Coal Tattoo

‘Coal in its current form is simply unsustainable’

Coal

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.

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WV PSC approves John Amos transfer

This just in from the West Virginia Public Service Commission:

amosThe Public Service Commission of West Virginia issued an Order today approving the petition to allow Appalachian Power Company (APCo) to acquire two-thirds of the John E. Amos 3 generating unit. There will be no impact on rates as a result of this transaction. Because of a significant deficit in generating capacity to serve their West Virginia customers, last year APCo filed a petition with the PSC to allow the transfer to APCo of 867 MW of generating capacity presently owned by Ohio Power Company (OPCO), an affiliate.

In the same Order, the Commission deferred ruling on a proposed merger of Wheeling Power Company (WPCo) into APCo stating the companies must provide a longer-term, achievable and economic plan to serve the WPCo load before the merger is consummated. The Amos acquisition will resolve APCo generation capacity deficit without the merger until 2015 when APCo has scheduled the retirement of certain other generation facilities.

The Commission deferred ruling on APCo’s proposal to acquire one-half of the Mitchell Power Plant. The Mitchell acquisition, which requires the approval of both the Virginia State Corporation Commission (VSCC) and the West Virginia Commission, has already been denied by the VSCC. In its Order today the West Virginia Commission stated that “reliance on a transaction that is critical to an overall long-term capacity plan but which cannot go forward because of regulatory roadblocks in other jurisdictions, is not realistic or reasonable at this time.”

Intervenors in the cases included the Consumer Advocate Division (CAD); West Virginia Energy Users Group (WVEUG); the West Virginia Citizen Action Group (CAG); the Sierra Club; the West Virginia Oil and Natural Gas Association (WVONGA); and the West Virginia Building and Trades Council, AFL-CIO; and Steel of West Virginia. APCo and WPCo together serve over 478,000 customers in West Virginia.

For previous coverage and background, see here, here  and here. To read the PSC ruling, click here.

Kentucky Weather

Snow falls in the downtown area of Maysville, Ky. Sunday, Dec. 8, 2013. (AP Photo/The Ledger Independent, Terry Prather)

Here’s how the Lexington Herald-Leader (which played no small role in pushing for this discussion, with its 50 Years of Night series) started its report from the SOAR meeting earlier this week:

Leaders grappling with a painful downturn in coal jobs in Eastern Kentucky got a primer Monday on how another state dealt with a similar collapse in its mining region.

The situation 30 years ago in the iron-ore belt in northeastern Minnesota was dire.

Mining jobs dropped by more than 60 percent in 18 months and people started moving out, at times stopping by the bank on the way out of town to drop off keys to houses and cars they couldn’t pay for, said Joe Sertich, a former community-college president in the region known as the Iron Range.

The Eastern Kentucky coalfield has been similarly battered by layoffs. The coal industry has cut 6,000 jobs since mid-2011, with some counties losing more than half the jobs that were once the bulwark of their economy …

The Iron Range had some things in place to deal with its downturn that Eastern Kentucky doesn’t, however.

One was the Iron Range Resources and Rehabilitation Board, which is headed by Sertich’s son, Tony, a former Minnesota state lawmaker who also spoke at Monday’s development summit.

The state had set the board up in the 1940s to promote investment and workforce development in its iron-ore region, so when the industry shriveled there was a panel in place to help guide a response.

The panel paid for short-term public-works projects to cushion the blow of mining losses — helping stem the population loss — then invested in longer-range efforts to attract new businesses and boost tourism and other sectors, Tony Sertich said.

Planners also brought better coordination to community colleges in the region and put more focus on technical education and training.

Sertich said the long-term effort has been successful. The unemployment rate in the region is about 6 percent, and there has been nearly $500 million in public and private investment in the region since 2010, which is projected to create more than 4,100 jobs, he said.

So it’s clear there is hope, and there are ways to move forward … it’s all a question of whether the people of the coalfields — and their political and business leaders — will help things along in that direction. This goes not only for Eastern Kentucky, but also here in West Virginia.

The big news here the last few days has been the naming of E. Gordon Gee as interim president of West Virginia University, and it’s an indication of how far West Virginia has to go in facing facts about the coal industry’s role in the state that so few mentions have been made of Gee’s connection to Massey Energy, where he served on the board and headed a key committee that was supposed to make sure Massey protected the environment an the health and safety of its workers. And look around to see how much media coverage West Virginia journalists gave to a major new report that re-examined the question of “Who Owns West Virginia?” and found coalfield landownership is still concentrated in the hands of a few large corporations.

In an editorial following the Kentucky Soar Summit, the Courier-Journal of Louisville noted that:

… The problems of Eastern Kentucky are stubborn and deep. They include generational poverty, high unemployment, low educational attainment, poor health and entrenched political corruption.Such problems will require a sustained effort to help the people of Eastern Kentucky, who account for about one-fifth of Kentucky’s population, become better educated, find meaningful employment and lead productive lives.

This event in Eastern Kentucky was far from perfect. The voices on the stage weren’t diverse enough. There was still too much talk about coal coming back, and not enough about other energy options. Young people — who have far more to lose in all of this than the rest of us — weren’t heard from nearly enough. But then there’s this, as noted by that Courier-Journal editorial:

Gov. Beshear was particularly blunt in calling for citizens and elected leaders to face reality about coal, once king in Eastern Kentucky but now a fading force in jobs and energy.

While coal has been a “foundation” of the region’s economy and remains important, “there should be no doubt in anyone’s mind that its role as an employer is reducing,” he said. “To ignore that is to blindfold ourselves and stick our heads in the sand.”

Gov. Beshear described as “urgent” the need to address challenges facing the region.

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Census Dying Counties

Over in Eastern Kentucky, a wide variety of citizens, business leaders and government officials are getting to work this morning, with the start of Shaping Our Appalachian Region, or SOAR, an event aimed at jump-starting discussions about how to improve the lives of the people of the coalfield region (watch live here). As the Lexington Herald-Leader explained this weekend:

The meeting Monday is part of that effort, started by Republican U.S. Rep. Harold “Hal” Rogers, whose 5th District includes the Eastern Kentucky coalfield, and Gov. Steve Beshear.

The two appointed a panel of more than 40 people — mostly business and education leaders — to help guide the process. The Rural Policy Research Institute is assisting.

People who attend the meeting will be able to submit suggestions for boosting the region’s economy, and there will be panels on entrepreneurship, tourism, lifelong learning, investment in the region and other issues. More than 1,500 people have registered, Beshear’s office said.

The summit is important, but it’s a beginning, not the end, Rogers said.

It will take hard work and time to accomplish whatever recommendations it produces, the 17-term congressman said.

“I hope that it’s the beginning of a long-term effort to revitalize the economy of that whole region,” Rogers said.

The Herald-Leader’s weekend editions had a two-day collection of essays focused on these sorts of discussions. The paper explained:

No one should expect an overnight transformation. But here you can read some interesting ideas for getting started.

We solicited a variety of viewpoints, and the response was so strong we have an overflow of commentaries to publish in coming weeks.

A place and people whose back-breaking work and natural resources produced huge wealth for other places and people still struggle to thrive. Irreversible declines in the coal industry and in coal severance tax revenue have left no choice but to try something new — after 50 years of night, it’s time for a new day.

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CONSOL closes on deal with Murray Energy

Robert Murray

Here’s the news announced today by CONSOL Energy:

CONSOL Energy Inc.  announced today that it has closed on its previously announced agreement to sell its Consolidation Coal Company (CCC) subsidiary, which includes all five of its longwall coal mines in West Virginia, to a subsidiary of Murray Energy Corporation (Murray Energy) for $3.5 billion in value.  The transaction was originally announced on October 28, 2013.  

“The completion of this complex transaction this year,” commented J. Brett Harvey, chairman and CEO, “enables us to enter 2014 with our focus of achieving our gas growth production targets of 210–225 Bcfe for 2014 and 30% annual gas production growth in 2015 and 2016.”

The total consideration paid in the transaction includes $850 million in cash paid at the closing and future payments expected to total nearly $184 million in value resulting from the retention of a royalty on select reserves and tolling fees at CONSOL’s Baltimore Terminal. CONSOL Energy is also significantly de-levering its balance sheet in the transaction, with Murray Energy acquiring $2.4 billion of CONSOL balance sheet liabilities. Additionally, Murray Energy is acquiring CONSOL’s UMWA 1974 Pension Trust obligations, which have a present value of approximately $941 million. The cash purchase price is subject to a working capital adjustment, which is expected to be immaterial.

As we have reported before:

The $3.5 billion transaction frees CONSOL to focus more on its increasing interest in the region’s growing natural gas market, and roughly doubles the size of Ohio-based Murray’s workforce and annual coal production.

In separate statements, Murray Energy and CONSOL said they had entered into a purchase agreement that includes CONSOL’s McElroy, Shoemaker, Blacksville, Loveridge and Robinson Run mining complexes.

The mines, using advanced longwall machines, are located in Marion, Marshall and Monongalia counties, and employ about 2,800 hourly workers who are represented by the United Mine Workers union. They are five of the top six underground mines in West Virginia, with nearly 30 million tons of combined production in 2012, according to federal data.

The deal also includes coal reserves, related river transportation and dock facilities and other assets.

“No company has developed a better legacy with its employees, with its customers, with the financial markets, with the regulatory agencies, or with the public in general, over many decades than has CONSOL and Consolidation Coal,” said Robert E. Murray, president and CEO of Murray Energy. “Murray Energy intends to preserve this well-earned legacy.”

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Alpha close to $265 million deal in safety suit

ALPHASIGN2

Early this morning, Alpha Natural Resources issued its latest quarterly financial statement, and it certainly has some interesting news:

Alpha has made significant progress toward reaching a tentative understanding to settle for $265 million the securities class action brought by Massey stockholders in early 2010 alleging deficiencies in Massey’s disclosures of safety information.

The statement continues:

Additional material terms must still be negotiated. If a definitive settlement agreement is achieved and approved by the court, the settlement would result in the dismissal of the action. Alpha expects insurance recoveries of approximately $70 million to help cover the cost of the settlement.

And:

In connection with these developments, Alpha recorded an increase in its loss contingency accruals of approximately $115 million in the third quarter. Alpha plans to continue settlement discussions in an effort to resolve all outstanding issues, including the form of consideration. Whether Alpha can resolve those issues, and when, remains uncertain, but if the case can be resolved, it would staunch the uncertainty, distraction, risks and potential costs that pursuing this litigation would involve, and would close the book on the most significant Massey-related litigation issues passed to Alpha in the acquisition.

Ky. leaders announce coalfield economic summit

Coal

Here’s some news from the folks at the Herald-Leader in Lexington:

Stung by the loss of nearly 6,000 coal jobs in Eastern Kentucky since mid-2011, Democrat Gov. Steve Beshear and Republican U.S. Rep. Hal Rogers announced Monday a summit to come up with ideas to improve the region’s crippled economy.

Beshear and Rogers also announced a planning committee of more than 40 people — many from the private and education sectors — to come up with topics and goals for the summit, which will be Dec. 9 at the Eastern Kentucky Exposition Center in Pikeville.

People involved in the effort acknowledged Monday that there have been many plans put forth in the past to develop or diversify the economy of Appalachian Kentucky, with little progress made.

Ideas will have to come from within the region if the new effort is to work, Beshear said.

“To be successful, the people of Appalachia must step up and take ownership and responsibility for their own future,” Beshear said at a news conference at Hazard Community and Technical College.

 The story continues:

Rogers, who has been a strong critic of tougher environmental rules on mining and burning coal put in place by the Obama administration, said he would continue fighting for the coal industry.

But Monday, he said the region needs to embrace an economy defined by technology and innovation.

“Our best resources are a different energy source” than coal, Rogers said. “It’s our people.”

The event Monday was a bipartisan show of support for the effort to come up with a plan for the region. Kentucky House Speaker Greg Stumbo, D-Prestonsburg, and Senate President Robert Stivers, R-Manchester, also spoke.

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murrayhorizont2We wrote about two weeks ago regarding the widespread speculation that Murray Energy was going to buy CONSOL Energy’s major coal operations in Northern West Virginia, and this morning that deal was made official.

The first thing I saw was Pittsburgh-based CONSOL’s statement saying:

CONSOL Energy Inc. (NYSE: CNX) has taken a transformative step to advance its E&P growth strategy. The company has entered into an agreement to sell its Consolidation Coal Company (CCC) subsidiary, which contains all five of its longwall coal mines in West Virginia, to a subsidiary of Murray Energy Corporation (Murray Energy) for $3.5 billion in value.

“While this transaction furthers CONSOL’s E&P growth strategy,” commented J. Brett Harvey, CONSOL’s chairman and CEO, “the sale of these five mines – assets that have long contributed to America’s economic strength and our company’s legacy – was a very difficult decision for our team. The employees at these mines are among the safest and most productive miners anywhere in the world.  In the end, we concluded that the time had come to sell these mature assets to ownership whose strategic direction is more aligned with those mines.”

The CONSOL statement explained:

The CCC mines being sold are McElroy Mine, Shoemaker Mine, Robinson Run Mine, Loveridge Mine, and Blacksville No. 2 Mine. Collectively, these mines produced 28.5 million tons of thermal coal in 2012. Murray Energy is acquiring approximately 1.1 billion tons of Pittsburgh No. 8 seam reserves.

CONSOL’s River and Dock Operations are included in the transaction.  In 2012, the fleet of 21 towboats and 600 barges transported 19.3 million tons of coal and other commodities along the upper Ohio River system.

Murray Energy issued its own statement, quoting company president Bob Murray saying:

No Company has developed a better legacy with its employees, with its customers, with the financial markets, with the regulatory agencies, or with the public in general, over many decades, than has CONSOL and Consolidation Coal. Murray Energy intends to preserve this well-earned legacy.

The Murray statement has some figures that explain the size of this deal:

Murray Energy direct employees:  3,300 before the transaction, and 7,100 after the transaction; annual coal production, 30.1 million tons before, and 58.6 million tons after; coal reserves of 859 million tons before the transaction, and 2,396 million tons after the transaction.

Murray  said:

This is truly a momentous time for the combined employees of Murray Energy Corporation and for our company.

The United Mine Workers of America, which represents 2,800 miners at the operations Murray is buying from CONSOL, issued its own statement:

This changes nothing for our members with respect to the terms and conditions of their employment. Our collective bargaining agreement does not go away with this transaction, and our members remain covered by its provisions. There will be no changes in pay, benefits, insurance, schedules, working conditions, safety provisions, grievance procedures or any other language in the contract.

 

 

The decline of coal and W.Va.’s budget shortfall

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)

It’s always interesting to see how coal industry officials will jump to use any little tidbit in the media to try to make their argument that the Obama administration’s “war on coal” is somehow unfairly punishing West Virginia, destroying coalfield communities and dismantling our state budget in the process.

Some folks are doing that today with parts of Gazette statehouse reporter Phil’s Kabler’s latest effort at covering the state budget, in which Phil told us:

Based on current revenue projections, legislators will need to cut spending by about $80 million in the state budget that begins next July, and that budget gap is projected to grow to $265 million for 2015-16, state Budget Office Director Mike McKown told legislators Monday.

“The way you do that is to cut budgets or to raise taxes, and there’s no appetite to raise taxes,” McKown told a legislative interim committee.

Here’s the part about the coal industry:

… The state economy of late has been flat, primarily because of declining coal sales, he said.

For the first three months of the 2013-14 budget year, tax collections are down 3.4 percent.

“As long as our revenues are flat and our expenses go up, we’re getting into structural problems with our budget,” McKown said.

Electrical power plants are converting from coal to cheaper, cleaner natural gas, and while the state collects a 5 percent severance tax on each source of energy, statewide coal sales last year were about $8 billion, while natural gas sales totaled only about $2.3 billion, McKown said.

Severance taxes account for about 11 percent of the state’s general revenue budget, he said.

Also, natural gas production is much less labor-intensive, McKown said, pointing out that consumer sales taxes and personal income taxes combined account for 72 percent of the state budget.

“Coal miners make a lot of money, pay a lot of income taxes, and buy a lot of things,” he said, outlining the impact of declining coal employment on the budget.

Fair enough. There’s simply no question that the coal industry has a big impact on our state’s economy and, especially, on the state government budget.  In a coal industry-sponsored study published in 2010, researchers from WVU and Marshall documented this impacts. Of course, that’s not the whole story. Downstream Strategies explained in a separate report that the coal industry actually costs the state government budget more than the industry provides to the state.

But the media reports  don’t exactly tell the full story about the current budget situation. They leave out some important facts that would help readers understand that a big hunk of the budget problems West Virginia officials now face are really self-inflicted ones. For example, as the West Virginia Center for Budget and Policy has tried to explain, state leaders decided to phase out the business franchise tax and reduce the corporate net income tax rate. The center warned back in early 2011:

Because the Legislature did not replace the lost tax revenue with corresponding tax increases, it will become increasingly harder for the state to fund services and programs.

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What if Murray buys CONSOL’s W.Va. mines?

Robert Murray

It seems like a lot of folks in the coal and energy media are pretty convinced that Murray Energy is getting ready to buy most of CONSOL Energy’s West Virginia coal-mining operations.  We’ve seen stories so far this week from Barron’s, the Wall Street Journal, and the Pittsburgh Tribune-Review.

Privately-held Murray Energy was among the companies listed in last week’s Wall Street Journal story about CONSOL’s efforts to restructure itself, as were Chris Cline’s Foresight Energy and Alliance Resource Partners.  The more recent Wall Street Journal item also mentioned a possible bid by coal industry veteran Ben Statler, formerly of CONSOL and PinnOak Resources.

Much of the media speculation appears to be traced back to this information, recounted by the Tribune-Review in its story:

Coal & Energy Price Report in Knoxville, Tenn., said Consol is “very close” to a deal to sell the mines to St. Clairsville, Ohio-based Murray Energy Inc., newsletter editor Jim Thompson said, attributing his information to multiple industry contacts without identifying them.

He said Consol likely will sell its Shoemaker, Robinson Run, McElroy, Blacksville and Loveridge mines, plus related assets such as barges and transportation equipment “as a pure thermal coal domestic play.” Those mines produce coal for electricity generation and have output of 28 million to 30 million tons a year.

Thompson did not know the price, but Clarkson Capital Markets analyst Jeremy Sussman in New York said in a report that Shoemaker, Robinson Run and McElroy may be worth about $450 million each.

The story continued:

Thompson called Murray Energy and CEO Bob Murray a “very strong player in the industry,” and the transaction would double its output, adding 30 million tons to the 30 million in annual production it already has. “It would give them a stronger position in northern Appalachia and better access to reserves they already own. It’s about as close as you can come to a win-win for Consol and Murray, and the people who work at those coal mines.”

Murray Energy officials have declined to comment, as they did last night when I contacted them for a response to the continued media reports. Meanwhile, though, Darren Epps at SNL Financial had a piece that examined some of the implications if such a deal ends up happening. The headline is pretty much on the money: Potential deal with CONSOL would make Murray Energy a force in Northern App. The story explains:

A rumored deal involving CONSOL Energy Inc. and Murray Energy Corp. would make the privately held Murray a dominant producer in Northern Appalachia, but also raises questions about the legacy liabilities associated with the mines involved in a potential deal.

If Murray were to acquire the mines, the company would own seven of the 13 highest-producing Northern Appalachia mines, based on data from the U.S. Mine Safety and Health Administration. Murray already owns the Century and the Powhatan No. 6 mines in Ohio.

The CONSOL mines reportedly for sale are the company’s union assets. Doyle Trading Consultants LLC said Oct. 14 that the union assets have more than $3 billion in legacy liabilities associated with them. In an Oct. 15 note, BB&T Capital Markets analyst Mark Levin placed the number at about $4 billion. Doyle said Murray works with the United Mine Workers of America at Powhatan No. 6.

“Assuming [the report] is right, we wonder what will happen to the company’s legacy liabilities (~$4B), and if so, how they will be valued,” Levin said. “We also wonder if CNX would decide to keep the Baltimore export terminal.”

Currently, Murray Energy has no active mines in West Virginia, though the company employs West Virginians at its operations across the river in Ohio. And the mines CONSOL is looking to unload — Blacksville 2, Loveridge 22, McElroy, Robinson Run, and Shoemaker — are among the state’s top producers. They’re also probably as well positioned as any coal operations in West Virginia going forward. As we explained in a story on Sunday:

Those CONSOL mines are generally considered by industry experts to be more insulated from some of the pressures affecting the rest of the mining business. CONSOL uses advanced longwall mining machines, and its operations generally produce high-sulfur coal that can be burned by scrubber-equipped power plants that are considered less likely to be shuttered by utilities.

And generally speaking, Northern Appalachian coal production – which includes Northern West Virginia — has not been projected to show the steep declines that are ongoing in Southern West Virginia and Eastern Kentucky, where large-scale surface mining has been more prevalent and a larger share of high-quality reserves are believed to have been mined out.

It’s important to remember that these CONSOL mines have long-standing relationships with the United Mine Workers of America union. Generations of West Virgina UMWA miners have provided for their families by working at CONSOL operations in northern West Virginia and in the north-central part of the state.

And that brings us to some of the other potential implications of this rumored deal between Murray Energy and CONSOL. The coal industry isn’t all about tonnage and pricing and stuff like that. As we’ve all learned from the Patriot Coal bankruptcy, what financial analysts call “legacy liabilities” our neighbors think of as their health-care benefits and pensions.

Romney 2012

Hundreds of coal miners and their families stand in line while waiting to attend a rally at the Century Mine near Beallsville, Ohio, for Republican presidential candidate, former Massachusetts Gov. Mitt Romney Tuesday, Aug. 14, 2012. (AP Photo/The Intelligencer, Scott Mccloskey)

West Virginia’s coal industry still provides important jobs and tax revenues, along with the coal it produces for power plants and steel mills. But the state remains at a sort-of crossroads, examining the broader implications of coal on our the climate of our planet, the health of our communities and our environment, the safety and health of the industry’s workers, and where coalfield economies are headed over the long-term.

So it’s worth pointing out that the vast majority of Murray Energy’s mines are non-union operations.  And at mines where workers were unionized — such as Maple Creek in Pennsylvania and Powhatan in Ohio — the UMWA and Murray Energy have not always gotten along so well (see here, here and here, for example). So far, the UMWA isn’t saying anything about the rumors of a CONSOL sale to Murray, and union officials seem to know little more than the rest of us about what’s happening behind the scenes.

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Patroit Bankruptcy Protests

There’s an interesting piece out from the American Prospect by influential columnist Harold Meyerson that rightly praises the United Mine Workers of America for the success it’s had so far in its campaign for justice for the retirees at Patriot Coal. It starts out like this:

The story of the United Mine Workers of America is the story of the American labor movement as a whole. The Mine Workers were once the single most important union in the United States: the union that broke from a stodgy labor federation in 1935 to devote its resources to organizing the nation’s factories, the union that built such dynamos as the United Auto Workers and the Steelworkers; the union that sunk so much money into Franklin Roosevelt’s 1936 campaign that FDR didn’t raise a peep when striking auto workers occupied General Motors’ Flint, Michigan, factories and didn’t come out until GM had recognized their union; the union that had the strength and cojones to strike during World War II’s strike ban; the union that transformed industrial America. Today, their membership shrunk to perhaps just 10 percent of their peak strength numbers, the Mine Workers, like the labor movement generally, have a past that quite outshines their present. Their retirees outnumber their current members, and they would outnumber them by an even larger margin if coal mining, with its black lung and emphysema, didn’t shorten so many miners’ lives. Clustered in Appalachia, the union, like its industry, sometimes seems to inhabit a land that time forgot.

And yet, for all that the Mine Workers can seem to epitomize yesterday’s news, the union has just waged a brilliant and innovative campaign that has ended in a stunning victory. Last week, the Mine Workers persuaded a company that had gone into bankruptcy, and whose plan to break its union contracts and end its pension and health-care obligations to retirees had been approved by a federal judge, to honor its contracts and pay its retirees after all. This isn’t how bankruptcy proceedings usually end; workers and retirees more commonly finish out of the money. But the Mine Workers—combining the old-time class-war religion of the Appalachian hollows with a new-age campaign on social media—came through for both their members and their retirees.

The piece makes some excellent points regarding the UMWA’s strategy:

Its retirees deluged the New York Court with petitions to change the venue to a city with at least some presence of actual workers and retirees, and the court concurred, transferring the case to St. Louis. Miners and retirees rallied and marched in St. Louis (where Peabody is headquartered), in West Virginia and in Kentucky, demanding that Peabody assume the obligations it had sloughed off. Despite their entreaties, a federal bankruptcy judge in St. Louis granted Patriot’s bankruptcy petition and declined to compel Peabody to re-assume its responsibilities.

The Mine Workers refused to admit defeat. They mounted steadily larger demonstrations in the coal-mining regions where Peabody was a major employer, in which the indignant testimony of visibly and audibly short-of-breath retirees proved as irresistible to local television news crews as it was a complete nightmare for Peabody. The miners reached outside their ranks—something that John L. Lewis, their legendary leader from the 1920s through the 1950s, would never have considered—to enlist such civil rights groups as the NAACP as allies and to persuade sympathetic clergy to preach the gospel against Peabody from pulpits across the Bible belt. They worked the media, turning up both sympathetic retirees and academic studies to help reporters dramatize and elucidate a story of Dickensian moral clarity. They reached out to campuses and established a Facebook page that up to 100,000 people visited daily.

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Longview Power, MEPCO file for bankruptcy

longview

Here’s today’s news from Longview Power and MEPCO:

Longview Power, LLC today announced that it and certain of its affiliates, including Mepco Holdings, LLC and its affiliates, commenced Chapter 11 proceedings in the United States Bankruptcy Court for the District of Delaware. Both Longview and Mepco intend to operate their businesses as they continue to negotiate a chapter 11 plan with their lenders to de-risk their balance sheet. 

Longview, of course, operates a fairly new coal-fired power plant outside of Morgantown. And MEPCO’s CEO is James Laurita Jr., the chairman of the West Virginia Coal Association. There’s more background here.

Updated: I’ve posted a copy of their initial bankruptcy filing here, a copy of their list of creditors here, and an affidavit from Longview CEO Jeffrey Keffer here.

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Appeals court overturns Peabody benefit ruling

Patroit Bankruptcy Protests

Here’s the news in today from the United Mine Workers of America:

The United States Bankruptcy Appellate Panel for the Eighth Circuit today reversed a decision by federal Bankruptcy Judge Kathy Surratt-States that would have allowed Peabody Energy to stop paying health care benefits for some 3,100 retirees that it had assumed in the spinoff of Patriot Coal.

 The strongly-worded decision by the three-Judge panel means that Peabody continues to hold responsibility for paying the health care benefits for this group of retirees, who are mostly in the Midwest.

 “This is a bright ray of good news in what has been a long, dreary period for the retirees, their dependents and widows who have been desperately worried about what’s going to happen to their health care,” UMWA International President Cecil E. Roberts said.

 “Peabody has spent years trying to get rid of its obligations to the thousands of retirees who made it the richest coal company in the world,” Roberts said. “This decision foils part of that plan. And it makes us even more determined to keep fighting to make sure the company lives up to its entire obligation to these miners.”

 In preparation for the spinoff of Patriot, Peabody signed a 2007 agreement with Heritage Coal Co., which was at the time a Peabody subsidiary that Peabody included in the Patriot spinoff. That agreement allowed Peabody to reduce its contribution levels for retiree health care benefits to the same level as Heritage (Patriot) would pay if such levels were modified in the future. 

 Peabody argued that since Heritage (Patriot) was relieved of all its obligation to pay for retiree health care by Judge Surratt-States, that Peabody  should be relieved of its obligation as well. Judge Surratt-States agreed, and issued a ruling in Peabody’s favor on May 29. Patriot and Heritage appealed, and their appeal was supported by the UMWA.

The ruling is posted here.

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a1harrisonpowerplant_I130330194324

The news came this morning via this press release from FirstEnergy:

FirstEnergy Corp. (NYSE: FE) subsidiaries Mon Power and Potomac Edison, along with the majority of the parties to the companies’ generation transaction proceedings involving the Harrison Power Station, today filed a comprehensive settlement agreement with the Public Service Commission (PSC) of West Virginia, which, if approved, would be expected to reduce an average residential customer’s electric bill by about $1.50 a month.

We’ve got an initial crack at a story online here, and you can read the settlement agreement for yourself here. Previous coverage of this case is available here, here and here. Holly Kauffman, president of FirstEnergy’s West Virginia operations, said:

We appreciate the support of the parties in reaching this agreement, and look forward to implementing our cost-effective plan to provide our customers with electricity generated in the heart of our service territory. Having 100 percent ownership of the Harrison Power Station will help shield our customers from unpredictable spot market prices and help provide greater rate stability for years to come.

As a news consumer, I’m certainly wishing today that the great Pam Kasey had not left The State Journal, because Pam would be all over this story — and reading her coverage would let me steal lots of ideas for questions to ask in preparing a piece for tomorrow’s Gazette. But there are a few points to keep in mind:

— The deal still needs to be approved by the West Virginia Public Service Commission, and at least one party that’s been very opposed to the transaction — the West Virginia-Citizen Action Group —  remains opposed.

— Initially, FirstEnergy had proposed a rate hike amounting to $63 million annually for Mon Power customers, to cover the costs of the Harrison Plant deal. Now, the company is agreeing to instead reduce rates by about $16 million a year, which amounts to $1.42 per month for residential customers. But those rates aren’t set in stone forever, and they could change starting in 2015, depending on any variety of factors.

— While perhaps at least temporarily improving the rate picture, the settlement does not really address the concerns from groups like the Sierra Club (which has tentatively approved the settlement) or WV-CAG that the plant transfer would further lock West Virginia into coal-fired power, at a time when a variety of factors are chipping away at coal and making it less competitive.

— FirstEnergy touts all kinds of things it’s going to do under the settlement — creating 50 new jobs in West Virginia, giving money to teach energy efficiency in our public schools, etc. — but the bottom line is that the energy efficiency improvements FirstEnergy is committing to here (reductions of 0.5 percent between 2013 and 2018) amount to not that great of a jump compared to what other states are doing.

Also worth remembering is that this is one of two coal-fired plant transfer cases pending before the West Virginia PSC. Recall that Appalachian Power’s proposal concerning its John Amos and Mitchell plants received a major setback in Virginia.  West Virginia utility commissioners have asked for more information about that ruling, and they’ve moved back the dates for legal briefs in that case … so stay tuned.

 

 

 

UMWA members approve Patriot Coal deal

Patriot Bankruptcy Protest

Here’s the news just in tonight:

Members of the United Mine Workers of America (UMWA) who work at Patriot Coal operations in West Virginia and Kentucky today ratified a settlement the union reached with the company late last week that makes significant improvements in terms and conditions of employment over a federal Bankruptcy Judge’s order from last May.

The final tally was 85% in favor to 15% opposed. Members from 13 local unions participated in the vote, which was overseen by UMWA local union tellers and conducted at worksites. The UMWA International Auditor/Tellers have certified the vote.

“The membership has made it clear that they are willing to do their part to keep Patriot operating, keep their jobs and ensure that thousands of retirees continue getting the health care they depend on and deserve,” UMWA International President Cecil E. Roberts said. “This has been a difficult and uncertain year for our members. But I believe that in the end, they understood that we had done a lot to improve what the judge had ordered. They also understood all that was at stake and resolved to move forward in a positive way.

“But as we work to keep Patriot a viable company into the future, we have not forgotten how we got here and who is responsible,” Roberts said. “With this agreement, we have foiled the schemes of Peabody Energy and Arch Coal by continuing to both provide health care for retirees and maintain union jobs at these mines.”

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Patriot Coal May 2013 Rally

It’s a bit day today for miners at Patriot Coal, and for the bankrupt coal company. As Jessica Lilly reports over at West Virginia Public Broadcasting:

The United Mine Workers of America is expected to vote today on an agreement between Patriot Coal and the union.  The nation’s largest miners’ union says a proposed settlement with Patriot Coal would restore most wage cuts the company had sought as part of its bankruptcy reorganization.The nation’s largest miners’ union says a proposed settlement with Patriot Coal would restore most wage cuts the company had sought as part of its bankruptcy reorganization.

The ratification vote is expected to happen at the various Patriot subsidiary workplaces in West Virginia and Kentucky where the UMWA represents the workers.

Some 1,800 current or laid-off Patriot workers in the two states are eligible to cast a ballot.

If you missed it before, here’s the video of UMWA President Cecil Roberts explaining the deal to union members (though you have to sit through a fairly long history of Patriot’s creation to get to the actual contract details):

There are several key documents you can read to understand this more fully: A proposed new Collective Bargaining Agreement between the UMWA and Patriot Coal operations, a Memorandum of Understanding between the company and the union, and a list of existing Collective Bargaining Agreements between various parties to the bankruptcy proceeding.

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Details are out on proposed Patriot Coal-UMWA deal

Patroit Bankruptcy Protests

Last evening, Patriot Coal lawyer made this filing to the U.S. Bankruptcy Court out in St. Louis, asking for court approval of the company’s proposed deal with the United Mine Workers of America.

Michael Niven over at SNL Financial is reporting on some of the details of the proposed deal:

The proposed equity arrangement is in line with what Patriot originally proposed in April when it offered the union a 35% stake in the reorganized company. The UMWA later submitted a counter proposal calling for a 57% stake in a reorganized Patriot.

The trust would also be funded by other income sources, including additional payments from Patriot, the amounts of which would be determined by the company’s financial performance. Patriot would also fund the retirement trust through royalty payments on coal production. The agreed upon royalty rates are 20 cents/ton on targeted production levels established in Patriot’s five-year business plan and $1/ton on any production that exceeds targeted levels.

The complex settlement deal also includes a wide range of other terms including wage concessions from the union and obligations that Patriot facilitate union representation at some non-union mines.

Additional documents that are available about this today include three exhibits to that court filing: A proposed new Collective Bargaining Agreement between the UMWA and Patriot Coal operations, a Memorandum of Understanding between the company and the union, and a list of existing Collective Bargaining Agreements between various parties to the bankruptcy proceeding.

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Patroit Bankruptcy Protests

The Gazette’s Dr. Paul Nyden had more in today’s paper about yesterday’s big announcement of a tentative deal between Patriot Coal and the United Mine Workers:

United Mine Workers of America and Patriot Coal announced a settlement Monday on retirees’ health-care benefits, after a federal bankruptcy judge earlier this year allowed the company to throw out union-negotiated contracts and significantly reduce those benefits.

In a news release, the UMW said the settlement includes significant improvements in the terms and conditions of employment from those approved by federal U.S. Bankruptcy Judge Kathy Surratt-States in Missouri on May 29 and implemented by Patriot on July 1.

UMW President Cecil E. Roberts said in the statement, “After several weeks of nearly around-the-clock negotiations, I believe we have reached something that can be taken to the membership for ratification.”

A new bankruptcy court filing made last evening provides no real details of the deal, but it does reveal that it was reached on Friday, and that more information was being withheld from public court records until the UMWA had time to provide those details to its members directly. Patriot’s lawyers asked for an expedited hearing for the court to consider the settlement, saying the deal would allow the company to “secure the outside investment necessary to reorganize as a going concern” and that delaying the hearing beyond Aug. 20 “would seriously threaten the Debtors’ reorganization efforts at this very important juncture.”

Interestingly, the Patriot settlement comes just as the UMWA has another protest planned today against Peabody Energy, as part of its campaign over Peabody’s role in creating Patriot and saddling Patriot with so much liability for health-care benefits for retired miners and their families. UMWA President Cecil Roberts said this morning:

We have reached a tentative settlement with Patriot Coal which will lessen the impact of severe cutbacks on active and retired miners, but as we’ve said all along, Patriot really is bankrupt and just does not have sufficient resources to pay for the contractual promises made to retired miners and their families by Peabody and Arch.  We’re back at Peabody because that’s where this problem started. Executives at Peabody Energy created Patriot, they failed to give it enough assets to meet its obligations, and we’re not going to sit idly by and let miners and their families pay the price.

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Patriot Coal May 2013 Rally

Well, the latest police response to the continuing United Mine Workers of America “Fairness at Patriot” campaign event certainly seemed like a bit of overkill, as this letter to the editor of the St. Louis paper suggests (see the photos as well).  But it appears that some progress on the Patriot issue is being made in Congress.

UMWA President Cecil Roberts issued this statement yesterday, announcing the union’s support for new bipartisan legislation to help retired Patriot miners whose pensions and health-care benefits are threatened by the company’s bankruptcy:

The legislation introduced today by Reps. David McKinley (R-W.Va.) and Shelley Moore Capito (R-W.Va.) will provide significant help to retired miners and widows whose health care is threatened. The Coal Healthcare and Pensions Protection Act of 2013 will also provide security for the UMWA 1974 Pension Plan, which serves nearly 100,000 pensioners.

“I want to thank Reps. McKinley and Capito for introducing this bill, and for their support of the retired miners, their spouses or widows, who through no fault of their own, currently face a loss of the health care they were promised and earned through lifetimes of service in America’s mines.

Reps. McKinley and Capito issued a joint statement with Rep. Nick J. Rahall. Rep. McKinley said:

Over the past two and a half years, my staff and I have been working with United Mine Workers of America (UMWA) officials, miners, and retirees in an effort to protect healthcare and pension benefits for our miners. After hearing the stories of what these men and their families face if they lose their benefits, it was clear that we had to find a solution.

And Rep. Capito said:

I am proud to join my West Virginia colleagues in introducing this legislation. We have worked diligently together to craft legislation that addresses the most pressing issues retirees are facing as a result of Patriot Coal Company’s bankruptcy. These hardworking coal miners have dedicated their lives to providing electricity to the Mountain State and building its economy, and we cannot let them down. I will continue to fight for our coal miners and the retirees whose benefits are at risk.

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ALPHA627

Here’s today’s quarterly financial report from Alpha Natural Resources:

Alpha Natural Resources, Inc. (NYSE: ANR), a leading U.S. coal producer, reported a second quarter 2013 net loss of $186 million or $0.84 per diluted share compared with a net loss of $2.2 billion or $10.14 per diluted share in the second quarter of 2012 which included approximately $2.5 billion of pre-tax impairment and restructuring charges.  Excluding the items described in our “Reconciliation of Adjusted Net Loss to Net Loss,” the second quarter 2013 adjusted net loss was $129 million or $0.59 per diluted share compared with adjusted net loss of $72 million or $0.33 per diluted share in the second quarter of 2012.

Kevin Crutchfield, Alpha’s chairman and CEO, said:

Alpha continues to proactively address changing market conditions by optimizing our mine portfolio and idling additional uneconomic metallurgical and thermal coal capacity, and we anticipate additional actions may be required between now and the end of the year.  At the same time, we remain focused on adjusting our overhead and capital expenditures in proportion with our changing operational footprint. 

In this environment, operational execution and the ability to implement thoughtful changes with alacrity are paramount to our success.  In addition, our commitment to safety has never been stronger as evidenced by the recent dedication of our Running Right Leadership Academy, an industry-leading training facility that will enable our workforce to gain critical skills and experience in a safe and controlled training environment.  The Leadership Academy is the first of its kind and will advance Alpha and the industry toward the goal of zero fatalities and a 50 percent reduction in lost time accidents.

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