Justice Department: Alpha planning ‘liquidation,’ not ‘reorganization’

By Benjamin Hulac, E&E reporter

The coal mining company Alpha Natural Resources Inc. is moving to sell off chunks of its business and has provided limited details about its future operations, based on plans the company submitted in court papers, the Justice Department said.

In an objection filed Tuesday, attorneys for the U.S. Trustee Program raised questions about Alpha’s March plan to restructure its debt and emerge from bankruptcy, taking issue with a vague business plan the firm outlined in a key bankruptcy document.

“Although this case was originally represented to the court and the creditors as a reorganization, the proposed plan makes clear that the end-game here is more in the nature of [if not a complete] liquidation,” the attorneys said in their objection.

In one portion of the plan, Alpha says the reorganized company would “be operated for the principal purpose of conducting and completing environmental reclamation.” Or, as the U.S. Trustee Program said, it would be “[p]utting its mining properties back into a safe and environmentally stable state.”

During the case, Alpha has requested permission to sell “non-core” and “core” assets, as well as natural gas rights, including plots in several Pennsylvania counties.

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Alpha did not respond to multiple requests for comment. A spokesman for the United Mine Workers of America, the union that represents a minority of Alpha employees, declined to comment.

Alpha employed about 8,000 full-time workers when it filed for bankruptcy, about 1,000 of whom UMWA represented at the time.

Disclosure statements provide creditors in bankruptcy proceedings with information about the party in debt and the debtor’s plans for the future. Creditors in bankruptcy cases rely on that information to make “an informed and reasoned” decision to approve or reject reorganization plans, government attorneys said.

The U.S. Trustee, a watchdog division within the Justice Department, oversees bankruptcy cases nationwide.

Alpha filed for bankruptcy Aug. 3, 2015, with $10.1 billion in assets and $7.1 billion in debt. Two other major U.S. coal companies, Peabody Energy Corp. and Arch Coal Inc., each filed for bankruptcy this year.

Unanswered financial questions

When they made their first statements to the court in August, Alpha’s top executives said they intended to bring Alpha out of bankruptcy and into profit.

“The debtors and the coal industry — like their coal miners — are resilient,” said CEO Kevin Crutchfield.

Sierra Club attorney Peter Morgan said there were “significant information gaps” in the company’s proposed plan.

The Sierra Club, West Virginia Highlands Conservancy and Ohio Valley Environmental Coalition joined the U.S. Trustee yesterday, filing their own objection to the disclosure statement.

Alpha hasn’t explained how it will meet obligations to reclaim affected land or uphold previous legal agreements, they said.

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“It certainly appears that Alpha is creating an entity that will be burdened by close to a billion dollars of nondischargeable environmental liabilities to reclaim the land and treat polluted water at its orphaned former mining complexes, without sufficient assets to perform such liabilities,” the environmental groups’ objection reads. “It appears more likely than not that this ‘reorganization’ will be quickly followed by a chapter 7 liquidation.”

The two types of bankruptcy that companies in the United States commonly seek are Chapter 7 and Chapter 11, known respectively as liquidation and reorganization cases.

If company managers believe their firm can weather the tough conditions that prompted them to seek bankruptcy protection, they might file for Chapter 11, streamline the company and open again for business. But if the brass have a bleaker outlook, they may submit Chapter 7 papers and strip the company of its assets.

Morgan said two questions are important to keep in mind: Does Alpha have an accurate understanding of its environmental reclamations, and will it have enough money to meet those obligations? The answers to those questions are unclear, he said.

Alpha operates surface and underground mines in Kentucky, Pennsylvania, Virginia, West Virginia and Wyoming.

Talk of total liquidation is premature but, Morgan said, always a possibility.

“We need a lot more information from Alpha before we can really gauge where things are headed,” Morgan said.

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— Originally published by ClimateWire. Contact E&E publishing for permission to republish.