Peabody Moves Away from Self-Bonding
Tuesday, March 7, 2017
Peabody Energy Corp. yesterday declared its intention to give up — at least for now — on a controversial method for meeting mine cleanup bonding obligations.
Nearly a year into its bankruptcy, environmentalists and state regulators pressured the world’s largest private-sector coal company to replace so-called self-bonding (Greenwire, Jan. 24).
The practice of self-bonding, unique in the energy sector, allows a coal company to use its financial stability — without collateral — to ensure cleanups.
At more than $1 billion, St. Louis-based Peabody holds the most in self-bonds. It is the last coal giant to give up on the practice.
Coming out of their own bankruptcies, Arch Coal Inc. and Contura Energy Inc. — a spinoff of Alpha Natural Resources Inc. — both replaced more than $1 billion combined in self-bonded liabilities.
Coal company financial woes in recent years prompted concerns about the risk of taxpayers footing the bill for coal mine cleanups.
The federal Office of Surface Mining Reclamation and Enforcement, under President Obama, proposed regulatory changes. Those have thus far survived the transition to the Trump administration.
Despite criticism to the contrary, Peabody believes it still qualifies for self-bonding and may try to use it again in the future.
“We are pleased to reach a bonding solution that we believe best serves the capital structure of the new Peabody at this time,” CEO Glenn Kellow said in a statement.
When the company emerges from federal Chapter 11 bankruptcy reorganization, Peabody said it will have in place $1.26 billion in third-party surety bonds and $14.5 million from a state bond pool to replace all self-bonding in Indiana, Illinois, New Mexico and Wyoming.
The company acknowledges that the total “significantly exceeds” the $471 million it has factored into its restructuring for asset retirement obligation, but says it can meet the obligations because mines will continue to operate for years to come.
Peabody views land restoration as an essential part of the coal mining process,” the company said.
Last year, during the worst year for coal mining since 1978, Peabody said it reclaimed 70 percent more land than it disturbed.
“We are encouraged that Peabody has finally recognized the need to end its flawed self-bonding for mine reclamation,” said Howard Learner, executive director of the Environmental Law & Policy Center, one of the groups challenging Peabody in bankruptcy court.
“But the devil is in the details, and we will carefully review this proposal to ensure Peabody meets all of environmental cleanup responsibilities and does not shift the costs onto the public taxpayers.”
L.J. Turner, a Wyoming rancher and member of the Powder River Basin Resource Council and the Western Organization of Resource Councils, said: “Self-bonding left the public at risk — and threatened to leave tens of thousands of acres of Wyoming forever scarred. Better financial assurance will protect taxpayers and neighboring landowners.”