Is the Next Taxpayer Bailout the Coal Industry?

Eight years after we bailed the big banks to the tune of $14 trillion, American taxpayers could soon be on the hook again, this time to help out the coal industry.

Just a few years ago, Big Coal was riding high on the crest of a nice little boom. Energy prices were high, as was demand from China’s rising economy.

And so Big Coal started doing what big industries always do when the times are good: consolidated and expanded. Alpha Natural Resources bought Massey Energy; Peabody Energy bought Macarthur Coal; Walter energy took over Western Coal, and so on and so on.

At the time, the debt-fueled consolidation wave looked like a smart business decision. The world showed no sign of backing off its addiction to coal, and energy giants like like Alpha had every reason to believe that gobbling up the competition would bring home the big bucks for decades to come.

Well, things didn’t really turn out that way.

A combination of slowing demand from China, competition from renewables and natural gas, and tougher regulations, has pushed coal production to its lowest levels in three decades.

Big Coal is now in big trouble.

Lower production and lower energy prices have turned those expansions from the earlier part of the decade into liabilities, especially because they were almost all paid for with debt - these companies took out massive loans to fund the acquisitions and all the executive bonuses that go with them.

As a result, Arch Coal, Patriot Coal, Walter Energy, and Alpha Natural resources have all filed for bankruptcy in the past few years.

Peabody Energy, meanwhile, is pleading with its creditors for extra time to pay off its debts.

And, both morally and legally, when coal companies like Peabody go under, they’re supposed to clean up the mess they made at their mining sites.

A 1977 law actually requires them to do this.

But even so, many of the big coal companies currently facing financial ruin may not be able to afford the cost of cleaning up their mines because they've handed so much money off to their executives and stockholders.

As the Washington Post reports this weekend, “The biggest coal companies typically pay third parties to ensure that mine sites are cleaned up in the event of financial hardship. But in recent years, many coal companies have relied on a cheaper technique called ‘self-bonding,’ pledging only their own names and financial wherewithal to guarantee their cleanup obligations.”

The problem here is that pledging yourself as a bond doesn’t really mean much when you’re company on the edge of bankruptcy.

So-called “self-bonding” is basically the coal companies’ way of saying that they don’t want to pay -- the cost of cleaning up their mines and would rather just distribute that money to their VIPs.

Which raises the question: if coal companies won’t pay to clean up their mines, who will?

You and me the taxpayers, of course!

Somebody has to clean up the environmental wasteland that is an old coal mine, and as the Washington Post reports, “In a bankruptcy… a judge can decide which creditors are paid and how much -- and state and federal governments could be left holding the bag for reclamation costs.”

Classy, right?

Big coal gorges itself in the boom years thanks in large part to the taxpayer subsidies that go to the fossil fuel industry, but when things go bad it tries to make “We the People” foot the bill.

What’s going on here isn’t unique to the coal or fossil fuel industries -- Wall Street did basically the same thing back in 2008 -- but what’s unique about the fossil fuel industry is that it’s one of only two industries in the world that doesn’t pay to clean up its own waste (the other being the nuclear industry).

Instead of paying for the costs of their waste, both to the environment and in terms of its cost to poisoned humans, fossil fuel companies pass the costs of that waste on to the rest of us in the form of what economists call "externalities.”

Some examples of “externalities” include things like the cost of cleaning up from climate-change-driven severe weather events, the cost of pollution-related health problems from asthma to cancer, or, in this case, the cost of cleaning up an old, deserted coal mine.

If we had from the get-go required coal companies to pay for taking out their own trash, we wouldn’t be in the situation we are now, where Big Coal is, for all intents and purposes, blackmailing the government into cleaning up the mess it’s created.

We would also probably be well on our way to kicking our fossil fuel habit once and for all.

It’s time to make Big Coal -- as well as Big Oil and Big Gas -- pay to take out its own trash.

It’s time for a national carbon tax.

It’s that simple.

Comments

Willie W's picture
Willie W 6 years 26 weeks ago
#1

Too big to bill.

kipopp's picture
kipopp 6 years 26 weeks ago
#2

There is one part of your position that is wrong. Taxes paid to the monetarily sovereign Federal Gov't isn't used to pay anything. Federal taxes are accounted for by the IRS and are then destroyed never to be used again. The Federal Gov't creates dollars ad hoc whenever it pays its bills.

John Pranke's picture
John Pranke 6 years 26 weeks ago
#3

Privatize the profits, screw the environment and the workers.

cccccttttt 6 years 26 weeks ago
#4

If congress were a rational body, then many things would be different.

All the best in twisting enough arms to push through a national carbon tax.

However a bit of good news:

new hybrid device shown by computer simulation to extract energy from coal

with major cut in emissions:

http://revolution-green.com/hybrid-system-cut-coal-plant-emissions-half/

ct

BMetcalfe's picture
BMetcalfe 6 years 26 weeks ago
#5

It's time we get serious with Big Coal and all other "self-insured" corporations. If they truly want to be self-insured, then they need to buy the appropriate insurance policy, and pay the premiums. We must never, ever let any other company or corporation claim their own holdings as "self-insurance."

When we - you and I - want to self-insure something, we have to actually BUY A POLICY for whatever worth we intend to insure. I did that once... and I am just a normal, everyday working person." But I shelled out the premiums for a $50K policy! It was hard, but I had to do it. They are 100 times more wealthy than I ever was. Why are they being held to a totally different standard?

This isn't fair. It's time Congress finally gets to work and does something truly constructive, for once.

stwo's picture
stwo 6 years 26 weeks ago
#6
If they truly want to be self-insured, then they need to buy the appropriate insurance policy, and pay the premiums.

And if they truly want to grow their own food they need to go to the grocery store and buy it.

And if they truly want to build their own house, they need to hire a contractor and pay him to build it.

If you bought an insurance policy, you were not self insured for what ever that policy covered.

I have had to post a surety bond when self insuring a risk-- maybe that is what is being referred to.

Kpax's picture
Kpax 6 years 26 weeks ago
#7

My state has been fracking and tearing up the land for coal and natural gas, (meaning liquid natural gas for export), export for years or decades now to sell overseas for profit.

OUR INDEPENDECE OF FORIEGN OIL IS A JOKE, A FARSE!!!

Our WY Federal State Senator Barrasso stood on the Senate floor along with John Hoeven (R-ND), and John McCain (R-AZ),.,.a year or so ago and made the plea to export LNG, (liquid natural gas), (in my opinion for profit for the country of Ukraine!)

ALL THREE SENATORS STATED, ON THE FLOOR, THAT NOT ONE DOLLAR FROM THE TAXPAYERS WOULD BE USED FOR THE PRODUCTION OF NATURAL GAS OR LIQUID NATURAL GAS, bla bla bla.

I called all three senator offices to express my disgust at the lies they told! Here in Wyoming we, the taxpayers are picking up the tab for bankrupt companies, 900 to 1400 and growing, for NG CO's that are going bust!

Now coal companies are dying (yea!!), in our state so they are going to leave the state with the taxpayers cleaning up their mess as usual!

I HATE THIS CORPORATE AMERICAN WAY OF DOING BUSINESS!! It sucks. Hey!, but go capitalism, right?

dbuls's picture
dbuls 6 years 25 weeks ago
#8

Coal is one of the best carbon sequestration methods ever. We don't have to pay the landowners, but we could pay the people and it would be better than a "bailout".

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