It’s no secret that the coal industry has had a rocky couple of years. Competition with the natural gas industry and the cheaper Asia-Pacific coal market has pushed many U.S. companies into bankruptcy. Not even the biggest companies, such as Alpha and Peabody, have been immune. The biggest news coming out of these companies’ woes is the uncertainty of miners’ pensions and health benefits. And, although it is imperative that Congress act to protect miners’ benefits, another issue must be addressed: bonding.
Coal companies, especially those carrying out surface mining, are required to put up bonds. The bonds are to help guarantee the companies will have the funds to clean up their messes once the mining is complete. This cleanup is known as reclamation.
The 1977 Surface Mining Control and Reclamation Act allowed states to decide whether to let companies participate in “self-bonding.” The West Virginia DEP has allowed many companies to self-bond on a discretionary basis.
So, what’s the issue with self-bonding? Self-bonding under SMCRA basically helped established a “too big to fail” status for companies. These companies, citing their multi-million dollar profits, could just promise that they would be good for reclamation money.
However, what many were shocked to discover is that, when companies went into bankruptcy, there was no bond money available.
Think of it this way: Someone rents a house or apartment, and instead of putting down a security deposit, they promise that they are “good for it.” But then, after causing extensive damages, they file for bankruptcy and have no money for repairs. In the case of coal mining, when a company fails to produce the bond money, the cost of the reclamation falls on the state. With West Virginia mines, there is usually only enough money to cover a small portion of the mess companies have made. Taxpayers, at the state and federal level, are left with the cleanup bill.
Bonding issues came to light nationally when coal companies started going bankrupt in recent years. Some mining states never allowed self-bonding, and some had already been working to end the practice.
West Virginia, however, continued to allow it even though industry money woes were predicted years ago. Last year, Sen. Maria Cantwell, D-Wash., introduced a bill, the Coal Clean Up Taxpayer Protection Act, which would ban new self-bonds federally and phase out the existing ones. The bill did not move much in the senate. Even Joe Pizarchik, director of the federal Office of Surface Mining Reclamation and Enforcement, proposed new regulatory rule making on bonding, but the agency failed to move the rule before the 2016 election. It is unlikely the new administration will continue pursuing new rules on bonding.
So, here we have yet another promise by coal companies that they are trying to turn their backs on. It is bad enough they are creating uncertainty and fear of losing pensions and benefits for current and retired employees. They are also trying to walk away scot-free on the messes they have made.
Under bankruptcy law, environmental cleanup is one of the very last things companies have to pay for. Whether they restructure like Alpha Natural Resources recently did, or completely liquidate like Patriot, there is little to no money for the bonds they promised. Alpha currently owes around $152 million in West Virginia, if they don’t receive any more reductions since emerging from bankruptcy. They originally owed $244 million before the DEP allowed reductions.
West Virginia needs to eliminate its bond pool and transition to full-cost bonding that is based on the cost of actual reclamation, not an arbitrary fee. Because it’s unlikely any new federal regulations will address bonding issues in the coming years, it will be up to citizens to put pressure on the state legislators and DEP to stop allowing companies to self-bond. We must not let this issue become an afterthought.
The DEP says they do not foresee allowing any self-bond to be issued in the near future, but we won’t be certain of this until a rule is in place that explicitly ends self-bonding in West Virginia. Companies must be held responsible for their cleanup, not taxpayers. Don’t let them renege on another promise.
Dustin White is a community organizer with the Ohio Valley Environmental Coalition.