Peabody and assurance: coal mine clean-up deal in U.S reached

The largest U.S coal producer has struck a deal to cover the costs of mine clean-up liabilities while in bankruptcy with three U.S states, court documents have revealed.

Peabody Energy Corp, the world’s largest private-sector coal company with operations in the U.S and Australia, is currently in a state of bankruptcy.

The company has benefited from a governmental program known as self-bonding, which allows the company to extract coal without setting aside cash or collateral in a bid to ensure the company will restore the site to its natural setting.

"Peabody is continuing our actions to restore coal mined lands using best-in-class practices, and we are committed to our reclamation as we have been for decades," said Peabody President – Americas Kemal Williamson.

"We are pleased to reach agreements that provide additional security toward our reclamation obligations and look forward to ongoing discussions regarding Peabody's reclamation bonding long term."

Self-bonding has come under increased scrutiny due to the bankruptcy filing by Peabody as the practice exposes taxpayers to potential billion-dollar clean-up cost, should the company walk away from the site.

In the deal with Wyoming, New Mexico and Indiana, about 15 percent of Peabody's $1.2 billion in self-bonds will be secured by debtor-in-possession financing during its bankruptcy.

Wyoming can receive $127 million cash if Peabody were to walk away from reclamation while in bankruptcy, New Mexico $32 million and Indiana $17 million.

The agreement with Peabody is yet to be approved by a federal bankruptcy judge, with a hearing scheduled for August this year.

Following uncertainty as to whether Peabody will replace its self-bonded liabilities once the company emerges from bankruptcy, state regulators are concerned that the state would foot the bill for the clean-up of the mine.

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