{"id":1865,"date":"2016-05-02T13:35:25","date_gmt":"2016-05-02T13:35:25","guid":{"rendered":"http:\/\/minutes.machine.market\/?p=1865"},"modified":"2016-05-02T13:35:25","modified_gmt":"2016-05-02T13:35:25","slug":"faced-with-massive-cleanup-bill-wyoming-lowers-peabody-energy-self-bonds-by-138-million","status":"publish","type":"post","link":"https:\/\/machine.market\/blog\/faced-with-massive-cleanup-bill-wyoming-lowers-peabody-energy-self-bonds-by-138-million\/","title":{"rendered":"Faced with massive cleanup bill, Wyoming lowers Peabody Energy self-bonds by $138 million"},"content":{"rendered":"
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State regulators lowered Peabody Energy<\/a>\u2019s reclamation costs by $138 million shortly before the coal giant filed for bankruptcy protection in early April.<\/p>\n<\/div>\n

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Wyoming authorities framed the decision as a more accurate portrayal of Peabody\u2019s cleanup bill, one that accounts for lower diesel prices and the mining firm\u2019s existing equipment.<\/p>\n<\/div>\n

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But the decision has prompted concerns from environmentalists who worry the state is relaxing reclamation standards to aid financially battered coal companies.<\/p>\n<\/div>\n

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\u201cWe see it as part of a trend, a conversation that is happening, which is basically making excuses for these companies,\u201d said Shannon Anderson, a lawyer at the Powder River Basin Resource Council, a Sheridan-based landowners group.<\/p>\n<\/div>\n

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In all, state regulators lowered Peabody\u2019s self-bonding total from almost $867 million to nearly $728 million prior to April 13, the date the company filed for bankruptcy.<\/p>\n<\/div>\n

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Peabody applied for the change earlier in the year, and state regulators accepted public comment on the proposal before implementing the change.<\/p>\n<\/div>\n

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The decision reflects coal\u2019s new reality, said Kyle Wendtland, who oversees the Department of Environmental Quality\u2019s Land Quality Division.<\/p>\n<\/div>\n

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Mining firms and regulators paid less attention to estimated cleanup costs during the coal industry\u2019s boom days, he said.<\/p>\n<\/div>\n

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\u201cNow that this market has become tighter, accurately defining that liability has become more important,\u201d Wendtland said. \u201cWe\u2019re just taking a much harder look at that, and for good reason.\u201d<\/p>\n<\/div>\n

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The lower cleanup estimate for Peabody\u2019s four Wyoming mines is based on two factors: lower diesel prices and a new shovel sharing policy.<\/p>\n<\/div>\n

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Heavy haul trucks and bulldozers use vast quantities of diesel fuel in reclamation operations. A drop in diesel prices resulted in a $91 million reduction of Peabody\u2019s reclamation bill.<\/p>\n<\/div>\n

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But the new shovel sharing policy, which lowered Peabody\u2019s cleanup tab by $47 million, is perhaps more controversial.<\/p>\n<\/div>\n

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When regulators calculate a company\u2019s reclamation bill, they essentially estimate what it would cost the state if it had to pay for the cleanup itself.<\/p>\n<\/div>\n

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Included in that estimate is the cost of purchasing a new shovel at each mine. The massive earth moving machines generally sell new for around $24 million, Wendtland said.<\/p>\n<\/div>\n

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But if Wyoming had to reclaim Peabody\u2019s mines, it is unlikely the state would buy a new shovel for each facility, Wendtland said.<\/p>\n<\/div>\n

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In Peabody\u2019s case, regulators implemented the new shovel share policy at the company\u2019s Caballo and Rawhide mines. Caballo\u2019s self-bond included the price of a new shovel. Rawhide\u2019s bond included the cost of moving and reassembling the Caballo shovel.<\/p>\n<\/div>\n

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The shovel share policy ultimately saved the company $22.6 million at Caballo and Rawhide. It was also applied to Peabody\u2019s North Antelope Rochelle and School Creek mines, where it saved $24.5 million.<\/p>\n<\/div>\n

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\u201cThat is much more fiscally responsible use of the equipment,\u201d Wendtland said, noting the shovel share policy could be used only by companies that have multiple mines in Wyoming.<\/p>\n<\/div>\n

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The change would require mines to rotate through the varying stages of reclamation, he said. A bulldozer would work at one mine to reduce the size of mining benches, while pits would be filled in with a shovel at a second mine, Wendtland said. The two mines would then switch.<\/p>\n<\/div>\n

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Anderson, the Powder River Basin Resource Council attorney, questioned the change.<\/p>\n<\/div>\n

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\u201cIf this is the fiscally responsible thing to do, why haven\u2019t we done it until now?\u201d she said. \u201cIt is a fairly substantial change to the bonding program after doing it the same way after all these years.\u201d<\/p>\n<\/div>\n

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The practice of self-bonding has drawn increased scrutiny in recent times, as the coal industry\u2019s fortunes plummeted and doubts over miners\u2019 ability to pay for cleanup mounted.<\/div>\n<\/div>\n<\/div>\n
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Under federal law, mining firms are allowed to pledge their assets as a guarantee on future cleanup costs \u2014 provided they can pass a financial stress test. The U.S. Office of Surface Mining, Reclamation and Enforcement has ultimate authority over mine reclamation, but Wyoming is responsible for implementing oversight of cleanup operations.<\/p>\n<\/div>\n

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For coal companies, the consequences of losing self-bonding status are particularly high. Those that lose the designation are required to obtain guaranteed financing like surety bonds, cash or letters of credit.<\/p>\n<\/div>\n

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A reclamation bond, be it a self-bond or another form of financing, is required to maintain a mining permit.<\/p>\n<\/div>\n

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Amy Schwetz, a Peabody executive, explained the importance of maintaining reclamation bonds in a bankruptcy filing earlier this month.<\/p>\n<\/div>\n

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\u201cIf any surety bonds lapse without renewal, or if the debtors (Peabody) are unable to self-bond or obtain new third-party surety bonds for certain purposes, the debtors could default on various obligations, which could severely disrupt the debtors\u2019 operations and impair the debtors\u2019 prospects for a successful reorganization,\u201d she wrote.<\/p>\n<\/div>\n

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There have been growing calls to reform the self-bonding program. Senate Democrats have become increasingly vocal<\/a>, expressing concerns that taxpayers could be left with the bill for mine cleanup.<\/p>\n<\/div>\n

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Federal regulators have questioned<\/a> Wyoming officials\u2019 oversight of Peabody, writing in February that the mining giant may not have met the standards needed to qualify for self-bonding.<\/p>\n<\/div>\n

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Arch Coal and Peabody maintained their self-bonding status right up until the time each filed for bankruptcy.<\/p>\n<\/div>\n

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Wyoming regulators initially revoked Alpha Natural Resources\u2019 self-bonding status before agreeing to a deal that secured 15 percent of the Virginia-based mining firm\u2019s $411 million reclamation tab.<\/p>\n<\/div>\n

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Wyoming officials, for their part, have defended their oversight of the program. Wendtland, in a letter to federal officials, noted that Peabody\u2019s self-bonds were guaranteed by a subsidiary \u2014 a practice allowed under federal regulations.<\/p>\n<\/div>\n

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But there are indications that companies are moving<\/a> away from the self-bonding program.<\/p>\n<\/div>\n

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Executives at Cloud Peak Energy noted in a call this week with financial analysts that they are in talks to secure the company\u2019s $190 million in self-bonds.<\/p>\n<\/div>\n

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\u201cWe are proactively working to address the ongoing regulatory uncertainties regarding self-bonding programs by seeking to voluntarily transition fully to third-party surety bonds,\u201d Cloud Peak Energy Chief Financial Officer Heath Hill told analysts.<\/p>\n<\/div>\n

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And in Colorado, state regulators are moving to transition coal mines away from self-bonds. Peabody Energy converted $27 million in self-bonds to surety bonds at regulators\u2019 request. Colorado officials are also seeking to transition Tri-State Generation and Transmission Association\u2019s mines away from $80.5 million in self-bonds.<\/p>\n<\/div>\n

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Yet the bond amounts in those cases are comparatively small to those found in Wyoming. Alpha, Arch and Peabody have a combined $1.6 billion in self-bonds.<\/p>\n<\/div>\n

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Wyoming regulators are reviewing the state\u2019s bonding policies as part of Gov. Matt Mead\u2019s energy strategy. But they have shown little indication of moving away from the program.<\/p>\n<\/div>\n

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\u201cThe thing you have to remember there is OSM will play a role in that,\u201d Wendtland said, when asked if the state would transition away from self-bonding. \u201cThe thing we don\u2019t want to do is change our rules, and then have OSM change theirs.\u201d<\/p>\n<\/div>\n

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Peabody, meanwhile, is unlikely to be the last company to apply for a reduction in its self-bonds. Arch, Alpha and Cloud Peak are all expected to make similar requests, Wendtland said.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

State regulators lowered Peabody Energy\u2019s reclamation costs by $138 million shortly before the coal giant filed for bankruptcy protection in early April. Wyoming authorities framed the decision as a more accurate portrayal of Peabody\u2019s cleanup bill, one that accounts for lower diesel prices and the mining firm\u2019s existing equipment. But the decision has prompted concerns […]<\/p>\n","protected":false},"author":1,"featured_media":1866,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":""},"categories":[2,4,9],"tags":[224,1080],"yoast_head":"\nFaced with massive cleanup bill, Wyoming lowers Peabody Energy self-bonds by $138 million - MachineMarket Blog<\/title>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/cranemarket.com\/blog\/faced-with-massive-cleanup-bill-wyoming-lowers-peabody-energy-self-bonds-by-138-million\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Faced with massive cleanup bill, Wyoming lowers Peabody Energy self-bonds by $138 million - MachineMarket Blog\" \/>\n<meta property=\"og:description\" content=\"State regulators lowered Peabody Energy\u2019s reclamation costs by $138 million shortly before the coal giant filed for bankruptcy protection in early April. 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