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PA Bulletin, Doc. No. 97-1846



[25 PA. CODE CHS. 86--90]

Postmining Discharges; Licensing and Bonding

[27 Pa.B. 6041]

   The Environmental Quality Board (Board) by this order amends Chapters 86--90. The amendments implement provisions of the Surface Mining Conservation and Reclamation Act (SMCRA) (52 P. S. §§ 1396.1--1396.19a), concerning coal mine operator licensing, bonding, postmining polutional discharges and liability insurance.

   This order was adopted by the Board at its meeting of August 19, 1997.

A.  Effective Date

   These amendments will go into effect upon publication in the Pennsylvania Bulletin as final rulemaking.

B.  Contact Persons

   For further information contact Roderick A. Fletcher, P.E., Director, Bureau of Mining and Reclamation, P.O. Box 8461, Room 209 Executive House, Harrisburg, PA 17105-8461, (717) 787-5103, or Joseph Pizarchik, 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 by calling (800) 654-5984 (TDD users) or (800) 654-5988 (voice users). This proposal is available electronically through the Department of Environmental Protection (Department) Web site (

C.  Statutory Authority

   These amendments are adopted under the rulemaking authority of the following acts: sections 4(d), 4.2(a), 4.5(f) and 18.4 of SMCRA (52 P. S. §§ 1396.4(d), 1396,4b(a), 1396.4e(f) and 1396.18d); sections 5(b), 315(b) and 605(b) of The Clean Streams Law (35 P. S. §§ 691.5(b), 691.315(b) and 691.605(b)); section 3.2(a) of the Coal Refuse Disposal Control Act (52 P. S. § 30.53b(a)); section 7(b) of The Bituminous Mine Subsidence and Land Conservation Act (52 P. S. § 1406.7(b)); and under Article 1920-A of The Administrative Code of 1929 (71 P. S. § 510-20) which authorizes the Board to adopt regulations necessary for the Department to perform its work.

D.  Background and Purpose

   Advisory Committee Role in Development of the Regulations

   The Mining and Reclamation Advisory Board (MRAB) is the Department's advisory body for the purpose of developing and updating regulations pertaining to the surface mining of coal.

   Drafts of the proposed rulemaking were discussed with the MRAB in May and July 1994, and the MRAB concurred with the proposed changes. The Department reviewed the draft final rulemaking with the MRAB at its meeting on July 10, 1997. The MRAB recommended approval of the final rulemaking at that meeting.

   General Background

   These amendments implement various provisions of SMCRA, as amended by the act of December 18, 1992 (P. L. 1384, No. 173) (Act 173) and the act of May 22, 1996 (P. L. 232, No. 43) (Act 43). A summary of the revisions to specific sections of the regulations, along with relevant background information, follows.

   Mine Operator Licensing

   Act 173 expanded SMCRA to provide for licensing of underground coal mine operators, in addition to surface coal mine operators. Further clarifications in this regard were incorporated by Act 43. Act 173 also modified the fee structure for issuance and renewal of licenses. The provisions of §§ 87.11--87.21, have been appropriately modified and relocated to Chapter 86, in the form of a new Subchapter K, Mine Operator's License, §§ 86.351--86.359. In addition to these changes, a cross reference in § 86.195 (relating to penalties against corporate officers) has been updated to reflect the revised numbering system for the licensing regulations.


   Act 173 amended section 4(d) of SMCRA to expand the types of financial instruments which can now be used for bonding of coal mining and reclamation operations. Sections 86.142, 86.156 and 86.158 (relating to definitions; form of the bond; and special terms and conditions for collateral bonds) have been revised to reflect the acceptability of life insurance policies, annuities and trust funds as bonding instruments. Section 86.142 is revised to add definitions for ''annuity,'' ''trust fund'' and ''trustee.''

   Act 173 amended section 4(g) of SMCRA to allow a person having an interest in a bond, including the Department, to request bond release. Prior to this amendment, only the permittee could request bond release. Section 86.171(g) (relating to procedures for seeking release of bond) is revised to allow a person having an interest in a mine site bond to request bond release. The Department can initiate bond release in cases where the permittee (that is, mine operator) has neglected to do so. A surety company also could request bond release on behalf of a permittee if circumstances warrant.

   Act 173 amended section 4(h) of SMCRA to require the forfeited bonds to be paid to the Department within 30 days and require the Department to hold the money in escrow (including any accrued interest on the bonds) pending resolution of any appeals relative to the forfeiture action. Section 86.182 (relating to procedures) has been revised by adding a provision requiring a surety company to pay the amount of a forfeited surety bond to the Department within 30 days of notice of forfeiture. The bond will be held in escrow pending resolution of any appeals to the forfeiture action. Section 86.182 also reflects the surety's option to reclaim the mining activity site in lieu of paying over the bond amount to the Department.

   Bonding for Postmining Pollutional Discharges

   Acts 143 and 43 added provisions to SMCRA to allow for bond releases on permits where postmining pollutional discharges exist. This bond release would occur only upon the permittee or mine operator providing for the sound future treatment of the postmining discharges associated with the permit. One method for providing for the sound future treatment of a discharge would be to establish a site-specific trust fund to pay for the treatment.

   The proposed amendments, which appeared at 25 Pa.B. 5885 (December 16, 1995) contained language which reflected those provisions in the SMCRA. At the recommendation of the Department, that language has been removed from this final rulemaking, specifically, from §§ 86.142, 86.149, 86.152, 86.172 and 86.174. At the request of the MRAB, the Department has undertaken an evaluation of the overall environmental and economic costs associated with postmining pollutional discharges, including mechanisms to assure future treatment of postmining discharges. The results of this evaluation are expected to have a significant influence on how postmining discharges are addressed. The issue of treatment of postmining discharges is also engaging the attention of the Office of Surface Mining (OSM). The Department has recently had several discussions with the OSM personnel about this issue, and there is now the potential for changes in Federal oversight. Both of these activities--the work started at the request of the MRAB and the assessment at the Federal level--could result in approaches that are in conflict with the provisions as currently proposed. Consequently, the Department recommends that rulemaking on the subject be postponed until the evaluation is completed and clarification is obtained on the Federal thinking on this issue.

   The removal of language dealing with the sound future treatment of postmining pollutional discharges does not prevent the Department from entering into agreements with mine operators for the purpose of establishing site-specific trust funds to assure the long-term treatment of postmining discharges. Authority for these agreements is provided by the Acts 173 and 43 amendments to SMCRA.

   Definitions have been added to § 86.1 for ''postmining pollutional discharge'' and ''passive treatment system.''

   Sections 86.151(b), (c) and (j) and 86.152(b) (relating to period of liability; and bond adjustments) have been revised to clarify the concepts of bonding, period of liability and bond adjustment where postmining pollutional discharges exist.

   Section 86.171(b) has been revised to require anyone seeking bond release to state whether any postmining pollutional discharges have occurred and to describe the type of treatment provided for the discharges. Section 86.175 has been rewritten with simpler language and appropriate cross references to §§ 86.171 and 86.174 (relating to procedures for seeking release of bond; and standards for release of bonds).

   Technology-Based Effluent Requirements for Postmining Pollutional Discharges

   New §§ 87.102(e), 88.92(e), 88.187(e), 88.292(e), 89.52(f) and 90.102(e) have been added to clarify the technology-based effluent requirements for postmining pollutional discharges for various types of coal mining activities, both in general and where the discharges can be adequately treated using passive treatment.

   As pointed out in the preamble language for the proposed rulemaking, these new provisions do not preempt the continuing regulatory provisions that would require a more stringent degree of treatment where necessary to protect the water quality of the receiving stream.

   Other Changes Not Related to Act 173 and Act 43


   Section 86.157 (relating to special terms and conditions for surety bonds) has been revised to clarify when the Department will accept a bond which is in excess of the surety company's maximum single risk exposure.

   Section 86.158(c)(6) (relating to special terms and conditions for collateral bonds) has been modified to eliminate a restriction on accepting certificates of deposit from only Commonwealth chartered banks. Certificates of deposit will now be accepted from banks chartered in the United States.

   Section 4(e) of SMCRA provides under certain circumstances, that the Department may allow an operator to use a phased deposit of collateral bond over a period of 10 years. Section 4(e) of SMCRA also requires that interest accumulated by the collateral shall become a part of the bond. The purpose of this requirement is to help the operator to achieve the full bond amount and to offset some of the risk associated with allowing phased depositing of a collateral bond. Accordingly, § 86.161(3) (relating to phased deposits of collateral) has been amended to state that interest accumulated by the phased deposit of collateral shall become a part of the bond.

   Liability Insurance

   Under section 3.1(c) of SMCRA coal mining operators are required to maintain a general liability insurance policy. The purpose of having the insurance is to provide financial protection to the public and the operator against liability such as damage from blasting, water supply loss or degradation, personal injury or other property damage.

   Changes have been made to § 86.168 (relating to terms and conditions for liability insurance) to clarify various provisions concerning terms and conditions for liability insurance; to increase the minimum amounts of insurance coverage for bodily injury and property damage; and procedures for suspending mine operator licenses and mining activity permits for failure to maintain the insurance.

E.  Summary of Comments and Responses on the Proposed Rulemaking

   The proposed rulemaking was published at 25 Pa.B. 5885. The public comment period expired on February 14, 1996. Public hearings on the proposed rulemaking were held on January 22, 1996, and January 24, 1996.

   Written comments were received from six commentators and the Independent Regulatory Review Commission (IRRC). A detailed description of comments, along with responses, is contained in the Department's Comment and Response Document which is available from the Bureau of Mining and Reclamation at the address shown in Section B of this Preamble.

   The following abbreviations and acronyms are used to facilitate discussion of comments and responses:

   SMCRA--The Surface Mining Conservation and Reclamation Act

   Act 43--The 1996 amendments to SMCRA

   Act 173--The 1992 amendments to SMCRA

   EPA--The United States Environmental Protection Agency

   OSM--The Office of Surface Mining Reclamation and Enforcement, United States Department of the Interior

   The sections of regulations which are being revised, along with a discussion of comments and responses, are presented in the sequence in which they appear in the proposed rulemaking.

Chapter 86--Surface and Underground Coal Mining: General

Subchapter F--Bonding and Insurance Requirements

§ 86.142.  Definitions.


   Although no comments were received on this definition, it has been revised to reflect the more common definition of the term ''annuity.''

''Minimal-Impact Postmining Discharge''

   Commentators suggested various changes to the wording of this definition. In conjunction with changes to §§ 86.152 and 86.174, the term ''minimal-impact postmining discharge'' is being deleted from the final rulemaking for two reasons. First, the concept of ''minimal-impact postmining discharge'' was incorporated into Act 173 as an interim step in order to describe applicable bonding and treatment requirements prior to the development of regulations. Second, the term ''postmining pollutional discharge'' actually encompasses ''minimal-impact postmining discharges'' and it is not necessary to mention both terms when describing the applicable bonding and treatment requirements in the regulations.

''Passive Treatment System''

   One commentator suggested that the definition be modified by adding the word ''physical'' as an example of treatment, and deleting the wording after ''Department'' in order to provide more flexibility to determine what constitutes passive treatment technology.

   Modifications are not possible since the language of the proposed definition tracks the definition language in section 3 of SMCRA, and is flexible enough to allow the Department to consider additional examples of passive treatment technology. This definition has been relocated to § 86.1 because of its general applicability to Chapters 87--90.

''Postmining Pollutional Discharge''

   This definition has been modified to incorporate ''minimal-impact postmining discharge,'' as discussed above. References to §§ 87.207 and 88.507 have been deleted to avoid confusion with preexisting pollutional discharges. This definition has been placed in § 86.1 because of its use in Chapters 87--90.

§ 86.149.  Determination of Bond Amount.

   Commentators expressed concern that the new provision in § 86.149(b)(6) to include the cost for treating postmining discharges for at least 50 years is excessively burdensome on the coal mining industry by making it very difficult, or impossible, to obtain the necessary surety bond amount. One commentator questioned the need for a requirement in view of the Department's prohibition on issuing mining activity permits where there is presumptive evidence of pollution of waters of this Commonwealth, and that SMCRA allows for other forms of security (for example, site specific trust funds) to address financial liability. Concern was expressed over the impact of this regulation on small operations in the anthracite region and it was suggested that the Department and the Legislature revise Act 173 as it pertains to the anthracite region.

   One commentator suggested that it is not appropriate to consider contingency costs under § 86.149(b)(6)(v) since they are not really quantifiable over the long term, nor are they necessary if construction and operational costs are known.

   IRRC supported the concerns and suggested that the provisions of § 86.149(b)(6) be relocated to § 86.174 (standards for release of bond).

   IRRC also recommended either deleting the contingency factor or, if kept, justifying its inclusion.

   Although the proposed amendments to this section have been removed from this final rule, the Board believes that a response to the comments on this section is warranted.

   The Board agrees that the language in proposed § 86.149(b)(6) was in the wrong place and could be interpreted as a presumption, at the time of permit issuance, that postmining pollutional discharges may occur. This would contradict the intent of SMCRA and § 86.37. The Board also agrees that the use of a contingency factor would be inappropriate. The Board acknowledges the concern of the anthracite industry; however, the concern may be largely unwarranted due to the nature of anthracite mining activities.

§ 86.151.  Period of Liability.

   The proposed language in § 86.151(c) states that, for coal refuse disposal activities, the period of liability for the bond related to risk of water pollution will be determined by the Department on a case-by-case basis. A member of the IRRC staff asked what factors would be used in making this determination.

   Coal refuse disposal operations are long-term facilities. Many of the existing operations have been active for 10 to 20 years. Almost all will have postclosure pollutional discharges. The size and quality of a discharge and the length of time for the discharge to stabilize depends on, among other things, the chemical and physical character of the coal refuse and its degree of hydrologic isolation.

   The Department's determination of the period of liability for risk of water pollution will be based on an evaluation of the factors which affect the discharge. Specific factors which may be considered include the surface contours of the coal refuse and adjacent land, the permeability of the cover material, the compaction of the coal refuse, the acid-producing potential of the coal refuse, and the presence and adequacy of liners and underdrains which isolate the refuse from groundwater. These and other factors vary considerably between coal refuse disposal sites. § 86.152.  Bond Adjustments.

   One commentator and IRRC noted that the original language in § 86.152(a) allows the Department to require permittees to post additional bond for any changes in cost of reclamation, restoration or abatement work. This would not make sense where the costs would decrease. This needs to be clarified.

   Section 86.152(a) has been revised to more clearly tie the increase in bond required to increased reclamation, restoration or abatement costs, and the discretionary term ''may'' has been restored.

§ 86.156.  Form of the Bond.

   One commentator suggested that the revised language of § 86.156(b) implies that the financial institution must issue all of the financial instruments listed, which would not make sense.

   This has been clarified in the final-form regulations.

§ 86.157.  Special Terms and Conditions for Surety Bonds

   No comments were received on this section; however, paragraph (8) has been revised to reflect the surety's option under SMCRA, subject to the consent and approval of the Department, to carry out the permittee's reclamation obligations in lieu of paying over the bond to the Department as part of a bond forfeiture action.

§ 86.158.  Special Terms and Conditions for Collateral Bonds.

   No comments were received on this section; however, a new § 86.158(f)(4) has been added to more clearly indicate that trust funds and annuities are intended to serve a public purpose and not to accrue in value to the benefit of the mine operator. This clarification is aimed at addressing potential concern over the taxability of investment proceeds of trust funds and annuities.

§ 86.159.  Self-Bonding.

   Although this section of the regulations was not included in the proposed rulemaking, one commentator suggested that self-bonding be allowed for addressing long-term liability for treating postmining discharges. The commentator stated that there are probably six or fewer mining companies that could generally qualify for self-bonding under the rigorous criteria of § 86.159, and the regulatory safeguards such as annual reevaluations do protect the interests of the Department.

   The specific provision in question is contained in § 86.159(a) and states that: ''The Department may accept a self-bond to cover all or part of the permittee's liabilities arising from coal mining activities. The Department will not accept a self-bond covering long-term indeterminate liabilities. These liabilities include, but are not limited to, obligations to treat discharges from mining activities which exist after completion of mining and reclamation activities....''

   Self-bonding is a nontraditional alternative to the use of surety or collateral bonds. Under self-bonding, the Department does not retain a specific bond instrument which is set aside to cover the cost of future reclamation. This approach relies upon the presumption that the self-bonded entity will continue in business and remain financially viable during the time period associated with the reclamation liability. There are currently no mine operators using self-bonding, presumably due to the rigorous qualification criteria under § 86.159.

   The proposed regulations did not include changes to the self-bonding regulations. The nature of the change proposed by the commentator should not be made without the opportunity for public comment and is not reflected in this final rulemaking. The Department is evaluating this and several other aspects of the self-bonding regulations under its Regulatory Basics Initiative.

§ 86.161.  Phased Deposits of Collateral.

   No comments were received on this section.

§ 86.168.  Terms and Conditions for Liability Insurance.

   One commentator stated that the proposed remedy in § 86.168(f) of issuing a license or permit suspension if a permittee fails to maintain insurance is unreasonable. As written, the Department could suspend a license or permit immediately upon termination of insurance, even if the termination is beyond the control of the permittee, such as when the insurance carrier goes out of business or cancels the policy. The commentator suggested that § 86.168(f) be revised to provide that the Department will issue notice of intent to suspend a license or permit based upon termination of liability insurance.

   The Board agrees and appropriate changes have been made in the final rulemaking. The revised language of § 86.168(f) reflects the longstanding practice of the Department to first notify the permittee or licensee of the lapse in insurance coverage and to provide time to correct the situation prior to suspending the license or permit.

86.171.  Procedures for Seeking Release of Bond.

   One commentator suggested that the requirement under § 86.171(b)(6) for identifying postmining discharges in the newspaper public notice for bond release needs to be clarified as to the level of detail needed.

   Clarifications have been made in the final rulemaking to require a statement as to whether any postmining pollutional discharges have occurred and a description of the treatment provided.

§ 86.172.  Criteria for Release of Bond.

   No comments were submitted on this section. However, the proposed amendments to this section have been removed from this final rule as explained in Section D of this Preamble.

§ 86.174.  Standards for Release of Bonds.

   With the exception of a minor change to the title of § 86.174(d), all proposed amendments have been withdrawn. However, the Board believes that a summary of the comments it received and its general response may be of value.

   One commentator felt that § 87.174(a)--(c) should be further amended by adding the words ''if such discharges exist'' following the new language concerning long-term liability for postmining discharges. The commentator and IRRC also stressed the importance of allowing other forms of financial assurances, besides trust funds, to provide for the long-term liability. The Board agrees that these clarifications would have been appropriate. However, the proposed amendments to these subsections have been withdrawn as indicated.

   Relative to the proposed language in § 86.174(d)(3), one commentator expressed concern that the Department is being overly conservative in its evaluation of the long-term annual inflation and annual investment interest rates which are to be used in calculating the initial amount of the trust fund to cover the 50-year cost of treatment for postmining discharges. The commentator evaluated these rates during a 14-year time frame between 1981 and 1995 (a period of ''modest inflation'') and pointed out that the average long term interest rate (yield on 30-year U.S. Treasury Bonds) was 9.3%. The interest rate was at or below 7% for only about 10% of this time period. The commentator also stated that general inflation during this same period of time as measured by the Implicit Price Deflator for Gross Domestic Product/Gross National Production averaged 3.4% per year. The annual inflation exceeded the 4% level in only 3 of those 14 years, or approximately 20% of the time. Based on the information the commentator believes that the ''real interest rate'' (the difference between investment interest and inflation rates) was 6% (for example, 9.3-3.4) during this 14-year period, but suggested a 5% figure to represent this difference.

   IRRC expressed similar concerns over the interest and inflation rates, and the historic time frame used in developing values for these rates. IRRC also indicated that there may be more appropriate construction cost indices which could be used to estimate inflation for future treatment costs. The commentator also suggested that the two equations used to develop the present value of future treatment costs could be simplified further by plugging in the respective values of (i), (E), (a) and (n) or that the values of (i) and (E) be based on definable indices instead of being fixed by regulation.

   These comments pertain to the provisions for determining the amount of financial assurance needed to provide for the sound future treatment of postmining discharges. The Board agrees that the proposed annual rate of inflation and the annual investment interest rate were too conservative and that definable indices should be used for these factors. However, the proposed amendment to § 86.174(d)(3) has been withdrawn as indicated.

§ 86.175.  Schedule for Release of Bonds.

   No comments were received on this section.

§ 86.182.  Procedures (for bond forfeiture).

   One commentator and IRRC noted that § 86.182(a)(3) ignores the option available to a surety company, under section 4(h) of SMCRA, to reclaim a bond forfeiture mining activity site in lieu of paying over the bond amount to the Department, and that this section should be revised to reflect that option.

   Clarifying language has been added in the form of new § 86.182(d) to reflect this option and to provide some specific structure to the procedure for exercising this option.

§ 86.195.  Penalties Against Corporate Officers

   No comments were received on this section.

§ 86.351.  License Requirement.

   No comments were received on this section. A minor clarification has been made.

§ 86.352.  Mine Operator's License Application.

   No comments were received on this section.

§ 86.353.  Identification of Ownership.

   One commentator pointed out that some of the informational requirements of this section appear more appropriate for submittal with permit applications and requested deletion of those items from the regulation.

   This section has been revised by deleting information which is applicable only to permit applications.

§ 86.354.  Public Liability Insurance.

   No comments were received on this section.

§ 86.355.  Compliance Information.

   No comments were received on this section; however, this section has been deleted since the information it requires is applicable only to permit applications.

§ 86.356.  Criteria for Approval of Application.

§ 86.357.  License Renewal Requirements.

§ 86.358.  Informal Conference.

§ 86.359.  Suspension and Revocation.

   No comments were received on § 86.358. One commentator and IRRC requested that §§ 86.356, 86.357 and 86.359 be rewritten to be specific to surface mine operators, to reflect the Act 43 amendments to SMCRA which were pending at the time of this comment. This was also based on the commentator's understanding of the original intent of Act 173 which, for the first time, provided for licensing of underground mine operators. Additionally, IRRC recommended that § 86.359 be revised to identify specifically those violations which will result in revocation or suspension of a license.

   The Act 43 amendments revised section 3.1(b) of SMCRA to clarify that the requirements for compliance with SMCRA, regulations and orders of the Department as a prerequisite to license issuance and renewal pertains only to surface mine operators. Appropriate changes have been made to §§ 86.356 and 86.357 in that regard. However, neither Act 43 nor Act 173 affected section 4.3 of SMCRA which provides for suspension or revocation of licenses. Consequently, § 86.359(a) has only been revised, as recommended by IRRC, to further identify specific violations which will result in revocation or suspension of licenses.

   It should be noted that, although § 86.359(a) lists a variety of causes for the Department to suspend or revoke a license, historically the Department has only done so as a last resort prior to, or in conjunction with, a bond forfeiture action. Consequently, subsection (a)(1) which refers to notice of violation has been deleted. The Board further notes that the factor most frequently contributing to bond forfeiture is bankruptcy of the operator and abandonment of all of the operator's mining activities.

§ 86.360.  Fees.

   IRRC suggested that this section either be revised to clarify the conditions under which a license fee is refundable, or that subsection (b) be deleted.

   The Board agrees that clarification of subsection (b) is warranted and has revised it accordingly.

Chapter 87--Surface Mining of Coal

Subchapter E--Surface Coal Mines: Minimum Environmental Protection Performance Standards

§ 87.102.  Hydrologic Balance: Effluent Standards.

§ 87.102(e).  Postmining Pollutional Discharges.

   Several comments were received on this portion of the proposed rulemaking. Although most comments focused on § 87.102, they would be equally relevant to the proposed changes in §§ 88.92 and 88.187. Several revisions to these provisions have been made in response to the comments received, as noted. In response to comments from IRRC §  87.102(e)(1) and (2) and related subsections have been rewritten to lay out a more straightforward approach for mine operators to follow when a postmining pollutional discharge occurs.

   Several commentators expressed concern that the description of discharges amenable to passive treatment in proposed § 87.102(e)(2)(ii) would overlook other categories of discharges which are being successfully remediated with passive treatment technology. One commentator also questioned the need for category (B) of this subsection, since that category would be already included in category (C).

   The description of categories (A) and (B) was drawn from the authorizing language in section 4.2(j) of SMCRA. Adjustments have been made in the language of the final rulemaking to allow for other discharges to be considered for passive treatment.

   Several commentators and IRRC questioned the percent-reduction approach expressed in proposed § 87.102(e)(3)(i), since it could result in more stringent effluent requirements for iron than the current Group A limitations which are based on Federal EPA regulations. Two commentators requested that a lesser reduction be allowed so long as the Group A limit for iron is achieved. One commentator suggested a specific revision to (i) to read: ''The system shall reduce iron concentration by at least 70% provided that the effluent limit shall not exceed 10 mg/l or be more stringent than the Group A effluent requirements for iron in subsection (a).'' One commentator suggested adopting a pollutant loading reduction approach, which would also take into consideration seasonally or intermittently high flow periods. Another commentator further suggested that the iron loading requirements be based upon the reduction needed to protect the water quality of the receiving stream.

   It must first be noted that this particular regulation is intended to address technology-based effluent requirements for pollutant reduction, and that the commentator's concern over water quality-based pollutant load reduction is already addressed under § 87.102(f). The Board agrees that the proposed percent reduction requirements may impose unnecessary costs in some cases, by requiring an effluent quality which is better than the current Group A limits for iron. The language in § 87.102(e)(3)(i) has been modified to reflect a more simplified percent-reduction approach. It should also be kept in mind, however, that more stringent treatment may be required where necessary to protect receiving stream water quality.

   In regard to proposed language in § 87.102(e)(3)(ii), that the passive system must produce an effluent alkalinity which exceeds the effluent acidity, one commentator noted that effluent acidity associated with unoxidized manganese (for example, mineral acidity) is not chemically available. This should perhaps be taken into account when a passive system is having difficulty achieving a net alkalinity due to the level of unoxidized manganese present.

   As a general rule, the presence of unoxidized manganese should not be a problem. The Department's analysis of wetlands, which was described in the Preamble for the proposed regulations, included discharges containing acidity due to unoxidized manganese. The conclusion from the analysis is that a properly sized and constructed wetland can be expected to produce an effluent alkalinity greater than effluent acidity.

   Section 87.102(e)(4)(v) has been rewritten to be grammatically consistent with the other subparagraphs.

   With regard to proposed § 87.102(e)(5), two commentators expressed concern that, under some circumstances, passive treatment may prove to be effective but cannot be maintained for a 25-year period (either because of size or maintenance constraints, or both, arising from precipitate accumulation). They suggested that systems with shorter design lives be allowed. Revised language has been included to address this concern.

   IRRC reflected the concern of the above commentators on the useful life of treatment facilities, but further pointed out that Act 173 did not specify such a design criterion and suggested that this portion of the regulation be made more consistent with Act 173.

   Although Act 173 is silent on this aspect, the Department believes it is important to have a criterion of this nature since these systems are intended to function for long periods of time without regular maintenance.

   Two commentators questioned the provision in § 87.102(e)(6) which would only allow qualified licensed professionals to design and supervise the construction of passive treatment systems. This could exclude many highly experienced, qualified persons who are fully capable of doing so but who have had educational and professional backgrounds (for example, environmental science, biology and the like) for which there is no licensing mechanism.

   The Board agrees and has modified the language in this subsection.

   One commentator suggested adding a provision to the regulations which allows the Department to amend effluent limits for postmining discharges with passive treatment systems operating in compliance with the requirements in § 87.102(e) and related sections of other chapters.

   The language in subsection (e)(1) and (2) would allow for the permit amendments to be made.

   One commentator questioned why the Department had not proposed alternative effluent limitations in Chapters 89 and 90 (relating to underground mining of coal; and coal refuse disposal). The commentator pointed out that discharges from the activities are covered under the definition of ''surface mining activities'' in SMCRA.

   In originally proposing the changes to Chapters 87 and 88, the Department was focusing upon surface mining operations, which have historically been the source of most postmining discharges for which passive treatment appears to be a viable long-term treatment process. In response to the commentator's concern, the Department reviewed EPA's effluent limitation guideline regulations for coal mining activities (40 CFR 434) and discussed this question with EPA personnel familiar with 40 CFR 434.

   The effluent limitation provisions for the postmining activity discharges, as outlined in 40 CFR 434, apply up until the time of bond release under Federal SMCRA. When EPA originally developed 40 CFR 434, it was with the firm understanding that SMCRA bond release occurs once mining and reclamation activity (backfilling, regrading, mine sealing, structure demolition and revegetation) was complete. EPA also assumed that postmining discharges might occur during the interim time frame between cessation of active mining and release of bonds, but did not contemplate postmining discharges existing after that point in time. The best professional judgment (BPJ) analysis which the Department carried out relative to postmining discharges from surface mining activities would be generally relevant to any other type of postmining discharge which can be adequately treated using passive treatment technology. Based on these considerations, the Department believes that this BPJ rulemaking process can be extended to cover postmining pollutional discharges from underground mining activities and coal refuse disposal operations, where discharges can be adequately treated using passive treatment. Appropriate changes are therefore being made to §§ 88.292, 89.52 and 90.102 (relating to anthracite refuse disposal activities; bituminous underground mining; and bituminous coal refuse disposal). Anthracite deep mining activities are addressed through existing cross references in § 88.493 to § 89.52.

   One commentator expressed concern over the impact of these postmining discharge bonding and treatment requirements to preexisting discharges in the anthracite region of this Commonwealth.

   Neither Act 173 nor the proposed rulemaking were aimed at making operators suddenly liable for discharges which existed prior to commencement of mining activities. The mechanisms to address the preexisting discharges are contained in Chapter 87, Subchapter F and Chapter 88, Subchapter G. The discharges are a separate category of regulated activity.

   One commentator also expressed concern that the proposed definition of ''postmining pollutional discharge'' refers to ''mine drainage'' which does not comply with applicable requirements of § 87.102 and the like. The commentator further pointed out that some naturally-occurring waters in the anthracite region exhibit some characteristics of ''mine drainage'' and was concerned that these regulations would create liability on the part of anthracite mine operators for discharges of naturally-occurring waters.

   The definitions in section 3 of SMCRA and § 86.142 are not intended to create liabilities. The definition of ''postmining pollutional discharge'' in § 86.142 has been modified to delete reference to §§ 87.207 and 88.507 which relate to preexisting discharge situations.

F.  Benefits, Costs and Compliance

   Executive Order 1996-1 requires a cost/benefit analysis of the proposed regulations.


   Mine Operator Licensing

   SMCRA has required licensing of surface mine operators for many years. Under the Act 173 amendments to SMCRA, underground mine operators must also be licensed. The licensing and annual license renewal process is also used to obtain updated ownership and control information for each mine operator, as required by OSM's regulations. This is convenient for operators and the Department. The new licensing provisions will also increase revenues to the Surface Mining Reclamation and Conservation Fund by approximately $30,000 per year. This will help the Department in carrying out a remining incentives program under the Act 173 amendments to SMCRA.

   New Bond Instruments

   By including certain types of life insurance policies, annuities and trust funds as acceptable forms of bonding, the Department is providing mine operators with more flexibility to address their financial obligations under SMCRA. Also, the use of annuities and trust funds will greatly enhance the Department's ability to ensure long-term funding for treatment of postmining discharges of mine drainage from various types of coal mining activities.

   Bond Release--General

   The primary benefit of these changes is to allow the Department, or a third party (such as a surety company), to initiate the bond release process if the permittee (that is, the mine operator) has not. The Department is currently holding bonds for many mine sites eligible for bond release, but cannot release the bonds because the permittee has not made a request. The primary beneficiaries of these changes will be banks and surety companies which have been maintaining those bond instruments. This will also enable the Department to reduce its inventory of releasable bond instruments.

   Phased Deposit of Collateral Bond

   Under the proposed rulemaking, a permittee would no longer be able to receive the interest accruing on phased deposits of collateral as it accrues. The interest would become part of the bond. On the other hand, by having the accrued interest retained along with the collateral on deposit with the Department, the process of achieving the full bond amount will be expedited.

   Escrow of Forfeited Surety Bond

   In the past, when a surety company had appealed a bond forfeiture it was able to retain the bond principal (and accrued interest) during the course of appeal proceedings and negotiations. The Act 173 amendments require that the bond principal be turned over to the Department to be placed in an interest bearing escrow account. The Department is now entitled to retain the interest if the surety company loses the appeal. If the surety company prevails, the bond principal and accrued interest will be paid to the surety company. The Department expects that this proposed new procedure will help both to resolve the appeals, and to achieve the necessary degree of site reclamation in a more timely fashion.

   Liability Insurance

   The proposed amendments to the insurance regulations will help insure that the public is adequately covered against loss, damage or bodily injury. The proposed amendments will require that the insurance company provide the Department with a notice prior to the termination or nonrenewal of a policy. This will provide the Department and the mining industry with more time to rectify the problem or to find a replacement policy without a lapse in coverage. The increases in insurance coverage dollar amounts will benefit both the industry and the public.

   Technology-Based Effluent Requirements for Postmining Pollutional Discharges

   Passive treatment technology is a cost-effective environmentally-sound approach to achieve technology-based effluent requirements. It will greatly reduce the long-term (50 year) treatment costs for postmining discharges and related bond amounts which must be posted by operators.

   Passive treatment may not be an option in some cases, particularly where the relative size and quality of the discharge and the receiving stream would necessitate more stringent effluent requirements. In these cases, more conventional mine drainage treatment techniques would be needed.

   In developing this aspect of the proposed rulemaking, the Department prepared a technical report entitled, ''Best Professional Judgment Analysis for the Treatment of Postmining Discharges From Surface Mining Activities'' (8/94). In that report comparisons were made between the annual 25-year costs of conventional treatment versus passive treatment.

   Based on those comparisons, the annual 25-year cost of passive treatment is expected to be between 15-50% of the cost of conventional treatment. For more acidic postmining discharges the initial cost of constructing a passive treatment system may be significantly higher than for a conventional system, but the annual operation and maintenance costs are substantially lower for a passive treatment system. For less-acidic postmining discharges, the construction costs are comparable. For alkaline postmining discharges the construction cost for passive treatment could be lower than for conventional treatment.

   Based on the number of older mining activity sites with postmining discharges, and the Department's general estimates of the costs of treatment for those discharges, it would appear that the use of passive treatment technology could save between $9.1-15.4 million in annual treatment costs.

   Compliance Costs

   Mine Operator Licensing

   As described under the Benefits section of this Preamble, the new licensing provisions are expected to impose additional costs upon licensed coal mine operators of approximately $30,000 per year. Many small anthracite mine operators will experience a subsequent drop in fee from $500 to $50 for a new license and from $300 to $50 for renewal. Most bituminous surface coal mine operators will experience no increase in initial license fee and a $200 increase in license renewal fee. Bituminous underground operators will now pay $1,000 for both their initial license and annual license renewal.

   New Bond Instruments

   There are no additional costs associated with these provisions.

   Bond Release--General

   There are no additional costs associated with these provisions.

   Bonding and Bond Release for Postmining Discharge Situations

   As described in the Preamble to the proposed rulemaking (25 Pa.B. 5885) the problem of postmining pollutional discharges is primarily a historic problem associated with coal mining activity permits issued prior to the mid-1980's. Many mine operators which originally had sites with postmining pollutional discharges have since abandoned those sites and have forfeited whatever reclamation bonds were associated with those sites. Those operators are no longer allowed to mine coal in this Commonwealth or in any other state. These amendments will, therefore, not have a direct impact on those operators.

   Other operators with older sites having postmining discharges have elected to continue in the coal mining business and have been continuously treating their discharges in order to avoid bond forfeiture and to retain the legal ability to obtain new permits. There are currently about 130 operators in this situation It is these operators who will continue to experience the financial impact of treating postmining discharges. Since the proposed language dealing with bond releases for postmining discharges has been removed from final rulemaking, there will be no change in compliance costs.

   Phased Deposit of Collateral Bond

   These revisions are not expected to have a significant economic impact upon the mining industry, and may actually help certain operators to more quickly achieve the goal of phased deposit of collateral bond.

   Escrow of Forfeited Surety Bond

   These revisions should not impose an economic impact on the surety industry.

   Liability Insurance

   In conjunction with developing the proposed rulemaking, the Department made some inquiries and found that insurance companies assess premium costs in different ways. One company assesses its costs for the current insurance amounts at a minimum of $2,000 annually for up to 60,000 tons of coal mined, plus approximately $3.10 to $3.30 per 100 tons of additional coal mined. The premium cost for the new insurance amounts would be a minimum of $4,000 annually for up to 70,000 tons of coal mined, plus $3.10 to $3.30 per 100 tons of additional coal mined. A second company assesses premium costs based on payroll. For the current insurance amounts the cost would be $12 per $1,000 of payroll. For the proposed new insurance amounts the cost would be $13.851 per $1,000 of payroll.

   Technology-Based Effluent Requirements for Postmining Pollutional Discharges

   These amendments do not create new liability or new costs for mine operators with postmining discharges. The costs of achieving technology-based requirements for discharges which can be adequately treated using passive treatment technology are expected to be substantially lower than the corresponding costs to construct, operate and maintain conventional mine drainage treatment facilities. The primary reasons for this are the much lower operation and maintenance costs associated with passive treatment.

   Compliance Assistance Plan

   The Department expects to hold a series of meetings with the coal industry and other interested parties to review and discuss these amendments.

   The Department also anticipates organizing technical seminars for its own staff, the public and industry personnel to review various principles and practices associated with constructing, operating and maintaining passive treatment systems for postmining pollutional discharges.

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