OSMRE puts state agencies on notice of possible Peabody reclamation bond violations

The U.S. Office of Surface Mining Reclamation and Enforcement (OSMRE) said in a Feb. 16 letter to WildEarth Guardians that it is putting the Colorado Division of Reclamation Mining and Safety (DRMS) on notice that it may be allowing Peabody Investments Corp. to operate in violation of the approved Colorado state coal regulatory program under the 1977 Surface Mining Control and Reclamation Act (SMCRA).

Peabody Investments is a unit of coal producer Peabody Energy (NYSE: BTU) that handles self-bonding of the company’s reclamation liabilities. Peabody’s stock market value has plunged in the last few years, prompting WildEarth Guardians to recently complain to OSMRE that Peabody no longer has the financial resources to self-bond for reclamation.

OSMRE said in the Feb. 16 letter that it is issuing the following Ten-Day Notices (TDNs) for these Peabody coal mining operations in Colorado:

  • Permit #C-1982-057 (Seneca II-W Mine)
  • Permit #C-1982-056 (Foidel Creek Mine)
  • Permit #C-2009-087 (Sage Creek Mine)
  • Permit #C-1981-044 (Williams Fork Mine)
  • Permit #C-1994-082 (Yoast Mine)

The relevant permits here are for Foidel Creek, a longwall mine under Peabody’s Peabody Twentymile Mining subsidiary, and Sage Creek, which is a new underground mine area in a different seam that is part of the Twentymile complex. The other permits cover past mining operations. U.S. Mine Safety and Health Administration data shows that Twentymile produced 4.1 million tons in 2015, down sharply from 6.7 million tons in 2014.

Federal regulations provide that absent an imminent danger or harm scenario, OSMRE must issue a TDN to a state Regulatory Authority (RA) when it has reason to believe a violation exists or when, on the basis of a federal inspection, it determines that a violation exists and OSMRE has not issued a previous TDN for the same violation. These TDNs are not based on federal inspections, and OSMRE has not yet determined that violations exist, the agency said.

“However, based on the allegations in the Citizen’s Complaint summarized below, OSMRE has reason to believe that DRMS may be allowing Peabody Investments Corporation to operate in violation of the Colorado Surface Coal Mining Reclamation Act and the Regulations of the Colorado Mined Land Reclamation Board for Coal Mining by allowing Peabody’s Colorado coal mine permits to continue operations while failing to meet regulatory qualification criteria for self-bonding,” said OSMRE.

On Feb. 8, OSMRE received a citizen’s complaint from WildEarth Guardians requesting an inspection and enforcement action regarding ongoing coal mining operations of Peabody Energy and its subsidiaries in Colorado, New Mexico, and Wyoming. WildEarth Guardians’ allegations pertaining to Peabody operations in New Mexico and Wyoming are being addressed through the TDN process separately.

Upon preliminary review of the Colorado complaint, OSMRE determined that the alleged violations could not possibly exist at the Hayden Gulch Terminal because a corporate surety bond is posted for that permit. All alleged violations pertain to self-bond qualification criteria which do not apply where a corporate surety bond is employed. For this reason, OSMRE did not issue a TDN for the Hayden Gulch Terminal permit.

OSMRE on Feb. 16 sent similar letters to WildEarth Guardians saying it has also issued TDNs to state regulators in Wyoming and New Mexico about possible Peabody reclamation bonding deficiencies in each of those states.

In Wyoming, OSMRE said it is issuing TDNs to the Wyoming Department of Environmental Quality for the Rawhide, Caballo, Shoshone #1, North Antelope Rochelle and School Creek mines. North Antelope Rochelle (the nation’s largest coal mine), Caballo and Rawhide are the relevant operations. School Creek is a mine next to North Antelope Rochelle that Peabody never wound up developing before the coal market went sharply south about four years ago. MSHA data shows that:

  • North Antelope Rochelle produced 109.3 million tons in 2015 and 118 million tons in 2014;
  • Rawhide produced 15.2 million tons in 2015 and 15.5 million tons in 2014; and
  • Caballo produced 11.4 million tons in 2015 and 8 million tons in 2014.

OSMRE said it is issuing TDNs to the New Mexico Mining and Mineral Division for Peabody’s El Segundo and Lee Ranch mines, which are surface jobs located near each other, with El Segundo being the newer of the operations that has taken on business from the depleted Lee Ranch operation. MSHA data shows that Lee Ranch has been out of production since 2013, when it produced 19,395 tons of coal, following production of 1.3 million tons in 2012. El Segundo produced 7.5 million tons in 2015 and 8.4 million tons in 2014.

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.