Enviro group pushes OSM to forbid Peabody from further reclamation self-bonding

WildEarth Guardians filed a Feb. 8 complaint with the U.S. Office of Surface Mining seeking to force Peabody Energy (NYSE: BTU) to seek outside reclamation bonding or cease its coal mining operations in Colorado, New Mexico and Wyoming.

“For too long, Peabody has been given a free ride to destroy our western public lands, our climate, and our clean energy future,” said Jeremy Nichols, WildEarth Guardians’ Climate and Energy Program Director. “It’s time to stop letting bankrupt coal companies ride on the backs of the American public and force them to pay their fair share.”

Notable is that Peabody, the largest U.S. coal producer, is most definitely not in bankruptcy. But two other coal producers that have recently had self-bonding issues with regulators for Wyoming coal mines, Arch Coal and Alpha Natural Resources, are in Chapter 11 bankruptcy protection. Arch, incidentally, filed with its bankruptcy court on Feb. 9 a proposed settlement with the Wyoming Department of Environmental Quality on the self-bonding issue.

The complaint filed with OSM calls on the Obama Administration to investigate Peabody’s practice of self-bonding its coal mines in Colorado, New Mexico and Wyoming. By law, for a coal company to be permitted to mine, it must first post bonds, a form of insurance, that cover the costs of reclamation if the company were to go bankrupt.

Normally, to meet bonding requirements, companies post sureties that are backed by third party guarantors. However, in some cases, companies are allowed to guarantee their own reclamation bonds and post what is called a “self-bond.” Self-bonding is only allowed where a company is solvent and meets certain financial criteria.

WildEarth Guardians said that in total, Peabody guarantees more than $1.1 billion in self-bonding in the western U.S. Nationwide, Peabody guarantees $1.36 billion in self-bonds. The company’s net worth, as reported at the end of the third quarter of 2015, is only $1.34 billion, the environmental group said.

By law, where a company no longer qualifies for self-bonding, it must post an alternate bond within 90 days or cease coal extraction activities. WildEarth Guardians’ complaint calls on the Obama Administration to enforce the law and ensure that Peabody posts adequate bonds or stops mining.

Peabody’s mines in Wyoming include the giant North Antelope Rochelle mine, which alone produces more than 10% of all U.S. coal. The mine produced 109 million tons in 2015. In Colorado, Peabody owns the Foidel Creek deep mine (also known as the Twentymile mine), as well as other mining operations in the area that are undergoing reclamation. In New Mexico, Peabody owns the El Segundo and Lee Ranch surface mines and is the state’s largest coal producer.

Although Peabody has announced its intent to sell its Colorado and New Mexico assets, this transaction has yet to be finalized and it remains unclear whether the purchaser, Bowie Resources, will be able to secure financing, WildEarth Guardians said.

Incidentally, Peabody noted in its Feb. 11 earnings statement covering the fourth quarter of 2015: “Peabody continues to qualify for self-bonding in all relevant states and, in the fourth quarter, the state of Wyoming reaffirmed self-bonding eligibility for the North Antelope Rochelle and Rawhide surface mines.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.