Peabody Energy Says It Will Pay $92M For State Coal Mine Clean-Up
Peabody Energy has three coal mines in southern Illinois, all of which are still producing coal.
When those mines eventually shut down, the company is required by state and federal laws to pay for the clean-up and reclamation of the land. St. Louis-based Peabody has guaranteed the state of Illinois it has the estimated $92 million to cover that work.
But as the company considers bankruptcy, some question whether the St. Louis-based company’s promise is worth much.
The Chicago-based Environmental Law and Policy Center filed a citizen complaint with the Illinois Department of Natural Resources in February. It asked the department to require that Peabody Energy purchase surety bonds from private insurers for mine reclamation.
"That’s a legal requirement. It’s a responsibility of Peabody. It’s an obligation of Peabody," said Howard Learner, the center’s executive director and president. "The taxpayers of Illinois have enough problems these days."
Learner says Illinois’ DNR should have moved on the issue long ago, especially since Peabody’s share value has plummeted in recent years. On Wednesday, Peabody’s stocks closed on Wednesday at $2.19. Two years ago, Peabody's stock was worth $237.09.
"It isn’t like we woke up overnight and Peabody was in financial distress," Learner said.
A spokesman for DNR said in an email that the agency will look at the company’s self-bonding after it receives financial statements from Peabody. Those are due at the end of the month.
"There is no regulatory time requirement, but DNR would conduct a prompt review," Chris Young wrote.
Even if the state acts, it may be too late.
In a regulatory filing this week Peabody Energy said it might have to seek Chapter 11 protection. The company missed a $71 million interest payment and is exercising a 30-day grace period. If the company goes into bankruptcy, Illinois likely would be in a long line of debtees seeking payment.
Another St. Louis-based company, Arch Coal, has seen its self-bonding obligations shrink in bankruptcy court. In a deal reached with the state of Wyoming, Arch’s more than $400 million in reclamation costs fell to $75 million.
Peabody Energy’s total self-bonding for reclamation of mines in Illinois, Indiana, Colorado, New Mexico and Wyoming exceeds $1 billion. The company also is facing pressure in other states over whether it can meet those financial clean-up requirements. In its latest SEC filing, Peabody said self-bonding reduces its costs.
"As a result of any adverse change in our ability to self-bond, our costs would increase and our liquidity available for other uses would be reduced to the extent of any collateral required to obtain replacement financial assurances," the company said.
In other words, purchasing surety bonds would wipe out the company’s available cash and hasten a bankruptcy.
The Environmental Law and Policy Center’s Learner has little sympathy for the coal giant, which he points out chose to self-bond. He said if the company does wind up in bankruptcy court, cleaning up mines should get priority above some creditors, "especially those who speculated on distressed corporate debt."