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The reclamation bonds that Utah regulators require of coal mines appear to be inadequate for ensuring mine sites are properly rehabilitated once operations cease, an environmental group alleges.
Acting on a complaint filed by WildEarth Guardians, the U.S. Department of the Interior has asked the Utah Division of Oil, Gas and Mining (DOGM) to explain why it has not increased bonds on three mines over time.
WildEarth's energy program director, Jeremy Nichols, examined the bonding history of the SUFCO, Skyline and Dugout mines, all owned by Bowie Resource Partners subsidiary Canyon Fuels Inc., and concluded they are underbonded to the collective tune of $6 million.
Nichols sees inadequate bonding as another subsidy to the coal industry. "Bonds are supposed to cover the full cost of reclamation in case a company goes bankrupt," Nichols said. "If Bowie were to go bankrupt and leave town, it would mean taxpayers would be on the hook for covering the shortcoming."
Earlier this month, the Interior Department sent notices to the DOGM, giving the state agency until the end of last week to formally respond. Based on Utah's response, federal regulators will decide whether the DOGM is violating federal law and whether to conduct a wider inquiry into Utah's management of reclamation bonds across the coal industry.
These notices are in no way a confirmation of WildEarth's allegations, which the feds have yet to investigate and are based on erroneous assumptions, according to Dana Dean, the DOGM's deputy director.
"We are sure we are doing it right," Dean said.
Denver-based WildEarth generally opposes fossil fuel extraction and is dedicated to putting an end to coal mining and use of coal in power generation, citing coal's disproportionate contribution to climate change and air pollution. Nichols has emerged in recent years as one of the West's most effective anti-coal advocates by dogging federal agencies to analyze fossil fuel extraction projects' greenhouse gas emissions. This time, he cites Utah's own coal regulations to build a case that the state is giving coal operators a break at taxpayers' expense.
"Available information strongly indicates Utah is not ensuring adequate bonding of all coal mining operations within the state," Nichols wrote in a Dec. 18 letter to Joe Pizarchik, reclamation director for Office of Surface Mining. "Given that most operations permitted within the state are located on federal lands, this raises serious concerns that the surface impacts of coal mining operations are not being appropriately managed such that American public lands are adequately protected."
Meanwhile, the Obama administration has imposed a moratorium on coal leasing while it reviews the federal coal program administered by the Bureau of Land Management.
The Surface Mining Control and Reclamation Act requires coal operators to post bonds sufficient to covering the cost of reclaiming surface impacts from their operations. That ensures the work gets done even if the mining company walks away from the project.
Coal corporations are teetering and falling into bankruptcy, with mines closing across the nation in the face of a prolonged slump in commodity prices due to a historic shift from coal to natural gas and renewables for power generation.
Some Western coal-producing states allow for self-bonding. Currently, $64 million in reclamation obligations remain outstanding in Utah, which does not allow self-bonding, according to U.S. Energy Information Administration data.
Dean noted it is rare that Utah "forfeits" a company's bond after it fails to reclaim a closed mine. It happened recently with the bankrupt Hidden Splendor Resources' Horizon Mine, but in that case, the DOGM was still able to secure the money needed to reclaim the underground mine northwest of Price.
Bonds are released back to the company in three phases as reclamation reaches certain milestones.
"Some are held back for 10 years to make sure vegetation grows back," Dean said. "That's a success for us. They got the coal, but now you can't tell there was a mine there."
After a bond is posted, the law requires that it be adjusted from time to time, particularly when a permit is renewed, to reflect changes in projected reclamation costs.
SUFCO, Skyline and Dugout are among Utah's largest coal operations, producing 11 million tons in 2014, or nearly two-thirds of the state's total output. All are underground mines, but they impact the surface, which must be reclaimed someday.
The problem with the Bowie mines, according to WildEarth, is their reclamation bonds have remained largely static through the years.
For example, the smallest of the three, Dugout, which occupies a 9,800-acre permit area, was approved in 1998 for a $3.7 million bond. The amount remained the same when the DOGM renewed the mine permit in 2003. Nichols calculated that it should have been raised to at least $4.13 million at that time, but instead, in 2008, it was slightly reduced. At the most recent permit renewal in 2013, the bond remained at $3.55 million, while Nichols calculated it should have been increased to $5.9 million. In other words, Dugout could be underbonded by at least $2.4 million.
"For nearly eight years, the bond for Dugout Canyon seems to have not reflected any inflation of reclamation costs," Nichols wrote. "When adjusted for inflation, the present-day value of the bond for the Skyline mine has steadily decreased over time, even as Utah has supposedly been escalating the value to account for increased reclamation costs."
Nichols is incorrectly assuming bonds should be raised in lockstep with inflation, according to Dean. Cost projections often go down because of technological improvements or economic downturns, as happened in 2008.
"We are trying to be consistent and not relying on old information that may have been wrong 15 years. Now we take a new look every five years," Dean said. "We don't just take a number and adjust it upward. We look at every line item in a bond."
Twitter: @brianmaffly