Peabody's Bonding Challenged in Illinois, Indiana

Daily Report for Executives provides in-depth coverage of unfolding legislative, regulatory, and judicial news from the nation’s capital, the states, and around the world. This daily news service...

By Michael J. Bologna

Feb. 16 — An environmental organization has filed a citizen complaint with the federal Office of Surface Mining (OSM) and similar state agencies in Illinois and Indiana, demanding a determination that the coal-mining giant Peabody Energy Corp. is violating surface mining statutes for operating without sufficient reclamation bonding.

The Environmental Law & Policy Center (ELPC) Feb. 12 filed citizen complaints with the Illinois Department of Natural Resources and the Indiana Department of Natural Resources, calling on the state agencies to strip Peabody Energy's self-bonding authority. Pointing to the energy company's “deteriorating financial condition,” ELPC asked the agencies to issue violations under the Illinois Surface Coal Mining Land Conservation and Reclamation Act and Indiana's surface mining statute.

The complaints come after ELPC wrote a letter to IDNR Director Wayne Rosenthal on Feb. 1 asking the agency to require Peabody to substitute its current $92 million in self-bonded obligations in Illinois with surety bonds. The letter asserted that Peabody's balance sheet is so compromised that bankruptcy is a strong possibility for the energy company .

Illinois, Indiana Targeted

If the Illinois and Indiana agencies fail to take action, the complaints called on OSM to intervene under Sections 517(h) and 521(a) of the Surface Mining Control and Reclamation Act (SMCRA).

“IDNR should immediately issue a notice of violation to Peabody for operating without sufficient reclamation bonding and require Peabody to post financial assurances other than selfbonds as a condition of continued mining operations in Illinois,” ELPC attorneys wrote in the Illinois complaint. “If IDNR fails to issue a notice of violation to Peabody within 10 days, OSM must conduct an inspection and issue a notice of violation to Peabody.”

The complaints stress, “This citizen complaint should be given immediate and emergency consideration in light of Peabody’s rapidly deteriorating financial condition.”

Peabody Pushes Back

Peabody is disputing ELPC’s assertions that it is no longer capable of meeting its self-bonding obligations. The company also said its “contemporaneous restoration practices” are designed to limit environmental disturbances over the life of each mining operation. “Peabody has an excellent record of land restoration and is routinely recognized for these programs,” the energy company said in a statement e-mailed to Bloomberg BNA. “All of our mines were reaffirmed for self-bonding eligibility last year in all states where we have self-bonding. Peabody operates some of the safest, most productive and competitive mines in the nation.”

Action in Western States

The complaints come just days after WildEarth Guardians filed a similar citizen complaint calling for an investigation of Peabody's self-bonding of mines in Colorado, New Mexico and Wyoming.

The complaints allege that Peabody is violating SMCRA and state laws in Illinois and Indiana because its current self-bonding, backed by Peabody Investments Corp. (PIC), is insufficient to assure full completion of any potential reclamation activities in the event of a financial collapse.

Precarious Finances?

The complaints assert that bankruptcy for Peabody is real possibility in light of the recent pattern of bankruptcies in the coal industry, including Alpha Natural Resources Inc., Patriot Coal Corp. and Arch Coal Inc. Specifically, the complaints note that Peabody's market capitalization has sunk to $45 million; Moody's and Standard and Poor's have given “negative” outlooks on the energy company's recent credit ratings; and, the Peabody recently posted higher than expected fourth-quarter losses.

“Given the precarious financial condition of Peabody Energy, and the degree to which PIC’s assets are pledged to its parent corporation, allowing any amount of self-bonding backed by PIC is insufficient to assure the completion of the reclamation plan if the work had to be performed by the State of Illinois in the event of Peabody Energy’s bankruptcy,” the Illinois complaint stated. “Self-bonding by a subsidiary whose assets are pledged to the debt of a parent corporation in deep financial distress is patently insufficient to assure completion of the reclamation plan.”

A spokesman for ELPC said the organization has not received any response from authorities in Illinois and Indiana.

To contact the reporter on this story: Michael J. Bologna in Chicago at

To contact the editor responsible for this story: Larry Pearl at