Feds crack down on coal cleanup financing

Federal regulators are asking states to stop giving coal-mining permits to companies without the financing to guarantee that they can pay to clean up the mines after they are abandoned.

The policy advisory from the Interior Department’s Office of Surface Mining, Reclamation and Enforcement (OSMRE) is the first significant effort by the federal government to crack down on so-called coal self-bonding, in which companies pledge that they can afford cleanups by relying solely on their financial returns.

{mosads}Self-bonding has come under scrutiny, as three of the largest domestic coal-mining companies have recently declared bankruptcy, calling into question whether they can afford their obligations to return closed mines to usable conditions.

The federal government is often left to pay for the cleanup if a coal company abandons a mine without paying for it.

“Lack of global demand for coal, competition from low cost shale gas and the unprecedented and continuing retirement of coal-fired power plants are clear signs that the energy industry is undergoing a major transformation and it is incumbent upon OSMRE to protect the public’s interest,” Joe Pizarchik, OSMRE’s director, said in a statement accompanying the policy advisory, the first in the agency’s nearly four-decade existence.

“This policy advisory provides clear direction to our partners who have the responsibility to enforce federal surface mining law at the state level,” he said.

The agency said that new self-bonds should not be allowed until the coal market’s production matches consumption, which regulators believe will likely happen in 2021.

The OSMRE is also asking states to immediately reassess whether companies with current self-bonds still have the financial wherewithal to justify them. New companies formed from bankruptcies should not get self-bonds for five years, it said.

The advisory was sent to the 21 states that have been allowed to enforce federal reclamation rules on their own; 10 allow self-bond permits.

It is not a binding policy and meant only as guidance.

Congressional Democrats are also trying to crack down on self-bonds.

Sen. Maria Cantwell of Washington, the top Democrat on the Energy and Natural Resources Committee, proposed a bill with three colleagues in June to tighten the rules for when a company can self-bond and to require that the self-bonds be no more risky to the government than traditional financing mechanisms.