Update (June 13, 2016): Bankruptcy filings of Peabody Energy, the world’s largest investor-owned coal company, reveal extensive funding of climate deception through trade groups, lobbyists, think tanks, and supposedly independent scientists.
Update (April 13, 2016): Today Peabody Energy filed for Chapter 11 bankruptcy. For more on this development, my colleague Jeff Deyette lays out the details of the company’s remarkable collapse and its broader implications for transitioning to a clean energy economy.
According to its regulatory filings, Peabody Energy, the world’s largest investor-owned coal company, is on the verge of bankruptcy. This development would be the latest in a string of coal company bankruptcies, following those of Arch Coal and Alpha Natural Resources.
Bankruptcy would not necessarily mean the end of Peabody Energy, though analysts believe the company must become substantially smaller to survive. A company filing for protection under Chapter 11 usually proposes a plan for reorganization to keep its business alive and pay creditors over time. Peabody would need to address many responsibilities in that process, including to its workers, pensioners, and the communities around its mines.
In my role at UCS, I get to imagine what it would look like for Peabody Energy to take responsibility for its role in climate change and climate science denial. To take you on this voyage, I must first admit that I am old enough to remember the schlocky 1970s TV series “Fantasy Island” that opened with Tattoo (played by Hervé Villechaize) pointing at the sky and shouting, “The Plane, The Plane.” As the week’s guests disembarked from a seaplane, white-suited Mr. Roarke (Ricardo Montalban) graciously intoned, “Smiles, everyone, smiles. Welcome to Fantasy Island.”
Photo: Pablo GarciaSaldaña
Suppose the board and top management of Peabody Energy were to chart a fantastical new course for their company to emerge from bankruptcy. In a carbon-constrained world, what would a reorganized Peabody Energy look like?
Here are three recommendations for the company to contemplate:
1. Fully disclose the financial risks of climate change to its business
Peabody has been inconsistent in its statements on climate change-related risks, and that inconsistency has gotten the company into trouble.
In an announcement this week of a new coalition of top state law enforcement officials working together on climate change, New York state Attorney General Eric Schneiderman highlighted his office’s multi-year investigation into Peabody Energy’s financial disclosures.
A 2015 settlement found that the company violated state laws prohibiting false and misleading statements to the public and investors regarding climate-related financial risks and potential regulatory responses. As part of the settlement, Peabody Energy agreed to revise its shareholder disclosures with the Securities and Exchange Commission.
To regain the trust of investors, Peabody will need to disclose the substantial climate-related risks associated with its business in a frank, open, and comprehensive manner. As Maryland Attorney General Brian Frosh said at this week’s meeting of state attorneys general, “What we want from ExxonMobil, and Peabody, and ALEC [the American Legislative Exchange Council] is very simple. We want them to tell the truth.”
Attorneys General from across the U.S. joined with former Vice President Al Gore to launch a new coalition on climate change. Photo: mass.gov
2. Stop spreading and funding disinformation on climate science and policy
Instead of telling the truth about the realities of its product and the risks of climate change, Peabody has a long and ongoing record of deception on climate change that dates back to the early 1990s and includes steadfast opposition to regulation of heat-trapping carbon pollution by the Environmental Protection Agency (EPA).
Peabody Energy denied the clear scientific consensus on climate change in its 2014 comments on the EPA’s Clean Power Plan proposal. “But no science supports the relevant causal links—the connection between changes in GHG [greenhouse gas] levels and any changes in climate,” the company’s comments claimed. Peabody Energy also funded a misleading 2014 report by Energy Ventures Analysis, which artificially inflated the costs and ignored the benefits of the EPA’s proposal.
Federal courts rejected several Peabody Energy-backed legal challenges aimed at blocking the Clean Power Plan, before the Supreme Court narrowly voted in early 2016 to place implementation of the EPA’s final rule on hold until legal challenges are resolved.
Peabody Energy remains active in ALEC, a group that spreads disinformation about climate change among policy makers in order to obstruct action. “The biggest scam of the last 100 years is global warming,” one member of ALEC’s Private Enterprise Advisory Board said during the group’s 2015 annual meeting, at one of the few sessions open to reporters. Peabody Energy is a leading member of ALEC’s Private Enterprise Advisory Council.
Peabody Energy is also a member of the American Coalition for Clean Coal Electricity, which serves as a front group for coal and utility interests to oppose climate action, including the EPA’s efforts to limit carbon pollution, and of the U.S. Chamber of Commerce, which is at the center of lawsuits aimed at blocking EPA action on climate change.
If the company reorganizes under bankruptcy protection, decision-makers should wisely choose to stop spending shareholder money on climate disinformation.
3. Pay its fair share of the costs of climate damages and adaptation
Communities around the world are already facing and paying for damages from rising seas, extreme heat, more frequent droughts, and other climate-related impacts. Additional investments must be made to protect and prepare communities for these risks today and in the future, and fossil fuel companies should pay a fair share of the costs.
Nearly two-thirds of all industrial carbon dioxide and methane released into the atmosphere since the dawn of the industrial revolution can be traced to just 90 entities, among them Peabody Energy (which ranks #6 among investor-owned companies and #12 overall in cumulative heat-trapping emissions).
As Peabody Energy envisions a way forward, its leaders must take into account the growing movement to hold fossil fuel producers accountable for the harms caused by their product. This week, Massachusetts Attorney General Maura Healey announced that she will join the attorneys general of New York and California in investigating ExxonMobil for misleading investors and the public about the reality and risks of climate change.
Meanwhile, California State Senator Ben Allen introduced the Climate Science Truth and Accountability Act, which would extend the statute of limitations under California’s Unfair Competition Law from four to 30 years, giving state and local law enforcement more leeway to prosecute fossil fuel companies.
If companies like Peabody Energy are forced to internalize the costs of fossil fuel production, their future business strategies will look very different from what brought them financial success in the past.
As Peabody Energy’s board and top management grapple with the question raised in regulatory filings of whether the company can “sustain operations and continue as a going concern,” I hope they will give serious consideration to the above recommendations. What may seem like Fantasy Island today is the reality that UCS and our allies are working toward with our campaign.
Smiles, everyone, smiles.