EPA-600/2-7B-003
January 1978
Environmental Protection Technology Series
ESTIMATING ENVIRONMENTAL DAMAGES
FROM SURFACE MINING OF COAL IN APPALACHIA:
A Case Stud
Industrial Environmental Research Laboratory
Office of Research and Development
U.S. Environmental Protection Agency
Cincinnati, Ohio 45268
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RESEARCH REPORTING SERIES
Research reports of the Office of Research and Development, U.S. Environmental
Protection Agency, have been grouped into nine series. These nine broad cate-
gories were established to facilitate further development and application of en-
vironmental technology. Elimination of traditional grouping was consciously
planned to foster technology transfer and a maximum interface in related fields.
The nine series are:
1. Environmental Health Effects Research
2. Environmental Protection Technology
3. Ecological Research
4. Environmental Monitoring
5. Socioeconomic Environmental Studies
6. Scientific and Technical Assessment Reports (STAR)
7. Interagency Energy-Environment Research and Development
8. "Special" Reports
9. Miscellaneous Reports
This report has been assigned to the ENVIRONMENTAL PROTECTION TECH-
NOLOGY series. This series describes research performed to develop and dem-
onstrate instrumentation, equipment, and methodology to repair or prevent en-
vironmental degradation from point and non-point sources of pollution. This work
provides the new or improved technology required for the control and treatment
of pollution sources to meet environmental quality standards.
This document is available to the public through the National Technical Informa-
tion Service, Springfield, Virginia 22161.
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EPA-600/2-78-003
January 1978
ESTIMATING ENVIRONMENTAL DAMAGES FROM SURFACE
MINING OF COAL IN APPALACHIA: A CASE STUDY
by
Alan Randall, Orlen Grunewald, Angelos Pagoulatos,
Richard Ausness, and Sue Johnson
The University of Kentucky
Lexington, Kentucky 40506
Contract No. 68-01-3586
Project Officer
John F. Martin
Extraction Technology Branch
Industrial Environmental Research Laboratory
Cincinnati, Ohio 45268
INDUSTRIAL ENVIRONMENTAL RESEARCH LABORATORY
OFFICE OF RESEARCH AND DEVELOPMENT
U.S. ENVIRONMENTAL PROTECTION AGENCY
CINCINNATI, OHIO 45268
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DISCLAIMER
This report has been reviewed by the Industrial Environmental Research
Laboratory, U.S. Environmental Protection Agency, and approved for publica-
tion. Approval does not signify that the contents necessarily reflect the
views and policies of the U.S. Environmental Protection Agency, nor does
mention of trade names or commercial products constitute endorsement or
recommendation for use.
11
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FOREWORD
When energy and material resources are extracted, processed, converted,
and used, the related pollutional impacts on our environment and even on
our health often require that new and increasingly more efficient pollution
control methods be used. The Industrial Environmental Research Laboratory-
Cincinnati (IERL-CI) assists in developing and demonstrating new and im-
proved methodologies that will meet these needs both efficiently and eco-
nomically.
This report presents the results of a case study to determine the
costs of environmental damage from strip mining in Appalachia. Its con-
clusions show that various regulatory frameworks, such as federal legisla-
tion or an economic incentive program, can reduce the value of environ-
mental damage. This information should prove useful to those interested
in formulating or enforcing surface mining laws, and to those individuals
charged with evaluating environmental concerns and conducting similar
economic case studies. For further information, contact the Extraction
Technology Branch of the Resource Extraction and Handling Division.
David G. Stephan
Director
Industrial Environmental Research Laboratory
Cincinnati
111
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ABSTRACT
The major objectives of this research were to develop a methodology
for valuation, in economic terms, of the environmental damage from surface
'mining; to apply that methodology in an empirical case study of the environ-
mental damage associated with surface mining of coal in Appalachia; and to
estimate, in economic terms, the value of the environmental damage from
surface mining of coal in the case study region, under four alternative
regulatory frameworks.
A coherent methodology for economic valuation of the environmental
damage from surface mining is presented in this report. This methodology
is entirely consistent with economic theory and the principles of benefit/
cost analysis, and incorporates market and non-market goods and private
and public goods into the analysis. It is consistent with a framework
appropriate to many problems in natural resource economics: an activity
(in this case, surface mining) changes resource quantity and/or quality
attributes, which in turn affects the net value of those resources in later
uses.
The empirical case study was conducted in the watershed of the North
Fork of the Kentucky River, a mountainous region which includes parts of
six counties, four of which have been heavily impacted by surface mining of
coal. The value of environmental damage from surface mining for coal in
the study region was estimated under four alternative regulatory regimes:
(1) the existing regulations, (2) a "no regulations" regime, (3) a regulatory
regime similar to that which would be established by a Federal surface
mining and reclamation.-bilj, and (4) an alternative regulatory framework,
generated by the research team, which relies more heavily on economic
incentives for damage prevention and reclamation. In this case study, legal,
economic and sociological analyses were integrated.
Estimates of five categories of damage were presented: aesthetic
damage; deterioration of water quality for domestic, commercial and indus-
trial uses; damages from increased flooding; damage to land and buildings;
and damage to fish, wildlife and recreation related activities.
Findings were that (1) surface mining in the study region generates
environmental damage of substantial economic magnitude; (2) existing
Kentucky regulations reduce the value of that damage; (3) a Federal bill,
similar to that introduced in the 1977 Congress would further reduce the
value of damage; (4) a regulatory alternative which places more emphasis
on economic incentives is worthy of further study; and (5) given current
reclamation technology some of the environmental damage from surface mining
in the mountainous study region is irreversible.
IV
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This report was submitted in fulfillment of Contract No. 68-01-3586
by the University of Kentucky under the sponsorship of the U.S. Environ-
mental Protection Agency. This report covers the period January 25, 1976,
to June 17, 1977.
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CONTENTS
Foreword iii
Abstract iv
Maps and Figures yjjj
Tables ix~~
Acknowledgments x
1. Introduction and Summary 1
2. The Study Region 5
Regional characteristics 5
The coal industry 16
References 25
3. Theory, Methodology and Research Techniques 28
Value and valuation 28
A general model for valuation of the costs
of environmental damage from surface mining .... 34
Valuation techniques 43
References 46
4. Estimates of the Value of Environmental Damage from
Surface Mining in the Study Region 49
Aesthetic damages 49
Degradation of the quality of water for domestic,
commercial and industrial uses 60
Flooding 67
Damage to land and buildings 68
Damage to fish, wildlife and recreation
related activities 70
The total economic costs of environmental damage . . 75
References 78
5. Non-Monetary Indicators of the Human and Social Impacts of
Environmental Damage from Surface Mining 81
6. The Economic Value of Damage Under Alternative
Regulatory Regimes 90
The economic costs of environmental damage 95
References 104
7. An Evaluation of the Methods Used for Estimating the
Economic Value of the Environmental Costs of Surface
Mining 105
References 110
Appendix
Legal analysis of surface mining regulation Ill
vn
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MAPS AND FIGURES
Number Page
Map 1 Topographic map 6
Map 2 Land use map 8
Map 3 Major roads and communities 11
Map 4 Major streams 21
Figure 1 Environmental damage from surface mining, as a function of
reclamation expenditure 100
Figure 2 Marginal costs and environmental benefits of reclamation . . 101
Vlll
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TABLES
1 Land Use: Percentage of Total Land in Each Use 1958 and 1967 ... 10
2 Population and Age Characteristics 1970 13
3 Years of School Completed by the Adult Population 14
4 Personal Income by Source, 1960 and 1970, Kentucky Counties .... 15
5 Rate of Unemployment by County, 1975 12
6 Civilian Employment by Industry, 1970 Kentucky Counties in
Percentages 17
7 Number of Mines, Coal Production, and Employment in Eastern
Kentucky, 1975 18
8 Coal Production in the North Fork Watershed, by Size of Firm .... 19
9 Coal Production in Metric Tons, Hazard Mining District Counties
1961-1975 20
10 Hypothesized Impacts of Mine Site and Mining Process Variables
on Resource Quality 40
11 Hypothesized Impacts of Resource Quality Changes on the Value of
Later Resource Uses 41
12 Bidding Game and Environmental Preference Results 57
13 Annual RWP For Aesthetic Environmental Improvement 59
14 RWP, As a Percentage of Regional Effective Buying Income 59
15 Annual TCP for Aesthetic Environmental Improvement, Game 1 59
16 Income Elasticity of Bid 60
17 Responses to "Who Should Bear the Cost of Surface Mine
Reclamation?" 61
18 Estimates of Water Quality Parameters 64
19 Predicted and Actual Recreation, Kentucky River Below Beattyville . 74
20 Environmental Awareness Response 83
21 Attitudes Toward the Mountain and Surface Mining Environment .... 85
22 Responses to Questions Concerning Surface Mining and Residental
Quality of Life 86
23 Environmental Perceptions and Preferences 87
24 Costs of Environmental Damage, Under Regulatory Alternative 1 ... 95
25 Costs of Environmental Damage Per Hectare Mined, Alternative 2 ... 96
26 Costs of Environmental Damage per Metric Ton of Coal Mined,
Alternative 2 97
27 Costs of Environmental Damage per Hectare Mined, Alternative 3 ... 98
28 Costs of Environmental Damage per Metric Ton of Coal Mined,
Alternative 3 99
IX
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ACKNOWLEDGMENTS
The investigators are grateful for the help and support offered by
the Project Officers, Michael Hay (until February 15, 1976), Elmore Grim
(from February 15, 1976 to November 30, 1976) and John F. Martin (from
December 1, 1976).
Donald L. Batch conducted studies of the impacts of surface mining
on aquatic life in streams, and the potential uses of reclaimed mine
sites to support fish and wildlife, as input to this research project.
Mr. J.D. Brackenrich, P.E., was of great assistance to the research team
in identifying the impacts (in physical terms) of alternative regulatory
regimes on the environmental damages from surface mining. The assistance
of these consultants was essential to this research.
The following research assistants worked above and beyond the call
of duty to facilitate various aspects of the research reported herein:
Frank Barna, James Baumgartner, Steven Dills, B.N. Hiremath, John Hoehn,
Jung-il Kang, Michael Kegley, Barbara Nartic, Webb Smathers and Ken Zeller.
The research team benefitted from access to information and helpful
comments provided by our fellow professionals in a wide range of organiza-
tions. A lengthy but, alas, incomplete list of those to whom we are
grateful includes William Adams and others at Eastern Kentucky University;
Robert Bohm and Bruce Tschantz, University of Tennessee; Ken Dyer, Willie
Curtis and their colleagues at the Southeastern Forest Experiment Station,
Berea, Ky.; Robert Spore and Robert Honea, Oak Ridge National Laboratory;
William Hays and his colleagues at the Hazard, Ky. office of the Kentucky
Department of Natural Resources and Environmental Protection; Billy J.
Barfield, Herman Collins, Edward Force, C.T. Haan, Mahlon Hammeter, Kenneth
Pigg, Karl Raitz and many others at the University of Kentucky; and the
helpful staffs of the Kentucky River Area Development District, Hazard;
the Kentucky Department of Natural Resource and Environmental Protection,
Frankfort; the U.S. Army Corps of Engineers, and the U.S. Geological Survey,
Louisville; the Kentucky Agricultural Extension Service, the Kentucky
Geological Survey, the U.S. Soil Conservation Service, and the Kentucky
American Water Company, Lexington. None of these bears any responsibility
for any inadequacies of this report.
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SECTION 1
INTRODUCTION AND SUMMARY
The research project reported herein had the following objectives:
1. To review the scientific literature pertaining to the environ-
mental damage associated with the various surface mining industries
in America.
2. To review the literature on valuation of the economic costs of
environmental damage.
3. To select a region in Appalachia in which to conduct an empirical
case study.
4. To develop a methodology for the estimation of the economic costs
of environmental damage from surface mining of coal in the case
study region.
5. To estimate the economic costs of environmental damage from
surface mining of coal in the study region, under the existing
regulatory framework, a "no regulations" framework, and two
alternative regulatory frameworks.
6. To evaluate the methodology developed under objective 4, and
applied in the case study, to determine its adequacy in this
use and the feasibility of its application to problems involving
surface mining for coal in other regions and surface mining for
other minerals throughout the United States.
The study region selected was the watershed of the North Fork of the
Kentucky River, which includes parts of Breathitt, Knott, Lee, Letcher,
Perry and Wolfe counties, in eastern Kentucky. Coal extraction, using
surface mining and deep mining methods, is the major basic industry in the
region, which has a relatively undiversified economy. Thus, economic depen-
dence on the coal industry and the government sector characterizes the
regional economy. It is a mountainous region, where surface mining for
coal is performed using the contour mining and mountaintop removal techniques.
Regional population declined rapidly throughout the 1950's and 1960's
as outmigration proceeded apace. However, population stabilized and, in
some counties, grew during the 1970's, when improved economic conditions in
the coalfields in a period of nationwide economic stagnation led to return
migration. By many socioeconomic criteria, the population remains of
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relatively low income, poorly educated, and poorly housed and provided with
medical services. The dependency ratio is relatively high.
Surface mining in the study region causes disturbance of soil and
vegetation, erosion, sedimentation, and increased run-off. These phenomena
lead to flooding, landslides, impairment of water quality, disturbance of
the land and water ecosystems, and aesthetic damage. Almost every facet
of daily life, economic and social, is affected by the impacts of surface
mining.
The methodology developed and applied in estimating the economic
value of the environmental costs of surface mining in the study region is
based upon a relatively simple concept. Surface mining affects resource
quality which, in turn, affects the values which people obtain from later
uses of those resources. In concept, surface mining may affect resource
quality favorably or unfavorably and may have beneficial or adverse affects
on the net present value of later uses. In this study, it was found that
most, but not all, of the environmental affects of surface mining were
adverse.
A variety of techniques are used to estimate the change in net
value of particular later uses as a result of mining-induced changes in
resource quality. No one technique is applicable for all of these tasks.
For most valuational purposes, well-known and accepted techniques are used.
In the case of aesthetic damages, the bidding game technique, which has been
used previously in a relatively few pioneering studies, is used with notable
success.
Thorough legal analysis of all four regulatory alternatives were
completed (Appendix A). Then, the impacts of these regulatory alternatives
were calculated, using accepted techniques of economic analysis consistent
with the methodological framework developed in Section 3. The regulatory
alternatives were examined to determine which particular mining and recla-
mation practices each would mandate or necessitate. The impact that the
practices mandated or necessitated by each regulatory alternative would
have on the physicial effects of mining on resource quality were determined
in consultation with a highly qualified expert on surface mine reclamation.
Then, economic analyses were performed, to calculate the estimated economic
costs of environmental damage in the study region under each regulatory
regime.
Finally, the methodology used in this case study was evaluated, and
its general applicability to the valuation of the environmental costs of
surface mining was considered.
Conclusions
Major findings and conclusions of the research are summarized below.
1. The research methodology and valuation techniques used in
this study are conceptually valid and appropriate for the valuation of
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the economic costs of surface mining.
2. Major inadequacies in economic information and data from the
physical and natural sciences were faced in this case study.
3. In spite of the data limitations encountered in this case study,
the case study region is probably better served with basic data than many
other surface mining regions. Therefore, increased knowledge of the social
costs of surface mining is dependent on increased research in the physical,
natural, and economic sciences.
4. It is desirable that sociological studies accompany economic
analysis. In this case study, it was found that (a) sociological studies
shed additional light, beyond that shed by purely economic analysis, on
some of the human dimensions of the environmental impacts of surface mining,
and (b) the sociological analyses tended to corroborate the results of
economic analysis.
5. Regulatory frameworks are superimposed upon an existing body of
private law and, in application, may perform somewhat differently than
was intended by those who passed the enabling legislation. Thus, economic
evaluation of regulatory alternatives should be based on careful legal
analyses.
6. The total economic costs of environmental damage from surface
mining in the study region under the existing regulatory framework were
estimated as follows:
a) Regional willingness to pay (R.W.P.) for relief from the environ-
mental impacts of surface mining was estimated, in 1976 dollars,
to be $3,556,000 annually, for the whole study region, given the
current pattern of mining. The present value of R.W.P. amounted
to $1,910 per hectare mined, or $0.40 per metric ton of coal
mined.
b) Total consumer payment (T.C.P.) was estimated at $58,995,000
annually for the whole region, $45,030 per hectare mined and
$9.14 per ton of coal mined.
The logical bases for the RWP and TCP estimates of the total environ-
mental costs of surface mining in the study region are explained in detail
in section 4. It is clear that RWP provides an underestimate of the lower
bound of these total costs. On the other hand, the TCP estimate is based
upon specific assumptions which ensure that it is an upper bound estimate
of the total costs.
It should be noted that data limitations encountered in this case
study ensured underestimation of some categories of environmental damage.
7. If there were no regulations pertaining to surface mining and
reclamation in the study region, the present value of the environmental
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costs of surface mining would be $101,825 (TCP) and $9,472 (RWP) per hectare
mined, and $20.64 (TCP) and $1.92 (RWP) per metric ton of coal mined.
The social benefits of reclamation occuring under existing regulations
are estimated at $11.50 (TCP) and $1.52 (RWP) per metric ton of coal mined.
For purposes of illustration, note that the costs to coal operators of
achieving reclamation under existing regulations are about $0.90 per metric
ton of coal mined.
8. The costs of environmental damage under regulatory alternative 3,
which is similar to recently proposed Federal surface mining and reclamation
legislation, are estimated to be $27,016 (TCP) and $1,076 (RWP) per hectare
mined, and $5.48 (TCP) and $0.22 (RWP) per metric ton of coal mined.
The social benefits of reclamation under regulatory alternative 3 ex-
ceed those under alternative 1 by $3.66 (TCP) and $0.18 (RWP) per ton of
coal mined. For the purposes of illustration, note that the costs to coal
operators of achieving reclamation under alternative 3 exceed those under
alternative 1 by about $1.90 per metric ton of coal mined.
9. A quite different form of regulation, based on flexible bond and
bond return provisions, is considered. This form of regulation has certain
inherent economic advantages. This alternative is explained and its econom-
ic impacts estimated (section 6).
10. This study generated strong evidence that some of the aesthetic
impacts of surface mining in the mountainous environment of the study region
are irreversible, given current reclamation technology. In other words, the
best reclamation practices available do not eliminate all of the aesthetic
damage caused by surface mining.
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SECTION 2
THE STUDY REGION
The watershed of the North Fork of the Kentucky River was selected as
the study region for the empirical case study performed as a part of the
project.
REGIONAL CHARACTERISTICS
General Physical Characteristics
The watershed of the North Fork of the Kentucky River is wholly
contained in the Commonwealth of Kentucky. It embraces portions of
Breathitt, Knott, Lee, Letcher, Perry, and Wolfe counties in the south-
eastern section of the state. The North Fork is the largest of the three
major branches that form the Kentucky River. It starts near the Virginia
border, and meets the Middlefork to form the main branch of the River
about 6.5 kilometers above Beattyville. A drainage area of 487,694 hec-
tares surrounds the 238 kilometer length of the North Fork, The eleva-
tion of the River varies from a maximum height of 340 meters to 190 meters
at the lowest point. The average slope of the river is 0.6 meters per
kilometer with a range from 0 to 4 meters per kilometer [21].
The North Fork lies entirely within the Mountains and Eastern Coal
Field Region. Stretching along the Western edge of the Appalachian Plateau,
this area is referred to as the Cumberland Plateau and is subdivided into
the Plateau Area and the Mountain and Creek Bottom Area. The Plateau forms
the small Northern portion of the watershed and is less rugged than the
Mountain and Creek Bottom area. Sandstone, siltstone, shale and coal
underlie the Plateau area with occasional limestone outcrops in some of the
valleys. Coal mining is not a significant activity in the Plateau. Most of
the watershed is in the rugged Mountain and Creek Bottom area, which is a
true mountain area with high and sharp-crested peaks, narrow valleys and
very little flat land except in the floodplains. The ridges generally
run in a Northeast-Southwest direction and become more rugged as one moves
southwestward. Abundant coal reserves exist in this more mountainous
area [21].
Elevations of ridgetops in the Mountain and Creek Bottom Area typically
range from 430 meters to 490 meters above sea level. Comparative elevations
in the Plateau Area range from 275 meters to 335 meters. The saw-toothed
crests of the extremely rugged southern portions of the watershed reach as
high as 990 meters. The generally steep slopes vary from 20 to 60 degrees.
Stream slopes of the North Fork vary from 2.5 meters per kilometer in the
headwaters to little more than zero where it meets the Middle Fork [21].
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Map1
TOPOGRAPHIC MAP
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The Breathitt Formation of Middle Pennsylvania!! Age is the dominant
geologic formation. It varies in thickness from about 300 meters in the
northeast to over 600 meters in the southwest. Most of the coal seams are
less than 120 centimeters thick though some outcrops of 300 centimeters occur
locally. Upland soils, reflecting their parent rock formation and topography,
are primarily residual soils composed of weathered limestone, shale, siltstone
or sandstone with some loess and wind-blown silt in the surface layers.
Soils are generally thin on hill and mountain sides whereas thick, younger
alluvial soils are found in the narrow valleys along river and stream
bottoms [21].
Climate and Hydrology
The climate of the region is relatively mild; average yearly tempera-
ture is 14° C with average summer highs of 23° C and average winter lows of
2° C. Temperature extremes and heavy snowfall are generally infrequent and
of short duration. Prevailing winds are from the west-southwest. Preci-
pitation in the North Fork Area averages about 117 centimeters a year.
It is generally evenly distributed throughout the year. Flooding, mostly
in the smaller mountain streams, is most likely to occur in the spring.
The maximum rainfall which can be expected in a 48 hour period once in 25
years is about 14.3 centimeters; once in 100 years a 17.6 centimeter fall
can be expected [22]. While these maximum rainfalls are similar to the
rest of Kentucky, the topography of the North Fork Area results in a rel-
atively high frequency of severe flash floods of rather short duration,.
especially in the narrow valleys surrounding small streams and tributaries[21],
There are no natural lakes in the North Fork area. To help meet
water supply needs and provide flood protection, two lakes have been construc-
ted in Letcher and Knott counties. Carr Fork Lake in Knott County is a Feder-
ally-funded installation with a 287 hectare surface area and a 799 hectare
meter capacity. The smaller state-funded Fishpond Lake in Letcher County
has a 12.55 hectare surface area and a 127 hectare meter capacity [21].
Potable groundwater can be found in the region from 60 meters to more
than 600 meters below the surface. Groundwater flow is among joint systems,
fractures and bedding planes of the sandstone, siltstone, shale and coal
strata. Moderately-soft groundwater from valley wells of 60 meters or less
usually provides enough water for household consumption in the area. The
numerous small springs in the area usually dry up in the summer [21].
Vegetation, Wildlife and Land Use
Originally, the North Fork Area was covered by mostly deciduous
trees with scattered patches of conifers. Valleys were cleared by early
settlers and the virgin forest was selectively logged for timber. The
non-commercially valuable trees and successional growth contributed to the
current diverse, degraded and unmanaged nature of much of the forests. Red
maple, American birch, sweet maple and flowering dogwood are common species.
Rhododendron and mountain laurel shrubs are also commonly found. Bottom
land vegetation is generally riparian,e.g. box elder, black willow, and
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OO
Map 2
LAND USE MAP
0
10
MUM
Graph Scale in Miles
Agriculture
Mining
Silviculture
Urban Center
Watershed Boundary
20
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sycamore. Wildlife resources in the area include deer, raccoons, squirrels,
grouse and quail. Common species of fish include smallmouth bass, rockbass,
muskellunge and suckers [2,5,29].
Most land in the study region remains in forests or unmanaged wood-
lots. In 1970, the percentage of land classified as forest-woodland ranged
from sixty-four percent in Wolfe County to eighty-eight percent in Breathitt
County [table 1]. Federal land use in Lee and Wolfe counties is primarily
National Forest, though there are no National Forests within the watershed
Study area [17]. Pasture and crops use accounts for twenty-three percent
of the land in Wolfe county and sixteen percent in Lee county. The average
figure for the North Fork area is ten percent. Use of the land for growing
crops has generally been declining in the North Fork area; land used for pas-
ture has increased. The 1969 Census of Agriculture put the average value of
agricultural production at 100 dollars per hectare or less and the average
value of farm land and buildings at 500 dollars/hectare [30]. Urban use
which now accounts for two percent of the land in the area, is generally on
the increase, especially in Knott and Wolfe Counties. Land surrounding
Carr Fork Reservoir, recently completed, will provide the major developed
outdoor recreation site in the watershed [23]. Of the 29,000 hectares
devoted to public and private recreation in the study area, less than two
percent has been developed and only two percent is currently available for
water related activities.
Mining currently uses 2.6 percent of the land in the region. Perry
and Letcher Counties are heavily surface mined: almost 6 percent of land
in Perry and more than 3 percent in Letcher County has been mined. In Lee
and Wolfe counties, mining uses less than 1 percent of the total land.
Transportation
The topography of the North Fork area limits the construction of
transportation arteries. Kentucky Route 15 is the major road in the area
and it is a two-lane highway linking the northern and southern portions.
Other internal roads are generally narrow and winding. Linking the North
Fork area to the urban areas of Kentucky is the Mountain Parkway, which
collects traffic from Route 15. The Daniel Boone Parkway provides trans-
portation from the center of the area to the western part of the state.
Railroad lines run along the North Fork of the Kentucky River primarily to
haul coal. Hazard and Whitesburg have airports but have no commercial
traffic [23].
Socioeconomic Data
The population of the North Fork area is, for the most part, rural.
Houses are scattered throughout the countryside, or clustered in small
settlements along the valleys. Hazard and Whitesburg, small cities, are
the largest urban places in the region [19]. Of the cities and towns in
the region, only Hazard shows any sizeable population growth over the 1960-
1970 decade. In the same period Seco lost eighty-three percent of its
population, Whitesburg lost thirty-six percent and Fleming lost twenty-nine
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Table 1
LAND USE: PERCENTAGE OF TOTAL LAND IN EACH USE 1958 AND 1967
County*
Breathitt
Knott
Lee
Letcher
Perry
Wolfe
TOTAL
Year
1958
1967
1958
1.967
1958
1967
1958
1967
1958
1967
1958
1967
1958
1967
Cropland
11.4
4.4
3.5
3.1
7.2
4.5
2.0
2.5
2.3
2.9
7.5
8.0
5.9
4.0
Pasture-
Land
2.5
2.6
0.7
3.3
4.5
11.0
0.8
6.3
1.5
1.6
6.8
14.7
2.4
5.5
Forest
Woodland
81.7
88.4
81.6
86.7
74.9
76.1
89.3
86.2
78.6
85.3
56.7
63.8
78.9
83.0
Federal
(Non-Crop)
0.0
0.0
0.0
0.0
5.0
5.1
0.0
0.0
0.0
0.0
9.7
9.8
1.6
1.7
Urban-
Built-Up
1.2
1.5
1.5
2.4
1.8
1.9
1.9
2.0
2.0
2.1
2.0
2.5
1.7
2.0
Water
0.5
0.6
0.0
0.0
0.0
0.2
0.4
0.4
0.6
0.6
0.0
0.0
0.3
0.3
Other
2.7
2.5
12.7
4.5
6.6
1.2
5.6
2.6
15.0
7.5
17.3
1.2
9.2
3.5
Figures are computed from base data total acres.
Source: Kentucky Soil and Water Conservation Needs Inventory, 1970.
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Map 3
MAJOR ROADS AND COMMUNITIES
4 0
8
HHH
Graph Scale in Miles
Major Roads
Watershed Boundary
o Major Communities
16
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percent (32).
Compared to the national population, the study area population tends to
be concentrated in the young and elderly age groups. Young and middle-aged
adult groups are under represented. Households in the study area have
relatively high dependency ratios and the "productive" age group (18-64)
forms a smaller proportion of the population than is characteristic of either
Kentucky or the U.S. (table 2). The population aged over the 1960-70 decade,
showing both a decline and fertility arid outmigration of the young, though
-his latter trend may now be in the process of revising.
The typical level of educational attainment among the residents is low,
about eight years, with a sizeable proportion of young people not completing
high school (table 3). Over seventy-five percent of the adult population
did not complete high school. Median family income is far below the U.S.
median and some $3-4,000 below the Kentucky median (table 4). Letcher
and Perry counties are the most prosperous counties and Wolfe county is
the poorest in terms of the median family income. Approximately one-half
to one-third of a typical poor family's income comes from transfer payments
in all but Perry county. About half the area's families fall below the
poverty line compared with a U.S. average of about ten percent. (26).
Housing generally reflects the poverty that characterizes the area. A
majority of houses are at least twenty years old, and often older than
thirty. Proportionally, there are more crowded households than is typical
in the U.S. or Kentucky. Over ten percent of the housing units in Perry and
Wolfe counties are vacant and the other counties also show a high proportion
vacant, in part due to the high outmigration from the region. About half
the houses lack at least one standard plumbing facility. The median value
of houses in the area is $5000 as contrasted with $12,600 for Kentucky and
$17,100 for the U.S., again reflecting the poverty of the residents (26).
The range of services and amenities provided in the North Fork region
is rather meager. Elementary and secondary education tends to be poorly
financed. The area is served by three junior colleses and one small, four-
year institution (23). Health facilities are also inadequate. There is a
severe shortage of doctors and other medical personnel (26). One doctor
serves an average of over 2,000 people, compared to a national average of one
octor per thousand persons. There is a total of 276 hospital beds in the
region. Fewer than twenty dentists work in the North Fork area. All the
counties maintain a health department and, except in Wolfe County, services
are also provided by a regional Home Health Agency. An anbulance service
in Hazard serves the area (23).
Water and sewer facilities are generally poor throughout the area
Approximately seventy-five percent of the residents have no public water
or sewer system serving their homes. This can be compared to the seventy-
five percent of the U.S. population who do have such facilities (24).
County seats, however, are served by city water and sewer systems. Except
for urban areas, little exists in the way of garbage collection. Dumping
in unauthorized sites is quite common in the area (23).
12
-------
Table 2
POPULATION AND AGE CHARACTERISTICS 1970
County
United States (000)
Kentucky (000)
Breathitt
Knott
Lee
Letcher
Perry
Wolfe
Sources :
U.S. Bureau of the
Kentucky, PC (1) -
U.S. Bureau of the
Total
Popu-
lation
203,166
3,218
14,221
14,698
6,587
23,1-65
26,259
5,669
Census, Census
19B.
Census, Census
Under 6
%
10.3
10.3
11.1
11.4
9.9
10.5
12.0
8.9
of Population
of Population
Age
6-17
%
24.1
24.3
30.0
29.1
27.1
27.3
26.9
29.4
, 1960,
, 1970,
18-64
%
55.7
54.9
48.8
49.8
48.8
51.6
49.1
48.3
General
General
65 § Over
%
9.9
10.4
10.1
9.7
14.1
10.6
9.9
13.5
Median Age of
Population
28.1
27.5
23.6
24.0
29.4
27.4
25.3
27.9
Population Characteristics,
Population Characteristics,
Kentucky, PC (1) - B19.
-------
Table 3
YEARS OF SCHOOL COMPLETED BY THE ADULT POPULATION
County
Breathitt
Knott
Lee
Letcher
Perry
Wolfe
Total
Kentucky
United
States
Less Than 8
48.0
. 44.8
44.6
40.8
39.6
48.4
23.6
15.5
Less Than 12
78.8
81.2
83.4
80.7
75.8
83.4
61.5
47.6
12 Years
10.2
9.6
9.5
12.4
14.5
8.8
24.1
31.1
Over 12
11.0
9.2
7.1
6.9
9.7
7.8
14.4
21.3
Sources:
U.S, Bureau of the Census, Census of Population, 1960, General Population
Characteristics, Kentucky, PC (1) - 19B.
U.S. Bureau of the Census, Census of Population, 1970, General Population
Characteristics, Kentucky, PC (1) - B19.
14
-------
Table 4
PERSONAL INCOME BY SOURCE, 1960 AND 1970, KENTUCKY COUNTIES
es
WAGES
1970
1960
PROPRIETORS
FARM
1970
1960
NON-FARM
1970
1960
PROPERTY
1970
1960
TRANSFER
PAYMENTS
1970
1960
TOTAL PERSONAL
INCOME -
1970
1960
GOVERNMENT
INITIATED
1970
MEDIAN
FAMILY INCOME
1970
1960
Source : Ralph
United Stat
($ Billions
541.4
270.8
15.5
12.0
51.0
36.2
113.0
52.6
79.6
28.5
800.5
400.1
9,590
5,660
J . Ramsey
Kentucky
($ Millions
6,633.3
3,139.0
425.6
298.0
729.1
393.0
1,121.0
514.0
1,136.0
438.0
9,719.6
4,702.0
1,428.2
7,441
4,051
and Paul
Breathitt
9.4
5.9
1.0
0.8
1.0
0.5
0.9
0.3
6.5
2.4
18.3
9.9
3.5
3,176 3
1,432 1
D. Warner
4-1
4->
o
c
4>
9.8 5.3
5.9 3.5
0.0 0.3
0.5 0.3
1.6 1.2
0.3 0.3
1.8 1.1
0.3 0.3
6.4 3.3
2.4 1.1
19.2 10.8
8.9 5.5
4.6 1.8
,279 3,390 4
,876 1,847 2
, Kentucky County
Letcher
42.2
28.9
0.1
0.0
4.3
1.6
3.9
1.2
11.2
4.8
59.7
36.6
5.6
,407
,615
Data
a.
38.6
30.4
0.0
0.2
4.9
2.8
3.4
2.0
12.5
5.7
57.4
41.1
8.1
4,607
2,689
Book,
i— i
o
3.2
1.3
1.2
0.9
0.6
0.2
0.3
0.1
2.6
0.9
7.8
1.3
1.5
2,694
1,455
Univ.
of Ky. Cooperative Extension Service and Department of Sociology,
Lexington, 1974.
15
-------
, There are library facilities in every North Fork county with the
exception of Knott County. Perry and Letcher counties have quite modern
libraries. Each county has a weekly newspaper as well as access to region-
al daily newspapers. Radio and television are available, the latter
often through cable service. There are numerous churches. Each county has
at least one small bank and the more populous counties have two. Motel and
motel rooms and private recreational facilities are quite limited. (18)
Labor Force Composition and Employment
The North Fork area has historically suffered from chronic unemploy-
ment and underemployment in spite of the recent upsurge in the coal industry,
unemployment rates remain high (table 5). The economy of the area is rela-
tively undiversified and heavily dependent on the coal industry. Mining
alone accounts for forty percent of all employment in Letcher county (table
6). The proportion of the labor force engaged in agricultural pursuits has
been steadily dropping. Trade and government sources of employment are
growing in importance (table 6). There is very little manufacturing
activity.
Women account for less than one-third of the labor force in all the
study counties.* Three-quarters of the women in Breathitt, Letcher and
Wolfe counties are not in the labor force.
Table 5
RATE OF UNEMPLOYMENT BY BOUNTY, 1975
Rate of
County Unemployment (%)
KENTUCKY 7.3
Breathitt 8.9
Knott 9.0
Lee 13.3
Perry 7.5
Wolfe 10.9
Source: Kentucky Department for Human Resources, Kentucky Labor Force
Estimates, Annual Averages, Frankfort, Ky. 1975.
THE COAL INDUSTRY
Eastern Kentucky produced 80,047,850 metric tons of coal and employed
36,759 men in coal mining in 1975 (table 7). There were 6,776 men employed
in coal mining in the study region, producing 22 percent of eastern Ken-
tucky's coal output. In the North Fork region, 95 firms engaged in surface
mining in 1975 (table 8). Approximately half of these firms produced only
Calculated from tables in Industrial Sources, Kentucky Department
of Commerce, for each county.
16
-------
Table 6
CIVILIAN EMPLOYMENT BY INDUSTRY, 1970 KENTUCKY COUNTIES
IN PERCENTAGES
Agriculture
Mining
Construction
Manufacturing
Transportation
Communication
Utilities
Trade
Personal Service
Health Service
Education
Public Admini-
stration
All Other
Total
t — N
0
0
o
0)
•p
etJ
0)
•p
•H
c
3
3.
0.
6.
25.
6.
20.
4.
5.
8.
5.
8.
entucky
reathitt
4-1
P
O
c
0)
etcher
X CO ^ i—3 i-J
7
8
0
9
8
1
6
5
0
5
0
76,554
7
2
7
27
7
20
5
5
8
5
7
.3
.8
.6
.6
.1
.2
.3
.3
.7
.1
.1
1,008,758
6
5
10
7
4
15
3
0
26
9
6
.4
.9
.6
.3
.3
.7
.7
.7
.5
.3
.8
2,944
0.2
18.4
13.6
5.0
6.9
13.9
3.2
2.8
20.0
7.0
7.4
2,823
0.4
15.4
12.6
11.9
6.5
18.2
6.7
2.3
10.8
6.1
5.3
1,368
0.1
41.4
5.1
4.6
4.1
5.8
9.0
4.5
5.8
5,095
X
f-i
a.
2.7
19.9
6.2
3.8
8.4
21.9
4.3
4.3
9.4
8.7
8.0
5,805
r-l
O
19.2
3.1
6.1
17.6
3.8
9.7
3.0
2.4
16.3
9.8
9.1
1,056
Sources:
U.S. Bureau of the Census, Census of Population, 1970 General Social-
Economic Characteristics, Kentucky. PC (1)-19C.
17
-------
Table 7
NUMBER OF MINES, COAL PRODUCTION, AND EMPLOYMENT IN EASTERN KENTUCKY, 1975
OO
Number of Mines
Counties
Eastern Kentucky Total
Six Hazard District
Counties*
Breathitt
Knott*
Lee
Letcher
Perry*
Wolfe
Total
3356
.720
73
124
24
303
182
v 14
* ."• ft
Underground
1120
370
1
76
4
222
67
Surface
1636
350
72
48
20
81
115
14
Production (metric tons)
Total
80,047,850
17,881,441
5,605,827
1,751,389
198,610
4,418,116
5,742,092
165,407
Underground
38,953,770
5,794,209
50,503
818,538
8,890
3,094,997
1,821,281
Surface
41,094,080
12,087,232
5,555,324
932,851
189,720
1,323,119
3,920,811
165,407
Men
Total
36,759
6,776
708
874
117
2,740
2,266
71
Employed
Underground
20,857
3,713
17
569
17
2,249
861
Surface
15,902
3,063
691
305
100
491
1,405
71
Source: Annual Report, Kentucky Department of Mines and Minerals, 1975. *Data For Perry and Knott Counties pertain to the sections of these counties
which are in the Hazard District as defined by the Department. The Hazard District includes all of the North Fork Area.
-------
three percent of the output while the largest six firms produced 59 percent.
Surface mining has steadily been increasing in importance and in 1975
accounted for 68 percent of the regional coal production [table 9]. Surface
mining output surpassed underground mining production in every study area
county except Letcher.
Surface mining occurs throughout the region but is concentrated in
several intensively mined areas. These include the head waters of Quick-
sand Creek in Breathitt county; the watersheds of Troublesome. Lost, Buckhorn,
and Grapevine Creeks centered near the boundary between Breatnitt and Perry
counties; the North Fork itself near Hazard; Leatherwood Creek in Perry
county; the stream valleys of Lotts Creek, Balls Fork, Troublesome Creek
and Carr Fork close to the county bondary between Perry and Knott counties;
and substantial portions of Line Fork, Rockhouse Creek, and the North Fork
in Letcher County.
Table 8
COAL PRODUCTION IN THE NORTH FORK WATERSHED, BY SIZE OF FIRM
Coal Production Class Percent of total
(Metric Tons) No. of firms Production
Below 22,678
22,679 to 45,358
45,359 to 90,717
90,718 to 226,795
226,796 to 453,591
453,592 to 907,184
907,185 and above
47
13
11
12
6
5
1
3.3
3.5
5.8
15.8
13.0
25.6
33.0
95
Source: Annual Report, Department of Mines and Minerals.
Environmental Impacts of Surface Mining
Prior to the enactment of surface mine reclamation legislation in
Kentucky in 1966, surface mining in the region was conducted under minimal
legal restraint (see Section 6 and Appendix A). The conventional method
of contour mining was commonly used. This method involves removal of
the stratum above the outcrop of coal until the coal is exposed. In the
crudest form of contour mining, the overburden is simply pushed down the
outslope. After the coal is removed, a bench is left. The width of the
bench depends on economic and topographical factors. The slope of the hill
determines the rate at which the overburden becomes deeper as the mining
operation moves toward the center of the hill. The cost of mining and the
price of coal determines the maximum depth of overburden which can profitably
be removed. When this maximum depth of overburden has been removed, a
vertical highwall remains exposed. Some additional coal may then be
19
-------
Table 9
COAL PRODUCTION IN METRIC TONS, HAZARD MINING DISTRICT COUNTIES
1961-1975
Year
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
Source:
Type of
Mine
Surface 5
Underground
Surface 3
Underground
Surface 4
Underground
Surface 4
Underground
Surface 2
Underground
Surface 1
Underground
Surface 1
Underground
Surface
Underground
Surface
Underground
Surface
Underground
Surface
Underground
Surface
Underground
Surface
Underground
Surface
Underground
Surface
Underground
Total: 27
: Annual Report
Breathitt
,555,324
50,503
,727,784
51,066
,298,738
,146,222
726
,355,649
23,614
,617,343
21,355
,358,963
14,923
426,445
21,319
879,969
89,475
519,913
72,303
331,765
71,115
18,144
96,013
62,653
166,869
86,183
507,775
415,971
494,570
,482,692
, Kentucky
Knott
932,851
818,538
1,113,287
1,179,769
786,751
835,503
567,323
864,875
1,444,064
951,630
1,297,258
1,496,962
982,070
1,258,430
495,854
1,174,104
597,174
1,340,542
903,859
1,747,453
663,565
1,201,081
350,109
1,363,153
797,920
1,442,058
620,845
1,244,283
364,901
1,295,160
30,151,372
Department
Lee
189,720
8,890
204,215
18,416
16,012
15,127
9,783
18,523
113
24,526
91
17,627
54
24,240
454
18,434
21,228
431,313
104,767
75,276
45,777
40,311
1,284,897
of Mines
Letcher
1,323,119
3,094,997
1,724,208
3,239,519
1,432,236
2,819,320
2,141,802
2,617,107
2,436,133
3,111,792
2,851,647
3,853,022
1,462,492
4,132,246
882,602
4,590,627
909,661
5,061,799
766,988
5,222,502
840,976
5,010,223
584,532
4,933,067
472,142
4,396,723
496,575
3,948,009
276,878
3,797,899
78,425,843
and Minerals
Perry
3,920,811
1,821,281
3,092,899
1,939,775
2,835,928
2,275,352
2,238,428
2,239,478
3,880,014
2,611,400
4,427,920
2,773,541
3,051,765
2,447,676
1,885,705
2,096,065
1,934,585
2,424,792
1,638,094
2,651,294
1,567,370
2,101,053
1,588,286
1,905,134
1,136,865
2,184,748
739,635
2,470,348
508,171
2,612,770
69,001,183
, 1961-75.
Wolfe
165,407
12,648
14,572
9,337
91
635
4,890
7,979
8,849
272
10,363
837
11,394
248,274
Total
12,087,232
5,794,209
9,875,041
6,428,545
9,353,653
5,966,187
9,093,775
5,737,313
10,140,215
6,716,959
10,203,618
8,169,406
6,855,381
7,870,902
3,690,660
7,906,446
4,321,843
8,935,677
3,828,854
9,714,780
3,403,676
8,819,675
2,541,071
8,410,113
2,469,580
8,275,523
1,943,510
8,226,555
1,566,758
8,247,104
206,594,261
*See Footnote, Table 7.
20
-------
Map 4
MAJOR STREAMS
4 0
Graph Scale in Miles
Watershed Boundary
16
-------
extracted by the use of augers inserted into the exposed vertical face of
the coal seam. Conventional contour mining thus leaves substantial coal,
under relatively deep overburden, unexploited. Augering allows only about
a 35 percent recovery rate of reserves within reach of the augers. When
the mining operation was completed, it was common practice to simply abandon
the site.
Unregulated contour mining in mountainous terrain caused very substan-
tial off-site environmental damage during and after mining, in addition to
despoiling the mining site and leaving it in a condition which discouraged
productive post-mining land uses. Types of off-site environmental damage
include:
-landslides, resulting from failure to properly stabilize overburden
deposits;
-increased run-off which results from soil disturbance and removal of
the vegetative cover and causes increased flooding, soil erosion,
siltation of streams and water impoundments, and sediment load in
streams
-deterioration in water quality which results when soil disturbance and
exposure of coal and toxic materials in layers near the seam increase
the sediment load and the content of certain chemicals in run-off
waters[3].
On-site and off-site damage resulting from surface mining may include aesthe-
tic damage, disturbance to ecosystems and noise pollution from explosions and
operation of mining equipment [3].
The pattern of mining in the mountainous terrain is much influenced
by the economic conditions prevailing in the market for coal. Mining sites
may be temporarily abandoned when prospects for profitable mining become
less favorable. During the period of abandonment, the mine site is left in
a disturbed state which results in continued off-site damages. Mine sites
may be re-opened some years after reclamation, in times of highly favorable
coal market conditions, in order to either mine further toward the center
of the hill or mine a deeper seam. Since stabilization and re-vegetation
of a mine site after regrading takes many years, the interruption of the pro-
cess increases off-site damage.
There have been several research projects on the environmental impacts
of surface mining conducted in the study region. The Southeastern Forest
Experiment Station has engaged in research in the Breathitt county area
for many years. Numerous studies have been conducted by this group in
the areas of geology, hydrology, forestry, soils, range and wildlife and
engineering. Curtis has done numerous studies on the hydrologic effects
of surface mining [9,10,11,12,13]. His studies of six small watersheds
indicate that surface mining has a pronounced impact on suspended sediment
levels, peak discharge levels, and chemical pollutants; especially sulfate,
calcium, and magnesium in the streams. These studies generally indicate
that acid mine drainage is not a major problem in the North Fork Watershed.
A water quality study of 415 locations in the North Fork supported the con-
tention that acid mine drainage is not a major problem [14]. Branson and
Batch found that suspended sediment in the same Breathitt county area
22
-------
reduced fish populations in the streams [4]. Weigle found that slides are
a common occurence from contour mining in Eastern Kentucky [34]. In another
study, Weigle found that erosion from abandoned coal haul roads in Eastern
Kentucky represents an important environmental impact [33].
A major study which has documented the impact that surface mining
has on water quality and land disturbance has been completed in the Quicksand
Watershed in Breathitt county [2]. In that study water quality samples
were taken from several sites within the watershed during a one year period.
In general, surface mined areas were shown to have higher levels of various
chemical constituents. Another major purpose of the study was to identify
and map land use, including land used for surface mining, for the entire
Quicksand Watershed.
Before the building of the Carr Fork Dam in the southeastern portion
of the watershed, the U.S. Army Corps of Engineers conducted a study of sur-
face mining in the Carr Fork Watershed [28]. The study focused on the
potential effects that surface mining would have on the proposed lake
project. In the study, various land disturbance analyses and water quality
analyses were conducted. In general, it was found that acid drainage was
was not a serious water problem but sedimentation affected every stream •
in the basin.
One of the most complete studies of the environmental impacts of
surface mining in Eastern Kentucky was conducted by the U.S. Geological
Survey on the Beaver Creek Basin [7]. Findings indicated that strip mining
of coal in the Beaver Creek basin has significantly increased the acidity
and mineralization of surface and ground water and increased the sediment
content of streams. These factors in turn reduced or eliminated aquatic
life in streams.
A major study of the techniques of surface mining in Eastern Kentucky
[1] concluded in 1975 that the environmentally damaging impacts of contour
mining can be reduced through the use of various modified mining techniques
and reclamation practices. Unfortunately, the study noted, these techniques
were not being used as frequently as desirable. Nevertheless, the enactment
of more stringent surface mining and reclamation regulations and improved
enforcement of regulations have resulted in a progressive improvement in the
environmental performance of the surface mining industry in Kentucky since
1966. Abandonment of unreclaimed mine sites is no longer permissible and
the deposition of overburden on the outslope is restricted. Sedimentation
structures to control run-off from surface mines are required.
Two relatively new mining methods, head-of-hollow fill and mountain-
top removal, are becoming more common in the region [2, 15]. Both methods
were designed to improve reclamation and resource extraction efficiency.
Using the head-of-hollow method an operator would place the spoil in a hollow
which has been scalped of vegetative cover and provided an internal drain.
The surface of the head-of-hollow is graded and revegetated. With mountain-
top removal the first cut is made along the contour line as in contour
mining. The spoil from the first cut is placed on the slope or in a hollow
23
-------
fill and in subsequent cuts spoil is placed on the previously mined bench.
These two methods alter the area by providing relatively flat land in a
generally mountainous area.
The Area of Land Disturbed by Surface Mining in the Study Region
During surface mining, the total area of land disturbed is substantially
more than the area mined. The additional land is used for spoil deposition,
access and haul roads, etc. Howard [16] has calculated that in Eastern
Kentucky, 4932 metric tons of coal are produced for each hectare of land
disturbed.
For the purposes of this study, it was necessary to estimate for the
study region (l)the area of land currently in a disturbed state due to
mining and reclamation in progress, (2) the area which has been previously
mined and is now reclaimed, and (3) the area of mined and abandoned lands
called "orphan lands".
The area of land currently disturbed was calculated under the assump-
tion that land remains disturbed for approximately three years after the
initiation of mining. Production records for the six counties for 1973
through 1975 were obtained [20]. The proportion of total production from
surface mines in the six counties which falls inside the North Fork watershed
boundaries was estimated using land use maps. Total study area production
was then divided by 4932 to estimate the number of acres currently dis-
turbed in the study area. It was found that 6,000 hectares of land was
in a disturbed state due to surface mining, at the end of 1975. Of that area,
mining had been initiated on 2,142 hectares during 1975.
Estimates of the area of reclaimed land and orphan land were derived
from a study [2] which used high and medium altitude aerial photography.
For these purposes, the estimates from aerial photographs are preferred to
estimates derived from production data, because the former method eliminates
the possibility of double counting areas which have been mined more than
once while the latter method does not. It was estimated that, in the study
area, there were 7,393 hectares of mined-and-reclaimed land and 671 hectares
of orphan mine lands in 1975.
24
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REFERENCES
1. Appalachian Regional Commission. Design of Surface Mining Systems
in Eastern Kentucky, Vols. I, III, Report ARC 7-66-T1, Washington,
D.C., 1975.
2. Appalachian Regional Commission. Surface Mine Pollution Abatement
and Land Use Impact Investigation. Vols. I-V, Report ARC 71-66-T2,
Washington, D. C., 1975.
3. Bohm, R.A., et. al. A Progress Report of NSF/RANN Funded Research
Related to Environmental and Economic Aspects of Coal Production.
Appalachian Resources Project, University of Tennessee, Knoxville,
Tenn., 1974.
4. Branson, B. A., and D. L. Batch. Effects of Strip Mining on Small-Stream
Fishes in East-Central Kentucky. Proc. Biol. Soc., 84(59) : 507-518,
1972.
5. Caudill, H. Night Comes to the Cumberlands. Little, Brown and Co.,
Boston, Mass., 1962.
6. Coal Age Staff. Flexibility Enhances Results in Two-Seam Surface Mining
Coal Age, 71(1): 60-63, 1966.
7. Collier, C.R., R.J. Pickering, and J.J. Musser, editors. Influences
of Strip Mining on the Hydrologic Environment of Parts of Beaver Creek
Basin, Kentucky, 1955-66. Geologic Survey Paper 427-C. U.S. Department
of Interior, Washington, D.C., 1970.
8. Cubbison, E., and L.C. Dunlop. Stripping the Land for Coal - Only the
Beginning. Publication Distributed by Coalition Against Strip Mining
and Friends of the Earth, 1972.
9. Curtis, W.R. Chemical Changes in Streamflow Following Surface Mining
in Eastern Kentucky. Proc. 4th Symp. Coal Mine Drain. Res.,
Mellon Institute, Pittsburg, Pa., 1972. pp. 19-31.
10. Curtis, W.R. Effects of Strip Mining on the Hydrology of Small Mountain
Watersheds in Appalachia. R. J. Hutnik and G. Davis (eds.) Ecology
and Reclamation of Devastated Land, Vol. 1. Gordon and Breach, New York,
N.Y., 1973. pp. 145-157.
25
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11. Curtis, W.R. Sediment Yield From Strip-Mined Watersheds in Eastern
Kentucky. Reprinted from: Second Research and Applied Technology
Symposium on Mined-Land Reclamation. Coal and the Environment Techs.
Conf. Oct. 22-24, 1974. National Coal Association. Louisville, Ky.,
pp. 88-100.
12. Curtis, W.R. Strip Mining, Erosion and Sedimentation. Trans. Am. Soc.
Agric. Eng., 14 (3): 434-436, 1971.
13. Curtis, W.R. Strip-Mining Increases Flood Potential of Mountain Water-
sheds. Proc. Natl. Symp. on Watersheds in Transition, June 19-22,
Amer. Water Resource Assoc. and Colo. State Univ., Ft. Collins, Colo.,
1972. pp. 357-360.
14. Dyer, K. Downstream Effects of Coal Mining on Water Quality in the
North Fork of the Kentucky River. U.S. Geological Survey, Louisville,
Ky., 1977.
15. Grim, E.G., and R. D. Hill. Environmental Protection in Surface Mining
of Coal. EPA-670/2-74-093, U.S. Environmental Protection Agency,
Cincinnati, Ohio, 1974.
16. Howard, H.A. A Measurement of the External Diseconomies Associated with
Bituminous Coal Surface Mining, Eastern Kentucky, 1962-67. Nat. Res.
J., 11(1): 76-101. 1971.
17. Kentucky Conservation Needs Committee. Kentucky Soil and Water Conser-
vation Needs Inventory. Soil Conservation Service, U.S. Department of
Agriculture, Lexington, Ky., 1970.
18. Kentucky Department of Commerce. Industrial Resources: Hazard,
Kentucky, 1974; Campton, Kentucky, 1974; Beattyville, Kentucky, 1974;
Jackson, Kentucky, 1976; Hindman, Kentucky, 1974; Whitesburg, Kentucky,
1976; Frankfort, Kentucky 1974, 1976.
19. Kentucky Department of Commerce. Kentucky Deskbook of Economic Statis-
tics. Frankfort, Ky., 1976.
20. Kentucky Department of Mines and Minerals. Annual Reports. Lexington,
Ky. 1961-1975.
21. Kentucky Department of Natural Resources and Environmental Protection.
The River Basin Water Quality Management Plan for Kentucky - Kentucky
River. Frankfort, Ky., 1976.
22. Kentucky Department of Natural Resources. Rainfall Frequency Values
for Kentucky. Engineering Memorandum No. 2, Division of Water,
Frankfort, Ky., 1971.
23. Kentucky River Area Development District. Land Use Plan. Hazard, Ky.,
1973, pp. 235.
26
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24. May, R.F. Predicting Outslopes of Spoil Banks. For. Exp. Stn. Res.
Note Cs-15. U.S. Department of Agriculture, Berea, Ky.
25. Priest, W.C., Jr. Reclamation of Strip Mine Spoils. Kentucky Law J.,
50(4): 524-566, 1962.
26. Ramsey, R.J., and P.O. Warner. Kentucky County Data Book. Res. Dev.
Series 16, Cooperative Extension Service, University of Kentucky,
Lexington, Ky., 1974.
27. Soil Conservation Service. General Soil Map and Interpretation for the
Kentucky River Area Development District-Kentucky. U.S. Department of
Agriculture, Lexington, Ky. 1972.
28. U.S. Army Corps of Engineers. Effects of Coal-Mining Operations. U.S.
Army Engineer District, Louisville, Ky., 1974.
29. U.S. Army Corps of Engineers. Final Impact Statement, Carr Fork Lake
Project. U.S. Army Engineer District. Louisville, Ky., 1974.
30. U.S. Bureau of the Census. Census of Agriculture, 1969. Volume 1,
Area Reports, Part 30, Kentucky. U.S. Government Printing Office,
Washington, D.C., 1972.
31. U.S. Bureau of the Census. Census of Governments, 1967, 1972. State
Reports, No. 17, Kentucky. U.S. Government Printing Office, Washington,
D.C., 1974.
32. U.S. Bureau of the Census. Census of Population, 1960, 1970. General
Population Characteristics, Final Report PC(1)-B 19. Kentucky, U.S.
Government Printing Office, Washington, D. C., 1962, 1972.
33. Weigle, W.K. Erosion from Abandoned Coal-Haul Roads. J. Soil and
Water Conserv. 21(3):lp., 1966.
34. Weigle, W.K. Spoil Bank Stability in Eastern Kentucky. Min. Congr.
J., 52(4):67-73, 1966.
27
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SECTION 3
THEORY, METHODOLOGY AND RESEARCH TECHNIQUES
VALUE AND VALUATION
The Simplest Case
For bundles of goods which represent small increments in the total
stock of a given commodity, the price established in unregulated compe-
titive markets is taken as the value of each unit. To arrive at the value
of the bundle, the quantity of units in the bundle is multiplied by the
parametric price. The competitive price is taken as the measure of value
since it is freely arrived at in a process of voluntary exchange. The
amount of money that buyers are willing to pay is equated with the amount
which will induce sellers to voluntarily relinquish the goods.
Thus, for bundles of goods which represent small increments in the
total stock of a given commodity which is frequently traded in unregulated
markets, valuation presents few conceptual difficulties. The relevant
quantity is determined, and is multiplied by the observed market price.
Valuation is often performed in a comparative framework where alter-
native situations or courses of action are being compared, and information
on the economic consequences of the alternatives is sought. The alter-
natives under consideration may result in differing kinds and amounts of
outputs being produced, outputs of differing quality and thus differing
unit prices being produced, and/or the use of differing kinds and amounts
of inputs. For valuation of each alternative, the task is to determine
the relevant quantities and prices, and calculate the net value of output,
Zp.q. -Ip.x.
11 J J
where
p. = price of output i; i=l,....,n.
q. = quantity of output i
p1 = price (cost) of input j,j=l,....,
x. = quantity of input j.
For comparative valuation exercises for short-run decisions, the net value
of output under each alternative is compared. If one alternative is the
existing situation (ie. no change) and another involves a change from the
existing situation, the net benefits (positive or negative) of the change
are equal to
28
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(ZPiq., - £p.jXj)p - (Spiqi - zPjxj)p
where the subscripts, p and p signify "with the proposed change"
and "without the proposed change" respectively.
If the decision-maker faces a cost constraint, then the quantities
of inputs and outputs should be chosen so as to maximize the net value of
output, subject to the cost constraint, for each alternative under consid-
eration.
For decision involving comparisons of long term investments, the
net present value of output from each alternative should be compared.
Present value of a stream of revenue, R, is
nRt
P.V.(R) = I -^—-
where R = revenue in year t; t-= l,....,n.
i = the rate of interest, commonly called the discount rate.
Where projects involving large capital investments are to evaluated,
a benefit/cost ratio may be calculated. A commonly used form of benefit/
cost ratio is
where B = benefits, defined as net present value of outputs,
which is equal to:
P. V. [(Zp.q. - Zp.x.) - (Zp.q. - Zp.x.)-], and
1 1. ^IMI *j j'p *• rini *j ;rpj
C = costs, defined as net present value of project costs,
which is equal to:
P.V.(C - C-)
v P P
A proposed project is judged to be efficient if
D
r > 1.0, that is, net benefits are in excess of c'osts.
While several projects are being considered by an agency or firm with a
limited budget, efficiency is served when projects are selected in decreas-
ing order of the size of the benefit/cost ratio, selecting no further pro-
jects when the budget is exhausted, or the benefit/cost ratio of the high-
est ranked remaining project is less than 1.0, whichever occurs first.
The foregoing has been a concise statement of the conceptual framework
29
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in which the economic value of goods is determined and the economic merits
of alternative situations, courses of action, and long-term investment pro-
jects may be estimated. For many decisions of major social consequence, val-
uation is complicated because one or more of the assumptions of the above-
stated conceptual framework are violated in significant ways. Of particular
concern in the study are violations of the following two assumptions: (1)
that the bundle of goods represents a small increment in the total stock of
the commodity, and (2) that prices may be observed which were generated in
unregulated, competitive markets.
Economic Surplus and Related Concepts
It is recognized that, when two parties who are rational and well-
informed consummate a voluntary exchange, both realize some gains from the
trade. Focusing on the buyer, his gains from trade may be defined as the
integral below his demand curve and above the competitive price line. This
has been called his consumer's surplus [24]. The logic of the concept is
that the consumer who has a negatively sloped demand curve for the commodity
and who buys n units at a parametric price p would have been willing to pay
more than p for each of the first through n-l units. The seller, too, ex-
periences gains from the trade, if he is operating on a positively sloped
supply curve for the commodity. He would have been willing to supply fewer
than.n units at prices lower than p. The integral above his supply curve
and below the competitive price line is called his producer's surplus, which
has been equated with economic rent [25]. The total economic surplus from
the production, exchange and consumption processes is the sum of consumer's
and producer's surplus.
For valuation, the consumers' surplus should be included in the total
value of a bundle of goods. For bundles of goods which represent small
increments in the total stock of a commodity, which has many close sub-
stitutes, consumers' surplus may safely be ignored since it will be small
and approaching zero. In other cases, consumers' surplus must be considered.
Where, for example, the bundle of goods represents a substantial proportion
of the stock of a commodity which has no close substitutes, in a given and
relatively-isolated market, consumers' surplus will be a major component of
total value. Where such a good is unpriced, consumers' surplus will re-
present the total value of the bundle of goods.
Unfortunately, the concept of consumers' surplus is not as simple
as the foregoing comments might suggest. Hicks [18] reformulated the con-
cept of consumers' surplus to define four consumers' surpluses, each ap-
propriate to a particular set of circumstances and each different under the
most likely set of assumptions. Compensating variation (C.V.) is appropriate
to analyses which leave the consumer in his initial welfare position follow-
ing a price change. Equivalent variation (E.V.) leaves the consumer in his
sub-sequent welfare position in the absence of the price change. Compensating
surplus (C.S.) and equivalent surplus (E.S.) are similar to C.V. and E.V.,
respectively, except that the consumer is constrained from making quantity
adjustments to price changes [18].
• The Hicks reformulation of the concept of consumers' surplus
30
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contributed to the current relatively widespread acceptance of the concept
in empirical analyses, and spawned a voluminous theoretical literature.
Machlup [22], for example, identified not just four but ten measures ana-
logous to consumer surplus in particular situations. Recent articles by
Currie £t al [9], Harberger [15], Willig [39], Broadway [5] and Hause[16]
are especially helpful in understanding the theoretical construct and em-
pirical application of consumers' surplus.
Which measures of consumers' surplus are appropriate and in what
circumstances? For goods which are divisible and additive (i.e. the most
commonly observed type of goods, which Samuelson [31] has called "private
goods", the argument of Mishan [26] that E.V. and-C.V. are the appropriate
measures has been widely accepted. But, in what circumstances should each
of these measures be used? For analyzing the impact of a price rise, E.V.
answers the question: "how much would you be willing to pay to reserve
your right to buy at the old price?", while C.V. answers the question:
"how much would I have to bribe you, in order to induce you to accept the
new price (assuming you retained the right to buy at the old price)?".
Both E.V. and C.V. provide an answer to the question: "What is your wel-
fare loss, as a result of the price rise?", but the answer given assumes
a different distribution of rights at the outset. In positive analyses,
E.V. assumes that the consumer is powerless to prevent the price rise, while
C.V. assumes that the consumer has the power to prevent the price increase.
For positive empirical analysis, it is appropriate to use the measure of
consumer surplus relevant to the actual initial position of the consumer.
In normative analyses, the use of E.V. assumes the consumer should be
expected to pay the going price to buy those things he wants, while C.V.
assumes the consumer should be compensated for changes in economic conditions
which adversely affect him.
The problem of selection of the appropriate measure of consumers'
surplus is empirically relevant only if the alternative measures yield
different quantitative results. In most cases of practical concern, they
do. For a price rise, C.V. is greater than E.V., in all cases where the
Slutsky income effect [35] is positive, as it usually is. How much greater
is C.V. than E.V.? If the commodity bundle concerned is a small part
of the total consumption set, and if the income effect is small, the differ-
ence between C.V. and E.V. will be small [39]. Conversely, it the com-
modity bundle is a substantial part of the consumption set and/or the
income effect is large, the difference between C.V. and E.V. is relatively
large, and the selection of the appropriate measure of consumers' surplus
remains an important consideration in empirical research.
There are some circumstances in which some authors have argued consu-
mers' surplus does not capture all of the value of a good or resource.
Consider a resource which is literally unique, for example, a plant or ani-
mal species or a natural phenomenon like the Grand Canyon or Kentucky's Red
River Gorge. There are no perfect substitutes, and perhaps even no close
substitute for these resources and the amenities they provide for people.
Now, consider a course of action which may result in the loss, or the
significant permanent modification, of a resource of this kind. Such a
31
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change would be literally irreversible or reversible only at an immense
cost in time and money.
The theory of valuation is not yet fully developed to handle irre-
versible changes. It is clear that the "reversible-irreversible" dichotomy
is not particularly serviceable. The Second Law of Thermodynamics implies
that, in a closed system, no change is reversible at zero cost. On the other
hand, many changes loosely called "irreversible" may perhaps be reversed
at less tha.n infinite cost. Rather than attempt to conceptualize and develop
a more adequate terminology, we will use the term "irreversible" to describe
changes which can be reversed only at prohibitive expense (given current and
expected technology).
When a change is determined to be irreversible, it does not follow
automatically that the change is undesirable. The thing to be lost may
have little value, relative to the benefits generated by the irreversible
change. However, the possibility of irreversible change confronts the
economist with some special problems in valuation. Valuation must be
approached with great caution. Perhaps the present generation may be willing
to permit the irreversible change in order to enjoy the benefits accompanying
the change, but future generations (who are, of course, not party to current
decisions) may have good reasons to wish the change had never been made.
Tastes and preferences may change in the future. Technologies may develop
which would permit future valuable uses to be made of resources which seem
to have Little value today. In either case, an irreversible change which
seems to be of little consequence to the present generation may represent a
significant loss to future generations. Economics has little ability to
predict the future course of technological development or the tastes and
preferences of generations yet unborn. In the context of intergenerational
conflict, about all that economics can offer is a sound argument for caution
in making irreversible change [20].
Irreversibility is not only of concern in the intergenerational
context. People who are not presently using a particular resource, have
never done so in the past, and who are uncertain as to whether they ever
will in the future, may derive utility from the maintenance of resource
quality because that would keep open their option for later use. The
value of this source of utility has been defined as option value [7,20,
21,27,33]. Recent articles have considered whether option value is con-
ceptually different from expected consumer surplus and have defined condi-
tions under which option value, as distinct from expected consumer surplus,
is positive or negative [7,27,33]. Regardless of the final resolution of
this controversy, expected consumers surplus and option value (where it
has a distinct existence) should be measured empirically. This logically
implies that the total value of a unique resource of good which is threatened
with irreversible change must be determined by aggregation of the values
placed upon it by both its users and non-users.
Non-users may place another kind of value, distinct from option
value or expected consumers' surplus, on a unique resource. This kind of
value is independent of any possibility that the non-user may ever use the
resource personally, in order to enjoy the amenities it provides. The
32
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non-user may derive utility from the knowledge that the unique resource
continues to exist (perhaps at a given level of quality). The value of this
utility has been called preservation value or existence value [20]. This
value, too, should be determined and is additive to the other kinds of value
discussed above.
Market Imperfections
A second generic source of valuation problems arises from violations
of the assumption that prices may be observed which were generated in un-
regulated, competitive markets.
For analyses which are based on a strict concept of economic effi-
ciency, any deviation from efficient prices, such as may result from
non-competitive market influences and direct or indirect price regulation,
is a cause for concern. However, observed market prices of importance
in this study are, for the most part, generated by markets which are reason-
ably competitive. The most significant pricing problem confronted in this
study are the result of the absence of observable market prices.
Let us consider some characteristics of goods which are important
in determining, first, whether a market in a particular good may exist
and, second, whether the market, if it exists, is likely to generate
efficient prices. Goods may be classified as private or public goods [30].
Private goods are additive and divisible, such that the total amount of a
commodity consumed is equal to the sum of the amounts consumed by each
consumer. Pure public goods, on the other hand, are neither additive nor
divisible: the total amount, once made available, is equally available
to all consumers and additional consumers can be added without diminishing
the amount available to any consumer. It is difficult to find examples
of pure public goods; among the best examples are T.V. and radio signals
[10]. However, there are many examples of congestible public goods, which
possess the following characteristics. Over some range, additional consum-
ers may be added without effectively diminishing the amount available to any
other consumers. Yet, eventually congestion begins to occur and the addition
of consumers reduces the amount or quality of the good available to the ori-
ginal consumers. In other words, additional consumers may no longer be added
at zero marginal cost. Then, as more consumers are added, the marginal
cost of adding each one rises until it eventually becomes asymptotic to
the vertical, at the point where an inflexible capacity constraint is
reached [10]. Many goods and amenities associated with community facilities,
recreational opportunities and outdoor environments have the characteristics
of congestible public goods.
In order to consider the prospects for an efficient market in a
commodity, one must also consider the rights associated with the goods.
If a good is exclusive, that is, payment is associated with exclusive
rights of use, a market can exist. A market in a non-exclusive good will
not exist, since there is little reason to pay if payment does not ensure
exclusive rights of use and, conversely, the good can be used without
payment.
33
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Goods may be produced and distributed in the following ways: (1)
private production and voluntary exchange (the market system); (2) public
sector production and distribution to buyers on a price (user charge or
fee for service) basis, and the price may be arbitrarily set at greater
than, equal to, or less than the average unit cost of production; and
(3) production by the public sector or philanthropic organizations, and
distribution at a zero price.
At long last, the punchline. All exclusive goods can be produced
and distributed by methods (1) and (2). Exclusive, private goods can be
produced efficiently in competitive market economies. Exclusive, public
goods may be produced and distributed by methods (1) and (2), but in
neither case is Pareto-efficiency possible [10]. Non-exclusive goods,
both public and private, may be produced and distributed only by method (3),
and Pareto-efficiency is impossible [10]. It should be pointed out that
many non-exclusive goods are non-exclusive only as a result of legislative
decisions. In these cases, exclusion requires that the law be changed to
establish exclusive rights over these goods. Exclusion, however, is not
cost -free activity, and some non-exclusive goods remain that way, even in
economies oriented toward private enterprise, because the high cost of ex-
clusion makes it economically infeasible.
Any good which is not produced and exchanged in the market may be
called a non-market good. One category of non-market goods may have ob-
servable prices (those goods produced by the public sector and exchanged
for a price, charge, or fee), yet it is uncertain a priori whether or not
the observed price is efficient and thus an acceptable measure of unit value.
Other categories of non-market goods have no observable prices. Non-market
goods must be valued by other methods; usually by techniques designed to
elicit value information from respondents, or by indirect observation based
on information about the demand for closely related market goods. These
techniques will be discussed later in this section. The foregoing discus-
sion has aimed to place the concept of non-market goods in theoretical per-
spective and to demonstrate that non-market goods may include goods with
many different kinds of economic characteristics.
A GENERAL MODEL FOR VALUATION OF THE COSTS
OF ENVIRONMENTAL DAMAGE FROM SURFACE MINING
The environmental impacts from surface mining are expressed in terms
of changes in resources quality. Mining has direct and indirect impacts
on the quality of the resources of the Appalachian coal producing region.
These resources have alternative later uses. The economic value of the
environmental impacts of surface mining is conceptualized as the change,
attributable to mining, in the net value of later uses of the impacted
resources.
Since there are many conceivable uses for the natural and environ-
mental resources of the Appalachian coal producing region, it is appropriate
to focus on relationships between uses. Three kinds of relationships
can be identified [11,19,36,37]: (a) neutral relationships between uses,
34
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when one use has no effect on other uses; (b) complementary relationships,
when one use increases the availability and/or improves the quality of
resources for another use; and (c) competitive relationships, when one use
adversely affects the quantity and/or quality of resources available for
uses.
Resource supplies and demands are differentiated in terms of quality,
as well as quantity, location and time. Resource quality is affected by
a set of physical, chemical and/or biological parameters, and resource
demands are expressed in terms of quality dimensions. Thus, a resource
supply of a particular quality may not serve different sources of demand
equally well.
It is in this context that we conceptualize environmental damage.
Damage occurs when waste constituents from one use affect the quantity
and/or quality of a resource supply so as to (1) preclude, (2) increase
the costs, or (3) reduce the benefits of a later use of the resource. Thus,
not all changes in resource quality are damaging; some changes may be
beneficial to later uses. In empirical estimation of the economic value
of environmental damage due to surface mining, it is appropriate to identify
and evaluate, in addition to damages, any beneficial changes in resource
quality that may be created.
In ascribing dollar values to the impacts of surface mining on environ-
mental quality, later uses of affected resources are traced, and net econo-
mic values placed on the preclusion of later uses, losses of productivity
of later uses and increased costs of treatments to restore or improve re-
source quality for later uses.
In the following pages, a model for determining the economic value of
impacts of mining on environmental quality will be developed. This model
provides a framework for identifying, first, the impacts of surface mining
on resource quality and, then, the impacts of changes in resource quality
on later uses. The model will permit the conceptualization of functional
relationships among identified variables and will provide the logical
basis for quantification of changes in resource quality and in the value
of later uses.
The General Model
Surface mining changes resource quality and, thus, the net social
benefits of later uses of these resources.
Let C denote the present value at time t of the future net value
of environmental impacts of surface mining which takes place in time period
t. It is hypothesized that the net economic value of the environmental
impacts of surface mining will be negative, thus C denotes "net costs"
of that damage.
I J K
Then C = E E I C. .. . (1)
t ijkt *•
35
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where
C. ., = the present value of the net loss in social benefits
•* of later resource use k (where k = 1,....,K), result-
ing from resource quality change j (where j = 1,....,J)
which occured as a result of mining hectare i (where i = 1,
.... ,1) in time t.
For notational convenience, equations (2), (3), (4) and (6) are
specified in present value terms, with a time horizon sufficiently long
to capture all of the costs of damage stemming from surface mining of the
hectare i. Thus, the subscript t may be omitted.
Now, let II, denote the net social benefits of later resource using
activity A, .
N M
Then n, = Ep. Y, - Zp. Y. + V* ---- (2)
k ^kn kn *Km km k L J
where
P, = price of commodity n (where n = 1,....,N) produced in
later use k.
Y, = quantity of commodity n produced in later use k.
p, = price of input m (where m = 1,....,M) used in later use k.
X, = quantity of input m used in later use k.
V* = v - V
vk vko vkw
V, = value of capital stock associated with resource use k,
- W given
V, = value of capital stock associated with resource use k,
KO • A
given 0. . .
ijo
The terms 0. . and 0. . refer to the quantity and quality of resource
xijw x n / i /
attribute j when the hectare 1 is mined, and when it is not mined, respec-
tively. Difference between Q. . and Q. . indicates the net impact of mining
on resource attribute j, that is, Q? . ,
where
For each of the outputs Y, produced by resource using activity A, ,
a production function can be specified which defines the impacts of resource
36
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quality changes on both output and input levels:
where the superscript, ->-, indicates a vector
Equations (2) and (4), together, specify the manner in which resource
quality changes Q* . , as a result of mining hectare i, influence the net
value of later uses, A, .
The total dollar reduction in the net social benefits of later
resource use k, resulting from resource quality change j, which occurred
as a result of mining hectare i is determined by equation (5) .
where
N 3V M 3X 3(Vk)
"k ' JPta ^ - S^ 1^ + BTT- ' ••••C6)
X1J ^IJ X1J
That is, the marginal change in the net social value of
resource use k, with respect to a change in Q. . .
Taking equations (5) and (1), together, we obtain the total economic
cost of damages from mining which occurs in time period 1.
This general model can be adapted to the estimation of the economic
costs of environmental damage from surface mining. All that is required
is the specification of relevant relationships, one by one, and the in-
corporation of these relevant relationships into the general model.
Mining of hectare i causes resource quality changes Q.T
where any Q* . = f(S~*"; P"*") ____ (7)
} ij u v
where
S = a vector of variables describing mine site characteristics
P = a vector of variables describing mining process characteris-
v tics
A substantial but non-exhaustive list of these variables includes :
Site variables, S
' u
S = slope of hillside mined below bench
D s= distance to nearest stream from bench (meters)
OD = depth of overburden at highwall (meters)
OPH = overburden pH
37
-------
OFE = overburden Fe content (ppb)
OMN = " Mn " ( " )
OZN = " Zn " ( " )
OPB = " Pb " ( " )
OCL = " chloride " (mils, per liter)
OSO = " sulfate " (mgs. " " )
ONO = " nitrate " ( " " " )
OCO = " carbonates and bicarbonates content mgs. per liter)
V = vegetative cover of mine site, as a series of dummy vari-
ables:
VI = 1: site vegetation is a managed forest
= 0: " " is not a managed forest
V2 = 1: " " is an unmanaged woodlot
= 0: " " is not an unmanaged woodlot
V3 = 1: " " is grassland
= 0: " " is not grassland
RHL = length of haul road (meters)
RHD = average distance of haul road to stream (meters)
RHS = slope below haul road
RHG = gradient of haul road
P = annual mean precipation (centimeters)
PI = rainfall intensity (maximum expected rainfall in centimeters,
in 24 hour period in 10 years)
DS = stream mean discharge, when no mining is occurring in catch-
ment basin
DSX = variables indicating discharge characteristics, flood
stages, etc., when no mining
L = location of site, with respect to population concentrations
Mining Process Variables, P
AD = number of hectares disturbed per hectare mined.
TE = time elapsed from initiation of clearing for mining, until
backfilling and grading is completed (months)
TV = time elapsed from completion of backfilling and grading
until establishment of satisfactory vegetative cover (months)
M = mining method, as a series of dummy variables:
Ml = 1: mining method 1
2=0: not mining method 1
M2 = 1: mining method 2
= 0: not mining method 2
38
-------
R = reclamation method, as a series of dummy variables:
Rl = 1: reclamation method 1
= 0: not reclamation method 1
R2 = 1: reclamation method 2
= 0: not reclamation method 2
In table 10, those resource quality changes, Q?., which are hypoth-
esized to be significant impacts of surface mining in the study area are
listed as row titles. The sites and mining process variables, S and P ,
are listed as column titles. The cells of table 10 indicate the hypothesized
direction of the impact of each mining site and process variable on Q*..
An empty cell indicates that no significant impacts are expected. A + sign
indicates that an increase in the value of the variable (S or P ) is ex-
^ u vj
pected to increase the extent of the resource quality change. A negative
sign indicates the opposite effect. The notation -, +, for example, indicates
that both positive and negative impacts are hypothesized, but the negative
effects are expected to be of greater magnitude. Where the site or process
variable is discontinuous and therefore expressed as a series of dummy vari-
ables, a / sign is used in all cells where some impact is expected.
Each row, therefore, can be read as a general form function,
Q*. = f(S*; P*)
xij ^ u vj
and the + and - signs can be read as the hypothesized signs of the partial
derivatives 3Q.. and 3Q...
8S IP
u v
Having specified the relationships between site and process variables
and resource quality changes, it is now appropriate to consider relation-
ships between net value of later resource uses, n , and resource quality.
Table 11 shows the relationships which we have hypothesized. Row titles are
A, , resource using activities, and column titles are Q*., resource quality
K 1J
changes. The cells of table 11 indicate the hypothesized impacts of each
Qt. on n, , the net social benefits of resource using activity A, . Notation
ij k K
in the cells is consistent with that in table 10.
Each row, therefore, can be read as a partial function,
nk = fWij")> )>
39
-------
Table 10.
HYPOTHESIZED IMPACTS OF MINE SITE AND MINING PROCESS VARIABLES ON RESOURCE QUALITY
Q.. for
j = l 23 ^--^
LAND
1. Vegetation Disturbance
2. Soil Disturbance
3. Erosion
4. Slides
5. Damage to Roads
6. Damage to Buildings
7. Noise
8. Flooding
WATER
9. Discharge
10. Turbidity
11. Eutrophication
12. pH
13. Conductivity
14. Hardness
15. Sulfates
16. Chlorides
17. Nitrates
18. Mn
19. Fe
20. Zn
21. Pb
22. Sediment
AIR
23. Dust
S
+
+
+
+
*
+
+
+
+
+
.+
+
+
+
+
+
+
+
+
+
D
,..
-
_
_
.+
_
_
_
_
_
_
_
.
OD
+
+
+
+
-
+
+
+
+
+
+
.+
+
+
+
+
+
+
+
-f
+
+
OPH
+
oso
_
+
+
OCL
_
+
ONO
_
+
+
oco
_
+
OMN
t
+
+
OFE
+
+
+
OZN
+
+
+
H.
OPB
+
+
+
+
V
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
RHL
+
+
+
+
+
+
+
+
+
+
— h
+
+
+
+
+
+
+
+
+
+
+
RHD
_
-
_
-
.+
_
.
.
_
_
_
.
_
_
_
RHS
+
+
+
+
+
+
+
+
+
+
_+
+
+
+
+
+
+
+
+
+
+
RHG
+
+
+
*
+
+
.+
+
+
+
+
+
+
+
+
+
+
P
*
+
*•
+
+
+
*
+ -
+ .
_ +
+ ^
+.
+ _
+ .
+.
+ .
+.
+ .
+ -
+ .
PI
+
+
,+
+
-
t
+
-
t
+ .
.+
+ .
•»•-
+ .
t.
+ .
+.
+ .
t.
+.
+_
DS
+ .
+
_ +
.+
.+
.+
,+
_ +
_+
.+
.+
.+
.+
.+
.+
DSX
/
/
/
/
/
/
/
/
/
/
/
/
/
/
L
+
+
+
+
AD
+
+
+
+
*
+ •
+
+
.t
+
t
.+
•f
+
+
.+
+
+
+
+
+
+
+
TE
+
+
+
+
+
+
+
+
+
+
.+
+
•t-
+
.+
+
+
+
+
t
+
+
TV
+
+
+
+
+ .
+
+
+
+
+
.+
+
+
+
— h
+
+
+
+
+
+
+
M
/
/
/
/
V
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
R
/
/
/
/
/ •
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
/
-------
Table 11
HYPOTHESIZED IMPACTS OF RESOURCE QUALITY CHANGES ON THE VALUE OF LATER RESOURCE USES
Disturbance
LAND
Resource Quality Changes
Qii
Activities, A. J ±
•rt O
O h
in uj
10
11
12
WATER
13
AIR
14
15
16
17
18 19
20 21
22
23
1. Agriculture, crops
2. Agriculture, Livestock
3. Forest/
4. Woodlots
5. Minerals
6. Oil 5 Gas
7. Transportation
8. Residential
9. Commercial
10. Industrial
11. Aesthetic uses
12. Hunting
13. Hiking
14. Camping
15. Nature Study
16. Fishing (Recreational)
17. Swimming
18. Boating
19. Fishing (Commercial)
-+
- +
~ +
_ +
-f -
+ -
+ -
- +
-+
+
-
-
-
-
-
- +
_ +
-4-
- +
- +
- +
- +
- +
- +
- +
-
-
-
-
-
.
-
-
-
-
-
-
-
-
-
-
_
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
_
-
-
-
- +
- +
-
-
-
-
-
-
-
-
-
-
-
_
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
_
-
-
-
-
-
-
_
-
-
-
_
-
-
_
-
-
-
-
_
_
_
_
-
-
-
_
_
_
_
-
-
-
-
_
_
_
.
_
_
-
_
_
_
~
.
,
_
-
_
_
_
~
.
_
_
-
_
_
_
~
.
_
_
_
.
_
_
-
_
_
_
_
.
_
.
~
-
_
-
-
_
-
.
_
-
-
-------
which is a partial representation of equation (4), and the + and - signs
can be read as indicating the hypothesized sign of the partial derivative,
9IIk ^ij
This completes the general model for conceptualizing the economic
costs of environmental damage from surface mining of coal in the study
region. This model provides the conceptual basis for the empirical valua-
tion which is performed in this case study. The model has several attributes
which are worthy of some discussion.
Attributes of the General Model
The model is totally consistent with a conceptual framework widely
used in natural resource economics: a resource using activity (in this
case, surface mining) affects the quality of resources, thus affecting
the net benefits derived from later resource uses. In many studies, this
framework is implicit. In this study, the framework is explicitly pre-
sented in a concise and rigorous model which serves as a basis for empirical
analysis.
The model is totally consistent with the concept of value, as pre-
sented at the beginning of this chapter.
The concept of the total net costs of environmental damage from
surface mining in the study region, as used in the general model, is en-
tirely consistent with the framework of benefit/cost analysis. However,
it provides a part, but not all, of the information required for benefit/
cost analysis. If it were desired to determine the social, as distinct
from private, benefit/cost ratio of surface mining in the study region, the
net total costs of environmental damage could readily be incorporated into
the analysis. If it were desired to determine the social benefit/cost
ratio of certain procedures for reducing environmental damage and reclaim-
ing land subsequent to mining, the change (attributable to the procedures
under consideration) in net total costs of environmental damage could be
calculated and treated as a benefit of those procedures.
The model is conceptually able to handle resource quality changes
which are reversible or irreversible. However, it has no intrinsic power
to solve the problems of valuation of irreversible changes. Since some
°f these problems are relatively intractable, some aspects of the irrever-
sibility question will be addressed independently of the analyses based on
this model.
The model, as presented above is strictly applicable only to private
goods. It can be modified, with relative ease, to incorporate the net
collective benefits or costs of changes in the quantity or quality of
public goods provided. Then, it can conceptually handle all market and
non-market goods. Once again, this model is essentially an accounting
tool, and the problems encountered in valuation of non-market goods must
be solved prior to incorporation of non-market goods in the model.
42
-------
While the model is designed to permit calculation of the economic
costs of environmental damage from surface mining in the study region,
no conceptual problem is presented by the accrual of some of these costs
outside the study region. The empirical application of this model expli-
citly includes costs which are visited upon users of water in, or downstream
from, the Kentucky River downstream from the study area.
VALUATION TECHNIQUES
As previously indicated, valuation of market goods is conceptually
a relatively simple matter, if sometimes laborious and time consuming in
practice. On the other hand, valuation of non-market goods requires that
procedures be used which are often relatively ingenious but nevertheless
not totally satisfactory.
Market Goods
In this study, market goods will be valued at their observed market
prices. Thus, valuation, itself will not pose serious problems. However,
the task of determining C.., , where the activity A, produces only market
1J Kt K
goods is not necessarily easy. The difficulty lies not in pricing inputs
and outputs, but in determining the changes in inputs and outputs which
result from the resource quality change, Q*.. This requires substantial
inputs from the natural and physical sciences, in order to establish the
underlying relationships between surface mining and resource quality
changes, and resource quality changes in the physical productivity of
later uses. The procedures used for these purposes in the empirical case
study are reported and the results presented in Section 4.
Non-Market Goods
The techniques which are designed for valuation in money terms of
non-market goods fall into two broad categories, (1) those which attempt
to infer the value of non-market goods by analysis of the revealed demand
for closely related market goods, and (2) those which seek to generate
information on value through processes which involve questioning of users.
The revealed techniques have the advantage that they are based on
what economists like to call "hard data", that is, data which record actions
that people have actually taken and decisions that people have actually
made. The hard data are actual market data for some good(s) which is
closely related to the non-market good of concern. Two well-known and
much studied examples involve the use of data on travel expenses to infer
the demand for outdoor recreation (for example, see [8]) and the use of
data on sales of residential land in metropolitan areas to infer the value
of air pollution abatement (for example, see [1]). A recent example in-
volves the use of data on wage rates for jobs involving varying degrees
of risk to life and limb to infer the value that people place on human
43
-------
life.* These techniques are necessarily quite ingenious and a substantial
literature reporting careful research has been built up. Nevertheless,
conceptual problems remain [23]. These problems include difficulties in
both the economic logic and statistical methods on which these techniques
are based. This is not to imply that the present authors reject revealed
demand techniques in all uses. Their basis in "hard data" is, in'itself,
a good reason for the attractiveness of these techniques in certain research
situations. Nevertheless, these techniques are clearly imperfect.
There is another, more pragmatic, reason to reject revealed techniques
for the valuation of many non-market goods. In many cases, it is not pos-
sible to identify a market good, the value of which can be determined by
market observation, and which is related closely enough to the non-market
good to allow inference of the value of the non-market good.
Several quite different techniques, which generate information on
the value of non-market goods through processes which involve questioning
of users, have been developed and applied. The "household production
function" approach involves questioning of respondents to determine in
great detail (a) household budgets, in terms of money and time and (b)
the mix of consumption activities, (including the activities which use
non-market goods, e.g. outdoor recreation, enjoyment of nature and environ-
mental aesthetics, etc.) which are undertaken of the household. Then an
iterative series of questions are asked, designed to determine how house-
hold budgets might be reallocated in response to changes in the price,
availability and/or time requirements of these activities. From these
data, using a well accepted framework of economic analysis, economic
value of the non-market good (s) in question can be calculated.**
An alternative valuation technique uses an iterative procedure based
on the Ramsey method of utility estimation to fit indifference curves be-
tween two non-market goods (or, conceivably, a market good and a non-market
good). From this data, individual demand curves are calculated and may be
aggregated to estimate community demand curves for the non-market good [34].
A third technique which uses data gathered by interviewing respondents
is known as the bidding game method. This method has been used to value
outdoor recreation, which may be a private good or a congestible public good
and may be exclusive or non-exclusive [12] . It has also been used to value
the outdoor environment of a region, which exhibits most of the characteris-
tics of a non-exclusive, public good [6,29,30].
*Report by Sherwin Rosen and Richard Thaler to the EPRI/Sigma work-
shop on Valuation of Non-Market Goods, Pacific Grove, Ca., August 2-5,
1976. (Proceedings in press)
**Report by Thomas D. Crocker to the EPRI/Sigma Workshop on Valuation
of Non-Market Goods, Pacific Grove, Ca., August 2-5, 1976. (Proceedings
in press).
44
-------
Through an iterative bidding procedure, indifference curves passing
through a given initial state, with dollar values on the vertical axis and
the non-market good on the horizontal axis, are fitted. If the non-market
good is a public good, individual bid curves are summed vertically to gener-
ate the aggregate bid curve. The aggregate bid curve provides estimates
of value which are exactly equivalent to benefits in the context of benefit/
cost analysis [4]. The first derivative of the aggregate bid curve, which
may be called the marginal aggregate bid curve, is analogous to the demand
curve; there are theoretical differences between the demand curve, which is
appropriate for private goods and the marginal aggregate bid curve, which is
appropriate for public goods [4]. In a collective sense, the efficient
amount of a public good may be determined by the intersection of the margin-
al aggregate bid curve with the marginal cost curve for providing the good.*
The three methods of valuation of non-market goods using questioning
techniques, discussed above, are all conceptually superior to the techniques
based on indirect inference using revealed demand data [12,6,28,29]. How-
ever, they suffer from a difficulty which can conceivab]y present signifi-
cant problems. Preference information is not the "hard data" variety.
Rather, respondents, usually in a personal interview situation, provide
answers to hypothetical questions posed in a "what if " context. This
is not necessarily a fatal flaw. Sociologists and social psychologists
have built up an impressive literature detailing methods by which such sur-
veys may be designed to generate reliable responses. In addition, some
evidence of the efficiency of bidding games is available. In one interest-
ing experiment, it was found that results exhibited an impressive degree of
consistency when a series of different bidding-type games, all well-designed,
were played by groups of experimental subjects [3]. Two bidding game stud-
ies, designed to value the same non-market good in the same study area, but
performed three years apart, showed a very high degree of consistency in
the results obtained [7,29]. Thus, bidding game results are replicable.
All of this suggests that questioning techniques such as those
discussed above can be useful and reliable research tools for valuation of
non-market goods. However, it is essential that the data collection in-
strument be designed very carefully and pre-tested thoroughly to ensure
that it is consistent with both the relevent economic theory and the princi-
ples of designing effective instruments to produce reliable data.
Bidding games are used in the empirical case study for the very
important purpose of valuing the aesthetic damage caused by surface mining
in the study area. The conceptual basis of these bidding games and the
design of the data collection instrument are discussed in detail in Section
4.
*Efficiency in the collective sense is not synonymous with Pareto-
efficiency. Pareto-efficiency in the provision of a public good is
impossible.
45
-------
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15. Harberger, A.C. Three Basic Postulates for Applied Welfare Economics:
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48
-------
SECTION 4
ESTIMATES OF THE VALUE OF ENVIRONMENTAL
DAMAGE FROM SURFACE MINING IN THE STUDY REGION
The general damage model developed in Section 3 provides the con-
ceptual basis for empirical estimation of the costs of environmental dam-
age from surface mining in the study region. However, limitations in data
have necessitated the aggregation of the twenty-three categories of resource
quantity/quality changes and the nineteen categories of affected later
uses into five general categories of damage: aesthetic damage; degrada-
tion of water quality; flooding; damage to land and buildings; and losses
to fish, wildlife and recreation related activities.
AESTHETIC DAMAGES
Surface mining in the study area, and throughout the western slopes
of the central Appalachian mountains, has major aesthetic impacts including
the removal of vegetation, the removal and deposition of overburden leaving
exposed benches and highwalls, the discoloration of water and increased tur-
bidity of streams. These aesthetic impacts are observable to resident and
visitor alike, and have been much photographed, written about, and dis-
cussed. However, there has been relatively little serious study of the
human and social response to these changed aesthetic conditions.
A number of studies, in various study areas throughout the U.S., have
demonstrated that individuals have clear preferences with respect to the
aesthetic environment [9,11,13,14,16,21,26, and 32]. In general, people
perceive environmental aesthetics visually, although the sense of smell
may be a source of positive and negative stimuli[ll]. The aesthetic
environmental damage of concern in this study is almost entirely visual.
Studies indicate that respondents are able to consistently rank landscapes
according to their preferences. Purely visual methods [13,14] and methods
combining visual techniques and a semantic differential rating [9] have
been used for this purpose. In general, it has been found that people
prefer more complex visual patterns to simple ones (i.e. they prefer
a landscape with greater visual variety) [2]. Stark landscapes are not
perceived as beautiful. However, the presence of flowing water improves
the perceived attractiveness of almost any landscape [9,16.32]. Among
outdoor and rural scenes, the natural landscape is usually preferred to
the man-made [2]]. People often combine recreational uses of land with
aesthetic uses such as sightseeing and nature study. Thus, an environment
which is less pleasing visually, is less attractive to outdoor
49
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recreationists [26] .
While these studies have not directly addressed surface mined
mountain landscapes, they do provide a basis for the hypotheses that
citizens in the study region may perceive the surface mined environment
negatively, and that citizens' perceptions of the mined environment may
be measurable.
Several studies [ 8,20,22 ] have shown that citizens can make
rational trade-offs among aesthetic environments and other goods (or
money, the medium of exchange). These studies have shown that, in aggregate,
citizens are willing to pay substantial amounts of money in order to obtain
specified levels of improvement in the aesthetic environment [ 8, 22]. In
one study of the environmental impacts of a single, huge coal-burning
electric power plant and its captive strip mine, it was estimated that
citizens and recreational users of the regional environment were willing
to pay approximately $24 million annually to ensure complete abatement
of visual pollution [22]. The package of environmental insults considered
in that study included unreclaimed spoil banks from an area surface mine
in an arid region. However, air pollution from the generating plant was
considered the most serious and pervasive of the negative visual impacts.
These economic valuation studies were not addressed specifically to
the aesthetic impacts of surface mining in mountainous areas. However,
they do provide a basis for the hypotheses that visual environmental
impacts, in general, are amenable to economic valuation, and the value of
the aesthetic impacts of surface mining in our study region are non-zero
and negative . Conversely, the value of aesthetic benefits from surface
mine reclamation are non-zero and positive.
In this case study, the economic value of the aesthetic impacts of
surface mining was determined in a public goods framework, using data
gathered using bidding games. In addition to data placing money values
on aesthetic impacts, citizens' perceptions of environmental quality and
preferences among alternative levels of environmental quality were de-
termined .
The Design of the Bidding Games
a) The Conceptual Basis of the Bidding Game Technique
The aesthetic environment of the study region is conceptualized
as a public good, in the sense of Davis and Whinston [12 ], since it is
inexhaustible over at least a wide range. Over this range, additional
users can be added with minimal diminution of the visibility and scenic
beauty available to each. Damage to that environment is a public dis-
commodity, and abatement of that damage, in this case by the use of tech-
niques to prevent offsite damages during mining and subsequently reclaim
the land, is a public good.
Bradford [7] has presented a theoretical framework for the valuation
of public goods. Traditional demand curves are inappropriate for the
50
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analysis of demand for public goods, since the situation is not one of
people responding to a parametric price per unit by choosing an appropriate
number of units. Rather, each person directly arrives at the total
value to himself of a given package. With a public good, one person
cannot exercise any choice over the quantity provided him, except as a
member of the collective which makes a collective choice. Further, the
nature of a public good like aesthetic environmental improvements is
such that increases in the quantity provided are not purely quantitative
increases, but are more in the nature of improvements in quality.*
Bradford proposes the concept of an aggregate bid curve for public
goods. Individual bid curves are simply indifference curves passing
through a given initial state, with the numeraire good (i.e., the measure
of value, which can be money) on the vertical axis and the public good
on the horizontal axis. The aggregate bid curve is the algebraic or verti-
cal, summation of individual bids over the relevant population.
The aggregate bid curve provides an accurate measure of the total
benefits, including consumers' surplus, of provision of the public good.
The Samuelson equilibrium [24,25], a level of provision which is efficient
in the collective sense but not Pareto-efficient, is that level of pro-
vision which maximizes the excess of aggregate bid over total costs of
provision. Alternatively, it can be found by equating the first derivative
of the aggregate bid curve with the marginal cost of provision. The ef-
ficient level of provision of a public good maximizes the surplus of bene-
fits over costs. Thus, the aggregate bid methodology is entirely consistent
with the theory and method of benefit/cost analysis.
The bidding game technique is directly applicable to the derivation
of individual, and aggregate, bid curves for public goods. Individual
bid curves can be generated directly from bidding game results, and
can be aggregated by vertical summation to generate aggregate bid curves.
The basic data gathered through bidding games are responses to hypothetical
questions about the respondent's willingness to trade money for environ-
mental amenities (i.e. to pay for environmental improvements, or to accept
compensation in exchange for environmental amenities).
Given the hypothetical nature of bidding games substantial effort
should be expended to minimize bias through sound design of the games and to
test the results for evidence of any bias that may remain. In a previous
study by the senior author [22], there is considerable discussion of the
design of bidding games to minimize bias. All of the desirable design
features identified in that discussion were incorporated in the bidding
games used in'- this study. These bidding games were also designed to per-
mit statistical tests for: (1) enumerator bias; (2) starting point
*Bradford [7] notes that these considerations of the nature of the
process of demanding a public good mean that the usual restraints placed
on the slope of demand curves may hot be relevant for public goods. A_
priori, nothing can be said about the slope of the "demand" curve for
a public good.
51
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bias, which occurs when the final bid in any game is influenced by the
money amount chosen as a starting point; (3) vehicle bias, where the spe-
cific methods by which money is to be (hypothetically) collected influences
the amount of money bid; and (4) strategic behavior on the part of res-
pondents. In addition, information, in non-monetary terms, about prefer-
ences with respect to the same environmental packages used in the bidding
games was collected to allow test for consistency among monetary and non-
monetary indicators of environmental preferences.
b) The Bidding Games
Four groups of color photographs were used to represent four levels
of the visual quality of the study region environment. Photographs in each
set were comparable in all respects, except for the level of environmental
quality depicted: one photograph showed a long distance view, two showed
intermediate views, and one focused on a flowing stream. Environment A was a
surface mined but unreclaimed environment (a condition currently illegal,
but represented by orphan lands in the region); Environment B was surface
mined with a partial, or intermediate level of reclamation; Environment C
was surface mined with full reclamation in accordance with current feasible
technology; and D had never been mined. Environment D, for some purposes,
served to depict an environment surface mined and reclaimed to its precise
Original condition (if that were possible).
Respondents, first, examined each set of photographs and ranked each
environment on two scales indicating (1) whether the environment is liked
or disliked and (2) how important is each environment to the respondent's
sense of wellbeing (i.e. how strongly does he care about the condition of
the environment). Analysis and results of this section are reported in
Section 5.
Then, three bidding games were used with each respondent: (1) asking
what increase in the price of coal would be acceptable if environmental im-
provements, as shown, were guaranteed to result; (2) asking what percentage
increase in the respondent's electricity bill....; and (3) asking how much
would the respondent be willing to pay into an "environmental improvement
fund" Each game assumed environment A, mined but unreclaimed, as the
starting point. Games were played considering improvements from A to D, A
to C, and A to B, in that order. The enumerator nominated a starting point,
by phrasing his opening question in terms of: "would you pay X if ...?"*
The answer, yes or no, was recorded and the amount was varied, iteratively,
by the enumerator until the highest amount which elicited a "yes" answer
was discovered and recorded.
If in response to any one of the games, a respondent's maximum bid
was zero, he was questioned to determine whether his zero bid represented
his "true" valuation of the environmental improvement, or was a protest
*To provide data with which to test for starting point bias, three
different starting points were specified for each game. Each respondent
faced one given set of starting points, selected randomly from the three
available sets.
52
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against one or more of the assumptions implicit in the format of the games.
"Protest" bids were counted, and then eliminated from those analyses designed
to calculate values. True zero bids were included in all analyses.
The Conduct of the Survey
The survey was conducted by the Kentucky Agricultural Experiment
Station* under the direction of Alan Randall and Sue Johnson. A pilot sur-
vey was conducted in Bell County, Ky., during the week of June 21, 1976.
The pilot survey permitted field training of the three enumerators (graduate
students in the social sciences who had undergone intensive training prior
to this field experience), and the redesign of certain sections of the sur-
vey schedule.
The survey was conducted in the study region, by three enumerators
with on-site supervision by Randall and Johnson during the period July 5
to 21, 1976. The sample was selected in a manner designed to approximate
a random sample, while economizing a little on travel costs in this very
rural region with many poor roads. It was desired to interview an adult
representative of approximately one percent of all households in the region.
Forty-four houses were selected randomly, so that each house in the region
had an equal probability of being selected, to serve as starting points for
systematic cluster sampling. Five schedules were completed in each sys-
tematically sampled cluster. Households which refused (13 percent of house-
holds refused), and where no one was found at home on the initial visit and
one call-back, were systematically replaced within the cluster. Interviews
were taken during working hours, and also at night and on weekends to ensure
that regularly employed adults were well represented in the sample. Sixty
percent of respondents were heads of households and thirty percent were
spouse-of-heads. The remainder were responsible adults. Of the 220 at-
tempted schedules,16 were rejected because they were incomplete or because
the enumerator reported that the respondent exhibited a low degree of co-
operation or understanding, or a high degree of suspicion or evasion. The
204 remaining schedules provided the data base for analysis.
Bidding Game Results
a) The Economic Meaning of the Bids
Individual bids for alternative levels of environmental quality
represent points on individual bid curves which, as Bradford [7] de-
monstrates, are indifference curves passing through a given initial state.
In each of three games and for every respondent, the initial state is taken
to be A, the zero level of reclamation, which is attainable at a zero cost.
Bids for situations B,C, and D assume the respondent has a right to the
starting point and determine his maximum willingness to pay for environ-
mental improvements. Thus, the final bids for situations B,C, and D leave
the respondent at his initial level of utility. All estimates of willing-
ness to pay obtained in this study are, therefore, compensating variation
measures of the consumer's surplus generated by environmental improvement.
*Under project H-43
53
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The three different bidding games assume a different distribution
of the burden of the costs of reclamation and damage prevention in the
North Fork watershed.
Game 1 assumes that all users of products derived from coal produced
in the region will contribute. Game 2 assumes that all users of electricity
generated from coal produced in the region will contribute. Game 3 assumes
that households in the region will bear the burden alone. Thus, it would
be expected that the total sum of money generated by multiplying the mean
bid by the relevant population would be quite different across games: game
1 would generate more money than game 2, and game 2 would generate more
money than game 3. However, the aggregate willingness of regional residents
to pay for environmental improvements should be exactly the same for all
three games. This is demonstrated by the following analysis.
Let the utility level of any respondent at the starting point be
represented by
U(E°, m°)
where
E° = initial level of environmental quality , and
mQ = initial level of money income
This initial level of utility can be expressed alternatively as
U(E°, m°) = U(E° M° + C° + P^£ + P^) (1)
where the superscript ° refers to initial values and ' refers
to final values
C = money value of compensation received
C° = 0
p = price of coal
q = quantity of coal which the individual consumes (perhaps
c indirectly)
p = price of electricity
q = quantity of electricity consumed
M = individuals adjusted income; M° = m° - (C° + P°q° + p°q°)
C C 66
Thus, m° = M° + C° + p°q° + p°q° (2)
Now, the respondent's willingness to pay for an environmental im-
provement to E1 will be given by the following equalities (since a bid
curve is an indifference curve):
54
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For the "coal price" game
U(E°, M° * C° + p°q° + p°q°) = U{E', M° + C° + [p°q° + (pV
*• rcnc re e "c c *c c
and, since E'> E°, (p°q° - p'q1) < 0
v- L- L. \*
For the "electricity bill" game
U(E°, M° + C° + P;q° + p'qp = U{E', M° + C° + pjqj + [pjqj
and, since E'> E° ,- (p°q° - p'q') < 0
66 66
and for the direct payment game
U(E°, M° + C° + p°q°' + p°q°) = U(E', M° + C1 + p°q° + p°q°)
f* f* •*• ^ 'o ^ C* f* P f*
(5)
and, since E'> E, C1 < 0
Given equations (1) and (2), we can rewrite equations (3), (4), and (5)
thus:
f f*\ 11 /T"1 O O"\ 11 FT"* I O i ^ O O t |*\T
(3) U(b , m J = U[b, m + (_p q - pq)J
(4) U(E°, m°) = U[E', m° + (p°q° - P'q'J]
(5) U(E°, m°) = U(E', m° + C1)
Thus,
fr>°n0 - P'nn = (p0cT - Pl£l') = C'
I LJ U r M I vir rtlrtirtirt-' f s *\
rcnc cnc e e e e (6)
This analysis indicates that the total amount of money bid by any
individual should be equal for all three games, and thus total willingness
of regional residents to pay should be the same for all three games. Thus,
the use of these games should provide an adequate test of vehicle bias.
It should also be noted that each individual bid (and, therefore, each
estimate of aggregate willingness of regional residents to pay) should
provide a conservative estimate of the value of environmental improve-
ments* Willig [31] has shown that the empirical difference between com-
pensating and equivalent measures of consumers' surplus, given certain
plausible assumptions about the magnitude of income effects, should be
relatively small. However, the measure derived from willingness to pay
always gives the smaller estimate and the measure derived from willingness
to accept compensation always gives the larger estimate of consumers' sur-
plus. Willingness to pay is strictly limited by the budget constraints
of regional residents, while willingness to accept compensation is not.
55
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Aggregation of the bids generated by game 3 can only be performed
in one way: mean household bid is converted to an annual measure and ag-
gregated over all households in the region, giving a measure of regional
willingness to pay (R.W.P.). Aggregation of the bids from games 1 and 2,
however, can proceed in two ways. R.W.P. can be calculated after deter-
mining the amount of coal used to make products consumed by regional resi-
dents, or the amount of electricity consumed by regional residents, respec-
tively. Alternatively, the bids can be aggregated over all surface-mined
coal produced in the region, or all electricity generated from surface-
mined coal produced in the region, respectively. These latter aggregates
have been called total consumer payment (T.C.P.). If, as hypothesized,
R.W.P. is of the same order of magnitude for all three games, TCP will
be substantially greater than RWP for games one and two.
Which of these provides the more accurate measure of the social costs
of aesthetic environmental damage from surface mining in the study region?
Both are based on specific ethical assumptions. RWP assumes first that
willingness to pay, rather than willingness to accept compensation, is the
appropriate measure of consumers' surplus; and second, that the total bur-
den of payment should fall on the residents of the region in which mining
takes place. On the other hand, TCP assumes that all consumers of products
made from surface-mined coal produced in the region either would be willing
to contribute, or should contribute toward the costs of reclamation and
off-site damage prevention at the same rate as the regional residents.
Thus, it is clear that RWP and TCP are not two different estimates of the
same quantity, but estimates of two fundamentally different quantities.
Further, observe that RWP does not include any measures for the fol-
lowing, all of which can be expected to be greater than zero: (1) the
willingness of visitors to the region to pay for aesthetic environmental
improvements, (2) the option value, or expected consumers' surplus, of
people who might one day live in, or visit, the region, and (3) the pre-
servation value which non-residents and non-visitors would place on the
mountain environment. Thus, RWP is clearly an underestimate of the social
costs of aesthetic environmental damage in the region. An aggregate of
RWP plus bids representing the willingness of visitors and non-residents
to pay would provide a lower bound estimate of these social costs.
On the other hand, TCP is a reasonable upper bound estimate of the
social costs of aesthetic damage from surface mining in the study region.
In this report, RWP and TCP measures are presented for all estimates
of. the costs of environmental damage attributable to surface mining of
coal in the study region. Interpretation of these results is left to the
reader, who may find the above discussion of assistance.
b) The Empirical Results
Mean individual bids and median individual bids were significantly
greater than zero (table 12). Mean bids were all greater than median bids,
which is to be expected since no one could bid less than zero, but a small
number of individuals who are intensely concerned about the aesthetic
56
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Table 12
BIDDING GAME AND ENVIRONMENTAL PREFERENCE
RESULTS (NORTH FORK OF THE KENTUCKY RIVER REGION, 1976)*
Game 1. An acceptable increase in the price of coal
Level of Reclamation . Mean (S/ton):
S.E. (mean)'
Median ($/ton)
Back to original
State-of-the-art
Partial
/ 8.97
6.39
3.51
1.27
0.94
0.70
2.00
1.50
0.75
Game 2. An acceptable increase in the household electricity bill
Level of Reclamation
Back to original
State-of-the-art
Partial
Mean (% increase)
15.32
11.33
6.87
S.E. (mean)
1.35
1.01
0.71
Median (%
increase)
10.00
8.00
5.00
Game 3. An acceptable monthly payment per household
Level of Reclamation
Mean ($/mo.)
S.E. (mean)
Median ($/mo)
Back to original
State-of-the-art
Partial
5.90
4.76
3.06
0.45
0.41
0.37
5.00
3.00
2.00
Environmental Preference Scores
[ Scale: Offends me greatly -12 +12, pleases me greatly.]
Environment Mean Score* . S.E. (mean)
Mined, no reclamation
Mined, partial reclamation
Mined, Full reclamation
Never Mined
-9.95
-2.54
7.84
11.52
0.29
0.46
0.29
0.12
*A11 mean bids were significantly different from zero, at the 0.01 level of
confidence. All mean preference scores were significally different from
each other at the 0.01 level of confidence.
** Short tons. ***Standard error of the mean.
57
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effects of surface mining could be expected to bid many times higher than
the median. It is interesting, however, that the median bid was closer to
the mean bid in Game 3 and furthest from the mean in Game 1. Game 3 places
all the costs of aesthetic environmental improvements directly on the re-
ceptors of damage, while Game 1 spreads that cost over the broad range of
consumers of coal products.
Prior to calculation of aggregate bids, all bids greater than the
mean plus one standard deviation were arbitrarily set equal to that amount.
This has the effect of limiting the influence of a small number of usually
high bids, and thus, arbitrarily introduces a conservative element into
the analysis.
Regional willingness to pay (R.W.P.), determined by translating in-
dividual bids into annual dollar amounts and aggregating them" across the
regional population, were very similar for all three games (table 13).
When compared to regional effective buying income (an indicator of total
personal disposable income in the region), all estimates of RWP were quite
small (table 14). Total consumer payment (TCP), calculated by applying
the results of game 1 to all coal produced in the study region generated
substantial amounts of money (table 15).
There was no conclusive evidence of any kind of bias in the bidding
game results. Using the test developed by Brookshire, et al [8], no
evidence of strategic bias was found. Tests for enumerator bias, starting
point bias and vehicle bias were conducted using analysis of variance.
Visual inspection of the data suggested that.bids generated using the
electricity bill game at environmental quality levels D and C were some-
what lower than the bids using the other two games. Perhaps, there was some
resistance to the idea of increased electricity bills at a time when con-
sumers had just suffered sudden and major increases in these charges. How-
ever, at the 5 per cent level of statistical significance, the hypothesis
that none of these biases (i.e. enumerator, starting point, and vehicle
bias) existed could not be rejected.
The general consistency of the results of all three bidding games
and the non-monetary preference scale (table 12) provides evidence, by
way of replication, that the bidding games generated valid results.
Relationship of Bids to Income
The relationship of willingness to pay and household income is of
interest. However, since the aesthetic environmental improvements under
consideration here are public goods, the concept of income elasticity of
demand, which pertains to private goods, is inappropriate. The calcula-
tion of an income elasticity of demand would require consideration of the
relationship between income and the quantity of homogeneous units of
environmental improvement demanded at a given parametric price. However,
in a study of willingness to pay for public goods, the quantity is fixed
for the individual by the predefined environmental quality levels A, B,
C, and D, while the amount bid varied for each individual.
58
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Table 13
ANNUAL RWP FOR AESTHETIC ENVIRONMENTAL IMPROVEMENT
(10% confidence limits in parentheses)
Environmental Improvement
From A to D
A to C
A to B
Game 1
$ millions
1.230
(±0.117)
0.918
(±0.086)
0.509
(±0.055
Game 2
$ millions
0.906
(±0.063)
0.675 -
(±0.048)
0.452
(±0.040) -
Game 3
$ millions
1.328
(±0.070) '
1.070
(±0.061)
0.655
(±0.045)
Table 14
RWP, AS A PERCENTAGE OF REGIONAL
EFFECTIVE BUYING INCOME*
Environmental Improvement Game 1 Game 2 Game 3
From A to D
A to C
A to B
0.66
0.52
0.27
0.59
0.37
0.24
0.71
0.57
0.35
* Source of effective buying income data: Survey of Buying Power 1976,
Sales and Marketing Management, Inc.
Table 15
ANNUAL TCP FOR AESTHETIC ENVIRONMENTAL IMPROVEMENT, GAME 1
(10% confidence limits in parentheses)
Environmental Improvement
From A to D
A to C
A to B
Game 1
$ Millions
84.307
(±8.114)
61.304
(±5.937)
34.854
(±3.739)
59
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Income elasticity of bid, defined as d.B_ . Y_ , or the percent
dY B
change in bid resulting from a one percent change in income, is a concept
appropriate to public goods. Income elasticity of bid was calculated for
each game and each level of abatement. In all cases, income elasticity of
bid was positive, and in five of the nine cases was significantly greater
than zero at the 95 percent level of statistical confidence (table 16).
We conclude that the amount bid tends to rise as income increases, but at
a slower rate.
Table 16
INCOME ELASTICITY OF BID
Environmental Improvement Game 1 Game 2 Game 3
From A to D
A to C
A to B
0.20
0.15
0.03
0.41*
0.37*
0.41*
0.29*
0.20*
0.15
* Significantly different from zero at the .05 percent level.
Who Should Bear the Cost?
Respondents, after having played each bidding game under the assumption
that the framework of that particular game represented the only feasible
way to collect money to pay the costs of environmental improvements, were
provided the opportunity to answer the normative question: "who should
bear the costs of surface mine reclamation"? The answers were almost un-
animous: 65 percent thought the cost should be borne entirely by the sur-
face mining industry, while an additional 26 percent thought the industry
should bear the major proportion of those costs (table 17). There was un-
animous rejection of the idea that the costs should be borne by the resi-
dents of the affected region.
DEGRADATION OF THE QUALITY OF WATER FOR DOMESTIC, COMMERCIAL AND
INDUSTRIAL USES
In order to estimate the economic costs of surface mine related
degradation in the quality of water for domestic, commercial and industrial
uses, it is necessary first to determine the influence of surface mining
activity on water quality in the study region.
The Impact of Surface Mining on Water Quality
To determine the impacts of mining on water quality, sophisticated
statistical techniques were applied using monitoring data collected in
the Quicksand watershed, a sub-region of our study region. On eight days
between June 1974 and June 1975, measurements of 18 parameters of water
quality were taken at each of 26 locations on second through fifth order
streams in the Quicksand watershed [3]. These time series and cross-
60
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Table 17
RESPONSES TO "WHO SHOULD BEAR THE COST
OF SURFACE MINE RECLAMATION?"
Response* % of Respondents
1 65
2 2
3 0
4 4
1,2 7
1,3 1
1,4 9
4,1 2
1,2, -,- Combinations 3
1,4, -,- Combinations 6
Other combinations 1
* Response code: 1 = the surface mining industry
2 = the final consumers of coal products
3 = the residents of the affected region
4 = the government
More than one entry indicates a combination, listed in order of the con-
tribution of each.
61
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sectional data were pooled. Eighteen simultaneous equations, one for each
water quality parameter, were estimated using seemingly unrelated regression
techniques.
Each equation for a water quality parameter Y had the general form:
Yt,i= £tYUt,i'(YUt,i)2' MINEt,i> SLPEi> DISTi> °2' V °4'
where
t = time of monitoring
i = location of monitoring
YU = concentration of the dependent variable at the
monitoring point immediately upstream
MINE = % mined for catchment immediately above monitoring_;site
SLPE = the slope of the overburden
DIST = the distance of the stream from the location where
surface mining is taking place
D = dummy variable, where
D = 1, if data collected on first monitoring date.
D = 0, if not.
etc.
This form is conceptually consistent with the general damage model
(section 3, note especially table 10). However, due to data limitations,
not all of the mining site and process variables indentified in table 10
could be included in this analysis.
The only mining process variable used was MINE., the proportion of
"the surface of the catchment immediately above monitoring location i, which
is in a disturbed state due to surface mining. The values for this variable
were calculated from topographical maps showing disturbed land [3]. Since
individual catchments may include several mining operations, it was not
possible to include other process variables such as mining and reclamation
techniques.
The mine site variables included were DIST., average distance of
mines in catchment i from the nearest stream; ana SLPE., average slope,
within catchment i, of mine site. Since these variable's are average data
across catchments which are quite homogeneous with respect to topography,
variability in the data was very limited and it was hypothesized a priori
that coefficients for these variables would be insignificant. Due to the
aggregate nature of the data, no other site variables could be considered.
2
Some comment on the variables YU and (YU) seems appropriate. Con-
sider the 26 catchments. For each catchment, Y ., is a function of
mining activity in the catchment, SLPE, DIST, tne1dummy variables and
the quality of the water when it enters the catchment, YU. The term
62
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2
(YD) is introduced to depict possible non-linear relationships between
Y and YU.
One would expect stream discharge to be an important variable. How-
ever, stream discharge data were unavailable. The dummy variables, D,
through DS, were used to identify the monitoring date for each water quality
observation. In the relatively small Quicksand watershed, relative dis-
charge should be fairly constant on a given date. That is, when the dis-
charge level is high at one monitoring location, it will be high at all
locations. Thus, the dummy variables, which serve to segregate the data
according to monitoring date, should pick up the effects of relative dis-
charge levels. Interpretation of the dummy variables, however, is not easy
since, in addition to discharge effects, the coefficients for the dummy
variables are also influenced by other time-related effects, e.g. time
of year, and seasonal patterns of mining activity.
The hypothesized signs of the estimated coefficients for the in-
dependent variables were: +MINE, +YU and -(YU) . Due to the limited
variation and the aggregate nature of the data, it was hypothesized that
the coefficients for SLPE and DIST would be insignificant. No a priori
hypotheses were formed with respect to DI through DS for reasons explained
in the preceding paragraph.
The empirical results obtained in this analysis are presented in
table 18. Each row of table 18 can be read as one equation (of the set of
18 simultaneous equations), relating an endogenous water quality parameter
to a set of exogenous variables. Most of the estimated coefficients were
significant and their signs as hypothesized in advance. Strip-mining
activity in the region appears consistently as the most important variable
in explaining increased concentrations of the particular quality parameter
in the water. The upstream concentration of each quality parameter contrib-
uted to an increased concentration downstream (at the monitoring point).
Only in the case of pH and chloride (Cl), was there a significant di-
lution effect from upstream to downstream.
As expected, slope and distance were insignificant in explaining
the variation in the concentration of water quality parameter, due to
the similarity of the topography of different locations within the study
region.
The hypothesis of curvilinear relationships of upstream concen-
trations to downstream concentrations was confirmed in the cases of pH,
conductivity, hardness, sulfate, chloride, potassium, magnesium, and
strontium.
The significance of the dummy variables was generally low, as expect-
ed. No apparent pattern of seasonal variations in the values of dependent
variables was detected. Further data plots indicated no significant
correlation between rainfall prior to monitoring and the dummy variables.
The Economic Costs of Degraded Water Quality
63
-------
Table 18
ESTIMATES OF WATER QUALITY PARAMETERS*
Exogenous Variables
Sediment
pH
Conductivity
Alkalinity
Hardness
S04
Cl
K
Na
Mg
Ca
Al
Sr
Mn
Fe
Zn
Cd
Pb
Intercept Dependent
Variable
Upstream
135.851 0.2585
(148.209) (0.1258)
7.267 -0.0547
(0.113) (0.0053)
104.733 0.1210
(39.484) (0.0341)
9.876 0.2839
(9.923) (0.0501)
30.678 0.1648
(19.664) (0.0333)
35.580 -0.0094
(15.338) (0.0494)
1.8S2 -0.0271
(0.342) (0.0121)
1.627 -0.0080
(0.446) (0.0047)
3.093 -0.0029
(0.865) (0.0167)
3.111 0.0140
(2.817) (0.0035)
6.311 0.0220
(3.605) (0.0040)
32.331 -0.1054
(11.891) (0.2212)
237.894 -0.0876
(59.136) (0.0600)
-159.889 0.4700
(30.243) (0.2628)
24.045 0.1968
(15.431) (0.1999)
-3.698 0.2602
I9.ff.f-1 (0.2422)
• O.OG03 C.1132
(0.1899)(O.U826)
1.340 0.2398
(0.436) (0.2136)
Dependent
Variable
Upstream
Squarred
0.00005
(0.00004)
0.0007
(0.00006)
0.0001
(0.00003)
0.0001
(0.0002)
0.0002
(0.00006)
0.0004
(0.0001)
0.0009
(0.0003)
0.0002
(0.00005)
0.00008
(0.0003)
0.00002
(0.000004)
0.000009
(0.000005)
0.0029
(0.0034)
0.0002
(0.00005)
-0.0001
(0.0004)
-0.0003
(0.0019)
-0.0035
(0.0037)
-0.0255
(0.0188)
-0.1347
(0.0760)
Mine
14.525
(1.787)
0.0114
(0.0013)
14.024
(0.496)
2.564
(0.124)
7.409
(0.248)
5.281
(0.191)
0.0047
(0.0039)
0.1286
(0.0055)
0.0351
(0.0098)
1.104
(0.035)
1.143
(0.045)
-0.2040
(0.1432)
13.082
(0.742)
3.103
(1.006)
-0.9497
(0.1924)
0.1809
(0.1140)
-?.n«S2
(0.0024)
-0.0001
(0.0052)
Slope
-1.805
(2.266)
0.0018
(0.0016)
-1.907
(0.623)
-0.2107
(0.1560)
-1.017
(0.311)
-0.9094
(0.2423)
0.0025
(0.0048)
-0.0153
(0.0069)
-0.0231
(0.0122)
-0.1349
(0.0447)
-0.1854
(0.0570)
0.1676
(0.1764)
-1.492
(0.905)
1.961
(1.269)
0.4070
(0.2287)
0.1376
(0.1447)
O.nnsi
(0.0030)
-0.0067
(0.0067)
Distance
-0.39994
(0.3S2S)
-0.00003
(0.0002)
0.0203
(0.0942)
0.0161
(0.0235)
0.0337
(0.0469)
-0.0181
(0.0366)
0.0009
(0.0008)
0.0007
(0.0010)
0.0016
(0.0020)
0.0064
(0.0067)
0.0047
(0.0086)
-0.0131
(0.0280)
0.0307
(0.1413)
0.5018
(0.1949)
0.0025
(0.0366)
0.0205
(n.0222)
-n. nnn4
(0.0004)
0.0021
(0.0010)
D2
32.483
(83.834)
0.1439
(0.0612)
60.897
(23.224)
9.534
(5.830)
25.105
(11.616)
16.969
(8.961)
0.4600
(0.1826)
0.479S
(0.2575)
1.728
(0.469)
2.355
(1.662)
5.642
(2.131)
-3.496
(6.646)
265.035
(33.717)
-8.596
(47.824)
20.229
(8.587)
2.624
(5.408)
0.1112
(0.1114)
-0.9849
(0.2546)
"3
174.180
(83.735)
0.0943
(0.0604)
68.197
(22.998)
15.778
(5.778)
29.888
(11.505)
15.509
(8.873)
0.3S12
(0.1812)
0.7003
(0.2551)
1.678
(0.465)
2.563
(1.646)
7.782
(2.112)
-0.1974
(6.601)
188.588
(33.028)
-49.351
(47.S17)
-3.489
(8.490)
6.034
(5.348)
0.2084
(0.1138)
-0.3622
(0.2495)
D4
-71.161
(84.659)
-0.1005
(0.0618)
-53.894
(23.460)
-5.725
(5.888)
-18.332
(11.733)
-18.154
(9.052)
0.3985
(0.1848)
-0.7495
(0.2604)
-0.7569
(0.4644)
-3.226
(1.680)
-1.924
(2.151)
-7.457
(6.698)
18.948
(33.570)
25.497
(48.583)
28.898
(8.775)
-O.S764
(5.378)
0.7162
(0.1193)
-1.385
(0.260)
E>5
195.012
(89.044)
-0.0153
(0.0630
-13.629
(23.460).-
1.026
(6.023)
0.8554
(12,0006)
-2.789
(9.255)
1.068
(0.2078)
-0.0512
(0.2661)
-0.1745
(0.4740)
-0.6561
(1.7183)
1.027
(2.201)
12.893
(6.968)
218.459
(34.510)
-0.9082
(49.726)
8.105
(8.865)
-1.885
(5.586)
0.2638
(0.1190)
-1.419
(0.266)
D6
-43.711
(83.752)
-0.1165
(0.0611)
-14.797
(23.215)
-1.433
(5.828)
-3.578
(11.612)
0.923
(8.966)
0.9527
(0.1887)
-0.4735
(0.2580)
1.225
(0.464)
0.0397
(1.6630)
-1.452
(2.129)
12.374
(6.832)
209.049
(33.401)
112.432
(48.460)
-7.257
(8.580)
-6.927
(5.513)
0.5217
(0.1172)
-1.386
(0.259)
°7
-54.679
(84.613)
-0.1402
(0.0617)
-7.547
(23.471)
-0.847
(5.917;
-5.266
(11.735)
8.053
(9.065)
0.6495
(0.1860)
-1.201 •
(0.261)
-0.3343
(0.4636)
-0.1930
(1.6807)
-1.543
(2.152)
8.531
(6.766)
15.997
(33.602)
107.054
(48.992)
24.019
'(8.744)
-7.291
(5.566)
n.317fi
(0.1166)
-1.467
(0.262)
D8
46.724
(87.958)
-0.0439
(0.0639)
14.173
(24.305)
11.061
(6.112)
23 . 843
(12.174)
4.432
(9.377)
0.6279
(0.1936)
0.3654
(0.2697)
-0.3023
(0.4804)
3.138
(1.742)
4.845
(2.233)
-8.582
(6.953)
14.249
(34.827)
55.508
(50.584)
9.153
(9.028)
-5.186
(5.659}
-1.16.17
(0.1202)
0.8666"
(0.2650)
* Values in parenthesis are standard errors.
-------
The degradation in water quality in the study region due to surface
mining results in economic losses by increasing the costs of water treat-
ment prior to domestic, commercial and industrial use. Water is treated
by water companies, local public sector water facilities, and some firms
which draw water directly from the river. It was found that a total of
59,100 million liters of water were withdrawn from the North Fork and the
main Kentucky River in 1975.*
A telephone survey of major water companies and specialized users
of water (eg. distillers, food processors, laundries, etc.) discovered no
cases where a user found it necessary to treat water, beyond the treatment
provided by the diverter. Thus, treatment costs accrued by water companies,
water services and private diverters are assumed to account for all treat-
ment costs.
The relationship between surface mining and water treatment costs
has been determined by Smathers [27]. It was found that water diverters
treated raw water with alum, lime, chlorine, and fluoride. Surface mining
affects the amounts of alum and lime used, but not the amounts of chlorine
and fluoride [27]. The use of lime and alum is related to the turbidity
of the water, which in turn is related to the concentration of suspended
solids. The effect of alum and lime treatment is to cause flocculation
which allows particulate matter to form a bond which enables removal of
the particulate matter by settling or clarification. The flocculation
process also results in removal of some of the metal ions in the raw water,
and lime is used to adjust pH. This water treatment process may increase
hardness of the water.
While the regression analysis (table 18) indicated that surface
mining has significant impacts on many water quality parameters, it appears
that, given current requirements for quality of delivered water and current
treatment technology, only suspended sediment has a direct relationship to
water treatment costs in our study region.**
The model developed by Smathers [27], which relates alum and lime
use to turbidity, stream temperature and rainfall, was developed through
multiple regression analysis. The fitted model is presented in equations
(1) and (2).
*Unpublished data, Engineering Division, Kentucky Department of
Natural Resources and Environmental Protection.
**This has two implications: (1) if more stringent requirements for
quality of delivered water were enacted, water treatment costs attributable
to surface mining may be greater than estimated here, and (2) if there are
any losses borne by domestic, commercial and industrial water users, other
than increased costs of alum and lime, these losses are not quantified here.
65
-------
Y = 0.17934 + 0.0004 X + 0.00036 X + 0.00723 X (1)
A 1A ^A jA
YL= 0.06784 + 0.00002 XIL + 0.00039 X2L + 0.00364 X3L (2)
where
Y.= Alum (in pounds) per thousand gallons of water treated
X = turbidity (J.T.U.). One J.T.U. is equivalent to 2.2 mg/liter
' of suspended sediment
\ = stream temperature (in Fahrenheit)
/A f L
X . = rainfall (in inches)
Jt\ y JL
Y,= Lime (in pounds) per thousand gallons of water treated
Using this model, and the mean values of the dependent variables for
our study region, the amounts of alum and lime used were calculated. In
the North Fork region, estimated useage was 45.4 kilograms of alum and
21.6 kilograms of lime per million liters of water treated. Downstream,
in the main Kentucky River, estimated use was 33.0 kg. of alum and 15.2
kilograms of lime per million gallons. Given the average price of alum and
lime in our study region ($0.181 per kilogram of alum and $0.095 per
kilogram of lime), the total costs of alum and lime used for water treat-
ment was calculated. It was assumed, correctly, that the incremental costs
of water treatment attributable to surface mining would be equal to the
costs of additional alum and lime needed. The costs of maintaining and
operating water treatment facilities would need to be met even if mining
activity was zero.
Our regression equation for suspended sediment allows the calcula-
tion that an annual average of 72 percent of the suspended sediment in
the water in the North Fork of the Kentucky River can be attributed to
surface mining. Thus, it was calculated that the total costs of water
treatment (attributable to surface mining) in the North Fork was $30,500
annually (in 1976 dollars).
In order to determine the proportion of water treatment costs in the
main Kentucky River which are attributable to mining in the North Fork,
it is first necessary to determine the proportion of the total sediment
in the Kentucky River which came from the North Fork. The average dis-
charge from the North Fork was calculated to be 59 percent of the average
discharge at Lock 14 and 23 percent of the average discharge at Lock 1
on the Kentucky River. Thus, an average of 41 percent of the water in the
main Kentucky River was attributed to discharge from the North Fork. It
was assumed, in the absence of scientific data, that one half of the sus-
pended sediment discharged from the North Fork settles out by the time
the water reaches Lock 1. At the mid-point between the end of the North
Fork and Lock 1, 75 percent of the suspended sediment load discharged
from the North Fork would remain in suspension. Thus, an average of
31 percent of the suspended sediment in the Kentucky River is calculated
to have come from the North Fork. Since 72 percent of that amount is
66
-------
attributable to surface mining within the North Fork watershed, 22 percent
of the averages suspended sediment in the main Kentucky River is attributed
to surface mining the North Fork watershed.
Twenty-two percent of the annual costs of alum and lime for treating
main Kentucky River water is equal to $94,400 annually.
Thus, the total water treatment cost attributable to North Fork
area surface mining is estimated to be $125,000 annually (in 1976 dollars).
FLOODING
The disturbance of the overburden during surface mining processes
generates higher levels of sediment load in streams draining the mined
watershed. Erosion from the mined area and spoil deposits continues for
some time after cessation of mining. The increased sediment load in streams
results in siltation, which reduces the capacity of streams to provide drain-
age. This effect may be exacerbated when mining on steep slopes causes
land slides, which increase erosion and, in some cases, may block stream
channels [19]. Additionally, the removal of vegetation and disturbance of
soil increases run-off during periods of intense rainfall. Together, these
two effects of surface mining (i.e. siltation and increased run-off) result
in increased severity of floods.
Existing studies of the characteristics of stream flow as a result of
sediment deposition indicate that strip mining significantly affects storm
runoff during peak flow periods and low flows during dry periods [10,18].
Strip mining activities have been directly related to the peak flood state
and these damages appear to represent substantial portions of the tangible
economic effects of strip mining.
In a 1962 study, the U.S. Army Corps of Engineers estimated that the
average annual value of flood damages in the North Fork below Carr Fork
was $780,000, and in the Kentucky River downstream it was $2,016,000 (in
1958 dollars). Since the North Fork provides approximately 41 percent of
the total water in the mainstream, it is assumed that flooding in the
North Fork causes $980,000 plus 41 percent of $2,016,000, that is $1,807,000
worth of average annual damages (in 1958 dollars). That is $3,627,000
in 1976 dollars.
A study in eastern Kentucky indicates that surface mining of coal
causes peak flow rates to increase by a factor of 3 to 5 in small Ap-
palachian watershed [ 10]. Also, retention time is reduced, thus effecting
an increase in the rate at which flood peaks move downstream. Peak flow
was found to be directly and positively correlated with the percent of
area disturbed during surface mining. Flood peaks increased by 73.3 per-
cent after surface mining had disturbed about thirty percent of the land
in the catchment [10 ].
Approximately 1.5 percent of the land in our study area is currently
in a disturbed state due to surface mining (that is, disturbed for mining
67
-------
and not yet properly revegetated following grading and back filling). As-
suming a linear relationship between flood peaks and proportion of the area
mined, and a linear relationship between marginal changes in the flood peak
and marginal changes in the-average annual value of flood damages, it was
calculated that 3.7 percent of the average annual value of flood damages
can be attributed to surface mining in the study region. This amounts to
$134,500 annually.
Now, the Corps of Engineers study [28] does not include flood damage
in the North Fork watershed from the following sources: the North Fork
above Carr Fork, and all North Fork tributaries other than Carr Fork. For
want of a better assumption, we conservatively assume that total annual
average damage from flooding in the study region is two times the amount
captured in the Corps of Engineers study. Total annual value of flood
drainage attributable by surface mining in the North Fork region is esti-
mated to be $269,000.
The reader will observe that, due to serious data limitations, sev-
eral undocumented assumptions were necessary in order to derive this es-
timate. The assumption of a linear relationship between marginal changes
in flood peak and marginal changes in the average annual value of flood
damage is especially unsatisfying, since the relationship between flood
peak and the area of land inundated is clearly non-linear. On a flat flood-
plain, small increases in flood peak may cause large increases in the area
flooded. Thus, our assumed linear relationship results inevitably in
underestimation of the flood damage attributable to surface mining.
DAMAGE TO LAND AND BUILDINGS
The surface mining industry may cause two categories of damage to land
and buildings: on-site and off-site damage. On-site damage occurs when
land is disturbed and structures are destroyed in the process of removal
and deposition of overburden. Off-site damage occurs when mining activity
results in slides, rockfalls, erosion, etc. which damage land and buildings
away from the immediate mining site.
Much of the damage occuring to land falls into several categories,
aesthetic damage, damage to wildlife and recreational uses and land-water
interactions such as sedimentation and flooding, which are being considered
in this study under other sub-headings. Here, we are concerned with damage
to land and buildings which is reflected in market values: e.g. changes in
the market value of land or the net value of its productivity in uses such
as agriculture and forestry which are integrated into the market, and
changes in the market value of structures or the cost of restoring damaged
structures for productive use.
On-site Damage to Land
During January, 1977, a telephone survey of realtors in the study
area, in which all major realtors were called, yielded the following re-
sults. There are relatively few transactions involving the surface estate
68
-------
of land which overlies coal reserves in the study region. This may be ex-
plained by two factors: (1) most of such land in the study region is un-
managed forests and woodlots of little immediate productive potential and
(2) "broad-form" mineral deeds (section 6) are common in the study region,
and thus the surface holder's use and enjoyment of his land is to a high
degree subject to decisions which are made by the mineral holder. Accord-
ingly, estimates of surface land values in the study region are based on
limited market information. With that caveat, the mean values obtained
through the survey of realtors are:
value of unmined land: $300 per hectare
value of mined but unreclaimed land: $150 per hectare
value of land contour mined and
reclaimed: $500 per hectare
value of land mined by mountaintop
removal technique and reclaimed: $850 per hectare
In 1975, 2,141 hectares were disturbed by surface mining, and 30%
of this area by the mountaintop removal method. Assuming that, in accord-
ance with the current Kentucky reclamation law, all of this area was re-
claimed, the disturbance and subsequent reclamation of land resulted in an
annual net gain of $653,000.
This gain may require some explanation. In the study area, most of
the land overlying coal reserves is currently used as unmanaged forests
and woodlots and is of steep slopes. Mining and subsequent reclamation
produces some grassed areas of flat to gently sloped land which may have a
variety of alternative uses including rangeland for domestic animals, wild-
life or game. It is conceivable that reclaimed land may have residential,
commercial and industrial uses. Thus, reclaimed land may have a higher mar-
ket value than unmined land. Reclaimed land mined by the mountaintop re-
moval technique may have higher value than land which had been contour
mined, since larger contiguous areas of flat to gentle slopes are created.
Nevertheless, it must be noted that surveys conducted by the study
team found that more than ninety percent of surface mined land in the
region was unmanaged forest or woodlot prior to mining and remained in that
status after reclamation. Thus, the potential beneficial land use impacts
of surface mining and reclamation are mostly unrealized.
It should be noted that if reclamation was not performed, a total
annual loss of $321,150 would be incurred.
Off-site Damage to Land
Off-site damage to land occurs when the productive uses of land, other
than at the mining site, are rendered less valuable, for example, by slides,
rock falls, erosion, or by damage related to mining and coal transportation
69
-------
operations. During the survey of regional residents, data on the value of
off-site damages were collected. Respondents indicated first whether they
had suffered off-site damages to land they owned and, then, their estimate
of the dollar value of damages. Thus, the estimates of the value of off-
site damages presented below are based on respondents' personal estimates
of financial losses they had suffered.
In the fiscal years 1975 and 1976, of 204 respondents, 22 respondents
suffered damage to land. The smallest reported loss in the two year period
was $50 while the largest was $2,500. The total annual value of damage to
land in the study region was $845,000 +_ $253,000 (10% confidence limit).
Damage to Buildings and Structures
The value of damage to buildings was calculated from survey data in
fiscal years 1975 and 1976. A total of 18 respondents reported damage to
structures they owned. The smallest reported loss in the two year period
was $10 while the largest was $16,000. The annual damage to buildings and
structures in the study region was $1,684,000 plus or minus $925,000 (10%
confidence limits). The confidence limit is rather wide, because one
respondent reported damage many times in excess of that reported by other
respondents.
Total Annual Damages to Land and Buildings
The total annual value of damages to land and buildings in the study
region was estimated at $1,837,000.
DAMAGE TO FISH, WILDLIFE.AND.RECREATION-RELATED
It is hypothesized that surface mining in the study, through its
impacts on the land and water resources, causes economic losses in fishing,
hunting and water-based recreation activities within the study region, and
in fishing and water-based recreation activities in the Kentucky River
downstream from the region. Economic estimates of the value of some cat-
egories of losses are presented below; in other categories, the losses
remain unquantified.
Commercial Fishing Losses (In-region and Downstream)
A small commercial fishing industry exists in the Kentucky River. A
study [30] indicates that surface mining has negatively affected mussel
beds, and probably had minor effects on populations of commercially valuable
fishes. Due to the lack of statistical data on the economics of commercial
fishing in Kentucky, these losses must remain unquantified.
In-region Recreational Fishing Losses
It has been determined that surface mining through its impacts in
increasing erosion and sedimentation of streams and, in some instances,
70
-------
reducing the pH of streams, results in reduced fish populations in the
streams of the study region [ 4 ].
Unfortunately there are no reliable estimates of fishing activity in
the region, (in terms of angler days of use, for example).
The survey of area residents does yield some qualitative information.
Of 204 respondents, 81 indicated that "reduced opportunities for fishing"
was an environmental problem in the region. Of these 81, 75% indicated
that the problem was "serious", 71% that the problem was "important to them",
and 87% that it had become worse in the last ten years.
It can be concluded that surface mining has caused an economic loss
in the value of recreational fishing in the region. That loss remains un-
quantified.
A study by Professor Donald Batch calculated that fish with a re-
placement cost of $410,000 have been lost from streams in the region, as
a result of surface mining [ 4 ]. In order to annualize this replacement
cost, we make the following assumption: if all surface mining in the
region were to cease at some time, it would take five years until water
quality improved sufficiently to justify replacement of the fish [ 4 ] .
Thus, the replacement cost of $410,000 is annualized over five years. The
present value of the annual loss was calculated to be $65,300.
In-region Hunting Losses
Some information is available on the impacts of surface mining on
hunting opportunities [ 5 ]. A study in Perry County, Ohio, reports that
reclaimed surface mined areas support a less diverse population of game
species and attract fewer hunters than unmined lands [ 6].
Unfortunately, there are no reliable estimates of hunting activity
(in terms of hunter days of use, for example) for the study region.
The survey of area residents does yield some qualitative information.
Of the 204 respondents, 105 reported that "reduced opportunities for hunt-
ing" was an environmental problem in the region. Of these 105, 87% said
that the problem was serious, 83% that the problem was "important to them",
and 79% that it had become worse in the last ten years. It is known, of
course, that surface mining and its cumulative environmental impacts have
increased in the region in the last ten years.
It is reasonable to conclude that some economic losses in hunting
activity can be attributed to surface mining. These losses remain un-
quantified.
Downstream Recreational Losses
Increased suspended sediment and turbidity in the Kentucky River,
downstream from the confluence of the North and Middle Forks, is hypoth-
71
-------
esized to result in diminished recreational value of the rivers. The method
by which an economic value is placed on this loss is as follows:
1. Recreational use of the main stream is estimated, assuming the
fourteen locks are equally desirable for water-based recreation
as other slack water areas in the recreation market area.
2. Estimated recreational use is compared with actual use, as re-
corded by the U.S. Army Corps of Engineers.
3. The difference between estimated and actual use, in visitor days,
is calculated. The total value of the "lost" visitor days is cal-
culated.
4. One half of this difference is attributed to the "muddy" turbid
condition of the water in the Kentucky River locks. The other
half of this difference is attributed to other disadvantages of
the locks for recreational purposes, e.g., relatively narrow ex-
panse of water, relatively poor access to some sections of the
river.
5. Of the one half of the "lost" recreational value of visitor days,
twenty-two percent is attributed to suspended sediment and turbid-
ity due to surface mining in the North Fork region (see sub-section
on water treatment costs for the derivation of the 22% figure).
6. Given the above assumptions, the value of downstream recreational
losses due to surface mining in the North Fork is calculated.
Downstream recreational losses were determined for the approximately
400 river kilometers of the Kentucky River below Beattyville to the con-
fluence with the Ohio River. A market area with a radius of 160 kilometers
around Frankfort, Ky., was defined as a potential market area for recrea-
tion on the Kentucky River. Regression equations as reported in a study
of recreation potential commissioned by the Appalachian Regional Commission
[2] were used to estimate the conditional probability of an individ-
ual's participation in three types of water based recreation activities:
swimming, fishing and boating. The equations estimated using Bureau of
Outdoor Recreation data are (t values in parentheses):
S= .0119A + .2536R + .2554Y - .0425Y2 - .0546U - 6809
(23.124) (6.222) (5.109) (2.424) (2.446)
B= -.00414A + 2277R + .0901Y + .0681E + .0662Re
(8.234) (5.691) (4.261) (3.755) (2.964)
F= -.0033A + .0583Y + .1060Re + .2509
(6.694) (3.202) (5.271)
where
A= age of respondent, in years
72
-------
R= Race: 0 = nonwhite
1 = white
Y= Family income
U= Urbanization: 0 = if respondent lives in area over 25,000
population
1 = if respondent lives in area less than 25,000
population
E= Education: 1 = if no response or less than six years
2 = if high school or less
3 = if more than high school
Re= Residence: 0 = if lives in an SMSA
1 = if does not live in an SMSA
S= Swimming
B= Boating
F= Fishing
Conditional probabilities were calculated for each ethnic and demo-
graphic classification and multiplied by the population in that classifi-
cation. The resultant number of persons participating in each of the three
recreation classifications was then multiplied by the average number of
activity days per participant as reported [2 ]. The results of these cal-
culations are the total number of recreation days for boating , swimming and
fishing demanded annually in the market area.
The surface area of water available for recreation in the market area,
and in the Kentucky River below Beattyville, was calculated. Assuming that
the Kentucky River is equally desirable for water-based recreation, com-
pared to other recreation sites, expected recreational use of the Kentucky
River, was calculated by dividing total recreation days demanded by the per-
centage of surface acres in the market area which are in the Kentucky
River.
These expected recreation days were compared with 1975 actual recre-
ation days recorded by the Corps of Engineers. Table 19 is a summary and
comparison of expected and actual recreation in the Kentucky River.
The economic value of the expected and annual recreational days of
use was calculated using a value of $1.50 per day, which is the midrange
of the current Water Resources Council estimates of the value of slack
water recreation. The shortfall in recreational use on the Kentucky River
amounts to about $1,922,000 annually. Of this, one half ($961jOOO) may
be attributed to suspended sediment. Of that, an annual loss of $115,000
may be attributed to impairment of water quality due to surface mining in
the North Fork basin.
Total Annual Losses in the Value of Fish, Wildlife and Recreational
Activities
The annual economic losses in downstream recreational activities
and the annualized replacement cost of fish in the region, attributable
to surface mining in the region, amount to $180,300. Commercial fishing
73
-------
Table 19
PREDICTED AND ACTUAL RECREATION, KENTUCKY RIVER BELOW BEATTYVILLE
Predicted Actual Difference Actual As Predicted
Recreation Recreation in Actual % of $ Value of
Days Days (1975 and Predicted Predicted Recreation
Swimming 778,440 100,388 678,052
Boating 508,934 13,107 495,827
Fishing 128,756 21,524 157,232
12.896 $1,167,660
02.575 $ 763,401
16.717 $ 193,134
Actual
$ Value of
Recreation
$150,582
$ 19,661
$ 32,286
Difference
In $ Values
$1,
$
$
017,078
743,740
160,848
-------
losses, in-region hunting losses, and in-region recreational fishing
losses remain unquantified. It is quite possible that the annual value of
the unquantified losses exceeds the value of those losses which could be
quantified.
THE TOTAL ECONOMIC COSTS OF ENVIRONMENTAL DAMAGE
It now remains to determine the total economic costs of environmental
damage from surface mining for coal in this study region, under the exist-
ing regulatory framework. Presented below are estimates of the total an-
nual costs of damage in the study region, the costs of damage per hectare
mined and per metric ton of coal surface mined (all in 1976 dollars).
For each of these calculations, total costs are determined by ad-
dition of the costs for the five identified and quantified categories of
environmental damage: aesthetic damage; water treatment costs; flood
damages; damage to land and buildings; and losses in fish, wildlife and
recreation related activities. These estimates of total damage are sys-
tematic underestimates, to the extent that flood damage is underestimated
and additional sources of damage remain unquantified and therefore are
omitted from these calculations. Unquantified sources of damage include:
in-region recreational fishing and hunting losses; in-region and down-
stream commercial fishing losses; downstream aesthetic losses (other than
recreational); and the option and preservation value of the mountain en-
viroment.
Two estimates of the total economic costs of environmental damage
attributable to surface mining in the study region are reported: total
consumer payment (TCP) and regional willingness to pay (RWP). These es-
timates differ only with respect to aesthetic damages, and their inter-
pretation is discussed in that subsection. To calculate total R.W.P.,
the estimates of aesthetic damage derived from game 3 are used.
Total Annual Environment Costs in the Study Region
Aesthetic costs can be determined from the bidding game results by
calculating the difference in value between the unmined environment, D,
and the existing regional environment. Of the land in the study region
which has been mined, mining of 42.9% has commenced within the last three
years, and so this land has not yet been revegetated. Also, 4.8% is orphan,
or unreclaimed land. These two categories of land are currently in state A,
mined but unreclaimed. The remainder of the mined land has been reclaimed
fully or partially. After considering the pattern of mining activity in
this study region over time and the time of enactment of existing reclama-
tion laws, we estimate that one third is now partially reclaimed and two-
thirds is now fully reclaimed. Thus, of the total area of land which has
been mined, 17.4% is now in state B and 34.9% is in state C.
The other categories of environmental costs were initially calculated
for existing conditions. Thus, we calculate annual environmental costs of
75
-------
surface mining in the study region to be:
Category of Costs T.C.P. R.W.P.
$ Millions $ Millions
Aesthetic 56.487 1.048
Water Treatment 0.125 0.125
Flooding 0.269 0.269
Land and Buildings 1.837 1.837
Fish, Wildlife and Recreation 0.277 0.277
Total 58.995 3.556
Present Value of the Environmental Costs of
Disturbing One Hectare by Surface Mining
It is assumed that almost all of the erosion and sedimentation which
result from mining occur in the first three years. After that time, re-
vegetation will stabilize the soil and result in very substantial reduction
in run-off, erosion and sedimentation. Thus, the flooding^ water treatment
and water-based recreational costs will occur in years 1 through 3 follow-
ing mining. The damage to land and buildings will occur, in very large
part, during years 1 and 2, the years when substantial earth moving activity
is under way. This assumes compliance with regulations designed to elim-
inate slides which result from improper deposition of overburden. Aesthe-
tic damage occurs as follows: the environment is in state A, unreclaimed,
for three years after the initiation of mining; it is in state B, partially
reclaimed for the next 5 years; and in state C, fully reclaimed thereafter
(again, assuming compliance with reclamation regulations).
The present value of the environmental damages from mining one hectare
in the study region, discounted at six percent per year, are presented be-
low.
Category of Costs T.C.P. R.W.P.
$/hectare $/hectare
Aesthetic 43,890 770
Water treatment 58 58
Flooding 122 122
Land and Buildings 834 834
Fish, Wildlife and Recreation 126 126
Total 45,030 1,910
Present Value of the Environmental Costs
of Producing One Metric Ton of Coal by
Surface Mining
Given that the disturbance of one hectare in the study region yields
4932 metric tons of coal, the present value of environmental costs per
metric ton is:
76
-------
Category of Costs T.C.P. R.W.P.
$/Metric Ton $/Metric Ton
Aesthetic 8.90 0.16
Water treatment 0.01 0.01
Flooding 0.03 0.03
Land and Buildings 0.17 0.17
Fish, Wildlife and Recreation 0.03 0.03
Total 9.14 0.40
77
-------
REFERENCES
1. Appalachian Regional Commission. Design of Surface Mining Systems
in Eastern Kentucky. Vols. I, III, Report, ARC 7-66-Tl, 1975.
2. Appalachian Regional Commission. Mine Drainage Pollution and Recreation
in Appalachia. Appendix E of Impact of Mine Drainage on Recreation and
Stream Ecology prepared by Robert R. Nathan Associates, Inc., June 1969.
3. Appalachian Regional Commission. Surface Mine Pollution Abatement and
Land Use Impact Investigation. Vols. I-V, Report, ARC 71-66-T2, 1975.
4. Batch, D.L. Impacts of Surface Mining on Fish and Wildlife.
Mimeograph, Dept. of Biological Sciences, Eastern Kentucky University,
Richmond. 1977.
5. Batch, D.L. Potential and Utilization of Surface Disturbed Areas
for Fish and Wildlife. Mimeograph, Dept. of Biological Sciences,
Eastern Kentucky University, Richmond. 1977.
6. Bookhout, T.A., C.P. Stone, and J.D. Bittner. Potential of a Strip-
Mined Area for Fish and Wildlife Reclamation. Ohio State University,
Research Foundation, Columbus, Ohio, 1968. 84 pp.
7. Bradford, D.F. Benefit-Cost Analysis and Demand Curves for Public
Goods. Kyklos 23:775-791, 1970.
8. Brookshire, D., B. Ives, and W. Schulze. The Valuation of Aesthetic
Preferences. University of New Mexico, Dept. of Economics, Resource
Economics Group, 1976.
9. Calvin, J., J. Dearinger, and M. Curtin. An Attempt at Assessing Pre-
ferences for Natural Landscapes. Environment and Behavior, 4:447-470,
1972.
10. Curtis, W.R. Strip-Mining Increases Flood Potential of Mountain
Watersheds. Proc. Natl. Symp. on Watersheds in Transition, June
19-22, Ft. Collins, Colo., Amer. Water Resource Assoc. and Colo. State
Univ., 1972. pp. 357-360.
11. David, E. Public Perception of Water Quality. Water Resources Research,
7:453-457, 1971.
12. Davis, 0. and A. Whinston. On the Distinction Between Private and
Public Goods. Amer. Econ. Review. 57:360-373, 1967.
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13. Dearinger, J.A. Aesthetic and Recreational Potential of Small Natur-
alistic Streams Near Urban Areas. Lexington, Kentucky, University of
Kentucky Water Resources Research Institute, Res. Rep. No. 13, 1968.
14. Dearinger, J., G. Woolwine, C. Scroggin, D. Dolan and J. Calvin. Measur-
ing Intangible Values of Natural Streams—Part II. Research Report 66,
Water Resources Research Institute, Lexington, Kentucky, 1973.
15. Leopold, L.B., and M.O. Marchand. On the Quantitative Inventory of
the Riverscape. Water Resources Research, 4:709-713, Aug. 1968.
16. Leopold, L.B. Landscape Esthetics. Natural History, 78:37-44, Oct.
1969.
17. Milbrath, L., and R. Sahr. Perceptions of Environmental Quality. Pre-
sented at VIII World Congress of the International Sociological Asso-
ciation, Toronto, 1974.
18. Minear, R.A., and B.A. Tschantz. Impact of Coal Surface Mining on Water
Quality of Mountain Drainage Basin Streams. Presented at the 48th
Annual Conference of the Water Pollution Control Federation.Miami
Beach, Florida, October 5-10, 1975.
19. Moore, J.R., et al. A Systems Approach to Energy Supply--Environmental
and Economic Aspects of Coal Production. NSF/RANN Grant S1A72-
03525A04, Appalachian Resources Project, Knoxville, Tennessee, 1974.
20. Pendse, D. and E. Wyckoff. A Systematic Evaluation of Environmental
Perceptions, Optimum Preferences and Trade Off Values in Water Resource
Analysis. Oregon Water Resources Research Institute Report 25, 1974.
21. Pyron, B. Form and Diversity in Human Habitats. Environment and
• Behavior, 4:87-120, 1972.
22. Randall, A., B.C. Ives, and C. Eastman. Benefits of Abating Aesthetic
Environmental Damage. New Mexico State University, Agricultural
Experiment Station. Bulletin No. 618, May 1974.
23. Randall, A., B. Ives, and C. Eastman. Bidding Games for Valuation of
Aesthetic Environmental Improvements. J. Envir. Econ. and Mgt. 1:132-
14, 1974.
24. Samuelson, P.A. The Pure Theory of Public Expenditure. Rev. Econ.
Stat. 36:179-182, 1954.
25. Samuelson, P.A. Diagramatic Exposition of a Theory of Public Expen-
diture. Rev. Econ. Stat. 37:53. 1955.
26. Shafer, E., and J. Mietz. Aesthetic and Emotional Experiences Rate
High with Northwest Wilderness Hikers. Environment and Behavior,
1:87-197, 1969.
79
-------
27. Smathers, W.M., Jr. The Economic Impact of Surface Mining on Water
Quality. Unpublished Thesis, University of Kentucky, Lexington, Ky.,
1974. 61 pp.
28. U.S. Army Corps of Engineers. Kentucky Rivers and Tributaries. U.S.
Army Engineer District, Louisville, 1962.
29. U.S.D.A. Soil Conservation Service. A Study of Sediment Sources in
the New River Basin of Tennessee. Nashville, TN, September 1973.
30. Williams, J.C. Commercial Fishery Investigations of the Kentucky
River, Part 1. United States Department of Commerce. Project No.
2-186-R, January, 1975. 64 pp.
31. Willig, R.D. Consumers' Surplus Without Apology. Amer. Econ. Res.
66:587-597. 1976.
32. Zube, E. Cross-disciplinary and Intermode Agreement on the Description
and Evaluation of Landscape Resources. Environment and Behavior,
6:69-89.
80
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SECTION 5
NON-MONETARY INDICATORS OF THE HUMAN AND SOCIAL IMPACTS OF
ENVIRONMENTAL DAMAGE FROM SURFACE MINING
Characteristics of the Sample
In addition to the estimates of the economic value of aesthetic envi-
ronmental damage from surface mining (reported in Section 4), the survey of
residents in the study region yielded additional valuable information about
their lifestyles and how they felt about their environment and what they per-
ceived the impacts of surface mining to be on their lives.
The 204 households sampled exhibited the following characteristics.
Reflecting the extreme rurality of the study area, 164 respondents were
located in rural areas, and 40 in the small town characteristic of the
North Fork region. The majority of respondents were heads of households
(132) or the spouse of the head (62). One hundred fifteen of the respondents
were male and 89 were female. The age distribution of the sample is repre-
sentative of the population of the North Fork area. The mean age of respon-
dents was 46, reflecting the elderliness of many of the respondents. Six-
teen were over 70 years old. Almost one-third of the respondents were age
36 and under. Their mean educational attainment was 9.67 years of schooling,
with 45 percent having an eighth grade or less education. Fifteen percent
had some college and 40 percent held high school diplomas.
Of heads of households, 24 percent were retired which again reflects
the elderliness of many of the respondents. Nineteen percent of heads of
households were employed in the coal mining industry. This number tends to
underestimate the economic dependence of study area households on the coal
industry; many retirees had retired from coal industry work. Sixteen percent
were employed in service industries and 7 percent in construction. Nine
percent were unemployed. While the mean household income of the sample was
a fairly high $10,265, the median is $9,156. Ten percent of sample house-
holds had incomes exceeding $25,000. A quarter of the sample had incomes of
$5,200 or less.
Household size ranged from one person (27 observations) to fourteen
persons (1). The largest number of households (47) were composed of four
persons and three person households were the next most common (39). Fifty
households contained five or six people. Eleven households had from seven
to fourteen persons in them.
Spouses (all but four were women) had characteristics similar to the
81
-------
household head. Their mean age was 43 and they averaged almost ten years
of education. Most spouses (129) were not employed outside the home.
Attachment to Place
The sample reveals a remarkably stable population with 93 percent of
respondents having been born in Eastern Kentucky and having lived there an
average of forty years. Ninety-five percent of the sample had lived in the
same residence for fifteen years or more. Sixty-four percent traced their
family's residence in the region back for more than 100 years. More than
one-third could trace their family roots in the region back for 150 years
or more. Only five percent said they or their families had lived in Eastern
Kentucky for thirty years or less. Nonetheless, a little over half the
respondents had lived outside of Eastern Kentucky at some time; they stayed
away for a median of five years. Respondents who had lived outside the
region had a variety of reasons for doing so. Some had fulfilled military
obligations or participated in depression-era work programs. Others had
sought employment primarily in manufacturing and service industries. The
reason for the vast majority (72 percent) returning was simple personal
preference for living in their present place. Only eight percent of the
respondents indicated a desire to reside elsewhere. Eighty-nine percent
said they wanted to be buried in the area. Eighty percent of them also
strongly agreed to the statement, "This is the only place I consider home".
Moreover, 56 percent said they would not consider moving away even if it
became a little harder to earn a living. Obviously, these people have a
strong attachment to their part of Kentucky.
Environmental Awareness
Twelve categories of potential environmental problems were listed.
Respondents were shown a map of the study region, and asked (1) whether
the problem exists in the region, (2) if it is a serious or minor problem
(3) whether it has become less or more serious in the last ten years, and
(4) whether the problem is of major, minor, or no personal importance to
the respondent. (See table 20).
Litter, stream pollution and deterioration of roads were considered
the most obvious and important environmental problems by a large majority
of respondents (table 20). A slight majority also saw air pollution, soil
erosion and reduction in wildlife as problems. Traffic noise was a problem
on which opinion was evenly divided. Deterioration in scenery, other kinds
of noise, crowded recreational sites and reduced fishing opportunities were
not regarded as problems in the North Fork area by a majority of respondents.
Many said the fishing had been poor for as long as they could remember.
Generally, most of the people who perceived that an environmental problem
existed in the area, also considered it serious, important, and to have be-
come worse over the past decade.
Attitudes Toward Surface Mining and the Environment
Attitudes toward the study area environment and toward the surface
mining industry were measured. Respondents were presented with statements,
82 •
-------
Problem
Table 20
ENVIRONMENTAL AWARENESS RESPONSES
(In percentages, N=204)
In the last 10
Present? How Serious? yrs, has it gotten?
How Important to You?
Column
Yes No* Very Somewhat Not Better Worse No Very Somewhat Not
Serious Change Important
1. Stream Pollution
2. Lake Pollution
3. Air Pollution
(include dust)
4. Traffic Noise
5. Other Noise
6. Litter
7. Soil Erosion
8. Deterioration
of Scenery
9. Reduction of
Wildlife
10. Reduced Opportun-
ities for Hunting
11. Reduced Opportun-
ities for fishing
12. Crowding in
Recreation Sites
13. Deterioration of
Roads and Highways
J4
18
57
SO
15
S5
66
47
52
52
40
42
72
16
72
43
50
85
15
34
53
48
48
60
58
28
69
45
52
46
39
75
70
53
70
59
72
60
85
26
39
29
38
36
20
20
40
24
29
24
26
12
5
16
19
16
25
5
10
7
6
12
4
14
3
20
29
15
3
17
18
13
16
7
6
5
0
13
61
47
63
79
66
66
61
74
85
79
89
92
78
19
24
22
18
17
16
26
10
8
15
6
8
9
72
71
76
58
52
82
79
77
79
67
72
55
91
17
18
15
27
28
12
13
20
10
16
20
23
8
11
11
9
15
20
of
6
8
3
11
17
8
22
1
00
*"Mn"
No" respondents are included from percentages in remainder of each row.
-------
and asked to indicate strong agreement, agreement, no opinion, disagreement,
or strong disagreement. Table 21 shows the responses.
There is a strong sentiment for conservation of the natural beauty
of the mountain environment. To better interpret the depth of these feel-
ings, recall the very strong attachment to place, as demonstrated by length
of residence in the region and length of family history in the region and
the very strong affirmation of attachment to the region which was elicited
by attitudinal questions. This sentiment for conservation of the mountain
environment seems to be a deeply held belief among a population strongly
attached to an environment and a way of life which is different from national
norms.
These people had a very strong perception that surface mining is
causing irreversible damage to the mountain environment. This perception,
among a population with strong sentiments toward conservation and strong
attachment to place, indicates a deep sadness about the effects that surface
mining is having. This, however, must not be taken as evidence of hostility
toward the surface mining industry. The industry is the major basic industry
in the region and 27 percent of the households had members who worked in the
industry, while 64 percent had close relatives (non-members of the household)
who worked in the industry. Our survey was not designed to determine at-
titudes toward the mining industry in general (just those attitudes closely
related to environmental aspects). However, it is apparent that many respon-
dents feel a deep sense of helplessness, due to their economic dependence
on an industry of whose negative impacts they are very conscious.
In this context, it is notable that, when asked who should bear the
costs of restoring the environment after surface mining (the coal industry,
consumers of coal and coal products, citizens in coal producing regions, or
the government), 65 percent indicated that the coal industry should bear
these costs alone and an additional 17 percent that the coal industry should
bear the major portion of these costs.
The strong assent to the statement that operators should get the
consent of landowners before surface mining provides evidence of the un-
popularity in the region of the manner in which Kentucky courts have inter-
preted the "broad-form" mineral deed (see Section 6).
Personal Experience of Impacts of Surface Mining
Respondents were asked whether they had personally felt the impacts
of surface mining in their immediate living environments, within the past
two years. If so, was the damage caused to them serious or minor? If they
had not come into personal contact with surface mining impacts in the past
2 years, had they ever experienced such impacts? Table 22 provides the
responses.
Damage to roads and noise from coal trucks are rather common impacts
of mining affecting a majority of respondents as they conduct their daily
affairs. Road damage is considered more serious by those affected. Visible
mines, either active or abandoned, are present in the daily lives of about
84
-------
Table 21
ATTITUDES TOWARD THE MOUNTAIN AND SURFACE MINING ENVIRONMENT
(Percentages, N= 204)
1. In the North Fork region, there are some
places where the environment should
never be disturbed.
2. There is no need to preserve the natural
beauty of the mountain environment for
future generations.
3. Sometimes, land surface mined and then
reclaimed is more productive than it was
before mining.
4. Once surface mining has taken place, no
matter how good are the efforts at recla-
mation, the land will never be exactly
as it used to be.
5. Once the headwaters of a stream have been
disturbed, the stream will never again
be as good as it used to be.
6. Mining operators should be required to
restore surface mined land to its ori-
ginal contour.
7. Mining operators should have to get per-
mission from the landowner before surface
mining.
0>
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0
9
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0
00
nJ
tn
•H
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7
5
0
0
4
1
1
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10
4
16
3
18
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38
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38
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18
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52
50
29
4
4
8
1
85
-------
Table 22
RESPONSES TO QUESTIONS CONCERNING
SURFACE MINING AND RESIDENTIAL QUALITY OF LIFE
(Percentages, N= 204)
In your immediate living environment (i.e. your home and the places
where you shop, attend school, church and/or regular social activities, but
not including your work environment) Kdve you noticed any of the following
impacts of surface mining?
Impacts
Active surface mine
visible
Abandoned surface mine
visible
Noise from blasting
Noise from operating
surface mining
equipment
Noise from coal trucks
Damage to public roads
that you use
Drinking water tastes
or looks unpleasant
In the la
Serious
26
33
28
12
26
71
16
st 2 year
Minor
22
26
33
22
33
18
8
s? *
None
52
41
39
66
41
11
76
Serious
29
1
20
14
29
50
6
Ever?
Minor
13
8
7
14
11
9
2
None
58
91
63
72
60
41
92
*If answered affirmatively, respondent was not asked "Ever?" questions.
These columns, "last 2 years?", represent proportions of the total respon-
dent sample... "Ever?" percentages are the proportion of those saying
"None" to "in the last 2 years" and thus form a sub-proportion of the
respondent sample.
-------
half the respondents and from a quarter to a third of all respondents con-
sider this to be a serious impact. Noise from blasting was considered a
serious impact by 28 percent of the respondents but only 12 percent felt
noise from mining equipment to be of serious impact..
We also asked if respondents had never experienced any damage to per-
sonal property due to surface mining. Eighteen did report some damage to
buildings and structures they owned in the past two years with ten of them
terming the impact as serious. Eight other respondents had sustained similar
damage in the past, and five of them considered it serious. Twenty-two
respondents experienced damage to land they owned in the past two years, with
thirteen characterizing the damage as serious. Those who had experienced
serious damage to their land in the past but not in the most recent two years
numbered eighteen, while four had suffered minor damage in the past.
When asked about other kinds of damage, nineteen had experienced vari-
ous environmental impacts that did not fall in our predetermined categories,
including eight who experienced flooding due to surface mining. Other com-
plaints included coal dust, damages from blasting, silt dam problems, ero-
sion, coal truck traffic and negative effects on their underground water
supply.
Environmental Perceptions and Surface Mining
Respondent's aesthetic preferences among four alternative environments,
each represented by four photographs, were recorded. The packages of photo-
graphs were the same as were used with the bidding games (Section 4). The
mined but not reclaimed, mined and partially reclaimed, mined and fully re-
claimed, and never mined environments were represented. Each respondent in-
dicated whether he liked or disliked the environments represented on a scale
of (dislike greatly -3, -2, -1, 0,1,2,3,4 like very much). He also indicated
how important each environment was to his sense of well-being on a scale of
(not important 0,1.2,3,4 very important). Multiplication of the responses on
these two scale allowed the development of a composite scale (offends me
greatly -12, -11, , 11, 12 pleases me greatl$.
Table 23
ENVIRONMENTAL PERCEPTIONS AND PREFERENCES
(North Fork of Kentucky River Region, 1976)
Scale: Offends me greatly -12,
Environment
Mined, no reclamation
Mined, partial reclamation
Mined, full reclamation
Never mined
+12, pleases me greatly.
Mean Score* SE (mean)
-9.95
-2.54
7.84
11.52
0.29
0.46
0.29
0.12
*A11 mean scores significantly different from each other at the .01 level
of significance. N=204.
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The respondents showed a remarkable degree of unanimity in their
responses. Each environment was ranked differently from the others, at the
.01 level of statistical significance. The unreclaimed environment was per-
ceived very negatively, the partially reclaimed environment slightly nega-
tively, the fully reclaimed environment quite positively, and the never
mined environment very positively (table 23)• It is very important to note
that the fully reclaimed environment was perceived as aesthetically inferior,
at a very high level of statistical significance, to the never mined environ-
ment.
As reported in Section 4, the respondents to the bidding games ex-
pressed a positive and substantial willingness to pay for aesthetic environ-
mental improvements in the context of damage from surface mining. Partial
reclamation was ranked lower than full reclamation, which was ranked lower
than reclamation to return the land to a condition indistinguishable from
the original (if that were possible), in terms of the dollar amounts respon-
dents were willing to pay. These differences were highly significant (table
12 Section 4).
These data recording the environmental perceptions of a sample of
regional residents and their willingness to pay for environmental improve-
ments are most interesting. Environments are perceived differently, by
ordinary citizens, most of whom would reject the "environmentalist" label.
Further, citizens are willing to pay to obtain a higher level of aesthetic
environmental quality. Reclaimed environments were perceived as preferable
to unreclaimed environments and the never mined environment as preferable
to the environment reclaimed with the best current practices. These data
provide further strong evidence that citizens in the study region see the
environmental damage from surface mining as irreversible.
Summary .
The result of a survey of residents in the study area show:
1. The population is a little older, poorer and less well educated
than the national population.
2. Respondents are aware of environmental problems in the study
region and many believe that, if anything, these problems are getting
worse as time goes on.
3. The lives of many respondents have been touched by surface mining
for coal: many by one or more of its environmental impacts and many by
its economic impacts in the region. This results in an ambivalence toward
the industry. Its environmental impacts are strongly disliked, while its
economic impacts provide the basis for the material aspirations of some.
4. The population has a very strong attachment to its home in the
mountains, and a strong positive sentiment for conservation of the beauty
of the mountain environment.
5. The aesthetic impacts of surface mining are seen as strongly
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negative, with reclamation ameliorating some of the damage.
6. The citizens are willing to undergo some economic sacrifice if
they were assured of aesthetic environmental improvements.
7. The aesthetic damage caused by surface mining in the mountains
is seen as irreversible. Reclamation improves, but cannot fully restore,
the surface-mined landscape.
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SECTION 6
THE ECONOMIC VALUE OF DAMAGE
UNDER ALTERNATIVE REGULATORY REGIMES
In Appendix A>' a detailed analysis of existing and alternative regimes
for the regulation of surface mining activities is presented. The
alternatives considered include:
1. the existing regime which consists of state regulations
superimposed on a structure of private law property
rights,
2. a "no regulation" regime, which consists only of the
existing private law property rights as they pertain
to land, minerals and water,
3. a federal surface mining law superimposed on state law
and private law, and
4. a modified state law, superimposed on the existing struc-
ture of private law. The state law would be modified by
the introduction of a flexible bonding schedule based on
a_ priori estimates of the social costs of surface mining,
in place of the existing, less flexible, bonding schedule
based on a priori estimates of reclamation costs.
Below, the salient legal features of each of the four regimes
are discussed. For convenience, alternative 2 is discussed first.
The other alternatives build upon the private law basis of alterna-
tive 2. Then, the impact of each regime on the economic cost of
environmental damage from surface mining is estimated.
Alternative 2.
The second alternative is one of "no regulation". By that we
mean a legal and economic environment in which there are no statutory
or administrative regulations by federal, state or local government
affecting surface mining activities. The types of public regulation
thus suspended would include those dealing with water pollution and
reclamation, as well as with the mining operation itself. Under this
approach, rights and liabilities would be determined solely by reference
to the principles of private law. In Kentucky, property law doctrines
would govern the relationship, between mineral and surface interests on
the same tract of land, while the law of nuisance would control in
the case of conflicts between the coal mine operator and other landowners.
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Although various legal interests can be created with respect to
subsurface minerals such as coal, in Kentucky the mineral interest is
usually regarded as a separate estate of equal dignity to the surface
interest. Thus we typically speak of a mineral estate and a surface
estate. In much of eastern Kentucky mineral estates were created by
means of "broad form" deeds. By their express terms these instruments
made the surface estates completely subordinate to the mineral estates.
Furthermore, these deeds often contained provisions by which the surface
owner and his successors in title waived any claims they might have
against the mineral owner for damage to the surface as a result of mining
operations.
According to the Kentucky courts, the broad-form deed, with its
waiver-of damages provisions, applies to strip mining activities and
makes the coal mine operator liable only for oppressive, arbitrary,
wanton or malicious conduct. If necessary, the surface estate may
be entirely destroyed in order to remove the coal.
Private nuisance principles apply when the mine operator does not
have any property interest in the tract which is damaged, as in the
case of downstream landowners injured by water pollution from upstream
surface mining operations. Liability is ascertained by examining
the reasonableness of the defendant's activity and the gravity of the harm
to the injured landowner. This involves a balancing of the social
utility of the defendant's conduct against the harm to the plaintiff's
land. If a nuisance is found to exist, the court may grant injunctive
relief or award damages to the injured party. Under the balancing
test described above, strip mining activities which cause substantial
harm to nearby property would probably be regarded as private nuisances.
However, the expense and uncertainties of litigation apparently have
discouraged many landowners from asserting their rights under private
law doctrines.
Alternative 1.
In addition to the limitations of private law described in our
discussion of the second alternative, surface mining is presently subject
to regulation by agencies of federal, state and local government. There-
fore, our first alternative, the "status quo", must take account of
these various forms of public regulation.
At the federal level, the Federal Water Pollution Control Act
Amendments of 1972 (FWPCAA) are potentially the most significant form
of existing governmental regulation. The goal of this legislation is to
eliminate all discharges of pollutants into the navigable waters of the
United States by 1985. Effluent limitations which are implemented by
means of a National Pollution Discharge Elimination System (NPDES),
will require the application of the "best practicable" control techno-
logy by 1977 and the "best available" technology by 1983. FWPCA is
administered by the Federal Environmental Protection Agency (EPA),
but the states will eventually run the NPDES permit programs once they
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meet EPA approval. At the present time it is unclear to what extent
FWPCA will apply to surface mining activities since many of the Act's
regulatory provisions are limited to "point sources". Federal law
also regulates strip mining operations in both national parks and national
forests. Mining is not permitted in most national parks, but may be allowed
in national forests, subject to strict regulation, where environmental
damage is not expected to be serious.
At the state level, the Kentucky Department for Natural Resources
and Environmental Protection, operating under the authority of KRS Chapter
350, has general regulatory responsibility for surface mining in Kentucky.
The Department's basic tool is a permit system which applies to all
private strip mining operations. To strip mine coal in Kentucky, an
operator must first obtain a permit, pay a fee, and post a reclamation
bond. The permit application must contain a variety of information along
with detailed plans indicating the proposed method of operation, the manner,
time and distance for backfilling and grading work, along with a reclamation
plan for the affected area. KRS 350 and Department regulations impose
limitations on solid bench width and highwall slope and prohibit contour
mining on slopes of more than 28 degrees. In addition, the state act
requires the coal operator to reclaim the land in a manner approved by
the Department.
Strip mining is at least potentially subject to regulation at the
local level as well. Kentucky's zoning enabling act, KRS Chapter 100,
authorizes cities and counties to exercise a variety of land use controls,
including zoning. The enabling act specifically mentions the "filling or
excavation of land, and the removal of natural resources....". Through
the use of this delegated power units of local government could probably
restrict strip mining activities in populated areas. However, to date,
few if any cities and counties have attempted to do so.
Alternative 3.
The third alternative is based on a possible federal regulatory
program. It should be noted that a federal strip mine bill, if enacted,
would not displace other existing federal, state, or local regulations,
although it would require some modification of KRS Chapter 350. Therefore,
in addition to the features discussed below, the third alternative would
include most of the elements of alternatives one and two described earlier.
A proposed Federal bill would probably differ from the present
Kentucky statute, KRS Chapter 350, with respect to permit applications,
bonding procedures, public hearings and enforcement measures, and would
impose stricter and more comprehensive regulations on both the mining
operation itself and subsequent reclamation efforts than existing state
legislation. A proposed federal bill would require segregation of
topsoil, plugging of auger holes and better reclamation practices. In
addition, where mining takes place on steep slopes, a proposed Federal
act would prohibit disturbance of land above the highwall, limit pushing
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spoil material over the outslope, and generally require the operator
to restore the land to its approximate original contour. Furthermore,
a proposed federal act might ban strip mining entirely in some areas.
Alternative 4.
The fourth alternative is aimed at confronting the coal mine operator
with the full social costs of surface mining. Under this approach, most
of the regulatory provisions discussed in Alternative 2 would be retained,
but a more flexible performance bond technique would be used instead of
that currently found in KRS Chapter 350.
Under Alternative 4, the performance bond would be set by the
regulatory agency at an amount equal to (or perhaps greater than) the estima-
ted social costs that would result if no reclamation was performed. Social
costs would be estimated on a case-by-case basis, taking all relevant
considerations into account. A matrix relating the estimated social costs
to the physical environment in the area of proposed mining operation
could be developed and used for this purpose. The operator could question
the amount of the proposed bond in an administrative hearing if he chose
prior to the issuance of the strip mining permit.
Upon satisfactory compliance with all requirements for the pre-
vention of off-site damage during mining and subsequent reclamation
the full amount of the bond would be returned. This is the present
procedure under KRS Chapter 350. However, under Alternative 4, the
operator, after posting bond and obtaining his permit, could elect
to abandon the site at any time. If he did so he would forfeit either
(1) the total amount of the bond, or (2) the costs to the state of
completely reclaiming the land plus a fixed penalty per acre abandoned,
whichever amount was less. If the operator reclaimed the land properly,
but failed to prevent off-site damages during mining, as required, the
prescribed penalties could be assessed and subtracted from the bond
prior to its return.
This approach may be contrasted with the performance bond pro-
visions of both the present Kentucky Statutes, KRS Chapter 350, and
the proposed federal strip mine bill.
At present, KRS 350.151 authorizes the state regulatory agency
to require the operator to post a performance bond of $500-$3,000 per
acre in order to obtain a strip mining permit. This bond may not be less
than $5,000. If the operator fails to comply with the terms of his
permit, provisions of the statute or agency regulations, the Department,
under KRS 350.130, may suspend and eventually revoke the permit.
Revocation also results in forfeiture of the performance bond. KRS 350.093
(6) provides for a partial release of the bond when the backfilling and
grading have been completed by the operator and approved by the agency
and the required soil pH level has been achieved. However, the Department
must retain $300 per acre until the required planting and revegetation
work is completed. According to KRS 350.113 (3), the remainder of the
operator's performance bond is released after the agency has determined
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that a satisfactory revegetative cover has been established on the reclaimed
area.
If the operator fails to reclaim the land in accordance with his
permit obligations, the agency may cause his bond to be forfeited pursuant
to the provisions of KRS 350.130. However, KRS 350.130 (3) states that
no operator who has forfeited a bond may receive another permit unless
the land involved has been reclaimed without cost to the state. An
operator who does not meet the planting requirements but does not want
his bond forfeited may instead pay the department a sufficient sum to
cover the remaining reclamation costs.
According to KRS 350.139, all funds from the forfeiture of bonds
are to be expended insofar as possible upon the lands for which the
bonds were originally given.
The provisions of the proposed federal strip mining statute
(Alternative 3) with respect to performance bonds are similar in many
respects to those of the Kentucky Act discussed above.
A proposed federal bill would provide that after a surface mining
permit is approved, but before it is issued, the applicant must post
a performance bond. The amount of the bond will depend upon the reclamation
requirements of the approved permit and would be determined by the regulatory
agency on the basis of independent estimates. Under the proposed Federal
bill, part of the bond would be released after completion of backfilling,
and drainage control for a bonded area in accordance with the approved
mining and reclamation plan. The remainder of the bond would be released
after completion of revegetation.
In a comparison with the performance bond provisions of KRS 350
and the proposed federal act, Alternative 4 vests a good deal more dis-
cretion in the coal operator. For any particular site, he would have to
decide whether or not to mine. If the operator decided to mine, he
would then determine his optimal expenditure on reclamation on the
basis of economic incentives. On the other hand, the public would be
fully compensated for any shortfall in reclamation performance.
Alternative 4 would involve comparatively minor changes in the text
of KRS Chapter 350. The upper and lower bond limits of KRS 350.060 (9)
and KRS 350.151 (2) would have to be removed. In addition, KRS 350.110
and 350.130, which deals with performance bond forfeitures, would have
to be revised. The only serious legal problem concerns the method by
which the amount of the performance bond would be determined by the
regulatory agency. Ideally, the statute should provide a comprehensive
list of the sorts of damages the Legislature considers to be social costs
of surface mining. The declaration of policy contained in KRS 350.020 does
this to some extent, but a more specific enumeration would be desirable.
Secondly, the agency should be directed to formulate by rule or administra-
tive regulation a specific procedure or methodology by which prospective
social costs can be identified and quantified in monetary terms for particular
tracts of land so that performance bonds will be determined on an objective
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basis. It is necessary to provide some standards to guide the agency
in such matters. Otherwise, it might be argued that the statute vests
too much discretion in the agency and thus amounts to an unlawful
delegation of legislative authority. Of course absolute precision would
not be needed to satisfy this constitutional requirement, and the methodology
developed in this study for identifying and quantifying the social costs of
strip mining might very well serve as a basis for these suggested administra-
tive guidelines. Another approach, the use of estimates by outside
sources as provided for in the proposed federal strip mining act, might
also be considered. In either event, the permit applicant (and possibly
other interested parties), should be provided with an opportunity to
challenge both the amount of the performance bond and the manner by which it
is calculated.
THE ECONOMIC COSTS OF ENVIRONMENTAL DAMAGE
Alternative 1
Alternative 1 is the existing regulatory regime, as currently
enforced. The economic value of environmental damage from surface mining
in the study region under alternative 1 is equal to the amounts calculated
in section 4. These estimates are presented in table 24.
Table 24
COSTS OF ENVIRONMENTAL DAMAGE, UNDER
REGULATORY ALTERNATIVE 1
Cost of Environmental Damage TCP RWP
For the study region ($ million, annual)
Per hectare mined ($, present value)
Per metric ton of coal mined ($, present value)
58.995
45,030
9.14
3.556
1,910
0.40
Alternative 2
Alternative 2 is a "no regulations" regime, in which the existing
private law property rights as they pertain to land, minerals and water
constitute the complete legal framework within which surface mining would
take place. The economic costs of environmental damage per hectare mined,
and per metric ton of coal mined, were calculated on the basis of the
following assumptions about physical damage.*
*Assumptions about the extent of physical damage to the environment
under regulatory alternatives 2, 3 and 4 were made by the study team in
consultation with Mr. J.D. Brackenrich, P.E. of Brackenrich and Associates,
consulting engineers, Lewisburg, W.V. Mr. Brackenrich is a noted expert on
surface mining and reclamation.
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1. Due to the absence of regulations concerning the deposition of
overburden, the incidence of slides would increase sixfold.
2. Sediment run-off from mine sites (which accounts for about 60
percent of total sediment under alternative 1) would increase
fourfold, due to unregulated deposition of overburden and water
management. Sediment runoff from haul roads (which accounts
for about 40 percent of the total sediment under alternative 1)
would increase at least eightfold. Unregulated haul roads would
most likely run adjacent to stream beds and, in some cases, along
stream beds since that would allow cost savings to operators. As
sediment entering streams increases, the suspended sediment in
streams increases, but at a decreasing rate. Thus, total sus-
pended sediment due to surface mining in the study region would
increase fourfold.
3. Total land disturbance would increase by a factor of 1/3, as
a result of unregulated deposition of overburden.
4. Flooding, due to increased peak run-off and siltation of stream
beds would increase by 50 percent.
5. For estimation of aesthetic costs and on-site damage to land,
the land is assumed to remain unreclaimed.
Estimates of the economic costs of environmental damage under alter-
native 2 are presented in tables 25 and 26.
Table 25
COSTS OF ENVIRONMENTAL DAMAGE PER HECTARE MINED,
ALTERNATIVE 2
Cost Item
TCP ($)
RWP ($)
Aesthetic
Water treatment
Flooding
Land and buildings
Fish, wildlife and recreation
Total
94,071
232
189
6,918
415
101,825
1,716
232
189
6,918
415
9,472
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Table 26
COSTS OF ENVIRONMENTAL DAMAGE PER METRIC TON OF COAL
MINED, ALTERNATIVE 2
Cost Item TCP ($) RWP ($)
Aesthetic
Water treatment
Flooding
Land and buildings
Fish, wildlife and recreation
Total
19.07
0.05
0.04
1.40
0.08
20.64
0.35
0.05
0.04
1.40
0.08
1.92
By comparing the environmental costs under alternatives 1 and 2,
it is possible to estimate the net economic benefits from the reduction in
environmental damages attributable to the existing Kentucky regulations.
Per metric ton of coal mined, the benefits attributable to existing regula-
tions amount of $11.50 (TCPjor $1.52 (RWP).
The contract under which the study was performed does not call for
formal benefit/cost analysis of reclamation. However, for the purposes of
illustration, the best available estimates of the cost of reclamation
suggest that in order to meet existing standards, the total costs of mining
are increased by about $0.90 per metric ton of coal mined.*
Alternative 3
Alternative 3 is the Federal surface mining regulatory bill, as intro-
duced into Congress in the 1977 session. Compared with alternative 1, the
existing Kentucky regulations, alternative 3 would make the following sub-
stantive changes in regulations (only those changes which are likely to have
major impacts on environmental damage are listed):
1. Mined land would be returned to its approximate original contour.
2. On steep slopes (i.e. slopes greater than 20°), which predominate
in our region, only spoil from the initial cut may be deposited
down the outslope providing such spoil is properly stabilized.
Otherwise, no spoil materials may be deposited down the outslope.
3. Access roads will be more strictly regulated.
*This cost estimate for reclamation was derived by adaptation of the
estimates presented in Table 12, Appendix E, of reference [1]. The esti-
mates presented in [1] are adapted from these in [2], and make use of in-
formation presented in [3].
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4. The operator will assume responsibility for five full growing sea-r
sons after the last seeding.
The economic costs of environmental damage under alternative 3 were
calculated under the following assumptions with respect to physical damage
(in each case the damage under alternative 3 is compared with that under
alternative 1):
1. Due to strict regulation of the deposition of overburden on the
outslope, the incidence of slides would be reduced by 50 percent.
2. Total sediment run-off is reduced by 44 percent. This would occur
as a result of (a) better design of haul roads (which would reduce
sediment run^off from haul roads by 80 percent), and (b) the reduc-
tion of deposition of overburden on the outslope and the stricter
revegetation requirements (which would reduce sediment run-off
from the mine site by 20 percent).
3. Flooding would be reduced by 20 percent.
4. On-site damage to land would be affected as follows. Contour mine
sites, following reclamation, would be valued in the market
similarly to unmined land (section 4). Mountaintop removal sites,
following reclamation, would be valued at the amounts reported in
(section 4).
5. In order to estimate aesthetic damages, it is assumed that the
mined land is in state A for three years following the initiation
of mining. For the next five years, the land will be a state of
similar value to state C. It will be returned to its approximate
original contour, and planted with trees. For the next 15 years,
as the trees grow, it will be in a state of aesthetic value midway
between C and D. After that time, it will be aesthetically
indistinguishable from D, the never mined state.
Estimates of the economic costs of environmental damage under alter-
native 3 are presented in tables 27 and 28.
Table 27
COSTS OF ENVIRONMENTAL DAMAGE PER HECTARE
MINED, ALTERNATIVE 3
Cost Item TCP ($) RWP ($)
Aesthetic
Water treatment
Flooding
Land and buildings
Fish, wildlife and recreation
Total
26,393
32
107
414
71
27,016
451
32
107
414
71
1,076
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Table 28
COSTS OF ENVIRONMENTAL DAMAGE PER METRIC TON
OF COAL MINED, ALTERNATIVE 3
Cost Item TCP ($) RWP ($)
Aesthetic
Water treatment
Flooding
Land and buildings
Fish, wildlife and recreation
Total
5.35
0.01
0.02
0.09
0.01
5.48
0.09
0.01
0.02
0.09
0.01
0.22
Per metric ton of coal mined, the incremental environmental benefits
of alternative 3 (compared with existing regulations, alternative 1) amount
to $3.66 (TCP, or $0.18 (RWP).
For the purpose of illustration only, we note that the best available
estimate of the additional costs of reclamation under alternative 3 (com-
pared with alternative 1), adapted from (1,2,3) is about $1.90 per metric
ton of coal mined.
Alternative 4.
Alternative 4 would set the operator's bond equal to the estimated
costs of environmental damage which would occur in the absence of environ-
mentally sound practices to prevent off-site damage during mining and re-
claim the land following mining. The amount of the bond would necessarily
be set on a case by case basis. For a typical mine in our study region,
the bond would be on the order of $102,000 per hectare if TCP were used
as the measure of environmental costs, or $9,500 per hectare if RWP were
used. Note that even the bond based on RWP exceeds the current maximum
bond under KRS 350, which is $3,000 per acre, or $7,426 per hectare.
Now, we estimate the amount of reclamation which would take place
under alternative 4, and the amount of bond which would be forfeited by
an economically rational operator of a typical mine in the study region.
Figure 1 presents the total environmental cost curves derived from the
TCP and RWP. Note that, no matter how great are the efforts at reclamation,
some environmental damage remains. This damage is the aesthetic damage
which occurs between the time of the initial cut and the time when revegeta-
tion is complete (i.e. when trees planted on the restored hillside are of
mature appearance). These unpreventable environmental costs amount to $5.35
(TCP) or $0.09 (RWP), per metric ton of coal mined. In figure 2, the
marginal benefits from reclamation are shown. Reclamation would proceed
until the marginal benefits (which, from the perspective of the operator,
are equal to the marginal savings in bond forfeiture) just equal the
marginal costs (see points A and B on figure 2). Thus, the total investment
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TOTAL CONSUMER PAYMENT
REGIONAL WILLINGNESS TO PAY
1 2
$ EXPENDITURE ON RECLAMATION
FIGURE 1. ENVIRONMENTAL DAMAGE FROM SURFACE MINING, AS A FUNCTION OF RECLAMATION
EXPENDITURE.
V
100
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13
12-
11
10
9
MARGINAL
BENEFITS
(TCP)
u
I
PL,
UJ
A = EXPENDITURE ON RECLAMATION
(R.W.P.)
B = EXPENDITURE ON RECLAMATION
(T.C.P.)
§
UJ
I
MARGINAL
BENEFITS
(RWP)
1 2 3
EXPENDITURE ON RECLAMATION ($)
FIGURE 2. MARGINAL COSTS AND ENVIRONMENTAL BENEFITS OF RECLAMATION.
101
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in reclamation would amount to $2.80 per metric ton of coal produced (TCP),
or $1.25 per metric ton (RWP). Now the points A and B (figure 2) may be
identified on the horizontal axis of figure 1. By drawing perpendicular
lines from A and B to their respective damage curves, and then to the hori-
zontal axis, bond forfeiture may be determined. An economically rational
operator would forfeit $5.48 (TCP) or $0.30 (RWP). Total environmentally
related costs faced by operators (i.e. reclamation costs plus bond for-
feiture) would be $8.28 (TCP or $1.55 (RWP), per metric ton of coal mined.
The degree of reclamation achieved would be about equal to that under alter-
native 3 (TCP), or perhaps 30 percent greater than under alternative 1
(RWP).
While the answers are beyond the scope of this study, some questions
must be raised. Under alternative 4, if TCP was used as the measure of
environmental costs of surface mining, bonds would customarily exceed
$100,000 per hectare mined, and the operator's mining costs would be $8.28
per ton greater than under the "no regulation" alternative. What would be
the impact of these cost increases on the price of coal, production of
coal, and employment in surface mining? Clearly, surface mining in the
steep, mountainous environments typical of our study area would decline.
On the other hand, if RWP was used as the measure of the environmental
costs of surface mining, compared to the current regulatory regime, the
increase in operator's costs would be quite reasonable, reclamation perform-
ance would improve somewhat, and the public treasury would receive
approximately 30 cents per ton of coal mined as compensation for the environ-
mental damage suffered by the public.
We are convinced that alternative 4 is worthy of additional study
compared with existing and proposed regulatory approaches, it has the
following potential advantages.
1. The decisions where and how to mine would be made on economic
grounds by mining operators faced with the full environmental
costs of their actions.
2. The decision as to reclamation would be made on economic grounds
by mining operators faced with the full environmental costs of
their actions.
3. The public would be compensated, through bond forfeiture, for
the full economic value of damage which remains unmitigated.
4. The provision that unpaid fines for violation of regulations
during mining are automatically deducted from the amount of
the bond returned would allow stricter enforcement than is
presently obtained under KRS 350.
A number of additional, fascinating possibilities are raised by
alternative 4. For example, it might be possible to provide for "negative
bond forfeiture" in the case where an operator re-opens an orphan mine for
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a second cut or to exploit a deeper seam. If the operator reclaimed the
site very well, his operation may result in a net environmental gain and
he could be returned more than the amount of his bond.
Given these various considerations, we recommend that serious, in-
depth analyses of the environmental, economic and energy impacts of alter-
native 4 be undertaken.
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REFERENCES
1. IGF Incorporated. Draft Final Report, Energy and Economic Impacts
of H.R. 13950 ("Surface Mining Control and Reclamation Act of 1976,"
194th Congress), Submitted to the Council on Environmental Protection
Agency, February 1977.
2. Nephew, E.A., and R.L. Spore. Costs of Coal Surface Mining and
Reclamation in Appalachia. Oak Ridge National Laboratory, 1976.
3. U.S. Environmental Protection Agency, Development Document for Interim
Final Effluent Limitations Guidelines and New Source Performance for
the Coal Mining Point Source Category, May 1976.
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SECTION 7
AN EVALUATION OF THE METHODS USED FOR ESTIMATING
THE ECONOMIC VALUE OF THE ENVIRONMENTAL
COSTS OF SURFACE MINING
The methods used in this case study must be evaluated by three
criteria: (1) their conceptual validity, (2) the feasibility of their
empirical application, and (3) their applicability to other empirical
problems involving the evaluation of the social costs of surface mining.
Conceptual Validity and Feasibility of Empirical Application
The basic methodology of valuing the environmental costs of surface
mining, as used in this study is in accord with sound and accepted economic
theory. It is consistent with the conceptual basis of benefit/cost analy-
sis, and adaptable to the special problems associated with non-market goods.
The basic economic methodology recognizes the problems introduced by the
prospect of irreversible change in man's environment, but provides no new
insights into the problems of valuation in the context of irreversibility.
In summary, the methodology used in this study (that is, the logical
framework of the general model presented in section 3) is conceptually
valid, and consistent with the state of the art in economic valuation of
external costs.
Within this coherent methodological framework falls a large number of
specific valuation problems which are handled pragmatically on a problem by
problem basis.
The valuation of aesthetic costs of surface mining is carried out
using the bidding game technique. This technique has been used successfully
in several recent studies [1,2], but nevertheless faces a skeptical recep-
tion by some economists who distrust data derived from other than the re-
corded outcomes of actual decisions. The basic data of bidding game stu-
dies, individual bids, are the responses of individuals to questions based
upon hypothetical situations. This is the one serious objections to the
bidding game technique. Otherwise, it is theoretically impeccable. The
problems introduced by the hypothetical nature of the data are attacked in
several ways: by the careful design of data collection instruments to in-
corporate the results of research in the social sciences on methods to make
attitude surveys more accurate; .by the replication, by other researchers
at later times, of bidding game results [1.2]; and by the internal replica-
tion of results, by using several comparable games. This study has used the
first and third of these approaches and, in addition, a device believed to
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be used here for the first time: the direct comparison of results obtained
using bidding games and non-monetary environmental preference scales with
the same test environments and the same respondent population. The degree
of consistency found among the results obtained using three different bid-
ding games and the non-monetary preference ranking scale was most impressive
and exceeded the prior expectations of the research team. Thus, substantial
validation of the research is provided.
The use of sociological analyses in this study provided a. valuable
complement to the economic valuation analyses. The examination of non-
monetary preference rankings for consistency with bidding game results
provided a degree of validation of the latter. The sociological study
demonstrated that residents of the study region perceive some of the ad-
verse effects of surface mining to be irreversible, and thus provided use-
ful information which could not be provided using traditional economic
analyses.
The valuation of damage suffered to land and buildings was based on
the results of survey: personal interview surveys to determine the value
of damage to buildings and land off the mining site; and a telephone sur-
vey of realtors to determine the value of land unmined, mined and reclaimed,
and mined but not reclaimed. The data collection technique relies on the
knowlegge and the honesty of respondents, or, on the assumption that errors
and prevarications (to the extent that they exist) are normally distributed
about the "true" mean.
The valuation of damages from increased flooding and impairment of
water quality was undertaken using conceptually valid techniques. However,
serious limitations in the data available forced the research team to under-
take various shortcuts in empirical valuation. In the case of flood damage,
it was necessary to assume that the relationship between the proportion of
the catchment area surface mined and stream discharge was linear regardless
of the size of the catchment area; and that the 1962 Corps of Engineers
study of flood damages in the North Fork below Carr Fork, and the main
Kentucky River, accounted for one half of the flood damages in our study
region and downstream. Access to better data would permit future studies
the use of actual data instead of such precarious assumptions. In the
evaluation of downstream damages from impairment of water quality, it was
necessary to make some heroic assumptions in order to calculate the impact
of mining in the North Fork region on the concentration of suspended sedi-
ment in the Kentucky River. Access to more reliable data on the behavior of
sediment loads in rivers would permit more reliable calculations.
The valuation of recreational losses was undertaken using conceptually
valid techniques. However, data limitations were so serious that this was
the least reliable facet of our empirical case study. No responsible agency
collected reliable data on hunting and fishing activity in the study region,
thus there was no empirical basis for either time series or inferential es-
timation of the impact of increased surface mining on the economic value
of hunting and fishing in the region. The estimation of losses in the value
of water-based recreation downstream from the region was based on a valid
technique but required two assumptions: (1) the assumption (discussed
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above) about the impact of mining in the study region on the concentration
of sediment in the Kentucky River downstream, and (2) an assumption that
one half of the shortfall in recorded recreation on the Kentucky River was
due to poor water-quality while the other half was due to disadvantages of
the river in terms of access and facilities forrecreationists.
More complete information about wildlife and fish populations, and
recreational use would have allowed much greater accuracy in our empirical
analysis of losses related to fish, wildlife and outdoor recreation. We
are certain that the empirical estimate of the value of these losses, pre-
sented in the study is a substantial underestimate.
In aggregate, we believe our estimates of the total value of the
damages from surface mining in the study region, under the various regula-
tory regions, are underestimated, since we know of no items which have been
overestimated but several which have been underestimated.
At this point, let us return to the general model for valuation of the
costs of environmental damage from surface mining (presented in section 3,
note equations 1 through 6 and tables 10 and 11). The observant reader will
have noticed that in our empirical case study while we were faithful to the
concepts of the model, we did not follow its dictates literally. The nine-
teen activities, A, , and twenty-three resource quality changes, Q*., were
compressed into five major categories of damage; aesthetic damage, damage to
land and structures, water treatment costs, damage from flooding, and losses
in fishing, hunting, and recreational activity. This compression is defen-
sible in that it omitted no major categories of damage while on the other
hand, double-counting was assiduously avoided. Further, it was rendered
totally essential by major limitations in the data, both economic and
physical, which were available to us.
However, it would be desirable if, in future such empirical investi-
gations, the general model (as expressed in equations 1 through 6 and tables
10 and 11) was followed more closely. Examination of tables 10 and 11 pro-
vides the basis for identifying the kinds of data which would be needed
from the natural and physical sciences in order to permit that approach.
Finally, it must be noted that there are some problems which our
economic approach did not permit us to analyze thoroughly. Among these are;
the question of irreversible change in the mined environment, the complete
human dimensions of the tragic dilemma faced by a population economically
dependent on an industry which changes irreversibly its beloved mountain
environment and culture, and the option demand and preservation demand
which non-use of the Appalachian environment may have. We feel strongly
that future studies of the environmental costs of surface mining should
include sociological studies of the regional population as we have done
(section 5) and, in addition, should determine option demand and preserva-
tion demand for the environment which may be irreversibly changed by mining.
The Economic Analysis of
Regulatory Alternatives
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The technique used for the analysis of the impacts of alternative
regulatory regimes on the economic value of damage from surface mining is
conceptually sound. The specific requirements of each regulatory alter-
native were identified following careful legal analysis. The research
team, in consultation with a highly qualified expert on surface mining re-
clamation, estimated the changes in physical damage to the environment which
would result from enforcement of the alternative regulatory requirements.
Then, using the techniques which had been used to estimate the economic
costs of environmental damage under the existing regulatory framework, these
costs were estimated under the three alternative regulatory frameworks.
Again, the analytical and empirical technique of economic investiga-
tion which were used in this work are conceptually valid. However, limita-
tions in the availability of essential physical data handicapped the econom-
ic analysis. In particular, we relied on the opinions of a highly quali-
fied, experienced expert, rather than the results of careful scientific
studies, to estimate the impacts of alternative regulatory requirements on
the physical extent of environmental damage from surface mining in the
region.
Feasibility of Application of These Research
Techniques to Other Empirical Problems
Conceptually, the research methodology developed in this case study
is applicable to the estimation of the economic costs of environmental
damage from surface mining of coal in other regions, and from surface mining
for minerals other than coal. As explained (section 3), these techniques
used can be incorporated into the analysis of the social benefits and costs
of surface mining, or the social benefits and costs of reclamation. How-
ever, limitations in economic data and research results from the natural
and physical sciences limit the empirical applicability of the research
technique and the reliability of the results obtained.
While we have noted repeatedly the data limitations which have af-
flicted our empirical case study, we believe that our study region is
rather favorably situated with respect to data, compared with many other
surface mining regions, at the present time. We had access to the follow-
ing, highly valuable, localized studies of our region: (1) the "Surface
Mine Pollution Abatement and Land Use Impact Investigation" study per-
formed at Eastern Kentucky University for the Department of Natural Re-
sources and Environmental Protection, and the Appalachian Regional Comis-
sion, 1975, report ARC 71-66-T2; (2) the long series-of studies conducted
by W.R. Curtis and his associates at the Southeastern Forest Experiment
Station, Berea, Ky*; and (3) the "Kentucky River and Tributaries" study
*In the context, it should be noted that we had access to re-
ports based on data collected prior to 1970. Reports based on more
recent data are in the draft stage, but were unavailable to this
research team. It should also be noted that in 1976 substantially in-
creased funding at the Berea station resulted in the installation of
much newer research equipment. Future research reports from the Berea
station will be very helpful in this kind of analysis.
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by the U.S. Army Corps of Engineers, 87/2 H. Doc. 423, 1962. We doubt
that data of this quality is available for most surface mined regions.
Conclusion
This empirical case study has been a valuable exercise. Its value
lies in two dimensions: (1) the development and refinment of a methodology
for estimating the economic costs of environmental damage from surface min-
ing, and (2) the development of empirical estimates of these costs for a
case study area. While these empirical estimates are subject to data limita-
tions, the research team believes they are of an acceptable order of relia-
bility, and are demonstrably conservative estimates since areas of under-
estimation but not of overestimation can be identified. In spite of the
imperfect nature of these empirical estimates, they represent a substantial
increment to knowledge, where little knowledge previously existed.
Accordingly, it would be highly valuable to carry out several more
such studies in a variety of different mining environments, and considering
each of the major minerals which are surface mined. The information which
would result is essential for the benefit/cost analysis of existing and
proposed surface mining legislation and regulations. In order that pro-
gress be made in this direction, a two-pronged research attack is necessary:
(1) continued research in the physical and natural sciences to elucidate
the relationships between mining and resource quality changes, and between
resource quality changes and the physical productivity of later uses; and
(2) continued economic analyses to provide a broader base of economic in-
formation on the costs of environmental damage form surface mining, to
allow replication of the results of this case study, and to further refine
the relevant techniques of economic analysis.
Finally, it is noted (in section 6) that the fourth regulatory al-
ternative which involves a flexible bonding schedule based on the social
costs of non-reclamation (rather than the private costs of reclamation)
has certain inherent economic advantages. In order to implement such a
regulatory shceme, if that were desired, a substantial investment in
research such as performed in this empirical case study would be necessary.
Nevertheless, that it is possible that the social benefits from such an
undertaking may exceed the costs.
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REFERENCES
1. Brookshire, D., B. Ives, and W. Schulze. The Valuation of Aesthetic
References. University of New Mexico Resource Economics Group, 1976,
2. Randall, A., B. Ives and C. Eastman. Bidding Games for Valuation
of Aesthetic Environmental Improvements. Journal of Environmental
Economics and Management, 1: 132-147, 1974.
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APPENDIX
LEGAL ANALYSIS OF SURFACE
MINING REGULATION
PRIVATE LAW CONCEPTS
The areas of private law we call contract, tort and property have
always played an important role in the ordering of human activities. Even
today, while governmental regulations often supplement this private law
framework rarely do they displace it entirely. This is certainly true
of the coal mining industry. If all legislative and administrative controls
were removed from coal mining operations, in most cases private law doctrines
would still allow the various elements of the coal production process to
adjust relationships among themselves.
While the law of contracts has a significant role in the dynamics of
coal production, tort and property law doctrines are more important in
the land use aspects of mining operations. Each of these bodies of sub-
stantive law will be briefly examined. Within the law of real property
there is a specialized area, known as mineral law, which deals with the
relationship between the holder of the mineral rights and the owner of the
surface estate. The discussion below will concentrate on this area. In
the case of tort law, nuisance is most important, although trespass cases
sometimes occur in the context of strip mining. As a general rule, the
law of nuisance seeks to protect the use and enjoyment of land from
externalities caused by other landowners. Where the plaintiff and defendant
each have an interest in the same tract of land as in the case of a sever-
ance of the surface and mineral ownership, principles of both property and
tort law may be applicable.
A. Mineral Law
1. The Ownership Theory Versus the Profit Theory
There are two theories in the United States concerning severed inter-
ests in real property such as mineral rights: the ownership theory
and the profit theory. Under the ownership theory the mineral inter-
est is regarded as a separate estate of equal dignity with the surface
interest. Title to the minerals underground is vested in the mineral
estate and severed entirely from that of the surface owner. According
to the profit theory, the surface owner continues to own the minerals
in the ground while the holder of the mineral lease or profit a_ pren -
dre, has the right to take and remove the minerals. In the latter
instance, title to the minerals passes to the lessee only when they
have been extracted from the ground. Although Kentucky favors the
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ownership theory, either type of interest can be created, depending on
the instrument by which the rights are granted.
As a general rule, the mineral owner or lessee has certain rights at
common law over the surface estate in order that he may extract the
subsurface minerals. These include the right to sink shafts and drill
through the surface to reach the mineral, the right to cut timber for
use in the mining operation and the right to pump water from the mine
onto the surface. On the other hand, mineral interests must normally
provide lateral and subjacent support for the surface estate.
2. The Broad Form Deed
In Kentucky the relationship between the mineral and surface estate
is often complicated by the existence of a broad form deed. Much of
Kentucky's mineral wealth was sold years ago under sweeping broad form
deeds drafted by coal and land companies. By their express terms these
instruments made the surface estates almost totally subservient to the
mineral estates. Moreover, the Kentucky courts have held that the
right to "mine" under such conveyances, refers not only to deep mining
techniques, but also includes strip mining. A number of court deci-
sions in this state have upheld the right of mineral owners under broad
form deeds to remove their minerals regardless of damage to the surface
estate. In most of these cases, the deeds contained waiver-of-damages
provisions that prevented surface owners from obtaining any compensa-
tion for their losses.
The leading case is Buchanan v. Watson 290 S.W. 2d 40 (Ky. 1956).
The Kentucky Court of Appeals in Buchanan held that the conveyance
of a mineral estate by means of a broad form deed was sufficient to
permit removal of the coal by surface mining methods, regardless
of the intent of the original parties. Moreover, since the broad
form deed contained a waiver of damages clause, the court declared
that "the owner of the mineral has the paramount right to the use
of the surface in the prosecution of its business for any purpose
of necessity or convenience, unless this power is exercised oppressive-
ly, arbitrarily, wantonly, or maliciously, in which event the surface
owner may recover for damages so occasioned." The surface estate
in the Buchanan case was unimproved land. Four years later, however,
in Blue Diamond Coal Co. y_. Neace, the court held that the mineral
owner under a broad form deed was not required to compensate the
surface estate for damage to improvements on the property either.
Applying the Buchanan rationale the court stated that the use of
surface mining techniques, instead of those associated with deep
mining, was not in and of itself sufficient to constitute arbitrary,
wanton, or malicious conduct.
Since 1960 the Kentucky Supreme Court has steadfastly refused to
alter in any significant manner the legal relationship between
the mineral owner and the surface owner. The issue was thoroughly
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re-examined in Martin y_. Kentucky Oak Mining Co. involving a 10-acre
tract of land in Knott County. Most of the parcel was on a hillside,
but there was also a small area of bottom land occupied by the
plaintiff's dwelling house, outbuildings and garden. The plaintiff
sought to prevent the mineral owner from removing the coal by auger or
strip mining operations. The trial court ruled that mineral owner
could strip mine the area but must pay damages to the surface owner
for any destruction of the surface. Both parties appealed the trial
court's decision. Amicus curiae briefs were submitted to the State
Supreme Court (then known as the Court of Appeals) by environmentalist
and civil libertarian organizations as well as by representatives of
the coal industry. A closely divided court (4-3) upheld the rights of
the mineral owner and refused to modify the holding of the Buchanan
decision.
Some years later, in 1974, the Kentucky Legislature attempted to
circumvent the effect of the Buchanan and Martin cases by amending
the state's strip mining regulations. This legislation, known as
"House Bill 9," required applicants for strip mining permits under
KRS Chapter 350 to obtain the written consent of the surface owner.
This would have prevented a mineral owner from strip mining without
securing the permission of the present surface owner. House Bill 9,
however, was declared unconstitutional as an invalid exercise of
the state's police power by the Court in Dept. for Natural Resources
y_. Np_. 8 Limited of Virginia, 528 S.W. 2d 684 (Ky. 1975).
B. Nuisance
The courts often distinguish between public nuisance and private
nuisance. Normally a public nuisance affects the public at large, or those
members of the public who come into contact with it, while a private
nuisance affects only a limited number of individuals. However, the
categories are not mutually exclusive: some conditions or activities may
be characterized as both public and private nuisances where public and
individual interests are simultaneously invaded. Mining activities which
cause water pollution, soil erosion, or mudslides may often be treated
as both public and private nuisances.
1. Public Nuisance
Public or common nuisances are diverse groups of minor criminal
offenses which involve some interference with the interests of the
community or the comfort and safety of the general public. The
entire community need not be affected, however, as long as the
condition interferes with the exercise of a public right. Al-
though a public nuisance is normally treated as a criminal offense,
the government may also pursue a civil remedy.
In addition, private individuals can maintain tort actions when
they suffer damage from a public nuisance which differs from that
suffered by the general public. When a public nuisance affects
the use and enjoyment of one's land, the property owner meets the
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requirements of the "special damage" rule. Not only is each tract
of land considered unique in the eyes of the law, but in most cases
the number of landowners affected by the nuisance will be limited
and their interest different from that of the general public. For
example, in Hancock v. Terry Elkhorn Mining Co., 503 S.W. 2d 710
(Ky. 1973), residents of Johnson County sued to enjoin the use of
overweight coal trucks on state roads. The plaintiffs alleged that
they suffered special injuries because their homes were damaged by
vibrations and dust from the trucks. The court held that the land-
owner's complaint stated a cause of action in public nuisance.
2. Private Nuisance
A private nuisance may be anything which unreasonably annoys or
disturbs the free use of one's property or which renders ordinary
use or physical occupation of the property uncomfortable. Liability
must be ascertained by examining the reasonableness of the defendant's
conduct against the harm to the plaintiff's land. According to the
Restatement of Torts, any intentional invasion is considered unreason-
able unless the utility of the defendant's conduct outweighs the
gravity of the harm. Factors that determine the gravity of the harm
are its extent and character, the suitability of the invaded interest,
and the burden on the injured party of avoiding harm. These factors
must be balanced against the social value of the invading conduct,
its suitability to the locality, and the ease by which it may be
modified to prevent the harm.
3. Remedies
A variety of remedies are potentially available to the successful
plaintiff in a nuisance case. The choice of remedies, however, may
depend on the nature of the defendant's activity, whether the action
is one of public or private nuisance, and whether the suit is brought
by the state or by a private party. Since public nuisance is both
a civil wrong and a crime, the government may institute a civil suit
to enjoin the maintenance of the nuisance or it may bring criminal
proceedings against the defendant. Depending on the circumstances,
a private individual, whether suing in private nuisance or under the
special damage rule in public nuisance, may seek either damages or
injunctive relief.
4. Strip Mining and Nuisance Law
It appears that neither public nor private nuisance theories have
been used very often against surface mining operations in Kentucky.
Mining activities which cause water pollution, endanger public safety,
or damage public highways would normally be considered as public
nuisances. Apparently state officials are reluctant to bring public
nuisances actions against mine operators when such conditions
occur or prefer to deal with these problems under Kentucky's strip
mine regulatory statutes.
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Private nuisance actions are also fairly uncommon. When speaking
of private nuisance it is necessary to distinguish between suits by
surface owners against mineral owners within the same tract of pro-
perty and suits by nearby landowners against surface mine operators.
As we mentioned earlier, where a tract has been divided into a
surface and a mineral estate under a broad-form deed, the surface
owner is usually barred from suing the mineral owner under private
nuisance unless the surface damage is caused by oppressive, arbitrary,
wanton or malicious conduct. The usual principles of private
nuisance apply where the mine operator does not possess any rights
to the plaintiff's land under a broad form deed or some other convey-
ance. However, even though the law provides some protection from the
effects of strip mining, it seems that the expense and uncertainties
of litigation discourage many landowners from asserting their rights
by means of private nuisance actions.
EXISTING PUBLIC REGULATIONS
A. Sources of Regulatory Authority
Although all levels of government, federal, state, and local, engage
in regulatory activities, each derives its regulatory authority from a
different source. In theory, the federal government has no inherent powers,
but may exercise only those powers granted to it under the federal constitu-
tion. Among the more important of these are the commerce power, the
property power, the tax power, and the war power. These constitutional
provisions have been liberally construed by the United States Supreme
Court and, -therefore, generally provide ample support for federal regulatory
legislation.
State regulatory legislation, on the other hand, is based on the
state's police power. This power can be defined as an exercise of the
sovereign right of the state to enact laws for the protection of the
lives, health, morals, comfort and general welfare of the people.
Institutions of local government, such as cities, counties and special
districts have no inherent regulatory powers, but the state, through
legislation, may delegate some of its police power to these local
governmental bodies. A regulation by local government, however, will
be deemed ultra vires and invalid if it exceeds the scope of the authority
delegated to it by the state. The state or federal government may also
delegate a portion of its legislative power to administrative agencies.
Local governmental bodies may also subdelegate their own delegated powers
in the same manner. Thus one can speak of a state or local administrative
agency as having "rulemaking" powers. Such delegation is lawful as
long as the delegating body provides the agency with adequate standards
to control the exercise of administrative discretion.
B. Constitutional Limits on the Exercise of Regulatory Power
Various constitutional provisions impose constraints upon federal,
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state and local governmental regulatory powers. The most important of
these are the due process and equal protection clauses of the federal
constitution. Both the United States Constitution and many state consti-
tutions also prohibit regulations which impair the obligation of contracts,
but this doctrine has largely been incorporated into the concept of due
process and will not be discussed further.
1. Equal Protection
The equal protection clause of the fourteenth amendment of the
federal constitution provides that no state shall deny to any person
within its jurisdiction the equal protection of the laws. Federal
regulatory activities are also subject to equal protection require-
ments through the application of the due process clause of the fifth
amendment. In addition, the principle of equal protection is part
of state constitutional law in virtually every jurisdiction.
Although the concept of equal protection is perhaps better known for
its use by the federal courts in racial discrimination cases, it
is also important where state and local economic or land use regu-
lations are involved. When governmental regulations differentiate
among various classes, such classifications are valid only where there
are real differences between the classes, and the system of
classification is reasonably related to the regulatory objectives
of the statute or ordinance.
2. Due Process
The concept of due process is perhaps the most significant restric-
tion on governmental regulatory authority. The due process clause
of the fifth amendment to the United States Constitution applies
to the federal government, while the due process clause of the
fourteenth amendment to the Constitution is applicable to the
states, and by implication, to local governmental bodies to which
regulatory powers have been delegated by a state. In addition,
most state constitutions have their own due process provisions.
Due process may be divided for analytical purposes into procedural
and substantive aspects. The concept of procedural due process
applies to both civil and criminal proceedings of an adjudicatory
nature. It provides that before life, liberty or property can be
taken by administrative or judicial action, those affected must be
notified and given the opportunity for a hearing before an impartial
tribunal.
Substantive due process imposes a two-fold limitation on governmental
power. First, the regulation must have a reasonable relation to
public safety, health, morals or general welfare. Legislative
findings that a regulation promotes one of these interests, while
not conclusive, are usually very persuasive. Second, governmental
regulations must be reasonable and not arbitrary, capricious or
oppressive. Property and individual rights may be impaired by the
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government only in a manner and to the extent reasonably necessary
to protect a legitimate public interest. This is sometimes referred
to as the "taking issue." Moreover, a regulation which is generally
valid, may be held invalid when applied to a particular individual
or class of persons. For example, a restriction which destroys
substantially all of the value of a particular piece of property
will often be held unconstitutional unless compensation is paid. This
implies a balancing process: the greater the public benefit, the more
burdensome the regulation may become. Nevertheless, there is always
a point beyond which the value of the affected property may not be
diminished, no matter how great the public benefit. This approach
is known as the "diminution-in-value" theory. Other solutions to
the taking problem have also found favor with courts or commentators,
but unfortunately, none of them, including the diminution test, can
be applied with any precision in a specific case.
C. Federal Regualtion
1. Federal Water Pollution Control Legislation
Strip mines are a major source of water pollution in Kentucky.
Sediment, iron compounds, and a variety of other substances are
often discharged into streams as a result of nearby surface mining
operations. Sediment is composed of both suspended solids and
rapidly settleable material. Suspended solids, made up largely
of fine particles of dirt and coal, block light for plant growth,
clog fishes' gills and fill the watercourse with mud. Rapidly
settleable materials, though not as harmful in the short run as
suspended solids, also contribute to the silting up of lakes and
reservoirs. Iron pyrite is often uncovered with strip-mined coal.
When exposed, this material reacts with oxygen in the air and mois-
ture from rainfall or in the stream itself to produce ferrous sul-
fate and sulfuric acid. These substances harm fish and other orga-
nisms by lowering the pH level of the stream. Other harmful
compounds containing manganese, aluminum, nickel, zinc, sulfates,
ammonia, fluoride, strontium, chloride, arsenic, lead, mercury,
oils, and cyanide may also be discharged into streams by strip
mining activities.
Since 1948, the Federal Water Pollution Control Act has been the
major federal statute dealing with water quality. This legislation
has been amended many times. The 1972 Amendments completely
overhauled the existing statute and represent a significant federal
commitment to water quality regulation. These Amendments require
that all discharges of pollutants into the navigable waters of
America be eliminated by 1985. Under its provisions, the
Environmental Protection Agency (EPA) is required to conduct an
extensive research into waste treatment methods. In addition,
the federal government has subsidized a large construction program
for municipal waste treatment facilities. Finally, the 1972
Amendments utilize a variety of enforcement devices in order to
attain the 1985 goal.
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Effluent limitation standards are an important feature of the new
Federal Act. An effluent limitation is a restriction which limits
quantities, rates and concentrations of chemical, physical, biolo-
gical or other constituents which are discharged into the water from
a particular point source. The Act provides that effluent
limitations must require the application of "best practicable" control
technology by July 1, 1977, and by July 1, 1983, effluent limi-
tations must require use of the "best available" technology. In
addition, point sources in certain categories, if constructed after
1972, must meet national performance standards--effluent limitations
equivalent to the 1983 requirements. These categories include such
operations as steel plants, textile mills, paper mills, and feed lots.
Finally, EPA is required to establish separate effluent limitations for
toxic substances.
Effluent limitations are implemented under the Federal Act by the
National Pollution Discharge Elimination System (NPDES). A dis-
charge permit will be issued only if all applicable effluent limitations
are met. In cases where the applicant cannot meet the 1977 or 1983 re-
quirements, the permit must include an enforceable schedule of com-
pliance to meet those goals, and the permit may be modified or re-
voked if any condition is violated. The 1972 Amendments authorize the
EPA to place the permit program under state control provided certain
conditions are met.
First, each state must submit to the EPA for approval a proposed
plan for implementing the new Act. This plan must provide for
effluent limitations and schedules of compliance sufficient to meet
the 1977 and 1983 requirements. The state implementation plan must
also contain new source and toxic standards which are strict enough
to meet the Federal requirements. Second, a state program must
comply with a variety of substantive and procedural requirements.
For example, state programs must provide for a monitoring and re-
porting system, enforcement procedures, and adequate state funding.
Once approved, the state permit program must remain in compliance
with the Federal Act and the EPA may revoke its approval if a state,
after proper notice, fails to remedy the alleged defect.
When the provisions of a federal discharge permit are violated, the
EPA must either issue a compliance order or institute a civil
action. If a state-issued permit is violated, the EPA may also
issue a compliance order or initiate a civil action. Moreover, under
a separate section of the Act, the EPA may seek injunctive relief
even when no permit has been violated, in cases where an imminent
danger to public health exists. Also, private citizens may sue to
enforce effluent limitations contained in state or federal permits
and may also bring suit to compel the EPA to perform any nondiscre-
tionary duty. Finally, there are criminal penalties for those who
willfully or negligently violate the Act's provisions.
At the present time it is unclear whether these strict Federal
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regulations apply to strip mining operations. Most of the Federal
Act's provisions, including NPDES, are applicable only to point
sources. The 1972 Amendments define a "point source" as "any dis-
cernible, confined and discrete conveyance, including but not
limited to, any pipe, ditch, channel, tunnel, conduit, well, discrete
fissure, container, rolling stock concentrated animal feeding
operation, or vessel or other floating craft, from which pollutants
are or may be discharged."
Federal officials in the EPA's Region IV, which includes the state
of Kentucky, have declared that the 1972 Amendments, including NPDES
extend to "pumped or gravity drainage from the bench, . . . dis-
charges from silt basins (settlement ponds) .... [and] discharges
from other treatment facilities associated with coal operations."
The EPA appears to take the position that sheet runoff into a
stream does not constitute a "discrete conveyance" and that a strip
mine would not be considered a point source, unless the operator
placed silt traps or some other treatment facilities into the
stream in question. However, settling ponds, silt traps, pump
hoses or ditches, if manmade, might also be regarded as "discrete
conveyances" within the meaning of the Federal Act. Kentucky's
existing strip mine regulations require strip miners to construct
drainage ditches above high walls and use collection basins, water
retarding structures and silt traps to reduce the effects of runoff
from their operations. Arguably, if a strip mine constructs such
facilities in order to comply with state law, it will also be
subject to the federal government's NPDES program.
The EPA's intention to treat some strip mines as point sources is
further evidenced by the fact that Region IV has already prepared
NPDES permit applications for strip mining. Similarly, the agency
has proposed some effluent limitations for strip mining. Although
a pH parameter of 6.0 to 9.0 is the only final limitation in effect
at the present time, final limitations for iron, dissolved iron and
suspended solids were announced on April 26, 1977 (40CFR434).
If either EPA or the courts finally determine that all or most
strip mining operations must comply with the provisions of the 1972
Federal Act, there will be a significant economic impact on the
mining industry in Kentucky. On the substantive level, the 1972
Amendments require that the discharge of pollutants from point sources
be eliminated by 1985. This goal is to be met by requiring all
operations to emply the "best practicable" control techniques
by 1977 and the "best available" techniques by 1983. A determination
of what "best practicable" means must include consideration of the
total cost of the technology, relative to the amount of effluent
reduction, age of equipment, type of facility and process involved,
as well as any nonwater quality environmental impact. In the case
of strip mining, the 1977 standards would probably require the use of
settlement basins and acid neutralization in conjunction with drainage
ditches and effluent pumpage from the bench. Determination of "best
available" is similar to that of "best practicable" except that cost
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relative to effluent reduction is not a relevant consideration.
It would appear that in some cases the costs of meeting this
standard would exceed the economic benefit of extracting the coal
by surface mining methods.
There are a number of procedural provisions in the new Federal Water
Pollution Control Act that would insure better enforcement of
strip mining regulations. For example, section 402 (b) (3)
requires adequate notice to the public and the opportunity for a
public hearing before any NPDES discharge permit is granted. In
addition, where administration of NPDES has been delegated to the
states, the state agency must give the EPA notice of each application
and provide it with a 90-day period within which to contest the
permit application. This means that each discharge permit would
undergo a minimum three-month review period instead of the two weeks
that is common in Kentucky at the present time. The Act not only
provides for citizen input in the permit application process, but
also requires that the public be given the opportunity to participate
in the development of regulations, programs and standards.
Another provision requires that in some cases, permit applicants
must also provide an environmental impact statement before their
NPDES permit can be granted. The applicant will have to balance
the social costs of extracting the coal by means of strip mining
against the expected economic benefits. Alternatives, such as deep
mining methods, must also be evaluated. Thus, it will be difficult
for the state agency to allow strip mining in areas where the social
or environmental costs greatly exceed economic or other benefits.
This requirement, however, extends only to "new sources." These are
operations which will become subject to NPDES regulation after EPA
establishes performance standards for them under section 304.
Regulation under the Federal Water Pollution Control Act is much
more limited in the case of nonpoint sources. The Act requires the
EPA to identify and study nonpoint sources of water pollution and to
develop alternative guidelines for their control. In addition,
the states must identify areas with substantial nonpoint source
pollution problems, and then, with EPA grants, the states must
develop methods of control for nonpoint sources. The Act, however,
is not very specific about the mechanics of this approach. It
appears, therefore, that the Federal Act would have little imme-
diate effect on strip mining operations if they are treated as
nonpoint sources.
2. Mining in National Parks and Forests
National parks are operated by the Department of the Interior
through the National Park Service. Prospecting, mining, and the
staking of mining claims are prohibited in national park areas
except where specifically provided by a particular park's autho-
rizing legislation.
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The only national park located in Kentucky is Mammoth Cave. There is
no provision allowing prospecting or mining in the authorizing
legislation for Mammoth Cave, and thus mining in the park is outlawed.
National forests were established to conserve natural resources and
to furnish a continuous supply of timber for the citizens of the
United States. Moreover, Congress has declared that the designation
of land as national forest is not to interfere with the exploitation
of the mineral and timber resources of the land so designated.
Nevertheless, there are regulations designed to minimize the adverse
environmental effects of such operations that must be adhered to
by anybody desiring to so utilize the land. To conduct mining
operations on national forest land one must submit a notice of
intent to the District Ranger having jurisdiction over the area in
which the operations will be conducted. If the District Ranger
determines that the operation is likely to cause a significant
disturbance of the surface resources, he will, within fifteen
days after receiving the notice of intent, require the operator to
submit a proposed plan of operations.
A notice of intent should provide information sufficient to identify
the area involved, the nature of the proposed operation, the route
of access to the operation, and the method of transport to be used.
The Forest Service may require the operator to submit a modification
of the plan detailing the means of minimizing unforeseen significant
disturbances of surface resources. Finally, the authorized officer
must perform an environmental analysis for each proposed plan, and if
necessary, may require the operator to prepare an environmental impact
statement.
All mining operations must be conducted in compliance with the
provisions of the Clean Air Act and the Federal Water Pollution
Control Act, and must comply with applicable federal and state
standards regarding the disposal of solid wastes. Operators
must harmonize their operations with the landscape, and take "all
habitats." Operators must also reclaim the surface disturbed in
their operations in such a way as to control erosion and landslides,
control water runoff, isolate or remove toxic materials, reshape
and revegetate disturbed areas where "reasonably practicable,"
and rehabilitate fisheries and wildlife habitats. Operators
must file reports with the District Ranger upon completion of mining
activities, and this includes temporary cessations. Operators
may also be required to post reclamation bonds when this is con-
sidered appropriate by the authorized Forest Service officer.
In 1964 Congress passed the Wilderness Act which designated
certain national forest areas as wilderness areas. These wilderness
areas were meant to be more primitive than forest areas, and the
act stipulates that no one may acquire rights to any mineral desposits
in designated wilderness areas after 1984. Rights acquired
in wilderness areas prior to 1984, however, are preserved and may
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be exercised under the same controls that exist for ordinary national
forest lands. There is a provision in the Wilderness Act
requiring that any mining done on wilderness areas must be carried
out in a manner compatible with the preservation of the wilderness
environment.
D. State Strip Mining Regulatory Legislation
The Kentucky Department for Natural Resources and Environmental
Protection (hereinafter referred to as "the Department") has general
regulatory powers over strip mining activities in Kentucky. The agency's
basic regulatory tool is a permit system which applies to all private strip
mining operations. The Department is expressly authorized to promulgate
rules and regulations for strip mining; to conduct investigations and
hearings; to levy sanctions or require remedial measures forcing an operator
to comply with the law; and to direct its Division of Reclamation to revoke
a permit when other sanctions are inadequate. In addition, the Department
has broad discretion to adopt whatever regulations it deems necessary to
"minimize or prevent injurious effects on the people and resources of
the Commonwealth." If an operator fails to meet the burden of proving
that the operation for which a permit is sought can and will be run and
reclaimed according to the law, the Department may deny, withhold, suspend,
or modify the terms of the permit application accordingly.
Within the Department, the Division of Reclamation supervises the
enforcement of Kentucky's strip mine laws and has seven specific duties:
(1) to enforce the state strip mining laws, rules, and regulations;
(2) to conduct investigations and research relating to strip mining and
reclamation; (3) to adopt administrative and procedural rules and regu-
lations; (4) to examine all reclamation and backfilling plans submitted
by operators in permit applications before approving them; (5) to make
any investigations or inspections needed to insure compliance with state
laws; (6) to order permits suspended when an operator is not complying;
and (7) to stop any operation for which no permit was obtained. Some
75 inspectors are charged with the field work of discovering violations.
To strip mine in Kentucky at the present time, an operator must first
obtain a permit, pay a strip mining fee, and post a reclamation bond.
He must identify his operation site by posting signs, and comply with
safety regulations issued by the state Department of Mines and Minerals,
and at the cessation of production at a particular site the operator must
file a report with the state. To obtain a permit, the operator must file
an application with the Department stating the location and area of the
land that will be affected by the mining operation, including a description
of the routes of ingress and egress to the affected area from the nearest
public highways; the identity of the owners of the surface of all land
within 500 feet of the affected area; the source of operator's legal
right to mine the coal; the permanent and temporary post office addresses
of the applicant; and whether the applicant, or any person, partnership
or corporation associated with the applicant, has ever previously held a
permit to mine coal in the state, and if so, where and when. An operator
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who has had a previous permit in any part of the state revoked or suspended
is not eligible to receive another permit until he has rectified those
deficiencies in his previous operation which led to his permit being
revoked or suspended.
The application for a permit must be accompanied by two copies of
a United States Geological Survey topographic map identifying the area to
correspond with the application, to be prepared and certified by a
professional engineer registered in the state. In addition to showing
the specific operation for which a permit is sought, the maps must show
any adjacent deep mining operations; the boundaries of the surface
properties; the names of the owners of the affected area and the area
within 500 feet of any part of the affected area; the names and locations
of all streams, creeks or other bodies of public water, roads, buildings,
cemeteries, oil and gas wells, and utility lines on the affected area
and within 500 feet thereof; the boundaries of the area of land to be
affected, the cropline of the coal deposit that is to be removed;
the total number of acres involved in the area of land to be affected;
the drainage plan on and away from the area of land to be affected, with
the directional flow of water, constructed drainways, natural waterways
to be used for drainage, and the bodies of water receiving the drainage
to be indicated. The map must be dated and state the name of the applicant
and the name of the person who located the operation on the map.
The permit application must be accompanied by a transportation plan
indicating any parts of the state primary road system over which the
applicant intends to transport coal or other minerals extracted by his
operation. This transportation plan should specify the legal weight
limits for each portion of state highway or bridge over which the applicant
proposes to transport extracted minerals, and should indicate whether
or not the applicant intends to obtain a special permit from the state
to exceed the weight limits on any highway or bridge. The transportation
plan must contain a certification by an authorized state Department
of Transportation official attesting to its accuracy. The permit
application must be accompanied by detailed plans indicating the
method of operation; the manner, time and distance for backfilling and
grading work; and a reclamation plan for the affected area.
The applicant must pay a fee of $150 plus $35 per acre or fraction
of an acre of land to be affected by the operation, and also post a
reclamation bond with the Department of between $500 and $3,000 for each
acre or fraction thereof to be affected, with a minimum amount set at
$5,000. Both fee and bond must be provided before the operation may
commence.
A permittee may apply to the Department for a modification of the
permit so as to entitle him to mine a larger area than originally applied
for. To obtain such a permit modification the operator must follow the
same procedure as that for acquiring the original permit--that is, he must
file an application accompanied by topographic maps of the modified
project, pay the mining fees for the additional acreage, and post
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reclamation bond for the new area. An operator may also apply to
have his permit modified to reduce the area he is entitled to strip.
If an operator's permit area is reduced, the reclamation bond posted for
the eliminated acres is returned to him (although the bond must not be
reduced to less than the $5,000 minimum), and the fees the operator paid
for those acres will be credited to any fees he may have to pay in
applying for future permits. A modified permit is not effective for
a full new year, but expires when the original permit would have expired.
An operator must prepare and carry out a method of operation, a
plan of grading and backfilling, and a reclamation plan for the affected
area. In developing such plans, all measures shall be taken to eliminate
damages to private citizens and their property, public roads, public
streams and all other public property from soil erosion, rolling stones,
and overburden, water pollution and "hazards dangerous to life and
property." Such plans must be submitted to the Department and it
must notify the applicant within twenty days as to whether or not such
plans were approved. If not, the Department shall give the operator
the reasons why and may suggest modifications which will make the plans
acceptable. The operator may request a hearing concerning any adverse
decisions. An operator is specifically required to cover the face
of the coal with compacted nonacid-bearing and nontoxic materials to a
distance of at least four feet above the seam being strip-mined, or by a
permanent water impoundment; bury all the toxic acid-producing or fire-
hazardous materials, including roof coal and pyritic coal or shale;
seal off any break through of acid water creating a fire hazard; impound,
drain or treat all runoff water so as to reduce soil erosion, damage to
agricultural lands and pollution of water bodies; and remove or bury all
metal, lumber and other refuse from the operation. Any dumping or placing
of any materials of debris from the operation beyond the boundaries
of the area described in the permit is prohibited. This prohibition
extends to placing any such materials in such a way that they will be
carried from the permit site by normal erosion or slides brought about
by natural physical causes.
There are also specific backfilling and grading requirements. On
lands where area stripping is done, complete backfilling is required,
"beginning at or beyond the top of the highwall and sloped to the top of
the spoil back at a maximum angle not to exceed the approximate original
contour of the land with no depressions to accumulate water." All
highwalls and spoil peaks are to be eliminated, and the Department can
order the operator to construct ditches or terraces to control water
runoff from the site or other restoration work if it deems such to be
necessary. Reclamation is relatively successful on lands stripped
by. the area method, both because it is easier to reclaim flat land than
hills and because the flat western part of the state is mined primarily
by large, multistate corporations which must be concerned with their
reputations'. Reclamation is much harder in the contour mined hills of
eastern Kentucky,. which is primarily mined by smaller independent
operators.
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Because a mountain cannot be put together again once it has been
cut apart, contour mined areas have much more specific backfilling require-
ments. For example, all highwalls must be reduced or backfilled, and the
steepest slope of the reduced highwall may be no greater than 45°,
although the Department is authorized to waive this requirement if there
is not sufficient soil from backfilling; the restored area shall have a mini-
mum depth of four feet of fill over the floor of the pit from which the
coal has been removed; the restored area must leave no depressions
which might accumulate water, and the Department may require the operator
to construct lateral drainage ditches connected to larger watercourses
when it thinks they are needed. Backfilling and grading requirements
are specified and, in addition, the operator's method of operation on steep
slopes may be regulated and controlled. Such regulations may limit
bench widths, control the amount of overburden placed beyond the solid
bench, and prohibit any overburden being placed beyond the solid bench
on precipitous slopes. The Department may also require the operator
to take any other reclamation steps that might be needed, and may estab-
lish special regulations for any operations conducted on steep slopes.
Operators may propose alternate reclamation plans which the Department
may approve in appropriate circumstances. Normally the backfilling
must be done promptly upon the completion of actual mining, "before
necessary equipment is moved from the operation," but there are some
exceptions to these requirements. For example, if any other bona fide
mining is to be done on the stripped land, the operator may supply the
Department with a map and the details of the additional mining, and
reclamation may be deferred until all mining of all types is finished.
Similarly, if the operator desires to use the mine openings for haulage-
ways or other lawful purposes, he may designate the openings to be so
used and defer reclamation of that part of the stripped land until it is
no longer used for those purposes. However, the reclamation bond posted
by the operator will not be returned to him for the portions of the site
on which reclamation is to be deferred until after the reclamation is
actually done. The reclamation bond is returned to the operator in
two steps after reclamation. The bulk of the bond is returned after the
grading and backfilling is completed, but with $200 per acre held until
after the operator has complied with the vegetative cover requirements.
The vegetative cover requirements for each site are to be defined by
regulations of the Department. Reclamation is to be completed within
one year of the expiration of the operator's permit, unless the Department
has approved an alternate plan of reclamation for the affected area.
The Department may authorize the operator to defer replanting until a
later time if it determines that the soil conditions of the stripped area
will not support plant cover at the time of reclamation. In more extreme
cases where the stripped land may never support vegetation, the Department
may allow the operator to substitute for reclamation an equal area of
orphan land previously stripped but never reclaimed.
While the mining operation is in progress, the operator must post
signs identifying the operator at the points of access to the operation
from the nearest public highways and place monuments outlining the
permit area. The operator must also file two reports. The first
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report must be filed within sixty days after the expiration of the permit,
stating the exact number of acres of land affected by the operation
and the amount of the reclamation work already accomplished. This report
must be accompanied by a copy of the topographic map filed with the
original application revised to reflect any changes in the original plan
made necessary by results of the operation. The second report must
be filed once the planting of a permit area is completed. This report
should include a description of the type of planting done, the date of
planting, and the area planted. The Department then waits at least
until the completion of the first growing season and inspects the vege-
tative cover of the reclaimed area. If the cover is sufficient, the
remainder of the reclamation bond is returned to the operator.
Compared with strip mining legislation in other states, the Kentucky
statute provides a fairly comprehensive regulatory framework. However,
the Act's enforcement provisions are weak. When an inspector detects a
violation, he reports it to the Department. If the violation is serious,
a notice of noncbmpliance is issued or an order of suspension may be made.
If the violations are not remedied, the operator's permit can be revoked
and his reclamation bond forfeited. However, the Department has no
enforcement power of its own, but must rely on the courts to enforce its
orders. The Department can fine operators between $100 and $1,000
for a violation, with the fine to be repeated for every day the violation
continues. To collect the fines, however, the director has to request
the Attorney General to sue the operator. Usually the Department
levies the fine, then threatens to go to the Attorney General, whereupon
the operator and the Department settle the fine out of court. The
Department can also ask the Attorney General to seek restraining orders
and temporary or permanent injunctions against recalcitrant operators.
For willful violations, an operator can be prosecuted for a misdemeanor
and fined between $500 and $5,000 for each day the violation continues.
The penalties are not stiff enough. Coal operators make their
biggest money by operating fast. To be unable to operate on any given
day may easily cost an operator $50,000. Thus, a fine of $1,000, or
even of $5,000 for a willful violation, is of small deterrent value. The
sanctions of suspension or revocation of a permit, on the other hand, are
of very great deterrent value. In Kentucky, however, these remedies are
very seldom used. Once an operator receives a notice of noncompliance,
he is to have a hearing with Department officials at which a scheme of
compliance is to be devised. If the violations persist, suspension or
revocation may be authorized.
Enforcement in the field is often inadequate. There are not
enough inspectors to cover all of the mining sites. Many of these inspectors
are not properly trained; some are corrupt; and others are often hired
away from the Department by the coal companies with large raises once
they have developed sufficient expertise to be troublesome to the coal
companies as inspectors. Threats and assaults upon inspectors efficiently
performing their duties are also not uncommon. Thus, it is likely that
many violations never get reported at all. Of the violations that did
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get reported to the Department during the last half of 1974, only 11%
resulted in issuance of noncompliance notices, with only 84 ultimately result-
ing in suspension.
Another weakness of the Kentucky law is that it does not provide
adequate remedies from citizens aggrieved by strip mining operations. If a
citizen has some complaint he may report it to the Department. If
the agency decides not to take action on the matter, the citizen is then
entitled to a hearing before a hearing examiner. But the Secretary
of the Department is authorized to block the citizen from going to the
hearing examiner if the claim is groundless, and even if the hearing
examiner finds grounds for the complainant, the opinion of the hearing examiner-
is merely advisory. The Departmen can, thus ignore the opinion if it
desires. This leaves the citizen taking his appeal to court, which re-
sults in delay. Considering that an area can be completely ruined by
strip mining in a very short time, the loss of time is crucial. Re-
straining orders and injuctions thus become necessary, but before a
citizen will be granted an injunction, he must post an injunction bond
which few Appalachian strip mining victims can afford.
The Kentucky law also does not require that notice be given to
residents before strip mining begins on their land. The Kentucky
Supreme Court's recognition of the broad form deed means that no
compensation need be paid to farmers before plowing up their crops,
although coal companies now as a practice provide such notice and pay
token consideration.
E. Local Land Use Controls
Local governments utilize a number of regulatory devices to control
land use. Zoning is no doubt the most important of these techniques,
but subdivision controls, official maps and other types of regulation
are also used.
1. Enabling Legislation
Cities and counties have no inherent power to zone or otherwise
control land use activities. They are usually authorized to do so
by state legislation commonly known as state zoning enabling acts
which represent a delegation of the state's police power. As
a general rule, enabling acts do not require local governments to
regulate land use; they merely allow cities and counties to exercise
such power if they wish. Those units of local government which
desire to regulate land use within their boundaries must then enact the
appropriate ordinances. State-enabling legislation, however, not
only authorizes land use controls by local governments, but often sets
limits on such regulation or imposes conditions that must be met
before such power may be exercised. Therefore local land use controls
that go beyond the provisions of the enabling act or are contrary to
them will be held invalid as ultra vires by the court. Kentucky's
enabling act, KRS Chapter 100, has vested extensive land use control
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authority in cities and counties, but also imposes strict standards
on the exercise of this power.
2. Local Zoning Ordinances
The conventional zoning ordinance consists of a text and a map.
The text lists a number of zone categories and describes the types
of land use that is permitted in each category. The zoning map
shows the geographical boundaries of each zone within the city or
county. The zoning ordinance must, of course, be enacted by the
local legislative body. Kentucky's zoning enabling act, however,
requires that a planning commission must be established and a
comprehensive land use plan adopted by it before a city or county
can exercise its power to zone. In addition, all proposed
revisions or amendments to the text or map of the zoning ordinance
must be reviewed by the planning commission before submission to the
local legislative body.
Occasionally, the text of the zoning ordinance will allow a use in
a particular zone only if a conditional use permit is obtained
from a local agency known as the board of adjustment. In addition
to granting conditional use permits, the board may issue a variance,
waiving the restriction of the ordinance for a particular applicant,
when it can be shown that strict application of the zoning restric-
tions would cause the landowner "unnecessary hardship".
3. Local Land Use Controls and Strip Mining
It seems that local governments in Kentucky could restrict strip
mining in some cases by zoning. Kentucky's zoning enabling act
provides that "the city or county may regulate...activity on the
land, including filling or excavation of land, and the removal of
natural resources...." Local zoning of strip mining was also
approved in an Attorney General's Opinion: 'Cities and counties
have the power under planning and zoning statues to reasonably
regulate strip mining in the public interest and to prohibit such
activity as long as it is not completely arbitrary and unreason-
able." Moreover, it appears that the state has not pre-empted
the field by regulatory strip mining under KRS Chapter 350. The
Kentucky Supreme Court in an analogous case held that local regu-
lation of oil and gas activities by means of zoning was not pre-
empted by state statutory authority to control the exploration and
recovery of oil or gas.
Even if regulation of strip mines is authorized by the state zoning
enabling act, particular zoning ordinances may be considered
invalid if they constitute a taking of property without due process
of law. As we mentioned earlier, all exercise of the police power
is subject to the constitutional limitations of substantive due
process. There are cases in other states which have overturned
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local mining restrictions on due process grounds. On the other hand,
such zoning regulations have also been upheld. In determining the
validity of strip mine regulations of this sort the courts must weigh
the economic interests of the coal mine operator against the health,
safety and environmental concerns of the local community. On this
basis it is likely that municipalities could prohibit strip mining
activities within the corporate boundaries.
At the present time several Kentucky coal counties are considering
the enactment of zoning regulations that will restrict the extrac-
tion of coal by surface mining techniques. Zoning by counties may
be less effective because county zoning regulation usually apply
only to unincorporated areas within the county. Attempts to restrict
strip mining in rural or lightly populated areas of a county may
create a taking problem particularly in cases where the land involved
is not suitable for other purposes.
PROPOSED FEDERAL STRIP MINING LEGISLATION
Alternative 3, discussed in Section 6, is based on the proposed
Federal strip mining bill, H.R. 13950, as it stood in August of 1976. We
believe that any Federal bill, when enacted, will have most of the features
described herein. The proposed Federal Act would probably be administered
by the Department of the Interior. The Act would make money available to
each participating state for research and would establish a national
reclamation fund. Money for the fund would be derived from the sale or
lease of federal coal deposits, user charges imposed on the leased federal
lands, and reclamation fees assessed from operators of coal mining opera-
tions. The Act would be administered by the individual states; the federal
government, however, would oversee all operations within a state until
the state submitted a regulatory scheme approved by the Secretary of the
Interior.
The primary regulatory device of the Act would be to require all
strip mine operators to obtain a permit--either from the state involved or,
if a particular state had no approved permit program, from the Secretary
of the Interior--before commencing operations. Permits would be issued
for a maximum of five years and would be renewable, but not transferable.
The proposed Federal Act would require certain information to be included
in a permit application, and a state operating its own approval program
could require additional information. Each permit application would have
to include reclamation plans for the area to be mined. If a proposed
mining area was not suitable for reclamation, no mining permit would be
issued. Reclamation would have to be achieved in a manner consistent
with the local environment and climatological conditions and applicable
state and local land use plans, with measures taken to assure the protection
of both on- and off-site surface water and insure the maximum practicable
recovery of the mineral resources. The regulatory agency with jurisdiction
may also prescribe by regulation any other requirements it deems appropriate.
Unlike the strip mining laws of some states, including Kentucky, the proposed
Federal Act would require that notice be given to and a hearing provided
for all holders of interests in the land to be affected before a permit is
129
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issued. After a permit application and reclamation plan was approved, a
performance bond would have to be posted by the operator before his permit
will be issued. The amount required for the bond would depend upon the
reclamation requirements of the affected area as determined by the regulatory
agency on the basis of independent estimates. The amount would have to be
sufficient to assure the completion of the reclamation plan if the work
had to be performed by a third party.
The Secretary of the Interior and the regulatory agencies of states
with approved plans would have joint responsibility for enforcing the Act.
All permittees would be required to establish and maintain appropriate
records during their operations, install monitoring equipment, and make
periodic reports to the appropriate regulatory agency. The state regulatory
agency would also inspect mining sites at irregular intervals.
The Secretary could request the Attorney General to initiate civil
proceedings against operators violating the Act, and seek injunctions or
fines. Criminal sanctions and imprisonment would be authorized for any
operator convicted of willfully and knowingly violating a permit condition
or of refusing to comply with an order issued by the Secretary. If the
Secretary found that violations of an approved state program appeared to
result from the state's failure to enforce its program effectively, he
could, after notice, assume the enforcement of the state program until
satisfied that the state would effectively enforce its own program. In
addition, citizens would be authorized to bring suit against either the
Secretary or the state regulatory agency to compel them to enforce the Act.
130
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TECHNICAL REPORT DATA
(Please read Instructions on the reverse before completing)
1. REPORT NO.
EPA-600/2-78-003
2.
3. RECIPIENT'S ACCESSIOI*NO.
4. TITLE AND SUBTITLE
ESTIMATING ENVIRONMENTAL DAMAGES FROM SURFACE
MINING OF COAL IN APPALACHIA: A CASE STUDY
5. REPORT DATE
January 1978 issuing date
6. PERFORMING ORGANIZATION CODE
7. AUTHOR(S)
Alan Randall, Orlen Grunewald, Angelos Pagoulatos,
Pif*V»Q"rrl Alienage CIIQ
8. PERFORMING ORGANIZATION REPORT NO.
9. PERFORMING ORGANISATION NA
The University of Kentucky
Lexington, Kentucky 40506
ADDRESS
10. PROGRAM ELEMENT NO.
1HA616
11. CONTRACT/GRANT NO.
68-01-3586
12. SPONSORING AGENCY NAME AND ADDRESS
Industrial Environmental Research Lab. -Gin., OH
Office of Research and Development
U. S. Environmental Protection Agency
Cincinnati. Ohio A5268
13. TYPE OF REPORT AND PERIOD COVERED
Final
14. SPONSORING AGENCY CODE
EPA/600/12
15. SUPPLEMENTARY NOTES
16. ABSTRACT
The major objectives of this research were to develop a methodology for
valuation, in economic terms, of the environmental damage from surface mining; to
apply that methodology in an empirical case study of the environmental damage
associated with surface mining of coal in Appalachia; and to estimate, in economic
terms, the value of the environmental damage from surface mining of coal in the
case study region, under four alternative regulatory frameworks.
The empirical case study was conducted in the watershed of the North Fork
of the Kentucky River, a mountainous region which includes parts of six counties,
four of which have been heavily impacted by surface mining of coal. Findings
were that (1) surface mining in the study region generates environmental damage
of substantial economic magnitude; (2) existing Kentucky regulations reduce the
value of that damage; (3) a Federal bill, similar to that introduced in the 1977
Congress would further reduce the value of damage; (4) a regulatory alternative
which places more emphasis on economic incentives is worthy of further study; and
(5) given current reclamation technology some of the environmental damage from
surface mining in the mountainous study region is irreversible.
17.
KEY WORDS AND DOCUMENT ANALYSIS
DESCRIPTORS
b.lDENTIFIERS/OPEN ENDED TERMS C. COSATI Field/Group
Mining
Surface Mining
Coal Mines
Economic Analysis
Reclamation
Kentucky
Appalachia
Environmental
Protection
05C
081
13B
18. DISTRIBUTION STATEMENT
RELEASE TO PUBLIC
19. SECURITY CLASS (ThisReport)
UNCLASSIFIED
21. NO. OF PAGES
141
20. SECURITY CLASS (Thispage)
UNCLASSIFIED
22. PRICE
EPA Form 2220-1 (9-73)
131
U. S. GOVERNMENT PRINTING OFFICE: 1978-757-11(0/666') Region No. 5-11
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