By Beth Burger

March 17, 2019 - Ohio Governor Mike DeWine’s proposed budget would restore $5 million to Ohio’s coal-mining reclamation fund that was raided by former Gov. John Kasich’s administration in 2017.

“When there’s a change in administration, I guess you never really know what to expect. I guess I would say I’m pleasantly surprised,” said Michael Sliva, a board member on the state’s reclamation forfeiture fund advisory board, who was unaware of the budget proposal before contacted Friday afternoon by The Dispatch.

At an advisory board meeting last week, members received preliminary figures from an actuarial report on the coal fund by Pinnacle Actuarial Resources.

“It’s actually not as rosy as it was two years ago,” said John Wade, a consulting actuary with Pinnacle.

Estimates showed that Ohio’s coal-mining reclamation fund would never recover from the Kasich administration taking $5 million from the fund for its general budget.

“This is an important fund for those worst-case scenarios it’s intended for, and as a result, (the new administration) believed it should be funded at an actuarial appropriate level,” said Dan Tierney, a press secretary for Gov. Mike DeWine, when asked about the money being added back into the coal-mining reclamation fund.

Five years from now, without the $5 million added back or other changes, the actuarial firm projected the fund balance would fall to $19.6 million, down from its current balance of a little more than $21 million.

Board members at Wednesday’s meeting asked Pinnacle to factor in a scenario for the final report in which $5 million went back into the fund.

Some members also noted that the fund was supposed to receive a lump sum of $5 million about a decade ago to help bolster it, but that money was never received. Members asked that money be factored in as well, bringing the potential total to $10 million. The initial missing $5 million has been documented in each of the past actuarial reports.

“We’ve been shortchanged 5 million bucks. Now they took another $5 million and that’s why we’re having this discussion,” Gary Kaster, a board member who resides in Morgan County and represents forestry interests, said at the meeting.

Ben Beckman, an actuarial analyst and board member representing the Ohio Department of Insurance, said during the meeting, “Didn’t we point out the initial $5 million was missing every single time and we’ve been ignored all these years? And since that time, the fund has grown to over $20 million. That $5 million’s not coming back. Right? It’s gone. Realistically, it’s gone and that $5 million they took last year, it’s not coming back either.”

Asked by The Dispatch after the meeting whether the funding and permitting process should be restructured, Beckman declined to comment.

If Ohio’s largest mining permit holder, Murray Energy Corporation, were to abandon its coal mines in the state, it could take an estimated $245 million to clean up the sites. For the fund to recover, it would take more than 150 years without any other companies abandoning mining sites, according to the most recent estimates.

Even if an average permit holder, calculated based on the potential liability of abandoned mines, could have an estimated price tag of nearly $34 million, it would take 11 years with no other forfeitures for the fund to recover.

The projections use calculations based only on current permit holders, but they take into consideration declining coal production and the state’s reclamation costs, said Arthur R. Randolph II, principal and consulting actuary with Pinnacle.

Coal production in Ohio and across the United States has been declining. According to the latest U.S. Energy Information Administration coal production weekly report, Ohio this year has produced 1,384 tons of coal through March 2 — a 16.3 percent decrease compared with the same period last year.

“Obviously, coal-mining production is down across the U.S. and really, the goal of the fund here is to make sure the land can be reclaimed. But if you’re talking about operators who are distressed because they’re not mining enough coal, those are the ones where the fund becomes a backstop because they don’t have the cash liquidity to pay for the reclamations,” Randolph said.

If there’s less coal mined, it means there will be less money going into the fund. The state’s reclamation fund pools money from all of the coal-mining companies by collecting a severance tax of 14 cents on each ton of coal mined.

Mining companies pay $2,500 per acre that they mine. If they fail to reclaim a mining site, the state uses that money for cleanup. If more money is needed to cover the cost, the state fund picks up the tab.

With coal companies struggling, there’s concern that more companies could abandon mines, leaving Ohio taxpayers to foot the bill. The fund is still recovering from its last forfeiture in 2014 when Valley Mining abandoned six mining sites that required more than $660,000 from the state reclamation fund. Cleanup is scheduled to be completed this year.

“It’s impossible to predict the future,” Tierney replied when asked whether the governor’s office thinks the reclamation fund should be restructured. “However, this proposal that’s in the budget supports reclamation efforts going forward. Whether changes are needed at this time, it’s too premature to say.”

Before the Kasich administration took money from the fund in 2017, its balance was $25.9 million — considered inadequate to cover catastrophic events involving larger permit holders, according to the 2017 actuarial report.

The actuaries are still crunching numbers to determine what amount the fund would need to be considered solvent.