Fri, March 28, 2014 5:30 pm

Surety Bonds

– The Silent Coal Killer-

Get the Facts:  Rising reclamation costs pose an enormous threat to the financial stability of U.S. coal companies as production moves lower to match demand.  This report provides great background on this ‘need to know’ issue and highlights which coal regions and coal companies are most vulnerable to the rising costs of reclamation and bonding.

Inside the Report:  Rising reclamation costs could be a deal breaker in M&A activity or even push coal companies into bankruptcy.

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  • Reclamation Background:  A brief background covering ‘need to know’ points on reclamation and its rising costs.  Miners in every state are at risk.
    • KentuckyBecame one of the first states to recalculate its bond amounts after identifying a $48 mm shortage of reclamation funds.
    • Pennsylvania:  PA has approximately 180K acres of abandoned mine land, which may cost billions of dollars to reclaim.
    • West Virginia:  In 2012, WV increased its Special Reclamation Tax 930% to offset its shortfall in funds.
    • Wyoming:  Some surety experts suggest reclamation costs should rise as much as 400%.
  • Reclamation Bonds:  Examine state and federal bond requirements and the different financial tools coal companies use to assure that they can properly reclaim the surface mine site to beneficial use.
  • Surety Bonds:  Independent third parties assure funds will be available to reclaim the mined land according to the mining permit.

Attainment:  What must companies do to attain a surety bond?

  • Attainment:  What must companies do to attain a surety bond?urety Industry:  Why is the industry terrified of the rising risk of bankruptcy associated with coal companies?
  • Permit Blockage:  What extreme measure does the government take to prevent bond forfeitures?
  • Surety Bond Costs:  What must coalcos pay to get surety bonds, and how are those costs changing?
  • Surface Liabilities Analysis:  What are the estimated surface mine reclamation liabilities associated with each U.S. coal company?

Conclusion:  Increasingly stringent reclamation standards and inadequate bonding funds are sending compliance costs higher. The surety industry is demanding higher premiums and more collateral to offset the risk of underwriting coal companies with limited capital. For the U.S. coal industry, the timing could not be worse as once-obscure surety bonds loom as a potentially silent killer. 

We believe the impact of reclamation costs and bonds will only increase in 2014 as companies continue to face restructuring.

Order Your Copy Today!  DTC Premium clients receive this report complimentary and all other DTC clients receive a discounted report rate of $495/copy($695/copy for non-DTC clients).  The report is available through DTC’s online store by clicking here or by contacting Alena Barford on +44 (0) 207551 9664

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