The Division of Reclamation was originally just one position called the "Coal Lands Forester" and was within the Indiana Department of Natural Resources Division of Forestry. The Coal Lands Forestry office was in Linton, IN. In 1956, the office moved to Jasonville, IN when the district forestry office was constructed on the edge of Shakamak State Park. In 1973, the Division of Reclamation (DOR) was formed by Executive Order from Governor Otis "Doc" Bowen. It consisted of two inspectors in Jasonville, and a director and secretary in Indianapolis. When the federal law (SMCRA - see next paragraph) was passed in 1977, DOR had eleven employees. The number of employees in the division peaked in 1988 with 105 positions. It has gradually downsized to its current staffing level of 62 through Operation Excellence, the DOR strategic plan and performance management system. The division is located in a modern office building between Jasonville and Shakamak State Park with access from SR 48.

On August 3, 1977, the United States Congress passed the Surface Mining Control and Reclamation Act (SMCRA). It established stringent national standards for coal mining and reclamation and created the Office of Surface Mining Reclamation and Enforcement (OSM) within the federal Department of Interior (DOI). The OSM performs oversight for all state coal mining programs, including the Indiana program which was approved by the state legislature on July 29, 1982.