The Department of the Interior's Office of Surface Mining Should More Fully Recover or Eliminate Its Costs of Regulating Coal Mining

Gao ID: RCED-85-33 May 28, 1985

GAO reported on: (1) the costs that the Department of the Interior's Office of Surface Mining (OSM) incurs for regulating coal mining; (2) measures which OSM could use to recover or reduce these costs; and (3) the impact that recovering these costs would have on coal production and demand.

GAO found that OSM spent approximately $65.4 million in fiscal year 1984 to regulate coal mine operations. About $51.5 million was allocated to program administration and state grants for regulating mining on federal, state, and private lands. OSM spent another $13.9 million for research, oversight, and other activities in support of both its own and state regulatory programs. About $29 million was recovered through permit fees. GAO believes that OSM should assess coal mine operators the actual costs it incurs to review, administer, and enforce permits to mine on federally regulated land, which could result in about $9.3 million in recoveries. GAO also found that state fees are generally well below OSM costs, and that the grants which the states receive fail to provide an incentive for the states to recover their costs directly from operators. Therefore, GAO believes that OSM should phase out or substantially reduce grants to states. If this were done, OSM could save up to $42.2 million annually. However, recovery of support costs for research, oversight, and other activities would require the enactment of special tax legislation. Finally, GAO found that the recovery of all of the costs would have little effect on the national coal demand or result in little change in coal production areas. Although production costs would increase, if these costs were fully reflected in price, demand for coal would be unaffected because it would still be the least expensive fuel used for electrical generation.


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