U.S. to Hear Concerns Over Coal Mines’ Self-Bonding

By and | May 20, 2016

The United States is considering whether to reign in a subsidy on coal mine cleanup costs and in so doing shield taxpayers from those liabilities, a leading regulator for the mining industry said on Wednesday.

The program, known as self-bonding, has allowed some of the country’s largest coal companies to avoid putting aside cash, bonds or other securities that are typically required to cover future mine cleanup costs. Instead, self-bonding allows a company to use its balance sheet as collateral – a problem when that company goes bankrupt.

Peabody Energy, Arch Coal and Alpha Natural Resources have all gone bankrupt in the last 10 months and left behind roughly $3.6 billion in self-bond liabilities, according to securities filings.

Environmentalists have warned officials that coal-producing states in the west left the self-bonding program open to abuse and the Office of Surface Mining and Reclamation Enforcement (OSMRE) on Wednesday said that it would investigate those concerns.

“I’d recommend that states decide not to accept any new self-bonds given the current situation in the coal industry,” OSMRE director Joe Pizarchik told reporters on a conference call.

Self-bonding may save a coal company money in bankruptcy but also day-to-day since every dollar that the government insures is a dollar that does not require private financing.

Peabody and Arch Coal were not immediately available for comment, while Alpha Natural declined to comment.

Following a complaint by WildEarth Guardians, Pizarchik said the regulator would open a 30-day comment period on Friday to hear public concerns about self-bonding.

“We think it’s good to solicit broader public feedback, but we hope (officials) will to move quickly to fix the problems around self-bonding,” said Jeremy Nichols of WildEarth Guardians.

Coal-producing states have discretion in accepting self-bonds and any change to the law, which dates to 1977, would have to be approved by Congress, a process that could take years.

In the meantime, Pizarchik said, officials would closely examine dealings between coal companies and states – some of which have snuffed out self-bonding.

“We don’t know whether there is collusion or anything else but I think the public has the right to know why were (some states) successful in replacing self-bonds while other states weren’t,” Pizarchik said.

(Reporting by Patrick Rucker and Tracy Rucinski)

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