Bob LeResche lays out what’s at stake as Wyoming’s Department of Environmental Quality reviews rules on self-bonding.
Written by Powder River Basin Resource Council Vice Chair Bob LeResche.
Coal mines in Wyoming are big. Really big. The Powder River Basin produces over 40% of the nation’s coal, and the dozen mines in Northeast Wyoming cover hundreds of square miles. Mining creates giant pits and rearranges the countryside, which needs to be put back in place and returned to productive use. This restoration is called “reclamation,” and state and federal laws require that coal mining companies do the work and pay for it. This means a lot of jobs. The downside is, if companies go under and walk away from their mines they leave a huge liability for taxpayers.
Most Wyoming optimists and “Friends of Coal” these days believe the coal industry dodged the bullet over the last couple of years. Coal production has stabilized (but at a lower level), big companies have emerged from bankruptcy with stronger balance sheets, and the risk of mines going under in the short term seems small. So why should we worry about this cleanup liability? We should worry because the market for Wyoming’s coal is shrinking, and the contraction is a trend, not a blip. Coal just can’t compete in a new energy marketplace flooded with low cost natural gas, wind, and solar. Profit margins of Powder River Basin mines are slim to none. And as mines become unprofitable, companies are already beginning to offload them – along with their cleanup liabilities – onto someone else. As successive owners fail, that someone else could be you and me as Wyoming taxpayers.
Here’s where bonding comes in. Every coal mine in Wyoming is required to post a reclamation bond – basically an insurance policy that guarantees even in the worst-case scenario our state will have the funds to hire workers and contractors to clean up the mines.
“…as mines become unprofitable, companies are already beginning to offload them – along with their cleanup liabilities – onto someone else. As successive owners fail, that someone else could be you and me as Wyoming taxpayers.”
Wyoming’s Department of Environmental Quality wisely proposed a new set of bonding standards that help meet that objective. Importantly, this proposal limits the controversial practice of “self-bonding.” Self-bonds really are not insurance at all, but merely promises from a company that they will cover the reclamation costs of their mines. These IOUs become worthless when a company enters bankruptcy. Self-bonding became a big problem for Wyoming when our three biggest coal companies went through bankruptcy over the past couple of years with over $1.5 billion in self-bonds. Yes, that’s billion with a B. Since self-bonds aren’t backed by a bank or other third party, the state was at the rear of the collection line during bankruptcy proceedings. That means if a company liquidates or sells off properties, Wyoming taxpayers will be left holding the bill for cleanup costs. DEQ’s proposed standards limit the share of cleanup liability that can be self-bonded, and require that companies have at least minimal official credit ratings to use self-bonding at all. This only makes sense, since the state is essentially extending its credit line when it allows a company to self-bond.
“…the agency should not meekly weaken the limits on self-bonding. If anything, they should strengthen their proposed standard and eliminate self-bonding – and its corresponding risk – altogether.”
Unfortunately, at a hearing in Gillette at the end of March DEQ’s Land Quality Advisory Board prioritized minor complaints from coal and utility interests over the clear public interest. The board refused to accept the proposed standards, and sent them back to DEQ for more review and justification. In doing so, the board missed an opportunity to ensure taxpayers will be protected and there will always be enough money for mine reclamation work, and significantly, for reclamation jobs.
Even though the standards were sent back to DEQ with vague comments, the agency should not meekly weaken the limits on self-bonding. If anything, they should strengthen their proposed standard and eliminate self-bonding – and its corresponding risk – altogether.
When the rules come back to the Advisory Board on June 27, let’s hope the Board protects Wyoming’s interests and jobs. The Board should approve stronger standards for reclamation bonds, which will ensure reclamation jobs get done and we taxpayers are not liable.
Bob LeResche is Vice Chair of Powder River Basin Resource Council and a board member of the Western Organization of Resource Councils. He is a former Commissioner of Natural Resources for the State of Alaska, Executive Director of the Alaska Energy Authority, investment banker and CEO. With his wife Carol, he operates a ranch and organic heirloom vegetable farm near Clearmont, Wyoming.