The Pennsylvania Department of Environmental Protection (DEP) Bureau of Mining Programs has completed an actuarial study of its Land Reclamation Financial Guarantee Program (LRFG). According to the report, the LRFG fund is “financially sound as of June 30, 2021.” Current assets and revenue exceed the estimated expenses for reclamation costs of forfeited mine sites, the report concludes.
However, while the report was overall positive, it does come with some concerns for the future. The report notes the LRFG fund is “susceptible to catastrophic or shock losses.” These catastrophic loses could come as a result of “concentration” of operator experiencing distress leading to a number of forfeitures in a very short space of time.
The biggest risk factor leading to such an occurrence would be the result of an economic downturn in demand and price for the mined materials. A resulting downturn would create stress on the program by increasing the chances of mining companies becoming insolvent and being able pay future premiums to cover the cost of the land reclamation costs.
According to the Department’s Bureau of Mining Programs, who administers the program, as of June 2021, the Department had underwritten a total of $49.1 million in Financial Guarantees. This is up about $800,000 from March of 2021. Currently, 116 coal mine operators across the state are utilizing the LRFG program on 216 permitted sites. The average amount for the guarantees is $416,300. There is currently a $3 million limit of the amount of the funds a company use. Four coal mining companies are currently operating on that $3 million max.
To ensure the long-term solvency of the program, the Department is looking at several options:
• Maintain the minimum surplus balance of $10 million.
• Adjust the permit limit for new LRFG permits and new LRFG operators to 30%
• Evaluate LRFG premium to make them comparable with private surety bonds.
Pennsylvania mining regulations allow the Department to utilize earned interest and a portion of the premium revenue to pay for the treatment of pre-SMCRA abandoned mine discharges in the western portion of the state. The study was completed by Aon Risk Solutions headquartered in London, England.
The Reclamation Committee of Mine Reclamation Advisory Board recently met with the Department to review and discuss the study and provide recommendations to the entire board on how to maintain long term solvency of the program. If you would like to have complete copy of the actuarial study, please email your request to firstname.lastname@example.orgGo back to previous page