Proposed rules to limit self-bonding for mining companies in Wyoming will be sent back to their writers, a citizen regulatory board decided Wednesday after hearing complaints from the coal industry.
The Land Quality Advisory Board remanded the proposed rules back to state regulators at the Department of Environmental Quality after a public meeting in Gillette. The decision is a road block for environmental groups that are fighting to end self-bonding in Wyoming and a win for mining firms that want a reasonable chance at self-bonding in the future.
“The standards can’t be set so high that no one can use it,” said Travis Deti, executive director of the Wyoming Mining Association.
Self-bonding came under fire from environmental advocates in recent years who said it puts taxpayers at risk. It allows companies to wager the cleanup of mining operations on the strength of their financial history.
Supporters point out that self-bonding hasn’t been a problem, as no coal company has fallen apart and passed reclamation onto the state in the three decades that self-bonding has been an option. State regulators in recent years said that they wanted to keep self-bonding as an option, part of a broad portfolio of options from traditional insurance to using property or equipment as collateral.
Still, the debate heated up during coal’s downturn in 2015 and 2016, when large coal firms filed for bankruptcy. The coal sector, a long-term bedrock of Wyoming’s economy, changed dramatically in a short period of time. Production fell by one-quarter and almost 1,000 full-time mine employees in the Powder River Basin lost their jobs.
That sector has recovered from the bottom of the bust, but is not expected to return to historic norms of robust employment and consistent growth. Coal faces a number of headwinds in years to come as cheap natural gas continues to outcompete coal in the electricity market and renewables are taking more of the power share every year.
Proposed updates from the Department of Environmental Quality surprised many late last year by greatly limiting self-bonding going forward. Though technically still possible, the proposed rules stated companies would need a high credit rating from a financial firm like Moody’s Investor Service.
Given uncertainties in the coal market post-downturn, qualifying under the proposed rules is unlikely even for Wyoming’s largest and most financially healthy coal firms like Peabody Energy.
A number of mining companies noted that self-bonding was effectively off the table for them under the proposed changes. They also argued against a provision limiting self-bonding to mines that have at least 10 years of production left.
The board heard those complaints and has asked the Department of Environmental Quality to review its rules in light of the pushback.
The board decision is not unusual in the rule-crafting process, said Keith Guille, spokesman for the department.
Essentially, there are still questions that the board would like explained, as well as some late comments from the public and industry that need to be answered, he said.
The board also requested that the department bring its economic advisor before them to explain the ratings system and why that was proposed in the rule.
Previously, state regulators looked at financial statements to gauge a company’s eligibility to self-bond. Using a rating from a firm like Moody’s would allow Wyoming regulators to look ahead at expected company health and anticipate potential company weaknesses, said Land Quality Administrator Kyle Wendtland in previous interviews with the Star-Tribune.
The Powder River Basin Resource Council, a landowners advocacy group, noted in its public comments on the proposed rules that there are a number of new pressures on the coal industry that make self-bonding more risky.
“The need to perfect Wyoming’s bonding rules will only grow,” the group opposing self-bonding wrote. “The risk of inadequate financial assurance practices continues to increase as smaller, less financially secure coal operators come into Wyoming and larger coal companies look to escape cleanup liability.”’
The Sierra Club also submitted comments supporting stricter rules on self-bonding.
Coal companies do not like the high bar proposed in the new rules. The rules go too far, industry says.
Peabody’s public comment notes that the proposed rules are “essentially eliminating self bond as a tool for the coal industry in Wyoming.”
Peabody, which owns the largest open surface mine in the country, North Antelope Rochelle, has replaced its self-bonds in Wyoming, part of the firms restructuring plan after bankruptcy. However, the firm’s leadership has said it would like to consider self-bonding again in the future.
Western Fuels, which operates the Dry Fork mine, said the rules don’t work for cooperatives like theirs. Company insolvency that dumps cleanup responsibility on the state is virtually impossible for a cooperative owned and operated mine, the company argued.
“We understand that there are some changes on the way for self-bonding rules,” Deti said. “As times change and economic conditions change, we simply believe operators should have (a self-bonding) option.”
The rules have to clear the Land Quality board before moving to a hearing before the Environmental Quality Council. Both sides have noted that they will continue to fight for, or against, the proposed changes at the council if necessary.
The Environmental Quality Council is an independent board, appointed by the governor, that reviews new environmental regulations and hears contested cases. It came under fire during the recent legislative session for siding with the Powder River Basin Resource Council by rejecting a coal mine permit.
Some lawmakers suggested the council’s second-year budget should be eliminated in light of the decision until the council had reported to lawmakers and the Department of the Environmental Quality on its efficiency. That funding was restored in the final state budget.
Follow energy reporter Heather Richards on Twitter @hroxaner
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