While the bulk of the $10 billion in debt that Peabody Energy Corp. is hoping to restructure in bankruptcy is held by hedge funds, banks and other sophisticated financial creditors, the coal company’s environmental obligations are also in play, the Wall Street Journal reported today. The St. Louis-based coal company sought chapter 11 protection yesterday in an attempt at “riding out the storm that has beset the coal industry,” according to Chief Financial Officer Amy B. Schwetz. Bankruptcy offers Peabody the breathing room to come up with a plan to reduce a debt load that includes $8.8 billion owed on various loans and bonds. But financial creditors aren’t the only ones affected by the bankruptcy. At risk are the company’s efforts to reclaim the land affected by its mining operations, which can cost hundreds of millions of dollars. In court papers, Peabody estimates its potential world-wide reclamation obligations are $723 million, although that number isn’t set in stone. Federal and state laws require coal miners like Peabody to reclaim the land and treat the water at mine sites as a condition of their mining permits. If the cleanup costs go unmet, the mine permits can be revoked, and the costs fall to taxpayers.
