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Peabody has
benefited from a federal program known as self-bonding that
allows the largest miners to extract coal without setting aside
cash or collateral to ensure the company will restore the site
to its natural setting.
The practice has come under scrutiny following bankruptcy
filings by Peabody and other large coal miners because without
collateral set aside for mine reclamation, taxpayers are
potentially exposed to billions of dollars in cleanup costs.
Under agreements reached with Wyoming, New Mexico and Indiana,
about 15 percent of Peabody's $1.2 billion in self-bonds will be
secured by debtor-in-possession financing during its bankruptcy.
Wyoming can receive $127 million cash if Peabody were to walk
away from reclamation in that state while in bankruptcy, New
Mexico $32 million and Indiana $17 million.
The agreements are similar to bankruptcy deals reached by coal
miners Arch Coal and Alpha Natural Resources in Wyoming and West
Virginia.
Peabody's agreement must be approved by a federal bankruptcy
judge at a hearing in August.
The deals did not specify whether Peabody must replace its
self-bonds once it emerges from bankruptcy, as Alpha did this
month in Wyoming.
In court filings, Peabody said that were it required to replace
its self-bonded liabilities, its entire liquidity would be
depleted, leaving it without enough cash to run its business.
This is a scenario regulators have said they want to avoid. If a
producer walks away from its self-bonded mines, the state would
be stuck with the cleanup.
There were $3.9 billion of self-bonds across the United States
as of June 1, including $2.2 billion in the hands of bankrupt
coal miners, according to federal mining regulator Office of
Surface Mining and Reclamation Enforcement (OSMRE).
If Peabody were to handle its own cleanups, it said the bill
would be significantly less than its $1.2 billion in self-bonds.
Reclamation costs are listed on its books at $450 million, it
said.
Peabody has already been taking steps to reduce its
environmental liabilities in Wyoming by speeding up grass
planting and regulatory paperwork at former mines.
The company also has self-bonds in Illinois, which has expressed
concern over the company's reclamation liabilities and was not
included in the settlements. (Reporting by Tracy Rucinski;
Editing by Tom Hals and Marguerita Choy)
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