A private mutual insurance company West Virginia lawmakers created with $50 million in taxpayer money in 2022 as a lifeline to coal mine operators has facilitated $10 million to $20 million in bonds, per the company’s chairman and CEO.
“We’ve written maybe a little bit more than we thought we were going to,†Mining Mutual Insurance Co. Chairman and CEO David Rader said in a phone interview last week.
Rader estimated the company has provided 50 to 60 bonds and is supporting three to four large coal operations.
Coal companies each require multiple permits that mandate bonds, Rader noted, ensuring that if one of them goes bankrupt, there’ll be sufficient funds to perform whatever reclamation work they promised when they received their permit.
“That’s why we’re in business,†Rader said.
$50 million in seed money from general revenue fund
The company was created by Senate Bill 1 of 2022, which followed a 2021 legislative audit warning state mine cleanup funds are nearing insolvency.
SB 1 lead sponsor and Senate President Craig Blair, R-Berkeley, was among the bill’s proponents who said the legislation would help guard against an expected rise in coal company bankruptcies that leave the state’s mine cleanup fund — and state taxpayers — on the hook for what could be billions of dollars in companies’ unfulfilled mine reclamation obligations.
Opponents of SB 1 said the mutual insurance company would attract high-risk companies that have struggled to secure bonds elsewhere in the private sector, increasing the likelihood the state would have to contribute more taxpayer money to the fund.
The $50 million set aside to create the company was transferred from surplus money in the state’s general revenue fund to a fund for the insurance company.
Rader doesn’t anticipate his nonstock company will need more than that $50 million — for now.
“We call that surplus, and we have plenty of surplus to meet our needs for the next couple of years with no problem at all. But that assumes the market doesn’t fall apart,†Rader said. “If the market falls apart, it’s a different story.â€
Coal-fired power, production projected to plummet
There are fresh signs the market could grow more vulnerable soon.
The federal Energy Information Administration predicted this month electricity generation from coal will decline by 9% in 2024 and by 10% in 2025 due to a combination of higher costs compared with renewable power and another 12 gigawatts of coal-fired capacity retiring in the next two years.
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The agency projected United States coal production will fall by over 90 million short tons to fewer than 490 short tons in 2024 and then drop below 430 short tons in 2025 — the least coal produced in the U.S. since the early 1960s.
Rader said his company began providing bonds in the second quarter of 2023, providing “a little bit†every quarter since.
“I’m not setting the world on fire, but maybe that’s good,†Rader said.
The company consists of Rader, executive vice president and coal industry environmental compliance veteran Thomas Cook, and an office manager housed in a Brooks Street office suite in ÂÒÂ×ÄÚÉä.
Serving alongside Rader and Cook on Mining Mutual’s five-member board of directors are treasurer and retired chief financial officer Gary Schultz; Patricia Clark, who has served as managing partner at ÂÒÂ×ÄÚÉä-based accounting firm Suttle & Stalnaker; and Gary White, former West Virginia Coal Association president and interim Marshall University president.
There are gaping holes in reclamation oversight
The 2021 audit report found lawmakers and environmental regulators risk letting West Virginia’s mining reclamation program slip into insolvency through gaping holes in statutory and permitting oversight.
The report found the state Department of Environmental Protection failed to comply with state and federal law in its reclamation program oversight, resulting in missed opportunities to financially shore up a program that will keep requiring hundreds of millions of dollars to reclaim permit sites per federal regulations.
The state’s current per-acre coal mining reclamation bond limits may not be enough to guarantee the solvency of the state’s mining reclamation program, the report said.
Rising reclamation costs have devalued permit bonds since the current limits were established by state code in 2001, the report observed, while the cost of reclamation has increased significantly.
SB 1 did not implement any of the report’s recommendations for shoring up the state’s mine cleanup funding. Recommendations included DEP compliance with its own reclamation permitting handbook, and denial of applications for permit renewals and revisions for companies found delinquent in paying special reclamation taxes.
The report estimated that bonds cover only 10% of reclamation costs in West Virginia.
As the coal industry’s decline persists, Rader is confident his taxpayer-seeded company will, too.
“We’ll just be a quiet little force out there for years,†Rader said.
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