Pennsylvania Regulatory Program, 2005-2015 [E9-603]

Agencies

• DEPARTMENT OF THE INTERIOR
• Office of Surface Mining Reclamation and Enforcement
• Surface Mining Reclamation and Enforcement Office

[Federal Register Volume 74, Number 9 (Wednesday, January 14, 2009)]
[Proposed Rules]
[Pages 2005-2015]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-603]


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DEPARTMENT OF THE INTERIOR

Office of Surface Mining Reclamation and Enforcement

30 CFR Part 938

[PA-153-FOR; Docket ID: OSM-2008-0021]


Pennsylvania Regulatory Program

AGENCY: Office of Surface Mining Reclamation and Enforcement (OSM), 
Interior.

ACTION: Proposed rule; public comment period and opportunity for public 
hearing on the proposed amendment.

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SUMMARY: We are announcing receipt of an amendment to the Pennsylvania 
regulatory program (the ``Pennsylvania program'') under the Surface 
Mining Control and Reclamation Act of 1977 (SMCRA or the Act). In 
response to a required program amendment codified in the Federal 
regulations and to a subsequent notification by letter, Pennsylvania 
has submitted changes to its regulations involving definitions; permit 
and reclamation fees; and the use of money and has provided additional 
descriptions, assurances, and supporting information to ensure that the 
reclamation of all sites that were bonded under its previous 
Alternative Bonding System (ABS) will be provided for under the 
approved Pennsylvania program and consistent with Federal regulations 
at 30 CFR Part 800.
    This document gives the times and locations that the Pennsylvania 
program and proposed amendment to that program are available for your 
inspection, the comment period during which you may submit written 
comments on the amendment, and the procedures that we will follow for 
the public hearing, if one is requested.

DATES: We will accept written comments until 4 p.m., e.s.t. February 
13, 2009. If requested, we will hold a public hearing on February 9, 
2009.
    We will accept requests to speak at a hearing until 4 p.m., e.s.t. 
on January 29, 2009.

ADDRESSES: You may submit comments, identified by PA-153-FOR; Docket 
ID: OSM-2008-0021 by either of the following two methods:
    Federal eRulemaking Portal: www.regulations.gov. The proposed rule 
has been assigned Docket ID: OSM-2008-0021. If you would like to submit 
comments through the Federal eRulemaking Portal, go to 
www.regulations.gov and do the following. Click on the ``Advanced 
Docket Search'' button on the right side of the screen. Type in the 
Docket ID

[[Page 2006]]

OSM-2008-0021 and click the ``Submit'' button at the bottom of the 
page. The next screen will display the Docket Search Results for the 
rulemaking. If you click on OSM-2008-0021, you can view the proposed 
rule and submit a comment. You can also view supporting material and 
any comments submitted by others.
    Mail/Hand Delivery/Courier: Mr. George Rieger, Chief, Pittsburgh 
Field Division, Office of Surface Mining Reclamation and Enforcement, 
4th and Market Sts., Suite 3C, Harrisburg, Pennsylvania 17101.
    Instructions: For detailed instructions on submitting comments and 
additional information on the rulemaking process, see the ``Public 
Comment Procedures'' heading of the SUPPLEMENTARY INFORMATION section 
of this document.
    Docket: In addition to obtaining copies of documents at 
www.regulations.gov, information may also be obtained at the addresses 
listed below during normal business hours, Monday through Friday, 
excluding holidays. You may receive one free copy of the amendment by 
contacting OSM's Pittsburgh Field Division Office.

George Rieger, Chief, Pittsburgh Field Division, Harrisburg Office, 
Office of Surface Mining Reclamation and Enforcement, 4th and Market 
Sts., Suite 3C, Harrisburg, Pennsylvania 17101, Telephone No. (717) 
782-4036, E-mail: grieger@osmre.gov
Joseph P. Pizarchik, Director, Bureau of Mining and Reclamation, 
Pennsylvania Department of Environmental Protection, Rachel Carson 
State Office Building, P.O. Box 8461, Harrisburg, Pennsylvania 17105-
8461, Telephone: (717) 787-5015 E-mail: jpizarchik@state.pa.us.

FOR FURTHER INFORMATION CONTACT: George Rieger, Telephone: (717) 782-
4036. E-mail: grieger@osmre.gov.

SUPPLEMENTARY INFORMATION:

I. Background on the Pennsylvania Program
II. Description of the Amendment
III. Public Comment Procedures
IV. Procedural Determinations

I. Background on the Pennsylvania Program

    Section 503(a) of the Act permits a State to assume primacy for the 
regulation of surface coal mining and reclamation operations on non-
Federal and non-Indian lands within its borders by demonstrating that 
its State program includes, among other things, ``* * * a State law 
which provides for the regulation of surface coal mining and 
reclamation operations in accordance with the requirements of the Act * 
* *; and rules and regulations consistent with regulations issued by 
the Secretary pursuant to the Act.'' See 30 U.S.C. 1253(a)(1) and (7). 
On the basis of these criteria, the Secretary of the Interior 
conditionally approved the Pennsylvania program on July 30, 1982.
    From 1982 until 2001, Pennsylvania's bonding program for surface 
coal mines, coal refuse reprocessing operations, and coal preparation 
plants, was funded under an ABS, which included a central pool of 
money, the Surface Mining Conservation and Reclamation Fund (Fund), 
used for reclamation. This pool was funded in part by a per-acre 
reclamation fee paid by operators of permitted sites and supplemented 
by site bonds posted by those operators for each mine site.
    In 1991, our oversight activities determined that Pennsylvania's 
ABS included unfunded reclamation liabilities for backfilling, grading, 
and revegetating mined land and we determined that the ABS was 
financially incapable of abating or treating pollutional discharges 
from bond forfeiture sites under its jurisdiction. As a result, on May 
31, 1991, we imposed the required amendment codified at 30 CFR 
938.16(h). That amendment required Pennsylvania to demonstrate that the 
revenues generated by its collection of the reclamation fee would 
assure that its Fund could be operated in a manner that would meet the 
ABS requirements contained in 30 CFR 800.11(e). This provision requires 
that an ABS 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.'' It also requires that the ABS 
``provide a substantial economic incentive for the permittee to comply 
with all reclamation provisions''.
    Also, on October 1, 1991, OSM sent Pennsylvania a letter, pursuant 
to 30 CFR Part 732, notifying the State that it must submit a program 
amendment that would address the aforementioned deficiencies in the 
ABS. This document is commonly referred to as a ``732 letter.''
    After a decade of trying to address the problems with the ABS, the 
Pennsylvania Department of Environmental Protection (PADEP) terminated 
the ABS in 2001 and began converting active surface coal mining permits 
to a conventional bonding system (CBS) or ``full-cost'' bonding 
program. This CBS requires a permittee to post a site-specific bond in 
an amount sufficient to cover the estimated costs to complete 
reclamation in the event of bond forfeiture.
    By letter dated June 12, 2003, OSM notified the PADEP that it 
concurred that the conversion to a CBS, as well as other additional 
measures taken by the State, were sufficient to remedy the deficiencies 
cited in the 732 letter, which it declared to be terminated. Then, on 
October 7, 2003, OSM published a final rule removing the required 
amendment at 30 CFR 938.16(h) on the basis that the conversion from an 
ABS to a CBS rendered the requirement to comply with 30 CFR 800.11(e) 
moot. 68 FR 57805. Subsequent to these OSM actions, a lawsuit was filed 
in the U.S. District Court for the Middle District Court of 
Pennsylvania, Pennsylvania Federation of Sportsmen's Clubs Inc. et al. 
v. Norton, No. 1:03-CV-2220. The district court affirmed OSM's decision 
in a Memorandum Opinion and Order dated February 1, 2006. Id.
    However, on August 2, 2007, the United States Court of Appeals for 
the Third Circuit reversed the district court's decision and set aside 
OSM's decision to remove the required amendment and the 732 letter. 
Pennsylvania Federation of Sportsmen's Clubs v. Kempthorne, 497 F.3d 
337 (3rd Cir. 2007). At issue, relevant to this notice, was whether OSM 
properly terminated the requirement that Pennsylvania demonstrate that 
its Surface Mining Conservation and Reclamation Fund was in compliance 
with 30 CFR 800.11(e).
    The Third Circuit concluded: ``While it is true that the `ABS Fund' 
continues to exist in name, it no longer operates as an ABS, that is, 
as a bond pool, to provide liability coverage for new and existing 
mining sites.'' 497 F.3d at 349. However, the Court went on to 
``conclude that 800.11(e) continues to apply to sites forfeited prior 
to the CBS conversion.'' Id. at 353. In commenting further on 30 CFR 
800.11(e), the Court stated that ``[t]he plain language of this 
provision requires that Pennsylvania demonstrate adequate funding for 
mine discharge abatement and treatment at all ABS forfeiture sites.'' 
Id. at 354. Finally, the court also concluded that ``a plain reading of 
the words `any areas which may be in default at any time' indicates 
that the obligations prescribed by Section 800.11(e) are not restricted 
to the immediate circumstances surrounding the approval of an ABS, but 
are instead ongoing in nature and apply at any time, so long as those 
mining areas originally bonded under the ABS, and not yet converted to 
CBS bonds, still exist.'' Id. at 352. Pennsylvania believes the 
submission that is the subject of this rulemaking will comply with the 
Third Circuit's mandate, and thus will satisfy the reinstated required

[[Page 2007]]

amendment and the October 1, 1991, 732 letter.
    You can find additional background information on the Pennsylvania 
program, including the Secretary's findings, the disposition of 
comments, and conditions of approval in the July 30, 1982, Federal 
Register, 47 FR 33050. You can also find later actions concerning 
Pennsylvania's program and program amendments at 30 CFR 938.11, 938.12, 
938.13, 938.15 and 938.16.

II. Description of the Amendment

    By letter dated August 1, 2008 (Administrative Record Number PA 
802.43), Pennsylvania sent us a proposed program amendment that is 
intended to satisfy a required amendment that was imposed by OSM in a 
final rule published in the Federal Register on May 31, 1991, 56 FR 
24687, and codified in the Federal Regulations at 30 CFR 938.16(h). 
This proposed program amendment is also intended to satisfy the 732 
letter dated October 1, 1991. Both the required amendment and the 732 
letter are discussed in more detail in Section I.
    This Pennsylvania program amendment submission provides a 44-page 
detailed narrative of actions taken by PADEP subsequent to the OSM 1991 
required amendment and 732 letter to address bond program deficiencies. 
Pennsylvania requests that the changes described be included in its 
approved program. The program amendment under consideration consists of 
changes to Pennsylvania regulations as well as narrative demonstrations 
as identified below. Included in parentheses are the pages within the 
44-page Pennsylvania narrative that are specific to each amendment:
    A. Regulatory Changes to Establish Legally Enforceable Means of 
Funding the O&M and Recapitalization Costs for the ABS Legacy Sites 
(summarized on pages 36-39; the actual text of these regulatory 
changes, along with brief summaries of them, are set forth below in 
Section A of Section Descriptions);
    B. The Conversion Assistance Program (pages 13-18);
    C. Trust Funds as an Alternative System and Other Equivalent 
Guarantee: Rationale for Approval (pages 26-31);
    D. Demonstration of Sufficient Funding for Outstanding Land 
Reclamation at Primacy ABS Forfeiture Sites (pages 31-33); and
    E. Demonstration of Sufficient Funding for Construction of All 
Necessary Discharge Treatment Facilities at the Primacy ABS Forfeiture 
Site (pages 33-34).
    Pennsylvania believes this State program amendment includes 
provisions that will cover the costs of all reclamation for sites 
bonded under the ABS that have had their bonds forfeited, as well as 
potential reclamation costs for sites bonded under the ABS and not yet 
forfeited, but for which conventional, full cost bonds or other 
sufficient financial assurance mechanisms have not been posted. These 
sites are the responsibility of the former ABS should they be forfeited 
prior to the posting of full-cost bonds or other adequate financial 
mechanisms.

Section Descriptions

A. Regulatory Changes To Establish Legally Enforceable Means of Funding 
the O&M and Recapitalization Costs for the ABS Legacy Sites

    Pennsylvania has completed final rulemaking to amend existing 
provisions of Chapter 86 relating to reclamation fees, definitions, and 
to the PADEP's use of money for reclamation of forfeited surface coal 
mine sites. The revised regulatory language and the State's summary of 
its rationale for these specific changes are identified below:

Subchapter A. General Provisions: Revised Language to the Pennsylvania 
Code:

Subchapter A. General Provisions

Section 86.1 Definitions
    The following words and terms, when used in this chapter, have the 
following meanings, unless the context clearly indicates otherwise:
    ABS Legacy Sites--Mine sites, permitted under the primacy Alternate 
Bonding System, that have a post-mining pollutional discharge where the 
operator has defaulted on its obligation to adequately treat the 
discharge and, either the bond posted for the site is insufficient to 
cover the cost of treating the discharge, or a trust to cover the costs 
of treating the discharge was not fully funded and is insufficient to 
cover the cost of treating the discharge.
* * * * *
    Operational Area--The maximum portion of the permitted area that 
the permittee is authorized to disturb at any specific time during the 
permit term in accordance with the approved mining and reclamation 
plan, including all of the land affected by mining activities that is 
not planted, growing and stabilized.
    Operation and Maintenance Costs--Expenses associated with the day-
to-day operation and maintenance of a conventional or a passive 
treatment facility, such as chemicals, electricity, labor, water 
sampling, sludge removal and disposal, maintenance of access roads, 
mowing, snow removal, inspecting facilities, repairing and maintaining 
all aspects of the treatment facility, equipment, and buildings.
* * * * *
    Primacy Alternate Bonding System--Bonding system utilized by 
Pennsylvania from July 31, 1982 until August 4, 2001 for surface coal 
mines, coal refuse reprocessing facilities, and coal preparation plants 
in which a central pool of money to be used by the Department for 
reclamation of forfeited sites was funded in part through imposition of 
a per-acre reclamation fee paid by operators of permitted sites.
* * * * *
    Recapitalization Costs--The costs associated with replacing 
discharge treatment facility components or the costs to install 
treatment systems with lower operation and maintenance costs than the 
system being replaced.

Summary of Regulatory Changes--Section 86.1, Definitions

a. Section 86.1 (Definition of ``ABS Legacy Sites'')
    The term ``ABS legacy sites'' has been added to the list of terms 
in Section 86.1 because it is used throughout the amendments to 
Sections 86.17(e) and 86.187. The term ``ABS legacy sites'' represents 
a certain class of surface coal mine sites which were permitted under 
the PADEP's ABS. These sites have post-mining pollutional discharge(s), 
the operator has defaulted on its obligation to adequately treat the 
discharge(s), and the operator's financial guarantee for reclamation is 
insufficient to cover the cost of treating the discharge in perpetuity. 
The PADEP'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 above. The cost of treating the discharges at 
these sites is being addressed by the amendments to Sections 86.17(e) 
and 86.187 as part of this final rulemaking.
b. Section 86.1 (Definition of ``Operational Area'')
    The term ``Operational Area'' is being added to Section 86.1 in 
order to help clarify the amendments to Section 86.17(e) concerning the 
manner in which the reclamation fee is assessed in a CBS.
c. Section 86.1 (Definition of ``Operation and Maintenance Costs'')
    The term ``Operation and Maintenance Costs'' is being added to

[[Page 2008]]

Section 86.1 in order to help clarify the amendments to Section 
86.17(e) and Section 86.187 concerning how certain monies are to be 
used to treat discharges on a certain class of bond forfeiture sites--
the ABS legacy sites.
d. Section 86.1 (Definition of ``Primacy Alternate Bonding System'')
    The term ``Primacy Alternate Bonding System'' is being added to 
Section 86.1 to accurately identify the class of mine sites being 
addressed by the amendments to Section 86.17(e) and Section 86.187. The 
ABS legacy sites, which are the focus of the Kempthorne case, are a 
class of coal mine sites that were permitted under the ``primacy 
alternate bonding system'' and have certain additional characteristics 
described in the definition for ``ABS legacy sites.'' PADEP is 
proposing this definition because it believes that it is necessary to 
distinguish sites permitted under the ABS from those converted to, or 
originally permitted under, the CBS in order to accurately identify the 
ABS legacy sites. Pennsylvania also proposes this definition to 
distinguish further between the ``primacy'' ABS and the ABS that 
existed for surface coal mine sites prior to Pennsylvania obtaining 
primacy in July 1982, because the pre-primacy ABS sites are not subject 
to the requirements of 30 CFR 800.11(e).
e. Section 86.1 (Definition of ``Recapitalization Costs'')
    The term ``Recapitalization Costs'' is being added to the list of 
terms in Section 86.1. 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 Section 86.17(e) and Section 
86.187. When calculating the costs to treat post-mining pollutional 
discharges at mine sites in perpetuity, the PADEP proposes to 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). This term is needed to assure that these specific 
equipment-replacement costs are identified as part of the ongoing costs 
for treating post-mining discharges at the ABS legacy sites.

Subchapter B. Permits: Revised Language to the Pennsylvania Code:

Subchapter B. Permits

    General Requirements for Permits and Permit Applications
Section 86.17 Permit and Reclamation Fees
* * * * *
    (e) In addition to the bond established under Sections 86.143, 
86.145, 86.149 and 86.150 (relating to Requirement to File a Bond; 
Department responsibilities; determination of bond amount; and minimum 
amount), and subject to the exception provided for in Section 86.283(c) 
(relating to procedures), the applicant for a permit or a permit 
amendment shall pay a per-acre reclamation fee for surface mining 
activities except for the surface effects of underground mining. This 
reclamation fee will be assessed for each acre of the approved 
operational area and shall be paid by the applicant prior to the 
Department's issuance of a surface mining permit. If a permit amendment 
results in an increase in the approved operational area, the 
reclamation fee will be assessed on the increased acreage and shall be 
paid by the operator prior to the Department's issuance of the permit 
amendment.
    (1) The reclamation fee will be deposited into a separate 
subaccount within the Surface Mining Conservation and Reclamation Fund 
called the Reclamation Fee O&M Trust Account, as a supplement to bonds 
forfeited from ABS Legacy Sites. The reclamation fee will be used by 
the Department to pay the construction costs and operation and 
maintenance costs associated with treating post-mining pollutional 
discharges at ABS Legacy Sites, and such money may not be used for any 
other purpose. The interest earned on the monies in the Reclamation Fee 
O&M Trust Account will be deposited into the Reclamation Fee O&M Trust 
Account and will be used by the Department to pay the construction 
costs and operation and maintenance costs associated with treating 
post-mining pollutional discharges at ABS Legacy Sites. Such interest 
may not be used for any other purpose. For purposes of this section, 
operation and maintenance costs include recapitalization costs.
    (2) After the end of each fiscal year, the Department will prepare 
a fiscal-year report containing a financial analysis of the revenue and 
expenditures of the Reclamation Fee O&M Trust Account for the past 
fiscal year and the projected revenues and expenditures or the current 
fiscal year. Beginning with the report for fiscal year 2008-09, the 
report will include the Department's calculation of the required amount 
of the reclamation fee, and the proposed adjustment of the reclamation 
fee amount. The fiscal-year report will be submitted to the members of 
the Mining and Reclamation Advisory Board for their review and comment 
and will be published on the Department's Web site. Notice of the 
report's availability will be published in the Pennsylvania Bulletin. 
The Department will review the fiscal-year report at a meeting of the 
Mining and Reclamation Advisory Board.
    (3) The amount of the reclamation fee shall be $100 per acre until 
December 31, 2009. Commencing January 1, 2010 and continuing until 
either a permanent alternative funding source is established or the ABS 
Legacy Sites Trust Account is actuarially sound, the reclamation fee 
will be adjusted as necessary to ensure that there are sufficient 
revenues to maintain a balance in the Reclamation Fee O&M Trust Account 
of at least $3,000,000.
    (i) The reclamation fee will be used until the ABS Legacy Sites 
Trust Account is actuarially sound unless an alternative permanent 
funding source in lieu of the reclamation fee is used to fund the 
Reclamation Fee O&M Trust Account.
    (ii) Until the ABS Legacy Sites Account is actuarially sound, the 
alternative permanent funding source must provide sufficient revenues 
to maintain a balance in the Reclamation Fee O&M Trust Account of at 
least $3,000,000 and to pay the annual operation and maintenance costs 
for treating post-mining pollutional discharges at the ABS Legacy 
Sites. Funds that are not needed for annual operation and maintenance 
or to maintain the $3,000,000 balance may be deposited into the ABS 
Legacy Sites Trust Account.
    (4) Commencing January 1, 2010 and continuing until the ABS Legacy 
Sites Trust Account is actuarially sound, the amount of the reclamation 
fee will be annually calculated and, if necessary, will be adjusted in 
multiples of $50 based on the following factors:
    (i) The current balance in the Reclamation Fee O&M Trust Account;
    (ii) The total amount of revenue into the Trust Account during the 
previous fiscal year from collection of the reclamation fee, the 
interest accrued by the Reclamation Fee O&M Trust Account, the deposits 
of civil penalties into the Trust Account and deposits from other 
sources of monies into the Trust Account;
    (iii) The amount of ongoing operation and maintenance costs 
incurred by the Reclamation Fee O&M Trust Account during previous 
fiscal years;
    (iv) The projected number of acres subject to the reclamation fee 
during the current fiscal year;

[[Page 2009]]

    (v) The projected amount of revenue into the Reclamation Fee O&M 
Trust Account during the current fiscal year from projected interest 
accrued by the Trust Account, projected deposits of civil penalties, 
and projected deposits of monies from other sources; and
    (vi) The projected expenditures of the Reclamation Fee O&M Trust 
Account for operation and maintenance costs for the current fiscal 
year.
    (5) Following the Department's review of its calculation of the 
required reclamation fee amount at a public meeting of the Mining and 
Reclamation Advisory Board pursuant to Subsection (2), the Department 
will publish the adjustment in the required amount of the reclamation 
fee in the Pennsylvania Bulletin. Adjustments to the amount of the 
reclamation fee will become effective upon publication in the 
Pennsylvania Bulletin. The Department's determination of the required 
amount of the reclamation fee pursuant to Subsections (3) and (4) will 
be a final action of the Department appealable to the Environmental 
Hearing Board.
    (6) The Department will cease to assess and collect the reclamation 
fee when the ABS Legacy Sites Trust Account established pursuant to 
Section 86.187(a) (relating to use of money) becomes actuarially sound. 
The ABS Legacy Sites Trust Account will become actuarially sound when 
the following conditions are met:
    (i) Financial guarantees sufficient to cover reclamation costs, 
including the costs to treat each discharge in perpetuity, have been 
approved by the Department for all mine sites permitted under the 
Primacy Alternate Bonding System;
    (ii) Construction of the necessary discharge treatment facilities 
has been completed at the ABS Legacy Sites; and
    (iii) The ABS Legacy Sites Trust Account, combined with the 
Reclamation Fee O&M Trust Account, contains funds which generate 
interest at a rate and in an amount sufficient to pay the annual 
operation and maintenance costs for treating post-mining pollutional 
discharges at the ABS Legacy Sites.

Summary of Regulatory Changes--Section 86.17, Permit and Reclamation 
Fees

a. Section 86.17(e) Reclamation Fees
    This proposal revises the text of Section 86.17(e) to clarify the 
application of this subsection in the context of the CBS. The revisions 
provide that the reclamation fee is assessed for each acre of the 
approved operational area of the permit. The proposed revisions also 
clarify the manner in which the reclamation fee is assessed. Finally, 
minor editorial changes were made by adding references to Section 
86.143 (relating to the requirement to file a bond) and to the 
exception for remining areas provided in Section 86.283(c).
b. Section 86.17(e)(1) (Deposit and Use of Reclamation Fees)
    This provision, in conjunction with Section 86.187(a)(1), 
establishes a separate subaccount within the Surface Mining 
Conservation and Reclamation (SMCR) Fund called the Reclamation Fee O&M 
(operation and maintenance) Trust Account, and requires the PADEP to 
deposit all reclamation fees it collects into the Reclamation Fee O&M 
Trust Account. This subsection also requires that the PADEP use the 
reclamation fees only for the purpose of paying the costs associated 
with treating post-mining pollutional discharges at ABS legacy sites. 
In addition, this paragraph requires that all interest earned on the 
monies in the Reclamation Fee O&M Trust Account be deposited into the 
account and be used only to pay the costs associated with treating 
post-mining 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 post mining pollutional discharges at ABS legacy 
sites. The PADEP decided to make the reclamation fee an adjustable 
source of revenue that would be used to help cover the costs of 
treating discharges at the ABS legacy sites.
c. Section 86.17(e)(2) (Preparation of Fiscal-Year Report on 
Reclamation Fee O&M Trust Account)
    This provision requires the PADEP to prepare a report at the end of 
each fiscal year, which will include a 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 
Pennsylvania Mining and Reclamation Advisory Board (MRAB) and the 
general public. This provision establishes a process by which the MRAB 
and the general public can examine the PADEP'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, the projected expenditures and projected 
revenue. Pennsylvania believes that this provision will assist OSM, the 
MRAB, affected persons in the industry, and interested members of the 
public, with their oversight of the PADEP's compliance with the 
requirements of 30 CFR Section 800.11(e) as applied to the ABS legacy 
sites, the Court ruling in Kempthorne, and the required program 
amendment at 30 CFR Section 938.16(h).
d. Section 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 adjusted annually based on 
criteria specified in Sections 86.17(e)(3) and (4). 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 
Sections 86.17(e)(3)(i) and (ii). Section 86.17(e)(3) provides that the 
PADEP 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. (See the discussion of 
the ABS Legacy Sites Trust Account in subsection 4.g., below.) Section 
86.17(e)(3)(i) reiterates the commitment for annual adjustment of the 
reclamation fee 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 instead. The 
State indicates that 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.
e. Section 86.17(e)(4) (Amount of the Reclamation Fee)
    The PADEP expects that the adjusted amount of the reclamation fee 
will become effective as of January 1, 2010, and will be similarly made 
effective on

[[Page 2010]]

that date each year thereafter. Section 86.17(e)(3) sets the basic 
parameters for annually adjusting the amount of the reclamation fee, 
and Section 86.17(e)(4) lists the specific factors to be used in the 
PADEP's calculation of the adjusted amount. Section 86.17(e)(3) 
requires that the reclamation fee be annually adjusted 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 
PADEP must prepare its year-end financial analysis of the Reclamation 
Fee O&M Trust Account pursuant to Section 86.17(e)(2). The 2008-09 
fiscal-year report must include the PADEP'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.
    Sections 86.17(e)(3) and (4) establish a mechanism for annually 
adjusting the amount of the reclamation fee. Pennsylvania indicates 
that 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 PADEP believes that the adjustment procedure is also 
necessary in order to maintain a sufficient cushion in the Reclamation 
Fee O&M Trust Account to prevent pollution and assure that the PADEP 
has sufficient money at any time to treat the discharges at the ABS 
legacy sites, including any sites with discharges that were originally 
permitted under the ABS, and for which the bonds are subsequently 
forfeited before the posting of a full cost, conventional bond or other 
financial mechanism that is sufficient to cover the costs of discharge 
treatment, in accordance with 30 CFR Section 800.11(e).
f. Section 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 PADEP 
to publish the amount of the adjusted reclamation fee. The PADEP must 
review its calculation of the adjusted reclamation fee amount at a 
public meeting of the MRAB (most likely in October of each year), where 
the members of the MRAB, affected persons in the industry, and the 
general public, will have an opportunity to comment on the PADEP's 
financial report and its calculation of the adjusted amount of the fee. 
The PADEP will subsequently publish the adjusted amount of the 
reclamation fee in the Pennsylvania Bulletin, with the adjusted amount 
becoming effective upon publication. This provision also establishes 
that PADEP's calculation of the adjusted reclamation fee is a final 
action appealable to the Environmental Hearing Board. According to 
Pennsylvania, section 86.17(e)(5) balances the PADEP'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 PADEP's administration of the Reclamation Fee O&M Trust Account and 
the calculation of the new reclamation fee.
g. Section 86.17(e)(6) (Conditions for Ceasing Collection of 
Reclamation Fee)
    Section 86.17(e)(6) requires the PADEP to cease assessment and 
collection of the reclamation fee when the ABS Legacy Sites Trust 
Account, established pursuant to Section 86.187(a)(i), is actuarially 
sound. The conditions which must be met for the ABS Legacy Account to 
become actuarially sound are prescribed here and in Section 
86.187(a)(2)(ii). The PADEP's current estimate of the annual operation 
and maintenance costs for treating the discharges at the ABS legacy 
sites is approximately $1,200,000. However, the ultimate annual amount 
for operation and maintenance costs vary considerably 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 PADEP completes construction of all 
necessary discharge treatment systems for all of the ABS legacy sites, 
the PADEP 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 PADEP to cease collection of the reclamation fee when the 
ABS Legacy Account contains funds which generate interest at a rate 
sufficient to pay the annual operation and maintenance costs for 
treating post-mining pollutional discharges at all the ABS legacy 
sites. At that point, the State believes that the PADEP 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 
that Pennsylvania will have met the requirements of 30 CFR 800.11(e) 
without the need for additional revenue from the reclamation fee.

Subchapter F. Bonding and Insurance Requirements: Revised Language to 
the Pennsylvania Code:

Subchapter F. Bonding and Insurance Requirements

    Bond Forfeiture
Section 86.187 Use of Money
    (a) Monies received from fees, fines, penalties, bond forfeitures 
and other monies received under authority of the Surface Mining 
Conservation and Reclamation Act (52 P.S. Sections 1396.1-1396.31), and 
interest earned on the monies, will be deposited in the Fund.
    (1) Monies received from the reclamation fees required by Section 
86.17[(b)](E) (relating to permit and reclamation fees), and the 
interest accrued on these monies, will be deposited into a separate 
subaccount within the fund called the Reclamation Fee O&M Trust 
Account.
    (i) The Department will deposit into the Reclamation Fee O&M Trust 
Account, up to $500,000 in a fiscal year, the monies collected from 
civil penalties assessed by the Department pursuant to the Surface 
Mining Conservation and Reclamation Act (52 P.S. Sections 1396.1-
1396.31) less the percentage of those penalty monies due the 
Environmental Education Fund pursuant to 35 P.S. Section 7528. If the 
amount of penalty monies collected exceeds $500,000 during a fiscal 
year, the Department may deposit the amount collected in excess of 
$500,000 into the fund and use the excess amount in accordance with 
Subsection (3).
    (ii) The Department may deposit into the Reclamation Fee O&M Trust 
Account a portion, to be determined at the Department's discretion, of 
the interest earned on other monies in the fund.
    (iii) The Department may deposit other monies into the Reclamation 
Fee O&M Trust Account, including appropriations, donations, or the fees 
collected for sum-certain financial guarantees needed to facilitate 
full-cost bonding in accordance with applicable law.
    (iv) The monies deposited in the Reclamation Fee O&M Trust Account 
will be used to pay construction costs and operation and maintenance 
costs associated with treating post-mining

[[Page 2011]]

pollutional discharges at ABS Legacy Sites, and such monies may not be 
used for any other purpose. For purposes of this section, operation and 
maintenance includes recapitalization costs. Monies in the Reclamation 
Fee O&M Trust Account will be held by the Commonwealth in trust for the 
benefit of all the people to protect their right to pure water and the 
preservation of the values of the environment. The State Treasurer will 
manage the investment of the funds in the Reclamation Fee O&M Trust 
Account with the advice of the Department.
    (2) Monies received from the forfeiture of bonds will be used only 
to reclaim land and restore water supplies affected by the surface 
mining operations upon which liability was charged on the bond, except 
as otherwise provided in this section and in Section 86.190 (relating 
to sites where reclamation is unreasonable, unnecessary or impossible; 
excess funds). Interest accrued on these monies will be used only to 
reclaim land and restore water supplies affected by surface mining 
operations for which the Department has forfeited bonds, as a 
supplement to bond forfeiture funds.
    (i) Monies received from bonds forfeited on ABS Legacy Sites, and 
the interest accrued on such monies, will be deposited into a separate 
subaccount in the Fund called the ABS Legacy Sites Trust Account, the 
Department may, upon review and recommendation of the Mining and 
Reclamation Advisory Board, transfer excess monies from the Reclamation 
Fee O&M Trust Account into the ABS Legacy Sites Trust Account. The 
Department may deposit other monies into the ABS Legacy Sites Trust 
Account, including appropriations, donations, or interest earned on 
other monies in the fund.
    (ii) Monies in the ABS Legacy Sites Trust Account, including the 
interest accrued by the Trust Account, will be used to pay the 
operation and maintenance costs associated with treating post-mining 
pollutional discharges at ABS Legacy Sites, and such monies may not be 
used for any other purpose. Monies in the ABS Legacy Sites Trust 
Account will be held by the Commonwealth in trust for the benefit of 
all the people to protect their right to pure water and the 
preservation of the values of the environment. The State Treasurer will 
manage the investment of the funds in the ABS Legacy Sites Trust 
Account with the advice of the Department.
    (iii) The Department may not make disbursements from the ABS Legacy 
Sites Trust Account until that Trust Account becomes actuarially sound. 
The ABS Legacy Sites Trust Account will become actuarially sound when 
the following conditions are met:
    (A) Financial guarantees sufficient to cover reclamation costs, 
including the costs to treat each discharge in perpetuity, have been 
approved by the Department for all mine sites permitted under the 
Primacy Alternate Bonding System;
    (B) Construction of the necessary discharge treatment facilities 
has been completed at the ABS Legacy Sites; and
    (C) The ABS Legacy Sites Trust Account, combined with the 
Reclamation Fee O&M Trust Account, contains funds which generate 
interest at a rate and in an amount sufficient to pay the annual 
operation and maintenance costs for treating post-mining pollutional 
discharges at the ABS Legacy Sites.
    (iv) When the ABS Legacy Sites Trust Account becomes actuarially 
sound the Department will transfer the monies in the Reclamation Fee 
O&M Trust Account into the ABS Legacy Sites Trust Account and the 
Reclamation Fee O&M Trust Account will terminate. At that time, the 
reclamation fee or alternative permanent funding source, whichever is 
in place, will cease and the deposit of civil penalty monies pursuant 
to Section 86.187(a)(1)(i) will also cease.

Summary of Regulatory Changes--Section 86.187, Use of Money

a. Section 86.187(a)(1) (Deposit of Reclamation Fee Into Reclamation 
Fee O&M Trust Account)
    This provision, in conjunction with Section 86.17(e)(1), has been 
revised 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 PADEP pursuant to Section 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 PADEP must use monies from fees, fines, 
penalties, bond forfeitures and other monies received under the 
Pennsylvania Surface Mining Conservation and Reclamation Act (PASMCRA), 
as well as interest earned on these monies. Pennsylvania believes that 
the enforceable regulatory mechanism created by these revisions will 
enable its bonding program to meet the requirements of 30 CFR Section 
800.11(e).
b. Section 86.187(a)(1)(i) (Deposit of Civil Penalties Into Reclamation 
Fee O&M Trust Account)
    Under Section 18(a) of PASMCRA, civil penalties collected pursuant 
to that statute may be used by the PADEP for reclamation of surface 
coal mine sites, restoration of water supplies affected by surface coal 
mining, or for any other conservation purposes provided by PASMCRA 52 
P.S. Section 1396.18(a). The PADEP is thus authorized to use civil 
penalty monies, as a supplement to forfeited bonds, for purposes of 
reclaiming the ABS legacy sites including treatment of post-mining 
pollutional discharges at these sites. New Section 86.187(a)(1)(i) will 
require the PADEP to deposit into the Reclamation Fee O&M Trust Account 
the monies collected from civil penalties assessed pursuant to PASMCRA, 
and to use those monies deposited into the account to pay the costs 
associated with treating discharges at the ABS legacy sites. PADEP 
believes that, in order to comply with the Court's ruling in 
Kempthorne, supra, it 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 pursuant to 
PASMCRA--and requires the PADEP to use this source of revenue to fund 
the discharge-treatment costs of 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. Section 7528.) 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 PADEP 
collects more than $500,000 in civil penalties during a fiscal year, 
Section 86.187(a)(1)(i) gives the PADEP discretion to deposit the 
excess amount into the SMCR Fund where it may be used for the purposes 
described in Section 86.187(a)(3).
c. Section 86.187(a)(1)(ii) (Deposit of Interest Earned on Other Monies 
in the SMCR Fund Into the Reclamation Fee O&M Trust Account)
    Similar to the deposit of civil penalties required by Section 
86.187(a)(1)(i), this section is being added to authorize the PADEP to 
deposit into the Reclamation Fee O&M Trust Account a portion of the 
interest that is earned on other monies in the SMCR Fund. The SMCR Fund 
includes monies from released bonds, license

[[Page 2012]]

fees, and other sources; these monies earn interest that may be used by 
the PADEP for the purposes specified by Section 18(a) of PASMCRA. See 
52 P.S. Section 1396.18(a); 25 Pa. Code Section 86.187(a). This 
provision gives the PADEP discretion as to the amount of the interest 
earned on other monies in the SMCR Fund which will be deposited into 
the Reclamation Fee O&M Trust Account during any given fiscal year.
d. Section 86.187(a)(1)(iii) (Deposit of Other Monies Into the 
Reclamation Fee O&M Trust Account)
    Section 86.187(a)(1)(iii) will give the PADEP 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 PADEP 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.'' (These 
devices are also known as ``conversion assistance financial 
guarantees'' or ``conversion assistance bonds,'' and are described 
below in Section B.)
e. Section 86.187(a)(1)(iv) (Restriction on Use of Monies in the 
Reclamation Fee O&M Trust Account)
    Section 86.187(a)(1)(iv) specifies that all monies deposited into 
the Reclamation Fee O&M Trust Account must be used to pay the costs 
associated with treating the post-mining pollutional discharges at the 
ABS legacy sites. This provision establishes that the monies held in 
the Reclamation Fee O&M Trust Account are being held by the State in 
trust for the benefit of all the people of the State in order to 
protect their rights under Article I, Section 27 of the Pennsylvania 
Constitution. Pennsylvania believes that an actuarially sound account 
will satisfy the requirements of 30 CFR Section 800.11(e).
f. Section 86.187(a)(2) (Use of Monies Received From Forfeiture of 
Bonds)
    A minor editorial change is being made to this provision to clarify 
that monies received from the PADEP'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 the 
provisions in Sections 86.187(a)(2)(i) and (ii), which are being added 
as part of this final rulemaking.
g. Section 86.187(a)(2)(i) (Deposit of Monies 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 monies 
received from the bonds forfeited on ABS legacy sites, and all interest 
accrued on such monies, must be deposited into the ABS Legacy Sites 
Trust Account according to new Section 86.187(a)(2)(i). Section 
86.187(a)(2)(i) will also provide regulatory authorization for the 
PADEP to deposit monies from other sources, such as appropriations, 
donations, or interest earned on other monies in the SMCR Fund, into 
this account. Finally, Section 86.187(a)(2)(i) authorizes the PADEP to 
transfer ``excess'' monies from the Reclamation Fee O&M Trust Account 
into the ABS Legacy Sites Trust Account. This provision requires the 
PADEP to seek the MRAB's review and recommendation prior to 
transferring any ``excess'' funds. Pennsylvania indicates that Section 
86.187(a)(2)(i) responds to the court ruling in the Kempthorne case 
regarding the obligation of the PADEP to meet the requirements of 30 
CFR 800.11(e).
    Section 86.187(a)(2)(i) will establish a type of savings account 
for monies ultimately to be used to pay the annual operation and 
maintenance costs associated with all of the ABS legacy sites. The 
PADEP 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 below, prohibits the PADEP 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. 
Pennsylvania believes that the amendments to Section 86.17(e) will 
enable the PADEP 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. Pennsylvania indicates that 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.
h. Section 86.187(a)(2)(ii) (Restriction on Use of Monies in ABS Legacy 
Sites Trust Account)
    This provision requires that all monies 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 Section 86.187(a)(1)(iv), the PADEP is declaring that it is 
establishing the ABS Legacy Sites Trust as an account in the SMCR Fund. 
The PADEP has included language in Section 86.187(a)(2)(ii) that 
specifically establishes the trust called the ABS Legacy Sites Trust 
Account. This regulation states that all monies deposited in the ABS 
Legacy Sites Trust Account are held by the State in trust for the 
benefit of the people of the State to protect their rights under 
Article 1, Section 27 of the Pennsylvania Constitution.
i. Section 86.187(a)(2)(iii), (A), (B), (C) (Restrictions on ABS Legacy 
Sites Trust Account)
    Section 86.187(a)(2)(iii) prohibits the PADEP from making any 
disbursements from the ABS Legacy Sites Trust Account until the account 
becomes actuarially sound. The conditions that must be met for the ABS 
Legacy Sites Trust Account to become actuarially sound are prescribed 
here. First, financial guarantees sufficient to cover all reclamation 
costs must have been approved by the PADEP for all mine sites permitted 
under the primacy ABS. Second, the PADEP must have completed 
construction of all necessary discharge treatment systems for all of 
the ABS legacy sites. Once the entire class of ABS legacy sites is 
known, and all necessary discharge treatment systems have been 
constructed for these sites, the PADEP will be able to ascertain the 
amount of annual operation and maintenance costs, including 
recapitalization costs, which will be necessary to treat all the 
discharges at all of the ABS legacy sites. Once this figure is known, 
the third condition precedent may be satisfied, i.e., the ABS Legacy 
Sites Trust Account and Reclamation O&M Trust Account must contain 
funds that generate interest at a rate and amount sufficient to pay the 
annual operation and maintenance costs for treating all post-mining 
pollutional discharges at all the ABS legacy sites. Pennsylvania 
believes that, once the ABS Legacy Sites Trust Account becomes 
actuarially sound, the PADEP will always have sufficient

[[Page 2013]]

funds on hand in the Account to cover the costs of treating the 
discharges at all the ABS legacy sites, and Pennsylvania's bonding 
program will meet the requirements of 30 CFR 800.11(e) without the need 
for any revenue from the reclamation fee or the other revenue sources 
dedicated to the Reclamation Fee O&M Trust Account.
j. Section 86.187(a)(2)(iv) (Transfer of Remaining Funds in Reclamation 
Fee O&M Trust Account to ABS Legacy Sites Trust Account)
    Section 86.187(a)(2)(iv) provides for termination of the 
Reclamation Fee O&M Trust Account when the ABS Legacy Sites Trust 
Account becomes actuarially sound. This provision authorizes the PADEP 
to transfer the remaining funds in the Reclamation Fee O&M Trust 
Account into the ABS Legacy Sites Trust Account when the latter account 
becomes actuarially sound. At that point, the Reclamation Fee O&M Trust 
Account will no longer be necessary and will terminate. In addition, 
the reclamation fee (or an alternative permanent funding source 
established in lieu of the reclamation fee) will no longer be needed 
and will cease to be collected, and the deposit of civil penalty monies 
into the Reclamation Fee O&M Trust Account pursuant to Section 
86.186(a)(1)(i) will also cease.
    The remaining portions of this State program amendment, described 
in Sections B through E, below, do not consist of changes to 
Pennsylvania regulations. Rather, they are financial mechanisms PADEP 
has established that will, in the PADEP's view, work in concert with 
the regulatory changes described above to bring Pennsylvania into 
compliance with the required amendment at 30 CFR 938.16(h), the 1991, 
732 letter, and, consequently, with the ABS standard of sufficiency set 
forth in 30 CFR 800.11(e).

B. ABS Program Amendment--The Conversion Assistance Program

    Pennsylvania indicated that when implementing the revised CBS and 
converting the ABS permits to conventional bonding, it had serious 
concerns regarding the financial ability of existing permittees to post 
significantly increased bond amounts. To address these risks, the PADEP 
developed and implemented a conversion assistance program as part of 
the conversion of ABS active permits to a CBS. Using its authority 
under Section 4(d.2) of the PASMCRA, 52 P.S. Section 1396.4(d.2), 
Pennsylvania developed the conversion assistance program as an 
alternative financial assurance mechanism that, it contends, meets the 
purposes and objectives of the bonding program. In pertinent part, 
Section 4(d.2) states that ``[t]he department [PADEP] may establish 
alternative financial assurance mechanisms which shall achieve the 
objectives and purposes of the bonding program.''
    The Conversion Assistance program was developed in which the PADEP 
would essentially operate as a surety company. Funded with an initial 
general-revenue appropriation of $7,000,000, and supplemented by annual 
premiums, the PADEP issued a ``land reclamation financial guarantee'' 
in a sum-certain amount to individual ABS permittees required to 
convert to a full-cost bond for land reclamation on an existing permit. 
The Land Reclamation Financial Guarantees (LRFG) were issued only to 
ABS permittees that were converting to a conventional bonding permit. 
Applicants who submitted applications after termination of the ABS are 
not eligible for the conversion assistance program. The PADEP indicates 
that, as of November 30, 1999, the forfeiture rate for primacy ABS 
permits was 10.4%. The PADEP concluded that, based on this historic 
rate, the $7,000,000 principal would cover up to $70,000,000 in bond 
exposure. The PADEP determined that the $7,000,000, when combined with 
existing site bonds, would be sufficient to pay for all forfeitures 
that may occur. Additionally, premiums collected for the LRFGs would 
provide additional funds to complete reclamation.
    In June 2001, the Pennsylvania legislature appropriated the 
$7,000,000 for the conversion assistance program. See Act of June 22, 
2001 (Pub. L. 979, No. 6A), known as the ``General Appropriation Act of 
2001,'' at Section 213 (appropriating $7,000,000 ``for the conservation 
purpose of providing sum-certain financial guarantees needed to 
facilitate the implementation of 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 
guarantee''). The general revenue appropriation of $7,000,000 was for 
one fiscal year, which necessitated the issuance of all the LRFGs by 
mid-2002. Issuance of new LRFGs ended after mid-2002, although some 
LRFGs have been reassigned to a new operator, generally as part of a 
permit transfer.
    As part of this submission, Pennsylvania requests that OSM approve 
the Conversion Assistance Program and its use of the LRFG as a 
financial guarantee equivalent to a conventional bond. Section 4(d.2) 
of PASMCRA is submitted as part of this program amendment as the 
authority for employing LRFGs under the Conversion Assistance Program.
    The PADEP stated, however, that by the close of the conversion 
process, there were six permittees actively mining large anthracite 
operations with outstanding bonding obligations that had to be 
addressed through Consent Orders and Agreements (CO & A's) establishing 
reclamation and payment schedules. These sites were either not provided 
with conversion assistance guarantees, or were provided with guarantees 
that fell short of underwriting the full estimated cost of land 
reclamation. Currently, only two of these permittees remain 
underbonded, and the PADEP asserts that it has made provisions for 
fully funding the outstanding reclamation obligations for these two 
remaining cases through reclamation and payment schedules.

C. Trust Funds as an Alternative System and Other Equivalent Guarantee

    Pennsylvania is also submitting the provision in Section 4(d.2) of 
PASMCRA for the additional purpose of providing the authority for the 
establishment of site-specific trust funds to be used to pay the costs 
of treating post-mining pollutional discharges in perpetuity. 
Pennsylvania is requesting approval of site-specific trusts as an 
alternative financial assurance mechanism consistent with Section 
509(c) of SMCRA and other applicable provisions of SMCRA. Pennsylvania 
proposes that its site-specific trust fund program is an alternative 
financial system to a bonding program that achieves the objectives and 
purposes of a conventional bonding program, and provides equivalent 
guarantees no less effective than a performance bond and 30 CFR 
subchapter J.
    In support of its request for approval of site-specific trusts as 
an alternative financial assurance mechanism consistent with Section 
509(c) of SMCRA and other applicable provisions of SMCRA, PADEP 
provided descriptions and demonstrations on its authority to enter into 
trust agreements, trust development and management process, and some of 
the administrative and financial components. More specifically, PADEP 
has provided discussions on Section 4(d.2) of PASMCRA authority to 
establish alternative financial assurance mechanisms, the use of the 
Consent Order and Agreement and a companion Trust Agreement, factors 
currently used to determine the amount of a site-specific trust fund, 
and the use of AMD-Treat for cost estimating. PADEP's

[[Page 2014]]

proposed amendment also discusses rates of return, inflation rates, and 
volatility rates used on previous trust agreements as well as how 
operation and maintenance (O&M) and recapitalization costs are 
addressed. Finally, the amendment submission describes trust 
disbursement procedures and flexibility to allow the permittee a 
reasonable period of time to fully fund a treatment trust.

D. Demonstration of Sufficient Funding for Outstanding Land Reclamation 
at Primacy ABS Forfeiture Sites

    An analysis by the PADEP of the existing land reclamation ABS 
forfeiture sites was initially 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 PADEP requested 
that the Pennsylvania legislature appropriate general revenue funds to 
provide the additional money needed to complete the land reclamation of 
ABS forfeiture sites. In 2001, the General Assembly appropriated 
$5,500,000 to be used solely for the costs of land reclamation at ABS 
forfeiture sites (the ``ABS Closeout Funds''). See Act of June 22, 2001 
(Pub. L. 979, No. 6A), known as the ``General Appropriation Act of 
2001,'' at Section 213. PADEP states that it has used the ABS Closeout 
Funds to complete land reclamation for some of the ABS forfeiture 
sites. In 2007-08, the PADEP prepared an updated list of primacy ABS 
bond forfeiture sites with outstanding land reclamation. It also 
prepared a detailed analysis of the current costs to complete all 
outstanding land reclamation at these sites and provided an estimated 
total cost to complete the land reclamation for all primacy ABS bond 
forfeiture sites of $7,946,890.
    The PADEP indicates that, in addition to the $5.5 Million 
legislative appropriation, it has sufficient other funds on hand to 
cover all land reclamation costs on ABS forfeiture sites. (See the ABS 
Bond Forfeiture Sites Land Reclamation Status Report, July 2008, p. 15, 
included as part of Attachment 8 to this State program amendment.) 
There is also money available in several other accounts in the SMCR 
Fund. Where funds are not restricted by law solely for use in 
reclaiming ABS forfeiture sites, the PADEP has identified monies which 
it is authorized by law to spend for this purpose. (See ABS Financial 
Summary, July 2008, included as part of Attachment 10 to this State 
program amendment.) Thus, the PADEP believes it has demonstrated that 
it has available sufficient money to complete the outstanding land 
reclamation for the ABS legacy sites at any time, as required by the 
Third Circuit's decision interpreting 30 CFR 800.11(e)(1).

E. Demonstration of Sufficient Funding for Construction of All 
Necessary Discharge Treatment Facilities at the Primacy ABS Forfeiture 
Sites

    Pennsylvania submitted information to demonstrate that it has 
sufficient funding to complete any initial facility construction at 
primacy ABS forfeiture sites. An evaluation of all the primacy ABS 
forfeited discharge sites was completed by PADEP to project the costs 
of treating the discharges. Post-mining treatment costs were 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 
and construction.
    The PADEP calculated that, as of July 2008, the total capital cost 
to construct all necessary discharge-treatment facilities for the 
primacy ABS forfeiture discharge sites is $2,073,104. The PADEP states 
that it has taken a conservative approach to this cost calculation.
    To address this aspect of the ABS legacy, the PADEP must assure 
that it has the funds to meet this obligation. The PADEP indicates that 
it currently has funds on hand that are available to cover the 
approximately $2,100,000 total c