After long debate, the House of Delegates passed a bill to create an insurance program meant to as a buffer against an avalanche of potential mine reclamation liability.
The bill would establish a mining mutual insurance company on the strength of$50 million in seed money from the state. Senate Bill 1 has received strong support from Senate President Craig Blair, who testified in multiple committees.
After more than an hour of discussion, delegates passed the bill today on a 61-36 vote. Supporters in the Republican supermajority said the bill is necessary to assure West Virginia doesn’t get caught with hundreds of millions of dollars in liability in an era of turbulent energy markets.
“Does it cost less to be proactive than reactive? The answer is yes,” said House Finance Chairman Eric Householder, R-Berkeley.
Delegate Vernon Criss, R-Wood, made similar comments.
“This is simply another situation where we have got to take care of ourselves,” said Criss, the vice chairman of House Finance. “We are going to be there for the near future and the long future in energy, and this is a component that we need to make sure we’re there.”
Democrats and some fiscal conservatives argued against using public dollars to establish what would be a private company. Some members of the Republican caucus argued there is no reason companies already operating in the private sector couldn’t provide the same insurance.
“This is probably a $50 million gift,” said Delegate Marty Gearheart, R-Mercer. “And I’m not quite certain in the scope of what we’re doing here and what we’re trying to accomplish and return money to taxpayers and fund the essential services of government that this is the proper move that we should make right now.”
Delegate Larry Pack, R-Kanawha, agreed.
“I think I also hear that this company can do this better than the private sector, but there’s really no explanation as to how that can happen or how it would happen,” Pack said.
Although Pack acknowledged the possible liability, he questioned whether it is urgent right now. “There may be a problem somewhere down the road, somewhere in the future. But we don’t have a crisis today,” he said.
Delegate Evan Hansen, D-Monongalia, also questioned whether the state would ever get the $50 million back.
“So the goal of this is to start with $50 million. But it will, I promise you, be more than $50 million,” he said.
“This $50 million-plus dollars, in my opinion, is very unlikely to be paid back.”
The bill establishing the insurance mutual specifies that it would not be considered a department or agency of the state — but instead would be a company governed by five directors. The chairman, though, would be appointed by the governor, and the remaining members would also be named by state officials.
The ball got rolling last summer after lawmakers heard the summary of a 52-page report laying out 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 reclamation for any areas where permit holders default.
Right now, the state’s Special Reclamation Fund is set up to cover any shortfall, but the worry is that could become overwhelmed by obligations.
West Virginia allows mining companies to post bonds of $1,000 to $5,000 an acre, amounts that the Department of Environmental Protection estimates would cover only about 10 percent of reclamation costs. West Virginia fills the gap with Special Reclamation Funds, which are are funded primarily by a 27.9 cent tax levied on every short ton of coal produced
Increased reclamation costs combined with economic strain on the coal industry has highlighted the possibility of a financial crisis.
Hansen noted that the insurance mutual was not one of the suggestions to shore up the reclamation fund suggested by the legislative audit.
“Now we can do what we want, but none of those suggestions were to create a mining mutual insurance company like this bill does,” he said. “There are other alternatives to shore up the special reclamation fund using funds from the coal industry, rather than taxpayers.”