Struggling coal companies must face their cleanup costs - U.S. official

By Patrick Rucker

WASHINGTON (Reuters) - The ailing coal industry must face the costs of cleaning up spent mines even as companies get pushed toward bankruptcy, the U.S. Interior Secretary said on Tuesday.

The mining industry is responsible for restoring old mine sites but a taxpayer subsidy called "self bonding" has allowed some of the largest companies to forego a large share of cleanup insurance.

Bankrupt Alpha Natural Resources and Arch Coal have sought to jettison cleanup liabilities in bankruptcy court and Interior Secretary Sally Jewell said officials will not tolerate such manoeuvres.

"Even at a time of financial distress, it is still the responsibilities of these companies to do the reclamation that they signed up for," Jewell told reporters after a meeting of the Senate Committee on Energy and Natural Resources.

"We need to make sure that those companies are held accountable."

Senator Maria Cantwell, the most senior Democrat on the energy panel, pressed Jewell on self-bonding during the hearing.

"How are we making sure that the taxpayer isn't left on the hook?" the Washington lawmaker asked during one round of questioning.

Jewell said federal officials were committed to shielding taxpayers from $3.6 billion in self-bonding liabilities across the country but coal-producing states have largely been left to manage the issue so far.

In some cases, the state has settled for much less money than needed to finish the cleanup work.

In a bankruptcy court in St. Louis on Tuesday, a federal judge approved a deal between Wyoming regulators and Arch Coal that earmarked just $75 million to cover self bond liabilities that top $450 million.

Wyoming reached a similar deal with Alpha Natural Resources with $61 million promised to cover $411 million in future cleanup now covered by self bonds.

Of the roughly $2 billion in future cleanup costs facing Peabody Energy Corp, $1.47 billion of that is self-bonded and has no concrete backing. Those costs could fall to taxpayers during bankruptcy.

Investors have lately worried whether a call to replace self-bonds with costly surety bonds could push struggling Peabody closer to bankruptcy.

A spokesperson for Peabody Energy said the company is a good steward of mined land and complies with mine-reclamation rules.

(Additional reporting by Sue Britt in St. Louis; Editing by Chris Reese and Alistair Bell)