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West Viriginia looks at mining cleanup expenses

BECKLEY, W.Va. — West Virginia is among several coal-producing states pressing coal companies to prove they have the funding available to clean up sites after they finish mining, placing a new headache on a financially strained industry.

Coal companies are suffering financially from cheaper natural gas, tougher environmental regulations and a global glut that has depressed prices. The nation’s three largest coal companies — Peabody Energy Corp., Alpha Natural Resources and Arch Coal — have seen their combined value collapse to below $1 billion from more than $25 million four years ago, according to various financial publications.

Overall, between 2009 and 2014, while the Dow Jones Industrial Average rose 69 percent, the Coal Sector Index lost 76 percent of its value.

That has state regulators stepping up oversight on coal companies amid worrying that taxpayers could be left with the costly and environmentally complicated cleanups as a number of coal companies with operations in West Virginia file for bankruptcy protection. At least three mining companies in the state are under Chapter 11 protection.

“It is rough times in the coal fields right now,” said Harold Ward, acting director of the mining and reclamation division at the state’s Department of Environmental Protection. “You hope for them to be successful, but you anticipate the worst.”

In West Virginia, only Alpha is self-bonded, a practice in which coal companies use their own finances as insurance to pay for future mine area cleanup. Alpha is likely to file for bankruptcy protection in earlyAugust and two weeks ago was kicked off the New York Stock Exchange and began the process of being delisted.

Ward said the state is continuing to monitor Alpha’s financial situation by talking with company officials and examining its quarterly reports.

Other coal companies in West Virginia must either post cash or secure outside guarantees to keep operating.

Ward said the DEP examines quarterly financial reports from each coal company operating in West Virginia.


explained the bonding formula is complex, filled with percentage of income and assets and total company value. 

For example, a coal company must have a ratio of total liabilities to net worth 2.5 times or less for self-bonding; otherwise, the DEP requires a company to post cash or secure outside guarantees, said Ward. This practice mirrors the federal government’s. 

That same federal law requires coal companies operating in the U.S. to set aside money to restore lands after a mine closes. The operators, according to the law, must plant trees and grass, bury exposed waste rock and build barriers to protect waterways from contamination. 

For its part the federal government has organized a group to help states with any revisions that may be needed in their approved state programs. 

Cleanup costs can run into the tens of millions for small companies and hundreds of millions for large coal mining companies. If a company cannot pay, funds would be taken from a special state fund, said Ward. 

 

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