In energy rich parts of the country, over one million acres of land is currently dug up and built on for coal mining operations. Reclaiming those mines—filling the pits with dirt and then recreating the ecosystem that once was, is expensive. Montana requires mining companies to put up money up front to pay for eventual clean up. But not all states, do, and as the dramatic decline of the coal industry advances, coal companies may no longer have billions in cash on hand to pay their clean-up costs. Inside Energy reporter Leigh Paterson looks at the massive task of reclaiming the land from our energy appetites.
I meet Karla Oksanen on a windy stretch of highway over-looking a dark, cavernous open-pit mine near Gillette, Wyoming.
She points past some power-lines, towards her house, nestled on a hill just past Eagle Butte Mine.
"The velveeta house. Its right through that post!"
Velveeta for its yellow color. Karla and her husband live so close to the mine, that they can feel it.
“The shaking from the blasts, yea. Its kind of like an earthquake hahaha!”
Over the years, they’ve managed to co-exist but Karla is now concerned about the issue of clean up because the future of this mine is uncertain. Its owner is Alpha Natural Resources, one of the largest coal companies in the country. They filed for bankruptcy earlier this year. Regulators estimate it would cost over $400 million to restore Alpha’s Wyoming mines, including this one. But in its most recent financial filings, the company listed nationwide liabilities as two and a half times greater than its assets. Now, the question of who will take on that clean-up debt and how it will get paid back is getting worked out in bankruptcy court.
“It would be a huge program to try to fill it all in. Hopefully they won’t leave it to the taxpayer to pay the bill.”
Leaving it to the taxpayer is exactly what is never supposed to happen. Before mining even begins, federal law requires that coal companies provide financial guarantees that clean-up will be paid for, even if the company goes under. But there is a certain type of financial guarantee behind billions of dollars in outstanding clean-up costs that isn’t much more than a promise. ..its called self-bonding. And no, it is not a move you read about in 50 shades of gray. Self bonding is more of a financial maneuver
“A self bond is basically like an IOU.”
Clark Williams-Derry is with the Sightline Institute, a think tank focusing on sustainability, energy and the environment.
“Its just kind of a piece of paper that says hey, you know what, I’m good for it.”
The requirements vary state to state but in order to self-bond, coal companies must first pass a test of financial strength.
“And for a long time, it didn’t seem like much of a problem”
But now, in a struggling coal market.
“Big companies that seemed to be too healthy to fail, too big to go under that are approaching bankruptcy and they’ve been self-bonding.”
Out of top coal producing states, Wyoming has the highest rate of self-bonding at 76 percent. But the issue extends far beyond the state’s coal- rich Powder River Basin. Inside Energy calculated that over half of the projected costs to clean up mines in at least 4 more states - Colorado, North Dakota, Indiana and Texas - are covered by self-bonds.
And the top two coal producing states, Wyoming and West Virginia are some of the first to be forced to deal with mine clean-up in this downturn. Regulators here defend the program and say the self-bonding system is working - for now.
Kyle Wendtland is with Wyoming’s Department of Environmental Quality.
“Nobody has had to pay a penny yet for this, out of the public for this reclamation.”
“It is a tough topic for everybody in the community,” says Karla Oksanen.
Over lunch Karla Oksanen, who is married to a retired coal miner herself, explained the catch-22 of the situation: if coal companies actually have to put up the money for reclamation in place of self bonds, it could hurt their already dismal balance sheets, sending them into bankruptcy. Alpha Natural Resources said as much in financial documents not long before it filed for bankruptcy, "failure to maintain self-bonding status, could affect our ability to mine."
“On one hand you want to see them do what’s right and on the other hand you know you understand that your friend and neighbors may still be going to work.”
By allowing self-bonding to continue for so long, we have dug ourselves into a deep hole that will likely only get worse. Two of the nation’s biggest coal companies -- Arch Coal and Peabody Energy -- together have nearly $2 billion worth of self bonded mines all over the country. Arch is on the edge of bankruptcy. Peabody could be next.
For Inside Energy, I’m Leigh Paterson.
Copyright Inside Energy. Published with permission from RMPBN. Inside Energy is a public media collaboration focused on America’s energy issues. Originally published at: http://insideenergy.org/2015/11/14/in-coal-county-no-cash-in-hand-for-billions-in-cleanup/