04/05/2004 03:30 PM Senate RES

                                                                                                                                
           HB 486-MINING RECLAMATION ASSURANCES/FUND                                                                        
                                                                                                                                
CHAIR SCOTT  OGAN called the Senate  Resources Standing Committee                                                             
meeting  to  order at  3:30  p.m.  Present were  Senators  Thomas                                                               
Wagoner, Ben  Stevens, Fred Dyson  and Chair Scott  Ogan. Senator                                                               
Ralph Seekins  arrived at 3:43  p.m. The first order  of business                                                               
to come before the committee was CSHB 486(FIN).                                                                                 
                                                                                                                                
MS.  JANET BURLESON-BAXTER,  Legislative  Liaison, Department  of                                                               
Natural Resources (DNR),  stated that the Senate  version of this                                                               
bill, SB 339, passed out  of this committee previously. The House                                                               
Finance Committee  made one  change on  page 3,  lines 7  and 11.                                                               
Chair Ogan  acknowledged those. She  said the  department intends                                                               
to  draft   regulations  to  address  any   questions  about  the                                                               
financial  instruments  that  are  mentioned  in  the  bill.  The                                                               
amendment  adds  that  it  has  to do  that  and  the  department                                                               
supports it.                                                                                                                    
                                                                                                                                
MS. BAXTER explained further that  there are three changes. State                                                               
law says  that mining operations  have to reclaim  disturbed land                                                               
and  was changed  in  the 1990s  to  accommodate predominantly  a                                                               
placer mining  industry. Large mining  has evolved over  the last                                                               
10 years.  Currently, the cap  for reclaiming disturbed  acres is                                                               
$750  per acre,  which  works  for the  placer  industry, but  is                                                               
inadequate to reclaim a large mine.  This bill keeps the $750 cap                                                               
in  place for  the placer  industry and  allows for  a negotiated                                                               
settlement  for a  reasonable reclamation  by  the industry,  the                                                               
applicant and  the DNR. It  also expands the number  of financial                                                               
instruments the department can use for reclamation.                                                                             
                                                                                                                                
The state  has some bonds in  the $26 million range,  but that is                                                               
on a voluntary basis; the state  has no statutory authority to do                                                               
that. Thirdly, it  provides for a trust that  the bonding company                                                               
can  put  money  into  that   over  time  accrues  interest.  DNR                                                               
anticipates having  a number of  instruments at the  beginning of                                                               
an operation, but  at the end of the  project, predominantly cash                                                               
would be used from the accrued interest.                                                                                        
                                                                                                                                
MR. BOB LOEFFLER,  Director, Division of Mining,  Land and Water,                                                               
Department of Natural  Resources (DNR), said he  was available to                                                               
answer questions.                                                                                                               
                                                                                                                                
CHAIR OGAN  asked what  financial tests a  company would  have to                                                               
undergo.                                                                                                                        
                                                                                                                                
MR.  LOEFFLER  replied  that  they  would be  like  a  net  worth                                                               
statement  or the  ratio of  assets compared  to liabilities.  He                                                               
could also use a bond rating from Moody or Standard and Poor.                                                                   
                                                                                                                                
CHAIR OGAN asked  if he anticipated factoring  in the fluctuating                                                               
price of minerals.                                                                                                              
                                                                                                                                
MR. LOEFFLER  replied no,  because the bonds  are to  assure that                                                               
the state  has the ability to  reclaim the land should  a company                                                               
default. The bonds become more  important during the times of low                                                               
metal prices,  because land costs  the same to reclaim  no matter                                                               
what the price of the metal is.                                                                                                 
                                                                                                                                
CHAIR  OGAN asked  if instead  of having  companies post  a bond,                                                               
they could opt to provide other financial assurances.                                                                           
                                                                                                                                
MR. LOEFFLER  replied yes and  explained that this  bill proposes                                                               
that they have  an opportunity to provide  financial assurance in                                                               
a variety of  ways, the same thing as a  bond. They could provide                                                               
a  letter   of  credit,  certificate  of   deposit,  a  corporate                                                               
guarantee that meets  the financial tests, a surety  bond or they                                                               
could actually provide cash in  a trust fund. Typically, he would                                                               
expect a  company to  use a  suite of those  to meet  the state's                                                               
bond requirements.                                                                                                              
                                                                                                                                
CHAIR OGAN exhorted him to do a good job.                                                                                       
                                                                                                                                
SENATOR WAGONER  moved to  pass CSHB  486(FIN), version  /D, from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note. There were no objections and it was so ordered.