self-bonding

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Wyoming Department of Environmental Quality

The Wyoming Department of Environmental Quality is changing how coal companies secure clean-up costs. For years, the department has accepted a kind of IOU based on a company’s financial strength. That’s called self-bonding.

Issues with self-bonding were highlighted in 2015 when several large coal companies went bankrupt, and were left without funds to cover reclamation costs.

Stephanie Joyce

A federal judge will consider Arch Coal's updated plan to get out of bankruptcy Tuesday. As part of that new plan, the company says it will replace its self-bonds in Wyoming with something more secure.

Arch Coal has more than $400 million in estimated cleanup obligations at its Wyoming coal mines. In the past, Arch was allowed to self-bond those obligations—effectively making a promise to clean up, without putting up cash or collateral to insure those obligations.

Aaron Schrank

Amid a wave of historic coal bankruptcies, states like Texas and Colorado have taken proactive steps to make sure coal companies are on the hook for their future cleanup costs while in Wyoming, over $1 billion of these cleanup costs have gotten tied up in bankruptcy court.

Why are there different outcomes in different energy-rich states?

Stephanie Joyce

The federal government is changing its rules for mine reclamation, to ensure there is money available for cleanup even when companies declare bankruptcy. 

Stephanie Joyce

How strongly should Wyoming consider doing away with the practice of allowing coal companies to self-bond when it comes to clean up?   

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Stephanie Joyce / Wyoming Public Media

With the downturn in the coal market, the federal government is encouraging states to reconsider whether to allow coal companies to self-bond. Self-bonding allows coal companies to avoid putting up cash or other assurances to guarantee their cleanup obligations.

The practice has come under scrutiny in the last year as many of the nation’s largest coal companies have declared bankruptcy with more than $2 billion in self-bonded cleanup on their books.

According to federal regulators, the Wyoming Department of Environmental Quality did not take appropriate action against Alpha Natural Resources when it was in violation of coal mining regulations. 

The issue, outlined in a letter sent by the federal Office of Surface Mining Reclamation and Enforcement (OSMRE) to DEQ, was that the bankrupt company was mining coal without enough reclamation bonding in place to cover its hundreds of millions dollars in reclamation liabilities.  

A judge in Richmond, VA approved coal giant Alpha Natural Resources' plan to get out of bankruptcy Thursday. The approval went through, in part, because Alpha agreed to put up real financial assurances to cover future reclamation costs, which totaled hundreds of millions of dollars. 

"The terms of the settlement provide a managed route for the company to restructure and continue operating, while also taking responsibility for mine land reclamation as a result of former disturbances of private and federal lands," a Department of the Interior representative wrote in a statement. 

 A bill introduced in the U.S. Senate today by Senator Maria Cantwell (D- WA) would ensure coal mine cleanup costs would get more expensive for coal companies. Under current regulations, some companies pay little to nothing to make sure coal mine cleanup – or reclamation – gets done. This bill would change that. Confused? Let me explain!

With three of the four largest American coal companies in bankruptcy, a federal regulator gave a blunt assessment today of potential problems with future coal mine clean up. The Office of Surface Mining, Reclamation, and Enforcement (OSMRE) is asking for public comment on how to make sure that coal mine reclamation is paid for.  

 

archcoal.com

Arch Coal has filed its initial plan for how it hopes to emerge from bankruptcy, but doesn't contain many details when it comes to reclamation and worker benefits.

Arch Coal filed for Chapter 11 in January, in the hopes of shedding some of its $4.5 billion in debt. The company’s restructuring plan outlines how various creditors would be paid—or not paid—if the plan is approved.

Cloud Peak Energy says it wants to change the way it insures its coal mine clean up costs in part, because of regulatory uncertainty.  

Peabody Energy / Wikimedia Commons

Responding to a federal inquiry, the State of Wyoming defended itself against accusations that it is allowing coal giant Peabody Energy to continue operating in violation of mining regulations.

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Peabody Energy is one of the largest coal companies in the world and operates mines all over the United States. But some of its senior lenders are now recommending bankruptcy, as the company faces potential defaults on several loans.

Last week, a federal bankruptcy judge approved a loan that will help Arch Coal stay afloat while it works its way through bankruptcy.

In January, the federal government notified the Wyoming Department of Environmental Quality that bankrupt coal company Arch Coal could be in violation of mining regulations. On Monday, DEQ responded to the notice, writing that it has already dealt with the alleged violation which relates to Arch Coal's reclamation bonding.

Regulators cited an agreement that would require Arch to put aside some funds for future coal mine clean up as one of the steps it has taken to ensure the company's reclamation obligations are covered. 

The federal government notified regulators in Wyoming, Colorado, and New Mexico this week that one of the world's largest coal companies may be out of compliance with coal mining regulations. 

In response to a federal inquiry about potential mining violations by bankrupt coal company Alpha Natural Resources, Wyoming regulators say they are in compliance with the law. But, regulators did note that the challenges created by "the dramatic decline in Alpha's financial condition... highlight certain systemic problems with self-bonding." Self-bonding references a financial tool that gives companies a pass on putting aside funds for clean-up if they can prove financial strength. 

The federal government has agreed to give state regulators an extension to respond to its inquiry into potential violations of mining regulations.

The Office of Surface Mining Reclamation and Enforcement, OSMRE, sent two Ten-Day Notices to the Wyoming Department of Environmental Quality on January 21st. The notices asked the state to take a closer look at whether two bankrupt coal companies are out of compliance with federal and state mining regulations.

Stephanie Joyce

Wyoming regulators have asked for more time to respond to the federal government's concerns about potential lapses in state oversight of coal mine reclamation.

The Office of Surface Mining Reclamation and Enforcement sent two ten-day notices to the Wyoming Department of Environmental Quality on January 21st. The agency believes that two bankrupt coal companies, with hundreds of millions of dollars in outstanding clean up costs, could be in violation of federal mining regulations.  

The federal government sent two notices to the Wyoming Department of Environmental Quality today, wanting regulators take a closer look at hundreds of millions of dollars in clean-up costs held by two bankrupt coal companies.

It is called a Ten-Day Notice. The Office of Surface Mining Reclamation and Enforcement (OSMRE) sends these out if it believes there is a violation of coal mining regulations. 

Another coal giant, with operations all over the US, declared bankruptcy today.

St. Louis-based Arch Coal hopes to get rid of $4.5 billion dollars in debt through this Chapter 11 reorganization. The company mines coal in Wyoming, Colorado, Illinois, and Appalachian states and says it expects operations to continue during bankruptcy proceedings.

Duncan Harris, Flickr Creative Commons

Colorado regulators say the state is changing its approach to ensuring coal mines get cleaned up.  

The change involves self-bonding, a program that gives coal companies a pass on putting aside money for future mine clean-up, if they can pass a test of financial strength.

Even though many coal companies are struggling in a steep market downturn and some have even declared bankruptcy, many of them are still self-bonded. The problem? It's no longer clear whether those companies will actually be able to pay for future coal mine reclamation.

As Arch Coal's financial health continues to decline, Western landowner groups are raising concerns about the company's ability to clean up its mines in the future. 

The Western Organization of Resource Councils, including the Powder River Basin Resource Council, filed a formal complaint today with the Wyoming Department of Environmental Quality over Arch Coal's ongoing mining operations.