On Wednesday, Wyoming’s Land Quality Advisory Board voted to limit so-called “self-bonding” in the state, a practice that allows coal and other mining companies to avoid putting up any collateral to reclaim land when the company is done with the mine. The new proposed rules will go through a public comment period and then need to be signed by the governor of the state to take effect, according to the .
The board’s passage of the proposed rules is somewhat surprising in a coal-heavy state, because it could potentially raise the cost of coal mining in Wyoming for some companies. However, there is political support for more stringent environmental rules after a number of coal companies filed for bankruptcy in recent years. Although no companies ended up abandoning mine cleanup to the state, the specter of hundreds of millions of dollars of cleanup in the event of another coal downturn has left regulators eager to limit how much damage the state could be on the hook for. The five-person advisory board voted 4-1 in favor of limiting self-bonding. The board member who voted against limits to self-bonding works for Peabody Energy, a major coal producer in the state.
The limits wouldn’t do away with self-bonding in Wyoming. Instead, to qualify for self-bonding, a coal company would have to have a strong credit-rating and would be expected to run the mine for at least five more years. The notes that credit ratings for coal firms also factor in the health of the market, so the state of Wyoming wouldn’t have to independently evaluate the larger economic risks to a mine going under.
If a company doesn’t qualify for self-bonding, it could still open a coal mine, but it would have to purchase some sort of surety bond or collateral bond to pay for mine reclamation after the mine has reached the end of its life, according to the US Department of the Interior (DOI). That requirement would increase the cost of starting a new mine, compared to a coal-mining company simply showing the state its financial statements under self-bonding.
Wyoming’s proposed amendments to its self-bonding rules are long in the making. In March, the Land Quality Advisory Board reviewed similar restrictions on the practice, but, amid pressure from major coal companies, the board sent the rules back to legislators to rewrite. The proposal that the Board passed this week seems to be only mildly less stringent than its March predecessor, which required 10 years of mine life left to self-bond instead of five, in addition to a strong credit-rating.
Wyoming is not the only state that allows self-bonding for mining companies. In fact, 19 states allow it, and of those, 10 states plus the Navajo Nation currently host self-bonded surface-mining operations, the DOI notes. But the financial troubles of the coal-mining industry have highlighted the risks involved with self-bonding in a way that previous operations have not.
At a federal level, self-bonding is not illegal, and the US government has largely allowed states to legislate the matter as they see fit. In April, however, the Government Accountability Office (GAO) recommended that the federal government end its tacit approval of self-bonding.