OSM: Arch Coal’s Wyoming reclamation bonding is deficient

The U.S. Office of Surface Mining Reclamation and Enforcement (OSMRE) told the bankruptcy court for Arch Coal that it has not signed onto a deal between the state of Wyoming and Arch Coal settling a reclamation bonding issue and has indeed started a proceeding with the state that finds Arch Coal’s bonding to be deficient.

Arch Coal, which sought Chapter 11 bankruptcy protection on Jan. 11, worked out a new reclamation bonding deal with the state of Wyoming that will allow it to keep operating its massive Black Thunder mine in the Powder River Basin, which is the second-largest coal mine in the U.S. and supplies a number of U.S. power plants with coal. Arch on Feb. 9 filed with the U.S. Bankruptcy Court for the Eastern District of Missouri a settlement with the Wyoming Department of Environmental Quality on reclamation bonding needs. Since 2004 in Wyoming, Arch Coal has been self-bonding some of its operations, meaning it provides its own reclamation insurance.

In its Feb. 18 filing with the court, OSMRE said it reserves its rights to respond to this deal within the court proceeding. It noted that Arch’s reclamation bonding obligations for the Wyoming operations amount to over $485 million.

Said the agency: “OSMRE is currently engaged in an administrative oversight process with WYDEQ regarding the adequacy of bonding for the Arch Wyoming Operations. On January 21, 2016, OSMRE issued seven Ten Day Notices to WYDEQ pursuant to 30 C.F.R. § 842.11. In those notices OSMRE found that it had reason to believe that WYDEQ may be allowing Debtors to operate at the seven Arch Wyoming Operations in violation of the approved Wyoming program by allowing Debtors to continue coal extraction while failing to meet the criteria for self-bonding. After being granted an extension of time to reply, WYDEQ’s response to OSMRE is due February 22, 2016.

“OSMRE’s oversight and enforcement functions, including but not limited to the referenced Ten Day Notice process, are not subject to the voluntary stay assented to by Wyoming in the Stipulation and Order, Paragraph 3(c). The United States is not a party to and should not be construed to endorse the Stipulation and Order. The United States hereby expressly reserves all of its rights under [the 1977 surface mining act] and its implementing regulations and other applicable law, including its rights to pursue administrative proceedings, including the administrative process identified in Paragraph 15, and may exercise such rights at any time in accordance with the police and regulatory exception to the automatic stay.”

The automatic stay being referenced is the standard one that a bankruptcy court routinely grants to a newly-bankrupt company that halts all outside litigation against the company, effectively routing that litigation through the bankruptcy court.

There are seven Arch operations covered by the reclamation deal, but only two involve current mining:

  • Black Thunder is a surface coal mine in Campbell County that has operated since 1977 and extracts coal from coal seams that average approximately 75 feet in thickness. Black Thunder is the second largest coal mine in the U.S., with 101.2 million tons shipped in 2014.
  • Coal Creek is a surface coal mine in Campbell County that began operation in 1979 and extracts coal from coal seams varying from 14-25 feet in thickness. Arch shipped 9.4 million tons of coal from Coal Creek in 2014. Coal Creek, like Black Thunder, is in the Powder River Basin, but relatively high production costs and low-Btu content for Coal Creek’s coal has kept this a relatively small operation.
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.