Alpha Natural Resources said it expects to reach a deal with the U.S. government over reclamation responsibility which could remove one of the most significant hurdles to the coal company’s plan to exit bankruptcy.

Reuters reported that Alpha Natural Resources, the fourth-largest U.S. coal miner and a slew of government agencies appeared to be heading for a showdown in court where Alpha was scheduled to ask a federal judge to approve its plan over objections.

The objections center on the self-bonding that has allowed leading coal companies to forego purchasing cleanup insurance on federal land by pledging to cover any such costs.

In the past year, Peabody Energy, Arch Coal and Alpha Natural Resources have all gone bankrupt and roughly $3.6 billion in self-bonding liabilities have been left, according to securities filings.

Federal officials have promised to try to shield taxpayers from that cost, but the Obama administration must compete with other creditors for the companies’ scarce assets.

The government called Alpha’s plan “fundamentally flawed” and said it was not prepared in good faith because it skirts environmental obligations, while the company has said the plan is the best way to benefit all parties.

One day before it was to appear in court, Alpha said it anticipated reaching a deal by Thursday with the U.S. Department of Interior,Environmental Protection Agency and other agencies, according to a filing in the U.S. Bankruptcy Court in Richmond, Virginia.

Alpha said a deal would include a “funding agreement” between Alpha, its lenders and a new company created to take over Alpha’s best mining assets.

Alpha filed for bankruptcy in August as coal prices plunged to a 12-year low.

Alpha plans to sell core mining assets to its lenders, who will pay by forgiving what they are owed rather than cash. Alpha has also reached a deal to sell natural gas assets for $200 million in cash.

The reorganized Alpha would continue to own a number of mining complexes primarily in Appalachia, and critics say it will lack funds for clean-up costs. The plan also shields its creators from liability.