03.31.17

Cantwell, Cartwright Introduce Bill to Reform Risky Business Practices in the Coal Industry

Bill Would Ban Self-Bonds, Protect Taxpayers and Establish More Stringent Rules for Surety and Collateral Bonds

WASHINGTON, D.C. – Ranking Member of the Senate Energy and Natural Resources Committee U.S. Senator Maria Cantwell (D-Wash.) and Rep. Matt Cartwright (D-PA-17) along with colleagues in both the House and the Senate, introduced the Coal Cleanup Taxpayer Protection Act. The bill would protect taxpayers from liabilities caused by coal companies’ risky financial practices.

"As coal companies emerge from bankruptcy, we should act now to avoid the mistakes of the past,” Senator Cantwell said. "That means coal companies need to set aside real resources for cleanup, not so-called 'self-bonds' that risk taxpayer dollars to clean up the mess these companies can leave behind.”

Current law requires coal companies to ensure that they can cover the cost of reclamation – that is, rehabilitating land after coal-mining operations on it have stopped. But the law allows the Interior Department and state agencies to accept performance bonds for this cleanup work from coal mining companies without separate surety, known as “self-bonds.” These self-bonds are a significant financial liability to state and federal taxpayers. As dozens of coal companies have declared bankruptcy in the past two years, the financial risk to taxpayers posed by self-bonding has become apparent.

Current law, however, does not require the acceptance of these bonds. In fact, some states do not allow their use, including Kansas, Kentucky, Maryland, Montana and Virginia.

Sen. Cantwell’s bill would prohibit any new self-bonds for coal reclamation. The bill would also phase out existing self-bonds when their 5-year operating permits come up for renewal under current law.

Sens. Dick Durbin (D-Ill.), Sheldon Whitehouse (D-R.I.), and Martin Heinrich (D-N.M.) have joined the bill as original co-sponsors. Rep. Matt Cartwright (D-PA-17) is the lead sponsor of the companion bill in the U.S. House of Representatives.

“Under the current system, coal companies can file for bankruptcy and avoid paying to clean up the public health and environmental hazards they created.  That’s not right,” said Sen. Whitehouse. “This legislation would ensure coal companies have assets available to pay for cleaning up their messes. Taxpayers shouldn’t have to foot the bill.”

“Taxpayers should not have to bear the burden of coal mining companies’ irresponsible financial practices,” said Sen. Durbin. “These measures strengthen bond requirements to successfully hold the industry accountable for reclamation.”

“This bill prohibits coal companies from pushing their financial responsibilities to taxpayers,” said Rep. Cartwright. “Coal companies which once seemed financially secure are declaring bankruptcy, forcing taxpayers to foot the bill for clean-up costs totaling billions of dollars. Ending self-bonding nationwide is imperative to protect hard-working Americans.” 

“If a coal company digs up the land and extracts its minerals, there should always be solid guarantees that it can pay to repair whatever long-term damage its caused, and not lean on taxpayers to fulfill its responsibilities. Eliminating self bonding is about basic fairness. It's time to accept reality and eliminate the self-bonding loophole and protect taxpayers from having to bail out coal companies,” said Dalal Aboulhosn, Deputy Legislative Director for Land and Water for the Sierra Club.

“As Peabody Energy’s recent reorganization shows, the era of allowing coal mining companies to self-bond environmental clean-up responsibilities needs to come to an end,” said Margrethe Kearney, Senior Attorney with the Environmental Law & Policy Center. “This legislation ensures coal mining companies don’t put taxpayers back on the hook.”

“During coal company bankruptcies, state regulators made it clear they cannot be trusted to implement self-bonding strictly enough to protect taxpayers and ensure reclamation will be completed. Even though Arch, Contura, Peabody and Cloud Peak are all replacing their self-bonds for now, they have stated their intent to again use self-bonding in the future, if allowed by the states.  Weaker coal markets both incentivize self-bonding and render it more dangerous to the public interest. Market volatility is projected to increase in the future, so now is the right time to end self-bonding nationwide once and for all,” said Bob LeResche, Powder River Basin Resource Council Chair and Western Organization of Resource Councils Board Member.

To protect taxpayers from footing the bill for coal companies, the bill sets a financial liability standard for alternative bonding programs. The provision limits the Interior Department’s ability to approve alternative state programs to those that “result no greater risk of financial liability” to the government than a standard surety or corporate bond program.

Sen. Cantwell’s bill also requires the Interior Department to issue a rule within a year of enactment to minimize the financial liability of the government by tightening requirements for sureties. 

Lastly, the bill adjusts rules for posting collateral by prohibiting coal companies from posting coal assets (including coal, mines and processing facilities) as collateral. The bill also authorizes the Interior Department to require the inclusion of coal executives’ salaries and bonuses as collateral.

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