(Adds Peabody talks with surety bonding firms)
By Tracy Rucinski
CHICAGO Dec 23 Peabody Energy Corp
failed to explain how it will cover future mine cleanup costs in
a reorganization plan filed late Thursday, triggering concerns
over the company's use of "self-bonds."
Under a federal program called "self-bonding," large miners
like Peabody have been allowed to extract coal without setting
aside cash or collateral to ensure mined land is returned to its
natural setting, as required by law.
The practice came under scrutiny following bankruptcy
filings by some of the largest U.S. coal miners because, without
collateral set aside for mine reclamation, taxpayers are
potentially exposed to billions of dollars in cleanup costs.
Environmental groups have been following the bankruptcy to
see whether Peabody, the world's largest private-sector coal
producer, replaces roughly $1 billion of self-bonds with other
guarantees, as rival Arch Coal Inc did in its October
In Thursday's plan to eliminate over $5 billion of debt to
emerge from Chapter 11, Peabody said it will address its
"self-bonding reclamation obligations in accordance with
applicable laws and regulations," without providing details.
While a leading U.S. coal regulator has started to toughen
rules for guaranteeing mine cleanups, the future of that process
under a Trump administration is unclear.
Howard Learner, executive director of the Chicago-based
Environmental Law & Policy Center, said the reorganization plan
dodged the issue of self-bonding, potentially shifting the risk
for Peabody's environmental cleanup costs onto the public.
"Peabody should be required to live up to its mine
reclamation responsibilities and assure that it will not saddle
taxpayers with these costs," Learner said.
Learner said his organization would fight Peabody's
Peabody hold self-bonds in Wyoming, New Mexico, Indiana and
Illinois, which has expressed concerns about the practice. The
company announced a temporary financing deal with the states in
July to cover a portion of the risk that it will walk away from
mine cleanup obligations while in bankruptcy.
Peabody spokesman Vic Svec said the company continues to
fund its reclamation obligations and was in talks with states as
well as third-party surety bonding firms over cleanup coverage.
"Now that we have defined a capital structure through our
plan of reorganization, we can firm up components of surety
bonding," Svec said.
In a revised business plan on Friday, Peabody raised its
target for earnings before interest, taxes, depreciation,
amortization, and restructuring (EBITDAR) to $4 billion between
2016 and 2021 from $3.1 billion projected in August, citing a
temporary rise in coal prices.
(Reporting by Tracy Rucinski; Editing by Jonathan Oatis)