The coal companies’ financial woes mean that federal regulators need to find new solutions to repairing the lands on which they have mined. Until now, the bigger companies set aside the monies and make the fixes. But now that many have declared bankruptcy, the burden could fall on taxpayers.
So the Office of Surface Mining Reclamation and Enforcement has said that it would reconsider just how it can get guarantees from coal companies. For example, in the past, the healthier ones have self-bonded, meaning that they pay for repairs out of funds from their balance sheets. Smaller companies take out insurance policies that provide such assurances. The agency may do away with the self-insuring, or self-bonding.
“The bankruptcy of the large coal mining companies has raised grave concerns,” said Joe Pizarchik, director of the surface mining enforcement agency, in a conference call Wednesday, as reported by the Los Angeles Times.
It wasn’t until 1977 that the U.S. Congress passed laws that were signed by the president to restore mine sites and to post a bond. The purpose of the so-called Surface Mining Control and Reclamation Act is to not just ensure that mine sites are cleaned up but to also make sure that taxpayers don’t get stuck with the bill.
It is thus up to the Office of Surface Mining Reclamation and Enforcement to oversee the process. As such, the agency is now reviewing its policy of allowing major conglomerates to self-bond in light of their financial woes. In other words, the original value of their assets is far more than what they would fetch in today’s markets — one that is enduring historically low prices for coal used to make electricity and for coal used to make steel. That’s on top of the fact that natural gas is taking market share from coal in electric generation markets.
In the last year or so, Peabody Energy, Arch Coal, Walter Energy and Patriot Coal have all declared bankruptcy. Dozens of coal enterprises have done the same in recent years. The issue now is that companies such as Peabody and Arch are using assets from their healthier subsidiaries as collateral to pay for mining repairs. This is a key issue that regulators need to resolve.
“Peabody and our operating subsidiaries remain in full compliance with state and federal requirements that govern bonding requirements, and all of our mines in states where Peabody has self-bonding have been reaffirmed for eligibility in 2015,” the company said in a formal statement. “We pride ourselves in our track record of high quality reclamation and believe that the standards that govern bonding are appropriate and have led to successful results.”
Any new rulemaking would take years of commenting and legal wrangles before it would be implemented. Congress could rewrite the laws and ban self-bonding. That would seem unlikely given the partisan feelings there and especially with the presidential election at hand; Donald Trump has vowed to reverse some of the regulations that the coal industry says has held it back.
Any taxpayer rescues, however, could quickly change public sentiment and lead to congressional revisions.