Friday roundup, Jan. 4, 2013

January 4, 2013 by Ken Ward Jr.

Afghan porters put a sack of coal donated by the United Nation’s refugee agency (UNHCR), in Kabul, Afghanistan, Wednesday, Jan. 2, 2013. Around 440 Afghan returnees and the most vulnerable families who are at risk in the cold winter weather received winter relief assistance distributed by the United Nation’s refugee agency. (AP Photo/Musadeq Sadeq)

In part two of a series about coal workers (see part one here), Mike Elk of In These Times did a take-out piece on the Patriot Coal bankruptcy, reporting:

If you are an individual struggling with debt, your options are limited. But if you are a coal company, you may be able to take advantage of a creative new strategy to shed your obligations.

Over the past decade, Peabody Energy and Arch Coal, the nation’s largest coal companies, offloaded large amounts of retiree healthcare obligations to new companies that now face bankruptcy. The United Mine Workers of America (UMWA) says that the spin-offs were designed to fail in order to clean the companies’ books of their retiree debts.

In 2007, Peabody Energy spun off a new company, Patriot Coal, which inherited 10 unionized mines in Kentucky and West Virginia. Along with the mines, Patriot took on $557 million in healthcare obligations to UMWA retirees. In 2008, Patriot bought Magnum, which had been similarly spun off from Arch Coal three years earlier. From Magnum, Patriot inherited another $500 million in obligations to retired miners, according to the UMWA.

Oddly, for a 5-year-old company, Patriot wound up with nearly three times as many retirees as active employees, more than 90 percent of whom never worked for the company. Overburdened by its debts, in July of 2012 Patriot declared bankruptcy.

In bankruptcy court, Patriot is seeking to be released from its pension and retirement obligations to some 10,000 UMWA retirees, covering more than 20,000 beneficiaries which total more than $1.3 billion.

“Especially in an era of declining demand and price for coal, there is a mismatch between the cost of [Patriot’s] legacy obligations and [its] ongoing ability to generate revenue,” Patriot Coal wrote in its bankruptcy filings. “[Patriot’s] return to long-term viability depends on [its] ability to achieve savings with respect to these liabilities.”

In response to the bankruptcy, the UMWA is suing Peabody and Arch Coal, saying Patriot was designed to fail in order to release Peabody from retiree obligations. Citing the Coal Act of 1992–in which Congress ordered coal companies to provide lifetime healthcare benefits to UMWA retirees–the UMWA says that the mining giants are still responsible for the retiree healthcare obligations assumed by Patriot.

Speaking of Peabody, Andrew Revkin had an interesting post about that company’s claims of being a “leader in clean energy solutions,” a piece that may have prompted Peabody to remove those claims from its website.

Closer to home here in West Virginia, the UMWA issued a statement in support of Gov. Earl Ray Tomblin’s decision to make Eugene White director of the state Office of Miners’ Health, Safety and Training.  And over in Kentucky, Erica Peterson at WFPL reported:

Kentucky Utilities will spend $57 million to install updated pollution control equipment and pay civil penalties under the terms of a proposed consent decree.

The money will go to installing a sulfuric acid mist emission control system at the company’s Ghent power plant, replace a coal-fired boiler and pay $300,000 in fines to the Environmental Protection Agency.

Also this week, many folks in the anti-mountaintop removal movement are mourning the death of Rebecca Tarbotton of the Rainforest Action Network. The New York Times noted:

Although the network, which is based in San Francisco, is not as familiar a name as environmental groups like the Sierra Club or Greenpeace, it was regarded as particularly effective while Ms. Tarbotton worked there.

Ms. Tarbotton joined the network in 2007 as director of its global finance campaign. In her first years, she helped lead an effort that persuaded some major banks, including Bank of America and Wells Fargo, to stop lending money to companies that mine coal by blasting off the tops of mountains in Appalachia.

Some critics dismissed the banks’ response as public relations moves and noted that mining companies could find financing elsewhere. But other analysts said that increasing scrutiny by environmental groups was pressuring big corporations to better align their activities with public attitudes on environmental preservation.

In this Nov. 13, 2012 photograph, a worker strides under a utility bridge in the gas cleanup and byproducts area at Mississippi Power’s Kemper County energy facility near DeKalb, Miss. Mississippi Power’s Kemper County plant, still under construction, is designed to use a soft form of coal called lignite in a gasification process to generate power. (AP Photo/Rogelio V. Solis)

In other coal-related news, Patrick Rucker at Reuters had this very interesting report:

Western states that rely on receipts from coal sales to help fund their governments are concerned the mining industry is dodging royalty payments on lucrative U.S. exports to Asia.

By valuing coal at low domestic prices rather than the much higher price fetched overseas, coal producers can skip a large royalty payout when mining federal land.

The practice could add up to hundreds of millions of dollars in forgone royalties if exports to Asia surge in coming years as the industry hopes, Reuters found.

That report prompted the leaders of the Senate Energy and Natural Resources Committee, incoming Chairman Ron Wyden (D-Ore.) and Ranking Member Lisa Murkowski (R-Alaska), to call for federal regulators to ensure taxpayers receive the full value for coal mined on federal and tribal lands.

Over at The State Journal, Pam Kasey did a story about a recent International Energy Agency report on carbon capture and storage:

 … High cost and lack of incentive policies are delaying deployment, the agency said in a Jan. 1 media release.

An example of that dynamic is AEP’s high-profile CCS demonstration project at the Mountaineer plant outside New Haven that was suspended in 2011.

The utility company was hailed for plans to expand its small, successful CCS validation project at Mountaineer into the first commercial-scale demonstration of retrofit carbon capture technology with on-site geologic storage. But the failure in 2010 of U.S. cap-and-trade legislation that would have placed limits on greenhouse gas emissions made it difficult for the company to find industry partners and to achieve regulatory approval to recover some of the costs in rates.

Also, four interesting takes on the future of coal and coalfield communities. First, from the Economist:

In A high-tech world, dirty black lumps of coal might seem like an anachronism. Yet coal is far from a thing of the past. However whizzy your iPad, your wall-mounted television or your electric car, the chances are that it is powered by the stuff. Coal-fired power stations provide two-fifths of the world’s electricity, and there are ever more of them. In the doubling of the world’s electricity production over the past decade, two-thirds of the increase came from coal. At these rates, coal will vie with oil as the world’s largest source of primary energy within five years. As recently as 2001, it was not much more than half as important as oil (see chart).

The main factor has been the unslakable thirst for energy in China, which in 2011 overtook America as the world’s biggest electricity producer. In 2001, according to the International Energy Agency, a club of rich nations, Chinese coal demand was about 600m tonnes of oil equivalent (25 exajoules). By 2011 China’s coal demand had tripled—a rise from two-thirds of the energy America gets from oil to twice that amount. China’s domestic coal industry produces more primary energy than Middle Eastern oil does.

Other developing economies are just as keen on coal, if not yet on such a grand scale. In India, producing 650 terawatt hours of electricity in 2010 took 311m tonnes of oil equivalent, and the power sector’s coal demand is growing at around 6% a year. The IEA reckons India could surpass America as the world’s second-largest coal consumer by 2017.

But if America no longer dominates the business as it once did, what is happening to the industry there is still able to trigger changes far away. And at the moment coal is falling from favour in America.

Next from Alpha Natural Resources CEO Kevin Crutchfield, via SNL Financial:

I believe that certain Central App thermal coals are attractive to many utilities across the pond because of favorable Btu, sulfur and ash characteristics. While I don’t think exports can prevent the overall decline of CAPP production that comes from declining demand in what has been a billion-ton domestic market, and from progressively harder geology, I do think the export phenomenon holds a lot of promise for companies like ours that have substantial shipping capacity on the East Coast.

And from The State Journal, quoting West Virginia Commerce Secretary Keith Burdette on Appalachian development efforts by the Appalachian Regional Commission:

I was looking back and thinking about the wisdom in the 1960s, of Sen. Byrd, Sen. Randolph, President Johnson and others who recognized at the time in a state that had almost no interstate highway system, had a changing set of demographics, changes in coal, changes in energy, changes in steel and recognized the cost of infrastructure and everything else it takes is so much more expensive through the Appalachian regional chain. I look back and wonder if we’d be that smart today to look that far ahead.

Finally, I somehow missed this thoughtful piece, Ky. vs. the future; Will state’s politicians enable a surrender to defeatism? by the Lexington Herald-Leader’s great editorial writer Jamie Lucke (I only noticed it when I came across this response):

What worries me is this: If enough Kentuckians convince themselves that the future is out to get them — and if politicians exploit and reinforce this belief — it becomes a self-fulfilling prophecy.

Then Kentucky really is sunk.

Also worrying, after the hammering Chandler took, no ambitious Kentucky politician will dare do anything that might be construed as disloyal to coal.

Such treasonous acts include pushing to diversify the state’s energy base or Eastern Kentucky’s economy. That’s unfortunate because doing both is critical to the future.

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