May 20, 2016 Read More →

Self-Bonding Leading to Environmental Hazards As Coal Company Bankruptcies Mount

By Mead Gruver in the Seattle Times:

CHEYENNE, Wyo. (AP) — As more coal companies file for bankruptcy, it’s increasingly likely that taxpayers will be stuck with the very high costs of preventing abandoned mines from becoming environmental disasters.

The question is not if, but when, where and how many more coal mines will close as the industry declines, analysts say. Many mines already operate at a loss, and there’s not enough money in the fuel anymore to enable their owners to keep their promises to clean up the land.

“It’s sort of a situation where nobody, really, is going to end up looking good,” said James Stevenson, director of North American coal for analyst firm IHS. “The states have I think a significant risk — the federal government does as well.”

This reclamation crisis looms because of a practice called self-bonding, which allows coal companies to promise to eventually cover the cost of cleaning up abandoned mines without first setting aside the necessary money.

Because of self-bonding, billions of dollars in legally required reclamation funding exist only as IOUs, without dedicated assets or bonds backed by third-party investors.

Nationwide, self-bonding in the coal-mining industry tops $3.3 billion. That includes $2.3 billion in IOUs that the three biggest bankrupt coal companies — Alpha Natural Resources, Arch Coal and Peabody — owe in five states, according to an Associated Press analysis of bonding obligations in the top 16 coal-mining states.

The dilemma for state and federal regulators got even bleaker when the nation’s largest coal producer, Peabody, filed for Chapter 11 protection from its creditors in April. Peabody alone holds more than $1.1 billion in self-bonding obligations for mines in Illinois, Indiana, New Mexico and Wyoming, where its North Antelope Rochelle mine produces almost 12 percent of the nation’s coal.

With several major U.S. coal producers filing for Chapter 11 over the last two years, the issue will play an important part in shaping coal’s future. Mines in Appalachia are particularly likely to close as the industry consolidates around a smaller number of still-profitable mines out West, Stevenson said.

Full article:  http://www.seattletimes.com/business/mine-environmental-risk-grows-with-bankruptcies-in-big-coal/

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