Peabody Energy, which filed for Chapter 11 protection on April 13 at the U.S. Bankruptcy Court for the Eastern District of Missouri, won a Sept. 16 approval from its bankruptcy judge for an alternative reclamation bonding program for its coal mining operations in Illinois.
The involved Peabody subsidiaries include Peabody Investments Corp.; Peabody Midwest Mining LLC; Peabody Coulterville Mining LLC; Peabody Gateway North Mining LLC; Peabody Arclar Mining LLC; Hillside Recreational Lands LLC; and Conservancy Resources LLC. The alternative bonding deal was worked out with the Illinois Department of Natural Resources (IDNR).
These companies operate two active mining operations in Illinois, the Gateway Mine and the Arclar Complex (which includes Cottage Grove, Wildcat Hills and Willow Creek), and also hold fifteen permits for ten closed mines (collectively, with the active mining operations, called the “Illinois Mine Operations”).
Over the last permit cycle, the reclamation self-bonding requirements in Illinois for the companies, calculated under standards established by IDNR, have been set at approximately $92.2 million (the “Illinois Reclamation Self-Bond Amount”). These companies have been “self-bonding” their reclamation obligations, which environmental groups say increases the danger that mine properties will be left unreclaimed by a bankrupt company.
These companies, in addition to the self bonds, utilize approximately $6.4 million in third party commercial bonds in connection with the Illinois Mine Operations reclamation obligations at certain closed mines.
The approved settlement with IDNR allows for a “Bonding Superpriority Claim” having priority over any or all administrative expenses in the amount of $12,897,495. The Superpriority Claim shall apply to all or any portion of the self-bonded reclamation obligations under all issued and outstanding permits.
Within thirty days of approval of this court approval, Peabody needs to post as a collateral bond a Bonding Facility Letter of Credit, or provide a third party commercial surety bond or deposit cash, that meets the requirements of all applicable Illinois statutes and regulations, in the amount of $3.2 million to secure the reclamation obligations related to these operations.
Within ninety days of this court approval, Peabody needs to provide IDNR a plan outlining a process whereby it will reevaluate its bonding liability for the Illinois Mine Operations to ensure that the bond reflects the best available reclamation technology and to identify any available reductions in bond liability.
Beginning immediately after this court approval, and within fifteen months thereof, Peabody is to use reasonable best efforts to reduce the total amount of the self-bonds by at least $20 million. It can reduce the self-bonds by any manner permitted under the IDNR regulations including, without limitation:
- obtaining bond releases or reductions with respect to any of the self-bonds that are eligible;
- transferring self-bonded permits to another operator; or
- replacing self-bonds with commercial bonds that satisfy IDNR regulations.