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Peabody

Haul trucks transport coal in 2012 at Peabody Energy’s North Antelope Rochelle Mine in the Powder River Basin. Peabody announced it will replace its self-bonds with traditional insurance.

The last of the large coal companies using self-bonds to cover reclamation in Wyoming announced recently it will switch to insurance when it emerges from bankruptcy next month.

Peabody Energy, which owns the North Antelope Rochelle mine in Campbell County, announced its decision to replace its controversial self-bonds with traditional insurance to cover more than $728 million in reclamation liabilities. The decision ends a long debate over self-bonding in the state, at least for now.

Self-bonds are reclamation obligations that a company essentially promises to pay, based on the health of a company’s balance sheet.

Peabody, Arch Coal and Alpha Natural Resources each declared bankruptcy as the coal market tanked in 2015 and 2016. At the time, each of the companies had millions in cleanup costs guaranteed by the solvency of their companies. Opponents of self-bonding criticized the Wyoming Department of Environmental Quality for reaching agreements with each company allowing them to continue mining and self-bonding until the end of bankruptcy proceedings. Environmentalists argued that insolvency made the firms ineligible for self-bonding in the state and tensions over self-bonding flared up in each company’s case.

The bankruptcies brought existing disagreements over self-bonds to the fore, but a larger question was posed on the future of the practice.

Opponents argue that in the struggling coal market, companies could no longer be trusted to pay up the billions in reclamation owed to states. That money must be posted with insurance to protect the taxpayer from picking up the tab should companies fall into insolvency or disband, they said. Firms and state regulators, however, say self-bonding is a legitimate way to ensure reclamation in some instances and maintain their federal right to do so.

Alpha and Arch both replaced their self-bonds at the end of bankruptcy under pressure from environmental groups and federal regulators.

Peabody now promises to do the same, offering $1.26 billion for cleanup costs via commercial surety bonds and $14.5 million through a state bond pool before its restructuring post-bankruptcy, exceeding the amount of the firms’ U.S. reclamation costs per their balance sheet, which totals $471 million.

But the company left the door open for a return to self-bonding someday.

“Peabody believes it continues to qualify for self-bonding and will consider adding self-bonding to its capital structure to support its coal mine reclamation requirements in the future, should circumstances warrant,” CEO Glenn Kellow said in a statement Monday.

The Wyoming Department of Environmental Quality declined to comment on whether Peabody would qualify for self-bonds after it emerges from bankruptcy.

Environmental and land advocates applauded Monday’s announcement.

“As someone who lives and ranches near Peabody’s large strip mines, I’m pleased to know that real reclamation bonds will be in place to protect the land and water resources of the area,” said L.J. Turner, a member of the Powder River Basin Resource Council and rancher in the Powder River Basin. “Better financial assurance will protect taxpayers and neighboring landowners and will ensure that the mining company remains responsible for any cleanup costs for its large Wyoming coal mines.”

Peabody will go before a bankruptcy judge next week seeking approval of its restructuring strategy that eliminates $5 billion in debt. If all goes according to plan, the company expects to emerge in April, one year after it filed for Chapter 11 amidst a coal market crisis.

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Follow energy reporter Heather Richards on Twitter @hroxaner

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Energy Reporter

Heather Richards writes about energy and the environment. A native of the Blue Ridge Mountains in Virginia, she moved to Wyoming in 2015 to cover natural resources and government in Buffalo. Heather joined the Star Tribune later that year.

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