"I'm glad that we have the resources available and a program set in place to handle such actions." Taxpayer liability At least 10 years before Miano's news release, OSM had warned the state that it didn't have adequate resources to reclaim abandoned mines.

In a 1989 report, OSM investigators said that the state mistakenly assumed that it cost $1,000 per acre, or the amount companies posted in bonds, to clean up abandoned mines. At the time, DEP spent about $2,000 per acre for land reclamation at abandoned sites.

By 1991, OSM ordered the state to come up with a plan by October 1995 to fix its bonding program.

October 1995 came and went. West Virginia regulators did nothing, and OSM did little to force the state to act.

In November 2000, lawyers for the Highlands Conservancy asked Haden to step in.

"The special reclamation fund does not have sufficient funds to treat or otherwise permanently abate the discharge of mine drainage pollutants from existing unreclaimed sites into State streams," conservancy lawyers said in a 22-page lawsuit.

Earlier this year, the judge dismissed DEP from the case because of a technicality over court jurisdiction.

But in the same order, Haden said that federal laws that require an adequate bonding program have been ignored for years in West Virginia.

"The results are obvious: An immense state liability incurred by the mine operators, but borne by the taxpayers, and ongoing pollution of the state's streams," Haden said in a May 29 opinion.

Toxic waste pile In the end, Royal Scot had posted about $2 million in bonds for 34 permits in the Anjean area.

Some DEP estimates put the reclamation cost for the sites at more than $6.5 million.

But the agency's Roger Green says the solution could actually cost more like $25 million.

The site's real problem is a 40-acre coal waste pile. It towers over the mine site, and runoff from it contains the toxic acid that would kill Little Clear Creek's trout. DEP officials figure there is about 3.5 million tons of coal waste in the pile.

"There is a lot of runoff," Green said. "When we get a couple of inches of rain, you could literally put a kayak in this drainage ditch." Green says that the state could leave the waste pile there, cover it up with dirt and grass, and continue to treat the acid runoff.

That's not an attractive option, he said. The state would have to keep staff on site and spend money on the site basically forever.

Green would rather remove the pile, or mix the toxic material in it with some sort of neutralizing agent. Theoretically, the toxic runoff would end. Then, the state could plant grass and trees.

Even once that's done, the site is littered with old mining equipment and a dilapidated preparation plant. Those need to be cleaned up as well.

'No end in sight' In May, Callaghan took the stand in Haden's courtroom to testify about the bond program's problems.

"The problem is [that] over time, the 3-cents-per-ton that was generated ... was not sufficient to allow the state to reclaim the sites that were forfeited by various coal operators," Callaghan told the judge.

"The state of West Virginia has essentially incurred a debt over a significant period of time to the point right now whereas we sit here with no mechanism to fix the sites that are already forfeited out there, and with no end in sight to getting enough money in that fund to fix what is already out there." In one report, DEP said the state needs $27.8 million to do land reclamation at about 300 previously abandoned mine sites. In another, the agency said it needs $20 million for one-time capital costs for water treatment at abandoned sites. Plus, those sites require a total of $1.4 million a year for water treatment.

On top of that, the state spends about $1.5 million to treat water at five abandoned sites.

Last month, Callaghan gave legislators his "20-20 Plan" to fix the problem. The cap on per-acre bonds would be increased to $20,000 an acre. The reclamation tax would be increased 20 cents per ton, to 23 cents per ton.

Matt Crum, Callaghan's mining and reclamation director, said the proposal was sure to do the job.

"Absolutely. There is no question that we would have sufficient funds to take care of the problem," Crum said. "Our guys have crunched the numbers." Here's how Callaghan figures it would work: If West Virginia produces 170 million tons of coal a year, the increased tax generates nearly $40 million a year. (The state produced that much coal in 1997 and 1998. Annual production dropped to less than 160 million tons each year since then, according to the U.S. Department of Energy.) The state's bond fund has a balance of about $8.9 million. DEP has another $1.1 million in outstanding bonds to collect. That adds up to $10 million. Add that $10 million to the $40 million generated by the increased reclamation tax, and the bond fund's deficit goes away.

Charlie Miller, chief of DEP's special reclamation unit, said the $40 million a year would be more than enough to reclaim any sites that are abandoned down the road.

DEP projects that the state only needs about $11 million a year to clean up future abandoned sites, Miller said.

Miller said DEP believes that, in the future, about 10 percent of mining permits will be abandoned by their operators.

No report or study has been written to explain where the 10 percent estimate comes from, Miller said.

"That's talking about what will happen in the future, and that's always a real difficult job," Miller said last week. "We sat there and did the calculation, and we put them on just a piece of paper." Last year, OSM published a series of reports by a consultant, Tetra Tech.

In an August 2000 report, Tetra Tech noted that about 460 nonabandoned mine sites in West Virginia currently require acid mine drainage treatment.

Tetra Tech projected that at least a third of those sites will be abandoned at some point.

Over the next 50 years, water treatment at those sites will cost more than $2.6 billion, or about $53 million a year, according to Tetra Tech.

If more than a third of those sites are abandoned, water treatment will cost even more. If all those sites are abandoned, water treatment will cost more than $6 billion over 50 years, Tetra Tech projected.

Miller of DEP said he hasn't seen the Tetra Tech reports.

The '20-20 Plan' When he testified in Haden's courtroom, Callaghan strongly pushed for his "20-20 Plan." "Back in my briefcase, I have got a legislative proposal to raise the bonding to $20,000 an acre and put 20 cents per ton of coal to fix this problem, and that's setting in my briefcase," Callaghan said.

"And I'm working closely with [House] Speaker [Bob] Kiss and [Senate] President [Earl Ray] Tomblin in discussing the possibility of calling a special legislative session within the next month or two months to address this very serious issue." That was in May. Soon afterward, Callaghan backed off. Coal industry officials opposed his plan. Legislative leaders wouldn't go along without industry agreement. The governor wouldn't call a special session without support from legislative leaders.

In an interview two weeks ago, Callaghan said his plan was far too ambitious.

"When you start talking about a liability that built up over 20 years, and paying it off over a year, that is pretty rapid payback," Callaghan said.

On Thursday, Callaghan announced a deal with the coal industry.

Through April 2005, the reclamation tax would be increased to 14 cents per ton. After that, it would drop to 7 cents per ton.

The 14-cent-per-ton figure would raise about $23 million a year. In a news release, DEP said that OSM had "given its tentative approval" to the deal.

"This agreement will resolve a longstanding bonding problem, and end the threat of a takeover of our agency," Callaghan said. "This has been a problem for at least 12 years, and I am glad we finally found an appropriate solution." Roger Calhoun, director of the OSM Charleston field office, told the state that the deal "should be adequate to remedy the existing land reclamation deficit and to treat pollution discharges from existing bond forfeiture sites" through 2005.

After that, Calhoun said in a letter, "it appears that the tax rate of 7 cents per ton may only be adequate for a few years."

Abandoned lands and polluted waters

Maps, permit lists and photos

To browse an interactive map of abandoned coal mine sites in West Virginia, click here. Or, you can download a list of abandoned mine sites, their locations and projected reclamation costs here.

You can also view a Department of Environmental Protection slide show that includes more photos of abandoned mine sites here, and download the agency's announcement of a deal with the coal industry.

Documents

Read the West Virginia Highlands Conservancy's lawsuit against regulators over the mine reclamation fund deficit.

Other documents from the lawsuit:

Judge Haden's orders denying a state motion to dismiss, his preliminary injunction against the state DEP and dismissing the agency from the case.

Other related documents:

Download the Tetra Tech study which estimates the potential future cost of water treatment at abandoned mine

Read other acid mine drainage reports prepared for OSM by visiting the agency's web site.

Read a Department of Environmental Protection report on the costs of acid mine drainage treatment at abandoned mine sites and a DEP study of acid mine drainage in West Virginia.

Read the OSM federal register notice opening the public comment period on Gov. Wise's reclamation bond proposal.

Read the bill passed by the Legislature to implement the reclamation bond proposal.

Read an OSM analysis of the state's proposal to fix the reclamation fund.

(Adobe Acrobat required for .pdf files)

ANJEAN - Roger Green walked to the edge of a bright orange pond and pointed at a small rubber hose.

A milky-white ammonia mixture trickled from the hose into the pond.

Water from the pond drained downhill into a series of other ponds, where more chemicals were added.

Through this process, toxic acid mine drainage is neutralized. Iron, manganese and other nasty chemicals are cleansed from the pond water.

A muddy sludge of coal waste settles to the bottom of the ponds.

Eventually, clean water makes its way into nearby Little Clear Creek, a popular Greenbrier County trout stream that feeds the Meadow River.

Green and his two-man Department of Environmental Protection crew spend more than $220,000 a year to make sure Little Clear Creek lives up to its name.

"If we don't do our job, the trout die, and the trout aren't dying," Green said.

Green and the DEP shouldn't have to do this.

Leckie Smokeless Coal Co. was supposed to reclaim the site. But in 1993, Leckie Smokeless went bankrupt. In 1999, so did Royal Scot Minerals, which bought the operation out of bankruptcy.

Today, the 400-acre site north of Rupert is among hundreds of abandoned mines that scar the West Virginia hills.

No one is really sure how many of these mines the state will have to reclaim, or how much the work will eventually cost.

Last year, the U.S. Office of Surface Mining reported that at least 15,000 acres of abandoned mines across the state's coalfields sit unreclaimed.

Dozens - perhaps even hundreds - of other sites are expected to end up on the abandoned list sooner or later, state and federal officials fear.

At many of these sites, a toxic stew of untreated mine runoff poisons streams.

Statewide, only five of the more than 200 sites with polluted water are being treated.

One OSM report, published in August 2000, estimated the total cost of water treatment alone would run anywhere between $2.6 billion and $6.3 billion over the next 50 years. The state has nowhere near that much money in its mine cleanup fund. Unless there are dramatic reforms, there is no way that much will ever be collected.

"This is our biggest environmental concern today," said Michael O. Callaghan, the Wise administration's DEP secretary.

In October 1991, OSM officials ordered the state to come up with a plan to fully fund these mine cleanups. The state never did.

Last week, Callaghan announced an agreement with the coal industry to increase current reclamation taxes to clean up the abandoned sites.

The deal would generate about $23 million a year.

But OSM consultants estimate that the state needs at least $53 million a year just to pay for water treatment at abandoned mine sites.

The total cost could be much higher. If coal companies abandoned huge mountaintop removal sites, for example, the land reclamation alone could cost $50 million for just one site, according to court documents.

No one has done a definitive study to find out the total long-term price tag.

In federal court in Charleston, the West Virginia Highlands Conservancy wants Chief U.S. Judge Charles H. Haden II to force the state's hand. Haden is considering a motion by conservancy lawyers to force OSM to take over the state's abandoned mine reclamation program.

'Alternative bonding' In 1977, Congress passed the Surface Mining Reclamation and Control Act, or SMCRA. Under the law, states are allowed to regulate their own coal mining industries. Congress created OSM to make sure that states force mine operators in their states to comply with SMCRA. Among other things, SMCRA requires states to make coal companies post reclamation bonds before they receive new mining permits. The idea was to make sure that mines abandoned after 1977 were cleaned up properly.

Older mines that were abandoned before 1977 are cleaned up with a separate pool of money from a federal coal production tax.

Under federal rules, states may adopt two types of bonding systems.

Under one type of bonding, coal companies must post bonds that would cover the full cost of reclaiming their mine sites.

If companies go belly up, they forfeit their bond money. States use the money to clean up the mine sites.

Under the second type, coal company bonds do not have to cover the full reclamation costs. Companies can post much smaller bonds. But state regulators must maintain enough money in a bond fund to reclaim any sites that companies abandon.

In West Virginia, the DEP uses the second type of bonding plan. This is known as an "alternative bonding" system.

Bonds are capped at $5,000 per acre. This amount often doesn't cover the entire cost to reclaim an abandoned mine site. So all coal companies pay a small tax that is supposed to provide enough additional money to reclaim sites where the bond wasn't sufficient.

At least that's the way it was supposed to work.

'Think Reclamation' On Feb. 16, 1972, the old state Department of Natural Resources approved a permit for Leckie Smokeless Coal Co.

The permit certificate is still in the files at DEP headquarters in Nitro. It boasts the DNR Division of Reclamation's motto at the time: "Think Reclamation." Under the permit, Leckie Smokeless could mine 400 acres of land along Little Clear Creek northwest of Lewisburg. The company planned to mine the Beckley and Fire Creek coal seams.

Following the rules of the time, Leckie Smokeless posted a $750-per-acre reclamation bond, or a total of $300,000.

In its permit approval, DNR officials concluded that they "do not expect to encounter acid or toxic material" during the mining.

DEP records don't show how much coal Leckie Smokeless mined, or how much money the company made.

But by 1993, Leckie Smokeless had filed for bankruptcy.

Initially, DEP officials tried to make the bankrupt company post a greater bond if it wanted its permit renewed. State mining rules had changed, and larger bonds were required now, the agency said.

Company lawyers argued that wasn't fair. She said Leckie Smokeless should only have to follow the rules as they were written back in 1972, when its permit was approved.

DEP backed down, and agreed to renew the permit without an additional bond payment.

No conclusive studies In West Virginia, OSM gave the state conditional approval to regulate its own mining industry in January 1981.

But OSM officials said at the time that the approval was conditioned upon the state doing a study to show that the reclamation fund was adequate.

Such a study has never been submitted.

Instead, in 1982, West Virginia gave OSM what state officials at the time called a "preliminary study." In March 1983, OSM said that study was good enough.

Three years later, in 1986, the U.S. General Accounting Office found that the preliminary study was practically worthless.

"The state's submission admitted that much of the data needed to make a conclusive study did not exist," the GAO said. "A final actuarial study of the fund was not made." In 1991, the Interior Department's inspector general reported that the state did not have adequate accounting policies for the bond fund.

State balance sheets showed that the fund had a surplus. The inspector general found that it actually had a deficit. The IG also noted that the fund had not "been previously audited by an independent accounting firm or a state auditor." 'Some sort of scam' By 1995, state inspectors had found major water quality problems at the Leckie Smokeless mine site. In 1993 and 1994, the company had been cited repeatedly for polluting streams beyond the legal limits.

Company officials signed consent agreements to resolve the violations.

They agreed to treat acid mine drainage that poured off the site, so that area streams wouldn't be polluted.

About that time, a company called Royal Scot Minerals bought the Anjean operations out of bankruptcy. Royal Scot was part of a British conglomerate, Rackwood Mineral Holdings PLC. But in April 1999, Royal Scot just walked away from the site.

DEP officials stepped in to continue water treatment. They wanted to keep acid mine drainage out of Little Clear Creek.

A handful of Royal Scot employees hung around, said Ed Griffith, assistant chief of the DEP Office of Mining and Reclamation. DEP officials found one of the workers on the site, using a bucket and ladle to put treatment chemicals into a pond, Griffith said.

"You should have been around the night we got the call from the guys up there saying, 'The Englishmen are pulling out tonight,'" Griffith recalled last month.

Today, DEP officials know that Royal Scot wasn't really interested in mining much coal. "The whole thing was some sort of tax scam or investment scam," Griffith alleged.

But at the time, agency officials approved the permit transfer from bankrupt Leckie Smokeless. The move allowed them to increase bond amounts on the site.

"It's a shame that some people insist on being reckless toward the environment," Michael P. Miano, DEP director at the time, said in a May 1999 news release that announced the agency's action to take over the Royal Scot site.

"I'm glad that we have the resources available and a program set in place to handle such actions." Taxpayer liability At least 10 years before Miano's news release, OSM had warned the state that it didn't have adequate resources to reclaim abandoned mines.

In a 1989 report, OSM investigators said that the state mistakenly assumed that it cost $1,000 per acre, or the amount companies posted in bonds, to clean up abandoned mines. At the time, DEP spent about $2,000 per acre for land reclamation at abandoned sites.

By 1991, OSM ordered the state to come up with a plan by October 1995 to fix its bonding program.

October 1995 came and went. West Virginia regulators did nothing, and OSM did little to force the state to act.

In November 2000, lawyers for the Highlands Conservancy asked Haden to step in.

"The special reclamation fund does not have sufficient funds to treat or otherwise permanently abate the discharge of mine drainage pollutants from existing unreclaimed sites into State streams," conservancy lawyers said in a 22-page lawsuit.

Earlier this year, the judge dismissed DEP from the case because of a technicality over court jurisdiction.

But in the same order, Haden said that federal laws that require an adequate bonding program have been ignored for years in West Virginia.

"The results are obvious: An immense state liability incurred by the mine operators, but borne by the taxpayers, and ongoing pollution of the state's streams," Haden said in a May 29 opinion.

Toxic waste pile In the end, Royal Scot had posted about $2 million in bonds for 34 permits in the Anjean area.

Some DEP estimates put the reclamation cost for the sites at more than $6.5 million.

But the agency's Roger Green says the solution could actually cost more like $25 million.

The site's real problem is a 40-acre coal waste pile. It towers over the mine site, and runoff from it contains the toxic acid that would kill Little Clear Creek's trout. DEP officials figure there is about 3.5 million tons of coal waste in the pile.

"There is a lot of runoff," Green said. "When we get a couple of inches of rain, you could literally put a kayak in this drainage ditch." Green says that the state could leave the waste pile there, cover it up with dirt and grass, and continue to treat the acid runoff.

That's not an attractive option, he said. The state would have to keep staff on site and spend money on the site basically forever.

Green would rather remove the pile, or mix the toxic material in it with some sort of neutralizing agent. Theoretically, the toxic runoff would end. Then, the state could plant grass and trees.

Even once that's done, the site is littered with old mining equipment and a dilapidated preparation plant. Those need to be cleaned up as well.

'No end in sight' In May, Callaghan took the stand in Haden's courtroom to testify about the bond program's problems.

"The problem is [that] over time, the 3-cents-per-ton that was generated ... was not sufficient to allow the state to reclaim the sites that were forfeited by various coal operators," Callaghan told the judge.

"The state of West Virginia has essentially incurred a debt over a significant period of time to the point right now whereas we sit here with no mechanism to fix the sites that are already forfeited out there, and with no end in sight to getting enough money in that fund to fix what is already out there." In one report, DEP said the state needs $27.8 million to do land reclamation at about 300 previously abandoned mine sites. In another, the agency said it needs $20 million for one-time capital costs for water treatment at abandoned sites. Plus, those sites require a total of $1.4 million a year for water treatment.

On top of that, the state spends about $1.5 million to treat water at five abandoned sites.

Last month, Callaghan gave legislators his "20-20 Plan" to fix the problem. The cap on per-acre bonds would be increased to $20,000 an acre. The reclamation tax would be increased 20 cents per ton, to 23 cents per ton.

Matt Crum, Callaghan's mining and reclamation director, said the proposal was sure to do the job.

"Absolutely. There is no question that we would have sufficient funds to take care of the problem," Crum said. "Our guys have crunched the numbers." Here's how Callaghan figures it would work: If West Virginia produces 170 million tons of coal a year, the increased tax generates nearly $40 million a year. (The state produced that much coal in 1997 and 1998. Annual production dropped to less than 160 million tons each year since then, according to the U.S. Department of Energy.) The state's bond fund has a balance of about $8.9 million. DEP has another $1.1 million in outstanding bonds to collect. That adds up to $10 million. Add that $10 million to the $40 million generated by the increased reclamation tax, and the bond fund's deficit goes away.

Charlie Miller, chief of DEP's special reclamation unit, said the $40 million a year would be more than enough to reclaim any sites that are abandoned down the road.

DEP projects that the state only needs about $11 million a year to clean up future abandoned sites, Miller said.

Miller said DEP believes that, in the future, about 10 percent of mining permits will be abandoned by their operators.

No report or study has been written to explain where the 10 percent estimate comes from, Miller said.

"That's talking about what will happen in the future, and that's always a real difficult job," Miller said last week. "We sat there and did the calculation, and we put them on just a piece of paper." Last year, OSM published a series of reports by a consultant, Tetra Tech.

In an August 2000 report, Tetra Tech noted that about 460 nonabandoned mine sites in West Virginia currently require acid mine drainage treatment.

Tetra Tech projected that at least a third of those sites will be abandoned at some point.

Over the next 50 years, water treatment at those sites will cost more than $2.6 billion, or about $53 million a year, according to Tetra Tech.

If more than a third of those sites are abandoned, water treatment will cost even more. If all those sites are abandoned, water treatment will cost more than $6 billion over 50 years, Tetra Tech projected.

Miller of DEP said he hasn't seen the Tetra Tech reports.

The '20-20 Plan' When he testified in Haden's courtroom, Callaghan strongly pushed for his "20-20 Plan." "Back in my briefcase, I have got a legislative proposal to raise the bonding to $20,000 an acre and put 20 cents per ton of coal to fix this problem, and that's setting in my briefcase," Callaghan said.

"And I'm working closely with [House] Speaker [Bob] Kiss and [Senate] President [Earl Ray] Tomblin in discussing the possibility of calling a special legislative session within the next month or two months to address this very serious issue." That was in May. Soon afterward, Callaghan backed off. Coal industry officials opposed his plan. Legislative leaders wouldn't go along without industry agreement. The governor wouldn't call a special session without support from legislative leaders.

In an interview two weeks ago, Callaghan said his plan was far too ambitious.

"When you start talking about a liability that built up over 20 years, and paying it off over a year, that is pretty rapid payback," Callaghan said.

On Thursday, Callaghan announced a deal with the coal industry.

Through April 2005, the reclamation tax would be increased to 14 cents per ton. After that, it would drop to 7 cents per ton.

The 14-cent-per-ton figure would raise about $23 million a year. In a news release, DEP said that OSM had "given its tentative approval" to the deal.

"This agreement will resolve a longstanding bonding problem, and end the threat of a takeover of our agency," Callaghan said. "This has been a problem for at least 12 years, and I am glad we finally found an appropriate solution." Roger Calhoun, director of the OSM Charleston field office, told the state that the deal "should be adequate to remedy the existing land reclamation deficit and to treat pollution discharges from existing bond forfeiture sites" through 2005.

After that, Calhoun said in a letter, "it appears that the tax rate of 7 cents per ton may only be adequate for a few years."

Abandoned lands and polluted waters

Maps, permit lists and photos

To browse an interactive map of abandoned coal mine sites in West Virginia, click here. Or, you can download a list of abandoned mine sites, their locations and projected reclamation costs here.

You can also view a Department of Environmental Protection slide show that includes more photos of abandoned mine sites here, and download the agency's announcement of a deal with the coal industry.

Documents

Read the West Virginia Highlands Conservancy's lawsuit against regulators over the mine reclamation fund deficit.

Other documents from the lawsuit:

Judge Haden's orders denying a state motion to dismiss, his preliminary injunction against the state DEP and dismissing the agency from the case.

Other related documents:

Download the Tetra Tech study which estimates the potential future cost of water treatment at abandoned mine

Read other acid mine drainage reports prepared for OSM by visiting the agency's web site.

Read a Department of Environmental Protection report on the costs of acid mine drainage treatment at abandoned mine sites and a DEP study of acid mine drainage in West Virginia.

Read the OSM federal register notice opening the public comment period on Gov. Wise's reclamation bond proposal.

Read the bill passed by the Legislature to implement the reclamation bond proposal.

Read an OSM analysis of the state's proposal to fix the reclamation fund.

(Adobe Acrobat required for .pdf files)