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Ledger 1 : 33 — For each dollar financing nature-based solutions in 2023, about $33 financed activities harmful to nature. (UNEP)
Cases / Liability shifting (spin-offs, bankruptcy, closure bonds) · United States · 2007–2020

Peabody, Patriot Coal and coal self-bonding

Nature's voice · report
No measurement of the harm done to me here is on record.
Did nature suffer? Not measured. Disputed
Not on record
  • The record does not name which of my species, waters, soils or forests were harmed.
What the record lacks: 4 insufficient · 1 not measured · 1 disputed · 2 unclear See the gaps
Accounts of the harm differ
Is a company's own balance sheet adequate security for mine cleanup?
  • Government and regulators US Government Accountability Office: Reported $1.2 billion of the $10.2 billion in US coal bonds was self-bonded (2017) and recommended that Congress eliminate self-bonding.
  • Government and regulators Office of Surface Mining Reclamation and Enforcement (OSMRE): Warned Wyoming about self-bonding; Arch and Alpha then moved to third-party surety on leaving bankruptcy. Western Organization of Resource Councils (WORC)

US coal companies were allowed to back mine-cleanup obligations with their own balance sheets rather than third-party guarantees. After bankruptcies in 2015–2016 and 2019, the sums at stake became visible.

$1.1652 billionPeabody's self-bond (US, 2016)
Recorded as one third of the national self-bond total; WORC, 2016.

Status As of 2020: Arch and Alpha had moved to third-party surety (2016); the Blackjewel bankruptcy left liabilities of $220 million tied to unsold permits; GAO's recommendation to end self-bonding is recorded without a legislative outcome.

What?
US coal companies backed mine-cleanup obligations with their own balance sheets (self-bonds); after bankruptcies the amounts, and the gaps between bonds and cleanup cost, became visible. Western Organization of Resource Councils (WORC)
Where?
Wyoming, Kentucky and Virginia, United States; Peabody's self-bond is recorded nationally.
When?
2007 to 2020; main figures from 2016 and 2019.
Who?
Gained
Lost
  • State governments — In the Blackjewel matter the record shows $220 million of bonded liability tied to unsold permits and $195 million of cleanup that would fall to Virginia if the Justice-family self-bonded permits were revoked.
Harmed
None on record
Why?
the sources reviewed does not state the companies' own reasons for using self-bonds.
How?
A mining company shows its own balance sheet as cleanup security in place of third-party guarantees.
6 of 6 questions answered from the record

What happened

The record, in order.

Self-bonding means that a mining company shows its own balance sheet as security for cleanup, instead of a third-party guarantee. The US Government Accountability Office (GAO) reported that US coal mines carried $10.2 billion in reclamation bonds in 2017: 76% surety, 12% collateral and 12% ($1.2 billion) self-bonds. GAO recommended that Congress eliminate self-bonding.

The 2015–2016 coal bankruptcies made self-bonds visible. The Western Organization of Resource Councils (WORC) reported on 13 September 2016 that Arch Coal held a self-bond of $486.5 million in Wyoming and that Peabody held $1.1652 billion nationally, about a third of the national total. Arch and Alpha moved to third-party surety bonds as a condition of leaving bankruptcy. the sources reviewed give the reason as a warning by the federal Office of Surface Mining Reclamation and Enforcement (OSMRE) to Wyoming.

In 2019 Blackjewel went bankrupt with about 300 permits. In October 2019 the record shows an indemnity of $115 million, $220 million of bonded liability tied to permits that could not be sold, and a payment of $21 million by Contura (the successor to Alpha) to Blackjewel to be rid of its Wyoming mines. In Virginia, 20 permits belonging to the family of Governor Jim Justice remained self-bonded; if they were revoked, $195 million of cleanup would fall to the state.

A 2020 Kentucky study found that for 20% of Blackjewel's mines in the state, cleanup cost exceeded the bond by $38 million. Blackjewel proposed leaving cleanup to a trust funded only by those bonds; the proposal would also have prevented the state from pursuing the personal assets of Blackjewel's founder, Jeff Hoops. A fraudulent-transfer case was filed against Hoops.

  1. 2016WORC reports self-bonds: Arch $486.5m in Wyoming, Peabody $1.1652bn nationally; Arch and Alpha move to third-party surety on leaving bankruptcy (13 Sep)
  2. 2017GAO: $10.2bn in US coal bonds, 12% ($1.2bn) self-bonds; GAO recommends ending self-bonding
  3. 2019Blackjewel goes bankrupt with about 300 permits; October figures for indemnity, unsold liability, Contura payment and Justice-family self-bonds
  4. 2020Kentucky study: cleanup cost exceeded the bond by $38m for 20% of Blackjewel's mines

What was said

Claims, in the words of those who made them.

Where accounts differ

Each party's account, side by side, with its source. The record does not settle these points; it shows them.

Is a company's own balance sheet adequate security for mine cleanup?
Government and regulators
US Government Accountability Office

Reported $1.2 billion of the $10.2 billion in US coal bonds was self-bonded (2017) and recommended that Congress eliminate self-bonding.

Government and regulators
Office of Surface Mining Reclamation and Enforcement (OSMRE)

Warned Wyoming about self-bonding; Arch and Alpha then moved to third-party surety on leaving bankruptcy.

Western Organization of Resource Councils (WORC)

How it looked

What was shown, beside what was recorded.

Shown

    Recorded

    • Arch Coal held a $486.5 million self-bond in Wyoming; Peabody held $1.1652 billion nationally, about a third of the national total (WORC, 13 September 2016).
      Western Organization of Resource Councils (WORC)
    • Arch and Alpha moved to third-party surety as a condition of leaving bankruptcy; the sources reviewed give OSMRE's warning to Wyoming as the reason.
      Western Organization of Resource Councils (WORC)
    • Blackjewel, October 2019: indemnity $115 million; $220 million of liability tied to unsold permits; Contura paid $21 million; Justice family's 20 self-bonded Virginia permits implied $195 million of cleanup if revoked.
    • Kentucky study, 2020: for 20% of Blackjewel's mines in the state, cleanup cost exceeded the bond by $38 million.

    In court and with insurers

    Every proceeding and every insurer decision on record.

    Lawsuits and rulings

    1. 2019–2020–Outcome not on record
      Fraudulent-transfer case against Blackjewel's founder
      not on record · Civil · not on record → Jeff Hoops, founder of Blackjewel

      the sources reviewed give that a fraudulent-transfer case was filed against Blackjewel's founder in connection with the Kentucky cleanup-trust proposal. The forum, claimant and outcome are not given.

    Insurers

    No insurer decision on record.

    What nature saw

    Outcomes measured on the ground, and nature's note.

    Nature's report opens this page. Below: further outcomes measured on the ground.

    Self-bonds as share of US coal bonds
    12%
    $1.2bn of $10.2bn (GAO, 2017)
    Blackjewel Kentucky mines with cost above bond
    20%
    Exceeded the bond by $38m (Kentucky study, 2020)
    Independent ecological evaluation
    None in the sources reviewed
    the sources reviewed give bond and liability figures, not ecological measurements.

    What we don't know

    Undisclosed, unproven, untried: recorded as data.

    Nature

    • Not measured Harm to nature: The record holds no measurement of harm to nature.
    • Disputed Is a company's own balance sheet adequate security for mine cleanup?

    Court

    • Unclear Fraudulent-transfer case against Blackjewel's founder: outcome not on record.

    Figures

    • Insufficient Area (ha): Unrepaired area associated with Blackjewel;; unverified.

    Record

    • Insufficient Reported but not independently verified: that Peabody spun off Patriot Coal in 2007 with 11% of assets and 43% of liabilities (according to one report), that Patriot went bankrupt in 2012, and that Peabody agreed in 2013 to pay $310 million to a retiree health fund.
    • Insufficient Reported but not independently verified: that Wyoming accepted $75 million in place of Arch's $486 million liability.
    • Insufficient Reported but not independently verified: about 13,000 acres of unrepaired land associated with Blackjewel (acreage).
    • Unclear Whether the 2015–2016 GAO and WORC figures cover the same scope: the national self-bond total is given as about $1.2 billion (2017) and Peabody's own as $1.1652 billion (2016); the sources reviewed does not reconcile them.

    Did the harm stop?

    Not established in the sources reviewed. Arch and Alpha left self-bonding in 2016; the sources reviewed give self-bonding by others (the Justice family's permits) still in place in 2019.

    Who paid?

    In the Blackjewel matter the record shows $220 million of bonded liability tied to unsold permits, and states that if the Justice family's 20 self-bonded permits were revoked, $195 million of cleanup would fall to the state of Virginia.

    Sources

    Voices on record: — Company or project— Government and regulators— Courts— Press and investigations✓ Communities and civil society— Researchers

    Communities and civil society

    1. Arch Coal replaces self-bonds
      Western Organization of Resource Councils (WORC) · 2016-09-13

    Connected cases

    Related matters, and cases linked to this one through the same organisations, with the role each played in both.
    Terms used on this page

    Bonds and banking

    Guarantee
    A commitment by a third party, often a development bank, to pay if the borrower does not.
    Liquidation, insolvency, bankruptcy
    Legal processes that apply when a company cannot pay its debts; its assets are sold and claims against it may go unpaid.

    Science and environment

    Hectare (ha)
    A unit of area equal to 10,000 square metres, about 2.5 acres. 100 hectares make one square kilometre.
    PFOA (C8) and PFAS
    PFAS are a large family of human-made chemicals that persist in the environment and the body; PFOA, also called C8, is one of them and was used to make Teflon.
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