As the COVID-19 pandemic accelerates King Coal’s decline, Virginia could be on the hook for millions in cleanup costs if an anticipated wave of bankruptcies destabilizes its bond pool system for managing the risks of company failures.
One of six states, all in or near the Appalachian basin, that allow coal companies to post partial assurances that they will cover the costs of reclamation if they cease operations, Virginia has known there are vulnerabilities in its system for almost a decade.
“The program has sufficient resources to withstand the forfeiture of one or two smaller permits,” wrote actuaries in a 2012 report commissioned by Virginia’s Department of Mines, Minerals and Energy. “The more significant risk to the Fund is from the exposure to companies with multiple permits and possibly from larger parent companies should they forfeit multiple permits simultaneously.”
Eight years later, the situation has taken on an added urgency with the continued shrinkage of the coal industry.
“Any state that has a bond pool is at enormous risk and is almost guaranteed to have to find other sources of funds to pay for the reclamation of abandoned coal mines,” said Peter Morgan, an attorney with the Sierra Club who has been tracking Virginia’s bonding program for more than a decade.
Virginia’s DMME is “concerned” with the system’s stability given the ongoing industry contractions, said Division of Mine Land Reclamation Director Randy Casey in an email to the Mercury, pointing out that “major industry-wide forfeitures would strain any bonding system, not just those in Virginia.”
Fixes, however, won’t be easy. In Virginia, any major alterations to the current system would need to be passed by the General Assembly, and many industry players disagree on the best way to proceed given the belief prevalent among regulators that if coal operators are pushed too far, they will walk away from their permits and leave the public to bear the burden of cleanup.
Still, said Joe Pizarchik, who between 2009 and 2017 served as the longest-running director of the U.S. Office of Surface Mining and Reclamation, the longer state governments and regulators delay in grappling with the problem, “the more severe and dangerous it becomes.”
“Eventually these bond pools are going to fail,” he said. “And when they fail, the state and federal government will probably be sued, and … then the state will have to come up with the money to complete reclamation.”
The Virginia Mercury is a new, nonpartisan, nonprofit news organization covering Virginia government and policy.