Bloomberg BNA: ELPC’s Kearney Says States Should Learn from Peabody Coal Bankruptcy that Self-bonding is Bad Idea

No Collateral Needed for Cleanup in Some States Despite Mine Bankruptcies
March 30, 2017
By Tipp Baltz, Stephen Joyce and Stephen Lee

Several states are still willing to let mines operate without putting up collateral for land cleanup even though three of the country’s biggest coal companies only recently emerged from bankruptcy.

Their plans could get a boost from the Trump administration, which has repeatedly shown a willingness to appease the ailing coal sector. And financial analysts predict that at least one major company will return to the controversial practice of self-bonding within 18 months.

Self-bonding is a financial mechanism that lets coal companies mine without setting aside money to reclaim the land once they’re finished mining. Instead, the companies are allowed to move forward by demonstrating that they have enough money in their own coffers to pay for reclamation.

But that approach has broken down, as three of the sector’s biggest players—Alpha Natural Resources Holdings Inc., Arch Coal Inc. and Peabody Energy Corp.—have filed for bankruptcy. Each of the companies agreed to cut back its use of self-bonding in its bankruptcy agreement.

“Hopefully, what states are learning from Peabody and from the earlier coal company bankruptcies involving self-funding is that it’s not wise to allow self-funding for reclamation obligations,” Margrethe Kearney, staff attorney at the Environmental Law & Policy Center in Grand Rapids, Mich., told Bloomberg BNA. “It’s an inherently volatile market. Things change more quickly than can be responded to by state regulators.”

Yet across the nation, state regulators said they don’t intend to rule out self-bonding, even though federal law allows them to.

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