WASHINGTON, Dec 9 (Reuters) - U.S. taxpayers could be left with multibillion-dollar liabilities if large coal companies are pushed to bankruptcy, the Interior Department Secretary said on Wednesday.
At issue is a practice known as self-bonding, allowed under a decades-old mining program, in which some of the country's biggest coal companies forego insurance on a portion of future mine cleanup costs.
Officials estimate that roughly $3.6 billion in self-bond liabilities could fall to taxpayers and "it is a big issue," Secretary of the Interior Sally Jewell told Congress.
"With the increased financial fragility of many coal mining companies, if they are self-bonded that does potentially leave the states and the taxpayers at risk," Jewell told the Natural Resources Committee of the U.S. House of Representatives.
On Tuesday, another Interior Department official said the Obama administration was alarmed about self-bonding but offered no concrete plans to protect taxpayers.
The coal industry has been battered by President Barack Obama's pollution controls on power plants and an abundance of natural gas in recent years leading some investors to predict some top companies could fail.
Coal operator Alpha Natural Resources Inc left behind more than $670 million in self-bond liabilities when it filed for bankruptcy in August and officials have not determined how best to protect taxpayers from that hit.
Leading coal companies have warned investors that eliminating the self-bond subsidy would drive up their costs for mine cleanup protection.
Arch Coal Inc, Peabody Energy Corp and Cloud Peak Energy Inc are among the nation's largest coal companies that make use of the self-bond program.
Representative Debbie Dingell pressed Jewell on the issue Wednesday and warned that taxpayers are positioned to prop up the coal industry as they did banks during the global financial crisis.
"As with most things that are labeled too-big-to-fail, many of these companies are now failing," said the Michigan Democrat, who called self-bonding a "textbook case of taxpayer exposure to polluter cleanup costs." (Reporting by Patrick Rucker; Editing by Alan Crosby)