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APPLICANT VIOLATOR SYSTEM Another issue has been the applicant violator system. The applicant violator system is up. It works. The program, the software, the hardware works. The problem is with the data that is in the system. We knew from the start that we would be taking data from old permits. So, some of the data on the owners, the controllers, the people involved in these companies is old and outdated. As a result, we have to go to an incredible effort to work with the companies to update the information.

Mr. YATES. How are you helped in the enforcement of that program by a $2 million cut?

Mr. CHRISTENSEN. We feel like we are still keeping up with the program because the important thing was to get the system up and running and verify the data contained in the system. And that's what we're doing right now.

Mr. YATES. Yes, but aren't you going to lose a lot of violators be cause of the cut?

Mr. CHRISTENSEN. No, because what we found was the majority of the violators that are in the system now will be duplicated when we add State data. There won't be a big difference. We will still be able to concentrate on the real gross violators.

Mr. YATES. In other words, you aren't affected by the $2 million cut.

Mr. CHRISTENSEN. No, because we need to remember that a great deal of the $2 million was one-time development costs that we won't incur again.

Mr. YATES. Well, are you going to have enough people to look at the data?

Mr. CHRISTENSEN. Yes.
Mr. YATES. You will.

Mr. CHRISTENSEN. We believe we have adequate staff right now. We have set up a clearinghouse for staff to verify the data.

Mr. YATES. You have enough right now, but are you going to have the same number next year when you are cut by $2 million?

Mr. CHRISTENSEN. Yes.
Mr. YATES. Okay.

Mr. CHRISTENSEN. We feel comfortable there are enough people to manage the data and go through it and work with it.

AML FEE COLLECTION Mr. YATES. All right.

Mr. CHRISTENSEN. There are two other things I wanted to briefly touch on. The status of fee collection activities for AML. The auditors have all been trained, both in and out of the classroom. They have much better guidance in their assignments. They know specifically which companies they're going to audit. They have been much more successful in doing the audits than they had been previously when they weren't as well organized.

TWO-ACRE COMPLETION IN VIRGINIA

The other thing that I wanted to say to you is that we have been able to go into Virginia in the last two years and settle or deal with most of the outstanding two-acre cases. By this spring, we will be able to start pulling some of those two-acre people out of Virginia and

move them to Kentucky to help us with the same effort there. That's a major achievement.

Mr. Chairman, you always have been very interested in our budget and always have been very willing to listen to us and talk with us. I would like to give you an OSMRE lapel pin, if you wouldn't mind.

Mr. YATES. Oh.
Mr. CHRISTENSEN. You and staff. She certainly deserves one.
Mr. YATES. What about Mr. Regula? [Laughter.]

Mr. CHRISTENSEN. And I've got one for him and a couple more here. So, I would like to pass them on. This didn't come out of the AML fund, I assure you!

That ends my statement.
Mr. YATES. Well, thank you very much. Thank you.
All right. Had that completed your statement?
Mr. CHRISTENSEN. Yes.
Mr. YATES. With the medal.
Mr. CHRISTENSEN. Yes.
Mr. YATES. For service above and beyond the call of duty.
Mr. CHRISTENSEN. For diligence.
Mr. YATES. Oh, okay. Thank you. (Laughter.]

REDUCTIONS FOR AVS AND CDMIS

Does the $2 million reduction have any effect on the operation of the AVS and the development of phases II and III?

Mr. CHRISTENSEN. No. The thing we need to remember about the $2 million is that it funded one-time development costs, which we have already incurred.

Mr. YATES. How about the budget? Is it large enough to carry on your work adequately, or is this the reason you're leaving for California?

STATE REGULATORY PROGRAM FUNDING

Mr. CHRISTENSEN. Mr. Chairman, I believe that the present budget is adequate, but I do have one concern that has to do with funding the State regulatory programs. When we prepared this budget a year ago and estimated what it would cost to match the States' regulatory program requests, we assumed that we had enough money in the budget to cover the costs. Now, through discussion with the States, we are finding that some of them are going to have more funds to run their programs. As a result, we may be a couple million dollars short to match their costs. We would like to talk with you a little more about this issue if it becomes a problem. .

Mr. Yates. You're talking about a shortage of $5 million?
Mr. CHRISTENSEN. It's approximately $5 million.

Mr. Yates. How are we going to get it to you? In a supplemental or by a reprogramming?

Mr. CHRISTENSEN. The thing we want to make sure of before we press the panic button on this is that the States really can come up with the matching funds. Right now, these are only preliminary indications.

Mr. Yates. How long will that take you?

Mr. CHRISTENSEN. This is an initiative that we will be more concerned about in Fiscal Year 1990.

Mr. YATES. Oh? But you are still going to be $5 million short in 1989.

Mr. CHRISTENSEN. Well, that's how it appears at present. We'll have to see, though, when the State legislatures meet, if this is really going to become an issue. In other words, will they come up with that much money? I think when we talk about West Virginia and discuss the problem they're having there, the issue will become more obvious.

FISCAL YEAR 1988 PAY RAISE

Mr. YATES. Does the Fiscal Year 1989 request contain sufficient funding to cover the pay increase in January? The cost of the January 1988 pay raise.

Mr. RISTENSEN. We are planning to absorb it in 1988.
Mr. YATES. Where would you absorb it?

Mr. CHRISTENSEN. Three-quarters of the pay raise will be absorbed in 1988 by not filling positions as quickly.

Mr. YATES. Well, how are you going to handle your work?

Mr. CHRISTENSEN. It will be done. It just increases the workload of other people until replacements are made.

Mr. YATES. Take a look at your new budget. You've got a cut from the amount you requested of the Department. You asked the Department for $110 million, and you got $101 million. You were cut by $9 million. How does that play with the pay raise?

Mr. CHRISTENSEN. A lot of that had to do with the retirement costs. It was anticipated that many employees would go into the new FERS system, but they didn't. So, there was a tremendous amount of savings.

BOND ADEQUACY Mr. YATES. What's the current situation with respect to bond companies nationwide?

Mr. CHRISTENSEN. We do a quarterly status report on bonding companies. There have been some failures. It is a very serious problem in the coal country and for coal operators.

One of the things that has helped us somewhat is the recent Circuit Court decision that allowed incremental and phase bonding so companies don't have to bond for the entire area. They are able to bond incrementally as they mine. This will help somewhat. But it is a very serious problem for many operators.

We would be glad to provide that report to your Committee, if you would like.

Mr. YATES. We would like to have it. [The information follows:]

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United States Department of the Interior

OFFICE OF SURFACE MINING

Reclamadoo and Enforcement
WASHINGTON, D.O 20240 Io Reply

Refer To:
DEC 3 1987

4101
TSR 18

Memorandum

Capelli

To: Deputy Director, Operations and Technical Services

Assistant Director, Eastern Field Operations

Assistant Director, Western Pield Operations
Through: Assistant Director, Program Policy
From: George C. Pangburn, Program Analyst

Office of Special Projects Coord laatok
Subject: Bond Insolvency Report for Third Quarter, 1987
The office of Special Projects Coordinator has reviewed the
third quarter, 1987 bond Insolvency reports submitted by the
Field Office Director: lo accordance with the August 28, 1987
Directive on this subject. The purpose of this memorandum 18.
to present to summary for the results of that review.
A total of 13 surety companies were reported by the Field
offices as being losolvent; all but one of those were
Locluded lo previous la solvency reports. These lo solvencies
have affected a total of 468 companies having 216 permits
currently producing coal and 816 permits with no current
production. The only new surety Insolvency lo this quarter
was Fortune Assurance, a Pennsylvania based company which was
declared lasolveat in August. This insolvency has affected
71 coal mining companies in Pennsylvania with a total of 84
permits having current coal production and 47 permits having
no production. of the producing permits, 26 have replaced
their bond and the remainder are under orders from the State
of Pennsylvania to replace their bond.
Nationwide, during the third quarter a total of 64 permit
bonds were replaced, bringing the total number of bonds
replaced on permits affected by surety Insolvencies to 367.
A total of 83 la solvency-affected permits ceased production
during the third quarter bringing the total oumber of permits
which have ceased production to 177. (Of the 83 third-
quarter permits which ceased production 39 were related to
the Fortine Assur ance case.) 'Additional details on each
lnsolveat surety are presented in the attached chart.

Attachments

DEC 7 RECO

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Companies Surety or Guarantor | Affected

Permits with Current Coal Production
Nuniber

Acreage T Total Last

| Annual Production

(000's)
8
153

264
73
6.880

2,019
156

147
38
2,288

2,740

151 92 12 21

Total Bond

Amount
(5000)

2,250
23,431
1,449
5,719

335 292 17 14

19,360 11,406

820 2.725

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STATE: N.A.

Part 1

Name Insolvent

Ameriran Druggist
Union Indienmity
Allied Fidelity
Merrhants and

Manufacturers
Guard Casualty
Integrity Insurancel
Grayson Loan Co.
American Fidelity i
Citizens Rank I
Carriers Insurance |

Co.
IST Natl. Bank of I
OKLA.

|
Commercial Standardi
Fortune Assurance

TOTALS

468

216

9,874

6,897

39,739

816

31,639

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Name Insolvent
Surety or Guarantor
American Druggist

Actions Taken in Reports Period
Permit Bonds

Ceased
Replaced

Prod. 7

7

Union Indemnity

24

37

1. Figures for Kentucky are estimates based on random samnles of

State Data.
12. Production figures not available for Alabama, Kentucky and

Pennsylvania.
Acreage figures nnt available for Pennsylvania.
Figures for permits with no production include both interim
and nermanent permits.

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