Wyoming's AML revenue stream slowing to a trickle

It all started as a way to finance the clean-up of forgotten coal mines, dangerous eyesores that collapsed or leaked acidic sludge into streams. Yet the Abandoned Mine Reclamation Fund turned into a piece of federal legislation with more lives than a resourceful alley cat.

Originally scheduled to expire in 1992, the Abandoned Mine Reclamation Fund (or AML) has been reauthorized by Congress seven times; the legislation is scheduled to remain alive until 2021.

But the most adroit – and scrappiest – feline in the AML saga has been the state of Wyoming.

Since 1977, the state of Wyoming has received (or been promised) $1,051,898,067.60 from the AML fund according to Office of Surface Mining, which operates under the auspices of the Department of the Interior.

While disbursements did go towards the original purpose of the fund – Wyoming has reclaimed more than 1,051 coal and non-coal mine sites – hundreds of millions also got funneled into building water systems in Gillette, clean-air research, a hospital addition in Sheridan, maintaining state highways, and the Wyoming Wildlife and Natural Resource Trust.

The largest single recipient has been the University of Wyoming, which has received more than $200 million in AML-related funding for research in clean coal technology, engineering and over-all energy research. This includes a 2007 $50 million appropriation for building the Michael B. Enzi STEM (science, technology, engineering and mathematics) facility.

A 2011 report from the Office of Surface Mining (OSM) on Wyoming’s AML activity put it plainly. “Wyoming has spent much of its AML funds on non-coal mining related problems.”

According to OSM documents, Wyoming has, thus far, spent only roughly 10 percent of its AML-related distributions, $151.6 million, reclaiming coal mine hazards.

Wyoming DEQ-AML office says the current number is closer to $164 million.

Beginning in FY 2014, however, Congress will significantly curtail distributions to Wyoming from the AML fund. (Actually, due to a 2006 settlement, distributions now come directly from the U.S. Treasury, not the AML fund).

Coming to an end will be an annual disbursement of $82.7 million. There have not been many strings attached to the funding, either. While Washington won’t totally turn off the AML spigot (another distribution, dedicated to specific mine remediation projects, will last until 2022), the legislature is scrambling to fulfill its wish list and adjust their funding before the annual checks cease to arrive.

For example, for the 2012-13 budget, the University of Wyoming reorganized the funding for its School of Energy Resources (SER), which has received more than $75 million in AML-related funding during the last four years. SER has now gone back to depending on the legislative general fund.

Still, this year the legislature approved projects fairly far afield from remediating dangerous coal mines, such as a $10 million stadium rebuild at UW and a $3.5 million agricultural building on the campus of Sheridan College.

The story of how the distribution became so inclusive gives testament to Wyoming’s powerful position in the coal production world, the tug-of-war between east vs. west mining interests, and the persistence of Wyoming politicians – particularly U.S. Sen. Mike Enzi, a Republican from Campbell County, America’s largest coal mining district – who made sure the money came back to the state.

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It began with the philosophy that the polluter had to pay a little.

In the mid-1970s, there were an estimated 1.1 million acres of abandoned coal mine sites in the United States. In Pennsylvania, West Virginia, and Kentucky, the abandoned sites numbered in the thousands. They were serious polluters, especially those dumping acid mine drainage into water systems. In Wyoming, streets in Rock Springs collapsed into sinkholes, the results of developing a municipality over old coal mine shafts.

To solve the problem, Congress passed the Surface Mining Control and Reclamation Act of 1977 or SMCRA, an ambitious law designed to regulate the environmental impacts of coal mining. It is the law governing the environmental impacts of strip mines in Wyoming today. The law also created a trust, the AML fund, to finance the clean-up of old, abandoned mine sites.

The trust operated on simple premise: mines would be levied a per ton fee: 35 cents per ton for surface-mined coal, 15 cents per ton for underground coal, and 10 cents per ton for lignite coal. The Department of the Interior would distribute the money, gathered in the interest-bearing trust fund, for various mine reclamation projects.

“When (Ed) Herschler was governor, Wyoming fought the idea that western coal mines should have to pay into fund,” said former Governor Dave Freudenthal. “It made no sense to us. This was largely an eastern problem. But, if we were going to pay, we had to have some assurance that we’d get the money back.”

To alleviate such concerns, Congress guaranteed states at least 50 percent of the money (called the state’s share) levied from mines in their borders would be returned for local clean ups. The other half of the money would go to areas in the country where it was needed most, regardless of where it came from.

Wyoming had its own unique problem, however.

The state’s star as a coal-producing colossus was on the rise. The year the AML fund came into being, 1977, Wyoming producers mined 44.4 million tons of coal; in 2008, they mined 467 million tons. Thus, each year producers began paying an increasingly higher percentage of per-ton AML contributions, especially since most of Wyoming’s production comes from strip mines, which pay a higher fee.

The problem got more complicated in 1984, when Wyoming voluntarily certified it had taken care of all of its serious abandoned mine issues. This would include remediating a smoldering underground fire at the Acme coal mine outside Sheridan and addressing subsidence (streets and houses collapsing into old coal mines) in Rock Springs.

Powder River Basin coal producers kept breaking production records. In 1988, Wyoming passed Kentucky as the lead coal producing state in the nation. Coal companies, especially in Campbell County, were pouring millions into the AML fund and Wyoming, fresh out of projects, had little to spend the money on.

Well, not quite. An amendment to SMCRA, called the Abandoned Mine Reclamation Act of 1990, gave Wyoming wiggle room.

The legislation “contained a new provision which expanded the rights of states that have certified completion of known coal [mining] problems to utilize state share funds for non-coal reclamation,” said Alan Edwards, who oversees AML projects in Wyoming.

This included “the repair of facilities serving the public, the construction of new public facilities in communities impacted by coal or mineral mining and the construction of new facilities or funding of activities related to the coal or mineral industries,” said Edwards.

Given enough imagination, this language opened up a potential cornucopia of cash. Applications came in for a community health center in Kaycee; sewer replacement projects in Greybull and Frannie; a $2 million vocational training center in Gillette; flood mitigation (again in Kaycee); and for building a snow fence along County Road #304 in Lincoln County.

Under Governors Mike Sullivan and Jim Geringer, communities from all over Wyoming applied for AML funds. “They had a stream of applicants,” said Don Richards, former energy policy advisor for Sen. John Barrasso (R-Wyoming) but now Director of Governmental and Community Affairs for the University of Wyoming. “The number of the requests exceeded the amount money available by a multiple of ten.”

Still, Wyoming was not getting anywhere close to its 50 percent state-share money back. The problem, said Richards, came from Washington and coal producing states competing for the money. By the year 2000, the AML corpus had reached $1.5 billion and had become somewhat of a financial darling for Congress.

Not only did its seven-figure corpus help offset (at least on paper) the federal deficit, the interest gathered was seen as a new source of revenue. States with an endless list of abandoned mine liabilities were not keen on seeing money, either from the interest or the corpus, going to any state that had taken care of their major coal mine problems.

“There came a certain stage when the government just about stopped giving us money,” said Freudenthal. “The federal government – who are they to make such a decision? It was such an outrage that if we were a colony, we’d be pitching tea into the water. Well, we would if the Platte had enough of flow in it.”

At the time, Mike Enzi (R) and Craig Thomas (R) represented Wyoming in the U.S. Senate while Barbara Cubin (R) was Wyoming’s sole vote in the House. They fought an uphill battle against Eastern coal states like Pennsylvania (19 House members); Ohio (18 House members); Kentucky (six House members); and W. Virginia, (three House members).

Powerful congressional members like Senator Arlen Specter (R, then D-Pennsylvania) and Rep. Nick Rahall (D-West Virginia) made sure that AML money flowed to problems in their states. They were influential in passing a 1992 law that made $60 million (gathered from interest) from the AML fund available to support the United Mine Workers of America (UMWA) Combined Benefit Fund. The UMWA describes this fund as “a group of six multi-employer plans that provide health and pension benefits to retired coal miners and their eligible dependents.”

This might have been fine for eastern coal miners, but at the time, there were roughly 100,000 (including active and retired) UMWA miners nationwide of which those in Wyoming numbered under 400.

The OSM, via the AML fund, made a second distribution of $69 million to the United Mine Workers Combined Benefit Fund in 2005.

In 2002, Pennsylvania claimed it had an abandoned coal mine remediation backlog requiring $4.5 billion. Yet, due to the small percentage its operators put into the fund, it could only receive $19.7 million. The same year, West Virginia had identified $625 million in abandoned or reclaimed coal mines, but could only collect $17.5 million. By contrast, Wyoming had no remaining high priority abandoned mines sites, but regardless received $21.3 million.

As time passed, Wyoming’s delegation became increasingly concerned about getting money returned to the state at all. Distributions from the AML funds were scheduled to expire on June 30^th, 2006.

The state did not suffer its dilemma in solitude. Three other states, Louisiana, Montana, and Texas, had certified they had taken care of their priority coal-related problems. So had the Crow, Hopi and Navajo Indian tribes. But Wyoming producers had contributed more to the AML fund than producers in these six entities combined.

“It was not an easy path for (the) three-party delegation to navigate,” said Richards, Director of Governmental and Community Affairs for the University of Wyoming.

Then, in the waning hours of 2006, Congress passed an amendment to SMCRA. It guaranteed that Wyoming would receive its state share (totaling $580 million) that Wyoming coal producers had put into the fund prior to 2006. Those familiar with the legislation point towards Sen. Mike Enzi for accomplishing the task.

From his position as Chairman of the Senate Health, Education, Labor and Pensions Committee, Enzi hammered out the legislation. “He definitely had a leadership role in getting that amendment passed,” said Richards.

Richards also said former Rep. Barbara Cubin (R-Wyoming) and her staff did “yeoman’s service,” in getting the measure approved. “She had no allies, really, other than Montana,” which also has just a single seat in the House.

“It was one of those moments when a state had to surrender any partisanship and all put their best foot forward,” said Freudenthal.  “But at the end of the day, the credit goes to Mike Enzi. In his quiet and methodical way, he got the job done.”

Senator Enzi and his staff declined to discuss any aspect of the AML with WyoFile.

Enzi put the language in a bill called the Tax Relief and Health Care Act of 2006 (sponsored by former Rep. Ellen Tauscher, D-California), and tucked it away in a section deemed so insignificant that most descriptions of the legislation do not include a single syllable about abandoned mines.

According to an OSM document explaining the measure, “The legislation revised the fee collections and distributions of the AML payments. The 2006 amendments extended the fee collection authority through September 30, 2021, reduced the fee by 10 percent, and changed the fee structure. The amendments also dramatically increased funding and changed distribution of the fee receipts to States and Tribes.”

What it said, in essence, is that all certified states would get back all the money their coal producers had put into the fund prior to 2006. The payout began in 2008 as “historic payments” and would end in seven years. For Wyoming, this equaled $580 million in $82.7 million annual increments.

In addition, Wyoming would get another $59.5 million annually, earmarked specifically for mineral reclamation projects until 2021.

One of the terms of the deal was that the distributions would not come from the AML fund, but the U.S. Treasury. Moreover, certified states were no longer guaranteed a return of all their state’s share for payments made after 2006.

But the battle wasn’t over.

The 2010 report issued by National Commission on Fiscal Responsibility and Reform, chaired by former Sen. Alan Simpson (R-Wyoming) and former White House Chief of Staff Erskine Bowles, otherwise known as the Simpson Bowles report, recommended modifying AML fund distributions including “eliminating these (historic) payments because they no longer serve their stated purpose — contributing to reclaiming abandoned coal mines.” The report only echoed the thought already running through federal budget proposals.

As the federal budget crunch worsened, administrations both Republican and Democrat began looking at ways to save money. That included reducing the amount of money sent to states. “For the last three years of the Bush administration and every year of the Obama administration, presidential budgets dealing with OSM have recommended reducing the payments to certified states,” said Richards.

On March 21, 2012, Gregory Conrad, Executive Director, Interstate Mining Compact Commission, an organization that consults 28 states on federal mining regulations, testified before the House Interior, Environment and Related Agencies Appropriations Subcommittee 2013 Proposed Budget for the Office of Surface Mining. Conrad complained strenuously about these presidential modifications.

For the 2013 AML distributions, the “OSM has budgeted an amount of $307 million based on an ill-conceived proposal to eliminate mandatory AML funding to states and tribes that have been certified as completing their abandoned coal reclamation programs. This $180 million reduction flies in the face of the comprehensive restructuring of the AML program that was passed by Congress in 2006, following over 10 years of Congressional debate and hard fought compromise among the affected parties,” said Conrad.

Thus far, however, Congress has thwarted the executive office from reducing the amounts promised by the 2006 amendment.

Back to basics?

With only two more $82.7 million payments to go, the legislature is refocusing spending AML-related distributions on energy-related projects.

In contradictory language common to federal legislation, the $82.7 million payments are a “mandatory disbursement,” yet the state must file a grant application for every project.

State Rep. Rosie Berger (R-Big Horn), who co-chairs the Joint Appropriations Committee, said there’s a perception that the OSM just hands Wyoming the $82.7 million each year. “It’s quite an arduous process. Due to that one word ‘grant,’ in SMCRA, we have to apply for every project, get it approved, build it, then bill OSM for the money,” she said.

This is one reason why UW is a primary candidate for AML-related funding, Berger said. The university offers plenty of opportunity for energy-related projects.  Moreover, the university’s systematic billing process streamlines the process of getting the money back to Wyoming.

Besides the School of Energy Resources, AML-related funds have gone toward the Wyoming Carbon Sequestration Major Research and Demonstration Initiative, Wyoming Reclamation and Restoration Center and a High Plains Gasification-Advanced Technology Center (now on hold).

Wyoming AML Administrator Alan Edwards concurs that Wyoming has to jump through numerous hoops to get the money, but there have been no outright denials from Washington. OSM’s approval of grants is “pretty automatic,” he said.

“We’re trying to focus back on energy, such as finding out how to work with rare earth elements, coal-to-liquids technology, and other alternative energy projects. We want to fund projects that brighten the economic future of Wyoming. Above all, we can’t forget about what we have: coal,” said Berger.

Maybe that’s why the legislative agenda list of projects for FY 2012-2013 AML funding allocates $10 million to UW’s School of Energy Research for the continuation of clean coal research and $9 million “to the Governor’s office for the purpose of supporting the construction and operation of a commercial scale facility which converts minerals to value added products.”

The Powder River Basin Resource Council, the Equality State Policy Center, and the Wyoming Outdoor Council all signed a letter asking Governor Matt Mead to exercise his power of the line veto on this last measure, saying it was “contrary to the purposes of the AML fund.”

“We know you are aware of the great need in Wyoming to address land reclamation, monitor and address air quality impacts, and remediate water contamination from oil and gas and other mineral development activities. We also know you are aware of the great need local governments around the state have to address socio-economic impacts of energy development, including county road maintenance and other infrastructure needs. We believe Wyoming should continue to prioritize the use of AML funds for these purposes,” the letter read.

But what of these AML fund related projects like a $10 million dollar auditorium renovation in Laramie and a $3.5 million agriculture complex in Sheridan?

These expenditures are, in fact, another example of Wyoming’s ability to shape federal mineral policy to the state’s advantage, despite poor odds.

The same case may be made for the billions that Wyoming receives in federal mineral royalties. Legislation concerning that program has, since 1920, been protected – and adjusted – by Wyoming’s Washington representatives to serve the state’s interest. It’s paid off. Federal mineral royalties have built $2.2 billion worth of new primary, middle, and high schools in Wyoming since 1999.

It doesn’t all go Wyoming’s way, however. When it comes to AML funds, Wyoming doesn’t have half its money back, not yet anyway. Not even close. As of 2011, Wyoming coal mines have contributed $3 billion to the AML fund since 1977; the state has received just roughly one-third of what they put in.

The 2011 Evaluation Summary Report for the Wyoming Abandoned Mine Land Reclamation Program

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