In the coal industry's bankruptcy game of musical mines, preventing environmental damage takes a back seat

Unreclaimed strip mine on the Kentucky-Virginia border, 2014 (Associated Press photo by David Goldman via ProPublica)

If your industry is declining, bankruptcy can be a business strategy. And if you're in the business of strip-mining coal, bankruptcy can relieve you of many of your environmental obligations. That's the upshot of a deep dive into the surface coal mining industry by Ken Ward Jr. of Mountain State Spotlight and Scott Pham and Alex Mierjeski of ProPublica.

Their object example is Blackjewel Mining, which became the nation's sixth-largest coal producer "partly by accumulating mines ... that had gone bankrupt," they report. "By 2018, it boasted more than 500 mining permits in Kentucky, Virginia, West Virginia and Wyoming. Then, in July 2019, Blackjewel stunned the industry by declaring bankruptcy, with claims against it later estimated at $7.5 billion." Other companies have followed a similar strategy, they report.

Environmental groups and state regulators "warned the bankruptcy judge that, while he was focusing on what they called the company’s 'significant financial mismanagement,' he should also be aware of 'severe environmental mismanagement problems'," including reclamation of mines that were causing damage downstream, the story says. "But, citing longstanding case law, the judge rejected their request. Instead, bankruptcy trustees began divvying up the company’s assets among preferred creditors such as banks and hedge funds. . . . By mid-2020, there were more than 600 outstanding violations of state mining and reclamation standards at the company’s mines in Kentucky, including 450 since the bankruptcy filing."

Bankrupt coal companies have long been bad environmental actors, but ProPublica and Mountain State Spotlight say they have documented for the first time "that mines that have gone through multiple bankruptcies also tend to create more environmental damage," based on bankruptcy court filings and state regulatory records. "We found that the median number of environmental violations for surface and underground mines that had been through multiple bankruptcies between 2012 and 2022 in Kentucky was almost twice the median number for mines that had not, and almost 40% higher in West Virginia."

Federal and state laws require coal companies to buy reclamation bonds, insurance that will cover the cost if the government has to clean them up. "But the required bond amounts often aren’t enough to cover all potential costs," Ward, Pham and Mierjeski note. "Cleanup costs have soared, partly due to larger surface mines that blew up or chopped off entire mountaintops, and partly because modern studies have increasingly identified water pollutants requiring lengthy and expensive treatment. According to a 2021 legislative audit, West Virginia’s reclamation bonds have covered only one-tenth of cleanup costs. . . . State officials are reluctant to revoke permits and take on the financial responsibility for cleanup. What often ensues instead is a game of musical mines. Knowing that they won’t end up on the hook for reclamation, other coal companies buy mines out of bankruptcy — and then often go bankrupt themselves."