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Arch Coal agrees on mine cleanup coverage plan to exit bankruptcy
September 13, 2016

Arch Coal will replace its use of self-bonding and instead set aside collateral to cover future mine cleanup costs as part of its bankruptcy reorganization plan, according to a court filing.

Reuters reported that the plan would end Arch's use of self-bonding, a controversial federal exemption that the largest U.S. coal companies have used for decades. Self-bonding exempts companies from posting bonds or other securities to cover the cost of returning mined land to its natural state.

Arch had $485.5 million in self-bonds in Wyoming when it filed for bankruptcy protection in January, saddled with $6 billion of debt.

Arch Coal must now replace all of its self-bonds within 15 days of its bankruptcy exit plan becoming effective.

Environmental groups that have waged legal battles to hold coal companies accountable for their cleanup obligations welcomed the news.

"Better financial assurance will protect taxpayers and will ensure that the mining company remains responsible for any clean-up costs for its large Wyoming coal mines," said Shannon Anderson, a lawyer for Powder River Basin Resource Council, a Wyoming conservation group.

Arch, which operates one of the largest U.S. mines, Black Thunder, in the coal-rich Powder River Basin, had initially resisted replacing its self-bonds, arguing in court filings that providing other forms of guarantees would eat into its delicate liquidity.

As the coal sector fell into decline with lower demand from China and increased competition from other energy sources self-bonding became a more prominent issue. U.S. coal watchdog Office of Surface Mining and Reclamation Enforcement has asked state regulators to crack down on self-bonding following Chapter 11 filings by some of the largest U.S. coal companies.

Peabody Energy Corp, Alpha Natural Resources and Arch had a combined $2.2 billion in self-bonding liabilities when they filed for bankruptcy over the past 13 months.

Peabody, which filed for bankruptcy in April with $10 billion of debt, has $1.14 billion of self-bonds in four states.

In July, Alpha agreed to replace its self-bonds in Wyoming with other guarantees as part of a complex deal to exit bankruptcy but will continue to cover reclamation at former mine sites in West Virginia with self-bonds.

 

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