Peabody Energy
by Philip Mattera
Peabody Energy is the largest private-sector coal company in the world and thus one of the planet's biggest contributors to human-generated global warming. Long known as the Exxon of Coal, Peabody is an unabashed advocate of fossil fuels and an ardent critic of environmental regulation. The company has tried to give itself an air of social responsibility by promoting "clean coal," but its former CEO and current chairman Gregory Boyce has a long history of denying the climate crisis. Faced with a steadily shrinking market, Peabody filed for Chapter 11 bankruptcy in 2016.
From Delivery Service to Mining Giant
Peabody Coal started out as a delivery service in the Chicago area in the 1880s and later opened its own mining operations in southern Illinois. In 1913 it began supplying larger customers such as electric utilities. It grew steadily as a coal producer, and by 1949 the company was listed on the New York Stock Exchange.
Although Peabody was now one of the country's ten largest coal miners, its focus on underground mines caused it to begin losing market share to competitors engaged in strip mining. Faced with losses in the early 1950s, Peabody entered into merger talks with Sinclair Coal, the third largest producer. In 1955 Peabody was taken over by Sinclair, which assumed the Peabody name.
This would be the first in a series of ownership changes. In 1968 Peabody Coal was acquired by Kennecott Copper but had to be divested eight years later for antitrust reasons. It was then controlled by a consortium of companies led by Newmont Mining. In 1990 Britain’s Hanson PLC conglomerate bought Peabody and held it until 1997, when it was spun off. It was then acquired by a unit of Lehman Brothers in a leveraged buyout. In 2001 Lehman sold about 40 percent of the company to the public in a stock offering and a few years later sold the rest of its stake. All of Peabody’s shares now trade on the New York Stock Exchange under the ticker symbol BTU.
Peabody operates more than two dozen surface and underground mines in the United States (Arizona, Colorado, Illinois, Indiana, New Mexico and Wyoming) and Australia (New South Wales and Queensland). It also has coal trading operations in countries such as China, India and Indonesia.
Environmental Record
Peabody has a history of resisting environmental legislation going back at least to the 1980s, when it fought against stronger federal rules to combat acid rain (see Coal Week, May 23, 1983). After George W. Bush took office in 2001, Peabody chairman Irl Engelhardt (a big Republican donor) served as an advisor to the new administration on energy policy and helped get Bush to abandon his campaign pledge to regulate carbon dioxide emissions from power plants and turn his back on the Kyoto treaty on global warming. Engelhardt and other Peabody officials apparently also used their influence to get the administration and Congressional Republicans to promote so-called clean coal, which set off a coal rush.
In 2006 the New York Times wrote: “Much in the way that Exxon Mobil influences discussion of climate issues in the oil industry, Peabody is a backer of industry-supported organizations that seek to prevent mandatory reductions in global warming emissions and promote demand for coal.” The Times also noted that Peabody CEO Gregory Boyce had chaired a federal advisory panel that produced a controversial report proposing exemptions to the Clean Air Act to encourage greater use of coal. In 2008 USA Today wrote that “Peabody is perhaps the staunchest opponent of stringent regulations to cap greenhouse gas emissions.”
Boyce was also a global warming skeptic. When asked by BusinessWeek in 2007 whether high levels of carbon dioxide are harmful, he was quoted as responding: “I think the simple answer is we don’t know.”
During this time Peabody promoted massive projects that would expand use of coal for energy generation at a time when many experts are calling for greater reliance on renewable sources. These included the Prairie State Energy Campus facility in southern Illinois, the Kentucky NewGas coal gasification plant (a partnership with ConocoPhillips), and the Thoroughbred Energy coal-fired power plant (also in Kentucky).
None of these have turned out well. In the face of widespread opposition, Peabody announced in 2008 that it would end its six-year effort to build the Thoroughbred project. The Kentucky NewGas project has also gone nowhere. The Prairie State Energy Campus did manage to deliver electricity but at costs above market rates, creating a serious burden for utilities that had signed long-term supply contracts. Peabody was also involved in the FutureGen public-private partnership in Illinois, which the federal government suspended in 2015.
In a 2009 Newsweek ranking of 500 large companies based on their environmental compliance and policies, Peabody ranked dead last, with a score of only 1 out of 100.
In 2010 Peabody came out against the EPA's finding that carbon dioxide emissions needed to be regulated. And after the EPA issued proposed regulations on power plant emissions in 2014, Peabody hired prominent constitutional scholar Laurence Tribe to represent it in the legal challenge to the rules and to testify before Congress.
Peabody also fights environmental regulation through its participation in the National Mining Association and the American Legislative Exchange Council (ALEC).
Faced with a shrinking domestic market in the United States, Peabody has been seeking to expand foreign demand in countries such as China with a campaign that depicts coal as a cure for global poverty.
In 2015, after being charged by the New York Atttorney General with misleading investors and the public about the financial risks of climate change, Peabody agreed to file revised shareholder disclosures with the SEC.
Worker Safety & Health
Peabody has a history of cutting corners when it comes to workplace safety. In 1982 the company pleaded no contest and paid a penalty of $130,000 to settle federal charges that it falsified dust-sampling reports submitted to the Mine Safety & Health Administration (MSHA) as part of the monitoring of conditions that can cause black lung disease (Coal Week, December 20, 1982). In 1991, after a year-long investigation by MSHA, Peabody once again stood accused of tampering with coal-dust test results. It pleaded guilty to criminal charges and was fined $500,000, the largest penalty that had ever been assessed for a non-fatal violation of federal mine safety regulations.
Sometimes the company’s loose practices had deadly results. In 1986 Peabody pleaded guilty to felony charges of violating federal mine safety laws in connection with the death of a worker at an underground mine near Shawneetown, Illinois. The company, which had been charged with allowing miners to work under an unsupported roof, was fined $50,000 (Coal Week, August 11, 1986).
Safety and health problems persist. In October 2009 the MSHA sent a letter to Peabody subsidiary Black Beauty Coal saying it had found a “potential pattern of violations” at the company’s Air Quality #1 mine in Indiana. In 2011 MSHA included Peabody's Willow Lake Portal operation in Illinois on a list of mines with safety problems. The following year a worker was killed at the underground mine in an accident that MSHA linked to inadequate controls by a Peabody subsidiary. Peabody subsequently closed the facility indefinitely.
Labor Relations
As a leading coal producer, Peabody was at the center of the contentious labor relations that marked the industry for decades. Like other operators, it was successfully organized by the United Mine Workers in the 1930s and was targeted in various industry-wide strikes. After the Second World War, the UMW leadership fostered a more cooperative relationship with the industry, resulting in a resurgence of rank and file militancy starting in the 1960s. That eventually led to a 110-day walkout beginning in December 1977, during which workers rejected a proposed settlement negotiated by the UMW leadership and defied a Taft-Hartley injunction issued at the request of President Carter. In 1981 UMW members at Peabody strip mines walked out, paving the way to another industry-wide strike, this one lasting 73 days. Peabody was the main target of a seven-month UMW walkout in 1993 focusing on issues of job security.
In the following years the UMW avoided large strikes, but it continued to battle Peabody's attempts to reduce the union presence in its operations. In 1999 a mediator awarded UMW members $1.3 million in damages from Peabody in connection with the transfer of coal reserves to a non-union operation. In 2005 workers rallied at Peabody headquarters in St. Louis to protest what they said was a company effort to drive unions out of its workforce through firings and other forms of intimidation. The following year the UMW got Peabody to agree to add to its corporate code of conduct a commitment to abide by International Labor Organization conventions on labor rights.
Peabody was targeted again after Patriot Coal, which had been spun off in 2007, declared bankruptcy in 2012 and was given court approval to slash wages, pensions and healthcare benefits of its workers and retirees. The UMW held Peabody responsible and staged protests at the company's headquarters. In 2013 a federal appellate court ruled that Peabody still had liability for some of the benefits. The legal battle continued until Peabody agreed later that year to pay $310 million over four years to fund benefits for Patriot workers; it also extended $140 million in credit to Patriot to help it emerge from bankruptcy. In 2015, however, Patriot announced a new Chapter 11 filing.
As a result of Peabody's de-unionization efforts, workers at only one of its U.S. mines were still covered by a collective bargaining agreement at the end of 2014.
Relations with Tribes
For more than 40 years, Peabody has engaged in strip mining in an area of northeast Arizona called Black Mesa, which served as the ancestral home of Hopi and Navajo Indians. Critics charge that in the 1960s Peabody negotiated one-sided deals with the tribes to gain access both to the coal deposits and to vast amounts of water used to transport coal slurry through a 270-mile pipeline to a power-generating station in Nevada. It was later revealed that the lawyer purportedly representing the Hopi was at the same time working for Peabody.
Peabody was also the subject of accusations that it instigated — or at least took advantage of — a 1974 decision by Congress to order the relocation of more than 10,000 Navajos and Hopis, ostensibly to resolve a century-old land dispute between the tribes.
Tensions between Peabody and the tribes escalated over the years. In 1999 the Navajo Indian Nation sued the company in federal court, charging that it engaged in influence peddling at the Interior Department during the Reagan Administration to avoid a big mandated increase in royalty payments and thereby defrauded the tribe of at least $600 million. (The tribe, which had also sued the federal government, eventually lost the case in the U.S. Supreme Court.)
There were also ongoing protests over the company’s use of the water from Black Mesa’s aquifer. A 2000 report by the Natural Resources Defense Council found that “water levels have decreased by more than 100 feet in some wells and discharge has slackened by more than 50 percent in the majority of monitored springs.” To make matters worse, the company that operated the pipeline was fined by state and federal environmental agencies for illegal discharges.
In 2002 Peabody offered an alternative to its use of the aquifer that was just as controversial: it proposed drilling 1,200 shafts in the rim of the Grand Canyon to access water from the Colorado River. The idea went nowhere.
All these disputes seemed moot in 2006, when Peabody suspended its mining activities in Black Mesa following the closure of the Nevada power plant it was supplying. The shutdown occurred because the plant’s owners declined to install pollution-control equipment designed to bring the facility into compliance with environmental regulations.
Peabody, however, was not prepared to abandon its Black Mesa mine. It began looking for other customers, and in the waning days of the Bush Administration it got the federal Office of Surface Mining to put the mine under the same permit as another Peabody mine in the area that supplies Arizona’s Navajo Generating Station power plant. The company, however, continued to face opposition from native and environmental organizations
Federal Leasing
Peabody is one of a handful of companies taking advantage of a non-competitive program that allows coal operators to lease federal land at below-market rates. A 2012 report by the Institute for Energy Economics and Financial Analysis estimated that over 30 years the Treasury lost $28.9 billion in revenue from the failure to obtain fair market value for the coal extracted from the Powder River Basin of Wyoming and Montana, the country's (and Peabody's) largest coal-producing region. A report released by the U.S. Government Accountability Office in 2014 also found a pattern of undervaluing coal leases, as did a 2015 report by Headwater Economics estimating that two reform options would have generated additional revenue ranging from $850 million to $5.5 billion for the 2008-2012 period.
In 2014 the Western Organization of Resource Councils and Friends of the Earth filed a lawsuit asking that the Interior Department's Bureau of Land Management be required to prepare a comprehensive environmental impact review of the federal leasing program. The last time such an assessment was done was in 1979.
Issues in Australia
Peabody has also been at the center of a controversy in Australia. Its underground Metropolitan mine located south of Sydney is one of a group of coal operations using the controversial longwall system that have caused waterways to dry up in some places and then created cracks in the streambeds through subsidence. A 2007 report by the advocacy group Total Environment Centre found that the mine, which Peabody acquired as part of its 2006 purchase of Excel Coal, had caused extensive damage to the Waratah Rivulet, which is part of Sydney’s drinking water catchment area.
Rather than rethinking the wisdom of longwall mining below waterways, a Peabody subsidiary decided the solution was to try to glue the cracks with polyurethane resin. Moreover, in 2008 the company applied for permission to nearly double the output of the mine and then threatened to shut down the entire operation if the application were not approved. In 2009 the government of New South Wales approved a modified version of the proposal that creates some buffer zones but allows the company to mine under the Woronora Dam, the main drinking water source for southern Sydney. The plan was strongly opposed by Total Environment Centre and other groups, which warned that the mine could cause the dam floor to crack. In 2011 it appeared that such cracks were responsible for unusually low water levels near the dam.
Other Information Sources
Violation Tracker summary page
Watchdog Groups and Campaigns
Construction, Forestry, Mining and Energy Union (Australia)
Dine Citizens Against Ruining Our Environment
Institute for Energy Economics and Financial Analysis
Natural Resources Defense Council
Total Environment Centre (Australia)
United Mine Workers of America
Western Organization of Resource Councils
Key Books and Reports
A Climate of Corporate Control: How Corporations have Influenced the U.S. Dialogue on Climate Science and Policy (Union of Concerned Scientists, May 2012).
An Assessment of U.S. Federal Coal Royalties (Headwater Economics, January 2015).
Coal Leasing: BLM Could Enhance Appraisal Process, More Explicitly Consider Coal Exports, and Provide More Public Information (U.S. Government Accountability Office, GAO-14-140, February 2014).
Drawdown: Groundwater Mining on Black Mesa (Natural Resources Defense Council, October 2000)
Exporting Powder River Basin Coal: Risks and Costs (Western Organization of Resource Councils, January 2011).
The Great Giveaway: An Analysis of the Costly Failure of Federal Coal Leasing in the Powder River Basin by Tom Sanzillo (Institute for Energy Economics and Financial Analysis, June 2012).
Last updated May 16, 2016