Despite ‘systemic problems,’ Wyo. defends Alpha deal

by Dylan Brown, E&E reporter

— Originally published at Environment & Energy on Tuesday, February 16, 2016, and republished here with permissions. — Ed

Wyoming regulators are dismissing allegations that a deal they reached with bankrupt coal company Alpha Natural Resources Inc. over mine reclamation financial assurance obligations violated federal law.

The Wyoming Department of Environmental Quality on Friday officially responded to a letter of concern from the Interior Department’s Office of Surface Mining Reclamation and Enforcement (Greenwire, Jan. 25).

The deal puts the state ahead in line of other creditors for $61 million if Alpha were to go under (Greenwire, Sept. 9, 2015). And in their letter to OSMRE, Wyoming regulators defended allowing the company to wait until after bankruptcy reorganization before securing third-party bonds to secure mine cleanups.

Alpha currently holds $411 million in self-bonds, which use a company’s financial health to ensure cleanup costs as allowed under the Surface Mining Control and Reclamation Act.

Environmental groups have condemned self-bonding. While cheap natural gas, falling foreign demand and regulatory fears decimate the coal industry, critics worry taxpayers will be left to pay for cleanups.

Groups have objected to Wyoming’s deal with Alpha and a similar agreement last week with fellow bankrupt coal giant Arch Coal Inc., which covers 19 percent of the company’s $486 million in reclamation liabilities. Both agreements are pending federal bankruptcy court approval.

‘Systemic problems’

Wyoming officials admitted that Alpha’s “dramatic” collapse put them in a bind.

“These events highlight certain systemic problems with self-bonding, but had to be addressed individually and in a timely manner,” they wrote in the response letter.

Wyoming regulators found Alpha no longer met solvency requirements for self-bonding last May and ordered the company to post new financial assurances for reclamation at its Belle Ayr and Eagle Butte mines.

Alpha sued, and the case was tied up until a state judge agreed to postpone proceedings pending settlement negotiations. Four days later, Alpha filed for Chapter 11 federal bankruptcy protection.

“After significant negotiations,” the two sides reached a deal mirroring another between West Virginia regulators and Alpha.

Wyoming would allow Alpha to emerge from bankruptcy before swapping $244 million in reclamation self-bonding for sureties. West Virginia allowed the company to “gradually transition away from the self-bonding program.”

Wyoming DEQ leaders said the agreement not only ensures reclamation work continues, but avoids costly litigation that could put Alpha at even greater risk of liquidating.

“Actions have ensured that the public has not incurred one dollar in reclamation liability for Alpha’s operations in Wyoming,” they wrote. “At the same time, not one miner has been put out of work as a result.”

Wyoming sternly reminded OSMRE of the federal agency’s limited oversight role under SMCRA, which puts states in control of strip mine oversight as long as rules meet a federal minimum standard.
“Having cleared the low bar of rationality and lawfulness, OSMRE is not permitted to second-guess the wisdom of DEQ’s settlement agreement,” Wyoming wrote.

“While OSMRE might have chosen not to settle or to settle on other terms, the fact that Wyoming has an approved program means that DEQ has exclusive jurisdiction to make these decisions.”
‘Very poor quick settlement’

The Powder River Basin Resource Council, a local landowner group that has challenged both Alpha and Arch’s agreements in Wyoming, panned the state’s response as shortsighted, citing deep concerns about “future reclamation of the tens of thousands of acres of open-pit coal mining for which Alpha is responsible.”

“Fifteen cents on the dollar is 15 cents on the dollar,” said Bob LeResche, chairman of the Powder River Basin Resource Council. “We believe the settlement does not comply with the law, and that WDEQ struck a very poor quick settlement with Alpha.

“We are sorry it has taken two huge bankruptcies to wake the state up to this risk, but we are encouraged to see them finally acknowledge something needs to be done,” he added. “Hopefully self-bonding will become a thing of the past in Wyoming.”

— Twitter: @DylanBrown26 Email: dbrown@eenews.net

Read Wyoming DEQ’s response to OSMRE regarding Alpha Natural Resources self-bonding: