Coal Tattoo

Jim Justice

 

Well, our friend Howard Berkes at NPR (along with the good folks at West Virginia Public Broadcasting and the Ohio Valley ReSource) have put together the pieces of the puzzle. Their bombshell this morning on Democratic gubernatorial nominee Jim Justice reports:

… Justice’s mining companies still fail to pay millions of dollars in mine safety penalties two years after an earlier investigation documented the same behavior. Our analysis of federal data shows that Justice is now the nation’s top mine safety delinquent.

His mining companies owe $15 million in six states, including property and minerals taxes, state coal severance and withholding taxes, and federal income, excise and unemployment taxes, as well as mine safety penalties, according to county, state and federal records.

The story continues:

In the past 16 months, while fines and taxes went unpaid, Justice personally contributed nearly $2.9 million in interest-free loans and in-kind contributions to his gubernatorial campaign, according to state campaign finance reports.

Grant Herring, a spokesman for the Justice gubernatorial campaign, said Justice “won’t be doing an interview,” despite multiple requests after NPR provided details of our investigation.

Importantly, the investigation also reports:

Delinquent Justice mines also continue to have worse-than-average safety records, according to NPR’s analysis of MSHA injury and violations data. Our analysis shows that injury rates (for injuries forcing time away from work) are twice the national average and violations rates more than four times the national rate during the years the Justice mines failed to pay penalties.

The Justice fines concern Celeste Monforton, a former MSHA official, mine disaster investigator and lecturer on workplace safety at George Washington University and Texas State University.

“I don’t think we should forget that the reason that he has those penalties is because there were violations and hazards in his coal mining operations,” says Monforton.

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Arch Coal emerges from bankruptcy

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Here’s the news out this morning from Arch Coal Inc.:

Arch Coal Inc. today announced that it has successfully completed its financial restructuring and emerged from court protection, with new equity that will trade on the New York Stock Exchange under the ticker symbol ARCH.

“Today marks the beginning of a new era for Arch Coal,” said John W. Eaves, Arch’s chief executive officer. “We are extremely pleased with what we have accomplished during our highly expeditious restructuring process, and are eager to move forward with our compelling plan for value creation. I am confident we have all the pieces in place for long-term success – an extraordinary workforce, cost-competitive assets, a high-quality reserve base, a clean balance sheet and an excellent management team.”

Arch emerges as the leading producer of metallurgical coal and the second largest producer of thermal coal in the United States, with a streamlined portfolio of large, modern, low-cost mines. Arch’s operations have a proven track record of generating cash through all phases of the market cycle, with significant upside in rising price environments.

Arch is emerging with more than $300 million of cash on its balance sheet and a debt level of just $363 million, consisting of a new term loan and capital leases. The company’s total debt is just 7% of what it was prior to restructuring. Cash requirements are expected to be modest, with projected capital spending of $55 million in 2017 and projected debt service of approximately $33 million. In addition, the company has third-party surety bonds in place covering 100% of its reclamation bonding requirements.

You can read the full statement here.

 

Contract vote a relief for UMWA, Murray Energy

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The news Friday evening was certainly welcome for both the United Mine Workers of America union and Murray Energy:

Rank-and-file members of the United Mine Workers of America voted Friday to approve a proposal for a new contract with the Bituminous Coal Operators Association, whose major member company is Murray Energy.

According a statement issued by the UMW, 60.3 percent voted in favor of the new collective bargaining agreement at six Murray Energy mines in West Virginia and Ohio.

As our story noted:

Murray has previously warned that finalizing a new contract with the UMW is a crucial part of his company’s plan to avoid financial default, and has hinted that without a deal he might consider bankruptcy court protection.

While the UMWA membership earlier this summer voted down an earlier contract proposal, the last thing union leaders want is to face a Murray Energy bankruptcy that would certainly not help their current battle to preserve union pensions and health-care benefits.

UMWA President Cecil Roberts said:

This was a tough vote for our members to take. The coal industry is in a depression and more than 50 companies have filed for bankruptcy in the last few years. Thousands have been laid off. The pressures on those who are still working are tremendous and growing.

But despite all that, our members took a courageous stand by voting to try to keep their company operating while maintaining the best wages, benefits and working conditions in the American coal industry.

And Murray CEO Bob Murray said:

This is a good day for Murray American’s UMWA-represented employees, as this agreement will go a long way toward ensuring that our coal mines can keep operating, and our employees working, even in the current depressed coal marketplace.

Alpha emerges from bankruptcy

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Here’s the press release just issued by Alpha Natural Resources:

Alpha Natural Resources and its affiliates announced that the Company has today successfully emerged from Chapter 11 bankruptcy protection. The reorganized company is a smaller, privately held company operating 18 mines and eight preparation plants in West Virginia and Kentucky.

David Stetson, who was appointed CEO of the reorganized company, said, “By completing this restructuring, ANR emerges as a company with a solid financial foundation and a strong team to continue to mine and sell coal. We are now also better positioned to satisfy ANR’s environmental responsibilities. I am confident ─ even though coal markets continue to be challenged by both competitive and regulatory pressures ─ the company created by our Plan of Reorganization will have the structure, resources, and talent to successfully weather these challenges.”

Stetson continued, “There are many people to thank. ANR could not have successfully completed this process without the loyalty and work of employees across our organization. During the restructuring, we reached important agreements with key stakeholders that will create a more sustainable business model going forward, and we appreciate their support, which ensures our ability to continue serving our customers and playing a positive role in our communities.”

Read the rest here.

It was big news a couple years ago when CONSOL Energy sold its major West Virginia coal holdings to Murray Energy.  And now CONSOL, long a mainstay of West Virginia’s coal industry, has dropped this announcement, as reported by Taylor Kuykendall:

CONSOL Energy Inc. plans to divest itself of its Miller Creek and Fola mines in West Virginia, the last two coal mines the company held in Central Appalachia, by paying another producer $44 million to take the properties off its hands.

CONSOL, which has other mines run by its master limited partnership CNX Coal Resources LP in Northern Appalachia, will transfer the mines to Booth Energy’s Southeastern Land in exchange for Booth taking on $103 million in liabilities for the mines. An agreement disclosed in a U.S. SEC filing on July 25 said CONSOL will pay Booth $44 million over time, including $27 million at the closing of the sale.

CONSOL announced this move in a U.S. Securities and Exchange Commission filing yesterday. As the State Journal pointed out:

Miller Creek is still an active mine site, producing 2.1 million tons of coal in 2015, while the Fola site is idled and last produced 1.3 million tons in 2012.

The CONSOL SEC filing added:

The Miller Creek Complex is a premier asset in Central Appalachia, but no longer fits our portfolio. Taken together, the Miller Creek and Fola Complexes generated negative EBIDA in 2015 and are expected to generate negative EBITDA in 2016. These transactions constitute an important step in continuing to strengthen CEI’s balance sheet, enhancing liquidity, reducing our operational and regulatory risk profile and assisting with CEI’s transition to a pure play E&P business. In association with the transactions, the Miller Creek and Fola assets and liabilities are classified as held for sale in discontinued operations on CEI’s Consolidated Balance Sheets, their results of operations are included in discontinued operations on the Consolidated Statement of Income, and the reclassification of these assets resulted in an impairment charge of $356 million in the quarter. These assets were acquired in 2007 and the write down reflects the deterioration in the Central Appalachian coal market since then. The transactions are expected to close in the third quarter.

 

Peabody files for Chapter 11

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FILE - This Jan. 27, 2009, file photo shows Peabody Energy headquarters in St. Louis. Peabody Energy Corp. filed for Chapter 11 bankruptcy protection Wednesday, April 13, 2016, in the United States Bankruptcy Court for the Eastern District of Missouri. (AP Photo/Jeff Roberson, File)

 

Here’s the big news this morning from Peabody Energy:

Taking a major step to strengthen liquidity and reduce debt amid an unprecedented industry downturn, Peabody Energy Corporation (NYSE: BTU) today voluntarily filed petitions under Chapter 11 for the majority of its U.S. entities in the United States Bankruptcy Court for the Eastern District of Missouri.  Through this process, the company intends to reduce its overall debt level, lower fixed charges, improve operating cash flow and position the company for long-term success, while continuing to operate under the protection of the court process.

All of the company’s mines and offices are continuing to operate in the ordinary course of business and are expected to continue doing so for the duration of the process.  No Australian entities are included in the filings, and Australian operations are continuing as usual. 

I’ve posted a copy of their Chapter 11 Petition here.

As has been widely reported, this isn’t really any surprise. Readers in West Virginia might want to recall this, which we reported last month:

More than three-quarters of Peabody’s production comes from the Powder River Basin, in Wyoming, where the company’s North Antelope Rochelle Mine last year generated 109 million tons of coal, more than all of the mines in West Virginia combined.

Twenty years ago, Peabody, through its Eastern Associated Coal Corp. subsidiary, was among West Virginia’s largest coal producers. Today, the company lists no producing mines in West Virginia in its filings with MSHA. Peabody has no active mining permits on file with the West Virginia Department of Environmental Protection, with all the permits in its name having been reclaimed, said DEP spokeswoman Kelley Gillenwater.

In explaining its move to seek bankruptcy protection while reorganizing, Peabody said this:

The factors affecting the global coal industry in recent years have been unprecedented.  Industry pressures in recent years include a dramatic drop in the price of metallurgical coal, weakness in the Chinese economy, overproduction of domestic shale gas and ongoing regulatory challenges. 

 

 

Patriot Coal: Here we go again …

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Patriot Coal May 2013 Rally

Here’s the news from The Associated Press:

Patriot Coal wants a bankruptcy judge’s permission to reject the company’s collective bargaining agreement with union miners and change retirees’ health care benefits … Patriot wrote that it would otherwise run out of cash and have to liquidate in a matter of weeks.

Patriot said the move would be necessary to close on a proposed partial sale to Lexington, Kentucky-based Blackhawk Mining LLC.

Otherwise, the United Mine Workers of America would need to reach collective bargaining terms with Blackhawk, which doesn’t want to contribute to the pension plan. Patriot wrote that discussions with the UMWA and Blackhawk are at an impasse.

You can read the court filing for yourself here or here.

Of course, we’ve seen this movie before. But it’s far from clear how it will end this time. Certainly, though, this Patriot move provides quite a contrast to what the bankrupt company sought from the court in this regard (as reported by West Virginia Public Broadcasting:

Last Friday, the United Mine Workers of America filed an objection to Patriot Coal’s proposed bankruptcy plan, which includes $6.4 million in bonuses paid to management employees.

The UMWA says Patriot’s proposed “key employee” bonus plan would benefit only the top executives. The union is concerned that the plan will ultimately lead to union miners having to take pay cuts, reduce their benefits, or even losing their jobs.

“At a time when Patriot is attempting to rid itself of obligations to workers, retirees, widows and families, it is simply outrageous that the five people who already make the most money in the company are getting hundreds of thousands more,” UMWA International President Cecil E. Roberts said. “For what? On what planet does it make sense to reward people who preside over bankrupt companies?”

Alpha: Running right to bankruptcy court?

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It may only be a matter of time before Alpha Natural Resources seeks bankruptcy court protection. As the Wall Street Journal reported earlier this week:

Alpha Natural Resources Inc. is in talks to obtain financing for a potential bankruptcy filing early next month as it grapples with a severe downturn in coal prices, according to people familiar with the matter.

The Bristol, Va., coal miner is negotiating the terms of a “debtor in possession” loan with its loan holders and senior bondholders, the people said. The new financing would help see Alpha through bankruptcy should it file for chapter 11 protection in early August, around the time some of its convertible bonds come due, the people said.

The loan could total around $300 million to $400 million, one of the people said. Jointly providing the loan could align the interests of the two creditor classes, potentially smoothing Alpha Natural’s efforts to restructure its debt.

This morning, the Gazette’s Dr. Paul Nyden noted:

The New York Stock Exchange on Thursday stopped the trading of Alpha Natural Resources common stocks because of the company’s dramatically low stock prices.

On Aug. 1, 2008, Alpha’s stock reached the value of $104 per share. At the close of business on Wednesday, the value of Alpha’s stock had dropped to 24 cents a share.

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Bad news keeps coming for coal industry

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FILE - In this March 28, 2007 file photo, lignite coal is mined at the Freedom Mine in Beulah, N.D. Sixteen years after North Dakota agreed to finance research aimed at revitalizing growth in the state's lignite industry, only one project has been built while other proposals that promised jobs and increased state tax revenue resulted in little more than multimillion-dollar studies that failed to find a clean and cost-effective use for the plentiful but low-grade coal. (AP Photo/James MacPherson, File)

In this March 28, 2007 file photo, lignite coal is mined at the Freedom Mine in Beulah, N.D.  (AP Photo/James MacPherson, File)

Earlier this week, The Associated Press put this out as big news:

Natural gas overtook coal as the top source of United States electric power generation for the first time ever this spring, a milestone that has been in the making for years as the price of gas slides and new regulations make coal riskier for power generators.

Unfortunately, in some ways, the AP story (largely a rewrite of an earlier SNL piece)  buried some relevant context:

The EIA said in a May report that it expects the level of coal-generated electricity to rebound as natural gas prices rise later this year and coal-fired plants return from spring maintenance. Overall, the EIA expects about 36 percent of total U.S. electricity generation to come from coal in 2015 and 31 percent to come from natural gas.

The Guardian had some interesting thoughts on this:

In April a glut of fracked gas from new shale regions drove the price of gas down to just $2.50/million Btu (British thermal unit, a widely-used measure of energy), a 35% drop since February. This oversupply, combined with a routine seasonal shut down of coal plants, caused gas production to creep above coal for the first time.

“Power generators often use the spring months to take their plants offline for maintenance, especially coal plants. This maintenance period happened to coincide with a period of very low natural gas [prices],” said Tyler Hodge who works on the EIA’s Short-Term Energy Outlook.

Hodge said gas prices were expected to rise again in the coming months, and coal would reassert itself at the top of the production table when plants fire up again for the winter.

The back and forth is probably going to continue, but as we’ve reported here before, the long-term picture is not so good for coal, especially in Southern West Virginia.

Coal’s broader problems were made clear again today with a couple of interesting developments.

First, there was this announcement from Walter Energy:

Walter Energy, Inc.  today announced that it has entered into an agreement with certain of its senior lenders on the material terms of a restructuring. To implement this pre-negotiated restructuring, Walter Energy and its U.S. subsidiaries have filed for relief under chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy Court for the Northern District of Alabama. Walter Energy’s non-U.S. operations, including those in Canada and the U.K., are not included in the filings.

There’s more about this (with commentary from SNL’s Taylor Kuykendall, here. Keep in mind that Walter’s focus is mining of steel-making coal. The UMWA, which represents Walter miners in Alabama, said:

The Chapter 11 bankruptcy filing by Walter Energy is yet another indication of just how troubled the American coal industry is today. Walter does not produce coal for the energy market; it mines metallurgical-grade coal that is a raw material in steel production. Increasing competition from other countries in a shrinking worldwide steel market has caused metallurgical coal prices to plunge to levels not seen for years.

Second, there was this announcement from the Sierra Club:

Alliant Energy, a major Iowa utility, has committed to phase out coal use at six of its plants in the state, marking the 200th coal plant to shut down in the United States.  This marks a milestone in the country’s transition to clean energy and underscores Iowa’s growth as a clean energy state. The announced coal plant retirements are the result of the Sierra Club’s Beyond Coal campaign advocacy, which has been a driving force in the national transition to renewable sources of power. The retirement of 200 coal plants nationwide represents the phase out of nearly 40 percent of the 523 U.S. coal plants that were in operation just five years ago. The work of Sierra Club and more than 100 allied organizations to retire these plants and replace them with clean energy has enabled the United States to lead the industrialized world in cutting global warming pollution, and has put the White House on firm footing to push for a strong international climate accord in Paris at the end of this year.

The Sierra Club added:

As coal plants are retiring at record rates, states are also making major investments in wind and solar power, fueling the transition to a clean energy economy. Iowa, for example, already generates more than a quarter of the energy powering homes and businesses from wind farms, ranking first in the nation in power generated by wind. Nearly 7,000 Iowans are now employed in the fast-growing wind energy sector, more than any other state, and Iowa has the potential to generate 100 times its current wind energy output. Iowa provides a model for neighboring states to phase out coal and capitalize on clean energy, which can also be a cost-efficient and commonsense way to meet the U.S. Environmental Protection Agency’s forthcoming Clean Power Plan requirements.   

 Recognizing that coal is dirty, unnecessary and increasingly uneconomical, smart utility and energy companies are transitioning to cleaner, renewable sources of energy. Clean energy sources like wind and solar have increased four-fold since 2005, as the prices for clean energy have plummeted.

 

Patriot Coal: The shoes start to drop

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Patriot Bankruptcy Protest

Here’s the big — but not unexpected — announcement today from again-bankrupt Patriot Coal:

Patriot Coal Corporation  a producer and marketer of coal in the eastern United States, today announced that it has filed with the Bankruptcy Court a letter of intent for a proposed sale of a substantial majority of its operating assets to Blackhawk Mining, LLC (“Blackhawk”), as well as a motion outlining bidding procedures. The contemplated transaction would be consummated pursuant to a chapter 11 plan and is subject to documentation of a definitive asset purchase agreement, bankruptcy court approval of the sale, confirmation of a chapter 11 plan, and other customary conditions. Patriot’s mining operations and customer shipments will continue in the ordinary course during the sale process.

Under the terms of the letter of intent, Blackhawk would issue to Patriot’s secured lenders new debt securities totaling approximately $643 million plus Class B Units providing them an ownership stake in Blackhawk.  In addition, Blackhawk would assume or replace surety bonds supporting reclamation and related liabilities associated with the purchased assets.

 

Bob Bennett, President and Chief Executive Officer of Patriot, said:

We feel strongly that the proposed transaction with Blackhawk is in the best interest of Patriot, and its employees and stakeholders.  Blackhawk shares our dedication to operational and environmental excellence, and this transaction creates a viable path forward in this challenging market environment, enabling our mining operations to continue serving customers and preserving jobs in the communities in which they operate. As always, we remain committed to operating safely and serving our customers throughout this sale process.

There’s been previous media coverage hinting that Blackhawk was the likely buyer here, and also some coverage that provided background on the closely-held private company (see here and here).  (Personally, I found it interesting when the U.S. Mine Safety and Health Administration’s lead investigator at the Upper Big Branch Mine Disaster, Norman Page, showed up at a state mine safety board meeting, having left MSHA and announcing his new job was as a safety officer for Blackhawk).

But to understand part of what’s going on here with Patriot, you have to read beyond the press release to the company’s court filing, which explains that properties excluded from the deal with Blackhawk include Patriot’s Federal No. 2 Mine in Fairview, W.Va., as well as “Corridor G, Jupiter, all other Logan County assets” — in other words, Patriot properties with long-standing United Mine Workers contracts or — in some cases — with really big and long-term environmental liabilities (see here and here).

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Jim Justice sued … again

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Jim Justice

In this July 2, 2010 file photo released by The Greenbrier Resort, The Greenbrier Resort owner and chairman Jim Justice attends the gala opening of The Greenbrier Casino Club, in White Sulphur Springs, W.Va.  (AP Photo/Evan Agostini for The Greenbrier Resort, File)

Last evening, The Associated Press picked up on a new lawsuit filed against billionaire coal operator/businessman/gubernatorial candidate Jim Justice:

A lawsuit says two of billionaire Jim Justice’s affiliated companies owe $2 million from a 2013 coal deal.

In Tuesday’s complaint in Beckley federal court, Pennsylvania resident Thomas K. Lampert sued Tams Management, Inc. in Beckley and Southern Coal Corporation, a Delaware company doing business in Roanoke, Virginia.

The lawsuit says the companies didn’t pay $2 million from a March 2013 agreement for equity and membership interests in Newgate Development of Beckley, LLC.

It says Lampert’s trust never received the agreed-upon $4 per ton for the first 500,000 tons of coal mined and sold.

The AP report was short, and didn’t contain these interesting details from the suit:

One such specified act or omission is any failure to comply with the “Purchaser Permit Approval Obligation,” whereby Tams was required to pursue and secure
approval, within ninety (90) days, of the transfer of all applicable permits for the Three Marie Mine located in the Slab Fork District of Raleigh County, West Virginia.

Tams further agreed that “time shall be of the essence” with respect to the Purchaser Permit Approval Obligation, and that any failure to meet the Purchaser Permit Approval Obligation “shall be a material event of default.”

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COAL TRAIN

A C.S.X. train loaded with coal winds its way into the mountains in this Nov. 21, 2004 file photo taken near the New River at Cotton Hill in Fayette County, W.Va.  (AP Photo/Jeff Gentner)

The latest coal production forecast is out from West Virginia University’s Bureau for Business and Economic Research, and the news isn’t good:

West Virginia’s coal industry has seen production decline significantly over the past several years. After climbing to nearly 158 million short tons in 2008, the state’s coal mine output has tumbled in each successive year to an annual total of approximately 115 million short tons in 20141─or a cumulative decline of 27 percent. The overall rate of decline was much smaller during 2014, as mines in the state produced roughly 0.8 percent fewer tons of coal in comparison to 2013. Unfortunately, however, this slower rate of decline is expected to be temporary and preliminary data already indicate mine output fell 4 percent on a year-over-year basis during the first quarter of 2015 to an annualized rate of 110 million short tons.

While coal production within West Virginia has declined rapidly over the past several years, the downward trend in statewide production has been much more significant when compared to most of the nation’s other major coal-producing regions. Aggregate non-West Virginia coal production in the US was estimated to have increased 1.7 percent during calendar year 2014, leaving it at about 87 percent of production levels achieved during 2008. As a result, this has caused West Virginia’s market share of total U.S. coal tonnage to fall appreciably over the past several years, retreating from 13.5 percent in 2008 to 11.5 percent in 2014.

 Why is this happening?

The fall-off in the state’s coal production has been driven by a combination of weak export demand, declining domestic use of coal in electricity generation, changes in emissions compliance standards for utilities and increasingly challenging geologic conditions in Southern West Virginia.

The short-term forecast:

The baseline forecast calls for state coal production to decline to approximately 104 million short tons in calendar year 2015 before contracting further to 98 million short tons in 2016. Numerous factors are expected to weigh on West Virginia coal production over the next two years, with declines likely in both the state’s northern and southern coalfields. After replenishing their coal stockpiles following an extremely cold first quarter of 2014, inventories of coal at electric utilities grew appreciably over the latter half of the year and have stayed at relatively high levels through the first several months of 2015 due to increased use of natural gas. Utilities are expected to draw down from existing stockpiles slowly in 2015, which will weigh heavily on thermal coal production. Domestic industrial use and export demand for coal are also expected to remain weak during the next two years.

And the long-term forecast:

Coal production in West Virginia is expected to rebound moderately between 2017 and 2020, rising to an annual average of nearly 105 million tons in 2020. Retirements of coal-fired generation will taper off and, while no measurable amount of capacity additions to the coal-fired fleet are likely, an expected increase in natural gas prices should allow coal to regain some share of electricity generation. For the remainder of the outlook period, statewide coal production is expected to fall, contracting to less than 96 million short tons in 2035. This will be driven entirely by losses in production in the state’s southern coalfields. Northern West Virginia production will likely experience a solid rebound through 2020 that will then remain relatively stable level over the remaining portion of the forecast.

Report: Murray planning 1,800 layoffs

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Robert Murray

Here’s the report out today from the Wall Street Journal:

Coal miner Murray Energy Corp. is set to announce layoffs of around 1,800 workers at nine locations on Friday, according to a person familiar with the matter, dealing another blow to the coal-mining industry in Appalachia.

The planned layoffs, which represent about 21% of Murray’s workforce, will come largely at mines in West Virginia and Ohio, a region already reeling from the impact of abundant natural gas and a global coal glut.

The story continues:

Robert Murray, the 75-year-old founder and chief executive of the company, made the decision Wednesday after a 12-hour meeting with operations managers, according to the person familiar with the matter.

The company decided to make much bigger cuts than it had previously been considering because of growing concerns about the slumping market for thermal coal, the person said.

The company plans to send formal notice on Friday to workers at the Monongalia County Coal Co. in West Virginia, the mine that will see the largest layoffs. The mine had been idled earlier this spring, putting several hundred miners out of work.

Asked to confirm the Journal’s report, a Murray Energy spokesman said the company would have a statement this afternoon …

UPDATED: Word of these layoffs came first in reports from the Pittsburgh Business Times and the Tribune-Review, both of which had stories yesterday, based on comments Bob Murray made at an industry conference.

Patriot Coal files Chapter 11 — again

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patriotlogoHere’s the new filing this morning in U.S. Bankruptcy Court in Richmond, Va., from Patriot Coal Corporation.

This comes only a few weeks after Patriot announced a major management shakeup (see here and here), and as the company was working with financial advisers to come up with a restructuring plan.

And, obviously, it wasn’t so incredibly long ago that Patriot emerged from a previous Chapter 11 bankruptcy process. In a press release just issued, Patriot said that the company “intends to complete its review of strategic alternatives and present a value-maximizing restructuring plan to the Court as quickly as possible.”

The release continued:

Patriot expects its customer shipments and mining operations to continue in the ordinary course during the restructuring process. The Company has received a commitment for $100 million in “debtor in possession” (“DIP”) financing led by a consortium of the Company’s secured debt holders to support its continued operations. Upon approval by the Court, the DIP financing, combined with cash generated from ongoing operations will provide sufficient liquidity to support the business during the restructuring process.

Bob Bennett, President and Chief Executive Officer of Patriot, said:

In light of the challenging market conditions, and after a comprehensive review of our alternatives, the Board and management team have determined that this process represents the best path forward for Patriot and its stakeholders.  Patriot is dedicated to operational and environmental excellence and, as always, we remain committed to operating safely and serving our customers throughout this restructuring process. We greatly appreciate the continued support of our customers and our suppliers and the ongoing hard work of our employees.

 

Bob Murray makes another big buy

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Robert Murray

Another big coal deal by Ohio-based Murray Energy was announced last night. Here’s the press release:

Murray Energy Corporation and Foresight Energy GP LLC (“FEGP”) have announced that Murray Energy and Foresight Reserves, LP (the current owner of FEGP) have entered a definitive agreement for a transaction whereby Murray Energy will acquire a controlling interest in Foresight Energy LP (NYSE: FELP) and FEGP (together with FELP, “Foresight Energy”), to create the premier coal mining company in the United States, controlling over nine (9) billion tons of coal reserves, and one of the leading coal companies in the world. Following the closing, Mr. Christopher Cline, the founder of Foresight Energy, will remain a significant investor in Foresight Energy, maintaining a twenty-two and five tenths percent (22.5%) equity interest in FEGP and an approximately thirty-five percent (35%) interest in FELP and will be actively involved as a member of the Board of Directors of that Company.

Bob Murray said in that release:

Mr. Chris Cline, who is very much respected in the United States coal industry, and his team at Foresight Energy, have built and operated four of the most efficient coal mines in America utilizing the longwall mining technique. We are pleased that these operations will join Murray Energy’s twelve mines employing thirteen longwall systems.

We are very excited about this new venture and the resultant world class organization. It is truly a transformative event for our companies and the entire world coal industry.

Of course, this deal comes after Murray Energy’s purchase in late 2013 of the northern West Virginia operations of CONSOL Energy, a transaction we’ve covered before here, here and here.

In explaining this latest deal, the St. Louis Post-Dispatch notes:

The combined 9 billion tons of coal reserves held by the new company would represent one of the industry’s largest.

St. Louis-based Peabody Energy, which bills itself as the world’s No. 1 privately held coal miner, reported 7.6 billion tons of proven and probable reserves, according to its most recent annual report.

Foresight recently joined the ranks of publicly held St. Louis coal companies, offering units to investors in June. It has been one of the few big miners to post profits in recent quarters, in part because its Illinois coal holdings and longwall mining equipment allow it to produce tons of coal cheaply.

All of its holdings are in the resurgent Illinois Basin, which fell out of favor decades ago as power plant operators sought cleaner-burning coal to cut back emissions. But now that many of those power plants have installed expensive scrubbing technology, Illinois coal has become a cheaper alternative to more expensive Appalachian varieties.

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Arch Coal closing Cumberland River complex

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Here’s the news announced late yesterday afternoon by Arch Coal:

APPALACHIA, Va., July 21, 2014 — Arch Coal, Inc. (NYSE:ACI) today announced that it is idling the Cumberland River Coal Company complex (“Cumberland River”), located in Wise County, Va., and Letcher County, Ky. Cumberland River comprises two underground operations and related facilities. The mining complex previously shuttered two contract mines during the second quarter of 2013.

With this move, we are actively responding to currently challenged metallurgical coal markets while striving to enhance our overall competitive cost position in Appalachia,” said John W. Eaves, Arch’s president and chief executive officer. “Our strategy is to increasingly shift our portfolio toward higher-margin, lower-cost metallurgical coal operations, while retaining our valuable reserves for when market conditions strengthen in the future. We will continue to serve our customers here and abroad with the high level of quality they have come to expect from Arch.”

In total, 213 full-time positions will be eliminated by idling Cumberland River, and the company is taking steps to provide opportunities at other Arch subsidiaries where available.

“We deeply regret the need to take this action,” said Eaves. “We thank the men and women at Cumberland River for their dedication, hard work and strong commitment to operating in a safe and responsible manner.”

Cumberland River sold approximately 290,000 tons in the first half of 2014, consisting primarily of higher-cost metallurgical grade coal. The decision to idle operations at Cumberland River will reduce Arch’s annual 2014 metallurgical coal sales volumes by approximately 200,000 tons. As such, the company now expects to ship between 6.3 million and 6.9 million tons of metallurgical coal for 2014. Arch plans to provide an update regarding its full year 2014 expectations in its second quarter 2014 earnings release on July 29, 2014.

Cumberland River Coal Company is a subsidiary of Arch Coal, Inc.’s Catenary Coal Holdings, Inc.

New coal fight: Bob Murray vs. Chris Cline

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Robert Murray

Murray Energy President Bob Murray certainly is willing to use the legal system when he feels he’s been wronged.  So the latest report from The Associated Press is probably not that big of a surprise:

A leading U.S. coal company is suing a rival with which it shared confidential business plans during a deal that later fizzled, saying the competitor used the proprietary details to buy up land in southern Illinois to thwart the accuser’s expansion plans.

Murray Energy Corp., a privately held Ohio-based company with operations in Utah, alleges in a lawsuit Saline County, Illinois, that Williamson Energy LLC breached terms of a confidentiality agreement in 2008 when Murray was trying to sell it operations in the southern Illinois.

The story explains:

Under the agreement, the lawsuit claims, Williamson pledged not to disclose or use any of Murray’s confidential information to acquire mineral or property rights related to Murray’s operations for eight years.

Murray claims Williamson has done just the opposite since 2009, buying cherry-picked parcels and mineral rights at above-market prices — in some cases, four times the going rate — “directly in the path” of Murray’s mining operations. Murray alleges it planned to buy or lease those tracts, that the parcels are too small to offer mining potential to Williamson, and that Williamson bought the land “to hinder MEC’s operations to gain an unfair competitive advantage.”

Oddly, what AP reporter Jim Suhr doesn’t seem to have explained — at least in none of the versions of the AP story I’ve seen — is that the target of Murray’s lawsuit, Williamson Energy parent company Foresight Energy, is owned by another fairly colorful coal operator, West Virginia native Chris Cline (see here, here and here).

I’ve posted a copy of Murray Energy’s press release about lawsuit here and you can read the full complaint for yourself here.

Coal industry legend ‘Buck’ Harless has died

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I’m just back in the office after an extended holiday break, and we’re learning today of the overnight death of James H. “Buck” Harless, a legendary figure in West Virginia’s coal industry. Here’s the report from West Virginia Public Broadcasting:

Ninety four-year-old James “Buck” Harless has passed away. Harless was born in Gilbert, W.Va. in Mingo County and worked as a miner for the Red Jacket Coal Company for several years after high school.

He gave that up when he bought the Gilbert Lumber Company, and eventually grew it into the multi-million dollar conglomerate, International Industries. The company is based primarily in coal mining and timber, but also includes manufacturing, hotel and real estate industries.

Harless’ philanthropy is felt throughout his home state and especially in his home town of Gilbert.

For some context about Mr. Harless, out-of-state readers may want to go back to this piece from the Wall Street Journal, which reported:

William Raney opened the West Virginia Coal Association’s annual meeting here last month by congratulating the group for helping George W. Bush win this traditionally Democratic state.

“You did everything you could to elect a Republican president,” Mr. Raney, the organization’s director, told the 150 industry executives. Now, “you are already seeing in his actions the payback, if you will, his gratitude for what we did.”

Mr. Raney was the middleman in an unlikely triumvirate that helped pull off a political coup and gave coal a significant edge in this year’s energy debate. His partner in the effort was James H. “Buck” Harless, the union-battling patriarch of West Virginia’s coal industry, who encouraged Mr. Raney and the state’s coal establishment to back Mr. Bush early on and urged the campaign not to cede West Virginia to Al Gore. The third ally was Charles “Dick” Kimbler, an unemployed miners’ union official who blamed Clinton-Gore environmental policies for killing his job and was enlisted by Mr. Raney to neutralize the Democrats’ advantage with union voters.

With their assistance, Mr. Bush carried a state that hadn’t backed a nonincumbent Republican for president since Herbert Hoover in 1928. That gave Mr. Bush West Virginia’s five electoral votes — the equivalent of his victory margin over Mr. Gore. Now, the industry is enjoying a decidedly coal-friendly president, who is reversing an anticoal-policy trend that began gathering momentum when Mr. Bush’s father signed the Clean Air Act of 1990.

At 81 years old, Mr. Harless is the last of West Virginia’s homegrown coal barons. Long a local kingmaker, he hadn’t ventured into national politics much. But in April 1999, he crossed the narrow wooden bridge from his island home on the Guyandotte River to his helicopter pad, took a chopper to his private jet at the Charleston airport and flew to Austin, Texas, to meet then-Gov. Bush.

At the time, Mr. Bush’s nascent campaign saw little hope of carrying West Virginia and was interested in Mr. Harless mainly for his fund-raising potential. At a luncheon for two dozen prospective fund-raisers, the governor and the coal titan hit it off immediately, with Mr. Bush dubbing his guest “Big Buck.” At one point, Mr. Harless asked Mr. Bush how his views on the environment compared with those of Mr. Gore, who had advocated increasing taxes on fossil fuels in order to discourage their use.

The candidate replied that he favored fossil fuels but didn’t want to let Mr. Gore paint him as being against the environment, so he planned to depict his opponent as an extremist, Mr. Harless recalls. “It was obvious then that he wasn’t going to be like Gore and stop coal,” Mr. Harless adds. A White House spokesman said he wouldn’t confirm details of Mr. Bush’s conversations with supporters.

Fueling the industry’s fears of a Gore presidency was a fierce attack that environmentalists were waging against mountaintop-removal mining. The industry contends the practice is the only economically viable way to extract coal from certain locations. Mr. Harless praises the resulting flat spaces as an added benefit for this mountainous state; he owns part of an industrial park on a flattened mountain near his tiny hometown of Gilbert. His own company has blown up several peaks and plans to start work on another this year to take advantage of rising coal prices.

The Gazette named Mr. Harless its “West Virginian of the Year” back in 1983, and I’ve posted a copy of the lengthy profile piece that was published on Jan. 1, 1984, here, and you can read Dr. Paul Nyden’s review a Buck Harless biography here. UPDATED: An initial Gazette story by Dr. Nyden is posted here, and explains.

I certainly won’t claim to have known him very well, but I did cross paths with Mr. Harless any number of times professionally. I recall early on writing about how he resigned from two important state posts over his belief that then-Gov. Gaston Caperton was not using State Police troopers to quell picket line violence during the 1989 Pittston Coal strike.

And in 1996, I did a lengthy interview in which Mr. Harless expressed concern about proposals for more chip-mills and a large pulp mill, saying that West Virginia needed more value-added industries such as furniture factories.

Patriot Coal set to emerge from bankruptcy

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Patriot Bankruptcy Protest

The Associated Press had the story yesterday out of St. Louis:

A federal bankruptcy court has approved Patriot Coal’s reorganization plan, clearing the way for it to emerge from 17 months of bankruptcy, the St. Louis-based company said Tuesday as it finished wrapping up its exit financing.

The story continued:

As part of its push to regain its financial footing since filing for Chapter 11 bankruptcy in July of last year, Patriot Coal Corp. lined up $586 million in financing from Barclays and Deutsche Bank, having already obtained a $250 million infusion through a rights offering backstopped by Knighthead Capital Management LLC.

Key to Patriot’s strive to exit bankruptcy was its October settlement with former corporate parent Peabody Energy Corp. of months of legal tangling over retiree health benefits. Under that deal, Peabody, which spun off Patriot in 2007, will spend $310 million over four years to fund the benefits and provide about $140 million in letters of credit to Patriot.

In a press release, Patriot CEO Ben Hatfield said:

This marks the final step in Patriot’s financial restructuring.  We look forward to a new beginning as a well-capitalized company providing a competitive product to the electric utility and steel industries.

 

‘Coal in its current form is simply unsustainable’

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The latest projections from the International Energy Agency are out this morning, and here’s how they read:

Tougher Chinese policies aimed at reducing dependency on coal will help restrain global coal demand growth over the next five years, the International Energy Agency (IEA) says in its annual Medium-Term Coal Market Report released today. Despite the slightly slower pace of growth, however, coal will meet more of the increase in global primary energy than oil or gas – continuing a trend that has been in place for more than a decade.

Coal industry supporters will love this quote from IEA Director Maria van der Hoeven said:

Like it or not, coal is here to stay for a long time to come. Coal is abundant and geopolitically secure, and coal-fired plants are easily integrated into existing power systems. With advantages like these, it is easy to see why coal demand continues to grow.

Those coal supporters — especially those who oppose any efforts to do anything about coal’s carbon footprint — need to read on, because van der Hoeven also said:

But it is equally important to emphasise that coal in its current form is simply unsustainable.

Check out the prepared remarks here, because there’s more:

There is no denying the controversial reality of coal, and its dominance of power generation worldwide. No fuel draws the same ire, particularly for its polluting qualities both locally and in terms of greenhouse gas emissions. And yet no fuel is as responsible for powering the economic growth that has pulled billions out of poverty in the past decades. As we look to the long term, we must ask what role coal has to play in the energy mix that we want to achieve – because there will be a role. But without mitigating the polluting effects of coal, pursuing business as usual will have enormous and tragic consequences.

Continue reading…