Government, Private Watchdog Groups Call for End to Self-Bonding by Coal Companies

Since passage of the federal surface-mine law in 1977, coal companies have been on the hook to reclaim disturbed land when mining ends. Too many of them have wriggled off through bankruptcy, say reports from conservation groups and the federal government.

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A pair of reports – one privately produced and the other created by the federal government – say coal companies should be required to put more assets on the table to ensure that they restore strip mines when they are finished extracting coal. 

The separate reports, one from the Western Organization of Resource Councils (WORC) and the other from the federal General Accounting Office (GAO), say states should stop allowing coal companies to “self-bond” the funds necessary to reclaim surface mines when mining is complete.

“Self-bonding is risky to taxpayers and unnecessary to coal mining companies,” said Bob LeResche, a WORC board member from Clearmont, Wyoming. “The GAO recommends ending self-bonding outright, and our report demonstrates that would not harm the industry. Self-bonding could be ended tomorrow and no one would blink.” 

Self bonds are backed by the coal company’s own financial resources. The GAO report says this type of bonding is riskier than surety bonds, which are guaranteed by a third party, and collateral bonds, which are backed by an asset like a certificate of deposit. 

Self bonds can be empty promises if a coal company goes bankrupt before reclamation work is completed, the reports say. 

The GAO report said self-bonding creates difficulties if there are unanticipated costs in reclamation. Having to determine whether a coal company is financially healthy enough to self-bond is a burden on local governments and taxpayers, the report says. The risks can increase when the coal market is soft, as it is now. 

WORC’s Report, Now is the Time to End Self-Bonding, documents how the practice of self-bonding is now at historic lows, particularly due to the bankruptcies of Peabody Energy, Arch Coal and Alpha Natural Resources. As a part of bankruptcy proceedings during the last three years, each of the three was forced to shift from self-bonding to other, more secure forms of bonding.  

In addition to the decreasing size of the portfolio, the WORC report documents the wide availability of affordable terms for surety bonds as a possible solution for companies moving away from self-bonding.  

The calls for reforming the self-bonding system are also playing out locally in Wyoming. In late March, the state’s Land Quality Advisory Board sent proposed limits to self-bonding back to the Department of Environmental Quality for a rewrite after the coal industry pushed back.  

One of WORC’s state-based member groups, the Powder River Basin Resource Council, spoke in favor of the reforms, stating in public comments, “The need to perfect Wyoming’s bonding rules will only grow. The risk of inadequate financial assurance practices continues to increase as smaller, less financially secure coal operators come into Wyoming and larger coal companies look to escape cleanup liability.” 

Federal policy, too, could play a role in the issue. Senator Maria Cantwell (D-WA) is sponsoring legislation, the Coal Cleanup Taxpayer Protection Act, that would amend the Surface Mining Control and Reclamation Act to prohibit OSMRE and state regulatory authorities from accepting new self-bonds for coal reclamation. The legislation also mandates that existing self-bonds or corporate bonds used for coal reclamation must be converted to surety or collateral bonds. 

“I welcome GAO’s recommendation to pass responsible legislation making coal companies clean up pollution. Secretary Zinke should also reverse course and crack down on this irresponsible coal mining practice,” Senator Cantwell wrote in a statement of support for GAO’s findings.  

The ranking member of the House Natural Resources Committee, Rep. Raul Grijalva (D-AZ), also supports the recommendations for reform. 

“It’s absurd that coal companies are allowed to profit off our land and then leave American taxpayers with the bill to pay for the clean-up costs,” Grijalva wrote. “It’s time we put an end to the cycle of allowing dirty industries to put communities’ air and water at risk with no repercussions.”   

The other option for ending the practice of self-bonding in the coal industry could come by administrative rulemaking through the Department of Interior, according to the GAO report. At this point, Secretary of Interior Zinke has not commented on the rules or the proposed legislation.  

Requiring coal companies to post mine-reclamation bonds was part of the 1977 Surface Mining Control Reclamation Act. Another part of the act created the Abandoned Mine Land Fund, which is supposed to pay for reclamation of surface mines that were abandoned before the reclamation requirements went into effect.

 

 

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