Arch Coal files for bankruptcy
Arch Coal Inc. joined the ranks of bankrupt coal miners as the U.S. continues to shift toward cheaper, cleaner-burning natural gas, threatening the dominance of one of the world’s dirtiest sources of energy.
The holder of the second-largest reserve of coal in the U.S. filed for creditor protection Monday. The company, which operates the Black Thunder and Coal Creek mines in Wyoming as well as the West Elk Mine in Gunnison County, said it has an agreement with a majority of its senior lenders to erase $4.5 billion in debt from its balance sheet and allow it to keep operating without interruption. Arch has been losing money since 2012.
“Over the past several years, a confluence of economic challenges and regulatory hurdles has hobbled the coal industry,” Arch chief financial officer John T. Drexler said in a filing accompanying the Chapter 11 petition in St. Louis.
Arch officials said they plan to continue the company’s operations, including mines in seven states, and continue customer shipments throughout the reorganization process. Arch had $600 million in cash and short-term investments as of Monday, offi-
cials said in a statement.
In Colorado, Arch’s West Elk Mine near Somerset was the highest-producing coal mine in the state through November. The operation churned out 4.87 million tons of coal as of Nov. 30, according to Colorado Division of Reclamation Mining & Safety data.
At that time, 320 people worked at West Elk Mine, down from a high of 359 employees in April.
Colorado Mining Association president Stuart Sanderson said he’s not aware of any near-term impacts on operations at West Elk Mine — or other mines across the state.
He noted that coal remains the fastest-growing major source of electricity worldwide and that it still fuels the bulk of Colorado’s electricity demands.
According to the World Coal Association, coal’s share of electricity generation in the U.S. fell to 30 percent in April, as the historically popular fuel was overtaken by gas for the first time. Coal still generated more than 40 percent of electricity around the world and is used in the production of 70 percent of the world’s steel.
“Rumors of coal’s demise are greatly exaggerated, though serious challenges loom,” Sanderson said in an e-mail. “Local communities throughout the state have thrown their support behind continued mining in northwest Colorado. But the Arch announcement does point to the need for government to not make the situation worse through the regulations like the recent EPA rules.”
Industrywide troubles including slower demand from China, competition from Australian exports and cheap gas, which pushed competitors Patriot Coal Corp., Walter Energy Inc. and Alpha Natural Resources Inc. into bankruptcy last year.
Arch said in the filing that environmental regulations have made it more expensive for companies to use coal. It blamed EPA rules for causing more than 400 coal-fired generators to close. Overall, 23 percent of the generating units are expected to retire or convert by 2025, Arch said.
The Sierra Club called the filing “the end of an era,” but another environmental group cautioned that the bankruptcy could affect reclamation — the restoration of land after coal is extracted.
Black Thunder mine in Wyoming’s Powder River Basin is the second-largest in the U.S. The Powder River Basin Resource Council, a preservation group, said Arch’s more than 90 square miles of coal mines in the area have a $458 million reclamation liability. The mine produced about 10 percent of U.S. coal in 2014.
“State and federal taxpayers must not be left with the bill,” the group said.
The court filing listed $5.8 billion in assets and $6.5 billion in debt. The company has agreed to the terms of a $275 million loan to keep it operating during bankruptcy. The loan includes a $75 million carve-out for environmental reclamation obligations, according to court papers.
As of the end of 2014, Arch estimated that its pension benefit obligations were $353 million, according to court filings. The company said it doesn’t expect its pension plan, which is well-funded, to be affected during the bankruptcy.
Arch is different from its competitors in that it has several good mines that can make money even with low prices for its main product, said Ted O’Brien, CEO of Doyle Trading Consultants in Grand Junction.
“Arch is very clearly a capitalstructure issue as opposed to a company that’s been running uneconomic mines because they can’t afford to close them,” he said.
Arch Coal, which operates the Black Thunder mine in Wright, Wyo., says its Chapter 11 filing will not affect employee pay or benefits while the company reorganizes debt. Associated Press file