Interim Joint Committee on Natural Resources and Environment


Minutes of the<MeetNo1> 3rd Meeting

of the 2012 Interim


<MeetMDY1> August 2, 2012


Call to Order and Roll Call

The<MeetNo2> 3rd meeting of the Interim Joint Committee on Natural Resources and Environment was held on<Day> Thursday,<MeetMDY2> August 2, 2012, at<MeetTime> 1:00 PM, in<Room> Room 149 of the Capitol Annex. Representative Jim Gooch Jr., Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Brandon Smith, Co-Chair; Representative Jim Gooch Jr., Co-Chair; Senators Joe Bowen, Ernie Harris, Dorsey Ridley, Katie Stine, Robert Stivers II, Johnny Ray Turner, and Robin L. Webb; Representatives Tim Couch, Keith Hall, Tim Moore, Marie Rader, John Short, Kevin Sinnette, Fitz Steele, Jim Stewart III, and Jill York.

Legislative Guest: Representative Rocky Adkins.


Guests: Commissioner Steve Hohmann, Department for Natural Resources; Commissioner Bruce Scott, Department for Environmental Protection; Secretary Len Peters, Energy and Environment Cabinet; Dr. Karen Waldrop, Mark Mangeot, and David Hise, Kentucky Department for Fish and Wildlife Resources.


LRC Staff: Stefan Kasacavage, Lowell Atchley, and Kelly Blevins.


After a motion and a second, the minutes were approved.


Regulations Regarding Increased Reclamation Bonding Requirements for Coal Mining Operations

Steve Hohmann, Commissioner for the Kentucky Department of Natural Resources (KDNR) discussed the recent interactions between KDNR and the federal Office of Surface Mining (OSM) which led to new reclamation bonding requirements promulgated emergency regulations filed May 4, 2012. Commissioner Hohmann stated that prior to these emergency regulations, Kentuckyís reclamation bond amounts had not been revised in 20 years.


A few years prior to promulgation of the emergency regulations, the federal Office of Surface Mining (OSM) took two actions in regard to coal mining reclamation bonds: first, OSM reviewed Kentuckyís primacy over the surface mine permitting program and, second, OSM commenced a nationwide study of reclamation bond amounts. OSM concluded that Kentuckyís reclamation bond amounts were insufficient to cover reclamation costs in the instance of bond forfeiture. Kentucky was approximately $4 million dollars short on necessary reclamation bond amounts to return forfeited permits to permanent program standards.


The federal government issued a 733 letter to Kentucky stating that the reclamation bond program was not sufficiently funded, and OSM would federalize the reclamation program if changes were not made in 30 days. OSMís assumption of the Kentucky surface mining program would result in a loss of abandoned mine land (AML) funding and possible federal assumption of other parts of the coal permitting process.


The May 2012 emergency regulations increased the individual bonds amounts, revised the rate per acre, and established an emergency statewide bond pool in the event the bond amounts were insufficient. KDNR also issued an advisory memorandum 155 to give guidance to the coal industry on how the protocols would be applied to existing operations and to new permitting actions. The overall result of the emergency regulations is that each permit will have a 5 year period to bring all existing operations into adjusted status; however, operations that would be at the end of the permit life and beginning reclamation would likely not have the bond amounts adjusted.


Since May 3, 2012, a number of permits have had their bonds adjusted with an average bond increase of approximately 2.3 times over the initial amount. To establish the emergency bond pool, KDNR has hired an actuary to determine the level of funding for the pool, options on a fee structure to capitalize the pool, liabilities the pool might face, and how the pool should be administered. A first phase report is due from the actuary in mid August with a final report and recommendations by October 2012. Statutory changes will be needed in 2013 to establish a statewide reclamation bond pool.


In response to a question about the percent increase of the average bond and whether OSM has issued a 733 letter to other states, Commissioner Hohmann responded that the bond increased approximately 2.3 times, and OSMís response to the emergency regulations appears to be positive. An informal conference is scheduled for mid August. Mike Haines, General Counsel for KDNR, responded that the Secretary of the Interior would enter an order to take over the bond process if these actions are not taken. The study cost is 200,000, and no other state has received a 733 letter. Other states have bond pools, and that may be why KDNR did not receive letters.


In response to a question regarding reclamation as relates to underground mining, the Commissioner said there is reclamation associated with both underground and surface mines. Both will have disturbances on the surface. Preparation plants have surface disturbances too.


In response to a question about whether there have been reclamation problems in the past in Kentucky, Commissioner Hohmann stated that in the past 2 years there have been 15 to 25 mining permits forfeited, and that has occurred for some time. The studies found that the bonds posted under the old protocols were insufficient over 70 to 80 percent of the time. When a bond is forfeited, AML begins reclamation.


In response to a question about whether the small coal operators participated in the workgroup and whether the new protocols will impact the small coal operators bond pool, Commissioner Hohmann stated that small coal operators participated in the workgroup, but it is uncertain how the protocols and the universal bond pool will affect the small coal operators pool. The department awaits information from the actuary.


In response to a question regarding whether larger coal companies assumed permits that would have been forfeited, Commissioner Hohmann replied that assumption occurred in some instances, and those companies performed the reclamation.


Request to Amend 301 KAR 3:022 by the Kentucky Department of Fish and Wildlife Resources

David Hise, General Counsel, Dr. Karen Waldrop, Wildlife Director, and Mark Mangeot liaison, Kentucky Department of Fish and Wildlife Resources requested an amendment to regulation 301 KAR 3:022 be approved by the committee. Dr. Waldrop explained that the amendment makes a change in the name of a deer permit. After a motion and second, the amendment was approved.


Update on Progress and Staffing of Department for Environmental Protectionís Section for Reviewing KPDES Permits for Coal Mining Operations

Commissioner Bruce Scott, Department of Environmental Protection, provided an update on water permits for surface coal mine operations. The 402 permit is a discharge of wastewater that is subject to the federal Clean Water Act 402 program. These permits are issued under two different types of mechanisms: the individual and general coal permits. Roughly 80 percent of coal permits are general permits. The total universe of permits is 10,000 permitted entities, and the permit can be renewed. Of the 10,000 permits, roughly 20 percent are for coal mining operations and a number of those permits are pending.


Some of the challenges faced by permittees include increased oversight by US EPA of the 402 program. Currently 36 permit objections are pending, and Kentucky EPA has responded to those objections under tight budgetary constraints. Kentucky EPA also faces staff turnovers and retirements. Previously, KY EPA had 18 people handling all the permits, and Kentucky has traditionally had a backlog of permits which the department is trying to address. Under the reorganization of the 402 permit process, coal permits were split off from noncoal mining related permits to facilitate actions on those permits. Staffing was prioritized to address permit differences. The General Assembly appropriated $250,000 for each part of the biennium in 2013-2014.


Commissioner Scott provided an update on the lawsuit filed by the Mining Association and KY EPA against US EPA. Kentucky filed suit against US EPA for use of a guidance document as if it was a regulation without it having gone through the regulation process. On July 31, 2012 the court affirmed that the guidance document was not acceptable, and the court set out to equalize the federal/state relationship. The court affirmed that the state acts as a first resort and is responsible for establishing and implementing water quality standards.


Additionally, the Clean Water Act does not have the authority to impose requirements on the federal Surface Mining, Control and Reclamation Act (SMCRA). The ruling speaks to reasonable potential or when a limit is necessary to protect water quality, and the state has first responsibility rather than the federal government in implementing the standard. Kentucky EPA anticipates that the decision will be appealed. The ruling does not change Kentuckyís perspective on how to approach the permitting process. Existing rules have not changed, but Kentucky does not know how US EPA will respond to new permits and that includes the 36 permits that have received US EPA objections. Kentucky has requested a release of those 36 permits as part of the ruling. Kentucky should implement and improve upon electronic filings as a cost savings.


In response to a question regarding objection of the 36 state permits, Commissioner Scott stated two things need to change in US EPA federal regulations. The first is a timeline to make a final action. Under the way the law is written, US EPA does not have to make a decision. The second is making an objection a final agency determination subject to due process. The 36 permits are not under any obligation to make any response and trigger due process.


In response to a question about US EPA making rule and regulation changes as part of court settlements and decisions are made without accountability to voters, Commissioner Scott stated historically US EPA functions under consent decree and that becomes the new law for how a regulatory problem is administered.


In response to remarks about US EPA not adhering to a reasonable timeline for a decision on a permit, Commissioner Scott stated that the court has been clear in that objection is not a final agency determination.


After a motion and a second, the committee adjourned.