WVDEP, Alpha Natural Resources Reach $15 Million Settlement
The West Virginia Department of Environmental Protection (DEP) has reached an agreement with Alpha Natural Resources valued at about $15 million to resolve a recently filed lawsuit in the coal operator’s bankruptcy case. 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 Inc., which purchased a substantial amount of Alpha assets in July, 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, DEP 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 lawsuit. 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 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.
“The settlement provides the state with significant additional bonding and other security to ensure that reclamation will be done,” said DEP Cabinet Secretary Randy C. Huffman. “It also helps to ensure that Alpha will remain a viable operating company with sufficient resources to perform required land reclamation and water treatment.”
The agreement is subject to approval of the bankruptcy court and the fulfillment of other conditions.
Both Alpha and Contura said they were pleased with the resolution.
“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.
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.”
North Korea Rejects UN Sanctions on Coal Exports
The United Nations Security Council has unanimously imposed sanctions on North Korea, placing a cap on the country’s coal exports in response to its nuclear tests. The new resolution demands that North Korea “abandon all nuclear weapons and existing nuclear programs” and takes aim at the state’s exports of coal, its top external revenue source. Under Resolution 2321, North Korea will be restricted from exporting more than 7.5 million metric tons (mt) of coal next year, a 62% reduction from 2015.
North Korea’s Ministry of Foreign Affairs said late last month it rejects the latest sanctions, saying they are denying its sovereignty and right to survival. The resolution could cost the regime $700 million.
Alberta Proposes Deal to Close Coal-fired Power Plants
The Alberta government might pay three coal power producers more than $1 billion over the next 14 years to compensate them for shutting down their plants early as part of its climate change agenda, the Calgary Herald reported. The province is nearing the end of negotiations over contract disputes that led to a controversial lawsuit, reaching three agreements with companies, two of which are tentative. Talks with a fourth player, Calgary-based public utility Enmax, are ongoing.
The deals are the latest in a series of changes the government has made to Alberta’s energy landscape to cut greenhouse gas emissions and produce cleaner power. The government’s climate change plan aims to shut down all coal-ﬁred plants in Alberta by 2030, but six newer facilities were previously allowed to operate until as late as 2061, leading their owners to call for compensation. The province will pay TransAlta Corp., ATCO Ltd. and Capital Power Corp., which each own stakes in the plants, a total of $97 million annually over 14 years, beginning in 2017—for a total cost of almost $1.36 billion.
In related news, government ofﬁcials said they had also made progress resolving a dispute over power purchase arrangements. Enmax, Capital Power, TransCanada Corp. and AltaGas Ltd. walked away from the power agreements when the province increased the carbon levy on large industrial emitters, citing an opt-out clause that allows them to terminate the deals when a change in law makes the power pacts unproﬁtable. If the government is unable to work out a deal, Albertans could be on the hook for $2 billion.