Federal officials believe the world’s largest coal miner Peabody Energy may not meet its obligation to provide financial assurance of complete mine cleanup in three states, including Wyoming.
The Office of Surface Mining Reclamation and Enforcement on Wednesday sent “10 day notice” letters to mine reclamation management agencies in Wyoming, New Mexico and Colorado. Those state agencies must explain how they will address “possible violations” of reclamation bonding requirements by Peabody, a company that analysts say is on the verge of bankruptcy.
At question is whether Peabody qualifies to “self-bond” for the cost of mine reclamation. Self-bonding allows a surface mine operator to guarantee the cost of reclamation — eventually repairing the environmental disruption done by mining operations — with its own assets instead of providing the necessary funds upfront.
Peabody is the third major coal operator in Wyoming to come under federal scrutiny for its self-bonding status in recent months. OSMRE sent similar 10 day notice letters to the Wyoming Department of Environmental Quality regarding self-bonding by Arch Coal and Alpha Natural Resources. Wyoming DEQ submitted its response regarding Alpha on Friday claiming the operator is in compliance, while also admitting to “systemic problems” with the self-bonding program.
“It’s time to acknowledge this is a national issue, and Interior needs to step up and be more active on this and play more of an oversight role,” WildEarth Guardians climate and energy program director Jeremy Nichols said.
WildEarth Guardians filed a citizen’s complaint to OSMRE on Feb. 8 regarding Peabody Energy’s qualification for self-bonding, asserting “Peabody claims that these states have continued to determine that the company qualifies for self-bonding, even though it clearly does not.”
Peabody’s mine reclamation bond obligation in Wyoming is $790 million. A total $1.1 billion is needed to comply in all three states. Arch Coal’s mine reclamation bond obligation in Wyoming is $485 million, and Alpha’s is $411 million. Arch and Alpha are already reorganizing under bankruptcy.
“At the heart of the issue here is reclamation,” said Nichols, “and we hope it impresses upon Peabody they get busy on reclamation.”
“This is serious,” Nichols continued. “They [OSMRE] understand there is a problem here and things are not looking better for Peabody. It’s an opportunity to set things straight before they file bankruptcy.”
Read the citizen’s complaint filed by WildEarth Guardians:
Ready the OSMRE’s 10 day notice letter to Wyoming DEQ regarding Peabody Energy:
Natalie Riehl says
February 19, 2016 at 10:50 amWho are the dopes who made “self-bonding” legal?
Reminds me of Colorado in the 1960s-70s when the wood products industry was allow to “harvest” by clear-cutting, go bankrupt and never clean up the site.
It’s the same old game played by these natural resources industries: extract the resources and leave the taxpayers to clean up their messes.
RT Cox says
February 19, 2016 at 7:10 amThis long-winded Ten Day Notice from the Office of Surface Mining is surreal. OSM cannot cause the Wyoming DEQ to extract new collateral from Peabody or improve Peabody’s debt-to-asset ratio or credit ratings. The coal companies are losing market and declining in value, due largely to uncertainties in the electric power business caused by Wild Earth Guardians and their allies. Peabody is no exception.
So, should DEQ order Peabody to stop mining coal? Is that what Wild Earth Guardians and OSM want, to shut down the mines? Without ongoing operating revenues, Peabody will have no money; who then is going to reclaim the mined land? Peabody would be forced into Chapter 11 bankruptcy and would have every incentive to try to escape its reclamation obligations as unsecured obligations. Wyoming DEQ is trying to work with these companies in or out of bankruptcy court to keep the reclamation process going.
Peabody cannot go out and find insurance companies to sell reclamation bonds. That ship has sailed. The time to require secondary collateral to secure companies’ self-bonding is gone.
Meanwhile, as I have written before, the legislature better save the AML money for reclamation of abandoned mine lands.