the SMCR Fund where it may be used for the purposes described in § 86.187(a)(3).
§ 86.187(a)(1)(ii). (deposit of interest earned on other moneys in the SMCR Fund into the Reclamation Fee O&M Trust Account)
Similar to the deposit of civil penalties required by § 86.187(a)(1)(i), this section is being added to authorize the Department to deposit into the Reclamation Fee O&M Trust Account a portion of the interest which is earned on other moneys in the SMCR Fund. The SMCR Fund contains moneys from released bonds, license fees, and other sources; these moneys earn interest which may be used by the Department for the purposes specified by section 18(a) of the PASMCRA. See 52 P. S. § 1396.18(a) and; § 86.187(a). This provision identifies another source of revenue to be used to fund the discharge-treatment costs of the ABS Legacy Sites. Section 86.187(a)(1)(ii), like § 86.187(a)(i), is being added to the final-form rulemaking as part of an enforceable regulatory mechanism for assuring that the Department always has sufficient funds to cover the costs of reclamation, including the costs of treating postmining pollutional discharges in perpetuity, at all the ABS Legacy Sites. Notably, this provision gives the Department discretion as to the amount of the interest earned on other moneys in the SMCR Fund which will be deposited into the Reclamation Fee O&M Trust Account during any given fiscal year.
§ 86.187(a)(1)(iii). (deposit of other moneys into the Reclamation Fee O&M Trust Account)
Section 86.187(a)(1)(iii) will give the Department regulatory authority to deposit other monies from sources such as legislative appropriations or donations into the Reclamation Fee O&M Trust Account. In addition, in the event a change in the applicable law provides for it, this provision will give the Department regulatory authority to deposit into the Reclamation Fee O&M Trust Account the fees that will be collected for ''sum-certain financial guarantees needed to facilitate full-cost bonding'' (colloquially called ''conversion assistance financial guarantees'' or ''conversion assistance bonds''). Under section 213 of the General Appropriation Act of 2001 (P. L. 979, No. 2001-6A), the Legislature appropriated $7 million to the Department for purposes of establishing a financial guarantee program to assist with the conversion to full-cost bonding. Section 213 of the General Appropriation Act of 2001 also authorized the Department to collect fees for the conversion assistance financial guarantees issued by the Department as part of the program, although the law requires these fees be used to help finance reclamation of the sites participating in the conversion assistance financial guarantee program which have been forfeited. See General Appropriation Act of 2001 (P. L. 979, No. 2001-6A) in section 213 (appropriating $7,000,000 for ''the conservation purpose of providing sum-certain financial guarantees needed to facilitate full-cost bonding for a fee and, in the event of forfeiture, to finance reclamation of the forfeited surface mining site in an amount not to exceed the sum-certain financial guarantee''). In response to the recommendation of the MRAB, the Department added § 86.187(a)(1)(iii) to the final rulemaking to provide explicit regulatory authority for the Department to deposit moneys from other sources into the Reclamation Fee O&M Trust Account where the moneys will be used to fund the costs associated with treating discharges at the ABS Legacy Sites.
§ 86.187(a)(1)(iv). (restriction on use moneys in the Reclamation Fee O&M Trust Account)
Section 86.187(a)(1)(iv) specifies that all moneys deposited into the Reclamation Fee O&M Trust Account must be used to pay the costs associated with treating the postmining pollutional discharges at the ABS Legacy Sites. As with the other amendments to § 86.187(a)(1) added for the final-form rulemaking, this provision creates an enforceable regulatory mechanism for assuring that the Department always has sufficient funds to cover the costs of reclamation, including the costs of treating postmining pollutional discharges in perpetuity, at all the ABS Legacy Sites. As part of its approval of this final-form rulemaking, the MRAB recommended that the Department strengthen the text of the regulations to make it clear that the moneys in the Reclamation Fee O&M Trust Account and the ABS Legacy Sites Trust Account may only be used for the purpose of paying the costs associated with discharges at the ABS Legacy Sites. In response to the MRAB's recommendation, the Department is declaring through this final rulemaking that the Department is establishing the Reclamation Fee O&M Trust which is an account in the SMCR Fund. The Department has included language in § 86.187(a)(1)(iv) that specifically establishes the trust called the Reclamation Fee O&M Trust Account. This provision explicitly states that the moneys held in the Reclamation Fee O&M Trust Account are being held by this Commonwealth in trust for the benefit of all the people of the Commonwealth to protect their rights under Article I, § 27 of the Pennsylvania Constitution. The Commonwealth's exercise of its fiduciary duties to manage and use these moneys for the purposes specified will assure the Department has sufficient funds to cover the annual treatment costs at ABS Legacy Sites until the ABS Legacy Sites Trust Account is actuarially sound which will meet the court ruling in the Kempthorne case regarding the obligation of the Department to meet the requirements of 30 CFR 800.11(e).
§ 86.187(a)(2). (use of moneys received from forfeiture of bonds)
A minor editorial change is being made to this provision to clarify that moneys received from the Department's forfeiture of bonds on ABS Legacy Sites will be used to reclaim the land and restore water supplies affected by the surface mining operations upon which liability was charged on the bond, and, more specifically, in accordance with § 86.187(a)(2)(i) and (ii) which are being added as part of this final-form rulemaking.
§ 86.187(a)(2)(i). (deposit of moneys from bonds forfeited on ABS Legacy Sites into separate subaccount)
Section 86.187(a)(2)(i) establishes a separate subaccount within the SMCR Fund called the ABS Legacy Sites Trust Account. The moneys received from the bonds forfeited on ABS Legacy Sites, and all interest accrued on such moneys, must be deposited into the ABS Legacy Sites Trust Account according to new § 86.187(a)(2)(i). Section 86.187(a)(2)(i) will also provide regulatory authorization for the Department to deposit moneys from other sources, such as appropriations, donations, or interest earned on other moneys in the SMCR Fund, into this account. Finally, § 86.187(a)(2)(i) authorizes the Department to transfer ''excess'' moneys from the Reclamation Fee O&M Trust Account into the ABS Legacy Sites Trust Account, upon review and recommendation of the MRAB. The MRAB recommended that the Department's authority to transfer funds from the Reclamation Fee O&M Trust Account be limited to ''excess'' moneys in the Reclamation Fee O&M Trust Account. The MRAB did not explain what would constitute ''excess'' funds; this provision requires the Department to seek the MRAB's review and recommendation prior to transferring any ''excess'' funds. Section 86.187(a)(2)(i) responds to public comments on the proposed rulemaking regarding assurance of adequate funding to treat the discharges at the ABS Legacy Sites, as well as to the court ruling in the Kempthorne case regarding the obligation of the Department to meet the requirements of 30 CFR 800.11(e).
Section 86.187(a)(2)(i) will establish a kind of savings account for moneys ultimately to be used to pay the annual operation and maintenance costs associated with all of the ABS Legacy Sites. The Department currently has approximately $4.8 million in forfeited bonds held for primacy ABS forfeited discharge sites; these funds will constitute the initial principal in the ABS Legacy Sites Trust Account. Section 86.187(a)(2)(iii), discussed as follows, prohibits the Department from making any disbursements from the ABS Legacy Sites Trust Account until the account becomes actuarially sound. The Reclamation Fee O&M Trust Account will be used to pay the ongoing operation and maintenance costs on a pay-as-you-go basis, while funds in the ABS Legacy Sites Trust Account accumulate from earned interest and other potential income sources. The amendments to § 86.17(e) in this final rulemaking will enable the Department to annually replenish and maintain funds in the Reclamation Fee O&M Trust Account sufficient to cover the annual operation and maintenance costs for treating discharges at the ABS Legacy Sites for the foreseeable future. In the meantime, the ABS Legacy Sites Trust Account will grow to the point that the interest earned on that account will be enough to cover all the annual operation and maintenance costs for the ABS Legacy Sites, without the need to generate any additional revenue from other sources such as the reclamation fee.
§ 86.187(a)(2)(ii). (restriction on use of moneys in ABS Legacy Sites Trust Account)
This provision requires that all moneys deposited into the ABS Legacy Sites Trust Account be used only to pay the operation and maintenance costs for treating discharges at the ABS Legacy Sites. As in § 86.187(a)(1)(iv), and in response to the MRAB's comments, the Department is declaring through this final rulemaking that it is establishing the ABS Legacy Sites Trust as an account in the SMCR Fund. The Department has included language in § 86.187(a)(2)(ii) that specifically establishes the trust called the ABS Legacy Sites Trust Account. This regulation explicitly states that all moneys deposited in the ABS Legacy Sites Trust Account are held by this Commonwealth in trust for the benefit of the people of the Commonwealth to protect their rights under Article I, § 27 of the Pennsylvania Constitution, and these funds may only be used to pay the costs associated with treating discharges at the ABS Legacy Sites. The Commonwealth's exercise of its fiduciary duties to manage and use these moneys for the purposes specified will assure the Department has sufficient funds to cover annual treatment costs at ABS Legacy Sites which will meet the court ruling in the Kempthorne case regarding the obligation of the Department to meet the requirements of 30 CFR 800.11(e).
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