Current work in wildlife, rivers, public lands, and climate

Thursday, February 18, 2016
Guardians Complaint Spurs Peabody Coal Investigation

Obama Administration Directs States to Investigate Whether Company Should Pay More than $1 Billion in Coal Mine Cleanup Guarantees
Contact: Jeremy Nichols (303) 437-7663 jnichols@wildearthguardians.org

Denver—In responseto a formal complaint filed by WildEarth Guardians, the U.S. Department of theInterior directed the states of Colorado, New Mexico, and Wyoming toinvestigate whether Peabody Energy should be required to pay more than $1billion to guarantee its coal mine cleanups.

“This is major step forward for reining in coal andsafeguarding our climate,” said Jeremy Nichols, WildEarth Guardians’ Climateand Energy Program Director. “For toolong, Peabody has ridden on the backs of the American public and that’s finallyset to change.”

In a citizen complaint filed with the U.S. Office of SurfaceMining Reclamation and Enforcement, WildEarth Guardians called on the ObamaAdministration to investigate Peabody’s practice of “self-bonding” its coalmines in Colorado, New Mexico, and Wyoming.

Peabody is the largest coal company in the United States andthe largest privately owned coal company in the world. In the U.S., the company produces more than180 million tons of coal annually. When burned, this coal produces more than330 million metric tons of carbon dioxide annually, more than 5% of all U.S.greenhouse gas emissions.

By law, for a coal company to be permitted to mine, it mustfirst post bonds to cover the costs of reclamation. This ensures that if acompany becomes insolvent or goes out of business, the costs of cleaning up amine doesn’t fall upon taxpayers.

Normally, to meet bonding requirements, companies postsureties that are backed by third party guarantors. However, in some cases,companies are allowed to guarantee their own reclamation bonds and post what iscalled a “self-bond,” which is effectively a corporate IOU. Self-bonding isonly allowed where a company is solvent and meets certain financial criteria.

Although Peabody self-bonds mining operations in Colorado,New Mexico, and Wyoming, the company is on the verge of bankruptcy and nolonger meets legal criteria for self-bonding.

In total, Peabody guarantees more than $1.1 billion inself-bonds in the western U.S. Nationwide, Peabody guarantees more than $1.4billion in self-bonds. The company’s net worth, as reported at the end of 2015,is only $870 million.

“We’re effectively bailing out bankrupt big coal,” saidNichols. “This is bad for our climate, bad for the American taxpayer, and badfor our western public lands.”

By law, where a company no longer qualifies forself-bonding, it must post an alternate bond within 90 days or cease coalextraction. Guardians’ complaint called on the Obama Administration to enforcethe law and ensure Peabody post adequate bonds or stop mining.

In letters to Colorado, New Mexico, and Wyoming regulators,the Interior Department directed the states to investigate whether Peabodyqualifies for self-bonding. Interiorgave the states 10 days to respond.

The 10 day notices come as the coal industry has declinedprecipitously in the last year. Coal giants Alpha Natural Resources and ArchCoal have both filed for bankruptcy. Reports indicate Peabody Energy, which isthe nation’s largest coal company, is nearing bankruptcy as well. The company’sstock has declined from a high of more than $1,000 per share in 2011 to currentprice of around $3.50 per share.

Peabody Energy operates 12 mining operations in Colorado,New Mexico, and Wyoming. Its mines in Wyoming are the largest in the nation andinclude the North Antelope-Rochelle mine, which alone produces more than 10% ofall U.S. coal.

In Colorado, Peabody owns the Foidel Creek mine (also knownas the Twentymile mine) in northwest Colorado, as well as other miningoperations in the area that are undergoing reclamation. In New Mexico, Peabodyowns the El Segundo and Lee Ranch mines and is the state’s largest coalproducer.

Although Peabody has announced its intent to sell itsColorado and New Mexico assets, this transaction has yet to be finalized and itremains unclear whether the purchaser, Bowie Resources, will be able to securefinancing.

Much of Peabody’s mines underlie public landsand extract coal that is owned by the American public. The company is the second largest holder of publicly owned coalleases in the western United States.