Coal Mine Subsidence:

Several States May Not Meet Federal Insurance Program Objectives

RCED-91-140: Published: May 28, 1991. Publicly Released: Jun 10, 1991.

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Pursuant to a congressional request, GAO examined: (1) the Department of the Interior's Office of Surface Mining Reclamation and Enforcement's (OSMRE) efforts to implement the federally assisted coal mine subsidence insurance program; and (2) six states' efforts to develop self-sustaining insurance programs.

GAO found that: (1) after 5 years experience with the program, two of the six states that received grants may not be progressing toward self-sustainability; (2) state officials noted that their participation rates were too low to generate sufficient premium income to meet the insurance reserve requirement for anticipated claims; (3) state officials also noted that low participation rates greatly increased the risk that a major subsidence event would threaten solvency; (4) OSMRE lacked effective management of federal grants and did not provide the oversight necessary to ensure that program objectives were met; and (5) OSMRE cited the limited funds involved and the resources needed to actively participate in state-administered programs as the reason for its passive grants management.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Interior stated that it continues to follow its financial assistance manual.

    Recommendation: To ensure that states implement coal mine subsidence insurance programs that have a reasonable probability of achieving self-sustainability, the Secretary of the Interior should direct the Director, OSMRE, to follow the requirements of the OSMRE Financial Assistance Manual as it manages this grant program.

    Agency Affected: Department of the Interior

  2. Status: Closed - Implemented

    Comments: Interior notified Ohio and Indiana that their programs might be terminated. Subsequently, Ohio passed legislation requiring subsidence insurance and Indiana passed legislation encouraging participation. Both states completed actuarial studies which are being reviewed to see if programs are self-sustaining.

    Recommendation: As part of OSMRE enhanced oversight, the Director, OSMRE, should: (1) monitor the states' progress toward achieving self-sustaining programs; (2) encourage those actions that will enhance their prospects of achieving self-sustainability; and (3) as a last resort, terminate a state's grant if it becomes clear that a self-sustaining program is not obtainable. In particular, the Director should encourage states to automatically include subsidence insurance coverage in all property owner policies and inform mortgage lenders of the availability of the insurance.

    Agency Affected: Department of the Interior: Office of Surface Mining Reclamation and Enforcement

 

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