Peabody Energy, the largest private coal mining company in the world, went bankrupt earlier this year.
These days, however, bankruptcy is not the end for any big corporation. It is merely a way station, a "restructuring," that allows the company's core activities to continue producing profit, workers to get laid off, and burdensome obligations (to retired miners and their families) to be jettisoned. Sometimes bankruptcy can just make an awful company even worse.
So it is with Peabody. Let us count the ways.
1) Peabody has degraded the reputation of a once widely respected lawyer
Peabody has sued the Obama administration over the Clean Power Plan, which would require all 50 states to reduce greenhouse gas emissions from their power sectors.
In itself this is not particularly notable; just about every fossil fuel company, business group, and state attorney general sued the Environmental Protection Agency the second the rule was released.
What set Peabody’s bid apart is that it included supporting arguments from Laurence Tribe, a Harvard law professor, longtime Obama friend and mentor, and liberal icon.
Though Tribe’s name gave the suit an initial sheen of legitimacy, his arguments were not very good, vigorously contested by other legal scholars ("Were Professor Tribe’s name not attached to [these arguments], no one would take them seriously"), and embedded in a document that contained right-wing-blog-level rhetoric bashing Obama and celebrating coal — rhetoric clearly written by Peabody employees (and that’s the charitable interpretation).
How much did Tribe receive for what was widely regarded as a crass sellout? We don’t know the total, but thanks to a recent legal filing, reported this week by Bloomberg News, we now know how much Peabody plans to pay him between May and December of this year: $435,000. Not bad, if you’re into that kind of work.
2) Peabody has funded climate denialist groups for years
The Guardian has been analyzing Peabody court documents and uncovered funding for a network of right-wing, pro–fossil fuel, and climate-denying organizations and politicians. A small sample from its investigation:
Among Peabody’s beneficiaries, the Center for the Study of Carbon Dioxide and Global Change has insisted – wrongly – that carbon emissions are not a threat but "the elixir of life" while the American Legislative Exchange Council is trying to overturn Environmental Protection Agency rules cutting emissions from power plants. Meanwhile, Americans for Prosperity campaigns against carbon pricing. The Oklahoma chapter was on the list.
Contrarian scientists such as Richard Lindzen and Willie Soon also feature on the bankruptcy list.
So does the Washington lobbyist and industry strategist Richard Berman, whose firm has launched a welter of front groups attacking the EPA rules.
Here’s more on Richard Berman, whose nickname, which he embraces, is "Dr. Evil." He’s notorious in Washington for channeling corporate money into deceptive PR campaigns in a way that can’t be traced. (Unless those corporate donors file for bankruptcy — d’oh!)
Some of Berman’s work:
No one is particularly surprised that Peabody is contributing to pro–fossil fuel groups, but the breadth of the funding was a revelation. "We expected to see some denial money," Nick Surgey, director of research for the Center for Media and Democracy, told the Guardian, "but it looks like Peabody is the treasury for a very substantial part of the climate denial movement."
3) Peabody is probably going to stick taxpayers with the bill for cleaning up its abandoned mines
Federal law requires coal companies to set aside money for mine cleanup, through a form of insurance called surety bonds. But if a company is in good financial shape, the feds will allow it to "self-bond," accepting its promise that it has the funds to cover cleanup. It’s cheaper for the coal companies, and, hey, what could go wrong?
Peabody has been self-bonding for a long while. But it’s no longer in good financial shape. It’s bankrupt! And forecasts for coal markets remain grim as far as the eye can see. This has made experts skeptical about Peabody’s promises to clean up after itself.
From the Washington Post:
Peabody alone has cleanup obligations of nearly $1.4 billion guaranteed by self-bonding, according to statements filed by the company last year with the Securities and Exchange Commission.
From a Reuters investigation:
Federal regulations require a mining company of Peabody's size to have a strong credit rating or robust balance sheet to qualify for self-bonding.
Specifically, it must have a ratio of total liabilities to net worth of 2.5 times or less, and a ratio of current assets to current liabilities of 1.2 times or greater.
A Reuters review of securities filings found that Peabody failed both those tests at the end of 2014.
Needless to say, things have not improved for Peabody since the end of 2014.
Now a bankruptcy judge will decide which of Peabody’s obligations will be met and which won’t. If cleanup gets shorted, taxpayers will foot the (very large) bill.
4) Peabody is likely to screw its retirees out of health benefits
As I covered in some detail in this post, several years ago Peabody dumped a bunch of its retiree pension and health care obligations onto its subsidiary Patriot Coal, which later went bankrupt and reneged on large portions of those obligations. You can read more about the retirees who got hosed in this story and more about the grudging settlement Peabody reached (about half of what it owed) earlier this year in this story.
Now the retired workers still on Peabody’s books are worried about the fate of their benefits in the restructuring. Lawyers for pension and benefit groups call that fate "highly speculative and uncertain."
Representatives of retired workers even suggest, in a court filing last week, that it is unseemly for Peabody to offer its executives — the executives who piloted it into bankruptcy — $3.24 million in retention bonuses to stay with the company through the restructuring.
Getting paid extra to stay at a company you helped bankrupt is a special kind of incentive only available to the executive class. For workers, the promise of health care benefits in retirement was part of the incentive to do the backbreaking, lung-crushing work of mining coal.
Some incentives, it seems, are more important than others.