Arch Coal files for bank­ruptcy

The Denver Post - - BUSINESS - Den­ver Post staff and wire re­ports

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

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.