Arch Coal and its subsidiaries received approval from the U.S. Bankruptcy Court for the Eastern District of Missouri today for its reorganization plan that will require the company to replace all of its existing self-bonds with more reliable financial instruments to assure funding for required future environmental reclamation. Arch Coal filed for bankruptcy protection in January 2016, and today’s reorganization under Chapter 11 of the Bankruptcy Code is expected to become effective sometime later this month. The approved reorganization plan also leaves in place Arch Coal’s additional environmental obligations at its coal mines across the country.

Self-bonding—a dangerous loophole used by large coal companies that allows them to forgo purchasing reliable, third-party guarantees to cover the cost of cleaning up (also known as reclaiming) their mines in the event that they go out of business—has been widely criticized by environmental and citizens groups as an unacceptable maneuver that can leave working families and honest taxpayers with millions of dollars’ worth of mine cleanup costs if the company goes under. The approved reorganization plan provides stronger accountability for the company and its cleanup obligations by requiring that the company replace all existing self-bonds with more trustworthy financial instruments guaranteed by third parties. 

The Sierra Club, Ohio Valley Environmental Coalition, and West Virginia Highlands Conservancy participated in the bankruptcy proceeding as parties in interest, represented by Earthjustice and Goldstein & McClintock LLLP, with Sierra Club also serving as co-counsel. The groups plan to continue pursuing their two Clean Water Act enforcement actions against Arch Coal subsidiaries in West Virginia, represented by Appalachian Mountain Advocates. Those actions, which seek to ensure that Arch Coal complies with critical environmental safeguards to protect water quality, had been stayed during the company’s bankruptcy.

“Now that Arch Coal’s Chapter 11 plan recognizes our enforcement efforts can proceed, we will keep working to prevent further harm to the precious streams and other natural resources that West Virginians depend on being around for generations to come, for our enjoyment, and for our children, and grandchildren,” said Cindy Rank, with West Virginia Highlands Conservancy.

“This is just one more step in Appalachia’s ongoing battle to end the harm mountaintop removal coal mining causes,” said Dianne Bady, Ohio Valley Environmental Coalition. “We will continue standing up to protect clean water, enforce the law, and hold coal companies accountable to meet environmental protection requirements, especially if they want to keep mining coal in our region that has been betrayed and destroyed by coal for too long.”

“Arch Coal’s commitment to replace its worthless self-bonds is a very positive development because  it will ensure that funds will be available to clean up the company’s mines if it finds itself back in financial difficulty,” said Sierra Club staff attorney Peter Morgan. “To date, no company emerging from bankruptcy has been allowed to continue relying on the empty promise of self-bonding at any coal mines that have not already fully switched over to reclamation work.”

“As clean energy leads the way and coal turns into a dinosaur industry, at every step we must be vigilant to prevent coal companies from using the bankruptcy process to escape responsibility for the devastating harm they cause to communities, waterways, and other natural areas in Appalachia and beyond,” said Emma Cheuse, attorney with Earthjustice.

SUMMARY OF THE ARCH COAL CHAPTER 11 PLAN’S ENVIRONMENTAL EFFECTS

Federal agency oversight and advocacy by environmental groups within and outside the bankruptcy proceeding headed off threats under Arch Coal’s initial plan that the company might seek bankruptcy court authorization to escape certain environmental obligations under federal and state law. The final plan recognizes that the reorganized company remains responsible for the environmental harm the coal company has caused and may cause in the future. 

• Section 11.4 of the plan recognizes that environmental obligations are not released or discharged, and pending enforcement suits seeking injunctive relief to remedy and prevent harm under the Clean Water Act and Surface Mining Reclamation Act (SMCRA) may proceed in litigation on liability. 
• Importantly, the plan requires the coal company to promptly replace all $485.5 million in self-bonds for natural resource reclamation obligations in the Powder River Basin in Wyoming with more reliable financial assurances.  This follows requirements of federal law that prohibit coal companies from mining without ensuring sufficient resources are dedicated to restore and reclaim waters and mountain areas in the event that the company faces further financial difficulties.
• The plan’s recognition that Arch Coal must replace all self-bonds with more secure financial assurances is a further example illustrating why federal reform is needed to prevent self-bonding by coal companies, as the Office of Surface Mining Reclamation and Enforcement (OSMRE) has recognized in a new policy statement and initiation of a federal rulemaking under SMCRA.
• As a result of its reorganization, Arch Coal is also relinquishing its 38 percent interest in a controversial proposed coal-export terminal in Longview, Washington (the Millennium Bulk Terminal), and has dropped plans for an unsound mining project in Montana’s Otter Creek valley. In addition to being bad investments, both projects would have wreaked havoc on local communities opposed to the projects and exacerbated climate-disrupting greenhouse gas pollution.  Together with local partners, Sierra Club and Earthjustice applaud the termination of the Otter Creek project and the replacement of the Arch Coal’s self-bonds, while continuing to oppose construction of the Millennium Bulk Terminal.

Read Environmental Groups’ Reservation of Rights.