CHICAGO, Dec 23 (Reuters) - Peabody Energy Corp failed to explain how it will cover future mine cleanup costs in a reorganization plan filed late Thursday, triggering concerns over the company's use of "self-bonds."
Under a federal program called "self-bonding," large miners like Peabody have been allowed to extract coal without setting aside cash or collateral to ensure mined land is returned to its natural setting, as required by law.
The practice came under scrutiny following bankruptcy filings by some of the largest U.S. coal miners because, without collateral set aside for mine reclamation, taxpayers are potentially exposed to billions of dollars in cleanup costs.
Environmental groups have been following the bankruptcy to see whether Peabody, the world's largest private-sector coal producer, replaces roughly $1 billion of self-bonds with other guarantees, as rival Arch Coal Inc did in its October bankruptcy reorganization.
In Thursday's plan to eliminate over $5 billion of debt to emerge from Chapter 11, Peabody said it will address its "self-bonding reclamation obligations in accordance with applicable laws and regulations," without providing details.
While a leading U.S. coal regulator has started to toughen rules for guaranteeing mine cleanups, the future of that process under a Trump administration is unclear.
Howard Learner, executive director of the Chicago-based Environmental Law & Policy Center, said the reorganization plan dodged the issue of self-bonding, potentially shifting the risk for Peabody's environmental cleanup costs onto the public.
"Peabody should be required to live up to its mine reclamation responsibilities and assure that it will not saddle taxpayers with these costs," Learner said.
Learner said his organization would fight Peabody's reorganization plan.
Peabody hold self-bonds in Wyoming, New Mexico, Indiana and Illinois, which has expressed concerns about the practice. The company announced a temporary financing deal with the states in July to cover a portion of the risk that it will walk away from mine cleanup obligations while in bankruptcy.
"Peabody continues to fund every dollar of our reclamation obligations and continues to provide strong assurances for future obligations. We look forward to working with the states to that end," Peabody spokesman Vic Svec said in a telephone interview.
In a revised business plan on Friday, Peabody raised its target for earnings before interest, taxes, depreciation, amortization, and restructuring (EBITDAR) to $4 billion between 2016 and 2021 from $3.1 billion projected in August, citing a temporary rise in coal prices. (Reporting by Tracy Rucinski; Editing by Jonathan Oatis)