Patriot files bankruptcy, gives up mountaintop removal

After being driven to bankruptcy, environmental groups were able to use cleanup obligations to pressure a major mountaintop removal practitioner to give up mountaintop removal mining.

Patriot Coal was having plenty of problems this year. By this summer, the company was filing for bankruptcy and it didn’t take long for union representatives to raise some red flags.

Patriot was primarily made up of mines in Central Appalachia – a region that hasn’t been performing so hot in the recent decade. The United Mine Workers of America claimed that Peabody Energy and Arch Coal had both spun portions of their operations into Patriot in order to dispose of its least-performing, most liability saddled operations.

“They got liabilities off of their books to enhance the value of shares that remained and they never had to pay their healthcare benefits they promised,” UMWA President Cecil Roberts said in an interview with the State Journal. “If this was such a lucrative deal, why did they get rid of these operations in West Virginia and in Kentucky? They could have retained them and made all the money they though Patriot was going to make.”

The company said that the move was being made in response to ever-changing coal markets.

“The coal industry is undergoing a major transformation and Patriot’s existing capital structure prevents it from making the necessary adjustments to achieve long-term success,” said Patriot Chairman and Chief Executive Officer Irl F. Engelhardt. “Our objective is to use the reorganization process to address important issues in an orderly way and make the Company stronger and more competitive.”

Though the UMWA considered a recent change of venue ruling in bankruptcy court as a small victory, it had sought to instead move the proceedings to Charleston.

“Though we would have preferred this case to be moved to Charleston, W. Va., moving it to St. Louis puts it on the front porch of Peabody Energy and Arch Coal,” Roberts said. “We filed this case so that it would be moved away from a place where no coal has ever been mined to a place where people are familiar with the coal industry.”

Aside from liabilities to its workers, Patriot Coal also faced a large liability to clean up selenium as part of a court-ordered agreement with environmental groups the Ohio Valley Environmental Coalition, the Sierra Club and the West Virginia Highlands Conservancy. Those same environmental groups were willing to ease those obligations to hopefully allow Patriot to continue to pay worker benefits.

That concession, of course, came with a price. No more mountaintop removal coal mining.

“Patriot Coal has concluded that the continuation or expansion of surface mining, particularly large scale surface mining of the type common in central Appalachia, is not in its long term interests,” the company said in a prepared statement.

Patriot agreed to ratchet down its coal production from surface mining, from 6.5 million tons in 2014 to 6 million in 2015 and 2016, 5 million in 2017 and 3 million in 2018 and beyond.

“It’s heartening any day we learn that a major player decides that mountaintop removal is not in the best interest – of the company or of our mountains, streams, and communities,” said Jim Sconyers, Chair of the West Virginia Sierra Club. “We look forward to the day when full implementation of this agreement is achieved.”

The end of the practice comes amid speculation of the long-term geological and political viability of domestic coal. While exports are expanding, particularly in metallurgical markets, the future of the industry remains uncertain.

Patriot, like its peer Alpha Natural Resources, appears to be realigning business to focus more on international and metallurgical markets. The long-term implications both of Patriot’s decision to stop mountaintop removal and the outcome of its bankruptcy are almost sure to be wide-reaching as consequences of results of those decisions play out.

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