SMCRA_ryan.pdf

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Established in 1977 by the United States Congress and

implemented by individual states, the Surface Minining

Control and Reclamation Act (SMCRA) regulates US coal

mining and reclamation. This Science and Technology

Note provides an overview of how regulations differ for

mine land reclaimation before and after SMCRA, and

details of West Virginia’s post-SMCRA bonding system

meant to ensure adequate funds for former mine land

restoration.

What Mine Lands Are Covered Under

SMCRA?

In West Virginia SMCRA is codified as West Virginia

Code §22-1. For all mines operating after the law

passed in 1977 (post-SMCRA), mine operators are

required to post bonds equal to the estimated cost of

reclamation and develop reclaimation plans before coal

mining begins. It legally obligates states to reclaim any

post-SMCRA mines where the bond is forfeited, even if

the bonds do not cover the full costs of reclamation.

Research Highlights

• SMCRA regulates former mine lands in West

Virginia under two different regimes depending on

whether the mine was in operation when the law

passed in 1977 (see table for summary).

• Pre-SMCRA mine lands are eligible for reclaimation

funding through through the abandoned mine land

(AML) program (and the later AMLER program), but

there is no legal responsibility for states to restore

former mine land to its pre-mining state.

• Post-SMCRA mine operators must post a bond to

cover the costs of reclamation and create a recla- mation plan prior to the start of mining. The mined

land is required to be restored to its pre-mining

state. If the mine operator defaults, legal responsi- blity for restoration falls to the state.

Abandoned mine lands (AML) are defined as “lands

mined for coal or minerals that were abandoned,

inadequately reclaimed and where no individual or

company is responsible for the site’s reclamation.”Mines

abandoned prior to the passage of SMCRA in 1977

(pre-SMCRA) are not subject to the same bonding

and restoration requirements as post-SMCRA mines.

For these previously abandoned mine lands, SMCRA

established the Abandoned Mine Land (AML) program,

which offers states and tribes funding to restore

pre-SMCRA abandoned mines. The AML program

is funded by fees on current coal production, and

participation by states in the AML program is voluntary.

There is no legal obligation to resore pre-SMCRA lands to

their pre-mining state. Created in 2016, the abandoned

mine land economic revitilization (AMLER) program

funds economic development projects on pre-SMCRA

abandoned mine lands. The Office of Surface Mining

Reclamation and Enforcement (OSMRE) implements

SMCRA in partnership with the West Virginia Department

of Environmental Protection (WVDEP).

The Post-SMCRA Bonding System

For all post-SMCRA mines, states are required to have

sufficient money available to complete the reclamation

plans if a coal company enters bankruptcy or abandons

The Surface Mining Control and Reclamation Act (SMCRA)

of 1977 and West Virginia

August 2024

Map of Abandoned Mine Lands

Source: WV Department of Environmental Protection GIS Viewer

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This Science & Technology Note was written by Colin Dunn, JD, WVU, Ryan Nesselrodt, PhD, and Dr. Deborah Stine on behalf of West

Virginia University’s Bridge Initiative for Science and Technology Policy, Leadership, and Communications with financial support from

the US Department of Commerce’s Econonomic Development Agency, Federal Award ID Number: 01-79-15295. Please see https://

scitechpolicy.wvu.edu/ or contact scitechpolicy@mail.wvu.edu for more information.

License Works 4.0 License.

its reclamation obligations. This money is held in two

forms. First, all mine operators are required to have

posted bonds to cover post-mining land reclamation

costs. These bonds come in three types: self-bonding,

surety bonds, and collateral bonds (see table). In

addition, West Virginia has a Special Reclamation Fund

(SRF), funded primarily by state taxes on coal mining

activity. The SRF is meant to provide funds to complete

land restoration when posted company bonds are

insufficient to cover the full costs of land reclaimation. A

2021 West Virginia Legislative Auditor report estimates

posted bonds would cover 10% of reclaimation costs in

West Virginia. The solvency of the SRF and the issues

with the bonding system are discussed in more depth in

this Science and Technology Note.

As of 2017, West Virginia companies held reclamation

bonds totaling aroudn $971 million, the vast majority of

these surety bonds. The Legislative Auditor’s report notes

that due to bankruptcies of coal companies operating in

West Virginia, over 55% of the state’s bonds are at risk of

being forfeited. In 2021, five surety companies held over

90% of all surety reclaimation bonds in the state, with

one company, Indemnity National Insurance Company,

holding 66.9%. The report notes this consolidation may

mean surety companies will be unable to honor forfieited

bonds, increasing the risk the state will be liable for

former mine land reclamation costs.

Regulatory Regime Pre-SMCRA Former Mineland Post-SMCRA Former Mineland

Legal Obligations No money or legal obligation to reclaim

minelands

Posting of a bond that will only be released after reclamation is

finished to ensure there are no more AMLs; federal production tax

on coal to clean up legacy mine sites

Money available for

reclamation

Eligible for funding from the AML and AMLER

programs

Bonds are meant to ensure that reclamation is completed by the

mine operator. West Virginia’s SRF is meant to meet shortfalls

Legal Protections Developers in West Virginia are likely to be

protected from lawsuits stemming from

pollution from AMLs if reclamation attempts

are made under the WV Good Samaritan

Statute (W. Va. Code Section 22-27-1).

Mining permits require land to be returned to its pre-mining state

unless a variance is authorized because restoration is not technically

feasible (e.g., mountaintop removal). Potential variances include

using the land for industry, homesteading, forestry, or renewable/

alternative energy production (geothermal, biomass, etc.).

Bond Type Description Key Features

Self-Bonding Allows coal mining operators to demonstrate

sufficient corporate assets for site reclamation

without requiring cash or collateral upfront

No funds for the operator to forfeit, in

bankruptcy as the value of the bond is based

on the solvency and assets of the company

• No cash or collateral upfront

• Dependent on sufficient corporate assets

• No funds at risk

• Nothing is left to reclaim if the company declares bankruptcy

• The GAO has recommended removing the option of self-bonding

entirely

Collateral Bonds Requires coal mining operators to provide

financial instruments or property assets (cash,

certificates of deposit, first-lien interests in real

estate) as collateral

• Originally cover the cost of the bond but depreciate and can be

hard to recover in bankruptcy proceedings

• Only 3% of bonds in WV

Surety Bonds Underwritten by an insurance company that

will cover costs if the coal company forfeits

the bond

Theoretically the safest bonds but dependent

on the solvency of the underwriting company

• Full costs of the bonds are recoverable in event of bankruptcy by

the mine operator

• WV has no statutory limits on the amount of reclamation surety

bond coverage a single surety company may issue, either in the

case of individual bonds or in the aggregate

• Highly concentrated among a few surety companies due to the

risk involved, which increases the risk that the surety companies

could go bankrupt if too many of the bonds are forfeited

Regulatory Regimes for Pre- and Post-SMCRA Mine Lands

Types of Bonds Used for Funding Mind Land Reclamation