Aided by a sharp downturn in Eastern Kentucky coal production, state regulators completed all required inspections of surface mines in the most recent fiscal year, a marked improvement over the 88 percent completed in the prior year, according to a new report.
However, the industry's compliance rate with mining and reclamation rules, while edging up from the previous year, continued to lag well below the levels it has achieved in the past, the federal oversight report said.
The level of industry compliance "remains a serious issue," according to the report from the U.S. Office of Surface Mining Reclamation and Enforcement (OSM).
The report also said the bond money coal companies posted to guarantee reclamation of the sites they mined was too low on most permits OSM analyzed — an issue the state moved to begin correcting during the evaluation period.
Kentucky has primacy to enforce federal rules on surface mining in the state, but OSM oversees its program and issues an annual evaluation report. The latest report covered July 1, 2012, through June 30, 2013.
The state is required to complete one full and two partial inspections each quarter on each active mine site and one full inspection on inactive and abandoned sites.
In the 2012-13 year, that totaled more than 23,000 inspections on nearly 1,800 "inspectable units," which include surface mines, the surface areas of underground mines, haul roads and preparation plants. The state met the required inspection frequency on 99.9 percent of those permits.
Kentucky traditionally had met the required frequency on more than 98 percent of sites, but slipped to 83 percent in the 2008-09 fiscal year, when a large number of inspectors retired and budget shortfalls prevented filling the slots, OSM said.
The concern over not completing the required inspections is that violations that can endanger people or the environment might go unnoticed.
The state's inspection rate remained below 90 percent until the most recent year, when managers stressed the need to up the number of inspections, and other employees such as supervisors and bond-release specialists pitched in to help buttress the inspection staff.
"The credit for this accomplishment goes to our hard working and dedicated inspection and support staff who overcame numerous challenges, including reduced staffing, to achieve this goal," said Steve Hohmann, commissioner of the Department for Natural Resources.
The OSM report noted the state's work to boost inspections, but said having people who don't usually do inspections assume extra work is "not a permanent solution" to meeting inspection-frequency requirements.
The state's surface-mining agency has lost positions because of tight state budgets and has given up $5.9 million in federal funding since 2008 because it didn't have money for the required match, according to the OSM report.
The evaluation said the downturn in regional coal production also helped the state increase its inspection frequency.
Coal companies cut surface production in Eastern Kentucky 27.8 percent in 2012 and an additional 19.5 percent in 2013, according to the Kentucky Energy and Environment Cabinet.
The drop in active mines cut demands on inspectors' time, as well as the number of citizen complaints about violations near their homes, the report said.
State inspectors wrote 1,081 noncompliance notices during the evaluation year. That was down from 1,331 the year before, with the drop in coal production likely a key factor.
The industry's level of compliance with permit standards improved from 70 percent to 72 percent in 2012-13, but that was still the lowest level it had been in two decades, according to the OSM evaluation.
OSM defines industry compliance as the percentage of joint, random inspections in which federal and state regulators see no violations.
The federal agency looks at enforcement data, information on mines causing impacts on property outside the permit boundary, and other measures to see how many mines are in full compliance with the standards they're supposed to meet.
The industry's compliance rate was 60 percent in 1990, but improved to a high of 88 percent in the 2005-06 fiscal year before dropping off.
"It's a significant problem, and it's very troubling," Doug Doerrfeld, a past president of Kentuckians for the Commonwealth, said of the industry's lower compliance rate.
Doerrfeld said the penalties for violations apparently are not stiff enough to force companies to comply with environmental rules.
"The only way to get them not to cut these corners is to make the cost of getting caught and getting fined a deterrent," Doerrfeld said.
The OSM report said 85 percent of mine sites were free of what are called "off-site impacts" such as landslides, pollution of streams and drinking-water wells, and pieces of rock being blown onto adjoining property by blasting.
That was an improvement from 82 percent the year before, but still far below the level of 97 percent the industry achieved in 1999-2000.
Bill Bissett, president of the Kentucky Coal Association, said the industry needs to improve its compliance rate, but noted that rate, as well as the number of off-site impacts and citizen complaints, all showed a positive trend during the evaluation year.
"I do think there's some good news for Kentucky coal" in the report, Bissett said. "I think we will continue to improve."
On another front, a longstanding problem in the state of inadequate reclamation bonds continued, according to OSM.
Coal companies have to post bonds to cover the cost of reclaiming surface-mined sites if the companies don't do the work as required. Critics have long said Kentucky did not require large enough bonds, giving coal companies a financial break.
Since the 2007-2008 fiscal year, the money a coal company had posted was not sufficient to properly reclaim mined areas in 76 of the 96 cases in which companies forfeited the bonds, according to the OSM report.
In the 2012-13 year, 13 of the 15 bonds companies forfeited were not large enough to cover reclamation costs, OSM said.
In May 2012, the federal agency in effect threatened to take away the state's authority to set bonds. State officials responded with new rules to increase required bonds and set up a bond pool financed by the industry to guarantee reclamation.
The higher bonds are being applied to new permits and to existing permits as they come up for review. Bonds have gone up an average of 60 percent under the new program, according to Dick Brown, a spokesman for the state Energy and Environment Cabinet.
Bill Estep: (606) 678-4655. Twitter: @billestep1