Gov. Matt Mead’s administration struck a deal this week with bankrupt coal mine operator Arch Coal, securing $17 million in collateral and $75 million in creditor priority on the company’s $485 million reclamation bonding obligation.
Mine operators are required by state and federal law to post bond or guarantee securities sufficient enough cover the cost of environmental clean-up at the end of a mine’s life or should they abandon operations.
The state struck a similar deal with Alpha Natural Resources, which is also reorganizing under bankruptcy — securing $61 million creditor priority on $411 million in required bonding. But the federal Office of Surface Mining Reclamation and Enforcement told the Wyoming Department of Environmental Quality that regardless of the priority creditor deal with Alpha, it still may not be in compliance with state and federal standards.
OSMRE also issued a 10 day notice regarding its concern that Arch may not be in compliance with bonding requirements. (see OSMRE’s 10-day notice letters below)
Self-bonding allowed Arch and Alpha to guarantee the cost of reclamation with their own assets instead of providing the necessary funds upfront, which has been common practice for large coal miners in the state. But because of the their financial insolvency, the bankrupt companies may no longer qualify to self-bond. OSMRE has ordered Wyoming DEQ to explain how it will bring Arch and Alpha into compliance with federal requirements. DEQ’s response regarding Alpha Natural Resources’ bonding is due today, and it’s response regarding Arch is due February 22.
An advisor to Gov. Mead says the administration believes its creditor priority agreements with Arch and Alpha meet state and federal mine reclamation bonding standards, and the state will detail its case regarding Alpha in a letter to federal officials today. For now, the obligation to meet the bonding requirements resides with Arch and Alpha. The state is not considering helping the companies meet their bonding obligations, said Jerimiah Rieman, policy advisor to Mead.
Uncertain future for Arch and Alpha mines
If federal officials determine that Arch and Alpha do not satisfy reclamation bonding requirements several of the nation’s largest coal mines could be in violation of their mining permits. Operators found to be in violation of their mining permits can have those permits revoked, meaning mining operations must cease.
It’s unclear what kind of financial assurances — short of self-bonding and other approved bonding methods — might satisfy federal laws, or whether or how the state and mine operators might work out a deal to allow the mines to continue operating if they are determined to be in violation of the federal requirements.
Arch Coal operates the Black Thunder mine spanning some 90 square miles in northeast Wyoming. The complex is in varying stages of production and ongoing reclamation. More than 101 million tons were mined at Black Thunder in 2014, and the mine employs some 1,600 workers.
Alpha operates the Belle Ayr and Eagle Butte mines in Wyoming with a combined production of 36.3 million tons in 2014, and about 569 employees in 2015.
The idea that a coal mine in the Powder River Basin — the largest coal-producing district in the nation — might be abandoned may have seemed a remote possibility for decades. But the recent financial struggles and bankruptcies among key operators there makes for an unpredictable future for the industry in northeast Wyoming.
“You’re dealing with companies that by being in bankruptcy are by definition financially insolvent,” said Shannon Anderson of the landowner advocacy group Powder River Basin Resource Council. “There’s just a lot of uncertainty, and the whole point of the bonding program that was part of our surface mining laws, both at the state and the federal level, was to prevent this from happening.”
The possibility of temporarily idling mines due to noncompliance of reclamation bonding is not the intent of the Powder River Basin Resource Council, Anderson said.
“It’s difficult because the remedy that the law gives you is stopping mining,” Anderson said. “But with these companies in bankruptcy right now, it’s in everybody’s interest to keep them going. That’s how they make money and how they are going to get out of bankruptcy, so we as an organization, we’re interested in some kind of compliance schedule where the companies commit to post bonding, maybe over a period of time that doesn’t exactly comply with the immediate obligations under the law but at least sets us forward and that it’s an enforceable obligation that regulators could enforce if they needed to.”
Wyoming DEQ spokesman Keith Guille said that if a company is found to be in violation of its mining permit, it doesn’t automatically mean the permit is revoked. “I think there is a process. I don’t know if there would be a notice of violation, or what.”
Wyoming Mining Association assistant director Travis Deti said he believes the amount of bonding required to cover reclamation costs is fair, and he’s hopeful that operators and the state can work out an arrangement that satisfies federal regulators.
“The state is working with companies to make sure the people of Wyoming are protected,” Deti said. “It’s definitely a tough time for the industry, but I think something will be worked out.”
— Photo courtesy of EcoFlight.
Read the priority claim the state of Wyoming filed to secure a percentage of Arch Coal’s $485 million reclamation bonding obligation:
Read the OSMRE 10-day notice regarding Alpha Natural Resources’ bonding:
Read the OSMRE 10-day notice regarding Arch Coal’s bonding:
Read Wyoming DEQ’s response to 10-day notice letter regarding Arch Coal: