US Regulator: Coal states must soon rule on Peabody Energy's cleanup subsidy

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The coal states needs to decide whether the largest U.S. coal company, Peabody Energy Corp, can keep up regarding taxpayer subsidy that has decreased its mine cleanup insurance costs for several years now, told by federal regulators.

If regulators will cancel Peabody Energy's right to self-bonding, the company may be in need of private financers to cover up the amount of about $1.38 billion in liabilities. These won't have any concrete backing now.

Cash, surety bonds and even other financing methods were used by coal companies to assure that there is restoration of spent mines. In the case of self-bonds, this allowed some big coal companies to have their balance sheets used as collateral.

Coal companies' struggles is very evident that they filed for bankruptcy few months ago. Some of them are Alpha Natural Resources and Arch Coal, which are Peabody's peers, cited in Yahoo.

Sally Jewell, Interior Secretary stated that protecting taxpayers from about $3.6 billion in self-bond liabilities was their main concern, but regulators just recently made a strong action pertaining to it.

This week, the states of Colorado, New Mexico, Wyoming, Illinois and Indiana received a call from The Office of Surface Mining Reclamation and Enforcement. The states' regulators are to rule over Peabody's use of self-bonding program not later than mid-March.

Roughly $107 million in self-bond liabilities were booked but the company, Peabody, in the states of Illinois. From the letter released by OSMRE on Friday, the state is rightful in responding to the allegations that requirements to that self-bond are violated. According in a statement, Peabody said that state regulators endorsed in the past its self-bonding and the "excellent record of land restoration."

Right now, the global demand for coals is getting weak. Although natural gas is becoming abundant, the strict rules regarding pollution is making the industry in huge problem. Even a company such as Peabody is having some troubles by debt.

Last year, Peabody had claimed about $2 billion loss. It has struggled to increase cash at its share price made a huge change from over $100 to $2 at this season last year.

From Reuters, Peabody has aimed for a $358 million sale of mines in Colorado and New Mexico. It is under a privately held Bowie Resource Partners that waits for a coal recovery. Until now, the deal was not closed.

From lawyers' point of view, if the company can't handle its existing debt and if the Bowie deal won't be pushed through, Peabody's options will be too little and may eventually file for bankruptcy just like its peers.

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