Senate Democrat proposes bill to crack down on coal industry self-bonding

Sen. Maria Cantwell (D-Wash.), the ranking Democrat on the Senate Energy and Natural Resources Committee, has introduced the Coal Cleanup Taxpayer Protection Act, a measure that would clamp down on “self-bonding” in the coal industry.

Cantwell announced the measure June 16 in a news release that included statements of support from groups including the Sierra Club and the Western Organization of Resource Councils.

Current law requires coal companies to ensure that they can cover the cost of reclamation – that is, rehabilitating land after coal mining operations on it have stopped.

But the law allows the Interior Department and state agencies to accept performance bonds for this cleanup work from coal mining companies without separate surety, known as “self-bonds.”

These self-bonds are a significant financial liability to state and federal taxpayers. As dozens of coal companies have declared bankruptcy in the past two years, the financial risk to taxpayers posed by self-bonding has become apparent, according to the Cantwell news release.

The proposal would prohibit the Interior Department or state reclamation programs from accepting new self-bonds for reclamation of mines; phase out existing ones when the current five-year Surface Mining Control and Reclamation Act (SMCRA) operating permits need renewal; limit approval of alternate state programs (such as bonding pools); require tougher surety bonds; and limit the posting of coal company assets for reclamation.

“The bill also authorizes Interior to require the inclusion of coal executives’ salaries and bonuses as collateral,” according to a bill summary.

The Interior Department’s Office of Surface Mining (OSM) and coal states are also working to diffuse the crisis surrounding self-bonding. For example, the West Virginia Department of Environmental Protection said June 9 that it has reached an agreement in principle with the state’s largest coal operator, Alpha Natural Resources, which filed for bankruptcy in August 2015.

“We need to make sure the taxpayer isn’t on the hook for cleanup work by bankrupt coal companies anymore. Self-bonding clearly isn’t working, and we need to stop this dicey practice from continuing,” Sen. Cantwell said.

Current law, however, does not require the acceptance of these bonds. In fact, some states do not allow their use, including Kansas, Kentucky, Maryland, Montana and Virginia.

Several states have come to their senses about the risks of this practice, so the federal government should be next. We’ve already taken the step to abandon self-bonding for hardrock mining, so coal mining is a natural next step,” Sen. Cantwell said.

Sens. Dick Durbin (D-Ill.), Sheldon Whitehouse (D-R.I.) and Martin Heinrich (D-N.M.) have joined the bill as original co-sponsors, and Rep. Matt Cartwright (D-Pa.-17) is introducing a companion bill in the U.S. House of Representatives.

In March, Cantwell and Durbin asked the Government Accountability Office (GAO) to investigate self-bonding by coal companies.

“Illinois and Indiana taxpayers should not be left holding the bag for bankrupt Peabody Energy’s $253 million in self-bonded mine reclamation and environmental cleanup responsibility costs,” said Howard Learner, executive director of the Environmental Law & Policy Center.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.