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Coal Report for April 17, 2015

Coal Report for April 17, 2015

Walter-J-Scheller
Walter J. Scheller, CEO of Walter Energy. According to a new report, Scheller received a sizeable pay increase last year even though his coal company’s stock price fell by 90% // photo via walterenergy.com

Even though many US coal companies are struggling and taking huge hits in their stock price, coal company CEOs are making even more money.  This according to SNL Energy, which reports that average pay to coal CEOs jumped 19% last year to an average of $4.9 million per executive, even though 2014 saw the coal market decline sharply across the country.  The report said that some companies will pay CEOs more in difficult times to get them to stick around.  As an example, Walter Energy, a coal producer based in Alabama, paid its CEO $6.3 million last year, more than double what he’d been paid the year before, even though Walter’s stock value fell by over 90% in that time, and is under threat of being de-listed from the New York Stock Exchange.  Arch Coal’s CEO also got $7.3 million last year, an raise of $3 million from 2013, even though Arch’s stock value fell by over 60% in that time.

Another central Appalachian coal operator has filed for bankruptcy.  The Lexington Herald-Leader reports that the Xinergy coal company is the latest.  Close to home, Xinergy owns the True Energy surface mining complex in Wise County, Virginia.  It also owns mines across southern West Virginia.  The company blamed weak coal demand, competition from natural gas, and environmental regulations for its bankruptcy.  Xinergy does plan to continue mining while it goes through the bankruptcy process.  It seems unclear yet if layoffs will happen.

Layoffs are coming at other West Virginia mines, though.  Murray Energy has announced that it will lay off 214 workers at mines in Ohio, Harrison, and Marshall counties.  SNL Energy reports that 155 of those workers are either hourly or contract employees.  While also blaming the weak coal market and competition from natural gas, Murray also blamed the layoffs on what he called “the ongoing destruction of the US coal industry” by the Obama Administration.  This isn’t the first time Murray has blamed the federal government for layoffs at his company—the day after the 2012 election, Murray laid off more than 150 people across the country, with KSL TV in Utah reporting at the time that he gave no reason for the layoffs other than what he called the president’s “war on coal.”  News came out a few months later that many of those miners were actually being re-hired, and a report from the Cleveland Plain-Dealer said that some opponents saw the layoffs as just a political stunt.

Because it’s been struggling so much in recent years, Alpha Natural Resources may soon have to buy insurance to make sure that it would be able to reclaim its strip mines in the event of a bankruptcy.  The Reuters news service reports that coal companies are required by law to have either cash on hand or insurance to cover the cost of reclamation at their surface mines, so taxpayers aren’t on the hook to clean up the old mines if the company goes under.  But Alpha and other coal companies deemed to be in good financial shape have long been exempt from having to buy this insurance or have this cash up front.  And because of this, Alpha has been allowed to leave over $600 million worth reclamation liabilities uninsured in Kentucky and West Virginia.  But Alpha now seems such a risk for bankruptcy that it no longer qualifies for the exemption, and it may soon have to pay upwards of $10 million per year for reclamation insurance.  An official the insurance industry said that it’s unprecedented for this to be happening to coal companies.

And finally, it’s long been hoped that exports could help make up for declining demand for coal in the US.  China especially burns about as much coal as the rest of the world combined, and it’s been seen as essential to hopes of increasing coal exports from the US. But Reuters reports that China’s coal imports have fallen by 42% compared to last year.  In part, this is because China’s economy, which had been growing astronomically, has finally started to slow down.  China has also intentionally been importing less coal to support Chinese coal producers, and it has also announced plans to limit its coal use as a country, due to concerns over record-breaking pollution in China’s cities.  And the investing website the Motley Fool also reports that India also plans to end coal imports in the next few years, which could take another huge buyer off the market for US coal.

The Coal Report is a weekly production of WMMT. It is assembled from newspapers and press services and reports coal-related material as these sources give it. It does not represent the opinion of WMMT on the matters discussed. Our aim is to reflect both local developments regarding coal and the big picture we’re a part of. For feedback, comments, or questions, email [email protected]

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