02/05/1996 03:35 PM Senate RES

                                                                               
 SRES 2/5/96                                                                   
                   SB 240 MINING BONDING POOL                                 
                                                                              
  CHAIRMAN LEMAN  called the Senate Resources Committee meeting to             
 order at 3:35 p.m. and announced  SB 240  to be up for consideration.         
 He said this bill was recommended by the Alaska Minerals Commission           
 and that it also applies to coal mining operations.                           
                                                                               
 BOB STILES, President, Alaska Coal Association, said he is                    
 currently involved in the development of the coal reserves in the             
 Beluga region. He said SB 240 doesn't decrease the amount of the              
 bonding requirement for a surface coal mining operation.                      
 Typically, a surface coal mining operation bonding requirement will           
 be $1,000 - $10,000 per acre, he said.                                        
                                                                               
 SB 240 would not increase the risk profile of a bonding pool,                 
 although there has never been a forfeiture of a reclamation bond by           
 a western coal mining operation.  The reason for that is if an                
 operator ever forfeits a reclamation bond, he will never get a                
 permit to operate a coal mine again.                                          
                                                                               
 This bill has the potential of reducing the amount of assets an               
 operator has to pledge in order to obtain the bond.                           
                                                                               
 Number 75                                                                     
                                                                               
 Most importantly, the bill makes bonding available when it might              
 not be available otherwise.                                                   
                                                                               
 MR. STILES said SB 240 was a very good piece of legislation.                  
                                                                               
 SENATOR LEMAN added that this bill does not propose any additional            
 state commissions to be established and assumes the Alaska Minerals           
 Commission could cover it.  He asked Mr. Stiles what he thought of            
 that.  MR. STILES responded that there clearly were a number of               
 things to be addressed in the surface mining program, bonding is              
 one of them.  There needs to be some sort of mechanism for that               
 occurring.                                                                    
                                                                               
 Number 125                                                                    
                                                                               
 CHARLIE BODDY, Usibelli Coal, supported SB 240.  The 1982 Surface             
 Mining Law specifically said the commissioner "shall" develop                 
 regulations.  SB 240 amended the 1990 reclamation law which                   
 addresses all other types of non-coal mining and the words used in            
 that legislation are the commissioner "may."  The coal operators              
 thought it was imperative to change the "may" to "shall" since they           
 didn't have a self-bonding program, yet.  He hoped that the State             
 bonding pool would be the source of recognition of bonding for all            
 types of mining.                                                              
                                                                               
 Number 158                                                                    
 JULES TILESTON, Director, Division of Mining and Water Management,            
 said he had no problem with changing "may" to "shall."                        
                                                                               
 As the bonding program exists today, they have a more comprehensive           
 idea of how to fine-tune the reclamation/bonding act.  The bonding            
 pool now is comprised of mostly small placer mining operations and            
 a few large hard-rock operations.  There are approximately 400                
 operations involving a total of 2,500 acres in the bond pool.                 
 These small operations have contributed the total of about $500,000           
 in cash bonds.  The Red Dog Mine has approximately a $1 million               
 plus letter of credit to cover its 5-year reclamation obligation.             
 Fort Knox has a $1.5 million letter of credit, in addition to a               
 $450,000 bond with DEC to cover solid waste.                                  
                                                                               
 Both DEC and DNR are operating on a single line, MR. TILESTON                 
 pointed out, and they needed to look at whether two bonds should be           
 required or if one bond instrument would handle it.                           
                                                                               
 At present, no coal operation has requested or is in the bonding              
 pool.  There are a little over $5 million in bonds by the coal                
 producers of the State, today.  About $3.9 million of that is a               
 collateral bond for Usibelli.  The Wishbone Hill project had filed            
 a $6.1 million letter of credit and their reclamation will be about           
 $35 million.                                                                  
                                                                               
 Number 230                                                                    
 SENATOR PEARCE moved to pass SB 240 from committee with individual            
 recommendations with the accompanying fiscal notes.  There were no            
 objections and it was so ordered.