The widespread practice of "self-bonding" in the coal industry could end up leaving taxpayers footing the bill for cleaning up an increasing number of abandoned mines, Mead Gruver reports for The Associated Press. Self-bonding allows companies with certain assets "to promise to eventually cover the cost of cleaning up abandoned mines without first setting aside the necessary money. Because of self-bonding, billions of dollars in legally required reclamation funding exist only as IOUs, without dedicated assets or bonds backed by third-party investors. Nationwide, self-bonding in the coal-mining industry tops $3.3 billion. That includes $2.3 billion in IOUs that the three biggest bankrupt coal companies—Alpha Natural Resources, Arch Coal and Peabody—owe in five states, according to an Associated Press analysis of bonding obligations in the top 16 coal-mining states."
"The dilemma for state and federal regulators got even bleaker when the nation's largest coal producer, Peabody, filed for Chapter 11 protection from its creditors in April," Gruver writes. "Peabody alone holds more than $1.1 billion in self-bonding obligations for mines in Illinois, Indiana, New Mexico and Wyoming, where its North Antelope Rochelle mine produces almost 12 percent of the nation's coal. ...Wyoming, which produces almost 40 percent of the nation's coal, has more than $2 billion in self-bonded coal mining, almost two-thirds of the nationwide total."
"The 1977 Surface Mining and Reclamation Act enabled companies to open strip mines on the condition that assets be set aside to contain any pollution and return the mines to something resembling the pre-existing landscape," Gruver writes. "But companies with debts no greater than 2.5 times their net worth were allowed to avoid tying up capital by "self-bonding" instead. Self-bonding has grown to represent more than a third of the industry's cleanup costs. With several companies now in bankruptcy, states have reached agreements to secure pennies on the dollar for reclamation should Chapter 11 reorganization proceed to Chapter 7 liquidation."
"The dilemma for state and federal regulators got even bleaker when the nation's largest coal producer, Peabody, filed for Chapter 11 protection from its creditors in April," Gruver writes. "Peabody alone holds more than $1.1 billion in self-bonding obligations for mines in Illinois, Indiana, New Mexico and Wyoming, where its North Antelope Rochelle mine produces almost 12 percent of the nation's coal. ...Wyoming, which produces almost 40 percent of the nation's coal, has more than $2 billion in self-bonded coal mining, almost two-thirds of the nationwide total."
"The 1977 Surface Mining and Reclamation Act enabled companies to open strip mines on the condition that assets be set aside to contain any pollution and return the mines to something resembling the pre-existing landscape," Gruver writes. "But companies with debts no greater than 2.5 times their net worth were allowed to avoid tying up capital by "self-bonding" instead. Self-bonding has grown to represent more than a third of the industry's cleanup costs. With several companies now in bankruptcy, states have reached agreements to secure pennies on the dollar for reclamation should Chapter 11 reorganization proceed to Chapter 7 liquidation."
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