This Article describes the emergence of "too-liable-to-regulate" fossil fuel companies: firms whose environmental liabilities are so large that they effectively become judgment-proof, enabling them to evade remediation and decommissioning obligations. Although liability is typically thought to reduce production and deter corporate misconduct, large cleanup liabilities can insulate companies from regulatory enforcement, since regulators may hesitate to pursue enforcement that would push distressed firms into liquidation.

To understand how the judgment-proof problem is affecting fossil fuel asset remediation, we compile every domestic coal mine reclamation (cleanup) and onshore gas plug and abandonment (P&A) law and calculate cleanup obligations for two companies: Diversified Energy, the largest oil and gas well owner in the United States, and Indemnity National, the country's largest insurer of coal mine reclamation obligations. Our estimates show that both firms' continued operation depends on predictable underenforcement of cleanup and decommissioning laws.

Our analysis of Diversified and Indemnity supports four theoretical points. First, judgment-proof fossil fuel companies are making it difficult for environmental regulators to manage the decline of extractive industries. Second, significant cleanup liability may, counterintuitively, encourage continued production and lead to worse environmental outcomes as firms with poor environmental records operate at a loss rather than paying for cleanup. Third, the judgment-proof problem creates regulatory challenges not just for individual firms, but across entire industries, since well-capitalized firms avoid cleanup by transferring burdensome assets to judgment proof companies. Fourth, the decline of coal mining has created an adverse selection problem in the market for reclamation-bond insurance. As solvent insurers have exited, one severely undercapitalized company—Indemnity National—now underwrites up to seventy percent of reclamation bonds in Appalachia. We conclude by proposing reforms that would improve environmental outcomes in markets that have already seen significant liability partitioning, and also describe best financial assurance practices to ensure that decommissioning funds are available in markets that have yet to encounter the emergence of too-liable-to-fail firms.

Make-whole provisions appear in over eighty percent of corporate bond issuances. They emerged in the mid-1990s after traditional call provisions and non-refunding covenants failed to protect bondholders from opportunistic refinancing. Outside bankruptcy, they generate little controversy. But inside bankruptcy, they have generated extensive litigation over whether acceleration extinguishes the premium, whether Section 502(b)(2) disallows it as unmatured interest, and whether solvent debtors must pay it anyway. This Note makes three arguments.

First, the apparent circuit split over make-whole enforcement is illusory. Courts have reached different results because the underlying contracts have materially different language, not because of conflicting legal principles or policy preferences. Second, the solvent-debtor exception is best understood as a corollary to the absolute priority rule, not as a historical practice or equitable right. When a solvent debtor distributes value to equityholders while invoking Section 502(b)(2) to deny creditors postpetition interest, the statutory disallowance operates as a backdoor priority violation. Third, the real problem with make-whole provisions in bankruptcy is their economic structure. The standard formula discounts future payments at Treasury yields plus a fixed spread without adjusting for the issuer’s default risk. This design means the premium is largest when the debtor is in distress and the estate has the least capacity to satisfy other creditors.

Courts should subordinate bankruptcy-triggered make-whole premiums under Section 510(c) rather than disallowing them under Section 502(b)(2) or enforcing them at parity. This approach avoids the binary created by current doctrine. Disallowance eliminates the premium entirely and hands the savings to equityholders. The solvent-debtor exception, albeit in a few cases, pays it at parity. Subordination would preserve the claim but pays junior creditors, who bargained for fixed returns, ahead of make-whole holders.