Alpha restructuring plan could set precedent for Peabody, Arch Coal

July 09--Alpha Natural Resources has received bankruptcy court approval for a financial restructuring plan that apportions the Bristol, Va.-based company's assets while addressing future mine reclamation costs.

Once the nation's fourth-largest mining company, Alpha manages large-scale mining operations in Wyoming's Powder River Basin as well as Appalachian coal-producing regions.

Under the agreement approved Thursday, Alpha's Wyoming properties and other key assets will be ceded to a new company called Contura Energy Inc. Contura will be backed by Alpha's first-lien lenders and will contribute up to $100 million toward Alpha's outstanding reclamation obligations.

The arrangement may set a precedent with strong implications for St. Louis-based coal companies Peabody Energy and Arch Coal, which are also in the midst of bankruptcy and face similar questions related to restructuring and reclamation.

Arch Coal and Peabody operate the two largest mines in Wyoming -- which are also the largest coal mines in the nation -- and have reclamation commitments that exceed $1 billion. Alpha, meanwhile, is on the hook for more than $400 million in self-bonds for reclamation in Wyoming, alone.

Independent analysts said that the Alpha decision could reflect growing scrutiny toward the practice of self-bonding, which enables companies to pledge future contributions to mine cleanup costs, instead of paying the money to states as an insurance policy upfront.

James Stevenson, director of North American coal at the IHS analyst firm, says that regulators used to trust that self-bonds were sufficient, particularly when national coal production was growing steadily, as it largely did until 2008.

"These rules that we set for a growing market: Are they still valid?" Stevenson asks.

Bryce Gray --314-340-8307

@_BryceGray on Twitter

[email protected]

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