Correspondence suggests that shareholders were deliberately left out in the cold in the run-up to bankruptcy by Alpha Natural Resources, which owns the Belle Ayr mine pictured here. (Dustin Bleizeffer/WyoFile)

Originally published Friday, May 29, 2015 by Environment & Energy Daily. Contact E&E for permission to republish.

Wyoming regulators are asking Alpha Natural Resources Inc. to prove it can cover the cost of reclaiming its mining operations were the company to get into financial trouble.

The move is a symptom of the persistent downturn in the coal markets, which has kept top mining companies in the red for years and sent stock values downward.

The Surface Mining Control and Reclamation Act requires companies to provide bonds or other financial assurances in case they can’t meet their obligation to return the land to pre-mining conditions.

In Wyoming and West Virginia, Alpha has taken advantage of the ability to self-bond. In other words, the company can provide its own financial assurances as long as it meets certain financial benchmarks.

Today, Alan Edwards, the Wyoming Department of Environmental Quality’s deputy director, said a review of the company’s 2015 financial statements meant it no longer qualified for self-bonding.

Edwards said DEQ recently asked Alpha for more information about its financial health. “Unfortunately,” he said, “that did not satisfy all the tests and the requirements that have to be met.”

Companies in Wyoming, the country’s top coal-mining state, have about $2 billion in self-bonding, mostly Alpha, Arch Coal Inc., Cloud Peak Energy Inc. and Peabody Energy Corp.

Edwards said DEQ approved Alpha’s self-bonding late last year and was not formally due for renewal until this fall. But he said the company’s end-of-the-year financials were reason to ask the company for alternatives.

“We’ve had self-bonding for 30 years,” Edwards said during an interview. “We’ve always been in full compliance with our regulations. We take our responsibility very seriously.”

Alpha now has 90 days to present Wyoming regulators with financial assurance alternatives. One possibility is a partial self-bond combined with other measures. “Any amount of self-bond would have to meet the test,” Edwards said.

“We’re confident they will be able to come with us with some replacement instruments,” he added. “We’re in the process of identifying now what a suitable replacement is.”

Edwards said DEQ could also reconsider Alpha’s self-bonding status next year once it has reviewed the company’s end-of-the-year financials.

Alpha Natural Resources operates the Eagle Butte Mine, shown here just east of Campbell County Airport. (Wikipedia Commons/Lithium6ion)
Alpha Natural Resources operates the Eagle Butte mine, shown here just east of Campbell County Airport. (Wikipedia Commons/Lithium6ion)

Alpha Natural Resources disagrees, meets W.Va. requirements

Alpha said today it strongly disagreed with Wyoming DEQ’s decision and was reviewing its options. The company said it qualified based on its own calculations, following the state’s rules. And it said DEQ should have given the company more clarity before making a determination.

“Alpha and its affiliates take very seriously our obligation to operate in an environmentally responsible and fiscally sound manner,” said Alpha Chief Financial Officer Philip Cavatoni. “We also appreciate the firm but fair approach with which the Wyoming Department of Environmental Quality has managed its self-bonding program in the past, which is why the limited transparency in this current process is concerning.”

Alpha has told investors that problems with being able to self-bond could affect the company’s finances. The downturn has made it harder and more expensive for companies to secure financial assurances through financial institutions.

Regulators with the West Virginia Department of Environmental Protection have also been reviewing Alpha’s self-bonding there. Spokesman Jacob Glance said the company is in good standing. States can have different requirements for self-bonding as long as they follow SMCRA principles.

“According to its first-quarter financials, Alpha now meets eligibility criteria for self-bonding,” Glance said. “However, the DEP continues to closely monitor Alpha’s financial situation and is in discussion with the company about its future plans.”

In 2012, West Virginia lawmakers boosted the special reclamation tax on coal-mining companies to make sure the state has enough money to deal with sites where companies went bust and forfeited their bonds.

The federal Office of Surface Mining, Reclamation and Enforcement is coordinating bonding issues with the states amid the downturn (Greenwire, April 28). Last month, it urged West Virginia to take account of special reclamation commitments that companies have made when calculating total liabilities.

Twitter: @ManuelQ | Email:
Wikimedia Commons photo from Lithium6ion.
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