Illinois asks Peabody Energy for info on future cleanup costs

WASHINGTON, March 21 (Reuters) - The Illinois attorney general has asked Peabody Energy Corp in a letter to explain how it would cover $92 million in future cleanup costs in the state if the company sought bankruptcy protection.

Peabody , the country’s largest coal producer, said in a regulatory filing last week that it may have to seek bankruptcy protection, citing poor economies in countries that import coal and other factors weighing on the coal industry. [nL3N16O4CV}

In an emailed statement, Peabody declined to comment on the specifics of the letter but said, “We see our land restoration as an essential part of the mining process, and take great pride in the work that we do.”

If the company did seek bankruptcy protection, a judge would decide how to prioritize liabilities like $92 million in future cleanup costs in Illinois that are not guaranteed by cash, bonds or other securities.

Large coal companies like Peabody have been allowed to leave a share of future mine cleanup without collateral through a program called ‘self bonding’ that is now under federal review.

“I have significant concerns about Peabody’s ability to fulfill its self-bonding obligations,” Attorney General Lisa Madigan wrote in the letter to Peabody that was seen by Reuters on Monday.

Madigan, the state’s chief lawyer and a Democrat, asked Peabody to “publicly disclose financial information” that underpins its application to self bond in the state.

The Illinois Department of Natural Resources answers to the state’s Republican governor Bruce Rauner. A spokesman for the agency did not immediately respond to a request for comment.

The coal industry is struggling with competition from natural gas, a weak export market and clean-air regulations and two of Peabody’s peers, Alpha Natural Resources and Arch Coal, have filed for bankruptcy in recent months.

Interior Secretary Sally Jewell has said that taxpayers could face a $3.6 billion bill if self-bonded coal companies fail. (Reporting By Patrick Rucker)