Enviro groups object to Alpha deal on coal reclamation bonding in West Virginia

The Sierra Club said Dec. 15 that environmental groups have filed their first objection in the Alpha Natural Resources Chapter 11 bankruptcy case now being pursued at the U.S. Bankruptcy Court for the Eastern District of Virginia.

Alpha, one of the nation’s largest coal producers, sought Chapter 11 protection on Aug. 3 and has so far proposed to sell a number of marginal mines, while retaining many of its larger operations.

The Alpha proposal to the court, opposed by the Ohio Valley Environmental Coalition, Sierra Club and the West Virginia Highlands Conservancy, seeks to replace Alpha’s $244 million self-bonded mine reclamation liability in West Virginia with a commitment to pay $39 million, leaving West Virginia citizens potentially on the hook to cover more than $200 million in mine reclamation costs should Alpha forfeit or abandon its mines in the state, the club said.

Alpha’s current financial condition means that it no longer qualifies for “self-bonding,” and must provide substitute reclamation bonds backed by a third-party financial institution. Both federal and state mining laws prohibit mine operators like Alpha from mining if they lack adequate reclamation bonds. Rather than require Alpha to stop mining or provide substitute bonds, West Virginia’s Department of Environmental Protection is seeking to let Alpha walk away from more than 80% of its reclamation bonding liability, the club said.

“Pursuant to federal law, West Virginia has a mandatory duty to compel any operator that lacks adequate reclamation bonds to cease mining immediately and begin reclamation,” said the complaint filed in court. “Because Alpha does not meet the self-bonding criteria and has not posted substitute bonds, West Virginia lacks the legal authority to authorize Alpha to continue to operate its mines in West Virginia without adequate reclamation bonds. Because the proposed settlement would violate federal and state statutes and regulations, West Virginia may not authorize, and this Court may not approve, such a radical deviation from clear and well-established law.

“In addition to relief which would violate established law and to which they are accordingly not entitled, the Debtors also seek authorization from this Court to pledge the entire amount remaining in its Bonding Accommodation Facility to WVDEP. The Debtors’ approved debtor-in-possession financing facility (‘DIP Facility’) provided for a $100 million reserve (the ‘Bonding Reserve’) to be used for governmental authorities that make any demand, request or requirement for any surety bond, letter of credit, or other financial assurance under applicable law. The Debtors have already pledged $61 million from the Bonding Reserve to the State of Wyoming and the Wyoming Department of Environmental Quality (‘WDEQ’). Through the Settlement Motion, the Debtors propose to pledge the remaining $39 million of the Bonding Reserve to WVDEP, leaving no funds to support bonding for environmental reclamation in states other than Wyoming and West Virginia. All other localities will be left without a source of funding from the Debtors. Moreover, it is not clear whether these other localities have received notice of the proposed settlement.

“Because the Debtors’ proposed settlement with WVDEP violates federal law and leaves no money to support bonding for environmental reclamation in states other than Wyoming and West Virginia, the Settlement Motion should be denied.”

West Virginia DEP fires back

Said the West Virginia DEP in a Dec. 16 response filed with the court: “While they sat entirely on the sidelines with respect to the Debtors’ prior motion to authorize their entry into a similar settlement with the State of Wyoming, the Citizens Groups filed a broad objection to the Debtors’ entry into the Consent Order. That objection, however, in attacking DEP’s motivations for entering into the Consent Order and challenging the legality of DEP’s regulatory and enforcement actions as ultra vires, seeks only to promote their own narrow agenda of putting coal companies out of business.

“While there are, as the Citizens Groups well know, appropriate forums in which to pursue their agenda, this Court is not one of them. Indeed, nothing contained in the Consent Order (or the Debtors’ motion or the related proposed order of this Court) limits the rights of the Citizens Groups to commence and prosecute an appropriate action in an appropriate forum to challenge DEP’s actions in entering into the Consent Order, and this Court is well within its power and authority to require that they pursue an appropriate action against a third-party regulatory authority in an appropriate forum again as they have already done.”

The DEP noted that before entering into the Consent Order, it communicated directly with its federal oversight authorities. “The Director, in particular, communicated with the Director of Field Operations for the Office of Surface Mining Reclamation and Enforcement (‘OSMRE’) in Charleston regarding DEP’s enforcement order and the resolution thereof. DEP also participated in multiple conferences with representatives of OSMRE’s regional and national level, the United States Departments of Interior and Justice, and the United States Environmental Protection Agency, as well as various States, to discuss the self-bonding issues facing West Virginia and Wyoming. None of those federal regulatory representatives ever objected to DEP’s actions with respect to Alpha’s self-bonded reclamation obligations. And, more importantly, OSMRE, despite being fully aware for many months of the proposed resolutions of those self bonding issue and the actual resolution of the Debtors’ self-bonding issues with the State of Wyoming for more than two months now, has never taken any federal oversight action against West Virginia or Wyoming with respect to self-bonding.

“Contrary to the insinuations of the Citizens Group in their objection, DEP takes its responsibility under the Act and to the people of the State of West Virginia very seriously. One need look no further than DEP’s actions in Patriot Coal’s recently completed bankruptcy case in this District, where DEP (in stark contrast to the Citizens Groups which largely sat idly by) actively and aggressively pursued its rights and obtained a highly favorable settlement that committed substantial additional resources to the reclamation of Patriot’s former mining sites. DEP will, as necessary or appropriate, take an equally active and aggressive role in protecting the State’s interests in these cases, particularly as Alpha looks to shed most of its West Virginia mining operations.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.