Risks and regulations

 

Wonderful trenchant article on the surface, but the real story lies just below ground (“Coal company bankruptcies jeopardize reclamation,” HCN, 1/25/16). The article mentioned the various methods that are used to ensure a mine site would be cleaned up in the future, i.e., surety bonds, letters of credit, cash deposits, etc. As a young bank officer, my first letter of credit was provided to the San Diego Port Authority on behalf of  Trans World Airlines just prior to their third and final bankruptcy. It was secured, dollar for dollar, by $25 million of cash held at my bank. Logically, that was the only way to ensure future performance in the event of bankruptcy.


Yet later upon my arrival in the American West, I discovered that concerns regarding performance risks had been cast aside. I could ensure to the satisfaction of any number of state regulatory bodies (e.g. Colorado, Idaho, and Wyoming) that mine reclamation would be completed simply by providing a short-term standby-letter of credit. All of us bankers knew that the financial instruments we were using to support future reclamation were short-term, and further, that the actual history of reclamation in the American West made clear that we could all easily avoid liability either now or in the distant future.


We also knew that the risks implicit in any mining operation were categorically broad, i.e., they involved commodity, transportation, personnel, economic, political and environmental risks, and therefore, necessitated the provision of cash held in trust as the only rational means available to offset performance risks and ensure future mine remediation.
The reclamation decisions that have been made, and are being made today, remain grounded on local jobs and corporate profits — not future reclamation.


Erick Miller
Salida, Colorado

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