Self-Bonding Triggers Clash in Comments to Mining Agency

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By Stephen Lee

July 20 — Familiar fault lines over self-bonding emerged in public comments filed with the Office of Surface Mining Reclamation and Enforcement, with environmentalists calling for tighter rules and mining groups saying states should decide.

The agency's docket, which closed July 20, collected responses to a petition from WildEarth Guardians that asked OSMRE to tighten its rules on self-bonding, a financial mechanism that lets companies obtain mining licenses by putting up their own assets as collateral for future land reclamation.

OSMRE hasn't tipped its hand about how it will respond to the comments. However, agency officials have made clear their concerns about self-bonding in the past, and OSMRE chief Joe Pizarchik told reporters in May that the public comments could result in “any number of changes” to the agency's rules.

The agency has no timeline for responding to the comments, Christopher Holmes, an OSMRE spokesman, told Bloomberg BNA.

Environmentalists Call for Change

One comment letter, signed by 32 environmental groups, called on OSMRE to promptly issue guidance clarifying that only unencumbered assets can be used to qualify for self-bond status, that any company emerging from bankruptcy must post substitute bonds to cover the costs of reclamation and that regulators can review self-bonding status at any time.

According to the groups, which include the Sierra Club, Greenpeace, Natural Resources Defense Council and Powder River Basin Resource Council, more than 50 coal companies have filed for bankruptcy in the last few years.

Those filings provide clear evidence of a sector-wide collapse imperiling obligations that were approved at a time when the industry seemed healthy and companies appeared capable of paying for cleanup, the groups said.

Liabilities Used as ‘Blackmail'?

Now, however, coal companies owe some $3.86 billion in self-bonded liabilities, and the companies wield those huge debts as “blackmail,” Peter Morgan, staff attorney at the Sierra Club, told reporters during a July 19 conference call.

“They're saying to regulators, ‘If you push us too hard, we're going to have to liquidate, and you can't afford to let us do that because that would leave you on the hook for hundreds of millions, if not billions, in cleanup costs,' ” Morgan said.

In another docket comment, the Conservation Law Center proposed that OSMRE go a step further and deny self-bonds to any companies that are in default on any loan, bond or other financial obligation.

More than 37,000 Sierra Club members and supporters flooded the docket with comments on the last day it was open.

Industry Reps Push Back

The Interstate Mining Compact Commission submitted a comment letter noting that the states that allow self-bonding already have begun to explore the problem, in conjunction with OSMRE.

Among the issues being discussed are the correct calculation of reclamation bond liability, effective and appropriate bond instruments, matching bond instruments to risk of forfeiture and how states should treat companies that undergo Chapter 11 bankruptcy filings, wrote Gregory Conrad, IMCC executive director.

Until those investigations are complete, an OSMRE rulemaking would be “premature,” Conrad wrote.

Another industry-side argument that arose was that coal remains a critical element of the nation's energy mix. Emily Fisher, vice president, legal at the Edison Electric Institute, wrote that OSMRE shouldn't modify its self-bonding requirements if doing so will reduce the supply of coal available for electricity generation.

Petition Based on Emotion, Mining Group Says

Moreover, wrote Fisher, barring companies that have filed for bankruptcy from using self-bonding wouldn't change their financial situation or make funds available for reclamation.

Fisher also contended that neither WildEarth Guardians' petition nor OSMRE have shown that any company that has filed for bankruptcy isn't meeting its reclamation obligations.

Jonathan Downing, executive director of the Wyoming Mining Association, wrote that the petition isn't based on fact, but rather on “emotional and dire presumptions” about companies that have recently gone through the bankruptcy process.

Prescriptive federal rulemaking would deprive the states of the flexibility they need to develop programs that work best for them, Downing wrote.

Not all states accept self-bonding. Those that do include Illinois, Indiana, Ohio, West Virginia and Wyoming.

Concerns in Senate

In May, Pizarchik said OSMRE could end up writing new rules that define when and which companies are eligible to self-bond.

Separately, Sen. Maria Cantwell (D-Wash.) has introduced a bill that would outlaw self-bonding altogether.

“We need to make sure the taxpayer isn't on the hook for cleanup work by bankrupt coal companies anymore,” Cantwell, the top Democrat on the Senate Energy and Natural Resources Committee, said June 16. “Self-bonding clearly isn't working, and we need to stop this dicey practice from continuing.”

To contact the reporter on this story: Stephen Lee in Washington at stephenlee@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

For More Information

OSMRE's docket is available at https://www.regulations.gov/docket?D=OSM-2016-0006 .

WildEarth Guardians' petition is available at http://src.bna.com/e63 .

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