Who Pays for Mine Cleanup After Big Coal Goes Bankrupt?

Peabody Energy’s recent filing could change how the country funds mining messes.

June 22, 2016
Coal from a Peabody mine in Colorado
WildEarth Guardians

A geologic pool of coal and oil lies beneath most of Illinois, as well as parts of Indiana, Kentucky, and Tennessee. It’s called the Illinois Basin, and energy companies have been harvesting its fossil fuels for more than a century. Peabody Energy, the country’s largest coal company, is one of them. Its founders started by selling coal out of a cart in Chicago in 1883; on April 13, 2016, it filed for bankruptcy.

Peabody isn’t the only coal company to go under in recent years. In the past 10 months, two other behemoths, Alpha Natural Resources and Arch Coal, did too. The companies have something else in common: They’ve all left behind mines in the Illinois Basin that—if left as is—could harm the ecosystem and local watershed. For its part, Peabody operates several mines in the basin. Under the federal Surface Mining Control and Reclamation Act (SMCRA), energy companies are required to remediate the lands they have mined. And if Peabody now doesn’t have the cash to do so, “there’s a risk of taxpayers being left holding the financial bag,” says Howard Learner, director of the Chicago-based Environmental Law and Policy Center.

The Missouri-based company has assured Illinois Attorney General Lisa Madigan that it can pay for cleanup at the three mines still operating in the state: Gateway near Coulterville, Wildcat Hills in Saline County, and Cottage Grove in Gallatin and Saline Counties. Peabody responded to a request for an interview by referring onEarth to press releases; a company spokesperson told Reuters that it sees “land restoration as an essential part of the mining process” and that it takes “great pride“ in its work. But to make sure Peabody’s not relieved of its reclamation duties, Learner and his colleagues are fighting to hold the company accountable in bankruptcy court.

Peabody’s cleanup bill in the Illinois Basin alone would come to $92 million, but it also operates mines in Australia, Arizona, Colorado, New Mexico, and Wyoming, where the North Antelope Rochelle mine—the largest in the country—stretches across 100 square miles. Five companies that are collectively responsible for more than 40 percent of the nation’s coal mining capacity are now in bankruptcy court. But what’s happened with Peabody, specifically, may change the way states look at how they get and keep money for reclamation.

Each state funds the costs of mine cleanup differently, and for its operations in many of them, Peabody was allowed to self-bond, something the company insisted on. This means that as Peabody went about its mining, it didn’t have to set money aside for later cleanup efforts, Learner says. To make a case for paying for reclamation down the road, Peabody pointed to its sizable finances and argued that demand for coal would increase indefinitely. It didn’t. The price of metallurgical coal (gobbled up by China for steel mills) fell from an all-time high of $200 per short ton in 2011 to $80 in 2015. The price of Illinois Basin coal took a hit, too, dropping from roughly $60 in 2008 to less than $40 in 2015. Falling prices of natural gas and renewables, coupled with stricter environmental regulations, made dirty coal an even less attractive fuel.

“At the time, when shares were $74 apiece, [self-bonding] didn’t seem like such a bad idea,” Learner says, but state agencies should have acted as coal’s stock price slipped. Now they are left with uncertainty around who’s responsible for what, including remediation efforts like removing structures, protecting water and soil from acid-mine drainage, and converting the land back to farmland or forest.

“We’d like to see self-bonding go away,” says Theo Spencer, a policy advocate for NRDC (which publishes onEarth). Peabody’s executives “saddled the company with millions of dollars of debt,” he says. “Bad management by rich executives shouldn’t land on the backs of the taxpayers who end up having to pay for the cleanup.”

If a bankruptcy judge rules that Peabody is off the hook, a decision that could come within the year, reclamation will likely be left to state agencies. Many states are experienced at cleaning up mines because the cleanup of abandoned sites fell to them before SMCRA took effect in 1977. In some places, like Ohio, a tax on coal mining helps fund reclamation. Still, state budgets go only so deep. A recent report by the Center for Investigative Reporting found that across the country as many as 500,000 abandoned mines await cleanup.

“I’ve seen lands that were not reclaimed, and they look like moonscapes. Barren, black, nothing there,” says Tracy Branam, a geologist at the Indiana Geological Survey who has studied mine reclamation for 25 years. “Once they reclaim them, you’ve got a lot of vegetation, you’ve got a lot of wildlife, and the quality of the streams is phenomenal.” But someone has to pay for it.

onEarth provides reporting and analysis about environmental science, policy, and culture. All opinions expressed are those of the authors and do not necessarily reflect the policies or positions of NRDC. Learn more or follow us on Facebook and Twitter.

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