Alpha Liabilities Cause Concern for West Virginia Regulators

Just months after emerging from bankruptcy, Alpha Natural Resources has revealed $100 million in what it calls “unaccounted for obligations,” causing West Virginia regulators to worry that the burden puts the company at further risk of financial failure.

The Alpha disclosure, made in a recent bankruptcy court filing, has increased fears about there being adequate money available to complete proper reclamation on hundreds of Alpha mining permits across West Virginia, The Charleston Gazette-Mail reported.

The disclosure prompted a strongly worded objection from the West Virginia Department of Environmental Protection.

It also brought a related lawsuit by the DEP that threatens the possibility state officials could eventually block a half-dozen former top Alpha executives or affiliated companies from obtaining new coal-mining permits anywhere in the country.

In one recent court filing, DEP lawyer Kevin Barrett referred to the amount of Alpha’s unaccounted for obligations as “whopping.” Barrett said the issue “is devastating” and “seriously threatens” the reorganized company’s ability to perform its legal obligations to reclaim remaining mine sites.

“That’s a lot of money,” said DEP Secretary Randy Huffman. “We just felt like we needed to take some action.”

The DEP filed a legal complaint in U.S. Bankruptcy Court in Richmond, Virginia, against Alpha and against six former Alpha executives who are now running a new company that took over Alpha’s most valuable holdings as part of its bankruptcy reorganization.

The complaint seeks to void previous DEP agreements for which the state could not hold those former Alpha officials responsible if the reorganized Alpha ended up going belly up and leaving mines unreclaimed.

If the DEP’s request is granted, those six officials could be linked to any Alpha reclamation problems on the federal government’s “applicant violator system.” The so-called “AVS” is a system that aims to prevent companies or individuals with unresolved environmental violations or unreclaimed mine sites from getting new coal-mining permits.

The DEP’s action in the Alpha case is the latest move regarding growing concerns from environmental regulators, citizen groups and labor organizations that the historic downturn in the Appalachian coal market will leave behind billions of dollars in “legacy liabilities” that range from scarred land and polluted streams to financially strapped health care and pension programs and unpaid taxes.

In the Alpha bankruptcy, most of the company’s larger and more valuable properties — primarily in the western U.S. — were transferred during the court-approved reorganization to Contura Energy, a company formed by Alpha’s major lenders and now led by former Alpha CEO Kevin Crutchfield.

In a press release Friday, independent members of Contura’s board of directors said the DEP’s court filing included allegations the board believed “to be inaccurate and defamatory as they are made without any evidence whatsoever, with no basis in fact, and without merit.”

“The efforts of Alpha’s and Contura’s dedicated management teams continue to ensure the preservation of thousands of jobs and provide value to both companies’ diverse set of stakeholders,” the press release said. “We challenge any inference to the contrary. We intend to work with all parties to resolve these allegations and will vigorously defend the hard-earned reputations and integrity of management to the fullest extent.”