Alpha Natural Resources: Running Wrong

Alpha miners in Southwest Virginia (Photo by Scott Elmquist)

Alpha miners in Southwest Virginia
(Photo by Scott Elmquist)

 By Peter Galuszka

Four years ago, coal titan Alpha Natural Resources, one of Virginia’s biggest political donors, was riding high.

It was spending $7.1 billion to buy Massey Energy, a renegade coal firm based in Richmond that had compiled an extraordinary record for safety and environmental violations and fines. Its management practices culminated in a huge mine blast on April 5, 2010 that killed 29 miners in West Virginia, according to three investigations.

Bristol-based Alpha, founded in 2002, had coveted Massey’s rich troves of metallurgical and steam coal as the industry was undergoing a boom phase. It would get about 1,400 Massey workers to add to its workforce of 6,600 but would have to retrain them in safety procedures through Alpha’s “Running Right” program.

Now, four years later, Alpha is in a fight for its life. Its stock – trading at a paltry 55 cents per share — has been delisted by the New York Stock Exchange. After months of layoffs, the firm is preparing for a bankruptcy filing. It is negotiating with its loan holders and senior bondholders to help restructure its debt.

Alpha is the victim of a severe downturn in the coal industry as cheap natural gas from hydraulic fracturing drilling has flooded the market and become a favorite of electric utilities. Alpha had banked on Masset’s huge reserves of met coal to sustain it, but global economic strife, especially in China, has dramatically cut demand for steel. Some claim there is a “War on Coal” in the form of tough new regulations, although others claim the real reason is that coal can’t face competition from other fuel sources.

Alpha’s big fall has big implications for Virginia in several arenas:

(1) Alpha is one of the largest political donors in the state, favoring Republicans. In recent years, it has spent $2,256,617 on GOP politicians and PACS, notably on such influential politicians and Jerry Kilgore and Tommy Norment, according to the Virginia Public Access Project. It also has spent $626,558 on Democrats.

In 2014-2015, it was the ninth largest donor in the state. Dominion was ahead among corporations, but Alpha beat out such top drawer bankrollers as Altria, Comcast and Verizon. The question now is whether a bankruptcy trustee will allow Alpha to continue its funding efforts.

(2) How will Alpha handle its pension and other benefits for its workers? If it goes bankrupt, it will be in the same company as Patriot Coal which is in bankruptcy for the second time in the past several years. Patriot was spun off by Peabody, the nation’s largest coal producer, which wanted to get out of the troubled Central Appalachian market to concentrate on more profitable coalfields in Wyoming’s Powder River Basin and the Midwest.

Critics say that Patriot was a shell firm set up by Peabody so it could skip out of paying health, pension and other benefits to the retired workers it used to employ. The United Mine Workers of America has criticized a Patriot plan to pay its top five executives $6.4 million as it reorganizes its finances.

(3) Coal firms that have large surface mines, as Alpha does, may not be able to meet the financial requirements to clean up the pits as required by law. Alpha has used mountaintop removal practices in the Appalachians in which hundreds of feet of mountains are ripped apart by explosives and huge drag lines to get at coal. They also have mines in Wyoming that also involve removing millions of tons of overburden.

Like many coal firms, Alpha has used “self-bonding” practices to guarantee mine reclamation. In this, the companies use their finances as insurance that they will clean up. If not, they must post cash. Wyoming has given Alpha until Aug. 24 to prove it has $411 million for reclamation.

(4) The health problems of coalfield residents continue unabated. According to a Newsweek report, Kentucky has more cancer rates than any other state. Tobacco smoking as a lot to do with it, but so does exposure to carcinogenic compounds that are released into the environment by mountaintop removal. This also affects people living in Virginia and West Virginia. In 2014, Alpha was fined $27.5 million by federal regulators for illegal discharges of toxic materials into hundreds of streams. It also must pay $200 million to clean up the streams.

The trials of coal companies mean bad news for Virginia and its sister states whose residents living near shut-down mines will still be at risk from them. As more go bust or bankrupt, the bill for their destructive practices will have to borne by someone else.

After digging out the Appalachians for about 150 years, the coal firms have never left coalfield residents well off. Despite its coal riches, Kentucky ranks 45th in the country for wealth. King Coal could have helped alleviate that earlier, but is in a much more difficult position to do much now. Everyday folks with be the ones paying for their legacy.

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37 responses to “Alpha Natural Resources: Running Wrong

  1. Years ago the crusty editorial page editor of the Roanoke Times told an impressionable young intern that the role of an editorial writer was to watch the battle from the mountaintop, and then when it was over to ride down and shoot the wounded. What a fine editorial here, Peter.

    Businesses thrive, businesses fail, and eventually some industries fail. Coal booms and busts and this time the bust may be for good. You make a key point that the pension assets need to be preserved or else the federal agencies will have to step in, meaning the hit reaches everybody. But we’ve all lit our houses with cheap coal-fueled electricity for decades.

    I’m not sure, Peter, if you wouldn’t be more upset if the company was succeeding, as that would mean more mountains mined, more waterways threatened, more individuals at threat going down in the mines. Should coal mining end in that region, environmentalists would declare victory, wouldn’t they? And putting things in balance, isn’t a couple of 125 foot rights of way for pipelines a small price to pay for that victory? I think you’ll find the Obama administration has reached that conclusion.

  2. Steve,
    Thanks for what I will take as a compliment. A blog IS an editorial. As for taking pleasure in Alpha’s misery, I think you’ve got me wrong. I spent two years researching a book on Massey and if you read it you might say that I spent a lot of time with Alpha, which is obviously a huge improvement over Don Blankenship. Alpha invited me and photographer Scott Elmquist to visit one of their deep mines (although Blankenship let me into a Massey mine back in 2002). ANR always treated me well and they did try to do the right thing after they bought Massey.

    As far as pipeline rights of way, I really don’t see the connection. I still am not sure if there’s a major shortage coming of gas, whose pricing can be as fickle as coal’s. When you factor in how electricity demand may be controlled by more energy efficient machinery, I just don’t know what the demand growth will be. And, I agree totally with LarrytheG if this gas will end up in LNG on its way to Asia. If so, I don’t see the need for eminent domain and so on.

    One point that you are not bringing up but should is metallurgical coal. It has nothing to do with generating electricity. It does not “Keep our Lights On.” WHat it does do is keep blast furnaces roaring in China, South Korea, Brazil and other places. We have very few blast furnaces left since we recycle metal.

    Every ounce of the coal mined at Upper Big Branch where the 29 miners were killed was bound for the export market. It is not essential to our economy. It helps with our balance of payments and when the market is good, it can make a lot of money for the coal operator.

    The blessing of Central Appalachia is that a lot of its coal can go either way — met or steam. Not so Powder River Basin product which is electricity coal. The bad news for the Virginias and Kentucky is that the seams are getting thinner and harder to get. MTR is efficient and relatively cheap, but it causes ecological destruction on an unfathomable scale.

    When I was a kid in West Virginia, I used to play on abandoned strip mines dug out int he 1950s or 60s. That was bad enough. But you can’t imagine the scale of MTR unless you se it from an airplane — as I did for my book.

    Since I have spent years covering coal in good times and bad — intensively for the book — I don’t think I am “shooting the wounded” with Alpha. That characterization is a bit unfair. I talked to them in better times as well — just as they were moving into a modern new headquarters which they have since had to sell.

    • FWIW, I think demand is probably overstated, for two reasons.

      First, increasing ability for individual homeowners and businesses to generate and store their own electricity – tons of research going on and the technology is improving. Seems like MIT has a new press release about this every month. If you can get cost-effective solar and wind, and cost-effective battery storage, why buy it from the power company rather than generate it yourself?

      You already see power companies stepping up lobbying to limit how much individually generated excess solar and wind they have to buy back. IMHO that’s going to increase. If homes and businesses with renewables become the norm, then the money is going to be in load balancing and backup – with way less need for large projects – and less ability to pay back large projects.

      Second, I personally believe that projections of infinite demand in new economies are overstated – as China is currently showing, developing efficient market economies isn’t always a fast, smooth, easy process. They’ll grow, but longer term than some people think.

  3. I happily bow to your superior knowledge of that industry and I did pick up you had a higher regard for Alpha than for Massey. But I do wonder if the environmental movement and liberal political wing you often speak for can have it both ways, celebrating the death of the industry while complaining how it will kill the local economy. You indicate exports are not essential to our economy, but I’m sure the miner about to lose job/health coverage/pension would consider that export business quite essential to his economy.

  4. Peter, overall a solid, well-written post. I mean this in all sincerity. Thank you for your continued contributions to the blog for the peanuts — actually less, than peanuts, more like peanut shells — you get paid. (Thanks again to the loyal readers who contribute to this blog. Without your support, Peter wouldn’t even be paid peanut shells.)

    But in the best tradition of Bacon’s Rebellion I focus now on the main part with which I disagree, which is your contention that there is no “War on Coal.”

    You act as if the only thing driving the coal industry into the ground is market forces — as in, cheap natural gas and a declining market for metallurgical coal overseas. You are right to the extent that market forces the last few years have battered the coal industry. Natural gas is a cheaper, cleaner fuel. Export markets are drying up. Market forces are playing a major role. But that does not exclude the possibility that the anti-coal lobby is also kicking the coal industry when it’s down.

    To pretend that there is no “war on coal” is simply bizarre. The environmental movement continually harps (sometimes with good reason) upon the environmental damage caused by coal mining. Much of “Thunder on the Mountain” was dedicated to the proposition that coal mining creates environmental devastation. This very blog post emphasizes the coal industry’s environmental misdeeds. An active, well-funded environmentalist movement in Central Appalachia actively combats the coal industry locally at every step. Meanwhile, at a national level coal is demonized as the arch-fossil fuel responsible for toxic air pollution and global warming. The first wave of anti-coal regulation, designed to reduce toxic emissions, resulted in the closing of numerous coal-fired plants around the country. You say those plants were old, so they really don’t count. But they were creating a market for coal at least for a while. Now we have a new wave of regulations, designed to reduce CO2 emissions, that will close even more coal plants. The coal industry hasn’t felt the full effects yet, but it will within the very near future.

    Anyone who pretends that the “war on coal” is the only problem facing the coal industry, if such a person exists, is crazy. The fracking revolution has irreversibly changed energy economics to the detriment of coal. But to pretend that the “war on coal” does not exist is even crazier. There are thousands of Americans dedicated to the proposition that coal must be severely curtailed, if not entirely expunged, as an energy source — and, as a crusading journalist, you are one of them!

    Your “No War on Coal” trope sounds like an effort on your part to harmonize your relentless criticism (sometimes justified) of the coal industry with the fact that, when the coal industry goes belly up, thousands of Central Appalachians will lose their livelihood. You know they will lose their jobs, and you know that no other jobs are likely to replace them, but you don’t want to take ownership of it. It’s comforting to blame impersonal market forces, which is fine, because you’re perfectly happy to criticize heartless, soulless capitalism.

    • Jim, in fairness to Peter, I think the market dealt a far bigger blow to coal than EPA regulations.

      You can lobby against regulations. The market, not so much. Cheaper sources of power will displace more expensive ones, unless you subsidize them.

      I’m not arguing that all EPA regs are reasonable – the new water regs appear worrisome at first look, and the new rules for dishwashers are ridiculous – but in this case, I don’t think EPA is the villian.

  5. Jim,
    And thank you for the compliment, as well.

    Yes, the Sierra Club, Mike Bloomberg and others have extensive programs to fight the coal industry. Bloomberg put something like $50 million in it. So, the opposition, which includes shareholder activist groups, is better organized and has money? You don’t think the coal industry doesn’t? Look at Alpha’s generous donations to mostly Republicans like Kilgore and Norment who do their bidding.You also don’t think the fossil fuel industry isn’t tossing money left and right through overt and covert sources to promote themselves ands beat back regulation?

    I have a couple other points. While there has always been some kind of pushback against the coal operators, notably by the UMWA, eco-activism didn’t really hit its stride in the 1990s when mountaintop removal really came into play. I remember being in Cleveland for BizWeek and read a story about it in U.S. News & World Report. I went down to W.Va. to do my own story and was simply floor by the scope of what was going on. And, the Internet helped move the movement along.

    I think you are misrepresenting my book. It is actually more focused on deep mine safety although I get into MTR and other issues. Curious you don’t acknowledge this or perhaps didn’t read the book that closely.

    As far as bashing heartless-souless capitalism, I guess it depends on what kind of capitalism you are talking about. In this country, the Appalachian coal industry has never grown out of the First World model of outsiders exploiting a natural resource, shipping it elsewhere, making big money and putting very little of it back in the place the resource came from. It is sort of like how the Netherlands ran their Asian colonies 100 to 120 years ago.

    “Capitalism” has advanced greatly and morphed into different forms since the mid 19th century. In fact, there’s talk now that we are into “Post-capitalism.” But when you talk about my saying “heartless” capitalism, etc., you are setting up a straw man because you assume that your definition of capitalism is the correct one.

    Like Steve Haner, you tend to have the view of the business elite. Steve’s a lobbyist with ties to Newport News Ship which is just fine, but it does give him a certain mindset that tends to cut big industries a break. As for you, other issues don’t come into play, such as whether workers have a right to organize or protest safety violations. It is funny but I was up in NOVA in late May attending a funeral and went to a dinner afterwards in Arlington. There was an official from the AFL-CIO DC office there and an organizer from Raleigh. They were talking a lot about Bernie Sanders. I was thinking how among many on this blog, one never hears of Sanders or would consider that union officials might be intelligent, productive people. It can’t be a Virginia thing because this was in NOVA, so maybe it’s a Richmond thing.

    Lastly, as far as the “War on Coal,” consider the proposed Clean Power Plan. You have assumed the role of the defender of the Virginia business elite led by you-know-who. This story shows that maybe achieving carbon dioxide emissions reductions isn’t all that hard.

    http://www.washingtonpost.com/national/health-science/with-new-epa-regulations-looming-some-states-gain-from-coals-free-fall/2015/07/23/80001208-2c93-11e5-bd33-395c05608059_story.html?hpid=z4

    I like the quote from Bruce Stanley, a coalfield lawyer who has fought Blankenship for years. “It’s not a War on Coal. It’s a war the coal industry has been waging on the people of West Virginia for decades.”

    He says this in “Blood on the Mountain,” a new documentary that will be shown August 5 at the Naro Theater in Norfolk. I contributed to the movie and am a talking head. Will also be part of a panel in Norfolk. But be forewarned, the movie is a lot tougher than my book ever was.

    • Isn’t people and organizations assembling money and arguments for their cause or against others’ cause the American way? The US Chamber of Commerce, the AFL-CIO, the Sierra Club, the Club for Growth, etc., etc., etc. does this all the time. Then individuals pick organizations and positions they like.

      I worry more about government agencies ignoring the law, most especially the Administrative Procedure Act.

      • Well said, U.S. Federal agencies ignoring the law, most especially the administrative procedure act, is creating not only a lawless U S government but it is also promoting the tradition of a lawless society and lawless culture in this country.

  6. re: The “war on coal”.

    what a quadruple load of BS!

    how about the “war on leaded gas”

    or the “war on CFCs (ozone)”?

    or the “war” on dioxin or nitrogen in the Chesapeake Bay?

    or here’s another – “The sequestration WAR on Va. DOD jobs”

    Bacon – you righties have ZERO SCRUPLEs these days!

    ya’ll should retire the “war on” idiocy.. and I suggest storing it where
    the light don’t shine!

  7. And Steve,
    I am not against exporting metallurgical coal at all. Show me where I did say that. As Massey Energy shows, however, mining met product is just as devastating as thermal coal.

    You seem to be conflating my opinion about exports of natural gas. All I am saying is that if the pipelines pitched by Dominion and others are for exporting LNG, then I can’t see why they should have the right of eminent domain to intrude upon or build upon property without the permission of the owners.

    True, if it were for an energy source vital to national security, that’s one thing. But if it’s for LNG to India or Japan as it is in DOminion’s Cove Point project, that’s not national security. Sorry.
    nd, you assume that I’m against LNG exports, period? Well if so, you are wrong. Here’s a piece I did for the WashPost a couple of years ago.In it, I say that LNG exports are a good idea:

    http://www.washingtonpost.com/opinions/an-energy-dilemma-at-mds-cove-point/2013/06/14/f9bb06c2-d3a1-11e2-a73e-826d299ff459_story.html

    And while we’re at it, here’s a piece I did for the Times on global LNG

    http://www.nytimes.com/2013/10/01/business/energy-environment/us-gears-up-to-be-a-prime-gas-exporter.html?_r=0

    Damn, I often feel that here at Bacons Rebellion, one can’t have opinions about an industrial sector without being tarnished as a liberal, union-loving agitator.

    You criticize the “environmental movement and liberal political wing you often speak for.” But Steve, who do you speak for? A big metal bending shipmaker or the state manufacturers association? I know who Jim speaks for.

    • I don’t speak for anybody. My views are my own, formed over decades and many jobs. I enjoy the debate. None of my clients wants me doing this and that client in particular probably hates me doing this, so if my clients are going to get dragged into this — I’m completely gone. Bye Bye BR.

  8. Good point, too many.

    One of the reasons I was dying to get out of Richmond in the early 1980s when I worked for the Richmond Times-Dispatch was that there was this automatic mindset that business was always good, government was always bad, unions were the devil and protestors should be ignored.

  9. re: ” Damn, I often feel that here at Bacons Rebellion, one can’t have opinions about an industrial sector without being tarnished as a liberal, union-loving agitator.”

    lots of crocodile tears for the miners JOBS – but not so much for their UNIONs, eh?

    and not a word about “bad miners” being “protected” by their thug unions!

    why I bet Jim Bacon’s father was blathering about the War on Horses and buggy whips.. when cars were invented…

    😉

  10. Actually, his Dad is a really cool ex submariner.

  11. My guess is that he isn’t the way his son is.

  12. Steve,
    I mean no offense, but if one makes assumptions about another and shines a spotlight, it might come back.

    • Peter –

      Your unfair and unfounded comments and innuendoes concerning steve haner are in my view despicable and they do great harm to the quality of the discussion on this blog . Your reckless behavior drives serious and thoughtful people of obvious experience and professional achievement away from particpating here. Your lack of manners and and accusations and snide comments poison the well for many others.

      • Peter has done me a favor by reminding me that, as much as I would like to, I cannot separate my comments here from my professional life and my clients. I started with Bacon’s Rebellion years ago using my byline (before I had clients), it caused some pushback so I went to using a nom de plume, then returned to my byline recently. The assumption was made (and expressed) that I was carrying water for a client. Given this era of “sponsorships” I guess that is a fair assumption. The only way to avoid that is to retire from the field completely on anything controversial or business or policy related, and I don’t have much to say about land use planning or hospitals. When I am done making my living practicing government affairs, perhaps I can return to offering my own opinions on issues. Either that or I’ll start doing elections again :)!

  13. Peter – ignore the flotsam. Jim – enforce your rule on personal attacks, please. Peter has not personally attacked anyone. Mr. Reed seem to have a propensity for that behavior.

  14. What is this? Some kind of country club where I am to be berated when my cell phone goes off accidentally in the foyer? Are you implying that I am somehow not on the level of others on this blog?

    Reed, for your information, I have been serving this blog for years. Who are you to accuse me of driving “serious and thoughtful” people away? Name one. I don’t recall you having contributed all that much.Instead of raising points about ideas, you go for personal attacks. I have never met you. You don’t know anything about me.

    Why don’t you just quit this and say something if you have something meaningful to add?

  15. Steve’s reaction is completely justified. Neither he nor I am doing the attacking here. Peter is. Without civility people with it will go elsewhere. Which is perhaps exactly what some wish for.

    • ” Your unfair and unfounded comments and innuendoes concerning steve haner are in my view despicable and they do great harm to the quality of the discussion on this blog ”

      this is a personal attack Reed.. own it..

  16. Peter wrote:  “… I don’t think I am “shooting the wounded” with Alpha. That characterization is a bit unfair.”

    It’s not fair at all.

    Since I’ve been a severe critic of Peter’s current position on the National Question, immigration, I want to distance myself from a couple of his critics here. I thought his article very interesting, and his responses to critics urbane.

    I don’t know enough to have a valuable opinion about Virginia’s coal industry but obviously Peter is very knowledgeable on the subject and he cares about the safety of the miners.

    One comment about an earlier thread I might as well make here:  Nuclear power is far cleaner than coal. The two shouldn’t be called dirty in the same breath. Years ago Petr Beckmann (the spelling is correct) wrote a good book on the subject, now out of print: The Health Hazards of NOT Going Nuclear.

  17. re: “dirty nukes”.

    Not to argue the point – because I generally support Nukes – with provisos

    but Nukes not properly contained are very, VERY DIRTY – and Nukes that break and leak are far, far dirtier than any coal plant would ever be – and, point of fact, no insurance company will insure for that risk and so the Govt has to subsidize Nukes and if it did not – Nukes would not be financially viable, would not exist.

    that being said – if we could be as successful with coal in terms of containing the pollution – like we are with Nukes – then we’d not be having the “war on coal” argument to start with.

    For years and years – we have heard about how “Clean Coal” technology was going to neuter the pollution critics.

    where is it?

    It’s no where to be found and in it’s place the “war on coal” zealots are teamed up with the “we’re destroying reliability” folks and running amok… in the CPP proposal.

    To this point – “fail-safe” Nukes are about as real as “clean coal” power plants.

  18. Iv worked for Massey and alpha both. Massey was far more safer then alpha ever was or will be. Massey mines had newer better safer equipment and tools. Alpha uses old dangerous equipment and expects you to break the law to do your job. And guess what you get jumped onto if you don’t do what alpha wants. The so called safety violations you speak of are ridiculous. And we had a lot more then 8000 employees when we merged, 15000 is the right number. Most violation are for trash , blown lights and so on. I could come to any person house and write you these serious violations in your home. People with no knowledge of what me or my brother do make me relize how ignorant people seriously are… Have a nice day:)

    • Interesting comment that reflects how different sources, senses, and experiences of the same apparent facts and circumstances can combine within two people who then each reach opposite conclusions on the same subject.

    • The comment reflects nothing of the sort. From his experience ‘Massey Strong’ thinks it’s safer to work at Massey than at Alpha. Show us where Peter said that it is safer to work at Alpha.

  19. Fawell’s comment is typical in its intended insult. I never said that Alpha was safer than Massey Energy although I’d bet bottom dollar it is. For Massey’s record suggest reading three studies or my book.

    I also don’t take seriously a comment by an alleged coal miner who remains unidentified.

    And, I have to tell you, I am getting very tired of the tonality on this blog these days. From Jim’s “sponsorship” to assholes like Fawell, it is very negative and abusive. The old BR seems gone.

  20. My goodness.

    Both Mark and Peter read into my comment what they want to see, which as so often happens, has nothing to do with what I in fact said, or meant to say.

    With regard to Peter’s comments that:

    “I also don’t take seriously a comment by an alleged coal miner who remains unidentified.”

    And his comment:

    “From Jim’s “sponsorship” to assholes like Fawell, it is very negative and abusive. The old BR seems gone.”

    Those sorts of comments and characterizations of other people have been going on for far too long around here, in my opinion, and both comments also speak for themselves as it relates to their author.

  21. In plain language, ‘Reed Fawell 3rd’ said that Peter contradicted ‘Massey Strong’. The latter had claimed – it was his main point – that Massey was a safer place to work than Alpha. QED as we used to say in geometry class.

    Who wants to read “My goodness” and other snide expressions of superiority while ‘Reed Fawell 3rd’ complains that people are rude to him, LOL.

    • No, Mark, you are totally wrong in your characterization of what I plainly said. What I said was:

      “Interesting comment that reflects how different sources, senses, and experiences of the same apparent facts and circumstances can combine within two people who then each reach opposite conclusions on the same subject.”

      That should not be hard for you to understand. Hence, the My Goodness.

  22. I’m reminded of when Clinton said “It depends on what the meaning of the word ‘is’ is.”

    Apparently ‘Reed Fawell 3rd’ uses a novel meaning of the word “opposite.”

    This got tiresome a few posts back. ‘The 3rd’ can have the last word.

    • Actually, since you refuse to deal with the obvious plain words of what I said, and want to demagogue this issue for some reason, you will get a fuller explainable which frankly you do not deserve.

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