New coal producer Contura Energy, which in July bought several mining operations of bankrupt Alpha Natural Resources, announced Nov. 29 a proposed resolution of recent filings by the West Virginia Department of Environmental Protection (WVDEP) in the U.S. Bankruptcy Court for the Eastern District of Virginia saying that certain liabilities were hidden during the bankruptcy restructuring process.
The proposed resolution, which was filed with the court on Nov. 29, would resolve all concerns raised by the WVDEP in its recent filings and would result in a dismissal with prejudice of its complaint. The resolution contemplates entry by the court of an order including findings of good faith on the part of all parties related to the design, negotiation and implementation of Alpha’s already-confirmed chapter 11 plan, as well as the related settlements between Alpha and Contura, and Alpha and its first lien lenders, respectively.
“We have always been of the view that Contura’s officers had acted in good faith in all respects, including in connection with the Alpha plan process, and we welcome this positive resolution,” said Neale Trangucci, independent director of Contura.
Contura Energy is a private, Tennessee-based company with affiliate mining operations across multiple major coal basins in Pennsylvania, Virginia, West Virginia and Wyoming.
Alpha Natural Resources Holdings Inc. and ANR Inc., which are a reorganized version of Alpha Natural Resources, said Nov. 29 that they have also resolved the concerns expressed by the West Virginia DEP over various unaccounted-for expenses, which were discovered shortly after Alpha’s emergence from bankruptcy. Financial responsibility for the expenses was resolved in a settlement agreement with Contura Energy and the agent for Alpha’s former first lien lenders.
Alpha CEO David Stetson said: “Alpha is pleased that the concerns raised by the West Virginia Department of Environmental Protection with respect to the proposed settlement between Alpha, Contura Energy, and the agent for Alpha’s former first-lien lenders have been fully addressed.”
Since identifying the unaccounted-for obligations in the weeks following the restructured company’s emergence from Chapter 11 bankruptcy, Alpha’s new management team was committed to finding a solution that allows it to fulfill its obligations to stakeholders, Stetson said, “Alpha believes that approval of the settlement, along with executing a 2017 mining plan that takes advantage of the stronger market for our coal, while maintaining a continued focus on realizing significant cost savings, will keep Alpha sustainable in the long run.”
The West Virginia DEP said Nov,. 29 that it has reached this agreement with Alpha Natural Resources valued at nearly $15 million. The settlement enhances DEP’s earlier settlement with Alpha and will provide additional bonding and other security for the coal operator’s ongoing reclamation obligations in West Virginia. Under the earlier settlement, announced in June, Alpha has posted bonds and other collateral totaling nearly $140 million with respect to its remaining mining sites in West Virginia. Alpha and Contura Energy have also committed to provide at least $165 million to fund reclamation and water treatment in West Virginia.
In early November, five months after that agreement was finalized, Alpha announced a $100 million error in the financial projections underlying its bankruptcy plan, which included the DEP settlement. The company simultaneously announced a new proposed settlement with Contura Energy and its former secured creditors that partially reduced that gap. However, the DEP said it remained concerned about the effects of Alpha’s reduced cash flow projections and brought suit in Alpha’s bankruptcy case.
The new settlement resolves that suit. Under the settlement, DEP has agreed to dismiss the complaint and release the defendants from liability relating to the error in the financial projections. In exchange, Alpha agreed to post its Julian (Boone County) headquarters building, which recently appraised for $6.3 million, as collateral securing its remaining reclamation obligations in West Virginia.
In addition, Contura agreed to post a $4 million letter of credit and issue a secured $4.5 million guaranty of Alpha’s obligations, each through the end of 2018. By that time, Alpha expects its financial condition to return to the level projected in its prior bankruptcy projections.
“Once again, DEP’s bankruptcy strategy has helped to ensure that our state’s interests are protected,” said DEP Cabinet Secretary Randy C. Huffman. “The settlement provides the state with significant additional bonding and other security to ensure that reclamation will be done. It also helps to ensure that Alpha will remain a viable operating company with sufficient resources to perform required land reclamation and water treatment.”
Alpha Natural Resources Holdings and ANR have affiliate mining operations in West Virginia and Kentucky, and supply metallurgical coal to the steel industry and thermal coal to generate power. ANR has offices in Kingsport, Tennessee, and Julian, West Virginia, which support 17 active mining operations.