An interesting article by Kayla Desroches (Report Raises Concerns Over Who Pays For Coal Mining Cleanup), raises concerns about the lack of reclamation bond coverage of mining operations in the State of Montana. Kayla reports, “. . . one of the major points of concern for WORC, according to its report, is self-bonding. That’s a form of “I owe you” where a company in good financial standing foregoes surety bonding and instead promises to pay the cost of reclamation.” She is correct and Montana is not the only state which allows “self-bonding”. This is a big mistake and based on the decline of coal businesses over the past decade, taxpayers are likely to end up footing the bill.
States that have examined the issue have concluded correctly that only a third party surety company should be providing reclamation bond capacity to the industry. The participation of corporate sureties ensures that regardless of the ongoing viability of a coal mine that the solvency, good name and creditworthiness of those carriers can be relied upon to step in and accomplish or finance a complete reclamation. Reclamation bonds required by the Bureau of Land Management (BLM) and various state environmental agencies are long term surety obligations. Generally, these surety bonds cannot be canceled, adequate performance can be highly subjective, and bond losses can be large. These and other onerous provisions require the input of underwriters with knowledge and experience in the reclamation field. Surety companies that offer the reclamation bond class are usually subject matter experts so their value to the states is greater than the value of the surety bond.
Kayla states, “An environmental advocacy group released a report on January 9th, 2020, “Planning for Coal’s Decline”, arguing that the coal industry may crash and leave the public with the financial burden of the environmental cleanup of developed mining sites.” We concur and this is a subject that should receive far more attention that is it receiving. Surety One, Inc. offers the reclamation bonds needed by local, state and federal government entities in all fifty states, Puerto Rico and the U.S. Virgin Islands, and acts as a consultant to government agencies that wish to explore the benefits of a reclamation bond as financial assurance. Questions about a reclamation bond? Call us at (800) 373-2804 or email us at Underwriting@SuretyOne.com .
