Coal Tattoo

Critics issue report on coal plant transfers

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We’ve had a few stories in the Gazette and on this blog about the recent proposals by FirstEnergy and American Electric Power to transfer greater ownership of some of their coal-fired power plants to their West Virginia-based subsidiaries (see here, here, here and here).

Now, there’s a new report out that presents some of the evidence and analysis questioning whether the state Public Service Commission should approve these proposals. The report, Mountain State Maneuver: AEP and FirstEnergy try to stick ratepayers with risky coal plant, was put together by Cathy Kunkel of Energy Efficient West Virginia and by energy consultant David A. Schlissel. Kunkel and Schlissel served as expert witnesses for citizen groups that intervened in the PSC cases to argue against the plant transfers.

In their report, they conclude:

These proposals will have the effect of shifting the risks of coal-fired power generation from merchant generators to captive ratepayers, while increasing both the cost and the risk for West Virginia consumers. They also raise concerns about the ability of holding companies to manipulate regulated subsidiaries …

… Neither proposal is in the best interest of the companies’ captive ratepayers in West Virginia, who would be locked into coal-fired generation, and its associated risks, for at least the next two decades. Furthermore, the FirstEnergy and AEP West Virginia companies would have excess capacity over the next several years – exactly the time period during which regional electricity market prices are projected to be low. Yet the West Virginia regulated subsidiaries have made no effort to negotiate a fair price for these plants or seek alternative options.

Why It Matters Climate Change

There’s a new report out today from SNL Financial that tells us:

As environmental regulations continue their forward march and gas prices remain low compared to historic rates due to increased domestic supply, the number of power plants changing their primary fuel source to natural gas has increased dramatically. In 2011 and 2012, just more than 5.5 GW of power plant capacity switched to burning primarily natural gas from another form of fossil fuel, according to an SNL Energy analysis of U.S. Energy Information Administration 860 data.

You can read the whole thing, and see charts of the plants involved, here.

 

Here’s the word today from Arch Coal’s latest quarterly financial report:

Arch Coal, Inc. (NYSE: ACI) today reported a net loss of $72.2 million, or $0.34 per diluted share, in the second quarter of 2013. Excluding non-cash accretion of acquired coal supply agreements and asset impairment costs, Arch’s second quarter 2013 adjusted net loss was $60.5 million, or $0.29 per diluted share. In the second quarter of 2012, Arch reported an adjusted net loss of $22.1 million, or $0.10 per diluted share.

Arch reported second quarter 2013 revenues of $766 million, representing a decline versus the prior-year quarter and reflective of overall weakness in the metallurgical coal markets compared with the year-ago period. Adjusted earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”) totaled $110.5 million in the second quarter of 2013 compared with $180.9 million in the second quarter of 2012 and $83.6 million in the first quarter of 2013, representing an increase of 32 percent versus the prior-quarter period. Arch’s second quarter 2013 adjusted EBITDA excludes an asset impairment charge of $20.5 million related to an investment in a clean coal power plant project that was cancelled.

Arch’s CEO, John W. Eaves, said:

During the second quarter, we achieved a sequential improvement in our earnings as we continued to manage our business effectively in the face of weak coal market conditions. Arch employed strong cost control, particularly in the Powder River Basin and in Appalachia, which positively impacted our per-ton margins. Our cost reduction initiatives are generating results, and we will continue to pursue aggressive cost reductions across all of our operations during the second half of the year.

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EIA: Coal market fundamentals have changed

Coal

Here’s the latest from the U.S. Department of Energy’s Energy Information Administration:

While coal market fundamentals changed in first-half 2013 compared with the same period of 2012, spot prices remained largely unchanged. Demand for coal was higher and supply was lower in first-half 2013, but because electric companies chose to burn off large inventories instead of buying more coal and because international coal prices were weaker, the spot market remained largely unchanged.

The latest EIA report explained:

The continued rise in natural gas prices drove more use of coal for electricity generation. This, combined with higher electricity demand, resulted in total coal consumption for electricity generation in all sectors of 31 million tons, or 13%, more in the first four months of 2013 than in the same period of 2012. Although data for the second quarter of 2013 are not yet available, the increase in domestic consumption for the first half of 2013 is likely to more than offset the weaker coal exports anticipated in the second quarter of 2013, resulting in higher year-on-year total coal demand.

Importantly, for folks in Southern West Virginia and Eastern Kentucky:

While the supply-demand balance tightened for coal in general, changes in consumption and production of coal from different mining regions varied. The rise of first-half-year average natural gas prices at Henry Hub to $3.76/MMBtu in 2013 is likely to have resulted in overall stronger growth of consumption of the lower-cost PRB and Illinois Basin (ILB) coals. Although Appalachian and PRB coal production all declined in response to lower demand for deliveries, Central Appalachian (CAPP) coal production was cut deeper than all other mining regions—10.3 million tons, or 13%, compared with the first half of 2012. Steadily declining domestic demand for steam coal from CAPP and weaker exports of metallurgical coal compared with the year before forced producers to close higher-cost mines. In contrast, ILB coal production increased year-on-year as the coal expanded its market both domestically and overseas. Higher gas prices and the lower cost of ILB coal relative to Appalachian coals supported more use of ILB coal for power generation in the domestic market. Geographic proximity to coal-exporting infrastructures also enabled the coal to benefit from international demand.

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UMWA continues Patriot Coal campaign

Supporter of the UMWA campaign for fair pay and benefits for active and retired miners at Patriot Coal hold a sigh asking the question “Are you next?”  Twenty nine Buses brought the more than 5000 supports from Alabama, Illinois, Kentucky, Missouri, Ohio, Pennsylvania, Virginia, West Virginia, and Virginia for the rally that was held on the campus of Fairmont State University, in Fairmont, W.Va. on Tuesday,  July 9, 2013.  At the end of the rally 31 people, including Roberts were arrested for non-violent civil disobedience. (AP Photo/Times West Virginian, Tammy Shriver)

Here’s the latest on the Fairness at Patriot campaign being waged by the United Mine Workers of America, via the AP’s Vicki Smith:

Thirty people were arrested Tuesday as some 5,000 coal miners and their families protested bankrupt Patriot Coal Corp.’s plans to cut benefits, a plan the United Mine Workers of America says amounts to a broken promise to tens of thousands of workers who made Patriot’s predecessor companies profitable for decades.

The rally on a football practice field at Fairmont State University in north-central West Virginia was the 14th protest so far, but UMWA President Cecil Roberts promised there will be many more. The next will be back in St. Louis, where Patriot and several other coal operators are headquartered.

“This is kind of like the struggle of the civil rights movement. It didn’t end in a week or a month or a year or two. It was a long process,” he said. “This is about justice and fairness, and anytime you’re fighting for justice and fairness, that fight might take a while. But we’re never going to stop.”

We’ve got the whole story online here.

FirstEnergy to close 2 more coal plants

The Hatfield’s Ferry plant in Masontown, Pa. Photo via FirstEnergy

Here’s today’s news from FirstEnergy:

FirstEnergy Corp. (NYSE: FE) announced today that it expects to deactivate two coal-fired power plants located in Pennsylvania by October 9, 2013. The decision is based on the cost of compliance with current and future environmental regulations in conjunction with the continued low market price for electricity.

The plants scheduled to be deactivated are Hatfield’s Ferry Power Station in Masontown, Pa., and Mitchell Power Station in Courtney, Pa.

FirstEnergy noted in its announcement:

The total capacity of these plants is 2,080 megawatts, representing approximately 10 percent of the company’s total generating capacity, but about 30 percent of the estimated $925 million cost to comply with the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS).

It’s worth noting that Hatfield’s Ferry had not so long ago been retrofitted with sulfur dioxide “scrubbers”, and had more recently been under consideration for a fuel switch to natural gas. FirstEnergy had previously announced closures of six plants in Ohio, Pennsylvania and Maryland, and three plants in West Virginia.

And while Hatfield’s Ferry had new scrubbers, the toxic stuff generated by burning coal has to go somewhere, and environmental groups were concerned about the water pollution from the scrubber waste at the facility.

 

Trying to follow the back-and-forth between the United Mine Workers of America and Patriot Coal this week has been a bit like watching a tennis match.

First, we had the UMWA declaring on Wednesday that Patriot officials had “walked out” on negotiations aimed at working out some sort of a deal prior to Patriot implementing its own proposal that was approved by a federal bankruptcy judge. Then that evening, Patriot officials issued their own statement, calling the union’s version of events inaccurate.

It turns out that at least two days of negotiations were called off. Patriot Coal insists the company “requested” what it called a recess so Patriot officials could more fully study the union’s latest proposals. But the union says Patriot didn’t request anything, and that company negotiators walked out of a meeting, saying that they figured they would just go ahead and implement its court-approved plan.

Then just a few minutes ago, there was some good news: UMWA spokesman Phil Smith confirms that negotiations are now scheduled to resume again on Tuesday. Talks will take place just a day after the union’s latest protest, planned for Monday and aimed at Peabody Energy. As the union said earlier:

Miners and supporters will rally following a decision by the U.S. Bankruptcy Court to allow Patriot Coal to impose its contract demands on active and retired mine workers. Patriot is the company created by Peabody Energy in 2007 to evade its obligations to retirees, and which later was saddled with similar obligations by Arch Coal.

“The bankruptcy judge may have made her decision about Patriot, but the jury is still out on Peabody and Arch, and that’s why we’ll be in St. Louis again next Monday,” said UMWA President Cecil Roberts. “The leaders of these two companies have schemed to take away health care that was promised to retired miners, and we’re not going to let them get away with it.”

Given what’s at stake here –pay, working conditions and benefits for active miners, retirement and health-care services for retirees, and the viability of a major employer — it certainly seems better to have the two sides talking to each other. But as the UMWA’s Roberts said the other day:

No matter what the events of the next few weeks may bring, this struggle is a long, long way from being over.

This just in from the United Mine Workers of America:

Negotiators from Patriot Coal walked out of talks with the United Mine Workers of America (UMWA) yesterday, threatening health care for thousands of retirees. The company also cancelled negotiations that were scheduled for the remainder of this week and into next week.

UMWA President Cecil Roberts said:

We are very disappointed by this action. We had made significant progress toward reaching an agreement that provided a workable alternative to the severe terms Patriot asked for last spring and that were approved by the bankruptcy court in St. Louis. The union had agreed to more than $400 million in savings for the company over the life of the current contract, which gives them the money they say they need to survive. But that still wasn’t enough for them.

When the company walked out, we were only about $30 to 35 million apart, which given the scope of this problem really isn’t all that much. A big chunk of that money is in bonuses the company wants to pay management personnel into the future.

I can only conclude at this point that there is no end to the depths of sacrifices our members and retirees are expected to make, even while hundreds of managers and executives are thinking about how they will spend the bonus money they’ll be getting in their bank accounts.

The company now says it will implement the terms and conditions approved by the judge, effective July 1. I have consistently made it clear to management that I could not recommend to our membership that they work under those terms, because the sacrifices they require from our active and retired members are too great.

Roberts went on to say:

We are going to explain all this, including the terms and conditions the judge approved and Patriot plans to implement, directly to our members. This is a democratic union, and our members will have their say about whether they want to work under it or not.

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There’s a new report out this week from the U.S. Department of Interior’s Inspector General, raising serious questions about the process used to lease publicly owned coal reserves out west to the mining industry. Reuters has the story:

U.S. officials who administer a federal coal program have undervalued the fuel, costing taxpayers $62 million in some recent mining leases alone, said a government report released on Tuesday.

About 40 percent of the coal sold in the United States is drawn from federal land and the program is administered by the Interior Department’s Bureau of Land Management, which is required to seek a fair price on behalf of taxpayers.

“We found weaknesses in the current coal sale process that could put the government at risk of not receiving the full, fair market value for the leases,” Interior’s Inspector General, the investigative arm of the department, said in an independent review.

Reuters, of course, broke this story back in December with this report:

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

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

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

Wyoming warned federal officials about flaws in the royalty system a year and a half ago. Last week Montana Governor Brian Schweitzer said he will not tolerate the coal industry skirting royalties: “If there’s phony baloney going on, we have to get to the bottom of it.”

You can read the IG report for yourself here.

UMWA continues Patriot Coal campaign

Hundreds of union coal miners, retirees, spouses and widows gather around the Henderson County Courthouse, Tuesday, June 4, 2013 in Henderson, Ky. Hundreds of coal miners are rallying in western Kentucky over planned cuts to wages and benefits by Patriot Coal Corp. for union members. (AP Photo/The Gleaner, Mike Lawrence)

 Here’s the latest from The Associated Press:

Hundreds of coal miners rallied in western Kentucky Tuesday to protest planned cuts to union wages and benefits by Patriot Coal Corp. as it goes through bankruptcy.

The rally organized by the United Mine Workers of America outside the Henderson County Courthouse ended with the arrests of about a dozen union members who briefly demonstrated in the street.

Patriot, a spinoff of St. Louis-based Peabody Energy, is seeking to cut worker and retiree benefits as part of a bankruptcy filing. Last week a federal judge in that city ruled in favor of Patriot, giving the go-ahead to significantly cut health care and pension benefits to thousands of workers and retirees.

Patriot has said it would have to spend $1.6 billion to cover the health care costs.

The miners, many of them retirees, carried signs and gathered near the courthouse steps Tuesday to hear from state lawmakers and union leaders.

“If there is no justice, Peabody, you will have no rest, you will have no peace,” said Dan Kane, the United Mine Workers’ secretary-treasurer. “You may depend on the poisonous words of a judge to let you out of a debt, but let me tell you, we’ll decide when it’s over, and it ain’t over yet.”

The rally was streamed live Tuesday on a website sponsored by the United Mine Workers.

Several union members in the crowd wore white T-shirts that read “Peabody Promised … Peabody Lied.”

Union leaders have argued that Patriot was intentionally saddled with unsustainable pension and long-term health care obligations when Peabody formed it as a separate company in 2007.

Kentucky Sen. Jerry Rhoads, a Democrat from Madisonville, said the proposed benefit cuts for union workers were “a matter of life and death.”

Rep. Brent Yonts, a Democrat from Greenville, said the May 29 federal court ruling in St. Louis was “the day big business struck down the little guy.”

“The outcome will be less health care for the retirees, a poorer future for those retirees, who will likely die earlier than they would have otherwise died due to poor health care,” Yonts said.

A representative from Congressman Ed Whitfield’s office said Whitfield is planning to propose legislation that would make the union retirees eligible for benefits under a 1993 federal law that guaranteed benefits to a group of retirees.

“It is critical that we protect the health care benefits of the thousands of Kentucky miners who have worked hard their entire careers to earn those benefits,” Whitfield said in a statement. Whitfield has received a total of $23,840 in campaign donations from Peabody and Patriot Coal political action committees since December 2007, according to federal records.

After the demonstration, about a dozen union members including United Mine Workers of America president Cecil Roberts walked out into the street, sat down and formed a prayer circle, expecting to be arrested. Police asked them leave and then quickly cuffed the members with zip ties and escorted them into a waiting van.

U.S. Bankruptcy Judge Kathy Surratt-States ruled last week that Patriot’s cost-cutting proposals were legal. The company sought bankruptcy protection last summer to address labor obligations it said had become unsustainable. The union said that negotiations would continue and that it would appeal the ruling.

Bennett Hatfield, Patriot’s president and CEO, said last week that bargaining with the union would continue, saying “a consensual resolution is the best possible outcome for all parties.”

Photo by David Kameras, UMWA

When the word came down from St. Louis earlier this week that a federal bankruptcy judge had approved Patriot Coal’s plan to dump its union contract and its retiree health-care plan, the reaction from the United Mine Workers was about what you would expect.

United Mine Workers of America President Cecil Roberts said in a prepared statement that the ruling  was “wrong, unfair and fails to fully recognize the coming wave of human suffering that will be experienced by thousands of people throughout the coalfields.” Roberts continued:

As often happens under American bankruptcy law, the short-term interests of the company are valued more than the dedication and sacrifice of the workers, who actually produce the profits that make a company successful.

The comments from Patriot CEO Ben Hatfield were equally predictable:

This ruling represents a major step forward for Patriot, allowing our company to achieve savings that are critical to our reorganization and the preservation of more than 4,000 jobs.  The savings contemplated by this ruling, together with other cost reductions implemented across our company, will put Patriot on course to becoming a viable business.

And while we’ve still heard next to nothing from most state political leaders — and certainly not from the Friends of Coal crowd —  about this issue, there were strong reactions from some elected officials. Sen. Jay Rockefeller, D-W.Va., said, for example:

Miners who have given their lives to this industry are now facing terrifying uncertainties over their health care, pensions, and pocketbooks. I am deeply disappointed by this outcome and what it means for our miners directly impacted by this decision and all workers who have experienced the unfairness of our bankruptcy system.

If you take the time to read closely the 102-page decision by Judge Kathy Surratt-States, it’s not too hard to see what the UMWA and its supporters — and anybody who thinks working people should be treated fairly — are upset. Start with just the fact that it takes a dozen pages in the ruling just to try to run through the long and complicated history of the UMWA’s effort to secure, through a maze of various plans, contracts and legislation, the “cradle-to-grave” benefits mine workers so rightly prize.

Or look near the beginning the decision, where the judge describes the letters the court has received by retirees and widows who are scared to death about what this case might mean for their lives:

Many discuss the horrendous conditions of the coal mines when those individuals first began to work, and how hard it was to achieve the promises made pursuant to both the previous and the current CBAs. Some discuss how physically, mentally and emotionally grueling being a coal miner was, many of whom worked as coal miners for over 30 years – a sacrifice made with due consideration of the promised health care from cradle to grave. The Court has received numerous medication lists, lists of various coal mining-related diagnoses and personal accounts of the years of hard work, and, all the reasons why these sacrifices were worth it for the promise of health care for life and an earned pension.

Some letters discuss various injuries sustained while working in coal mines, limbs of self and relatives lost, and the lives lost of relatives and friends. None of these letters, or their comments have been lost on this Court.

It’s true that the UMWA has great health-care benefits, both for workers and retirees. And it’s popular, even among many folk who consider themselves progressive, to say things like, “I don’t have benefits that good, why can’t they suck it up and accept less.” But isn’t the real question why the rest of us don’t have health-care as good as the UMWA’s? Or, why most of us are stuck without decent pensions, instead forced to rely on a 401-K system that, as Frontline recently explained, really isn’t working?

It’s great that some political leaders like Rep. Nick J. Rahall are pushing the CARE Act, legislation aimed at preserving benefits for retired coal miners. But the Patriot ruling should make it clear again that — in the words of a leading case on the matter — “bankruptcy law is draconian to labor unions”  and changes are needed to make the system more fair to workers.  In effect, as the judge explains, all of the decades of fighting by the UMWA to improve the working conditions and living conditions of its members — to rise above the day of the company store, really — became irrelevant the day Patriot filed for bankruptcy:

The argument here is therefore that the gravity of the concessions sought by the unionized miners is in effect just a ‘catch-up’ to the cutbacks that the remainder of Debtors’ employees have endured for the past few years. But of course, the unionized workforce escaped those pay freezes, vacation limitations, unrestricted work-hours and the like in exchange for lower pay, promised pensions, health care coverage and retiree benefits. The question is not is this fair to the unionized miners; is this equitable to the unionized miners. Rather, the question presented is whether these overall changes are fair and equitable to all interested parties which necessarily includes an evaluation of the treatment of the unionized Under federal law, employees have the choice of whether or not to be unionized. Bankruptcy law is also federal law and Section 1113 takes no prisoners. So it was written by Congress.

Years of toil, perseverance and determination of miners past yielded the employment terms and conditions of miners today, but this does not matter where, as here, savings everywhere else have already been explored within reason and exhausted.

In effect, the bankruptcy law and the judge are endorsing a race to the bottom for workers in the coalfields:

This is not a union versus non-union evaluation; it is an evaluation of what is necessary for Debtors to emerge from bankruptcy as a viable company and whether or not the path chosen to implement what is necessary is fair and equitable. Given the grave disparity between union and non-union pay and benefits prebankruptcy, the limitations placed on non-union labor that have been in place for years, and acceptance of the reality of the savings needed, the Court concludes that the UMWA represented employees are not tasked to disproportionately shoulder the burden of Debtors’ bankruptcy.

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Mining lobby touts impacts of coal exports

The National Mining Association has a new report out today that touts the economic contributions of the growing export market for U.S. coal. You can read the report here, and here’s a little of what the NMA has to say on the issue:

Rising exports of U.S. coal to Europe and Asia added $16.6 billion to the U.S. economy in 2011, making significant contributions to America’s economic recovery and job creation in many industrial sectors as well as in regions far beyond the nation’s coalfields.

In a report released today by the National Mining Association (NMA), the industry’s national trade group, Ernst & Young analysts found that the 107 million short tons of American coal exported in 2011 supported 141,270 high-wage jobs paying nearly 50 percent above industry averages. According to the report, “U.S. Coal Exports: National and State Economic Contributions,” an estimated 168,430 jobs were supported by the 125.7 million tons exported last year, a record volume. Each ton of coal exported supported 1,320 jobs, said the study commissioned by NMA to document the broad benefits of U.S. coal exports.

“This report confirms the valuable contributions that our economy derives from U.S. coal exports,” said NMA President and CEO Hal Quinn. “These benefits include good jobs for American workers – from the mines to rail transport and port facilities – as well as new revenue for state and local governments pressed to fund essential services.”

This is a bit of what the report had to say about West Virginia:

In 2011, West Virginia ranked second in the U.S. in total coal production, producing 131.2 million short tons (mmst) of coal and employing 36,552 workers in coal mining operations. Of total coal production, 27 percent (35.0 mmst) was exported abroad and accounted for 9,760 (27 percent) of the total 36,552 coal mining jobs.

Photo from Fairness at Patriot campaign Facebook page.

Here’s the latest from St. Louis, via The Associated Press:

Another round of protests involving United Mine Workers of America and their supporters results in about a dozen arrests in downtown St. Louis.

Several hundred protesters gathered again Tuesday near the federal courthouse, the site of a recent bankruptcy case involving St. Louis-based Patriot Coal. The protesters were peacefully arrested for sitting in the street.

Patriot filed for bankruptcy in July. Protesters are angry about Patriot’s plan to cut health-care and retirement benefits. Patriot says the moves are necessary to keep the company afloat.

Similar arrests have occurred at other protests in St. Louis in recent months.

As the UMWA noted in a press release, a key ruling in the case is due next week:

Patriot Coal, created by Peabody Energy 2007 with 43 percent of Peabody’s liabilities but just 11 percent of its assets, filed for bankruptcy in July, 2012. Patriot has filed motions demanding the effective elimination of the current system of health care for retired miners and drastic pay and benefit cuts for active workers. U.S. Bankruptcy Court Judge Kathy Surratt-States is scheduled to rule on the company’s motions on or before May 29.

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The Gazette’s Dr. Paul Nyden had a review in Sunday’s paper of Laurence Leamer’s major new book, “The Price of Justice: A True Story of Greed and Corruption. ” The book focuses on the Harman Mining/Hugh Caperton lawsuit against Massey.

As most readers of this blog certainly know, that case went all the way to the U.S. Supreme Court and produced a ruling that state Supreme Court Justice Brent Benjamin was wrong to refuse to step down from Harman Mining’s appeal because of then-Massey CEO Don Blankenship’s funding of a campaign that helped put Benjamin on the court. As Dr. Nyden has already reported, this whole dispute continues in the courts in Virginia.

In his Sunday book review, Dr. Nyden explains:

Leamer tells the story of Pittsburgh lawyers Bruce Stanley, who grew up in Mingo County and worked as a newspaper reporter in Williamson before getting a law degree, and David B. Fawcett, whose father and grandfather were both lawyers. Both work for prominent Pittsburgh firms — Stanley for ReedSmith and Fawcett [first] for Buchanan Ingersoll and now for ReedSmith.

Fawcett and Stanley also previously represented clients in two other lawsuits against Blankenship and Massey.

Wheeling-Pittsburgh Steel hired Fawcett to sue Massey after it violated its 10-year contract to supply the company with high-quality metallurgical coal. Instead, Massey began selling its met coal to buyers willing to pay higher prices, exporting much of it to steel producers in foreign countries. After a four-month trial that ended in July 2007, Fawcett won $220 million in damages for Wheeling-Pitt. When the U.S. Supreme Court rejected Massey’s appeal, Massey paid the troubled West Virginia steel company $267 million, including interest.

Stanley sued Massey on behalf of the widows of two coal miners killed during a fire in its Aracoma mine in Logan County. Using government inspection reports and testimony from other miners, Stanley proved Massey had forced its Aracoma miners to work under unsafe conditions. The size of the settlements paid to the widows were never made public.

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Can we debate the King Coal Highway honestly?

This morning’s story from West Virginia Public Broadcasting about the massive mountaintop removal mining project proposed as part of the King Coal Highway started off well enough:

Sen. Ron Stollings was admitting that Southern West Virginia is facing “a depleting economy with coal”  and Steve Kominar, executive director of the Mingo County Redevelopment Authority, said what should be obvious — but that few of our state’s leaders like to admit:

We’ve got to have an economy for West Virginia for life after coal. Coal is quickly depleting and if we don’t do that, than what have we left our children and grandchildren.

It’s good to hear from folks at the Mingo County Redevelopment Authority, one of the few local groups that has really tried — especially under the leadership of the late Mike Whitt — to focus on these issues, and to find ways to bring new jobs and a brighter future to our West Virginia coalfields. And the Buffalo Mountain Surface Mine permit that CONSOL Energy proposes as part of the highway project is certainly a timely topic, as the comment period on the latest environmental study is coming to a close.

Unfortunately, this story goes downhill pretty quickly:

Kominar said Consol has been fighting for the permit since 2007 and believes the EPA is doing everything it can to stop or stall the permit’s approval. Both the Army Corps of Engineers and the Federal Highways Administration have signed off on the environmental impact study that details how Consol will maintain run off and address water quality issues, but Kominar said that hasn’t been enough.

“… They say it’s an environmental concern, but their argument holds no credence. There’s no scientific evidence to back up what the EPA is saying except emotional testimony by people to say, well, it’s going to cause this or it’s going to cause that,”  he replied.

“We live here, we breathe this air, we drink this water. We obviously don’t want to destroy ourselves. There’s no evidence to prove that what some of the antis are saying is actually valid,” Kominar said.

“We’ve done hydrological surveys on water systems prior to mining, during mining and after mining, and without fail we found every time that the water quality during mining was a lot better than prior to mining, and was obviously a lot better after mining

Let’s be clear on what public broadcasting reported — without presenting anyone questioning it — There’s no evidence to prove that the kind of mining CONSOL is proposing here damages the environment?

No evidence? It’s hard to know where to start here. But there certainly is a lot of evidence in the peer-reviewed literature that shows large-scale surface mining is linked to pervasive and irreversible impacts on water quality.

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There was a flurry of activity yesterday afternoon in the wake of FirstEnergy Corp.’s quarterly conference call with stock analysts, with hints from some citizen bloggers that the company was on the verge of dropping its proposal to transfer the Harrison Power Station to its West Virginia subsidiary, Monongahela Power.

StopPathWV’s headline read “Harrison is no longer critical.” Bill Howley initially labeled his Power Line post, “CEO Alexander May Pull Plug on Harrison Scheme,” and wrote:

Tony seems to be sending signals that FirstEnergy may be dropping their Harrison power plant transfer to Mon Power. 

Bill has since edited the headline to say, “CEO Alexander Spinning on Harrison Scheme,” and has a more detailed post that puts a more thoughtful perspective on things.

After listening to the call yesterday and reading the transcript this morning, I’m not at all sure the news is nearly as big as folks were making it sound. But there is an interesting change in FirstEnergy’s talking points that is important in the context of the FirstEnergy and American Electric Power “asset transfer” cases pending at the Public Service Commission. You can read the transcript yourself here, but I’ll try to summarize.

Remember first that there’s a reasonable argument to be made that a huge part of what the FirstEnergy plant sale has been about is raising much-needed money to help the company deal with its debt.  The company said as much just a few months ago, during a February call with analysts:

Our financial plan is structured to improve the balance sheet, enhance liquidity and maintain investment-grade credit metrics. The plan initially focuses on reducing debt at our competitive companies, primarily FES and Allegheny Supply, by at least $1.5 billion. The proceeds of the Harrison-Pleasants transaction in West Virginia combined with asset sales are expected to be sufficient to fund the debt reduction. The assets we intend to sell are primarily our competitive hydro fleet, which includes nearly 1,180 megawatts that were initially in our plans to be sold in 2015.

As Keryn Newman’s StopPathWV blog (which has been following all of this very closely) said back in February:

It’s not “to help ensure reliable power for our Mon Power and Potomac Edison customers in West Virginia for many years to come,” it’s to raise desperately-needed corporate cash that West Virginia’s captive ratepayers will be stuck repaying for years to come. Let’s at least be honest about it, shall we, FirstEnergy?

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It’s earnings time, and the latest report out in the coal industry is from Alpha Natural Resources, which reported this morning:

Alpha recorded a net loss of $111 million, or $0.50 per diluted share, during the first quarter of 2013, compared with a net loss of $29 million, or $0.13 per diluted share, during the first quarter of 2012. The year-over-year increase in Alpha’s net loss is primarily attributable to lower per ton realizations on metallurgical and Eastern thermal coal and lower shipment volumes of Eastern and Western thermal coal, partly offset by lower cost of coal sales per ton, and lower SG&A and DD&A expenses.

Excluding the items described in our “Reconciliation of Adjusted Net Loss to Net Loss,” the adjusted net loss was $104 million, or $0.47 per diluted share, compared with an adjusted net loss of $58 million, or $0.27 per diluted share, in the first quarter of 2012.

But what I really wanted to point out was this:

In the eastern United States, inventories of NAPP thermal coal at utilities are approximately equal to the 5-year historical average providing a fairly balanced supply-demand landscape, and opportunities exist for producers to contract additional volumes with utility customers. However, despite the relatively healthy inventory levels, the ability of electrical generators to switch to other low cost coals, such as from the Illinois Basin, has created a somewhat stagnant pricing environment. Inventories of CAPP thermal coals have roughly doubled from their historical average in terms of days of burn to approximately 137 days as of the end of March 2013. This inventory situation has been driven by a reduction in utility consumption owing to a host of factors, including fuel switching in favor of gas due to the relatively high cost of CAPP thermal coal, coal-fired plant retirements which are disproportionately impacting the regions served by CAPP thermal coal, and encroachment of other lower cost coals, such as from the Illinois Basin. We believe a significant portion of the decreased consumption of CAPP thermal coal is a structural phenomenon, and Alpha has accordingly substantially reduced its production of CAPP thermal coal through its recent restructuring activities. Furthermore, at today’s seaborne thermal coal prices in the Atlantic, most eastern U.S. production is uneconomic, adding to the difficult supply/demand environment and general market weakness.

A little bit of news on power plant sales

 FirstEnergy’s Harrison Power Station near Haywood is among the state’s largest coal-fired power plants. Ohio-based FirstEnergy wants to sell the plant to a West Virginia subsidiary, and Mountain State customers would fund the purchase through increased electricity bills. (FirstEnergy photo)

There’s been a little bit of news over the last few days in the two big cases involving major power companies trying to transfer ownership of several of their coal-fired power plants to West Virginia subsidiaries — an issue that promises to only heat up as hearings scheduled for May and July before the state Public Service Commission approach.

First, the State Journal reported today:

In its petitions for West Virginia and Virginia approval to transfer parts of the Amos and Mitchell coal-fired power stations from Ohio subsidiaries to Appalachian Power, AEP announced May 1 that federal regulators have no objection.

While AEP did issue a statement announcing the Federal Energy Regulatory Commission’s decision, the State Journal put an unfortunate headline on its story saying “Feds clear way for transfer of Amos and Mitchell to ApCO.” I’m not sure there’s really all that much to this FERC decision. The real ball game is before the state Public Service Commission.

And in the other power plant sale case, involving FirstEnergy’s Harrison Power Station, a huge collection of testimony from PSC staff, the consumer advocate and various intervening parties hit the commission on Friday. You can read it all yourself by visiting the PSC’s website and searching for Case 12-1571-E-PC.

Also over at the State Journal, Pam Kasey wrote up one story that focused on the filing from PSC consumer advocate Byron Harris. Pam reports:

Cynical observers have suggested this proposal, and a similar proposal from Appalachian Power, are motivated for the two Ohio-based utility companies by a desire to move coal-fired power assets out of their Ohio utilities’ portfolios, where deregulation now forces them to compete, to West Virginia’s regulated market where the commission will guarantee the companies a return from ratepayers for the coming several decades.

“The transaction represents an effort to bail out the companies’ unregulated affiliates,” said PSC Consumer Advocate Byron Harris flatly in his testimony.

An alternative plan with energy efficiency and demand response, plus purchases from the market as needed, would cost $510 million less through 2034 than the proposal, in Schlissel’s analysis.

“Obtaining needed capacity and energy from the Harrison plant through the proposed (generation resource transaction) is the most expensive option,” he said.

And on his Power Line blog, Bill Howley has several posts (see here and here), including one that that argues, WV Coal Not an Issue in Harrison Case, FE Could Care Less About WV:

Mon Power could care less what coal the company uses, as long as it is cheapest and meets the company’s needs, not those of WV … So, if the WV PSC approves the FE Harrison plant scheme, the Harrison plant will not operate any differently from the way it operates now, when 80% of the plant sells power on the open market using FE’s non-utility generating company.

Big hearing starts in Patriot Coal bankruptcy case

Photo via UMWA’s Fairness at Patriot campaign

There was action in the streets and in the courtroom today in St. Louis. A key hearing began on Patriot’s effort to use its bankruptcy reorganization to throw out its contract with the United Mine Workers of America. And plenty of UMWA members, retirees, officials and supporters were on hand outside. Local station KMOV reported:

Sixteen people were arrested including a Reverend as more than 1,500 people protested in downtown St. Louis as Patriot Coal began to argue to a federal bankruptcy judge that it needs to significantly cut health care and pension benefits for its union workers, who protest the move. Rev. David Gerth, 11 retired miners and four others were arrested Monday afternoon after refusing to comply with demands from a police officer. 

The Associated Press reported:

Peabody accused the union of grandstanding “when it knows that this matter will be decided in the courts” and is between the union and Patriot, not Peabody. Peabody added it “has lived up to its obligations and continues to do so.”

The hearing could last through Friday, although U.S. Bankruptcy Judge Kathy Surratt-States may not issue a ruling immediately.

… Monday’s proceedings drew an overflow crowd, including nearly two-dozen Peabody retirees from Kentucky who wore T-shirts that said “Peabody promised …” on the front and “Peabody lied!” on the back.

Among them was Donald Morris, a Greenville, Ky., resident who retired from Peabody after working for 18 years in one of its mines near Beaver Dam, Ky. The 66-year-old’s speech is strained because of partial facial paralysis related to a brain tumor that was removed a decade ago, and he’s had to undergo several other costly procedures, including hernia and prostate surgeries. Morris said he worries that if he loses his health coverage, he doesn’t think he’d be able to find affordable coverage.

“My wife and I are at an age where we can’t buy insurance,” Morris said. “If we lose it, we’re done.”

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Patriot Coal: Potential progress and more protests

Retired coal miner Ricky Clark, left, of Man, W.Va., protests with around 2,000 other retired and active coal miners and their

The United Mine Workers of America is promising more protests in its continuing campaign regarding the Patriot Coal bankruptcy and the future contract and benefits for thousand of miners and retirees , as everyone is gearing up for a major court hearing that starts on April 29, and in the wake of last week’s announcement by Patriot Coal of a new offer to the mine workers, described in this story by the Gazette’s Paul Nyden:

Janine Orf, Patriot’s vice president for investor relations, said Thursday that the UMW would be given “a direct 35 percent equity stake in the reorganized enterprise.”

The bankrupt company said the union could then sell all or part of the stake and put the money in the new voluntary employees beneficiary association, or VEBA, that the company has proposed setting up.

Under the company’s new proposal, retiree health-care benefits would be moved to the VEBA Trust on Jan. 1, 2014, an extension of six months, if the UMW agrees to a short-term funding proposal.

If union leaders agree, UMW retirees and their beneficiaries will continue getting their current level of benefits until the end of the year.

The extension is being offered, Orf said, to give the UMW “ample time” to figure out the “optimum level of health-care coverage the VEBA Trust can provide.”

On Friday, UMWA President Cecil Roberts had this response:

While we are working with our financial advisors to fully analyze the amended Section 1114 proposals made by Patriot Coal yesterday with respect to health care for retired miners, their dependents and widows, this appears to be a step forward by the company.

There are still considerable problems with the company’s intentions to change the existing contract for active workers under the Section 1113 process. We are nowhere near a fair and just agreement regarding that part of this equation.

We continue to believe that an agreement can be reached that provides Patriot with the short-term relief it needs to emerge from bankruptcy, keep people working and become a profitable company again without putting retirees’ lives at risk or demanding the deep sacrifices the company says it needs from hourly workers. We will continue our discussions with the company on these issues.

Meanwhile, if you haven’t read these two stories by the State Journal’s Tyler Kuykendall (here and here), they are worth checking out for more detail and background on this whole mess, and for sure check out yesterday’s story recounting the State Journal’s interview with Patriot CEO Ben Hatfield, which includes quotes like these from Hatfield:

Patriot CEO Ben Hatfield was not at Patriot Coal when the company filed Chapter 11 bankruptcy just five years after it was birthed from the assets and liabilities of Peabody Energy. Hatfield was the CEO of International Coal Group. He said at that time, coal executives were scratching their heads about the formation of Patriot Coal.

“Frankly, as a competitor, we looked at that and said ‘how could that work?’ It looks like a bad balance here – too many liabilities and not enough assets,” Hatfield said. “Now, they were some good assets. These are coal mines that have a lot of potential and good people and good management, but an inordinate amount of legacy liabilities disproportionate to the assets. As a competitor we were very suspect from the day the spin was announced as to whether this venture could survive.”

 

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