Peabody Energy’s North Antelope Rochelle mine encompasses thousands of acres near Wright, about 65 miles south of Gillette. It is the largest coal mine in America, according to Peabody Energy. Miners have extracted more than 1.8 billion tons of coal from the mine since it opened in 1983. (Powder River Basin Resource Council)

Wyoming’s Department of Environmental Quality is facing a critical decision regarding Peabody Energy.

The state agency must decide whether the company can continue to self-bond for its $728 million Wyoming coal mine cleanup obligation. “Self-bonds” are unsecured IOU’s, uncollectable when a company hides under bankruptcy protection.

Peabody is the nation’s largest coal company, and is going through Chapter 11 bankruptcy. As energy markets shift away from coal, Peabody’s giant strip mines in Wyoming and across the world just aren’t as profitable as they once were. The company’s multi-billion dollar debt became too much to carry and Peabody filed for bankruptcy last April.

Bob LeResche
Bob LeResche

But there is some light at the end of the tunnel as Peabody seeks to emerge from bankruptcy next month. Through its reorganization plan, the company is about to escape more than $5 billion of debt.

That is good news for Peabody, and also good news for Wyoming. It means that Peabody should easily be able to afford to replace its self-bonds with real clean-up insurance that will actually protect the public the next time Peabody suffers financial reversals.

Most people would be appalled to learn that coal companies in Wyoming — a state that produces more coal than the next seven combined — are allowed to operate without posting any kind of enforceable financial assurance that they will clean up after themselves.

In the case of Peabody, this means that, while the company has obligations for clean-up costs of $728 million, the state has no separate cash, legitimate collateral or insurance from a bank or insurance company that would cover these significant obligations if the company again goes belly-up.

Today, having watched coal companies navigate bankruptcies, institute devastating layoffs, and collapse under excessive debt loads, DEQ needs to consider these risks very seriously. Dodging debt obligations through bankruptcy proceedings has given Peabody short-term relief, but the long-term financial outlook for coal is still gloomy as the industry struggles to compete with abundant natural gas and the clean renewable energy sources utility customers are demanding. Coal production in the United States has fallen eight years straight to its lowest level in nearly 40 years, according to the federal Energy Information Agency.

Two other huge bankrupt coal companies (Alpha and Arch) have committed to replace their self-bonds with real insurance as a condition of emerging from their bankruptcies. Peabody should do the same. Our DEQ should require them to do the same.

The bankruptcy judge in St. Louis overseeing Peabody’s Chapter 11 case has emphasized that the company must have a bonding solution in place as it exits bankruptcy.

In the coming weeks, Peabody must negotiate with DEQ a structure of bonding for its hundreds of millions of dollars of reclamation obligations in Wyoming.  Effective protection of Wyoming citizens and taxpayers requires that DEQ insist that Peabody must secure all of its reclamation obligations with third party surety bonds to replace the unsecured self-bonds they have been allowed in the past. Real surety bonds are the only reasonable security for Peabody’s reclamation obligations in Wyoming.

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The next few weeks are critical to Wyoming’s interests. As Peabody seeks to have its plan of reorganization approved, DEQ needs to stand firm and be sure the company isn’t cutting deals that leave Wyoming’s taxpayers in the high-risk situation we now endure. When Peabody does exit bankruptcy, it must no longer be self-bonded.

DEQ has the power to make this happen. Agency Director Todd Parfitt needs to show the Wyoming backbone that will cause it to happen. They must meet their obligation to make sure taxpayers are never stuck paying to clean up Peabody’s mines anytime in the future.

Leresche added this note Monday as WyoFile prepared his guest column for publication:

At 3:38 PM MST yesterday (March 6) Peabody announced that, “…while Peabody believes it continues to qualify for self-bonding, the company is choosing to support its coal mine reclamation bonding requirements through third-party bonding facilities.”  And, the company added, “…Peabody has arranged for $1.26 billion in commercial surety bonds and $14.5 million through a state bond pool to be in place upon emergence from Chapter 11…”  Although the “state bond pool” is still a black box, this change of heart by Peabody is certainly good news for Wyoming, and lends a great measure of assurance to taxpayers in our state.

— Ed.

Bob LeResche is chairman of the Powder River Basin Resource Council, a Wyoming organization of landowners and other concerned citizens that advocate for responsible development of our state’s natural resources. Bob is a former Alaska Commissioner of Natural Resources and CEO.  With his wife Carol, he operates a ranch and organic heirloom vegetable farm near Clearmont.

Bob LeResche ran Alaska’s oil and gas leasing program as commissioner of natural resources for that state. He was executive director of the Alaska Energy Authority, an investment banker and CEO, and...

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  1. Surety Bonds in place of self bonding is always the right choice. Being that they are a third party financial guarantee, the surety company will do the requisite underwriting to qualify the individual for the bonding limits required and in the event there is a failure to properly reclaim, the surety companies, who are sufficiently backed, will safeguard the lands by properly reclaiming them. At the point the surety company pays out under the terms of the bonds, it will them subrogate against the mining company for reimbursement of their loss, but the public and its lands are taken care of and returned. Hopefully the state is doing its due diligence and verifying the legitimacy and the financial strength of the surety company and its ability to pay out claims.