Self-Bonding in an Era of Coal Bankruptcy: Recommendations for Reform

Federal law requires coal companies to reclaim and restore land and water resources that have been degraded by mining. But at many sites, reclamation occurs slowly, if it all. Mining companies are required to post performance bonds to ensure the successful completion of reclamation efforts should they become insolvent, but regulators have discretion to accept “self-bonds,” which allow many companies to operate without posting any surety or collateral. As the coal industry experiences financial distress and coal companies declare bankruptcy, the viability of future reclamation work is endangered. Outstanding self-bond obligations currently total $3.86 billion nationwide, of which $2.4 billion is held by coal companies currently in bankruptcy. Without decisive action by policymakers, taxpayers may be saddled with the financial burden of funding costly environmental reclamation after coal mining ceases. This report offers recommendations to help regulators better assess coal companies’ financial health and take steps to curtail self-bonding.