Westmoreland Coal Company, one of the oldest mining companies in the country, became the second major coal bankruptcy of the Trump presidency Tuesday when the company filed Chapter 11 bankruptcy in a Texas court.
The company, which has a substantial presence in the Ohio Valley, has for years faced mounting difficulties as it continued to take on debt while many of the power plants that used its coal announced they intend to close or switch to cleaner fuels.
In a statement, Westmoreland Coal and its subsidiary Westmoreland Resource Partners, LP (WMLP) which has also filed for bankruptcy, said it will will continue normal operations through the bankruptcy case by using cash collateral and does not expect to lay off workers at this time.
While Westmoreland’s bankruptcy has been expected for some time -- the company warned investors in April it would likely seek bankruptcy protection -- some energy analysts said its current woes are a symptom of a much larger problem.
“The reason that Westmoreland is in trouble, one part of the reason, is that they're losing customers,” said Seth Feaster, an energy data consultant with the Institute for Energy Economics and Financial Analysis, who has studied Westmoreland.
Many coal-fired power plants in the region and beyond are retooling to burn cleaner natural gas and many utilities are closing older coal-burning power plants.
In the next four years, a slew of major coal-fired power plants in the Ohio Valley are expected to shut down. That includes in 2019 the Pleasants Power Station in West Virginia and in 2020 the Conesville coal generation facility in Ohio, Elmer Smith plant in Owensboro, Kentucky, and EW Brown plant in Kentucky. In 2021, FirstEnergy Solutions will close the Bruce Mansfield plant in Shippingport, Pennsylvania, and in 2022 its W.H. Sammis power plant in Stratton, Ohio, will shutter.
Feaster said as coal-fired power generation shrinks, the market for who supplies the remaining facilities with coal becomes more competitive.
“Westmoreland is now facing a whole bunch of other companies that are scrambling to get customers, too, because there's been very few mine closures,” he said. “The companies themselves are not making much money, and so they're in financially precarious positions. Somebody at some point in time has to blink and mines will have to close.”
Westmoreland’s Portfolio
According to filings with the Securities and Exchange Commission (SEC), as of Dec. 31, 2017, Westmoreland Coal and Oxford Mining Company, a WMLP subsidiary, operated 13 surface and one underground mine in Ohio. The company also owns a mining complex in Muhlenberg County, Kentucky, which is being reclaimed.
Westmoreland’s Ohio mines employed at least 490 people in the second quarter of 2018, according to a review of data from the U.S. Mine Safety and Health Administration.
With the exception of the Buckingham underground mine in Corning, Ohio, all of the mining operations in Ohio and Kentucky are operated by Oxford.The company estimates the value of the Ohio and Kentucky mines’ land, mineral rights, property, plants and equipment at more than $202 million, as of the end of 2017.
The bulk of the company’s Ohio operations supply thermal coal used for electricity generation under long-term supply contracts to American Electric Power and East Kentucky Power Cooperative, which accounted for 23 percent and 10 percent of the company’s revenues, respectively, according to their most recent 10-K filingwith the SEC.
In June, a subsidiary of AEP announced it would not renew a contract with Westmoreland to power its Conesville power plant after it expires at the end of this year. AEP said it will close down the 1,590-megawatt plant by by May 31, 2020, two years ahead of schedule, because it is not economically viable. The contract represented 14 percent of WMLP’s revenues.
According to court documents filed Tuesday, Westmoreland is seeking to sell off at least some of its Ohio mines, including the Buckingham underground mine, which provided coal for the Conesville plant.
Peter Morgan, a lawyer with the Sierra Club, said it’s unclear if anyone is interested in buying coal mines in today’s market.
“The question remains whether there are going to be any interested buyers in those mines because the market for the coal in those mines has been really going away,” he said.
Perry Forest
The fate of a recently-proposed mining project also hangs in the limbo in Perry County, Ohio, as the bankruptcy proceedings move forward. Oxford Mining has applied for a permit to mine 545 acres inside the Perry State Forest, which has drawn the ire of local landowners who oppose the project. Some have called on the company to post an increased bond due to the bankruptcy.
A spokesperson for the Ohio Environmental Protection Agency said they are continuing to review the draft permit and public comments.
Eric Heis, a spokesperson with Ohio Department of Natural Resources said in an email that currently Oxford Mining Co. has posted a $2500 per acre bond for that project.
“If Oxford were to forfeit bond at any point, the ODNR would seize all bonding instruments, and utilize funds from the Reclamation Forfeit Fund to complete reclamation,” he said.
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