May 1, 2018
This week the Powder River Basin Resource Council (Resource Council) filed a formal rulemaking petition with the Wyoming Department of Environmental Quality’s Land Quality Division to end the practice of self-bonding for coal mines. In order to better shield Wyoming taxpayers from having to fund mine clean-up in the event of a company’s bankruptcy or forfeiture, the petition proposes eliminating the risky practice of allowing coal companies to self-bond for reclamation obligations.
“The coal market has changed dramatically in the last 30 years. What worked then for self-bonding does not work with the new market,” said Stacy Page, a Resource Council member and former regulator involved in reclamation. “We have reached a point of energy transformation in our country, with coal usage on the decline and increasing usage of natural gas and renewable energy. The state has a responsibility to ensure reclamation happens and not at the expense of adjacent landowners or taxpayers.”
The petition proposes two amendments to the state’s regulations. First, it requests eliminating the loophole of self-bonds, which are not financial guarantees but rather a promise to pay from the company. Second, the petition asks for state to require that at least 25 percent of the mine operator’s bond be a cash bond. Because self-bonds are not backed up by any financial assurances, they do not ensure that the regulatory authority will have sufficient funds to reclaim the site if the company operating the mine fails to complete the required reclamation.
According to the petition, self-bonding does not achieve the main objectives of the Wyoming Environmental Quality Act’s bonding system, which is to ensure available funds to complete reclamation work, and to encourage timely and effective reclamation practices. Self-bonds do not fulfill the requirements of the Act because the taxpayers are responsible for covering reclamation costs should companies default on their obligations by bankruptcy or otherwise walking away from them. The Government Accountability Office (GAO) recently completed an audit in which it found that regulators have difficulty determining whether a company is financially healthy, and recommended eliminating the practice of allowing self-bonds.
“This is not a hypothetical situation. When the big three coal companies declared bankruptcy, they were holding $1.5 billion worth of reclamation work in worthless self-bonds. Luckily those mines continued operating so no bonds were forfeited, but we might not be that lucky again,” said Page.
“Right now there is about $2 billion in coal mine bonds in Wyoming, with $275 million of that in self-bonds. With our state’s financial situation, picking up the tab on $275 million in reclamation would be a huge burden on the taxpayers,” said LJ Turner, a Resource Council member and rancher impacted by coal mining.
The petition also explains that self-bonds do not provide any incentive for reclamation and bond release. When real financial bonds are on the line, companies are motivated to get their money back by completing their reclamation work. Only about 10 percent of lands disturbed by mining in Wyoming have been released from final bond, and some large mines, like Peabody’s North Antelope Rochelle, have not achieved any final bond release.
“Reclamation just isn’t happening as quickly as it should be. Companies need an incentive get the reclamation done in a timely fashion, and self-bonding won’t do that. For those who live near coal mines, this is especially important,” said Turner. “It’s time we close this self-bonding loophole and ensure that companies who want to mine are financially sound and up to the task of fulfilling their obligations to the public. No more IOUs that aren’t worth the paper they’re written on from companies on shaky financial ground.”
For more information on the rule-making petition, contact the Resource Council at 307-672-5809 or email firstname.lastname@example.org.