Blair sees a potential financial tsunami if West Virginia does not implement an insurance program to cover mine reclamation. It is prompted by a recent legislative audit pointing out that West Virginia could face hundreds of millions of dollars in mine reclamation costs if bond-holding companies disappear.
“We can’t afford that to happen,” Blair told the Senate Finance Committee today.
Blair noted that in his current position as Senate Speaker, he has decided not to sponsor many bills except as a traditional sign of respect for the governor’s priority bills. But in this case, he is the primary sponsor of Senate Bill 1, which also has a bipartisan list of co-sponsors.
“I think it’s a great idea. I signed it,” Senate Minority Leader Stephen Baldwin, D-Greenbrier, told members of the finance committee today.
The finance committee accepted the bill and sent it to the full Senate.
The bill would create a mutual mining insurance company. Subsequent legislative actions could inject $50 million in seed money to establish the program.
The insurer would be a bulwark against the possibility that the financial difficulties of the coal companies could make them unable to meet their obligations to reclaim the lands they have exploited.
At present, the Special State Rehabilitation Fund is set up to cover any shortfall, but the concern is that it could be overwhelmed with obligations.
The bill instituting the mutual insurance company specifies that it would not be considered as a service or an organization of the State, but rather as a company governed by five administrators. The chairman, however, would be appointed by the governor, and the other members would also be appointed by state officials.
“I think when this is all over, and five or ten years from now, it will provide an insurance policy for the state of West Virginia and the mining industry in that state,” Blair told his fellow senators. .
“This is not a bailout. Think of it as an insurance policy.
David Raider, retired director of the West Virginia Mutual Insurance Co., which handled doctors’ medical malpractice claims, also testified before the committee. Raider helps the State to operate the mutual insurance,
Sen. Ron Stollings, D-Boone, asked if $50 million would be enough for overall liability. “How will this help us?”
Raider replied, “We don’t know what’s going to happen here, how bad it’s going to be. Will it be in the billions of dollars? We cannot tell.
He acknowledged that the $50 million might prove insufficient, but described it as a starting point.
“If we launch this business and basically put it on the shelf – be prepared for a crisis,” Raider said.
“If this becomes the problem you’re talking about, the $50 million will be insufficient, and we’ll have to get a federal grant or something to get this business up to the upper ranges.” But you have to have a minimum to start with, and that’s what the $50 million is.
Funding for mine reclamation in West Virginia has become such an issue that environmental groups, including the Sierra Club filed a federal complaint last summer aimed at pressuring the federal government to intervene.
Also last summer, lawmakers heard a summary of a 52 page report presenting the likelihood of mine reclamation as a budget bomb.
In short, West Virginia is subject to federal requirements to have enough money available to complete the reclamation of all areas where permit holders are defaulting.
West Virginia allows mining companies to post bonds of $1,000 to $5,000 per acre, amounts that the Department of Environmental Protection estimates would cover only about 10% of costs of rehabilitation. West Virginia is filling the void with what it calls special reclamation funds, which are funded primarily by a 27.9-cent tax levied on every short ton of coal produced.
Rising reclamation costs combined with economic pressure on the coal industry highlighted the possibility of a financial crisis.
An organization called the Special Reclamation Fund Advisory Council predicts that liabilities from existing permits will total $496.7 million over the next twenty years.
“West Virginia’s coal mine reclamation program will continue to require hundreds of millions of dollars to reclaim permit sites in accordance with federal regulations,” the legislative auditor’s report concluded.
“The program has no known contingency plans should the reclamation funds become insolvent. If the program’s current funding sources prove insufficient to meet the rehabilitation requirements, the resulting additional financial obligations could prove to be detrimental to the state budget.
A big concern is the number of coal companies that have gone bankrupt in recent years. Six publicly traded coal companies holding 52% of permits and 59% of mines in the state declared bankruptcy between April 2014 and January 2016, the report noted.
“The most obvious effect on rehabilitation special funds is the presumption that failed businesses are the most financially vulnerable,” the report said.
“The biggest companies have been able to reorganize or sell assets and come out of bankruptcy. However, the large number of sites going through multiple companies and/or bankruptcies is a potential indicator that these sites may not be viable in the long term. »