Peabody Energy

Haul trucks transport coal at Peabody Energy North Antelope Rochelle Mine in the Powder River Basin in this 2012 file photo.

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The bankrupt coal company that laid off 235 of its northern Wyoming employees in March wants to provide almost $12 million in bonuses to its six top executives.

Peabody Energy, which operates the North Antelope Rochelle mine outside Gillette, argued in court documents filed Aug. 3 in the U.S. bankruptcy court in St. Louis that incentive bonuses, contingent on cutting costs, as well as meeting revenue and environmental reclamation goals, will ultimately boost the company’s viability.

Reaching the $11.9 million in potential bonuses would require that the executives exceed all targets, a company spokesman explained.

"This comes only after other employee wages, incentive plans and benefits were requested and confirmed first as part of the first day motions," the company said in a statement. "We then obtained approval for a program related to retention of key employees working on the filing and essential to timely completion. This last action is to consider the senior team."

Peabody's argument that incentives are vital to successfully emerge from bankruptcy is a familiar one and one that often succeeds in court.

Alpha Natural Resources, which operated the Belle Ayr and Eagle Butte mines, came under fire during its bankruptcy proceedings when the company received approval for millions of dollars in bonuses to top executives.

Peabody’s request, meanwhile, comes amid a debate in Wyoming over the company’s practice of self-bonding for reclamation.

“They don’t have enough money to purchase surety bonds, yet they’ve got enough money to give to their executives,” said Bob LeResche, chairman of the Western Organization of Resource Councils. “Each of the bankrupt coal companies have done such a thing. It amazes me every time.”

The practice of setting a company’s assets against the eventual cost of cleanup is a contentious one for environmentalists and landowners represented by groups like the Resource Council, who argue that corporate surety bonds and collateral bonds are the only way to keep taxpayers from picking up the bill for reclamation if coal companies go bust. Companies argue that the strength of their viable assets is sufficient to restore lands disturbed by mining.

The Office of Surface Mining Regulation and Enforcement on Tuesday issued a policy advisory to states encouraging an end to the practice of self-bonding at coal mines due to the number of prominent bankruptcies and an unstable coal market future.

The advisory recommends states immediately assess the financial stability of coal companies, halt new self-bonds and retain a five-year operating minimum before companies emerging from bankruptcy can self-bond.

The consistent, albeit subtle, pressure from the national regulators is a boon to Western landowners, environmentalists and outdoorsmen who fear Wyoming has failed to properly regulate the industry.

“The stakes are high,” LeResche said. “Peabody Energy has amassed a $726 million reclamation liability with over 90 square miles of unreclaimed mines in Wyoming. The writing is on the wall: Coal companies must replace their risky self-bonds, and we hope the state of Wyoming will follow these helpful guidelines from OSMRE.”

Peabody maintains that they are committed to paying the total of their reclamation costs.

"The company is continuing to provide assurances to states through a variety of forms including self-bonding, third-party surety bonding, letters of credit and now superpriority claims," the company said in a statement.

Wyoming is one of 24 states that have a state regulatory body for mining, the Department of Environmental Quality. Only 10 states, including Wyoming, currently have self-bonding agreements with surface mines, according to federal data.

Environmentalists worry the coal market will worsen, leaving more reclamation costs unpaid.

“Advising states to end self-bonding is a recognition that the collapse of the coal market is not over and that more must be done to protect people and the environment from the fallout,” said Sharon Buccino, director of lands at the Natural Resources Defense Council, in a statement. “As the era of Big Coal comes to an end, we must do more to ensure coal companies live up to their obligations to coal communities across the nation.”

For their part, bankrupt companies argue that replacing self-bonds is too expensive and lack of liquidity precludes the possibility of paying for other assurances.

But that argument isn’t satisfying to some.

The Resource Councils recently petitioned for federal intervention, arguing that Wyoming is breaking the law by allowing Peabody’s self-bonding during bankruptcy.

It filed a similar complaint against Wyoming’s self-bonding deal with Alpha, and federal officials agreed Wyoming broke its own laws in a declaration released last month. The state is appealing that decision.

Wyoming regulators said in the appeal that enforcing strict bonding requirements would only punish these bankrupt companies and hurt state revenue and the Wyoming workforce.

But self-bonding critics want states to do a better job regulating leases in the first place so that companies never reach that point.

“Granting a self-bond is total discretionary to the state,” LeResche said. “The state is supposed to use some judgment, and our state has never done that.”

This story has been updated from its original edition.

Follow energy reporter Heather Richards on Twitter @hroxaner

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