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Economy & Business

Peabody Energy and Illinois reach coal mine clean-up agreement

St. Louis Public Radio
St. Louis-based Peabody Energy announced that it doubled it profits in the last three months as higher global prices and demand for coal offset production disruptions blamed on devastating rains in Australia. (slprnews)

St. Louis-based Peabody Energy will set aside part of the funding it promised toward future mine reclamation in Illinois.

The coal giant reached a settlement with the Illinois Department of Natural Resources this week. The agreement puts “super-priority” status on $12.9 million for mine reclamation in Illinois, placing that funding ahead of other entities with claims in Peabody’s bankruptcy suit.

The motion for the agreement will be heard by a federal judge on Sept. 15.

Before it filed for bankruptcy in April, Peabody had used a practice called "self-bonding," essentially promising states that it could cover the cost of clean-up should its mines close.

In Illinois, Peabody self-bonded for $92 million. The settlement requires Peabody to set aside $12.9 million and another $3.2 million in collateral assurances. The court documents said another $6.4 million is covered by third party bonds.

In total about a quarter of what Peabody has promised for clean-up is now covered, said Howard Learner, executive director of the Environmental Law & Policy Center. He said Illinois got a better settlement than other states.

"It provides more protection for tax payers and more protection for the environment when it comes to move away from Peabody’s self-bonding," Learner said.

Under agreements Peabody made with Indiana, New Mexico and Wyoming only about 15 percent of the company’s $1.2 billion in self-bonds with those states were covered. Those settlements were approved by Judge Garry Schermer earlier this month.

Going forward, Learner said Peabody should abandon the practice of self-bonding. The company is expected to enter its reorganization plan with the federal court later this fall.

"If Peabody’s bankruptcy plan relies upon self-bonding going forward it’s not feasible under the bankruptcy code and should not be approved by the court," he said.

The federal Office of Surface Mining Reclamation warned states earlier this month with a policy advisory that they should not allow companies emerging from bankruptcy to self-bond.

Learner said he expects states will take that advisory to heart.

Follow Maria on Twitter: @radioaltman

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