When Coal Companies Fail, Who Pays For The Cleanup?

Feb 29, 2016
Originally published on March 2, 2016 10:23 pm

For decades massive, open-pit coal mines have been feeding the country's appetite for energy. Once coal companies are done with the land, they're supposed to restore it. But as America's coal industry declines, it may not have the funding to keep its cleanup promises.

Restoring a mine to its original state is an elaborate and expensive process, one that some say makes the land better than before. The coal companies, however, often don't have to set aside money for future cleanup processes thanks to a provision called "self-bonding" — an assurance for companies to pay for reclamation based only on their financial health.

Virginia-based Alpha Natural Resources, a coal company with mines in Appalachia and Wyoming, declared bankruptcy in August. Operations still continue at the company's Wyoming mines, and regulators estimate it would cost over $400 million to clean up those sites once mining is complete. But Alpha was approved to ensure its cleanup costs with self-bonds.

"A self-bond isn't much more than a wink and a promise," says Clark Williams-Derry, director of energy finance at Sightline Institute, a Seattle-based think tank that focuses on sustainability. "A promise that ... when the time comes, you'll be good for it."

But some of these companies may no longer be good for it. Federal regulations require that a company pass a test of financial strength to qualify for self-bonding, although some companies have been approved despite their questionable financial status.

In September, a second major company, Arch Coal, was reapproved to self-bond and filed for bankruptcy four months later.

"So then that raises the question, who is going to pay for cleanup? Is it going to be you and me? It is going to be the general public? Is it going to be adjacent landowners?" Williams-Derry says.

These questions extend far beyond the Powder River Basin. Three-quarters of Wyoming's cleanup costs are self-bonded. In Colorado, North Dakota, Indiana and Texas — in each state — it's more than half.

Greg Conrad, executive director of the Interstate Mining Compact Commission, says he doesn't sense that there is a huge crisis yet.

"I think we're still trying to get a handle on that," he says. "What I will say is that it doesn't appear that the sky is falling."

Conrad says regulators might hesitate to make coal companies put real money aside for fear that the additional expense could put them out of business, thus bringing mining and ongoing reclamation to a halt. In some states, coal is crucial for revenue, funneling in money for school construction, jobs and a way of life. Conrad said for all those reasons, regulators are wary to "push that button."

"We don't want that scenario. We just don't want to go there," he says.

It's a complex issue full of lawyers, Chapter 11 filings, and corporate press releases. But on the ground, in coal communities, reclamation matters.

Dave Edwards and his son Kean are ranchers near Gillette, Wyo., who lease reclaimed land from a coal company to graze their cattle. They live right across the road from a coal mine and have watched it grow from the day it was built.

Dave Edwards also works on reclamation himself. The reclaimed land blends in with the rest of the prairie but is slightly flatter and more manicured, resembling a golf course. The Edwardses expect the reclamation will continue. Someday, Dave Edwards says, the ground will be grazed by livestock and wildlife.

"Mule deer, rabbits, sage grouse. Bald eagles will be roaming and hunting these areas. Hopefully my grandkids are watching all of it," he says.

But for the moment, predicting the future for coal cleanup is nearly impossible. Wyoming has over $2 billion in reclamation costs backed by self-bonds, and right now, the coal industry is showing no sign of a comeback.

This story was reported with Inside Energy, a public media collaboration focusing on America's energy issues.

Copyright 2017 NPR. To see more, visit http://www.npr.org/.

AUDIE CORNISH, HOST:

For decades massive, open-pit coal mines fed the country's appetite for energy. Once coal companies finish with the land, they're supposed to restore it. But as the coal industry declines, it looks like it may not have the funding to keep up those promises. Inside Energy's Leigh Paterson reports from Wyoming, the largest coal-producing state in the country.

DANELLE WILKERSON: Anybody been to an open-pit coal mine - no - all a bunch of newbies - all right.

LEIGH PATERSON, BYLINE: Our tour guide was an enthusiastic schoolteacher named Danelle Wilkerson. She spent a summer mining coal.

WILKERSON: We're heading north of Gillette to Eagle Butte Coal Mine. It's owned by Alpha Natural Resources.

PATERSON: Eagle Butte is one of a dozen mines in Wyoming's coal-rich Powder River Basin, known as the PRB. Wilkerson pointed out some mounds of dirt and rocks that she said would be used in final reclamation later on.

WILKERSON: The reclamation is really a great process. They do a good job of putting the land back, I believe, better than the way they found it.

PATERSON: I've heard this over and over, that after reclamation, the land is better than before. But I took that tour two summers ago, before Alpha Natural Resources declared bankruptcy and before reclamation became a real concern.

So I'm back in Gillette and decided to pull over to revisit Eagle Butt. Even though Alpha is in bankruptcy, mining hasn't stopped. The scale of the mine, it's hard to grasp even in person. From this distance, massive haul trucks sort of look like little Tonka trucks. And to clean up after mining operations here and at a second mine that Alpha owns nearby, it would cost over $400 million.

But there's a problem. Alpha, like most other large coal companies operating in Wyoming, never had to set aside money for future cleanup thanks to something called self-bonding. And it's kind of a slippery term, basically an assurance to pay based on a company's financial health.

CLARK WILLIAMS-DERRY: A self-bond isn't much more than a wink and a promise.

PATERSON: Clark Williams-Derry is with the Sightline Institute, a Seattle-based think tank that focuses on sustainability.

WILLIAMS-DERRY: A promise that yeah, when the time comes, yeah, you'll be good for it.

PATERSON: But some of these companies may no longer be good for it. Federal regulations require that a company pass a test of financial strength in order to qualify for self-bonding. But in September, a second major coal company, Arch Coal, was reapproved to self-bond and declared bankruptcy four months later.

WILLIAMS-DERRY: So then that raises the question - well, who is going to for cleanup? Is it going to be you and me? Is it going to be the general public? Is it going to be adjacent landowners?

PATERSON: These questions extend far beyond the Powder River Basin. Three-quarters of Wyoming's cleanup costs are self-bonded. And in Colorado, North Dakota, Indiana and Texas, in each state, it's more than half. But Greg Conrad says he doesn't sense that there is a huge crisis yet.

GREG CONRAD: I think we're still trying to get a handle on that. But what I will say is it doesn't appear that the sky is falling.

PATERSON: As the head of the Interstate Mining Compact Commission, Conrad deals with departments all over the country. He says regulators might hesitate to make coal companies put real money aside for fear that the additional expense could put them out of business, bringing mining and ongoing reclamation to a halt. In some states coal is key to revenue, money for school construction, jobs and a way of life. Conrad said for all those reasons, regulators are wary to, quote, "push that button."

CONRAD: We don't want that scenario. We just don't want to go there.

PATERSON: It's a complex issue full of lawyers, Chapter 11 filings and corporate press releases. But on the ground, in coal communities, reclamation matters.

DAVE EDWARDS: And this is a feed pickup right here.

PATERSON: Dave Edwards and his son Kean are ranchers near Gillette. They live right across the street from a coal mine and have watched it grow.

EDWARDS: From the day they started building it 'til now.

PATERSON: The Edwards lease reclaimed land from the coal company to graze their cattle. Dave Edwards also works on some reclamation himself.

EDWARDS: We're sitting here looking right now at some dozers shoveling down some spoil piles.

PATERSON: The reclaimed land blends in with the rest of the prairie but is slightly flatter, more manicured, a little bit like a golf course. The Edwards expect this reclamation will continue. Someday, Dave says the ground will be grazed by livestock and wildlife.

EDWARDS: Mule deer, rabbits, sage grouse. Bald eagles will be roaming and hunting these areas. Yeah, hopefully my grandkids are watching all of it.

PATERSON: But for the moment, predicting the future for coal cleanup is nearly impossible. Wyoming has over $2 billion in reclamation costs backed by self-bonds. And right now, the coal industry is showing no sign of a comeback. For NPR News, I'm Leigh Paterson.

CORNISH: Inside Energy is a public media collaboration focused on America's energy issues. Transcript provided by NPR, Copyright NPR.

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