Source: Dow Jones News Service, June 9, 2016
Bankrupt coal operator Alpha Natural Resources Inc. has come to terms with West Virginia environmental regulators, and agreed to cover hundreds of millions of dollars worth of reclamation work at its mines.
Announced Thursday by West Virginia’s Department of Environmental Protection, the settlement calls for the agency to drop its objections to Alpha’s chapter 11 exit plan, in return for more than $300 million in commitments. Critics of Alpha’s chapter 11 emergence plan, including the West Virginia agency, said Alpha had failed to provide adequately for environmental damage left behind by coal mining operations.
“Another company might have just walked away, leaving hundreds of millions of dollars of reclamation and water treatment obligations to the state’s Special Reclamation Fund,” Randy C. Huffman, Cabinet Secretary for the West Virginia DEP, said in a release.
Instead, Alpha is providing “significant funding” over and above its existing bonds, to cover cleanup at operating and abandoned mine sites, he said. Profits from the continued operation of various mining sites in West Virginia will help support the cleanup efforts, under the pact.
Alpha’s chapter 11 plan is out for votes and the company is under pressure to reach agreement with federal regulators and other states worried that taxpayers will wind up footing the bill to clean up mining contamination.
Under the plan, creditors will take ownership of the most profitable mines, with other mines left behind to form a restructured Alpha.
In court filings and arguments, regulators expressed concern that the coal mining operation that emerges from bankruptcy won’t have the financial strength to clean up the land and water. According to court papers, nearly $293 million in reclamation obligations will be associated with the mines that Alpha keeps, while another $181.1 million in reclamation obligations would follow the mines that the creditors take.
The agreement with West Virginia calls for surety bonds Alpha posted to obtain its mining permits to remain in place. Additionally, Alpha will post an additional $100 million in penal bonds and $39 million in letters of credit or cash bonds, the West Virginia DEP said.
The company and its secured creditors have committed to fund approximately $209 million worth of reclamation and water treatment work over the next five to 10 years, including a guaranteed share of excess operating cash flow, according to the release.
The agreement must pass muster in bankruptcy court, after being put in final form. According to the West Virginia DEP, the reclamation funding settlement has the support of Alpha’s official committee of unsecured creditors and other creditors.
Alpha, based in Bristol, Va., sought chapter 11 protection in August, one of many coal companies driven to bankruptcy by debt loads that became insupportable when prices fell.