Mine cleanup concerns lead objections to Peabody bankruptcy plan

[January 24, 2017]  By Tracy Rucinski

CHICAGO (Reuters) - Indiana and several environmental groups are objecting to a plan by Peabody Energy Corp to exit its $8 billion Chapter 11 bankruptcy, citing concerns over how the company will cover about $1 billion in future mine cleanup costs.

Most creditors support the plan by the world's largest private-sector coal company to cut $5 billion of debt, but it faced official objections in court filings on Friday.

Indiana and the environmental groups objected to Peabody's failure to disclose how it will finance the future cleanup of contaminated mines, an issue that has attracted attention in several recent coal bankruptcies because of a federal program called "self-bonding."

For decades, self-bonding has exempted large coal companies like Peabody from setting aside cash or collateral to ensure that mined land would be returned to its natural setting, as required by law.

In its reorganization plan filed last month, Peabody said it would address its self-bonding cleanup obligations in accordance with the law but did not provide further details.

In a limited objection, Sierra Club said details on financial coverage of cleanup obligations were necessary for parties to determine whether the reorganization plan is feasible.

Peabody holds self-bonds in Wyoming, New Mexico, Indiana and Illinois.

In an emailed statement, Peabody spokesman Vic Svec said the company was funding every dollar of its current cleanup obligations and had accelerated restoration work over the past year, reducing its bond obligation by 18 percent.

"We look forward to continuing to restore the land and provide assurances for future obligations, through a potential blend of both third-party surety bonds and self-bonding," Svec said.

A view of mining operations is seen during a tour of Peabody Energy's Rawhide coal mine near Gillette, Wyoming, U.S. June 1, 2016. REUTERS/Kristina Barker

Rivals Arch Coal Inc and Alpha Natural Resources replaced self-bonds for environmental liabilities at active mines with third-party bonds when they emerged from Chapter 11 last year.

A hearing to approve Peabody's reorganization will be held in St. Louis on Thursday.

Among other objections filed on Friday, certain creditors and shareholders opposed the proposed recoveries granted under the plan, and four former executives, including ex-chief executive officer Gregory Boyce, filed a complaint about their retirement packages.

Svec said the company was evaluating the objections and would respond in due course.

The U.S. Trustee, a government watchdog for bankruptcies, has also objected to parts of the reorganization plan.

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