January 11, 2016 / 10:34 PM / 2 years ago

Arch Coal asks U.S. bankruptcy court to ease its cleanup costs

WASHINGTON, Jan 11 (Reuters) - Arch Coal Inc, the second-largest U.S. coal producer, on Monday asked a bankruptcy judge to put aside $75 million to backstop future clean-up costs - far less than the roughly $450 million that regulators forsee needing.

Arch made the proposal to a Missouri court after filing for bankruptcy protection on Monday, seeking to shed $4.5 billion in debt in the face of weak demand for coal and increasing pressure from creditors.

Arch has used cash, bonds and other financing to assure mine cleanup. But Arch's use of a federal program called self-bonding to cover a large share of clean up costs raises the possibility that taxpayers be saddled with much of the bill.

Self-bonding has allowed some financially-fit mining companies to forego costly financing, such as a surety bond, and leave future liabilities to taxpayers.

Securities filings show that Arch Coal has not qualified for self-bonding since 2012. In those years Arch Coal accessed self-bonding through a subsidiary, Arch Western Resources, according to regulatory paperwork.

Interior Secretary Sally Jewell said in December buttressing the self-bond program was "a big issue" for her agency.

Now that Arch has sought bankruptcy protection, a federal judge will decide which of the company's creditors get paid and how much.

Monday's court filings indicate that not only Arch Coal but dozens of affiliates including Arch Western Resources are seeking protection from creditors.

Arch has roughly $458 million in self-bond liabilities but asked the court on Monday to set aside only $75 million, according to court filings.

The Interior Department's Office of Surface Mining and Reclamation and Arch Coal did not respond to a request for comment.

Wyoming's Department of Environmental Quality said in a statement on Monday that the agency was "reviewing the (bankruptcy) filing and what this means for reclamation."

Arch's self bonding in Wyoming cover work at its Black Thunder mine, one of the largest in the country.

Besides Arch Coal, other leading companies like Cloud Peak Energy Inc, Peabody Energy Corp and now-bankrupt Alpha Natural Resources have booked roughly $3.6 billion in self-bond liabilities, according to officials.

Conservation groups in the West have urged Wyoming officials and federal regulators to protect taxpayers in the courts.

"Bankruptcy should not be used as a haven for the company to escape its obligations," said Bob LeResche of the Powder River Basin Resource Council. (Reporting By Patrick Rucker; Editing by Marguerita Choy)

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