Abandoned Mine Land Fund Reauthorization: Selected Issues

Order Code RL32373

CRS Report for Congress

Received through the CRS Web

Abandoned Mine Land Fund Reauthorization:

Selected Issues

Updated March 8, 2005

Robert L. Bamberger

Specialist in Energy Policy

Resources, Sciences, and Industry Division

Congressional Research Service ˜ The Library of Congress

Abandoned Mine Land Fund Reauthorization:

Selected Issues

Summary

The Surface Mining Control and Reclamation Act (SMCRA, P.L. 95-87),

enacted in 1977, established reclamation standards for all coal surface mining

operations and for the surface effects of underground mining. It also established the

Abandoned Mine Land (AML) program to promote the reclamation of sites mined

and abandoned prior to the enactment of SMCRA. To finance reclamation of

abandoned mine sites, the legislation established fees on coal production. These

collections are divided into federal and state shares; subject to annual appropriation,

AML funds are distributed annually to states with approved reclamation programs.

Since the program’s inception and through FY2004, collections have totaled $7.1

billion; appropriations from the fund have totaled $5.5 billion. The unappropriated

balance in the fund approached $1.7 billion at the end of FY2004. As of the end of

FY2004, roughly $1.1 billion of this sum is credited to the state share accounts, of

which nearly $430 million alone is in Wyoming’s account, because — even though

most of the sites awaiting cleanup are in the eastern part of the nation — coal

production has shifted westward. Consequently, the western states have been making

significantly larger contributions to the fund in recent years.

Authorization for collection of AML fees was scheduled to expire at the end of

FY2004, and was extended nine months to the end of June 2005 by the Consolidated

Appropriations Act for 2005 (P.L. 108-447) while Congress continued to debate

changes to the program. A number of bills were introduced during the 108th Congress

to reauthorize fee collections and make changes to the program that would address

concerns about the mechanics of the program, the fee structure, and the

unappropriated balances. A Bush Administration proposal (S. 2049/H.R. 3778)

proposed to refund, through a significant increase in appropriations, unobligated

state balances over a 10-year period. These balances would be returned to states and

Indian tribes that had completed reclamation of their Priority 1 sites. These states

would no longer receive grants from the AML fund itself, freeing up funds to be

targeted to states with sites awaiting cleanup.

House and Senate legislation — H.R. 3796 and S. 2086 — differed greatly in

some respects from the Administration proposal. These bills would have maintained

the distinction between state and federal shares and would have required that 50%

of annual contributions be returned to states even if cleanup of priority abandoned

mine sites had been completed. States and tribes would have been allowed to use the

money for other purposes if cleanup of AML sites had been completed. The House,

Senate, and Administration proposals were in agreement to end an allocation of a

portion of AML collections to the Rural Abandoned Mine Land Program, a program

that has received no appropriation since FY1995. The FY2006 budget submitted by

the Administration is essentially the same as the plan proposed for FY2005 with the

exception that the fees based on coal production would not be lowered in the FY2006

request. As of mid-March, no legislation had been introduced. This report will be

updated as developments warrant.

Contents

Grants Distribution: The Current Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Major Features of the Administration Proposal and Competing Proposals

(108th Congress) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

The Combined Benefit Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

List of Figures

Figure 1. FY2005 Grant Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

List of Tables

Table 1. FY2005 AML Fund Appropriation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Table 2. FY2005 State Reclamation Grant Distribution . . . . . . . . . . . . . . . . . . . 12

Table 3. State Share Balances and Distributions, FY2005 . . . . . . . . . . . . . . . . . 13

Abandoned Mine Land Fund

Reauthorization: Selected Issues

The Surface Mining Control and Reclamation Act (SMCRA, P.L. 95-87),

enacted in 1977, established reclamation standards for all coal surface mining

operations, and for the surface effects of underground mining. It also established the

Abandoned Mine Land (AML) program to promote the reclamation of sites mined

and abandoned prior to the enactment of SMCRA. To finance reclamation of

abandoned mine sites, the legislation established fees on coal production, which are

deposited in an AML fund administered by the Department of the Interior (DOI)

Office of Surface Mining (OSM). Authorization to collect these fees was scheduled

to expire on September 30, 2004, but the 108th Congress was unable to reach any

agreement among a number of proposals to make some changes to the mechanics of

the program, the fee structure, and distribution of the unappropriated balances.

Authorization to collect AML fees was extended for a brief time — nine months —

to the end of June 2005, by the Consolidated Appropriations Act for 2005 (P.L. 108447).

Debate over legislation to extend authorization further into the future, and to

make other adjustments to the program, is almost certain to continue in the 109th

Congress. To set the stage for that debate, this report summarizes the current

structure of the AML program and fund distribution, and reviews some of the major

proposals considered in the 108th Congress. As of mid-March, no legislation had been

introduced in the 109th Congress.

In its FY2006 budget submission for OSM, the Bush Administration once again

proposed changes in the AML program that were proposed with the FY2005 budget.

The FY2006 proposal does not include a lowering of the AML fees that was part of

the plan introduced with the FY2005 budget. On February 2, 2004, in company with

the Administration budget request for the Department of the Interior (DOI), the

Department released a reauthorization proposal that would have made changes in the

collection of fees for, and disbursement of grant monies from, the AML Fund.

Prominent among the provisions was a phased reduction in the AML fees assessed

on coal production. Under the Administration plan, unobligated balances that have

accumulated in individual state share accounts would be returned over a 10-year

period. This proposal, and other changes sought by the Administration requiring

congressional action to implement, are intended to address a number of long-standing

complaints about the formulas that are applied to the fees and the calculation of

grants disbursements. Full initial implementation of the Administration proposal

(introduced in the 108th Congress as H.R. 3778/S. 2049), would have required a

substantial increase in the FY2005 AML appropriation — from $190.6 million in

FY2004 to $243.9 million, an increase of $53.3 million. The FY2006 budget

CRS-2

proposes a comparable increase of $58 million over the final appropriation for

FY2005 of $188.2 million.1

There are a number of issues for Congress in the disposition of the

reauthorization. A prominent issue raised by the Administration proposal was

whether the changes proposed by the Administration would leave the fund with

adequate resources over time to meet all the fund’s obligations. The United Mine

Workers Combined Benefit Fund (CBF), which provides health care benefits to

retired miners, is also dependent upon transfers from the AML fund. Meeting the

expenses of the CBF has been one of the most important issues in the debate.

A second issue concerns the geographic balance between collections and

disbursements. As coal production has moved westward, western states have been

paying larger sums into the AML fund while grants distribution has favored eastern

states that have a larger number of priority sites to be reclaimed. At issue, too, will

be how the return of unobligated state share balances should be funded. The

Administration approach to program reform would finance the return through a

higher appropriation from the AML fund at a time of growing concern over federal

spending. A competing approach in the 108th Congress, H.R. 3796, would have

partly financed the return of these balances with proceeds from federal coal leasing.

That bill and one in the Senate, S. 2086, would have also — among other provisions

— provided for the return to states of a greater portion of current fee collections.

Grants Distribution: The Current Structure

Collections for the AML fund are divided into federal and state shares; subject

to annual appropriation, AML funds are distributed annually to states with approved

reclamation programs.2 Since the program’s inception and through FY2004, collections have totaled $7.1 billion; appropriations from the fund have totaled $5.5 billion.

The unappropriated balance in the fund approached $1.7 billion at the end of

FY2004. Of this figure, the federal share represents roughly $620 million, and the

unobligated balances in state share accounts approaches $1.1 billion.3 OSM, which

runs the program, has estimated that it will require roughly $3 billion to address the

remaining high-priority sites.4

The design and purpose of the AML fund has raised some significant issues,

some of which are common to trust funds in general. The AML program touches

1

Consolidated Appropriations Act of 2005, P.L. 108-480. A summary of the FY2006

appropriation and AML distribution appears in Tables 1 and 2 at the end of this report.

2

Twenty-three states and three Indian tribes received reclamation grants during FY2003.

3

Current figures are available from the OSM website. See [http://www.osmre.gov/

fundstat.htm].

4

See, for example, Statement of Jeffrey D. Jarrett, Director, Office of Surface Mining

Reclamation and Enforcement, U.S. Department of the Interior, before the [House

Committee on Resources] Subcommittee on Energy and Mineral Resources, U.S. House of

Representatives, on H.R. 3778 and H.R. 3796, March 30, 2004. Available at

[http://www.osmre.gov/reports/033004statement.txt].

CRS-3

upon long-held state concerns about levying fees on residents or businesses operating

in one state to remedy nationwide problems — albeit for the “common good” — but

which dot the landscape disproportionately among the several states. The allocation

and distribution of AML collections are designed to preserve a rough equity, given

the anomaly that the states with the greatest inventory of priority AML sites are no

longer among the largest coal producers. But not all states have been comfortable

with the distribution.

Nor are they sanguine about the level of annual congressional appropriations

from the fund. From the inception of the program, the fund has had unappropriated

balances. This places the AML fund in company with other trust funds held by the

federal government (such as the Highway Trust, and Land and Water Conservation

Funds) in which some states — eyeing the unappropriated balances — believe their

citizens, and businesses operating within their borders, pay more into the fund than

the state receives in benefits.

To finance reclamation of abandoned mine sites, SMCRA established a fee on

coal production that is paid by coal producers into an Abandoned Mine Land Reclamation trust fund.5 SMCRA authorized collection of AML fees through the end of

1992; the Energy Policy Act of 1992 (EPACT, P.L. 102-486) extended the AML

authorization through the end of FY2004. In between the passage of those two bills,

the Omnibus Budget Reconciliation Act of 1990 (OBRA, P.L. 101-508) had

extended authority for AML collections through FY1995. Additionally, OBRA

authorized the OSM to invest the unappropriated balance of AML funds in U.S.

Treasury securities. The investment interest is deposited in the AML fund; however,

EPACT authorized transfer of up to $70 million annually of this interest income,

beginning in FY1996, to the United Mine Workers of America (UMW) to help pay

the health benefits of retired miners. In recent years, low interest rates have generated

less money to be transferred to the UMWA Combined Benefits Fund (CBF).6

SMCRA also provided that 50% of AML collections would be allocated to the

states; this is generally referred to as the “state share” of AML fees. The balance of

the collections is under the control of the Secretary of the Interior and is generally

referred to as the “federal share.” As amended by P.L. 101-508, 40% of this federal

share (or 20% of the whole of AML collections) is designated for (1) emergency

projects in states and on tribal lands; (2) projects in states and on tribal lands without

approved reclamation plans; (3) the Small Operator Assistance Program (SOAP); and

(4) federal administrative costs. Twenty percent (or 10% percent of total AML

collections) is set aside to be transferred to the Department of Agriculture for its

Rural Abandoned Mine Program (RAMP).7 The RAMP program has had no

5

The current schedule is $.35/ton of coal produced by surface mining; $.15/ton of coal

produced by underground mining; and $.10/ton of mined lignite.

6

7

No appropriation is required for this transfer.

RAMP was designed to restore agricultural land that had been disturbed by strip mining.

While entitled by SMCRA to one-fifth of AML collection, the program had been receiving

significantly less — $10 million in the years before appropriations to the program ceased

after FY1995. There have been repeated attempts to abolish RAMP. Critics claimed it was

(continued...)

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appropriation since FY2005, and has an unappropriated balance of slightly more than

$300 million which, under the current structure of the AML program, is not available

for grants distribution. House, Senate, and Administration proposals in the 108th

Congress were in agreement that the allocation to RAMP should end. However,

there were differences among the proposals on disposition of the RAMP balances.

An additional earmark is made for the Appalachian Clean Streams Initiative

(ACSI). The ACSI program was initiated in FY1994 to clean up and restore streams

damaged by acid mine drainage, largely the result of past coal mining. The

remaining 40% of the federal half of total AML collections constitutes a pool from

which supplemental grants may be awarded to the states for remedy of Priority 1 and

2 sites,8 based upon historic coal production.

Congress annually appropriates money from the AML fund. OSM then calculates the distribution to each eligible state and Indian tribe from its shares of state and

federal apportionments of AML collections. Annual distributions are paid from both

shares. The formula is complex and applies differently to the state and federal share

of AML collections.9 While the draw from the pool of AML revenues allocated to

individual state shares is fairly straightforward and proportional, more complex

adjustments affect the proportionality of the final distribution paid from the federal

share. This makes it difficult to measure a direct transfer of wealth among individual

states.

Calculation of the distribution of grants to a state from its share of AML

collections is based on the state’s share of previously collected but yet undistributed

AML fees. The distribution to a state from the federal share is based on (1) a state’s

coal production prior to 1978, before enactment of SMCRA that established the

AML fund; and (2) adjustments to the distribution made on behalf of minimum

program states to bring their grants up to a designated minimum level of funding for

reclamation.

Minimum program states are states with relatively low annual coal production.

For these states, SMCRA was amended in 1990 to authorize appropriations for the

reclamation of the most dangerous sites (so-called Priority 1 and 2 sites) listed in the

AML inventory at the lesser of (1) the estimated cost to reclaim those sites, or (2) a

7

(...continued)

duplicative and that sites subject to regular AML grants were higher priority. More than

$300 million of the total unappropriated balance has been allocated to RAMP. See archived

CRS Report 95-706 ENR, The Rural Abandoned Mine Program — A Fact Sheet, by Duane

Thompson, June 12, 1995.

8

SMCRA defines Priority 1 sites as those warranting “the protection of public health,

safety, general welfare, and property from extreme danger of adverse effects of coal mining

practices.” Priority 2 sites are similarly defined, with the exception that the “adverse

effects” do not pose “extreme danger,” as with Priority 1 sites. Sec. 403(a) of SMCRA, 30

U.S.C. 1233.

9

Table 2 shows the breakdown in the distributions from the federal and state share

accounts.

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minimum program level of $2.0 million per state. Prior to that, appropriations had

provided $1.5 million annually to minimum program states.

These minimum program levels, however, remain subject to annual appropriations by the Congress. Congress may appropriate all, or less than, the $2.0 million

currently authorized. For FY1995, Congress provided a minimum program

appropriation to $1.5 million and it has remained there into FY2004.

As noted above, the Energy Policy Act of 1992 provided that payments of up

to $70 million (referred to as the “cap”) from interest earned annually on AML funds

would be transferred to the retired miners health benefits fund, the United Mine

Workers of America Combined Benefit Fund (CBF). This fund pays the premiums

of retirees who worked for companies that went bankrupt, or which no longer exist.

Prior to 1992, expenses of the CBF were less than the annual interest generated by

the AML fund, leaving interest balances that have been transferred as needed in

subsequent years when CBF expenses exceeded the annual interest generated.

Transfers of roughly $680 million have been made to the CBF as of the end of March

2004.10

Major Features of the Administration Proposal

and Competing Proposals (108th Congress)

As of early March 2005, legislation reauthorizing AML collections had not been

introduced in the 109th Congress, but the FY2006 budget request indicates that the

Administration will seek most of the changes proposed in the Administration

proposal introduced in the 108th Congress (S. 2049/H.R. 3778). It was intended to

address the major concerns outlined above. The Administration plan would have:

10

!

extended the program through FY2018;

!

reduced the AML fee assessed on each ton of coal produced by 15%

during the period FY2005-FY2009, and by 25% from FY2010 until

the expiration of the reauthorization in FY2018. The FY2006 budget

request does not include a lowering of the fees from current levels;

!

returned unobligated state share balances over a 10-year period to

states that have been certified to have completed reclamation of their

Priority 1 sites — these states would no longer receive AML grants

from the remaining unappropriated balances in the fund or from new

collections; non-certified states would have their state share balances

Office of Surface Mining. The Energy Policy Act of 1992 provided that the unobligated

balances would begin to earn interest in FY1993; however, transfers did not begin until

FY1996, so as not to violate deficit-control measures included in the Budget Enforcement

Act of 1990 provisions of P.L. 101-508. For a complete discussion of the genesis and

implications of this transfer payment, see Nonna Noto, “Interest Transfers from the

Abandoned Mine Reclamation Fund,” in U.S. Congress, House Committee on Ways and

Means, Development and Implementation of the Coal Industry Retiree Health Benefit Act

of 1992, June 22, 1995, WMCP: 104-3, pp. 50-54.

CRS-6

returned to them as part of their annual grants for reclamation

activities;11

!

ended the division and assignment of fee collections into state and

federal shares; all future AML collections would be deposited in a

single account;

!

removed the $70 million cap on the amount of interest to be

transferred annually to the United Mine Workers’ Combined

Benefits Fund, and make other changes to provide the CBF with

$310 million over the next few years;

!

provided minimum program states with $2 million each annually.

The FY2006 budget request seeks $1.5 million for minimum

program states, the level at which Congress has set this

appropriation since FY1995; and

!

ended the reservation of AML funds for the Rural Abandoned Mine

Land Program, which is under the jurisdiction of the Department of

Agriculture, and which has received no appropriation since 1995.

The cessation of assigning AML collections to a “state share” is one of the most

interesting features of the Administration proposal. This assignment has been

responsible for one of the greatest pressures on OSM. The creation of the separate

state and federal funds was more an accounting convenience than intended to be

literal. However, states have been displeased with the accumulating unobligated

balances in their state share accounts and regard these balances as “state” money to

which they are entitled.

Certain states have a special interest in how this particular issue is resolved. As

shown in Table 3, more than half of the nearly $1 billion in unobligated state share

balances is held in the accounts of Wyoming, West Virginia, and Kentucky.12 The

Administration proposed to return the state share balances over a 10-year period, and

has requested in the FY2005 budget an additional $53 million to begin disbursement

of the unobligated state share balances in FY2005. This figure is $58 million in the

FY2006 request. Under the Administration plan, states that have been certified would

receive only the disbursement from their unobligated state share balances; they would

11

Section 1240a provides for states to apply for certification that they have completed

reclamation of high priority sites. However, under the Administration proposal, certified

states would only receive return of unobligated balances in the state share account. Noncertified states would receive both a return of state share balances and reclamation grants

from the federal portion of the AML fund, creating a disincentive to apply for certification.

The Administration proposal would allow the Department of the Interior to initiate

certification without waiting for states to make application. At present, Louisiana,

Wyoming, Montana, Texas, and the Hopi and Navajo tribes are certified.

12

Montana has completed reclamation of all 18 of its Priority 1 and 2 sites. In contrast,

Kentucky has reclaimed 253 of 640 Priority 1 and 2 sites, and West Virginia has reclaimed

323 of 1,069 such sites. Source: Office of Surface Mining. Abandoned Mine Land

Inventory System (AMLIS): [http://www.osmre.gov/aml/inven/zintroin.htm].

CRS-7

receive no further grants from the AML fund. By seeking an additional appropriation

for returning state share balances — and assuming that the appropriation for grants

from the AML fund remains around current levels — the Administration has argued

that it will free up more grant resources to be awarded to those states with the most

sites awaiting reclamation. A further benefit, the Administration argues, is that

cleanup of these sites will be completed “decades sooner.”13 Grants to states and

tribes still with high-priority sites would be drawn first on the state share account

until the state share accounts for these states were also exhausted.

Under the Administration proposal, unobligated state balances would be largely

divorced from OSM and current AML mechanics. All future collections would go

into a single account, eliminating the state share designation altogether and ending

any further accumulation of unobligated balances in the state share. By predicating

return of these balances to a straightforward appropriation determined by Congress,

it would also eliminate the argument that OSM and the current formula for grant

distribution drawn on both federal and state share balances are the bottleneck for

return of these funds.

The unobligated balances in the state AML fund account have especially nettled

some states as coal production has shifted west of the Mississippi. Contributions to

the AML fund have been increasingly borne by western states. In 1950, nearly 525

million tons of coal were mined in the eastern portion of the country, while western

production was roughly 36 million tons. By 2003, western coal production was

roughly 550 million tons, while production in the East had declined moderately to

376 million tons.14

However, the prospects for approval of the sort of significant increase in

appropriated funds for this purpose sought in the FY2005 request (and again in the

FY2006 request) are unclear in a climate of renewed concern over federal spending

and borrowing. It is possible that, if the essential features of the reauthorization plan

proposed by the Administration were enacted, the calendar for return of state share

monies could be lengthened or even deferred. While disbursement of AML grants has

always been dependent upon congressional appropriation, the congressional role in

the AML program could have even more visibility if reimbursement of unobligated

state balances is tied to congressional appropriation as well.

A competing proposal, S. 2086, introduced by Senator Thomas in the 108th

Congress, differed from the Administration proposal in some important respects.

That bill would have:

!

extended the program through FY2014;

!

reduced reclamation fees in a single stage to $.25/ton of surface

mined coal; $.12/ton for underground mined coal; and $.08/ton for

lignite;

13

Summary sheet from DOI, Abandoned Mine Land (AML) Reclamation Program

Extension and Reform Act of 2004, Feb. 2, 2004.

14

Energy Information Administration, Annual Coal Report: 2003.

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!

preserved the distinction between state and federal shares, requiring

that 50% of state contributions be returned to states even if cleanup

of abandoned mine sites had been completed;

!

based grants on current, rather than historic, coal production,

reflecting the shift of production westward;

!

allowed transfer to the CBF of all interest generated by the AML

fund prior to FY2005 if needed to cover health care costs of

unassigned beneficiaries;

!

funded the difference from land lease revenues paid to the Treasury

under the Mineral Leasing Act, to the extent that grants to certified

states and tribes from the AML appropriation fall short of the stateshare allocation of collections; the transfer would not have been

subject to appropriations, and states and tribes could have used the

money for other purposes if cleanup of AML sites had been

completed; and

!

ended the reservation of AML funds for the Rural Abandoned Mine

Land Program (RAMP), and released $65 million of the current

RAMP balance to pay for the return of unobligated state share

balances to certified states and tribes that have no lands available for

leasing. Grants would have been proportional to a state’s or tribe’s

unappropriated state share balance.

The Thomas proposal would have reduced the fee assessed on surface-mined

coal by nearly 30%, a significantly larger reduction than in the other proposals, thus

changing the historic relationship between the fees assessed on the different

categories of coal production. To more or less equalize collections from the eastern

and western coal-producing states, the original fee structure may have been structured

to reflect that western coal was generally surface-mined while eastern coal was

largely produced from underground mines. Now that production has shifted

westward, proponents of S. 2086 argued that the fee relationship between the various

types of coal-mining should be adjusted. Whatever fee structure is settled upon will

no doubt be a reflection of regional considerations as well as the size of the fee

collections that a majority of policymakers favor, whether for the purpose of making

reclamation grants or meeting the needs of the CBF.

In the House, H.R. 3796, introduced by Representatives Cubin and Rahall, was

very similar to S. 2086, with some differences. Among these, H.R. 3796 would have:

!

extended the program through FY2019;

!

reduced reclamation fees in a single stage to $.28/ton of surface

mined coal; $.12/ton for underground mined coal; and $.08/ton for

lignite; and

CRS-9

!

ended the allocation of any AML collections to RAMP, and made

the money available for transfer to the CBF.15

The Combined Benefit Fund

The Coal Industry Retiree Health Benefit Act of 1992 (the Coal Act), enacted

as part of the Energy Policy Act of 1992 (P.L. 102-486, EPACT), established the

United Mine Workers of America Combined Benefit Fund. The function of the CBF

is to cover the unreimbursed health cost requirements of retired miners. Some such

costs are assigned to former employers, and some comprise a category of

“unassigned” beneficiaries. Premiums for assigned retirees are paid by former

employers or entities to which these individuals have been assigned. EPACT

provided that the expenses of the unassigned beneficiaries would be supported by

interest generated by the unobligated balances in the AML fund, capping annual

transfers at $70 million. While the fund began to earn interest in FY1993, transfers

to the CBF did not begin until FY1996 so as not to violate deficit-control measures

included in the Budget Enforcement Act of 1990 provisions of P.L. 101-508.16 There

are roughly 17,000 unassigned beneficiaries.

Assuring that there are sufficient funds to meet the expenses of the CBF is a

major consideration in the AML reauthorization debate. While the CBF ran

surpluses in its early years, it began to run deficits in FY1997. Interest generated

prior to 1996 was transferred to the CBF by the Interior Appropriations Acts for

FY2000 and FY2001. Low interest rates in recent years have reduced transfers to the

CBF.

The Clinton Administration established a trial Medicare drug prescription

program to provide reimbursement to the CBF for drug expenses. In January 2004,

the Bush Administration announced that the program, set to expire in June 2004,

would be extended through the end of FY2005. The United Mine Workers of

America estimated that the extension would increase the CBF’s Medicare

reimbursement by $190 million.17 As noted earlier, the Administration also proposed

to remove the $70 million cap on the amount of AML interest that can be transferred

annually, and estimated that — between the removal of this cap and extension of the

Medicare drug program — the CBF could be provided with $310 million over the

15

In this respect, H.R. 3796 incorporated the language of H.R. 313, the Coal Accountability

and Retired Employee Act for the 21st Century, generally referred to as CARE-21.

Introduced by Representative Rahall on January 8, 2003, it was reported from the House

Committee on Resources, October 28, 2003. H.Rept. 108-328.

16

For a complete discussion of the genesis and implications of this transfer payment, see

Nonna Noto, “Interest Transfers from the Abandoned Mine Reclamation Fund,” in U.S.

Congress, House Committee on Ways and Means, Development and Implementation of the

Coal Industry Retiree Health Benefit Act of 1992, June 22, 1995, WMCP: 104-3, pp. 50-54.

17

United Mine Workers of America, Crisis Averted: United Mine Workers of America

Praises Administration’s Plan to Increase Medicare Prescription Drug Demonstration

Program Funding, Press Release, January 29, 2003. The Administration projected that the

drug program and other provisions of its AML reauthorization would provide $310 million

to the CBF during the next two years.

CRS-10

next few years. S. 2086 would have provided for the transfer of any interest earned

prior to FY2005 if needed to cover the costs of benefits for unassigned beneficiaries.

While the UMWA has been favorably disposed toward some features of the

AML reauthorization advanced by the Administration, the union supported

provisions in H.R. 3796 that would have — in addition to the transfer of interest

earned by the AML fund — allowed transfers to be used to cover any deficit in the

expenses of the CBF for coverage of assigned beneficiaries as well.18

EPACT also provides that — in the event that authorization for collection of

AML fees expires — “the fee shall be established at a rate to continue to provide for

the deposit” of funds to the CBF. It is not apparent by what mechanism that fee

would be determined or how it is to be designed to meet the needs of the CBF.19

Whatever resolution is reached on AML reauthorization, treatment of the CBF is

likely to be a major piece in the negotiations and debate.

Conclusion

Dissatisfaction with the AML program has coalesced around perceptions that

the current structure has not been even-handed in the distribution of AML

collections. As noted earlier, the distribution formulas make it difficult to measure

a direct transfer of wealth among individual states. While it is impossible to predict

the outcome of this debate, opponents of the proposal advanced by the

Administration seem intent on making annual distributions more predictable,

particularly with respect to treatment of the balances in the state share accounts.

Some of the competing proposals, by establishing a component of distribution

outside of regular appropriations, would isolate some grant elements from what states

consider to be the vagaries of the current AML structure. In part, this may be due to

continuing skepticism about the likelihood that Congress will raise AML

appropriations sufficiently to institute the Administration’s proposed 10-year return

of the unobligated state balances. However, it may be equally possible that Congress

will not be inclined to free up the RAMP balance to the AML program, or the

mineral leasing revenues.

Resolution of a number of issues affecting provisions for the CBF could prove

to have a major influence on any final resolution of the broader AML reauthorization.

As noted earlier, if Congress and the Administration do not reach some compromise

before the authority for AML collections expire once again at the end of June 2005,

statute provides for the establishment of a fee expressly to provide for maintaining

18

See News from the United Mine Workers of America, “United Mine Workers of America

International President Cecil Roberts Hails Introduction of Legislation by Reps. Rahall and

Cubin to Extend America’s Vital Abandoned Mine Reclamation Program and Ensure the

Federal Government Keeps Its Promise to America’s Coal Miners of Lifetime Health Care

Benefits,” February 12, 2004.

19

Section 1232. The language does not vest the authority with the Secretary of the Interior

or specify any particular mechanism. This and other dimensions and complexities of the

issues concerning the Combined Benefits Fund are beyond the scope of this report.

CRS-11

a transfer of funds to the CBF. In the event of this scenario, Congress could

continue, or suspend, disbursements from the AML fund through the appropriation

process. Depending upon how statute is interpreted or upon the duration of the time

collections are suspended, the broader AML mission could be significantly affected

in the long term, given that the current AML balances are well short of the $3 billion

estimated cost of addressing remaining Priority 1 and 2 sites. In the short term,

policymakers faced with a need for another short-term reauthorization could resist,

arguing that nine months’ collections would fully fund grants awarded during

FY2005.

CRS-12

Table 1. FY2005 AML Fund Appropriation

RAMP

$0

Federal Expenses

$40,683,154

Total AML Grant Appropriation

$147,522,671

Total FY2004 AML Fund Appropriation

$188,205,825

Source: Office of Surface Mining (OSM).

Table 2. FY2005 State Reclamation Grant Distribution

State Share Distribution

55% x $142,160,169

$74,752,874

Federal Share Distribution

45% x $142,160,169

$61,161,442

State Emergency Program

$8,408,355

Appalachian Clean Streams Initiative (ACSI)

$3,200,000

Total State Reclamation Grant Distribution

$147,522,671

Source: Office of Surface Mining (OSM).

CRS-13

Table 3. State Share Balances and Distributions, FY2005

State/Tribe

State Share

Collections

Through

FY2004

State Share

Distributions

Through

FY2004

State Share

Balances as of

12/31/04

(see note below)

State Share

Distribution,

FY2004

Alabama

$72,652,614

$55,360,798

$17,874,767

$1,324,615

Alaska

$5,770,291

$3,875,994

$2,027,118

$155,421

Arkansas

$402,959

$396,306

$9,468

$453

Colorado

$66,890,260

$44,092,455

$25,805,296

$1,741,088

Illinois

$138,834,244

$110,494,931

$29,771,083

$2,284,815

Indiana

$133,688,710

$94,298,550

$42,906,890

$3,076,525

Iowa

$1,208,092

$1,172,990

$32,374

$3,163

Kansas

$3,292,367

$2,881,020

$399,773

$33,932

Kentucky

$437,669,635

$317,087,406

$127,581,634

$9,663,661

Louisiana

$2,830,710

$1,531,582

$1,444,610

$98,715

Maryland

$10,856,477

$7,623,940

$3,677,805

$244,042

Missouri

$13,016,398

$12,103,814

$969,151

$75,855

Montana

$142,881,355

$98,686,568

$47,827,484

$3,512,316

New Mexico

$53,096,356

$32,695,400

$21,101,632

$1,612,445

North Dakota

$33,647,137

$22,080,625

$12,584,546

$901,550

Ohio

$107,818,760

$84,490,723

$24,667,667

$1,882,157

Oklahoma

$12,046,087

$10,014,560

$2,196,921

$164,598

Pennsylvania

$219,044,461

$162,833,587

$59,322,509

$4,522,117

Texas

$59,386,659

$40,234,829

$20,647,765

$1,518,154

Utah

$37,388,266

$23,479,746

$14,958,214

$1,093,044

Virginia

$93,267,896

$67,551,029

$27,715,129

$2,033,593

West Virginia

$363,668,998

$241,221,880

$132,536,810

$9,572,163

Wyoming

$883,932,837

$493,756,180

$445,144,496

$29,305,188

Crow Tribe

$16,971,153

$9,961,270

$7,867,118

$545,954

Hopi Tribe

$13,303,707

$8,104,934

$5,608,088

$414,114

Navajo Tribe

$88,999,943

$59,705,609

$31,904,869

$2,315,769

National Total

$3,010,578,780

$2,004,427,227

$1,106,583,221

$78,188,093

Source: Office of Surface Mining. Note: Subtraction of state distributions from total

collections for FY2004 will be lower than the State Share Balances shown above. The

State Share Balances include additional collections during the first quarter of FY2005.

CRS-14

Figure 1. FY2005 Grant Distribution

Source: Office of Surface Mining.

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