The Lesson From a Coal Giant’s Collapse
Bankruptcy shouldn’t stop Peabody from cleaning up the mess it’s leaving behind
The bankruptcy of Peabody Energy, the largest U.S. coal producer, is the most vivid illustration yet of the market’s deep and welcome shift away from coal. It could also be calamitous for the environment: If Peabody goes out of business, who will clean up the pollution it has left behind?
Under federal law, companies must pay for the reclamation of the land they have contaminated through mining. The usual way to do this would be to require them to put up money or collateral to cover those costs. But some states, with the federal government’s blessing, allow companies to “self-bond”—essentially, to promise that when the time comes to clean up a mine, they’ll have enough money to do the job.
Peabody’s bankruptcy shows the folly of this practice. Of the six states in which Peabody has mines, four—Wyoming, New Mexico, Illinois, and Indiana—allow self-bonding. In those states, taxpayers could be on the hook for up to $1.15 billion.
A federal bankruptcy judge has some discretion to force Peabody to make good on its commitments to states, and the judge should use it. Failing to clean up an old mine, beyond leaving behind an eyesore, can let toxins leak into the water supply, threatening animals and people alike. Leaving a surface mine unreclaimed can also prevent local communities from using the land for grazing, farming, hunting, and recreation. Wyoming’s Powder River Basin alone will require an estimated $800 million.
The broader questions are how many more Peabodys there may be and how to pay for the environmental damage they have caused. The company is the latest in a string of U.S. coal producers to fail, in an industry that has lost 20,000 jobs and 94 percent of its market value since 2011. U.S. coal production in the first three months of 2016 fell 38 percent from the same period last year. <BW>