The Social Costs of Mineland Restoration Jay Sullivan and Gregory S. Amacher ABSTRACT. A model of mineland restoration is presented to show the wedge between mine operator and social planner decisions and social costs of current instruments. We find, first, mine operator efforts may not match socially optimal levels and consequently generate relatively high social costs, second, social costs can be reduced using a bond that targets eventual site factors and land rent generation, and, third, in general, social costs may not be eliminated fully at bond levels that still encourage the mine operator to choose forest over grassland as a postmining use. This suggests greater scope for command- and control-based regulation. (JEL Q23, Q28) I. INTRODUCTION The Surface Mining Control and Recla- mation Act of 1977 (SMCRA) mandates that surface-mined land in the United States be returned to a condition capable of supporting its premined use or a use of higher value, and that the land be reclaimed in a fashion that renders it at least as productive after mining as it was before mining. Mineland reclamation under SMCRA follows a process where, prior to mining, operators agree to a postmining land use and then post a performance bond that is held by the regulator until reclama- tion is evaluated and deemed to be success- ful. This process is common for mining in the United States and several other countries such as Canada, Australia, and New Zeal- and (Erickson 1995). In the United States, SMCRA covers several million hectares. The eastern mountain region is particularly important, because farmland and economic development opportunities for mined land are scarce, and thus the most practical land- use choices are either forestland or hayland/ pasture. Since 1977, the majority of mined land has been reclaimed as hayland/pasture (Ford 2004; Isabell 2004). As a result of past reclamation decisions, a limited livestock industry, and the fact that most pasturelands are abandoned after bond release, there are many hundreds of thou- sands of hectares of unproductive grasslands and scrublands located in previously forest- ed areas. Forests on these sites would be of much higher social value due not only to their potential rent-generating productive role, but also for their role in increasing land values or reducing natural risks such as erosion, flooding, and fire (Burger, Kelting, and Zipper 1998; Torbert and Burger 2000). Interestingly, because SMCRA requires the mine operator to return the land to a condition capable of supporting premined or higher and better uses, it is the operator who is responsible for the costs of reforestation and the choice of reclamation. Given that mine operators typically are not the owner of the surface rights, they are not likely to make decisions with future land rents in mind. Thus, an important externality undermines the reclamation process under SMCRA, but it largely has gone unnoticed in the econom- ics literature. The extent of this externality and the importance of the bond in amelio- rating the obvious external costs remains an open and important question. Our purpose is to examine the social costs of mineland reclamation, and to study the potential role of the bonding process in reducing these social costs. A model is used to show how mine operator reclamation deci- sions differ from those of a social planner, who represents the interest of society as a The authors are, respectively, professor and Julian N. Cheatham professor, Department of Forest Resources and Environmental Conservation, Virginia Tech. We thank the U.S. Department of Energy for funds to support this research, as well as Dr. Jim Burger and anonymous reviewers for their helpful comments. All remaining errors are ours. Land Economics N November 2009 N 85 (4): 712–726 ISSN 0023-7639; E-ISSN 1543-8325 E 2009 by the Board of Regents of the University of Wisconsin System