Office of Surface Mining Should More Fully Recover or Eliminate Its Costs of Regulating Coal Mining

Testimony was given concerning the impact on the coal industry of the Office of Surface Mining's (OSM) proposed rules to increase its mining permit fees. GAO discussed how OSM could more fully recover or eliminate its regulatory costs and the effects of doing so on coal demand and production. GAO found that: (1) Department of the Interior's policy requires federal agencies to recover as much of its regulatory costs as possible through user fees; (2) OSM should exercise its existing authority to recover costs for coal mining operations; and (3) OSM should seek full recovery of its own regulatory costs. GAO has held that, when federal funds are used indirectly to subsidize grants to state and local governments, federal agencies should encourage the recovery of expenditures by requiring reimbursement or eliminating grants altogether. GAO noted that, even with continued assistance to states for small mine operators, OSM could realize substantial savings by reducing or phasing out its grant programs. GAO also noted that OSM cannot recover the cost of activities that support both federal and state regulatory programs, because agencies may only charge fees for activities that benefit an identifiable recipient. GAO found that: (1) OSM could only recover the costs for support activities if Congress levies a special tax for that purpose; (2) if OSM were to charge fees that fully reflected its costs to process and enforce its permits and eliminate its grants to states, it could save over $51 million a year; and (3) overall demand for coal was not likely to be affected by full cost recovery, but variations in regulatory costs from state to state could cause regional shifts in demand.