Proposed Wyoming rules for coal mining may fill a void in the Cowboy State created by the Trump administration’s push for deregulation within the industry.
The federal agency that oversees mining and reclamation is poised to change its position on self-bonding — a practice allowing firms to post IOU’s based on the strength of their balance sheets in lieu of cash or insurance for post-mining cleanup costs. The administration is considering whether to halt proposed Obama-era rules that discourage self-bonding.
Meanwhile, the state’s Department of Environmental Quality is nearly finished with a preliminary update to state regulations, including self-bonding, said Keith Guille, spokesman for the department.
Those rules have not been released, but a draft for public input is expected next week, he said.
“From our standpoint, self-bonding still has a place, but what that will look like, that is what we are working on,” he said. “Self-bonding is not the only one we are looking at. We need to look at all the financial rules and see what needs to be changed.”
A Department of the Interior report released last week stated limiting self-bonding is an overly burdensome rule on the industry, one that could make it difficult for coal companies to continue operating.
It’s an argument that was often heard in recent years.
Whether coal companies should be self-bonded became a key point of contention during the coal bankruptcy period of 2015 and 2016, when Wyoming’s largest coal companies filed for Chapter 11, laid off workers and reduced production. They were strapped for cash and carrying billions in debt, a perfect storm of market forces and risky company decisions.
Environmental groups argued that companies in a weakening coal sector might eventually walk out on reclamation obligations in Wyoming and the tab could fall on the taxpayer.
Federal bankruptcy judges and the Department of Justice appeared to agree with the environmental groups, and bankrupt companies like Peabody Energy and Arch Coal were pressured to replace millions of dollars in self bonds with more traditional insurance options when they emerged from bankruptcy. The Office of Surface Mining began a rule-making process in mid-2016 to craft stricter provisions for companies wishing to self-bond given the uncertainty in the coal sector and the expectation that the coal market would continue to weaken.
A spokesman for the federal mining agency did not respond for comment by press time.
The coal economy has stabilized compared to this time last year, and the big companies have replaced their self-bonds. But the outlook long term for the coal sector has not improved. Wyoming regulators are supportive of the walk back on self-bonding from the Office of Surface Mining, said Guille, with the DEQ.
The citizen groups that opposed self-bonding have not changed their stance.
Setting a new standard
By federal law, Wyoming’s bonding rules can’t be weaker than federal standards.
However, states can be stricter, said Shannon Anderson, legal counsel for the Powder River Basin Resource Council, a landowner’s advocacy group based in Sheridan.
The group was a vocal opponent to the pervasive use of self-bonding by Wyoming operating companies, objecting multiple times to proposed restructuring agreements that did not replace those self-bonds.
Anderson said she hopes Wyoming picks up the slack from the federal side with the upcoming proposed rule changes.
“I think this is a great example of when the federal government isn’t acting, states can move in and act on their own,” she said. “This will be a Wyoming rule for companies operating here, but we also think it will be setting a new standard so other states can adapt, potentially OSM (Office of Surface Mining) at some level can adapt the state rule.”
Wyoming has frequently defended the practice of self-bonding, which came about because traditional insurance markets in the ‘80s were less secure than a company’s balance sheet. Self-bonds are just one of the ways Wyoming holds company’s financially accountable, DEQ representatives have said repeatedly.
Peabody Energy, the operator of North Antelope Rochelle in Campbell County, announced its plan to replace more than $700 million in self-bonds in March, but the company hinted that it may seek self-bonding again in the future.
Whether these large post-bankruptcy companies would be allowed to self-bond is a hypothetical question that Guille, spokesman for the DEQ, said he could not answer.
The agency would consider a request for self-bonds according to its rules, he said.
Neither a state nor federal rule can make self-bonding disappear. That would take a statutory change, but states can set a precedent by raising the bar for qualification, said Anderson from the Powder River Basin Resource Council.
“There is still room at the state to do good things,” Anderson said. “If anybody has something to lose on self-bonding it’s Wyoming, given the amount of coal mine reclamation that we have. It is in the state’s interest to do the right thing.”