Federal lawmakers discussed a bill that would eliminate the practice of self-bonding for coal companies during a subcommittee hearing amid debates over oil and gas regulations.
U.S. Rep. Matt Cartwright, D-Pa., recently introduced the Coal Cleanup Taxpayer Protection Act, which would prevent coal companies from self-bonding, a practice of using an entity's net worth rather than a bond to pay for coal mine reclamation obligations. The bill will ensure coal companies restore land once mining is complete, rather than letting those costs fall to taxpayers, and will tighten rules on other types of bonding, according to a Sept. 20 release.
If passed, the legislation will require each state to submit an actuarial study showing that a proposed bond pool will be financially stable over the next five years and to update those studies every five years thereafter. The bill also requires any appraisal or valuation of real property or equipment used for bonding to be disclosed and clarifies that bonding collateral should be revalued at least every three years if it is not cash, letters of credit, certificates of deposit or Treasury bonds.
Cartwright has introduced similar legislation in prior sessions.
In his remarks before a House Natural Resources subcommittee hearing Sept. 24, Cartwright said his bill "closes dangerous loopholes in the coal bonding process" and is based on recommendations from the mining regulatory authorities of the 13 states with active mines.
"This is an approach that might have made sense when coal companies were some of the most valuable businesses in the world, but we all know times have changed dramatically," Cartwright said, noting the recent string of coal bankruptcies. "With the coal industry struggling, stock prices collapsing and coal debt at alarming levels, self-bonding just no longer makes any sense."
U.S. Rep. Paul Gosar, R-Ariz., said coal mining is a "heavily regulated industry and bond requirements are no exceptions." To remain qualified for a self-bond, coal producers must have a net worth of at least $10 million, have $20 million worth of fixed assets, and either meet finance ratios or have an "A" or better bond rating, according to the website of the U.S. Office of Surface Mining Reclamation and Enforcement.
Cartwright's bill would overrule state discretion on how to reclaim coal mines, "even though the states are well equipped to evaluate if self-bonding is appropriate for their local operators," Gosar said.
Frank Rusco, director of the U.S. Government Accountability Office's Natural Resources and Environment team, noted that three large coal companies have declared bankruptcy in recent years with a total of $2 billion in self bonds.
"It is unclear at this time if and how much of any reclamation costs may fall on taxpayers, but we recommend an end to self-bonding for coal companies because it is administratively complex and burdensome, and it puts the ultimate risk on taxpayers rather than companies with skin in the game," Rusco said.
The Wyoming Environmental Quality Council, an agency in the nation's largest coal-producing state, unanimously voted to limit self-bonding for coal companies earlier this year out of fear that the state will bear the burden of reclamation liabilities. Council members noted the declining coal market at the time.
Since then, Cloud Peak Energy Inc. and Blackjewel LLC, both of which operated Powder River Basin coal mines, filed for bankruptcy protection and have sought or are seeking to sell their assets.
