How to make coal companies pay to clean up their messes

Peabody Energy, the world’s largest private-sector coal company, is not in great financial shape. Last month, it casually skipped a $71 million interest payment, and analysts are speculating that it may be edging toward bankruptcy. Standard and Poor’s recently downgraded Peabody’s credit rating to a “D.” The company has $6.3 billion in outstanding long-term debt.

If you’re cheering for the death of coal, that might sound like good news. But there’s a nasty catch: Peabody’s financial troubles mean it might not be able to pay to clean up its messes, and restoring landscapes and repairing streams and rivers can be expensive. The company has “self-bonded” to pay up to $1.4 billion in reclamation costs at its mines in the United States — and self-bonding means we’re trusting it to do so.

While coal companies usually offer up collateral or contract out in order to guarantee that cleanup will be paid for, it has become common in recent years for companies to simply pledge that they’re going to deal with the costs. These self-bonds (as opposed to, say, surety bonds, which rely on third-party insurers) only rely on the name and financial stability of the company itself.

State mining authorities could change those rules and instead require companies to post surety bonds or set aside cleanup cash in an escrow account. Or they could continue to allow self-bonding, but not through 100-percent-owned subsidiaries.

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