Steamboat Springs Fearing bankruptcy, an environmental group is acting quickly to ensure Peabody Energy has the money necessary to clean up its mining sites.
On Monday, WildEarth Guardians sent a notice to the world's largest private sector coal company saying it intends to file a lawsuit in federal court. Guardians is required to give 60-days notice before filing suit.
The lawsuit is related to Peabody's mines in New Mexico, Wyoming and Colorado, including Twentymile Mine in Routt County.
Guardians claims Peabody is violating the U.S. Surface Mining Control and Reclamation Act.
Given Peabody's dismal financial situation, Guardians claims Peabody does not have the financial assets to reclaim its mines.
Instead of fronting money for a reclamation bond, some states allow mining companies to self-bond, or use their own assets to guarantee the money is available to reclaim the mines.
There are rules governing when companies can self-bond, and Guardians claims Peabody does not have a high enough credit rating, has an excessive liabilities-to-net worth ratio and that the company's self-bonds exceed 25 percent of its net worth.
Last week, Guardians made the same allegations filed in a complaint with the federal Office of Surface Mining Reclamation and Enforcement. That complaint prompted the agency to tell the affected state mining regulators they have 10 days to respond.
The state regulators can ask for more time.
Guardians' climate and energy program director Jeremy Nichols said that, by taking the initial steps in filing a lawsuit, Guardians is putting itself in a good position to move forward if the states decide to delay the process.
"We hope the states realize this is a very important problem here," Nichols said.
Nichols said the environmental group trying to move quickly given the financial volatility of Peabody and the coal industry.
"Bankruptcy protects companies," Nichols said. "It doesn't protect the environment, and it doesn't protect the public interest."
Nichols said Guardians is concerned given other coal company bankruptcies.
In Colorado, Peabody has $25 million in reclamation liability.
In Wyoming, Arch Coal, which filed for bankruptcy in January, has $485 million in reclamation liability. The state has settled by way of an agreement with Arch to pay 18 percent of its reclamation liability.
"It's very likely the bankruptcy court will allow that," Nichols said.
U.S. Interior Secretary Sally Jewell told Reuters on Tuesday that coal companies need to be held accountable.
"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.
Nichols said the remaining costs of reclamation would be shifted to taxpayers.
"This is an immense failure," Nichols said, referring to the rules that allow companies to self-bond.
In a statement last week, Peabody said the company's mines were reaffirmed for self-bonding eligibility last year in all states in which it uses self-bonding.
"Peabody has an excellent record of land restoration, which we view as part of our social license to operate," the statement read. "We have been meeting our restoration obligations for many decades, and we routinely spend tens of millions of dollars to pay for the restoration of lands that others have mined."
In November, Peabody announced plans to sell Twentymile Mine and two mines in New Mexico to Bowie Resource Partners for $358 million. Peabody expected the deal to close at the end of this quarter, but the sale has not yet been completed.
During an earnings report on Feb. 11, Peabody CEO Glenn Kellow said Bowie was still arranging financing.
Bloomberg on Friday reported the sale had hit a snag, and the financing has been put on hold as terms are renegotiated.
On Feb. 23, 2015, shares of Peabody stock were selling for $111.82. On Tuesday, a year later, the stock was selling for $2.11.
To reach Matt Stensland, call 970-871-4247, email mstensland@SteamboatToday.com or follow him on Twitter @SBTStensland