Alpha files coal mine reclamation deals with bankruptcy court

The West Virginia Department of Environmental Protection has entered into definitive documentation of its previously-announced agreement in principle with the state’s largest coal operator, Alpha Natural Resources.

Alpha filed the DEP agreement on July 12, along with similar agreements with the other states in which Alpha will continue to operate, as well as several federal agencies, with the U.S. Bankruptcy Court for the Eastern District of Virginia. The bankruptcy court also entered a final order approving the agreements and confirming Alpha’s bankruptcy plan. A closing is expected to occur later this month, when Alpha will be split into two companies; a reorganized Alpha and a new company formed by certain creditors called Contura Energy.

Kevin W. Barrett, a Bailey & Glasser law firm partner and Special Assistant Attorney General for West Virginia in connection with the Alpha and other coal company bankruptcy cases, called the agreement “ground-breaking,” in a July 12 statemeent. He added: “Not only does the agreement secure the commitment of Alpha and its secured creditors to fully bond and reclaim all of Alpha’s mining sites in West Virginia, it marks the first time that a large coal company has committed to remain in business and continue to operate for the primary purpose of reclaiming its legacy mining sites.”

As previously announced, DEP’s agreement with Alpha, now with an undiscounted value of more than $325 million to the state of West Virginia, will pave the way for the bonding and reclaiming of all of Alpha’s legacy liability sites in West Virginia, as well as its continuing operations in West Virginia.

Under the agreement, the surety bonds Alpha previously posted to obtain its mining permits will remain fully in place. But Alpha, West Virginia’s last remaining self-bonded coal company, will post an additional $100 million in surety and other forms of bonds to replace all of the self-bonds at its active and inactive mining sites in West Virginia. Alpha will also immediately post $39 million in letters of credit or cash bonds as financial assurance for the performance of Alpha’s reclamation and water treatment obligations at its other remaining self-bonded sites in West Virginia.

Alpha has also committed to post bonds for, and reclaim and treat water at, all its remaining mining sites, including sites in other states and sites at which it has ceased mining operations, over time. To that end, Alpha and its secured creditors have committed to provide at least an additional $229 million in secured funding. Of that amount, Alpha has committed to provide at least $124 million of funding for reclamation and water treatment over ten years, with a further commitment to provide half of its excess operating cash flow over and above that amount for reclamation and water treatment at its legacy sites. The purchaser of Alpha’s Wyoming and other operations, Contura Energy, has agreed to provide the remainder of the funding—an additional $55 million in reclamation and water treatment funding over the next five years, as well as a guaranty Alpha’s excess operating cash flow commitment, up to an additional $50 million. West Virginia’s share of the $229 million in funds committed to reclamation and water treatment will exceed eighty percent for at least the first two years.

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.