A dump truck drives through Antelope Mine outside of Wright on Sep. 21. The Wyoming Department of Environmental Quality filed rules recently that would stiffen the state's self-bonding regulations.

Environmental groups are encouraged and companies hesitant over draft rules that would stiffen Wyoming’s self-bonding regulations.

For companies to operate in the Cowboy State, whether pumping uranium or digging coal, they have to set aside money for the environmental cleanup of the site. Firms can do that in a number of ways, from traditional insurance to posting collateral to applying for self-bonds.

However, the practice of self-bonding, which critics say is simply an IOU to the state, would be greatly restricted under the proposed rules, a win for environmental groups that fought the practice during the coal bankruptcy period and a headache for firms that want self-bonding to remain an option in Wyoming.

What’s in the draft?

Companies would only be able to apply for self-bonding for mines with more than 10 years of operations left.

The amount a company is allowed to self-bond is tied to credit ratings from reputable firms like Moody’s Investment Service, Standard and Poor’s Corporation or Fitch Ratings.

No company can self-bond more than 75 percent of its reclamation obligations.

Financial liability is tied to the ultimate parent company, not just the subsidiaries or operators.

The amount of the self-bond cannot exceed one-quarter of the company’s national net worth.

If a company falls out of eligibility for its self-bonds, the state can request a replacement, and the firm has 90 days to secure some other type of reclamation insurance.

Personal property cannot be used as collateral against cleanup obligations.

Bankruptcies and bonds

The debate over self-bonding in Wyoming became a heated issue in recent years. The state kept track of the health of companies via financial statements, but that allowed a struggling company to get further into financial straits before regulators were able to address the unsecured bonds.

State regulators were criticized during the coal bankruptcy period, between 2015 and 2016, for allowing mines to continue operations despite their owners no longer qualifying for many millions of dollars in self-bonds.

Peabody Energy, which operates the largest mine in Wyoming, had $728 million in self-bonds in Wyoming at the time of its bankruptcy in 2016, and $1.1 billion in self-bonds in four other states.

Deals were brokered with large firms like Peabody to operate with self-bonds until they had emerged from bankruptcy. The state has defended that position as the only reasonable way to maintain the jobs and revenue that come from Wyoming’s coal sector.

Since then, Peabody, Arch Coal and Contura Energy have replaced their self-bonds in the state with collateral and traditional bonds. Cloud Peak Energy, a large firm in the Powder River Basin that avoided bankruptcy, also replaced its self-bonds, but did so voluntarily. The others were obligated as part of their reorganization plans.

Officials for the Department of Environmental Quality have said in earlier interviews with the Star-Tribune that the proposed rules changes are not a direct response to the coal bankruptcies or to a changing market for coal.

Rather, the update to bonding rules will address the dramatic changes in financial markets since the rules were written in the early ‘80s, officials say.

Two sides to every story

Environmentalists in the state have expressed support for the direction of the rules, though many have long been advocates of completely removing the option of self-bonding from the state’s playbook.

“Wyoming should follow the lead of Montana and eliminate the practice of self-bonding, which can leave taxpayers at risk of having to pay for clean up after a coal company goes bankrupt due to bad business decisions,” said Connie Wilbert, director of the Wyoming Chapter of the Sierra Club. She also said the added protections for self-bonding were a step in the right direction in a statement Tuesday.

Members of the Powder River Basin Resource Council, a landowners group in northern Wyoming, support the reduction of self-bonding options, said Shannon Anderson, a lawyer for the group.

The Department of Environmental Quality invited interested groups and industry firms last year to weigh in on an earlier draft of the proposed rule changes.

In an informal email the Powder River Basin Resource Council sent to the department, the group supported limiting self-bonding to mines with more than ten years of mine-life left to go. It also noted support for eliminating private property as collateral against cleanup. With the decline in coal production in recent years, a surplus of equipment across the Powder River Basin is likely, the groups said.

“Therefore, we do not believe there would be a robust market for used mining equipment held by the state as bond collateral,” the letter states.

In a series of emails obtained by the council through a public records request, coal and uranium companies also weighed in on self-bonding, with some asking the state for a more attainable credit rating in order to self bond.

Peabody Energy, the firm that owns the largest open surface coal mine in the country, North Antelope Rochelle, noted that the proposed credit ratings were likely too high for companies to reasonably obtain.

“Even when most coal companies were at their peak financial years, they would not have qualified for any self-bonding with the required credit ratings included in the proposed rule,” the company’s vice president and treasurer, James Tichenor said. He also noted that the 10 years of mining life was unnecessarily prohibitive, as “the remaining life of a mine is fluid based on fluctuating market conditions.”

A rural electricity provider that gets coal from the Dry Fork mine argued that self-bonding for mine-to-plant operations should be handled differently. The risk of a mine being abandoned or the company landing in bankruptcy is “virtually nonexistent for utility or cooperative-owned mines,” said Michael Easley, CEO of Powder River Energy Corp in a letter to the department in February.

The Department of Environmental Quality’s Land Advisory Board will consider the proposed rule changes in a public meeting March 28 in Gillette. The draft is currently out for public comment. If the draft receives approval from the board, it proceeds to the Environmental Quality Council after another public comment period and ultimately to the governor. The board’s opinion could also lead to revisions before it is sent on to the council.

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Follow energy reporter Heather Richards on Twitter @hroxaner


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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