Bankruptcy filing raises concerns about Arch Coal's ability to clean up its mines

January 14, 2016

Arch Coal became the fifth major coal mining company to seek Chapter 11 Bankruptcy protection ( ME, Jan. 11 ) when it filed on Jan. 11 as part of a $5.1 billion restricting plan.

Shrinking demand for coal, legislative challenges and falling prices for coal have left many unemployed, but that is not where the problems end. Greenwire reported that the move by Arch Coal raises concerns about its ability to not only pay its debt to state and federal government, but to clean up its mines.

Coal miners such as Arch must, under state and federal law, post reclamation bonds to show their ability to clean up the land and treat the water at their mining sites. The Wall Street Journal reported that some states allow what is called self-bonding, in which the bonds aren’t backed by any insurance.

While self-bonds can save companies money, questions arise about their ability to fulfill the bonds when they run into financial trouble. If a company can’t pay for cleaning up the polluted land and water at a mine, the bill could be passed on to taxpayers.

In Arch’s case, its lenders have agreed to cover up to $75 million in cleanup and other regulatory obligations in connection with a proposed $275 million bankruptcy loan. But that falls short of the $485 million in self bonds that court papers show Arch has posted for its Wyoming mining operations.

As a result, private citizens’ groups such as Taxpayers for Common Sense and Wyoming landowners group Powder River Basin Resource Council stepped forward to express concern.

Arch said its mine-cleanup obligations are an “integral part of the mining process” and that it expects “to continue our award-winning reclamation practices for as long as the mine operates and to reclaim the land to the highest value thereafter.”

Experts say the continuing chapter 11 restructuring of Alpha Natural Resources Inc., launched in August, offers Arch Coal a playbook for its bankruptcy when it comes to these environmental obligations.

Alpha’s bankruptcy lenders agreed to make up to $100 million of its roughly $700 million bankruptcy-financing package available to cover cleanup obligations. Later in the case, Alpha settled demands from Wyoming and West Virginia regulators to replace more than $650 million in self-bonds by offering them $100 million in financial assurances.

Besides West Virginia and Wyoming, Arch mines for coal in Colorado, Illinois, Kentucky, Maryland and Virginia. Court papers show it has self-bonds only in Wyoming.



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