Coal news and updates

Regulators are wrangling with bankrupt coal companies to set aside enough money to clean up Appalachia’s polluted rivers and mountains so that taxpayers are not stuck with the $1 billion bill.

The regulators worry that coal companies will use the bankruptcy courts to pay off their debts to banks and hedge funds, while leaving behind some of their environmental cleanup obligations.

The industry asserts that its cleanup plans — which include turning defunct mines back into countryside — are comprehensive and well funded. But some officials say those plans could prove unrealistic and falter as demand for coal remains weak.

The latest battle is over Alpha Natural Resources, once a high-flying coal company that borrowed hundreds of millions when the coal market was booming but imploded in the face of competition from cheaper natural gas and tougher environmental regulations.

West Virginia faces perhaps the greatest fallout from the flood of coal bankruptcies that have hit the courts in the last year because many of its mines are scheduled to close and will require extensive cleanup. The state took the unusual approach of hiring a seasoned bankruptcy lawyer from New York who grew up in West Virginia to represent its Department of Environmental Protection in the Alpha case.

“The goal is to make sure the coal companies clean up the mess when they leave,” said the lawyer, Kevin W. Barrett of Bailey & Glasser, who was named a special assistant attorney general for West Virginia and is taking the lead on the Alpha case.

Regulators and environmental groups in Appalachia have tangled with coal companies for decades over their mining practices, particularly mountaintop removal mining, which involves removing mountain summits to extract coal.

But in the bankruptcy cases, West Virginia has been pressuring the industry’s lenders to share more of the responsibility for mine reclamation and water remediation, arguing that they exert great influence, if not outright control in some cases, over the bankrupt mining companies.

Still, figuring out who holds the industry’s debt can involve a cat-and-mouse game. Earlier this year, Alpha denied knowing the identity, or the holdings, of its so-called first-lien lenders, which are in line to be paid before many other creditors, according to a court filing.

So Mr. Barrett subpoenaed Citicorp, the agent for the first-lien lenders in the case, asking for the names.

It took Citi more than 30 days to respond to the state’s subpoena, the court filing shows. When the list of lenders arrived, it read like a who’s who of leading investment firms — including two big hedge funds, Highbridge Capital Management and a unit of Davidson Kempner.

Mr. Barrett promptly subpoenaed these firms too, asking how their plans to buy Alpha’s most valuable assets in the Powder River Basin of Wyoming would help pay to clean up the mines left behind in West Virginia.

Alpha’s current plan on the table would commit at least $209 million for reclamations and water treatment in five states: Illinois, Kentucky, Tennessee, Virginia and West Virginia. But Mr. Barrett worries that the cash is insufficient and that any additional contributions depend on future coal sales, which show little sign of recovery.

“There are a lot of questions whether that will even cover the costs,” said Mr. Barrett, a former lawyer at Weil Gotshal & Manges who grew up hearing the rumble of coal trains through his town in West Virginia.

Source: nytimes.com