Asleep at the Switch: How the Department of Labor Failed to Oversee the Black Lung Disability Trust Fund, House hearing transcript (February 26, 2020), GovInfo CHRG-116hhrg41101, PDF
Summary
The House Subcommittee on Workforce Protections examined the Department of Labor’s oversight of coal mine operators allowed to self-insure their black lung liabilities at this February 26, 2020 hearing, Serial No. 116-54. Cindy Brown Barnes of GAO testified that the bankruptcies of Alpha Natural Resources, James River Coal and Patriot Coal transferred an estimated 3,300 beneficiaries to the Black Lung Disability Trust Fund. GAO had reported around $325 million for those three bankruptcies; DOL had since raised the estimate to $865 million, and had secured just $27 million of collateral. Julia Hearthway of the Office of Workers’ Compensation Programs said the Trust Fund’s debt, just under $6 billion, is projected to exceed $12.6 billion in today’s dollars by 2044, with $11.4 billion due to accrued interest on advances from the Treasury.
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Full text
ASLEEP AT THE SWITCH:
HOW THE DEPARTMENT OF LABOR
FAILED TO OVERSEE THE BLACK
LUNG DISABILITY TRUST FUND
HEARING
BEFORE THE
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
COMMITTEE ON EDUCATION
AND LABOR
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
HEARING HELD IN WASHINGTON, DC, FEBRUARY 26, 2020
Serial No. 116–54
Printed for the use of the Committee on Education and Labor
(
Available via the World Wide Web: www.govinfo.gov
or
Committee address: https://edlabor.house.gov
U.S. GOVERNMENT PUBLISHING OFFICE
41–101 PDF WASHINGTON : 2022
COMMITTEE ON EDUCATION AND LABOR
ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia, Chairman
Susan A. Davis, California Virginia Foxx, North Carolina,
Raúl M. Grijalva, Arizona Ranking Member
Joe Courtney, Connecticut David P. Roe, Tennessee
Marcia L. Fudge, Ohio Glenn Thompson, Pennsylvania
Gregorio Kilili Camacho Sablan, Tim Walberg, Michigan
Northern Mariana Islands Brett Guthrie, Kentucky
Frederica S. Wilson, Florida Bradley Byrne, Alabama
Suzanne Bonamici, Oregon Glenn Grothman, Wisconsin
Mark Takano, California Elise M. Stefanik, New York
Alma S. Adams, North Carolina Rick W. Allen, Georgia
Mark DeSaulnier, California Lloyd Smucker, Pennsylvania
Donald Norcross, New Jersey Jim Banks, Indiana
Pramila Jayapal, Washington Mark Walker, North Carolina
Joseph D. Morelle, New York James Comer, Kentucky
Susan Wild, Pennsylvania Ben Cline, Virginia
Josh Harder, California Russ Fulcher, Idaho
Lucy McBath, Georgia Steve Watkins, Kansas
Kim Schrier, Washington Ron Wright, Texas
Lauren Underwood, Illinois Daniel Meuser, Pennsylvania
Jahana Hayes, Connecticut Dusty Johnson, South Dakota
Donna E. Shalala, Florida Fred Keller, Pennsylvania
Andy Levin, Michigan* Gregory F. Murphy, North Carolina
Ilhan Omar, Minnesota Jefferson Van Drew, New Jersey
David J. Trone, Maryland
Haley M. Stevens, Michigan
Susie Lee, Nevada
Lori Trahan, Massachusetts
Joaquin Castro, Texas
* Vice-Chair
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
ALMA S. ADAMS, North Carolina, Chairwoman
Mark DeSaulnier, California Bradley Byrne, Alabama,
Mark Takano, California Ranking Member
Pramila Jayapal, Washington Mark Walker, North Carolina
Susan Wild, Pennsylvania Ben Cline, Virginia
Lucy McBath, Georgia Ron Wright, Texas
Ilhan Omar, Minnesota Gregory F. Murphy, North Carolina
Haley M. Stevens, Michigan
(II)
C O N T E N T S
Page
Hearing held on February 26, 2020 ....................................................................... 1
Statement of Members:
Adams, Hon. Alma S., Chairwoman, Subcommittee on Workforce Protec-
tions ................................................................................................................ 1
Prepared statement of ............................................................................... 4
Wright, Hon. Ron, a Congressman from the State of Texas ......................... 5
Prepared statement of ............................................................................... 6
Statement of Witnesses:
Brown Barnes, Ms. Cindy, Director, Education, Workforce and Income
Security, U.S. Government Accountability Office ...................................... 8
Prepared statement of ............................................................................... 11
Hearthway, Ms. Julia, Director, Office of Workers’ Compensation Pro-
grams, U.S. Department of Labor ............................................................... 27
Prepared statement of ............................................................................... 29
Additional Submissions:
Ms. Adams:
Questions submitted for the record ......................................................... 53
Ms. Brown Barnes response to question submitted for the record .............. 55
(III)
ASLEEP AT THE SWITCH:
HOW THE DEPARTMENT OF LABOR
FAILED TO OVERSEE THE BLACK
LUNG DISABILITY TRUST FUND
Wednesday, February 26, 2020
House of Representatives,
Subcommittee on Workforce Protections,
Committee on Education and Labor,
Washington, D.C.
The subcommittee met, pursuant to call, at 3:01 p.m., in Room
2175, Rayburn House Office Building, Hon. Alma S. Adams (Chair-
woman of the subcommittee) presiding.
Present: Representatives Adams, DeSaulnier, Jayapal, Cline, and
Wright.
Also Present: Representatives Scott, Foxx, Cartwright, Walberg,
Meuser, Keller, and Griffith.
Staff Present: Jordan Barab, Senior Labor Policy Advisor; Ilana
Brunner, General Counsel; Sharit Cardenas, Labor Policy Fellow;
Eli Hovland, Staff Assistant; Stephanie Lalle, Deputy Communica-
tions Director; Jaria Martin, Clerk/Special Assistant to the Staff
Director; Kevin McDermott, Senior Labor Policy Advisor; Max
Moore, Staff Assistant; Ivorie Stanley, Health and Labor Policy Fel-
low; Banyon Vassar, Deputy Director of Information Technology;
Gabriel Bisson, Minority Staff Assistant; Courtney Butcher, Minor-
ity Director of Member Services and Coalitions; Rob Green, Minor-
ity Director of Workforce Policy; Jeanne Kuehl, Minority Legisla-
tive Assistant; John Martin, Minority Workforce Policy Counsel;
Hannah Matesic, Minority Director of Operations; Alexis Murray,
Minority Professional Staff Member; Carlton Norwood, Minority
Press Secretary; and Kelly Tyroler, Minority Professional Staff
Member.
Chairwoman ADAMS. The Subcommittee on Workforce Protec-
tions will come to order.
Welcome, everyone. I note that a quorum is present. I note for
the subcommittee that Mr. Tim Walberg of Michigan, Mr. Meuser
of Pennsylvania, Mr. Fred Keller of Pennsylvania, Mr. Morgan
Griffith of Virginia, and Mr. Matt Cartwright of Pennsylvania are
permitted to participate in today’s hearing with the understanding
that their questions will come only after all the Members of the
Subcommittee on Workforce Protections and the full committee, re-
(1)
2
spectively, on both sides of the aisle who are present have had an
opportunity to question the witnesses.
The subcommittee is meeting today for a hearing to hear testi-
mony on ‘‘Asleep at the Switch: How the Department of Labor
Failed to Oversee the Black Lung Disability Trust Fund.’’ Pursuant
to Committee Rule 7(c), opening statements are limited to the
Chair and the Ranking Member. This allows us to hear from our
witnesses sooner and provides all Members with adequate time to
ask questions.
I recognize myself now for the purpose of making an opening
statement.
Today we will hear the disturbing story of a major failure of gov-
ernment oversight, a failure apparently going back several decades,
and an even more troubling account of how the coal operators and
their creditors on Wall Street have left taxpayers to take the hit.
Last June the subcommittee held a hearing about the growing red
ink in the Black Lung Disability Trust Fund. A decline of coal pro-
duction, a reduced level of funding due to the sunset of the Black
Lung Excise Tax, and the resurgence of black lung disease is push-
ing the Trust Fund deeper and deeper into debt.
Today we will explore another important piece of this problem,
The Department of Labor’s failure to ensure that coal operators are
covering their fair share of the benefits owed to miners and their
families. When miners are disabled from black lung disease they
can file a claim for black lung benefits with the Department of
Labor. If a claim is approved, the coal operator that most recently
employed them is required to provide benefits and cover medical
expenses for the miner and their family.
The law requires that operators have insurance to cover benefits
for miners and their survivors, benefits that frequently outlast the
life of the mining company. If a mine operator shuts down or files
for bankruptcy, however, benefits are paid from the Black Lung
Disability Trust Fund, which is financed by a small tax on each ton
of mined coal.
In order to ensure that the obligations of the mine operators do
not fall on the Trust Fund and taxpayers, operators are required
by the DOL to either purchase commercial insurance sufficient to
cover their current and future obligations or mine operators can
self-insure, as long as they can prove that they have collateral suf-
ficient to cover their obligations. DOL is supposed to oversee that
self-insurance program. But the Department of Labor has failed to
enforce the mandate that self-insured mine operators set aside suf-
ficient collateral in the event of bankruptcy. As a result, the
amount of collateral DOL has required from some of these opera-
tors is tens of millions of dollars less than their most recent esti-
mated black lung benefit liability.
In 2016 Chairman Scott and then-Congressman Sander Levin
asked that the Government Accountability Office to examine the
potential exposure of the Trust Fund from self-insured mine opera-
tors who file for bankruptcy, evaluate the effectiveness of DOL’s
oversight over the program, and make recommendations for im-
proving oversight of the program.
The GAO is here today to detail their report. We will also hear
from the Director of the Department of Labor’s Office of Workers’
3
Compensation Programs to describe the Department’s efforts to
correct this problem. We will hear some troubling findings today.
Last summer, we learned from GAO that of 22 self-insured coal
operators, DOL had not reassessed black lung liabilities or collat-
eral levels of almost half of them in the past 10 years. And one of
these operators had not been examined for over 30 years.
Today, we will learn that over 6 months after the DOL required
self-insured coal operators to update their information, DOL has
still not publicly released updated estimates of liability and the ap-
propriate levels of collateral.
Today we will also hear about the consequences of this inad-
equate oversight. GAO’s report found that mine operators in three
very large recent bankruptcies involving nearly one billion dollars
in black lung liabilities were required to post only three percent of
the needed collateral.
At last June’s hearing, the GAO made a preliminary finding that
the bankruptcies of those three companies, Alpha Natural Re-
sources, James River Coal, and Patriot Coal, had resulted in $310
million being added to the Trust Fund’s obligations. Today we will
learn that the true number is $865 million, three times the original
estimate. While taxpayers were saddled with debt, coal executives
were walking around with millions of dollars in salaries and bo-
nuses.
Following their bankruptcy declaration, one of the bankrupt op-
erators, Alpha Resources, offered executive bonuses of up to $11.9
million to its top executives. Alpha CEO Kevin Crutchfeld made al-
most $8 million in 2014, the year Alpha declared bankruptcy, and
then another $1.8 million in 2016 when Alpha emerged from bank-
ruptcy. At the same time, Alpha dumped $494 million in liabilities
into the Trust Fund, while providing only $12 million in collateral.
As part of the $12 million payment, DOL allowed Alpha’s suc-
cessor to continue to self-insure after the bankruptcy. This fleecing
of the Trust Fund and taxpayers has occurred under DOL’s nose
despite the Department’s power to prevent it. The Black Lung Ben-
efits Act gives DOL the authority to hold coal executives personally
liable for the cost that was shifted to the Trust Fund, but this
power has rarely been used in the 40 years since this authority was
given to DOL.
Finally, the Department had no functioning appeals process in
those rare occasions when they remove an operator’s permission to
self-insure and the operator appealed.
The American people expect good government and deserve an-
swers.
I am disappointed that the Department has refused to brief the
committee prior to this hearing about its proposal to remedy the
self-insurance program.
That said, we will be particularly interested in their plans to ad-
dress this problem and we will want to ask GAO whether they
think these efforts are adequate.
This is a failure on multiple fronts over multiple administrations.
What we are seeing here is nothing less than a gaming of the sys-
tem. The winners are the coal operators and their Wall Street
creditors. The losers are the American taxpayers. In other words,
4
the costs of black lung disease have been socialized and the gains
from DOL’s failed oversight have been privatized.
Today we hope to learn what happened, how to fix it, and how
to prevent it from happening again.
Finally, I want to recognize all of the coal miners who are at-
tending this important hearing, thank you for traveling all this dis-
tance.
I look forward to hearing from our witnesses and thank them for
their testimony.
I now recognize the distinguished ranking member, Mr. Wright,
for the purpose of making an opening statement.
[The statement by Chairwoman Adams follows:]
Prepared Statement of Hon. Alma S. Adams, Chairwoman, Subcommittee
on Workforce Protections
Today, we will hear the disturbing story of a major failure of government over-
sight – a failure apparently going back several decades – and an even more trou-
bling account of how the coal operators and their creditors on Wall Street have left
taxpayers to take the hit.
Last June, this subcommittee held a hearing about the growing red ink in the
Black Lung Disability Trust Fund (Trust Fund). The decline of coal production, a
reduced level of funding due to the sunset of the black lung excise tax, and a resur-
gence of black lung disease is pushing the Trust Fund deeper and deeper into debt.
Today, we will explore another important piece of this problem: The Department
of Labor’s (DOL)failure to ensure that coal operators are covering their fair share
of the benefits owed to miners and their families.
When miners are disabled from black lung disease, they can file a claim for black
lung benefits with the Department of Labor. If a claim is approved the coal operator
that most recently employed them is required to provide benefits and cover medical
expenses for the miner and their family. The law requires that operators have insur-
ance to cover benefits for miners and their survivors, benefits that frequently out-
last the life of the mining company. If a mine operator shuts down or files for bank-
ruptcy however, benefits are paid from the Black Lung Disability Trust Fund, which
is financed by a small tax on each ton of mined coal.
In order to ensure that the obligations of the mine operators do not fall on the
Trust Fund and taxpayers, operators are required by the DOL to either:
1. Purchase commercial insurance sufficient to cover their current and future obli-
gations, or
2. Mine operators can self-insure, as long as they can prove that they have collat-
eral sufficient to cover their obligations. DOL is supposed to oversee that self-insur-
ance program.
But the Department of Labor has failed to enforce the mandate that self-insured
mine operators set aside sufficient collateral in the event of bankruptcy. As a result,
the amount of collateral DOL has required from some of these operators is tens of
millions of dollars less than their most recent estimated black lung benefit liability.
In 2016, Chairman Scott and then-Congressman Sander Levin asked the Govern-
ment Accountability Office (GAO) to:
1. Examine the potential exposure of the Trust Fund from self-insured mine oper-
ators who file for bankruptcy;
2. Evaluate the effectiveness of DOL’s oversight over the program, and
3. Make recommendations for improving oversight of the program.
The GAO is here today to detail their report. We will also hear from the director
of the Department of Labor’s Office of Workers Compensation Programs to describe
the Department’s efforts to correct this problem. We will be hearing some troubling
findings today.
Last summer, we learned from GAO that of 22 self-insured coal operators, DOL
had not reassessed black lung liabilities or collateral levels of almost half of them
in the past ten years. One of these operators had not been examined for over 30
years.
Today, we will learn that over six months after the DOL required self-insured coal
operators to update their information, DOL has still not publicly released updated
estimates of liability and the appropriate levels of collateral.
Today, we will also hear about the consequences of this inadequate oversight.
GAO’s report found that mine operators in three very large recent bankruptcies in-
5
volving nearly $1 billion in black lung liabilities were required to post only 3 percent
of the needed collateral.
At last June’s hearing, the GAO made a preliminary finding that the bankruptcies
of those three companies – Alpha Natural Resources, James River Coal, and Patriot
Coal – had resulted in $310 million being added to the Trust Fund’s obligations. But
today we will learn that true number is $865 million – three times the original esti-
mate.
While taxpayers were saddled with debt, coal executives were walking away with
millions of dollars in salaries and bonuses.
Following their bankruptcy declaration, one of the bankrupt operators, Alpha Re-
sources, offered executive bonuses of up to $11.9 million to its top executives. Alpha
CEO Kevin Crutchfeld made almost $8 million in 2014, the year Alpha declared
bankruptcy, and then another $1.8 million in 2016 when Alpha emerged from bank-
ruptcy.
At the same time, Alpha dumped $494 million in liabilities into the Trust Fund
while providing only $12 million in collateral. As part of the $12 million payment,
DOL allowed Alpha’s successor to continue to self-insure after the bankruptcy.
This fleecing of the Trust Fund and taxpayers has occurred under DOL’s nose de-
spite the Department’s power to prevent it. The Black Lung Benefits Act gives DOL
the authority to hold coal executives personally liable for the costs that were shifted
to the Trust Fund. But this power has rarely been used in the 40 years since this
authority was given to DOL.
Finally, the Department had no functioning appeals process in those rare occa-
sions when they remove an operator’s permission to self-insure and the operator ap-
pealed. The American people expect good government and deserve answers.
I am disappointed that the Department has refused to brief the Committee prior
to this hearing about its proposal to remedy the self-insurance program. That said,
we will be particularly interested in their plans to address this problem and wheth-
er those efforts are adequate. This is a failure on multiple fronts by current and
previous administrations to protect American taxpayers, miners, and their families.
What we are seeing here is nothing less than a gaming of the system. The win-
ners are the coal operators and their Wall Street creditors. The losers are the Amer-
ican taxpayers. In other words, the costs of black lung disease have been socialized
and the gains from DOL’s failed oversight have been privatized. Today, we hope to
learn what happened, how to fix it, and how to prevent it from happening again.
Finally, I want to recognize the coal miners who are attending this important
hearing. Thank you for travelling all this way. I look forward to hearing from our
witnesses and thank them for their testimony. I yield to the Ranking Member, Mr.
Wright, for his opening statement.
Mr. WRIGHT. Thank you, Madam Chair.
Workers in the mining industry have been an extremely valuable
part of the American economy for decades. Congress created the
Black Lung Benefit program to provide benefits to mine workers
who are disabled due to black lung disease. As the chair has men-
tioned, unfortunately the Black Lung Disability Trust Fund, which
is funded primarily through a tax on coal and designed to provide
benefits to these workers when responsible employers are not able
to pay benefits, has not been managed effectively.
According to a study released this morning, which was also men-
tioned, by the GAO the Trust Fund has faced financial challenges
since it was established more than 40 years ago. In fact, the Trust
Fund has needed to borrow from the U.S. Treasury almost every
year to cover its expenditures, which includes financing the debt
that the program has generated since its inception.
It is our understanding that today’s hearing is intended to focus
on Department of Labor oversight of the Trust Fund specifically re-
lated to the coal miner operator insurance program. While there is
bipartisan agreement that there have been serious oversight prob-
lems facing this program, it is disappointing that my Democrat col-
leagues have decided to schedule this hearing only hours after the
GAO publicly released its report. This has left members and the
6
public very little time to thoroughly go through the findings and
recommendations included in the report and limited their oppor-
tunity to question today’s witnesses more effectively. Program in-
tegrity and proper DOL oversight should not be shortchanged and
prematurely rushed by this committee.
I also take issue with the title of today’s hearing. Committee
Democrats have once again titled this hearing in a way to deceive
the general public and place scrutiny solely on the Trump Adminis-
tration. The GAO made it clear that the Trust Fund has faced fi-
nancial challenges since it was established in 1978, not just under
the Trump Administration, as the misleading title of this hearing
might suggest.
Additionally, the DOL’s oversight of the Trust Fund and oper-
ational failures have persisted for decades under both Democrat
and Republican administrations. Let us not forget the Obama Ad-
ministration’s war on coal made it harder for coal companies to
thrive, while at the same time the Trust Fund’s financial problems
continued to grow.
As we will hear from both of our witnesses today, the Office of
Workers’ Compensation programs under the Trump Administration
is taking long overdue proactive steps to improve oversight and
management of the Trust Fund by implementing new processes to
reevaluate and reauthorize self-insurance for coal mine operators,
requesting additional data on black lung claims and benefit liabil-
ity and issuing preliminary guidance to field supervisors and claim
examiners.
I believe we can all work together with this Administration to
support common sense, workable, and innovative approaches to en-
sure DOL is conducting proper oversight and ensuring miner bene-
fits are protected.
I am encouraged by Director Hearthway’s work in this area and
the ongoing efforts to implement the GAO’s recommended reforms
to improve oversight of this important program.
I want to thank both of our witnesses for being here today and
I look forward to your testimony.
Thank you, Madam Chair.
[The statement by Mr. Wright follows:]
Prepared Statement of Hon. Ron Wright, a Congressman from the State of
Texas
Workers in the mining industry have been an extremely important part of the
American economy for decades. Congress created the Black Lung Benefits Program
to provide benefits to mine workers who are disabled due to black lung disease.
Unfortunately, the Black Lung Disability Trust Fund, which is funded primarily
through a tax on coal and designed to provide benefits to these workers when re-
sponsible employers are not able to pay benefits, has not been managed effectively.
According to a study released this morning by the Government Accountability Of-
fice (GAO), the Trust Fund has faced financial challenges since it was established
more than 40 years ago. In fact, the Trust Fund has needed to borrow from the U.S.
Treasury almost every year to cover its expenditures, which includes financing the
debt that the program has generated since its inception.
It is our understanding that today’s hearing is intended to focus on Department
of Labor (DOL) oversight of the Trust Fund specifically related to the coal mine op-
erator insurance program. While there is bipartisan agreement that there have been
serious oversight problems facing this program, it is disappointing that my Demo-
cratic colleagues have decided to schedule this hearing only hours after the GAO
publicly released its report. This has left Members and the public very little time
to review thoroughly the findings and recommendations included in the report and
7
limited their opportunity to question today’s witnesses more effectively. Program in-
tegrity and proper DOL oversight should not be shortchanged and prematurely
rushed by this Committee.
I also take issue with the title of today’s hearing. Committee Democrats have once
again titled this hearing in a way to deceive the general public and place scrutiny
solely on the Trump administration. The GAO made it clear that the Trust Fund
has faced financial challenges since it was established in 1978, not just under the
Trump administration – as the misleading title of this hearing suggests. Addition-
ally, the DOL’s oversight of the Trust Fund and operational failures have persisted
for decades under Democrat and Republican administrations.
Let’s not forget, the Obama administration’s ‘war on coal’ made it harder for coal
companies to thrive, while at the same time the Trust Fund’s financial problems
continued to grow.
As we will hear from both of our witnesses today, the Office of Workers’ Com-
pensation Programs under the Trump administration is taking long overdue,
proactive steps to improve oversight and management of the Trust Fund by imple-
menting new processes to reevaluate and reauthorize self-insurance for coal mine
operators; requesting additional data on black lung claims and benefit liability; and
issuing preliminary guidance to field supervisors and claims examiners.
I believe we can all work together with the administration to support common-
sense, workable, and innovative approaches to ensure DOL is conducting proper
oversight and ensuring miner benefits are protected. I am encouraged by Director
Hearthway’s work in this area and the ongoing efforts to implement the GAO’s rec-
ommended reforms to improve oversight of this important program. I’d like to thank
our witnesses for being here today and I look forward to hearing your testimony.
Chairwoman ADAMS. Thank you, Mr. Wright.
All of the Members who wish to insert written statements into
the record may do by submitting them to the Committee Clerk elec-
tronically in Microsoft Word format by 5:00 p.m. on March 10.
I will now introduce our two witnesses. Our first witness will be
Ms. Cindy Brown Barnes, who is the Director of Education, Work-
force, and Income Security with the Government Accountability Of-
fice. Ms. Brown Barnes leads the Government Accountability Office
team that audited the Department of Labor’s management of the
Black Lung Disability Trust Fund. She has more than 30 years of
experience performing audits of Federal agencies, she holds a bach-
elor’s degree in accounting from Howard University and a master’s
degree in business from Johns Hopkins University.
I am now pleased to recognize my colleague, Congressman
Meuser to introduce the second witness appearing before us today.
As I understand, they served together in the Pennsylvania legisla-
ture.
Mr. Meuser, you may introduce our witness.
Mr. MEUSER. Thank you, Madam Chair.
Yes, it is my honor and privilege to introduce to the committee
Ms. Julia Hearthway. Julia spent from 1993 to 2011 as a pros-
ecutor in the Pennsylvania Attorney General’s Office. She then
from 2011 to 2015 did in fact serve as the secretary of the Pennsyl-
vania Department of Labor and Industry. Pennsylvania is the fifth
largest state and Miss Hearthway oversaw the fifth largest state
agency with over 5,000 employees, 150 offices, and an annual oper-
ating budget in excess of $1.2 billion.
There she performed extraordinarily. She set up a website,
known as Job Gateway, that had strong effect on the gaining of
nearly 250,000 jobs, she established something called the Keystone
Works, something she created, a workforce development initiative,
which is still in effect, and she played a very important role in the
8
largest single investment ever made, private sector investment
ever made within the business environment in Pennsylvania.
So in 2016, certainly worth mentioning Madam Chair, 2016 to
2017 Ms. Hearthway was appointed by a Democratic governor to
the Commonwealth Court of Pennsylvania as an appellate judge.
And from September 2017 until the present she now serves as the
director of the Office of Workers’ Compensation Programs at the
Department of Labor.
I can tell you, from being a colleague and friend of Ms.
Hearthway’s for a number of years, she is incredibly dedicated,
super smart, she is a great public servant. We are fortunate to
have her with us today. And she knows coal.
So nice to see you, Miss Hearthway.
I yield back, Madam Chair.
Chairwoman ADAMS. Thank you, thank you very much.
We appreciate the witnesses for being here today and look for-
ward to your testimony.
Let me remind the witnesses that we have read your written
statements and they will appear in full hearing record. Pursuant
to Committee Rule 7(d) and the committee practice, each of you is
asked to limit your oral presentation to a 5 minute summary of
your written statement.
Let me remind the witnesses that pursuant to Title 18 of the
U.S. Code, Section 1001, it is illegal to knowingly and willfully fal-
sify any statement, representation, writing, document, or material
fact presented to Congress, or otherwise conceal or cover up a ma-
terial fact.
So before you begin your testimony please remember to press the
button on the microphone in front of you so that it will turn on and
members can hear you. As you begin to speak the light in front of
you will turn green. After 4 minutes the light will turn yellow to
signal that you have 1 minute remaining. When the light turns
red, your 5 minutes have expired and we ask that you please wrap
up.
We will let both the witnesses make their presentations before
we move to member questions. When answering a question, please
remember to once again turn on your microphone.
I will now recognize Ms. Cindy Brown Barnes. You have 5 min-
utes, ma’am.
TESTIMONY OF CINDY BROWN BARNES, DIRECTOR, EDU-
CATION, WORKFORCE AND INCOME SECURITY, U.S. GOVERN-
MENT ACCOUNTABILITY OFFICE
Ms. BROWN BARNES. Chairwoman Adams, Ranking Member
Wright, and distinguished members of the subcommittee, thank
you for inviting me to discuss our concerns about oversight of coal
miner operator black lung insurance.
Black lung benefits are generally to be paid by coal operators
that are found responsible. However, the Trust Fund pays benefits
in certain circumstances, such as when an operator goes bankrupt.
A domestic coal tax is the Trust’s primary funding source. Today
I will discuss how coal mine operator bankruptcies have affected
the Trust Fund and how the Department of Labor, or DOL, man-
9
aged coal mine operator insurance to limit financial risk to the
Trust Fund.
Federal law generally requires coal mine operators to secure
their black fund benefit liability. A self-insured coal mine operator
assumes the financial responsibility for providing black lung bene-
fits to its eligible employees by paying claims as they are incurred.
Operators are allowed to self-insure, if they meet certain DOL con-
ditions and they must provide collateral. Operators that do not self-
insure must obtain commercial coverage.
We found that commercial coverage can help limit Trust Fund
exposure from coal operator bankruptcies. However, for self-insur-
ance we found that DOL failed to protect the Trust Fund by obtain-
ing adequate collateral from coal operators.
On slide one we identified six coal mine operators that filed for
bankruptcy between 2014 and 2016 that DOL had permitted to
self-insure. Three of these bankruptcies resulted in the transfer of
estimated benefit liability from the coal operator to the Trust Fund
and three did not.
Slide two provides some additional details. The bankruptcies of
Alpha Natural Resources, James River Coal, and Patriot Coal
transferred responsibility for an estimated 3,300 beneficiaries to
the Trust, which means the taxpayers will ultimately be respon-
sible for their black lung disability payments.
We reported to this committee last June that these three bank-
ruptcies would transfer around $325 million, however, DOL re-
cently increased this estimate to $865 million as a result of signifi-
cant changes to their actuary analysis. In the three bankruptcies
DOL had secured just $27 million of collateral. For example, the
collateral DOL required from Alpha Natural Resources was about
$12 million and $494 of estimated benefit liability was transferred
to the Trust Fund. DOL has been challenged collecting collateral
from coal operators. For example, in September 2001, DOL notified
James River Coal that $5 million in additional collateral was re-
quired, however, DOL never received this collateral and from 2001
until the James River bankruptcy in 2014 DOL took no action to
obtain additional collateral or revoke their self-insurance. As a re-
sult, this bankruptcy transferred an estimated liability of $141 mil-
lion to the Trust Fund.
In 2015 DOL stopped monitoring self-insured coal operators as it
began developing a new self-insurance process. While DOL was de-
veloping this process, several other self-insured operators also filed
for bankruptcy, including Cambrian Coal, Cloud Peak Energy,
Murray Energy, and Westmoreland Coal.
In 2015 DOL had also recommended revoking Murray Energy’s
self-insurance due to deteriorating financial conditions, however,
Murray appealed this decision and DOL officials said the postponed
responding to the appeal until their new self-insurance process was
implemented. Murray filed for bankruptcy about 4 years later and
DOL had not revoked the self-insurance or obtained a requested
additional collateral.
In July 2019 DOL began implementing a new process for coal
miner operators’ self-insurance that may help to address some past
deficiencies if implemented effectively. For example, when setting
collateral, DOL will consider an operator’s current and future ben-
10
efit liabilities and an operator’s risk of insolvency. A low risk oper-
ator would be required to obtain collateral of 15 percent of its esti-
mated benefit liability, a medium risk operator would be 45 per-
cent, and a high risk operator would be 90 percent. However, in
February, these percentages were revised to 70, 85, and 100 per-
cent respectively. These percentages have not been incorporating
formal agency guidance and we found that DOL’s new process still
lacks procedures for self-insurance removals and coal operator ap-
peals.
In conclusion, coal operator bankruptcies have already caused
substantial damage to the Trust Fund and we remain concerned
about continued bankruptcies and the looming unsecured black
lung benefit liabilities that still threaten the Trust Fund. While we
commend DOL’s efforts to address the deficiencies of its past self-
insurance process, DOL still has not collected adequate collateral
from self-insured coal operators and implemented key internal con-
trol improvements needed to protect the financial interests of the
Trust Fund.
Thank you. This concludes my prepared statement. I would be
happy to entertain any questions.
[The statement of Ms. Brown Barnes follows:]
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Chairwoman ADAMS. Thank you very much.
I will now recognize Ms. Julia Hearthway. You are recognized for
5 minutes, ma’am.
TESTIMONY OF JULIA HEARTHWAY, DIRECTOR, OFFICE OF
WORKERS’ COMPENSATION PROGRAMS, U.S. DEPARTMENT
OF LABOR
Ms. HEARTHWAY. Chairwoman Adams, Representative Wright,
Representative Meuser—thank you so much for the kind introduc-
tion—and distinguished members of the subcommittee, thank you
for inviting me here today to testify about the Office of Workers’
28
Compensation Program, OWCPs, administration of the Black Lung
Act’s insurance provisions.
In reference to the title of this hearing, I am pleased to report
to this committee that OWCP is wide awake. The self-insurance
approval process for coal mine operators has been completely re-
vamped. The process today is robust, it is financially sound, and it
is designed to protect the Trust Fund.
I also want to stress at the outset that no miner is at risk for
not receiving the benefits they deserve, nor have they ever been at
risk. All black lung recipients, miners and their families, will re-
ceive their benefits. Congress made certain that benefit payments
would never be in jeopardy. U.S. Treasury is required to make ad-
vances to the Trust Fund whenever necessary to meet its obliga-
tions. America has always met this obligation.
The GAO report highlights the failings of the prior self-insurance
approval process and the unfortunate impact on the Trust Fund. It
was a broken process that had been in place for at least 20 years.
And I agree, the process was woefully inadequate.
One of my first acts when I joined this Administration in Sep-
tember of 2017 as director of OWCP was to approve updates to the
self-insurance process. The new process was carefully developed in
consultation with economists, financial experts, and actuaries. All
coal mine operators that had previously been approved to self-in-
sure had to reapply for self-insurance authority. Under the new ap-
proval process coal mine operators are required to provide audited
financial statements for the past 3 years, all current black lung
claims information, and an actuarial estimate of current and future
liabilities. Operators must calculate those actuarial estimates on
assumptions drawn from historical data of the Black Lung Trust
Fund.
OWCP has now performed financial health assessments of each
operator, analyzed the actuarial reports, and calculated appropriate
security. Last week OWCP notified most of the coal mine operators
of the new security requirements. These new security requirements
thus far will add an estimated $164 million of total security to the
Trust Fund. To my knowledge, this is the most thorough process
in the history of the Black Lung Benefits Act. GAO has recognized
our efforts, and on behalf of OWCP I thank them for the acknowl-
edgement of our work.
GAO made three recommendations regarding our new process
and we have already implemented those recommendations. But let
me add, while all these steps are necessary to protect the Trust
Fund, this is not the major driver of the Trust Fund debt. The cur-
rent debt, which is just under $6 billion, is projected to exceed
$12.6 billion in today’s dollars by 2044. Approximately $1 billion of
that over the next 25 years is attributed to bankruptcy of the self-
insured operators. $11.4 billion is due to accrued interest on ad-
vances made from the Treasury.
The Trust Fund has been in debt since it was created. Over 90
percent of the beneficiaries entering the Fund did so during the
first 6 years of its existence. Only 10 percent of the beneficiaries
entered in the following 36 years. Twelve years after the Trust
Fund creation annual revenue collected from coal excise tax was
sufficient to fully pay annual benefits and expenses, however, it
29
was not sufficient to finance the debt generated during the pro-
gram’s early years.
With the overwhelming majority of beneficiaries entering the
Trust Fund in the early years, a financial structure that provided
no initial funding and an annual variable interest rate on all bor-
rowing, the Trust Fund has continuously borrowed money to pay
interest charges. But, again, despite the consistent rising interest
cost, no miner is ever at risk of not receiving the benefits they de-
serve.
Thank you, and I will be happy to answer any questions you may
have.
[The statement of Ms. Hearthway follows:]
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Chairwoman ADAMS. Thank you very much.
Under Committee Rule 8(a) we will now question witnesses
under the 5 minute rule.
I will recognize myself now for 5 minutes.
Ms. Brown Barnes, do you think that DOL’s revised criteria for
self-insurance, which was newly summarized in your report today,
is sufficient to prevent unfunded liabilities from being transferred
to the Trust Fund or does it need to be strengthened?
Ms. BROWN BARNES. We commend DOL’s new collateral require-
ments, but they still have to obtain the collateral and, more impor-
tantly, they have to provide the oversight and management of the
program to prevent the mistakes from the past.
35
Chairwoman ADAMS. So you believe that it needs to be strength-
ened then?
Ms. BROWN BARNES. Yes, it—and also continue to actually an-
chor these policies or these procedures in formal agency guidance
would also be helpful.
Chairwoman ADAMS. Okay. Ms. Hearthway, according to GAO
you had originally reported that you would require a high risk op-
erator to secure with collateral 90 percent of estimated benefit li-
ability, a medium risk operator to secure 45 percent, and a low risk
operator to secure 15 percent. Then this month DOL suddenly
changed that, telling GAO that you now plan to revise these per-
centages to 100 percent, 85 percent, and 70 percent for high risk,
medium risk, and low risk operators respectively.
Now, yes or no, did you adopt the higher levels of required collat-
eral? Yes or no?
Ms. HEARTHWAY. We did adopt it.
Chairwoman ADAMS. You did?
Ms. HEARTHWAY. Yes.
Chairwoman ADAMS. You did? Did you decide to adopt those
higher levels—or when did you decide to adopt them?
Ms. HEARTHWAY. So the initial levels that you read, the 15, 45,
90, they were sort of initial placeholders. This has been an ongoing
process, but it was relatively recent, in the last couple of months.
We had been discussing as we neared the end of the completion of
evaluating all of the self-insured coal mine operators what would
be the appropriate amounts. And in numerous discussions, with
lots of help from our actuary, we developed that we thought it
should be higher. So a low risk would now be at 70, a medium risk
would be at 85, and a high risk would be at 100. And when we sent
out the letters for the collateral amounts, that is what we have in-
dicated to each of those companies.
Chairwoman ADAMS. Okay. You state in your testimony that you
have issued 14 decision letters. What was the range of collateral
required of the coal operators in those decision letters that you
issued?
Ms. HEARTHWAY. So out of the 14, 2 of the coal operators were
not accepted to continue to self-insure, 6 of those operators showed
low, so we are asking for 70 percent of the collateral, 4 were me-
dium, and 2 were high with 100 percent being requested from
them.
Chairwoman ADAMS. Okay, so that was going to be my—you said
two were high?
Ms. HEARTHWAY. Two were at the high level, yes.
Chairwoman ADAMS. Okay. And how many medium and how
many low did you say?
Ms. HEARTHWAY. Four were at the medium level, six at the low
level, and then there was two that were not agreeing to self-insure.
Chairwoman ADAMS. Okay. All right. Can you provide the com-
mittee with copies of those 14 letters?
Ms. HEARTHWAY. I believe so. We will check with counsel, but I
don’t think it is a problem.
Chairwoman ADAMS. Okay. Ms. Hearthway, I described how the
corporate directors of the three coal operators who saddled the
Fund with an additional $865 million in under collateralized liabil-
36
ities personally profited from their bankruptcies to the tune of tens
of millions of dollars. So do you think that was right?
Ms. HEARTHWAY. Well, these are—clearly had the appropriate
collateral been secured before the bankruptcy, this would not have
been a problem. And as I have indicated, this was a broken system
and has been for two plus decades. Had the current collateral been
collected, then it wouldn’t have been an issue. But, unfortunately,
it was not.
Chairwoman ADAMS. What actions has DOL taken to protect the
Trust Fund in bankruptcy proceedings and keep coal executives
from profiting at the expense of taxpayers?
Ms. HEARTHWAY. So, this I think is a huge step. This is a step
where to prevent—well, regardless of what occurs with a coal mine
operator, you have these sufficient collateral up front protecting
any future claims with respect to their employees that may develop
black lung and fall into need of benefits and have a claim. That I
think is the most critical step.
The other tool available is to fine a coal mine operator if they
don’t properly secure. And we can do that on a daily basis. That
had not been done in the past. We do intend to do it in the future
if they do not properly attain the correct collateral or go to commer-
cial insurance.
Chairwoman ADAMS. Thank you, ma’am. I am out of time now.
So I am now going to recognize Ranking Member Wright for the
purpose of questioning the witnesses.
You are recognized, Mr. Wright.
Mr. WRIGHT. Thank you, Madam Chair.
Ms. Hearthway, the jump to $865 million, was that due solely to
the fact that collateral was not collected?
Ms. HEARTHWAY. The 800?
Mr. WRIGHT. The increased $865 million was a huge jump.
Ms. HEARTHWAY. Yes. So the initial estimate that was done, they
were done—three different companies over the course of a couple
of years from about 2015 to 2017. We started to see a trend where
claims were increasing, both the submission of claims and the ac-
ceptance of claims. And sometimes that occurs after a bankruptcy,
but this particular trend was sustained. So we went back and re-
calculated the collateral, or the potential liability of those three
companies. That trend line changed the dynamics. That, in addi-
tion to now we were 2 years later, there was a different discount
factor to apply to it, and there was 1 coal mine operator, when the
original projections were made, did not calculate in future claims.
Those primary three factors increased the amount. But we wanted
to be completely transparent and up front with what the actual li-
abilities were, so we redid the calculations to say going forward,
this is what we think the impact to the Trust Fund will be.
Mr. WRIGHT. And I commend you for that and also for the steps
you have taken. But speaking of trend lines, what is it now?
Ms. HEARTHWAY. The claims are still going up, both the submis-
sion of claims and acceptance of claims. Our last calculations have
all been done as September 30 of 2019.
Mr. WRIGHT. Okay. Ms. Barnes, the report released today notes
that between 2014 and 2016 coal production decreased by a billion
tons, down to 728 million tons. Now, what impact does this de-
37
creased production have on the Black Lung Disability Fund?
Doesn’t declining production contribute to this mess?
Ms. BROWN BARNES. It does contribute to it and the declining
production decreases the revenue.
Mr. WRIGHT. Realizing—and I am going back to you, Ms.
Hearthway—realizing that connection exist, isn’t it at least incon-
gruous to be, you know, passing blame on the coal companies when
you had a President of the United States that for 8 years launched
a war on coal and made it as difficult as possible for them to
thrive, wanted them to die, wanted them to fail, and now we have
got this huge increase in liability? During that period, wasn’t it
more difficult for the coal companies to operate?
Ms. HEARTHWAY. There is no question that between 2014 and
2016 eight coal companies declared bankruptcy. The three that
were being talked about today that are in the GAO report hap-
pened during that time period, and the liabilities for those—let me
get the full picture. There have been four bankruptcies since 2017
as well. That is a total of 12 bankruptcies, but currently 6 have en-
tered—of those liabilities have fallen on the Trust Fund. Three
bankruptcies have emerged from bankruptcy and those bank-
ruptcies will not impact the Trust Fund. There are three other
bankruptcies where we don’t know yet.
So clearly the economy and the impact of these 12 bankruptcies
have had an influence. But as I indicated in my opening, main
driver of the debt is still the interest charges—
Mr. WRIGHT. Right.
Ms. HEARTHWAY.—on the outstanding debt.
Mr. WRIGHT. Last thing, and I am about out of time, you indi-
cated earlier that you were in agreement with the recommenda-
tions from GAO. Is there anything you disagree with in their re-
port?
Ms. HEARTHWAY. No. The recommendations were well received,
they were of activities that we were planning on in many respects.
Everything should be very transparent. Of the letters that we sent
out we told all the coal mine operators that if they want to appeal
this it must be done within 30 days. My intent is to have any re-
sponse back on those appeals within a total of 90 days. Every coal
mine operator has also been told that they will have to reapply for
self-insurance status in a year and that they need to get us all doc-
uments 3 months prior to the end of that expiration period. All of
those things were recommendations that the GAO also made and
we have already implemented.
Mr. WRIGHT. Great. Thank you.
Thank you, Madam Chair.
Chairwoman ADAMS. Thank you.
The gentlelady from Washington, Ms. Jayapal, you are recog-
nized for 5 minutes.
Ms. JAYAPAL. Thank you, Madam Chair, and thank you both for
being here.
I think we all understand the backbreaking work that miners do.
My husband is from Pennsylvania and his grandfather and his
grandfather’s brother were both coal miners and I have heard a lot
of stories about that work and what it meant to come home after
a long day and all of the health effects that went along with that.
38
So I am grateful that Congress passed the Federal Coal Mine
Health and Safety Act and the Black Lung Benefits Act to make
sure that former miners who cannot work due to black lung disease
are cared for.
It is only logical that mine operators are responsible for paying
for these costs since their mines caused the miner’s lung disease
and their companies profited from the miner’s labor. But too often,
as we are seeing, these mining companies are forcing taxpayers to
foot the bill for their failures.
Ms. Brown Barnes, you are the director of Education, Workforce,
and Income Security at GAO. You have testified today that the De-
partment of Labor’s Office of Workers’ Compensation Programs has
permitted mine operators to avoid paying for workers’ compensa-
tion and instead many mine operators cut costs by a process known
as self-insuring. Is the DOL adequately screening companies that
apply for self-insurance?
Ms. BROWN BARNES. Under the former process, they didn’t. But
they have taken some steps to put this new process in place, but
it still remains to be seen in terms of the oversight and the man-
agement of it.
Ms. JAYAPAL. Mm-hmm. And as you know, Alpha Natural Re-
sources’ executives only posted $12 million of the company’s re-
serves to cover $495 million in liabilities, and yet Alpha’s execu-
tives managed to pay themselves tens of millions of dollars prior
to and during bankruptcy proceedings. If the DOL were to use its
current legal authorities to sue mining executive to recover losses
due to underfunded self-insurance, do you expect that those execu-
tives would do a better job of collateralizing their obligations?
Ms. BROWN BARNES. Yes. And that would have to happen before
bankruptcy, because after bankruptcy DOL has to get in line with
the other unsecured creditors.
Ms. JAYAPAL. Exactly. It is too late by then.
Ms. BROWN BARNES. Yes.
Ms. JAYAPAL. And the DOL has used this tool before and it recov-
ered money for the taxpayer.
In light of the declining financial health of the industry overall
and the egregious abuses by mine company CEOs, who manage to
escape their liability toward workers while getting millions of dol-
lars in payouts, it seems like it is time to end self-insurance and
simply require operators to rely on commercial black lung claims
insurance.
And so, Ms. Hearthway, you direct the Office of Workers’ Com-
pensation Programs, can you give us any good argument for why,
given what the GAO has revealed, there should continue to be a
self-insurance program? Why shouldn’t all operators be required to
just purchase commercial insurance?
Ms. HEARTHWAY. So the statute itself allows for self-insurance,
so we are following the law by administering it. But I do under-
stand your concerns and you are absolutely correct. Had the appro-
priate collateral been secured, then it doesn’t matter that they are
self-insured because the appropriate amount of collateral has al-
ready been secured. That is why these reforms are so important
and that is why we have done them now, to ensure that regardless
39
of whether it is commercial or self-insurance, the appropriate
amount of money is there to pay future claims.
Ms. JAYAPAL. Right. That is right. I mean I agree with that you
that it is necessary to have the collateral, but why not just ask—
I guess I didn’t hear an answer as to why not just ask for commer-
cial insurance instead of—are you saying it is because it is in the
law that it is allowed, and so you are just following the law as it
is?
Ms. HEARTHWAY. Correct. Correct.
Ms. JAYAPAL. Okay. And so the DOL may, under the Black Lung
Benefits Act, impose personal liability on CEOs and high level offi-
cers of the mining company when the company has not complied
with its obligation to provide sufficient insurance to cover its liabil-
ities to the program. Prior secretaries of the DOL have successfully
pursued those actions, including Secretaries Brock and Donovan,
who served under President Reagan. But under this current leader-
ship, the DOL doesn’t seem to have done that. Is that correct? Has
the DOL enforced this provision and required mining company ex-
ecutives to pay their fair share instead of putting it on the tax-
payers?
Ms. HEARTHWAY. So I noticed you went back to the Reagan Ad-
ministration. I could not find an instance where daily fines were
administered against a coal operator for not securing the appro-
priate insurance in the past 20 years.
Ms. JAYAPAL. But is there a reason you wouldn’t do it? It is al-
lowed by the law, so—
Ms. HEARTHWAY. No, I think it is—I think it is a valuable tool
if they do not secure the appropriate insurance or put up the re-
quired collateral.
Ms. JAYAPAL. Because you could do that right now from the ex-
ecutives of Alpha, Patriot, or James River. Those are all three self-
insured companies that recently went bankrupt. That would be a
great way to ensure that those companies actually pay into the
Fund that they knew from the very beginning that they were sup-
posed to pay into.
Ms. HEARTHWAY. I could not impose a fine on them now, post
bankruptcy.
Ms. JAYAPAL. But you could have?
Ms. HEARTHWAY. The past Administration could have.
Ms. JAYAPAL. Anyway, my time—yes, my time has expired, but
thank you so much.
Chairwoman ADAMS. Thank you very much.
I will now recognize the gentlelady from North Carolina, ranking
member of Education and Labor, Dr. Foxx.
Dr. FOXX. Thank you, Madam Chairman.
Ms. Hearthway, I think what you were trying to say that didn’t
get heard because you were interrupted is the previous Administra-
tion could have issued those fines. Is that what you said?
Ms. HEARTHWAY. Yes.
Dr. FOXX. Good. I think it is really important that we determine
that most of these problems occurred in the previous Administra-
tion, the Obama Administration. But they do go back for over 20
years, as you have said. So both Democrats and Republicans are
culpable.
40
It is really unfortunate that this has not been looked at in the
past. But much of what happened in the Obama Administration in
trying to put coal companies out of business exacerbated the prob-
lem.
Ms. Hearthway, in your comments, included in the GAO report
released today, you mentioned that the Office of Workers’ Com-
pensation Programs, OWCP, began efforts to address concerns
about coal miner operator insurance oversight in 2015. Could you
provide additional details about the timing and implementation of
improved processes and changes that have been implemented since
you were appointed as OWCP director?
And, by the way, if you have any ideas about why our prede-
cessor didn’t do any of these, I would love to hear those.
Ms. HEARTHWAY. So to give you an understanding of when the
bankruptcies started to occur in 2014, 2015, and 2016—
Dr. FOXX. Under the Obama Administration?
Ms. HEARTHWAY. Yes, yes. The career individuals in our office
recognized a problem and they started looking at it. When I came
on board in September of 2017 under the Trump Administration
one of the first things I did was support them from a leadership
point of view to implement this actual process. To give it—
Dr. FOXX. So the leadership in the Department of Labor did not
support the career people in implementing the proper policies?
Ms. HEARTHWAY. I can only speak that I did that at the time I
came in. It was not done—it had not been implemented before.
When I came in I signed a directive to move forward in putting a
new process in place. Myself and the team have worked very hard
to get this in place. It is a long time coming, but I think it is good
news that it is now there.
Dr. FOXX. Thank you. Ms. Hearthway, what is the primary
source of Black Lung Disability Trust Fund funding? I think you
have alluded to this before. How much of an impact did coal mine
company bankruptcies have on Trust Fund solvency compared to
other challenges, such as the interest? Again, you have alluded to
this. Are miners’ and survivors’ benefits ever at risk? You have told
us, I believe, that they are not even when the Trust Fund faces fi-
nancial administrative challenges.
Ms. HEARTHWAY. Yes. The bankruptcies have had an impact, but
if you look at it in the totality of what is happening, it is less than
10 percent. More than 90 percent of the impact to the Trust Fund
has been this accruing interest. It is really government borrowing
with government and charging interest on it. The coal excise tax
has been able to pay since 1990 the benefits and administrative
cost for the black lung program, but they have not been able to
make up the interest charges that accrue annually.
Dr. FOXX. Thank you.
Ms. Brown Barnes, when GAO provided the draft report to the
Department of Labor for review and comment, what was the De-
partment’s reaction to the recommendation you outlined, was the
Department aware of the concerns that the report detailed, the re-
port detail regarding oversight of Black Lung Disability Trust
Fund, and did the Department note that were ongoing inference to
correct these processes?
41
Ms. BROWN BARNES. Yes. As far as the recommendations, they
agreed with all of the recommendations and they note that they
had already started taking some steps to address them.
Dr. FOXX. Thank you very much.
Ms. Hearthway, OWCP is in the process of overhauling how it
determines collateral amounts required for self-insured coal mine
operators. Can you compare the new criteria with the criteria pre-
viously used, and discuss why using actuarial analyses to assess
the insolvency risk of operators in future black lung benefits liabil-
ities is important.
Dr. HEARTHWAY. Yes, thank you for that question.
This is a key game changer with respect to protecting the Trust
Fund. Actuarial reports were not asked for in the past. There is no
way without an actuarial report to have any indication as to what
future liabilities will be, both for current and future employees that
may come down with black lung disease.
But also, we are not allowing the coal operators to provide their
own actuarial reports based on their own factors. They have to ac-
cept the factors we have given them. For example, if it falls into
the Trust Fund, it is what the Trust Fund has experiencing in
terms of medical cost. So we gave them the factor in calculating the
actuarial amount. They must use our medical cost, they must use
our claims information, so that, one, every operator is using the
same factors when calculating their actuarial amount—
Chairwoman ADAMS. The gentlelady is out of time.
Ms. HEARTHWAY.—and they are not using their own. That is one
of the key factors.
In addition to that, though, we have 3 years of financial records,
we have the claims information, we—
Chairwoman ADAMS. We are out of time, ma’am. The gentlelady
is out of time.
Thank you.
Dr. FOXX. Thank you, Madam Chairman.
Chairwoman ADAMS. I want to recognize now the gentleman
from Virginia, Chair of Education and Labor, Mr. Scott. You are
recognized for 5 minutes.
Mr. SCOTT. Thank you, Madam Chair.
I think there is one thing we can agree on with the ranking
member, and that is that both parties helped to get into this mess,
so if we could just look forward to see how we can get out. We don’t
have to go through the blame game and all that.
The ranking member, the gentleman from Texas, mentioned that
this hearing is being held right after the report was issued. I would
like the record to reflect that my staff has advised me that an em-
bargoed draft of the report was available to the Republican staff 2
weeks ago and the final draft was made available to the Repub-
lican staff on Friday. If there is a miscommunication then we can
deal with that.
Ms. Hearthway, looking forward, what mechanisms are now
being used to enforce the collateral requirements?
Ms. HEARTHWAY. So we just sent out the letters with the new
collateral amounts for each of the operators. They have 30 days to
respond to that. We will not grant them self-insurance status until
we have the appropriate proof that collateral has been secured.
42
Mr. SCOTT. And what happens if they don’t respond?
Ms. HEARTHWAY. Then they will have to either get self-insurance
or they can be fined.
Mr. SCOTT. Okay. And is anything—
Ms. HEARTHWAY. I am sorry, I said self-insurance. They would
have to get commercial insurance or be fined. I misspoke.
Mr. SCOTT. Okay. Is anything being done to go after officials? It
is my understanding that the officials of companies jointly and sev-
erally and personally are liable if they did not put up appropriate
collateral. Is anything being done now to go after the officials?
Ms. HEARTHWAY. So once an operator falls into the bankruptcy
courts, our office is active in trying to negotiate as well as put for-
ward the—as any other creditor—of what is to be paid. But that
is all we can do at that point.
Mr. SCOTT. Well, that is—if the company is in bankruptcy, are
the officials in bankruptcy too?
Ms. HEARTHWAY. No.
Mr. SCOTT. They are jointly, severally, and personally liable. Is
that right?
Ms. HEARTHWAY. Yes, I believe so, but it is my understanding
through the bankruptcy court it would be still very difficult had we
not done fines ahead of time to collect that amount.
Mr. SCOTT. Okay. Is any consideration being given to go after the
officials at this point?
Ms. HEARTHWAY. In that sense no, sir, because the bankruptcy
courts, there are proceedings which our attorneys are involved with
respect to that. But our focus is to get the correct amount of collat-
eral now so that issue isn’t in front of us.
Mr. SCOTT. Okay. You indicated that the taxes were paying the
benefits but not the interest that is being accrued. Is that the old
interest rate that was paid 2 years ago or the lower interest rate
that is being collected now?
Ms. HEARTHWAY. So every year the interest rate changes.
Mr. SCOTT. Yes, but the tax. The tax was not extended—
Ms. HEARTHWAY. So we don’t know the end of the borrowing
from this year yet, but we were not—we did not have to borrow ad-
ditional funds last year when the tax was reduced, to pay benefits
and administration expenses. To pay the ongoing interest, a great
deal had to be borrowed.
Mr. SCOTT. Okay. Does the Department of Labor support a long-
term extension of the tax rate?
Ms. HEARTHWAY. No, that is not a position here. Tax is a factor
to be considered, but it is not the only factor to be considered in
the solution of the debt of the Fund.
Mr. SCOTT. Well, one of the problems with the tax not being suf-
ficient to pay the bills is that you have two—actually three possi-
bilities, either we continue to run up debt, and as you indicated it
is headed toward, what, $20 billion if we don’t do something, or we
can just let the taxpayer continue to subsidize. The third unfortu-
nate possibility is we cut benefits. Were benefits cut in 1981?
Ms. HEARTHWAY. I am not certain, sir, but I don’t think there is
any discussion of cutting benefits. And the real issue on the debt
is government borrowing from government. It is the interest
charges from the Treasury, which are charged each year. The
43
amounts are calculated, but that amount isn’t technically paid, it
just shows up on the spreadsheet.
Mr. SCOTT. Let me ask one quick question, is there any affect on
the Trust Fund caused by the increase in the progressive massive
fibrosis, the more severe black lung? Does that have an effect on
the Trust Fund?
Ms. HEARTHWAY. We have not been able to see a statistical effect
yet on that. We are certainly aware of the reports with respect to
that, but it hasn’t shown up in our data in terms of the number
of claims, the length of claims. We are seeing an increase in claims,
as I indicated before, but I don’t have more data that I could pin-
point a reason for that.
Mr. SCOTT. Thank you, Madam Chair.
Chairwoman ADAMS. I now would like to recognize the gen-
tleman from Pennsylvania, Mr. Keller. Five minutes please.
Mr. KELLER. Thank you, Madam Chair, and thank you to the
panel for being here today.
I do have a couple of questions regarding some things based upon
the report. But first, Miss Hearthway, under the Office of Workers’
Compensation Programs, new process for authorizing coal mine op-
erator self-insurance, what types of documentation are coal mine
operators required to provide as part of an application.
Ms. HEARTHWAY. So we ask a lot of more detailed questions in
our application. We ask for 3 years of audited financial statements,
we ask for the actuarial report. If they want to send their own ac-
tuarial report, they are welcome to do that. We ask for all current
claims benefit information that have been paid out over the past
3 years, and we have a tool in which we are analyzing based on
all that financial information the low, medium, and high risk cat-
egories that we have placed coal operators in.
Mr. KELLER. Okay. Another just to follow up on that You say
that you require this now, were these always the requirements or
were there new additions based on the GAO or other recommenda-
tions to strengthen the program oversight?
Ms. HEARTHWAY. So these are strengthened. There has always
been a request for financial documents. And the big problem here
is that so much time went by without there being a review of this.
So if the earlier questions and testimony is accurate, years would
go by and no one had reviewed the self-insurance process. So even
if you asked for financial information, it may have been 10 or 15
years old.
One of the key aspects of this new process is this will be done
annually and—and we are going to get quarterly financial reports
from all the operators going forward.
Mr. KELLER. The operators. And you talk about having the infor-
mation available. Of course, many companies are organized in dif-
ferent ways, are these companies privately held companies or are
they publicly traded companies or are they some of both?
Ms. HEARTHWAY. I believe they are a mixture, sir.
Mr. KELLER. They are a mixture. So actually a publicly traded
company then would have information more readily available?
Ms. HEARTHWAY. Correct.
Mr. KELLER. Okay. Just sort of trying to understand that, be-
cause I know we all talk about how we hold people accountable and
44
who owns these companies and makes the money from them. And
a lot of times it may not just be an individual, but it might be
something that is publicly traded on the stock market.
Ms. HEARTHWAY. Correct.
Mr. KELLER. Therefore owners could be pension funds and all the
other kind of things of some of these bankrupt companies?
Ms. HEARTHWAY. That is correct.
Mr. KELLER. Okay. Thank you.
Ms. Brown Barnes, you report mentions that the Black Lung Dis-
ability Trust Fund has faced financial challenges since it was first
established over 40 years ago. If there are not sufficient funds in
the Trust Fund to pay benefits, how does the Fund pay for these
benefits?
Ms. BROWN BARNES. The benefits are not in jeopardy, they are
paid for. That is under the Act, that they will be paid for.
Mr. KELLER. But where do we generate the—if the Fund—let me
ask this question, how often has the Fund had to borrow from the
Department of Treasury’s general fund to be solvent, or have they
had to do that?
Ms. BROWN BARNES. No, they have had to do that. They have
had to do that almost since the beginning.
Mr. KELLER. Since the beginning of the Act.
Ms. BROWN BARNES. Yes. Of the Trust Fund.
Mr. KELLER. Of the Trust Fund? Okay.
The other question I guess, Ms. Brown Barnes, the GAO exam-
ined eight coal miner operator bankruptcies in the report. How any
of the bankruptcies resulted in benefit liabilities being transferred
to the Black Lung Disability Trust Fund? Do we know that?
Ms. BROWN BARNES. We know about the three that we talked
about, James River Coal as well as Arch and Patriot. So we do
know about those three, but then there are four other ones that we
do not have complete estimates of. We have some information
about Westmoreland Coal. We have heard recently that was $17
million. And then there are others that did not—three others that
did not result in benefits being transferred to the Trust Fund.
Mr. KELLER. Okay. How many of the coal miner operators were
self-insured compared to the commercially insured? Do we know
that?
Ms. BROWN BARNES. We know that out of the eight, two were
commercially insured. Those benefits were not transferred to the
Trust Fund. Then there were the six that I had in my chart, and
out of that six three of the self-insured were transferred to the
Trust Fund. The other three self-insured were reorganized and
their benefit liabilities did not end up on the Trust Fund.
Mr. KELLER. Okay. And another one part, were these privately
held companies or publicly traded companies, or privately held? Or
don’t we have that information on these ones that were bank-
ruptcies?
Ms. BROWN BARNES. Yes, I can get you some of the details of
that to give you a fuller picture.
Mr. KELLER. I appreciate that. Thank you.
Ms. BROWN BARNES. Yes, sure. Mm-hmm.
Mr. KELLER. Thank you.
Chairwoman ADAMS. Thank you, sir.
45
I move to recognize the gentleman from Virginia, Mr. Cline. You
are recognized for 5 minutes.
Mr. CLINE. Thank you, Madam Chair.
This subcommittee had a hearing back in June on advances in
protections for miners, and I am glad we are following up with that
with today’s hearing.
As I mentioned then, Washington and Lee School of Law, which
is located in my district and has such esteemed alumni as the gen-
tleman from Virginia, Mr. Griffith, who is here, has an advanced
administrative litigation clinic for black lung. His clinic assists coal
miners and survivors who are pursuing Federal black lung bene-
fits. They have represented roughly 200 clients since being estab-
lished in 1996 and has a success rate of 5 times the national aver-
age.
Additionally, other Virginia schools are working on research for
ways to better health and safety practices. I am proud that my
home State of Virginia is active on these issues and is a great con-
tributor to raising the standard of care. And I also want to thank
the chairman of the full committee for his remarks and like his tie
today as well.
The issues that the Black Lung Trust Fund are serious. Proper
oversight over the distribution of the funds is needed. Workers who
need services should be taken care of any misallocation should not
be tolerated. With healthcare and safety measures improving we
are not in the same circumstances we were when it was set up, so
we should continue to evaluate and adjust oversight over these
funds to ensure miners are being taken care of.
So with that I will ask Ms. Hearthway, can you tell us what en-
forcement actions are OWCP prepared to take against coal mine
operators that do not comply with the new self-insurance author-
ization protocol?
Ms. HEARTHWAY. So I think the most critical thing is we will not
give them self-insurance status until they show us appropriate
proof of the collateral that we told them they have to secure. So
that is first and foremost. They won’t have the approval. If they
continue—if they don’t either get the sufficient collateral or get
commercial insurance, there are fines that we can assess against
them.
Mr. CLINE. That was my next question, what enforcement action
can be taken against the operators that don’t maintain sufficient
coverage, continuous coverage, and your answer is certain levels of
fines that are available.
What role does data from the NCCI play, the National Council
on Compensation Insurance, play in OWCP’s oversight enforcement
of coal mine operator commercial insurance policies?
Ms. HEARTHWAY. So thank you for that question.
The other aspect of this is the commercial insurance. And we are
to have oversight of that as well. NCCI provides us with a data
feed. So we get notifications of when a policy has been cancelled,
revoked, not renewed. There are currently I believe it is 455 coal
mine operations. We have gone through to start checking all of
their current insurance. We are about halfway, a little more than
halfway through of checking current commercial insurance for each
of those. We are looking at the data feed from NCCI and we are
46
developing in our computer system a way to have more checks and
balances so that we can be very proactive as soon as something
happens.
I believe in the report there were two commercial insurers that
initially the GAO found that appeared their commercial insurance
had lapsed. When we looked into it, it actually had not lapsed.
They had always had commercial insurance. But I agree, this is an
oversight responsibility OWCP has and we are putting steps in
place to make sure that we also monitor that.
Mr. CLINE. Are there limitations to the data and what plans, if
any, does OWCP have to address the limitations to ensure that the
operators are maintaining continuous coverage?
Ms. HEARTHWAY. I think there are some technical limitations in
working a robust system, a computer system that will give us these
quick alerts, but I think we have the ability because we are work-
ing through each of the 455 coal miners to monitor this with our
current staff at the time. So I wouldn’t say it is not without chal-
lenges, but I think the staff is more than up for those challenges.
Mr. CLINE. Thank you.
Thank you, Madam Chair. I yield back.
Chairwoman ADAMS. Thank you very much.
The gentleman from Michigan, Mr. Walberg. You are recognized
for 5 minutes.
Mr. WALBERG. Thank you, Madam Chairwoman.
This brings back memories of when I chaired this subcommittee
for 6 years. And while there is certainly, as I recollect, blame to
go around on both sides, because my chairmanship was during the
time of the past Administration, with what we often called the war
on coal that went on, making it more difficult for the resources in
the Trust Fund to be managed appropriately and to meet the needs
that we had. Yet I am thankful that it appears that there is some
recognition that is not acceptable and much has to be done to make
sure the financial resources grow and meet the needs of miners.
And we want to see that take place. So I appreciate the hearing
today and appreciate the witnesses being here.
Ms. Brown Barnes, approximately how many beneficiaries are
currently receiving black lung benefits?
Ms. BROWN BARNES. There is over 25,000 I believe.
Mr. WALBERG. Twenty five thousand?
Ms. BROWN BARNES. Yes.
Mr. WALBERG. Receiving the benefits right now?
Ms. BROWN BARNES. Yes.
Mr. WALBERG. Of these beneficiaries what percent of their claims
are paid for from the Black Lung Disability Trust Fund and what
percent are paid for by responsible coal mine operators? Do you
have a figure on that?
Ms. BROWN BARNES. I can get you the figure on—it is more than
half that are paid by the Trust Fund.
Mr. WALBERG. More than half?
Ms. BROWN BARNES. Yes. But I can get you some exact numbers.
Mr. WALBERG. The rest would be by coal mine operators that are
approving some responsibility?
47
Ms. BROWN BARNES. Some by coal mine operators and then there
is a portion where there are some interim benefits. And that is also
paid by the Trust Fund.
Mr. WALBERG. By the Trust Fund?
Ms. BROWN BARNES. Yes.
Mr. WALBERG. In what cases does the Black Lung Disability
Trust Fund assume responsibility for benefit liability?
Ms. BROWN BARNES. When there is no responsible coal mine op-
erator available or a responsible coal mine operator does not pay
because of bankruptcy.
Mr. WALBERG. Okay. In addition to the coal mine operator self-
insurance program, GAO examined OWCP’s oversight of the coal
mine operator commercial insurance program as well. Was GAO
able to determine what risk coal mine operators who had a lapse
in commercial coverage posed to the Trust Fund?
Ms. BROWN BARNES. We didn’t find any in terms of any benefit
liabilities being transferred to the Trust Fund from commercial in-
surers
Mr. WALBERG. None at all?
Ms. BROWN BARNES. No. We found some problems with—in the
data. We saw where there was at least one of the operators that
didn’t have adequate coverage or it was not at least indicated in
the data that we could get form the Department of Labor. And they
did have to go back out to that operator to make sure that they
extended their coverage.
Mr. WALBERG. Okay. When implemented by the OWCP, will
GAO’s recommendation to improve data collection and monitor
compliance allow this risk to be evaluated more fully?
Ms. BROWN BARNES. It will if the oversight is there and the qual-
ity checks that they are going to do to their systems are actually
implemented.
Mr. WALBERG. Okay.
Ms. Hearthway, do you have any addition to that?
Ms. HEARTHWAY. I just want to let you know that we are imple-
menting, have implemented a number of these reforms and we are
monitoring this. I think that is good news for the first time in a
couple of decades to have this kind of oversight at the—both com-
mercially and self-insured.
To answer your previous question, I do have the number. What
we call chief beneficiaries in the Trust Fund, there are currently
13,040 chief beneficiaries in the Trust Fund.
Mr. WALBERG. Thirteen thousand—
Ms. HEARTHWAY. Forty.
Mr. WALBERG.—forty. Thank you.
I yield back.
Chairwoman ADAMS. Thank you very much. I want to recognize
the gentleman from Pennsylvania, Mr. Cartwright. You are recog-
nized for 5 minutes, sir.
Mr. CARTWRIGHT. Thank you, Madam Chair, and thank you par-
ticularly, Chairwoman Adams, for inviting me to join this sub-
committee today and considering some of the most urgent issues
facing America’s miners and facing their benefits.
As this subcommittee has uncovered with the help of GAO—
thank you for being here Ms. Brown Barnes—the coal industry’s
48
risky self-insurance practices have endangered those benefits, and
the mismanagement of funds and the lack of oversight by the De-
partment of Labor have made a bad situation worse. And we will
talk about that.
I also want to highlight another barrier standing between dis-
abled miners and their health benefits, the deceptive practices coal
companies often use to prevent miners and their families from re-
ceiving the benefits they need and deserve, the doctors paid by the
coal companies systematically misdiagnosing miners with diseases
other than black lung, and the company lawyers withholding med-
ical evidence that miners could use to defend their claims by prov-
ing that they have black lung.
As such, I will be introducing the Black Lung Benefit Improve-
ment Act to ensure that miners have access to unbiased medical
evidence, ample representation, and up to date benefit payments.
Senator Bob Casey of Pennsylvania has already introduced this bill
in the Senate and I do look forward to working with this committee
to advance this in the House very soon. My hope is that we can
ultimately bring a package of bills to the floor addressing the var-
ious challenges facing coal country.
Now, we have been talking about self-insurance here this after-
noon, and with my remaining time I would like to ask the wit-
nesses a couple of questions about that.
Murray Energy has been mentioned. It filed for bankruptcy in
October of 2019. That made it the eighth coal company in a year
to file for bankruptcy—eight within a year. That means between
2018 and 2019. And we have twice heard in the space of time I
have been sitting here in the subcommittee, intoned the expression
‘‘war on coal’’. I think we can all agree there hasn’t been a war on
coal going on in 2018 and 2019. Nevertheless, eight coal company
bankruptcies. Obviously, and it is as plain as the nose on
everybody’s face, it has to do with the low price of competing nat-
ural gas.
So casting blame on whose administration is at fault, it doesn’t
make any sense.
Ms. Brown Barnes, I understand the Department of Labor or-
dered Murray Energy to end self-insurance in 2015. Nevertheless,
Murray Energy continued to self-insure until filing for bankruptcy
in 2019. Can you explain what went wrong there?
Ms. BROWN BARNES. Murray, they appealed the decision and the
Department of Labor, they had postponed responding to the appeal
because at that point it started looking into their new self-insur-
ance process and they wanted to wait until that was implemented,
but then in the interim Murray filed for bankruptcy last October.
Mr. CARTWRIGHT. Right. Why was that appeal never adjudicated
in the intervening years until it went into bankruptcy?
Ms. BROWN BARNES. That—the Department of Labor would have
to answer.
Mr. CARTWRIGHT. Well, what are the consequences of that Mur-
ray bankruptcy for the Black Lung Disability Trust Fund, Ms.
Brown Barnes?
Ms. BROWN BARNES. The consequences are that those liabilities
will be transferred to the Trust Fund and not be on the American
public.
49
Mr. CARTWRIGHT. Well, Ms. Hearthway, can you speak to the
consequences of the Murray bankruptcy for the Trust Fund?
Ms. HEARTHWAY. Currently—
Mr. CARTWRIGHT. You talked about 10 percent.
Ms. HEARTHWAY. Currently none of their liabilities have fallen
into the Trust Fund. Currently, Murray is continuing to pay bene-
fits on their black lung claims. So nothing has impacted with re-
spect to Murray on the Trust Fund yet.
It perhaps may in the future, but we don’t know that yet.
Mr. CARTWRIGHT. What is your answer about why that appeal
was never adjudicated between 2015 and when they filed for bank-
ruptcy in 2019?
Ms. HEARTHWAY. So, as I indicated before, Murray’s collateral
was determined back in 1996 and had never been reviewed until
2015 when their self-insurance status was revoke. At that time,
they asked for reconsideration. There was no enforcement action,
and I can’t explain to you why.
And then early 2017 it is discovered that they only commercially
insured some of their operators and not others.
We are now a couple of years down the road. We have started
to develop this new process that was supposed to be—and is—much
more robust. So we put all of the self-insured operators into that
process, including Murray, but the subsequently filed bankruptcy.
Mr. CARTWRIGHT. So the miners continue to get the benefits, but
the American taxpayers take it in the neck?
Thank you, Madam Chair. I yield back.
Chairwoman ADAMS. I want to recognize now the gentleman
from Virginia, Mr. Griffith. You are recognized for 5 minutes.
Mr. GRIFFITH. Thank you, Madam Chair, and thank you so much
for holding this important hearing.
Several people have said it, but it would be good to repeat. Ms.
Hearthway, all the folks who are receiving benefits, they are in no
danger of losing those benefits, is that correct?
Ms. HEARTHWAY. They are in no danger of losing their benefits.
None.
Mr. GRIFFITH. All right. Now, I have a question, and I think I
know the answer, but I will ask Ms. Barnes. In your chart in your
testimony it talks about Alpha Natural Resources, which was
headquartered in my district, so I want to make everybody aware
that was in my district, it says amount of collateral time of bank-
ruptcy $12 million, estimated transfer of benefit responsibility to
the Trust Fund $495 million. Now, the $12 million did not rep-
resent Alpha’s net assets. That, if I am reading it correctly—and
you correct me if I am wrong—that $12 million was how much they
had set aside to pay for black lung claims, is that correct?
Ms. BROWN BARNES. Yes.
Mr. GRIFFITH. Okay. That is what I thought, because they came
out of bankruptcy and they obviously had more assets than $12
million.
So here is my question to either or both of you, one, did the De-
partment of Labor go into the bankruptcy court with these num-
bers and ask for some of that money that was out there to be put
into the Trust Fund since there was a $494 million shortfall? And
50
is there a process for the Department of Labor to go into the bank-
ruptcy hearings?
And the reason I raise this question is a former CEO of Alpha
Natural Resources actually went into the bankruptcy court because
originally they were going to zero out, as I recall it, the pension
benefits as well and he filed in the bankruptcy court a petition that
they at least get some of their—the pensioners get some of their
money. And he was successful in getting them some of their money.
So the question then becomes, because part of it ended up with
the equity firms, and I don’t know all of the transactions, but they
came back out of bankruptcy as two different entities. So there was
money left over. Did DOL ask for that money and is there a process
for them to do that?
Ms. BROWN BARNES. The Department would have to answer that.
Ms. HEARTHWAY. So in a bankruptcy proceeding, yes, we are one
of the creditors, DOL, OWCP, and on behalf of the Trust Fund, one
of the creditors that puts forth the liabilities, or what is due and
owing. It is on current not the future. This is why setting the col-
lateral is so critical. But we are part of that process along with all
the other creditors—
Mr. GRIFFITH. Right.
Ms. HEARTHWAY.—to try and get and recoup as much as possible
for benefits.
Mr. GRIFFITH. Do you know if you all made an attempt to get
more than the $12 million out of Alpha Natural Resources? And
you may not know that answer today.
Ms. HEARTHWAY. And I will have to get back to you on that. I
know as part of the settlement agreement that we were in and
came out of the bankruptcy, but that they had to maintain some
of their current benefits and pay for them. But I would have to get
the specifics for you. I don’t have that on hand.
Mr. GRIFFITH. If you could get the specifics for Alpha, James
River, and Patriot, I would greatly appreciate that so that I, you
know, can have the information. And then if there is something
that your team thinks that we need to do legislatively to make it
possible to—and I don’t want to get in front of, you know, a lot of
other people, but this is important benefit to the miners who have
black lung—is there something that we need to pass legislatively
to make sure that we are getting some sort of a priority in the
bankruptcy system for these monies?
Can you do that?
Ms. HEARTHWAY. Yes, sir. Yes, sir.
Mr. GRIFFITH. I appreciate that. I do appreciate that you all tes-
tified today. There are a lot of things that can be done, and I am
going to be taking a look at Mr. Cartwright’s bill. I do think we
have to change some of the rules to make sure that the miners are
getting a fair shake in the process. It takes way too long for the
miners to get an answer in these cases and we have got to figure
out a better way to do that.
But I also want to make sure we get this information on the
bankruptcies to try to make sure that the taxpayers don’t—as Mr.
Cartwright said—don’t take it in the neck quite as bad as they cur-
rently are.
51
At the same time, I am glad that the miners are going to get all
of the benefits they deserve.
Thank you and I yield back.
Chairwoman ADAMS. Thank you very much.
I want to remind my colleagues that pursuant to committee prac-
tice, materials for submission for the hearing record must be sub-
mitted to the committee clerk within 14 days following the last day
of the hearing, preferably in Microsoft Word format. The materials
submitted must address the subject matter of the hearing. Only a
member of the subcommittee or an invited witness may submit ma-
terials for inclusion in the hearing record. Documents are limited
to 50 pages each. Documents longer than 50 pages will be incor-
porated into the record by way of an internet link that you must
provide to the committee clerk within the required timeframe. But
please recognize that years from now that link may no longer work.
Again, I want to thank the witnesses for their participation
today. What we have heard is very valuable and members of the
subcommittee may have some additional questions for you and we
ask the witnesses to please respond to those questions in writing.
The hearing record will be held open for 14 days in order to receive
those responses.
I remind my colleagues that pursuant to committee practice, wit-
ness questions for the hearing record must be submitted to the ma-
jority committee staff or committee clerk within 7 days. The ques-
tions submitted must address the subject matter of the hearing.
I will now recognize the ranking member for his closing state-
ment.
Mr. WRIGHT. Thank you, Madam Chair.
As we have heard today, there is bipartisan agreement that De-
partment of Labor oversight of the Black Lung Disability Trust
Fund has fallen short for decades during both Democrat and Re-
publican administrations.
I would like to thank our two witnesses for their testimony.
Ms. Brown Barnes summarized the GAO report that was re-
leased this morning, documenting past challenges and outlining
recommendations to improve oversight of the coal mine operator in-
surance program and to ensure the Trust Fund is managed effec-
tively.
Director Hearthway in the Office of Workers’ Compensation Pro-
grams should be commended for initiating significant improve-
ments to Trust Fund oversight and coal mine operator insurance
authorization and compliance.
While there is more work to do, I am confident that the Depart-
ment is on the right track. We look forward to receiving updates
on the progress OWCP is making to implement the GAO’s rec-
ommendations.
As I mentioned in my opening statement, I hope we can continue
to work together with the Administration to support common
sense, workable, and innovative approaches to ensure that the
Trust Fund is properly administered.
Thank you, Madam Chair. And I yield back.
Chairwoman ADAMS. Thank you very much.
I now recognize myself for the purpose of making my closing
statement.
52
Again, I want to thank Director Brown Barnes and Director
Hearthway for joining us for this important discussion.
When the Black Lung Disability Trust Fund was established
more than 40 years ago it was meant to guarantee miners with
black lung disease access to the benefits and treatment they need.
Yet as the committee learned today, the combination of declining
coal production, resurgence in cases of black lung, the inadequacy
of the coal excise tax, and the Department’s failure to ensure coal
operators carried enough insurance to cover their liabilities, has al-
ready plunged the Trust Fund into billions of dollars in debt, and
it promises to get worse.
As a result, taxpayers are on the hook for a growing share of
miner’s benefits and miner’s and their families are hopeful that the
red ink will not be steamed by the prospect of painful benefit cuts.
That is what happened in 1981 and we do not want a repeat 40
years later.
The Department of Labor’s decades-long failure to hold coal oper-
ators accountable for their full share of black lung benefits is unac-
ceptable. It is particularly offensive in light of the exorbitant bo-
nuses coal companies pay to their executives while simultaneously
dumping their Trust Fund liabilities onto the taxpayers. We cannot
continue to allow coal companies to privatize their gains and social-
ize their losses.
I remain concerned that the Department of Labor’s new approach
will not adequately protect taxpayers or miners and their families.
And I hope that it will implement the recommendations included
in the GAO’s analysis.
I look forward to working with the Department and with my col-
leagues in Congress to ensure the long-term sustainability of the
Black Lung Disability Fund.
If there is no further business, without objection, the committee
stands adjourned.
53
[Questions submitted for the record and their responses follow:]
54
55
56
[Whereupon, at 4:28 p.m., the subcommittee was adjourned.]
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