Washington, D.C. – Today, Ranking Member of the Senate Energy and Natural Resources Committee U.S. Senator Maria Cantwell (D-Wash.) wrote Interior Secretary Sally Jewell about her concerns with self-bonding for coal mine reclamation.

After laying out a series of recent examples and key arguments, Sen. Cantwell asked if the administration would support a prohibition on any new self-bonds for coal mining reclamation going forward.

Under the Surface Mining Control and Reclamation Act (SMCRA), the secretary – and select states whose programs have been approved by the secretary – may accept bonds without separate financial backing, as a promise to rehabilitate land after coal mining operations have ceased. These bonds without separate surety or collateral are known as self-bonds. Neither the Interior Department nor any state is required to accept self-bonds. Five states, including major coal producers, do not allow self-bonding: Kansas, Kentucky, Maryland, Montana and Virginia.

These self-bonds are a significant financial liability to state and federal taxpayers. Self-bonding firms are especially exposed to market downturns. Furthermore, self-bonding places an inappropriate burden on natural resource regulators, requiring financial analysis that generally lies outside their core competency.

The recent bankruptcy of Arch Coal is a glaring example. In September 2015, the state of Wyoming reaffirmed the eligibility of Arch Coal to self-bond, despite a clear public record of Arch’s struggles in the capital markets. Less than four months later, Arch Coal filed for bankruptcy. This example highlights that without appropriate financial assurance from the beginning, regulators may trap themselves down the line.

Companies currently operating coal mines under SMCRA have posted an aggregate of $3.6 billion of self-bonds, as reported by multiple states. The Interior Department has filed concerns and reservations of rights in bankruptcy proceedings for several coal companies. Given these recent developments and the scale of other companies’ self-bonding, Sen. Cantwell believes “the department and Congress should re-visit SMCRA’s self-bonding authorization.”

At a recent hearing before the Energy and Natural Resources Committee, Sen. Cantwell asked Secretary Jewell about her position on self-bonding, to which Secretary Jewell acknowledged that “there’s a very significant problem and risk to the taxpayer with high-profile bankruptcies that have taken place recently with coal companies.”

The letter today follows up on that discussion, with Sen. Cantwell requesting responses to a series of questions, including:

1. What more will the Interior Department do to enforcement the requirements of the Surface Mining Control and Reclamation Act and shield taxpayers from liability for reclamation?

2. Are there any changes needed to current law to minimize financial assurance challenges beyond self-bonding?

3. Are there successful examples of bonding compliance under bankruptcy proceedings that the department is suggesting states follow?

4. Would the administration support a prohibition on any new self-bonds for coal mining reclamation going forward?

Earlier this week, Sen. Cantwell and Senator Dick Durbin (D-Ill.) submitted a request to the U.S. Government Accountability Office (GAO) to investigate self-bonding by coal companies. GAO has extensive experience examining financial assurance requirements and practices in many industries. For example, in 2011, GAO testified that the Bureau of Land Management (BLM), the Forest Service, the Environmental Protection Agency and the Office of Surface Mining Reclamation and Enforcement – four key reclamation and cleanup agencies – had spent at least a total of $2.6 billion to reclaim abandoned hardrock mines on federal, state, private and Indian lands. Taxpayers may face even larger liability for coal mines.

Read Sen. Cantwell’s complete letter to Secretary Jewell here.
Read Sens. Cantwell and Durbin’s investigation request to GAO here.