Category Archives: Economics

A Massive Open (Money) Pit

As the nation’s 4th largest coal producer, Alpha Natural Resources, muddles through Chapter 11 bankruptcy proceedings, it has struck a deal with the state of Wyoming regarding land reclamation obligations left unpaid due to the inadequacy of relying on “self bonding” for reclamation of its massive open pit mines. Facing the prospect of losing its mining permits, the deal would allow Alpha to continue mining coal. While Alpha Natural’s reclamation obligations total $411 million to, the proposed agreement would put Wyoming first in line among creditors for $61 million, or less than 15% of its reclamation obligation. The deal raises many questions–chief among them: Who will pay for the remaining $350 million of reclamation costs beyond this $61 million?

It was supposed to be this way

In the 1960’s and early ‘70’s, strip mining had already devastated many Appalachian landscapes. Increasing demand for coal pushed devastating surface mining practices westward and, in the words of one Congressional report, threatened to turn huge tracts land into “.” Surface mining legislation to remedy these and other issues was repeatedly vetoed during the Ford Administration, but in 1977 President Carter signed the Surface Mining Control and Reclamation Act, with the intent to “reclaim surface areas as contemporaneously as possible with” the cessation of surface mining operations

Mining might cease when a mine plays out or when a mining company goes out of business. In the latter case, the Act required coal companies to put aside funds for reclamation to ensure that mines are cleaned up even if a company might go out of business. Critically, the Act left much of the details of implementation and enforcement with the states.

When a coal company begins surface mining, the company is required to provide financial assurance upfront – typically a type of insurance called a surety bond – that it will return the area to a usable condition. But in some states, like Wyoming, regulators allow coal companies to “self-bond.” If a company passes financial stress tests, it is allowed to simply promise to complete reclamation without requiring assurance upfront.

As the US reaches the end of coal that can be mined profitably, rising costs and competition from renewables and natural gas have pushed coal companies like Alpha Natural to file for bankruptcy. While others face potential bankruptcy, these self-bonding regulations have become seriously problematic. Who will cover the costs when coal companies, who have only promised to complete reclamation work, find themselves in bankruptcy? If asking coal companies to come up with reclamation funds only further degrades their financial situations, will the public be forced to choose between spending hundreds of millions to clean up mines or to simply leave the sites unreclaimed and hope for the best?

Too Late, Too Little

After years of warnings from environmental groups, in May, the Wyoming Department of Environmental Quality reviewed its self-bonding program and found that coal producer Alpha Natural Resources no longer met its financial stress . The financial outlook was so grim that Wyoming, one of the most fossil-fuel-friendly states, denied Alpha Natural, its self-bonding status. Wyoming demanded that Alpha Natural post a surety bond or collateral of $411 million for its outstanding reclamation work or cease mining in the state. These hundreds of millions of dollars are needed to reclaim refuse and slurry ponds, restore acres of pits from surface mines, and treat water contaminated from years of mining.

Alpha Natural failed the state’s financial stress tests for good reason. On August 3rd, Alpha Natural filed for Chapter 11 bankruptcy. According to the Casper Star-Tribune, as Alpha Natural negotiates with its creditors, it has struck a potential deal with Wyoming to continue mining in the state. If the bankruptcy court approves, Alpha Natural will put aside $61 million for Wyoming, less than 15% of what the state is owed, toward its reclamation obligations. Wyoming would get a “superpriority” claim on its $61 million: it would be first in line among creditors if Alpha Natural goes completely out of business.

While state regulators may be pleased to know that a small portion of reclamation work will now be completed, the outcome is a far cry from what is required by the federal Surface Mining Control and Reclamation Act (SMCRA) , which states that funds “shall be sufficient to assure the completion of the reclamation plan if the work had to be performed by the regulatory authority in the event of forfeiture” or bankruptcy. If Alpha Natural does go out of business, Wyoming will be first in line, but will only receive a small portion of what is needed to clean up Alpha Natural’s scars on Wyoming’s landscapes.

Enormous Risks

In the absence of a deal, it’s unclear how the courts would discharge of Alpha Natural’s reclamation obligations. As the Vermont Environmental Law Journal notes, the bankruptcy code gives no clear guidance here. Companies in Chapter 11 bankruptcy attempt to regain solvency by restructuring their debts. In some cases, this restructuring can mean reducing environmental obligations to just another debt that could receive “mere pennies on the dollar.”

Presumably, Wyoming’s Governor Mead would like to keep Alpha Natural in business and is seeking to lessen the company’s obligations until it might emerge from bankruptcy. If the company can emerge from bankruptcy, the company will be forced to comply with bonding requirements by purchasing costly insurance or by paying the full amount – if it can afford it. For now, it appears that Wyoming is willing to put its taxpayers and its ecosystems at enormous risk.

Public Banking: Supporting community Resiliency & Renewable Energy

An Evening with Gwen Hallsmith
Executive Director of the Public Banking Institute

January 29th
6:30 – 7 pm – Refreshments
7 – 8:45 pm – Discussion
Impact Hub, Boulder
1877 Broadway St.

Gwen Hallsmith
Gwen Hallsmith, the Executive Director of the Public Banking Institute will present on how public banking could play a role in financing a municipal electric utility and how Boulder can use public banking to enhance community wealth, resiliency, entrepreneurial participation and economic vitality. She will discuss the main advantage of public banking: lower-cost financing which enables states, counties and cities to better fund small business, infrastructure and projects such as affordable housing, libraries, farm-to-table agriculture, renewable energy, energy efficiency and public transportation. Each of these projects creates good local jobs. In these ways, public banks enable cities, counties, and states to better finance public priorities without relying on Wall Street or paying the high interest rates that pad big bank profits.

This presentation is part of Clean Energy Action’s Global Warming Solutions Speaker Series. Audience participation will be invited during discussion and Q&A. No RSVP required.

More About Gwen

Gwen most recently made national headlines with her work in Vermont to ask Town Meetings to consider public banking. On March 4th, 18 cities and towns in Vermont voted to endorse a resolution directing the state legislators to create a State Bank for Vermont. Thanks to the media expertise of William Boardman and Matt Stannard, the national media has picked up on the story, and there have been now over 20 radio interviews, print stories, and starting this week we’ll be on syndicated television with the story as well… Gwen has an interview with GritTV on Tuesday, and we understand that even bigger shows are working on the story – stay tuned.

Gwen is the author of several books on sustainable communities and economic reform, including her most recent book with Bernard Lietaer called Creating Wealth: Growing Local Communities with Local Currencies. She has been an advocate for economic reform for over 25 years, and implemented new currency projects on the local level in her recent position as the Director of Planning and Community Development for the City of Montpelier. Her work spans the globe – she has worked in all the major world regions at this point, and with cities, towns, regions, provinces, and states in the United States and Canada.

Her vision for the Public Banking Institute expands our horizons to include many other aspects of a public monetary system, everything from strengthening the possibilities for local investment that the new SEC regulations allow to fostering and supporting complementary currencies for local and regional means of exchange. Her deep commitment to local action matches our vision for the Institute as a source of technical assistance, training, and research for all the state, regional, and local initiatives underway to set up public banks and other currency and investment initiatives.

We Are Your Eyes on Xcel

Update 9/16: SAVE THE DATE 11-20-14! The Public Utilities Commission (“COPUC”) has set a public hearing for November 20, 2014. Clean Energy Action will be training folks on how to engage prior to that date.

Update 8/28: Clean Energy Action has been granted permissive intervention! We are the only party to have ever been granted intervention status with an express position of moving toward a zero carbon economy. As a party to this proceeding, we will now be able to develop a Statement of Position preceded by filing Discovery Questions, Answer Testimony and informing the public about the intricacies of the proceeding. Stay Tuned here for further updates.

Update 8/5: Clean Energy Action has filed a Motion Requesting Permissive Intervention in the rate case. We expressed our reasons for filing as mitigating climate change and rapidly moving to a zero carbon economy.

Update 7/9: Public Utilities Commission staff filed a request for a hearing on June 26th. The Commissioners granted that request today. Any petitions to intervene must be submitted by August 11th.  The hearing is set for December 2nd through December 5th, with a final ruling expected by February 13th, 2015.

On June 17th, Xcel Energy submitted a request to the Public Utilities Commission asking for a rate increase of $157 million annual increase. That could mean a 5.3% monthly increase for the average consumer.

Unlike almost everybody on earth, we are keeping an eye on Xcel and the PUC.  Xcel’s testimony alone is over 2,241 pages.  Believe it or not, those 2,241 pages are just the tip of the iceberg. Clean Energy Action is digging deeper to uncover the implications that this rate case could have on the deployment of energy efficiency and renewable energy.

We need your support to keep doing this work.

If Xcel wins, this would add $3.96 to every customer’s bill every month. Instead of paying that to Xcel, consider a monthly recurring donation to help us move them into the utility model of the 21st century.

Xcel is proposing some significant changes to their rate structure, including a proposal for decoupling, large capital investments from the Clean Air Clean Jobs Act, and restructuring the depreciation of their fossil fuel assets.

We cannot change the conversation about the future without your support.


Geology and Markets, not EPA, Waging War on Coal

With the release of the Environmental Protection Agency’s proposed rules limiting carbon pollution from the nation’s electricity sector, you’ve no doubt been hearing a lot of industry outrage about “Obama’s War on Coal.”

Don’t believe it.

Despite the passionate rhetoric from both sides of the climate divide, the proposed rules are very moderate — almost remedial.  The rules grade the states on a curve, giving each a tailored emissions target meant to be attainable without undue hardship.  For states that have already taken action to curb greenhouse gasses, and have more reductions in the works, they will be easy to meet.  California, Oregon, Washington, and Colorado, are all several steps ahead of the proposed federal requirements — former Colorado Governor Bill Ritter told Colorado Public Radio that he expects the state to meet the proposed federal emissions target for 2030 in 2020, a decade ahead of schedule.  This isn’t to say that Colorado has particularly clean power — our state has the 10th most carbon intensive electricity in the country, with about 63% of it coming from coal — but we’ve at least started the work of transitioning.

Furthermore, many heavily coal dependent states that have so far chosen to ignore the imperatives of climate change (e.g. Wyoming, West Virginia, Kentucky) must only attain single-digit percentage reductions, and would be permitted to remain largely coal dependent all the way up to 2030.  Roger Pielke Jr. and others have pointed out that in isolation, the new rules would be expected to reduce the amount of coal we burn by only about 15%, relative to 2012 by 2020.  By 2030, we might see an 18% reduction in coal use compared to 2012.  Especially when you compare these numbers to the 25% reduction in coal use that took place between 2005 and 2012, and the far more aggressive climate goals that even Republicans were advocating for just two presidential elections ago, it becomes hard to paint the regulations as extreme.  Instead, they look more like a binding codification of plans that already exist on the ground, and a gentle kick in the pants for regulatory laggards to get on board with at least a very basic level of emissions mitigation.

So, in isolation, there’s a limited amount to get either excited or angry about here.  Thankfully, the EPA’s rules will not be operating in isolation!

Continue reading Geology and Markets, not EPA, Waging War on Coal