COAL: Obama admin expresses concern about bonding deals
Manuel Quiñones, E&E reporter
Published: Wednesday, December 9, 2015

A top Interior Department official yesterday said preventing coal companies from abandoning their responsibility to return land and water to pre-mining conditions was a "huge priority" amid the industry's financial woes.

Janice Schneider, Interior assistant secretary for lands and minerals, also expressed concern about states working out deals with mining companies to address liabilities but also keep them from going further into debt and said the department is "still thinking through" action on the issue.

The matter came up during a House Oversight and Government Reform Committee hearing on the Office of Surface Mining Reclamation and Enforcement's proposed stream protection rule.

While the language includes tougher bonding requirements for mining companies, it does not address miners that rely on the strength of their balance sheet to meet financial assurance requirements for reclamation.

The practice is called self-bonding. As of earlier this year, several coal mining companies had billions of dollars in self bonding in states like Wyoming and West Virginia (Greenwire, April 28).

Schneider, during an interview with reporters, touted a coordination team within Interior's Office of Surface Mining Reclamation and Enforcement to help states.

"The states have primacy here," she said about enforcing the Surface Mining Control and Reclamation Act. "They are the ones that we want to engage with in a cooperative manner."

Environmental groups and state regulators worry about companies having more liabilities than what is covered by their bonds. They also worry about the patchwork of rules tied to self bonding. Several major coal producers have gone bankrupt.

Asked whether OSMRE would provide more concrete guidance, Schneider said, "We're in the preliminary stages of that. We're still thinking through all of that. We want to talk to the states and figure out what would be of most help to them."

Earlier this year the Wyoming Department of Environmental Quality decided bankrupt Alpha Natural Resources Inc. no longer qualified for self bonding. The company fought the ruling, saying obtaining new financial assurances would further hurt its finances.

In September, DEQ worked out a deal. It put off asking Alpha for new bonding mechanisms in exchange for getting ahead of other creditors for more than $60 million in liabilities.

Environmental groups, including the Sierra Club and the Powder River Basin Resource Council, have questioned the move's legality, but state and company officials have pointed to the issue as being resolved in federal bankruptcy court (Greenwire, Oct. 30).

"We do have some concerns about that," Schneider said. "We reserved our rights in that litigation and are looking at our options."

The administration has told the U.S. Bankruptcy Court in Richmond, Va., "To protect the public interest in these federally-owned resources in the event of bond forfeiture, the United States is a required co beneficiary on any performance bond involving federal coal and surface, and such bonds must be payable only to the United States to the extent federal lands are involved."

Yesterday the West Virginia Department of Environmental Protection stuck a deal with Alpha. The company promised to continue reducing self bonding and post $39 million in additional financial assurances.

"The consent order provides substantial additional financial assurance that Alpha will continue to perform its reclamation obligations in West Virginia, even as it considers its options to restructure its operations in bankruptcy," said DEP Secretary Randy Huffman in a statement.

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