MAC: Mines and Communities

"Coal is dead in the ground!"

Published by MAC on 2016-03-16
Source: Statements, Bloomberg, Mining.com, End Coal (2016-03-10)

But don't shout the message too soon...

The mafia-like boss of Western Virginia coal, Don Blankenship, may not get off so lightly as he previously though he would.

He's now being sued for restitution of money paid as a fine by another mining company, following the USA's biggest ever mining disaster in recent years. [See: A US travesty of justice: Coal Don found guilty of mere "misdemeanour" 

Even if found guilty, it doesn't mean that Mr Blankenship will go to prison for more than a year.

Arch Coal, a third north American company that's now filed for bankruptcy, has been secretly funding two "libertarian" think tanks", set up to lobby in favour of the blackstuff, according to Australian researcher Bob Burton.

At the same,  says Burton: "Coal industry lobby groups around the world are also among the potential financial losers from the collapse of Arch Coal", including the London-headquartered World Coal Association [which] is amongst the company’s creditors. Another is the Global Carbon Capture and Storage Institute (GCCSI) based in Australia, which promotes carbon capture and storage as a ‘solution’ to greenhouse gas emissions from coal-fired power plants".

Hot on the heels of Arch, and also heading towards bankruptcy, is the world's largest privately-owned coal company, US-based Peabody Energy.

One might well think  that - for American companies at least - coal is now decidedly for the chop

Nonetheless, despite several major disinvestments from the industry in recent years, some banks are still lagging behind the rest of the herd - including United Bank of Switzerland (UBS)  and Deutsche Bank.

On Top of Jail Time for Fatal Mine Blast, Blankenship Now May Face $28 Million Fine

Jef Feeley

Bloomberg

9 March 2016

Donald Blankenship, the former coal baron looking at up to a year in prison for flouting mine-safety rules, may be facing an even bigger penalty: $28 million in restitution tied to a fatal explosion six years ago.

Alpha Natural Resources Inc. asked a federal judge in West Virginia to order Blankenship to pay legal expenses and fines stemming from the 2010 Upper Big Branch mine blast, which killed 29 workers. At the time of the incident, Blankenship was chief executive officer of Massey Energy, owner of the mine. Alpha bought Massey in 2011. Jurors in Charleston, West Virginia, convicted Blankenship in December of a misdemeanor conspiracy charge of ignoring safety standards.

While federal prosecutors are backing Alpha’s request, Blankenship is fighting it.

“This is an unprecedented attempt to add Draconian penalties to an offense that Congress has classified as a misdemeanor, and Alpha has no right to recover any of these expenditures from Mr. Blankenship,” the former executive’s lawyers said in a March 7 court filing.

Steve Hawkins, a spokesman for Bristol, Virginia-based Alpha, declined to comment Tuesday on the restitution request.

April Sentencing

Jurors concluded that Blankenship orchestrated a conspiracy to ignore mine-safety standards to speed up coal production. The verdict was a rare instance of the U.S. holding a chief executive accountable for fatalities in the workplace. Blankenship, who was acquitted of two counts of securities fraud, has vowed to appeal the conviction.

He’s slated to be sentenced April 6 by U.S. District Judge Irene Berger and faces a maximum sentence of a year in jail plus a fine. He contends the fine is capped at $250,000, but the government says Berger can rely on a law that sets the criminal penalty based on twice the financial gain or loss generated by the conspiracy.

In court filings, prosecutors said they support Alpha’s request to recoup more than $13 million for costs of its internal investigation of the Upper Big Branch disaster, $4.3 million to cover legal expenses rung up by employees who cooperated with a government probe and prosecution of Blankenship and $10 million in fines paid by Alpha over the incident.

Blankenship’s Response

Blankenship countered in court filings that Alpha doesn’t qualify as a victim entitled to compensation and that allowing such an award would trample on the former coal executive’s constitutional rights.

Alpha and Blankenship have had other financial entanglements over the years. A Delaware judge ordered the mining company last year to pay about $6 million in legal fees as part of his defense to the criminal charges.

Alpha acquired Massey in 2011 for $7.1 billion in cash and stock, creating a company featuring 110 mines and coal reserves of about 5 billion tons. The acquisition soured after energy prices fell and the U.S. imposed tougher regulations.

Alpha filed for bankruptcy protection in August, the same day President Barack Obama announced sweeping rules to cut coal use at U.S. power plants to combat climate change. The U.S. Supreme Court has suspended those regulations while coal companies challenge their legality. The company said Tuesday it plans to sell its top-producing mines and wrap up its Chapter 11 case by June.

The criminal case is U.S. v. Blankenship, 14-cr-00244, U.S. District Court, Southern District of West Virginia (Charleston).


Peabody Energy's demise parallels the decline of King Coal

Peabody Energy made a $US2 billion loss for 2015 and its shares are down by 94 per cent over the past year. One quarter of US coal is produced by companies that have filed for bankruptcy.

Sue Lannin

http://www.abc.net.au/news/2016-03-11/peabody's-demise-parallels-the-decline-of-king-coal/7241246?

11 March 2016

Peabody Energy has been a powerhouse of the global coal industry, the world's biggest coal miner.

But now it is on the verge of bankruptcy in the United States, brought down by the slump in the price of coal and its decision to takeover Australian coal miner, Macarthur Coal, in 2011.

Major credit ratings agencies, Fitch Ratings, Moody's, and Standard & Poor's have warned that Peabody is on the verge of default with its corporate bonds rated as junk.

It owes $US10.1 billion. Its total assets are worth $US10.9 billion and it made a $US2 billion loss for 2015 according to the company's latest financial report.

Peabody's shares are down by 94 per cent over the past year and its lenders are pushing the company to restructure as it tries to sell coal mines.

Senior coal analyst from global consultancy firm IHS, Marian Hookham, said it was "widely expected" Peabody would enter Chapter 11 bankruptcy in the US, which allows a company to restructure and pay its debts over time.

She said Peabody's Australian mines in NSW and Queensland could either be sold or operated as a going concern by the US parent.

The value of the Australian mines has been written down by more than $US500 million.

Falling value, Chinese appetite hurts coal industry

Wall Street investment bank Goldman Sachs said around one quarter of US coal is produced by companies that have filed for bankruptcy.

Coal prices have plunged since 2011 because of oversupply and lower demand from China.

Australia is the world's major coal exporter and the price of thermal coal at the port of Newcastle has plunged from nearly $US140 a tonne in 2011 to around $US51 a tonne.

Coking coal, used to make steel, has had a bigger fall from grace.

In 2011, Australian premium hard coking coal was trading at more than $US300 a tonne. Now it is trading at $US81.00.

Colin Hamilton, the head of global commodities research with Macquarie in London, said he is bearish on the outlook for coal prices over the next four years.

"We expect the thermal coal price to be trading down towards $US50 a tonne in the Pacific Basin and then trading over time we expect to see around $US40 a tonne in the medium term," he told the ABC.

"Key to that will be what happens in the Chinese market."

Fossil fuel divestment bites

China's slowdown is not the only headwind for coal.

The push for renewable energy and global pledges to take action against climate change have also reduced demand.

Some global investors, such as insurers Allianz and Axa, have sold off coal stocks amid a wave of fossil fuel divestment.

Mark Payne, the chief executive of the Sydney diocese of the Anglican Church, said the diocese is planning to reduce the carbon footprint of its investment portfolio.

"We will certainly be looking to invest in companies that are involved in clean energy," he said.

"But we will also be looking to maintain investments in companies, perhaps even coal companies, that are doing serious work to reduce their carbon emissions."

'Coal industry is under pressure'

Mr Hamilton said a pending oversupply of liquefied natural gas and lower oil prices are even bigger threats to the future of coal.

"We're not saying it's the end of coal," Mr Hamilton said.

"Coal is facing pressure on a number of angles in terms of competition.

"LNG is probably the latest one and that's the one that can offer a bit of a hammer blow if you want to the coal price."


Deutsche Bank Changes Coal Financing Policy

Deutsche Bank Continues Lack of Transparency on Mountaintop Removal Coal Mining

Policy Falls Short of Commitments Needed to End this Practice and Address Climate Change

Rainforest Action Network press release

11 March 2016

San Francisco - Today, Deutsche Bank (DB) released a new corporate responsibility policy explaining that the bank has begun to phase out the provision of finance to companies that practice mountaintop removal (MTR) coal mining. The updated policy indicates that they will decrease financing for the most significant MTR producers, without transparency around the timeline for finance reduction.

While this policy is a positive move for the bank, it remains incremental in nature, relies on the trend of decreasing MTR production overall, and “the view that MTR is likely to be phased out in the near to medium-term future.” This ignores the fact that Deutsche Bank is the biggest banker of MTR, and currently finances Blackhawk, a coal company that has ramped up production at MTR mines over the past year. Deutsche Bank remains badly out of step on the issue of coal financing, as most of its US and European peers are ending financing for the entire coal mining sector, not just for MTR producers.

This measure falls well short of what is necessary to meet the global goal to keep climate change to 1.5 degrees. In December Deutsche Bank signed the “Paris Pledge for Action,” committing the bank to accelerate the transformational changes needed to reduce global warming to within acceptable limits. Yet today’s policy affirms the bank’s continuing support of the coal sector, stating the bank believes “Coal power is still necessary.” The bank, along with other financial institutions, must act quickly to transition away from financing fossil fuels, starting with an immediate halt to investment in the coal mining industry and coal-fired power production.

“Deutsche Bank continues to lag behind other banks by taking baby steps on MTR -- while others, having left behind this horrific practice years ago, are now cutting out coal mining altogether. We need an immediate and comprehensive end to the disastrous practice of mountaintop removal mining and real commitment to a carbon-free economy,” says Amanda Starbuck, Program Director with Rainforest Action Network.

Currently, Deutsche Bank is the largest banker of mountaintop removal mining, providing financing to top coal producers like Blackhawk to purchase mines from distressed and bankrupt coal companies. Meanwhile, Blackhawk is one of few producers to actually increase production of MTR coal in the past year. Mountaintop removal mining is a public health and environmental disaster and policies like this one that allow exceptions for future financing of this devastating practice are unacceptable. A growing body of peer-­reviewed scientific research has documented the catastrophic health and environmental impacts of mountaintop removal coal production, making it clear that Deutsche Bank would be wise to cut all ties to the practice. Impacted community members from Appalachia, a region where MTR has been heavily deployed, have traveled to Germany in 2013, 2014 and 2015 to confront the bank over its role in MTR finance.

This policy announcement comes less than three months after the historic Paris climate talks, where 195 nations agreed to lower greenhouse gas emissions and to pursue efforts to limit the global average temperature from rising more than 1.5°C. Given those commitments, it is clear that business as usual in financing fossil fuel energy must radically shift to transition the world to a green economy and climate stability.

For more information contact:
Blair FitzGibbon, Rainforest Action Network, +1 202-503-6141


Too little and too late – Latest UBS coal policy moves analysed

By Yann Louvel

BankTrack

8th March 2016

Swiss bank UBS has been making headlines in recent weeks as the latest major international bank to be facing the embarrassment of a legal probe into alleged tax malfeasance. As a formal investigation in Belgium opens into the practices of UBS, the prosecutor’s office in Brussels claimed at the end of February that “UBS is suspected of forming a criminal organization, money laundering and serious tax fraud.”

Far less publicity, however, has surrounded the Swiss bank’s belated catching up with the rush of forward momentum from major banks which announced new coal financing policies in 2015. UBS, currently BankTrack’s number 13 ‘coal bank’ with over €11 billion in financing to the coal sector between 2005 and April 2014, has also, it would appear, started to see the light on coal.

In recent years, UBS has revealed itself to be alive to the growing momentum of the global fossil fuel divestment movement. It has also been leading something of a post-Paris charge with a new global analysis published in January this year warning of the dangers of climate change for the world’s ‘middle class’. Climate change is happening, says UBS, and the middle classes will be worst affected – and, the bank reckons, this major section of the world’s population has the political and purchasing power to do the most about it.

Any expectations of a revolution in the new UBS approach to coal – which covers the bank’s lending and underwriting in the sector but not asset management – are quietly extinguished, however, by just a few innocuous and not very ambitious words.

On coal power, UBS will from now on: “Only support transactions of companies operating coal-fired power plants if they have a strategy to reduce coal exposure or adhere to the strict greenhouse gas emission standards recommended by leading international agencies.”

On mining, it commits: “Not to support certain coal mining companies and to significantly limit lending and capital raisings provided to the sector.” We contacted UBS and they clarified that “certain coal mining companies” refers to those involved in Mountaintop Removal coal mining.

This is progress from UBS, but it’s unspecific and highly qualified – and is decidedly weaker than recent coal policy revisions announced by European competitors such as ING and Crédit Agricole, both of which concretely exclude some coal companies above a specific threshold.

Nevertheless, for lending to mountaintop removal (MTR) coal mining, there is some progress at UBS. The bank seems to have now gone further than many of its peers by excluding companies “that are involved in mountain top removal operations,” and not only companies which are ‘predominantly’ or ‘significantly’ active in MTR. An important unknown, though, remains: how many MTR companies does this policy concretely exclude?

All told, the new approach from UBS to coal financing is too little – and, if it’s not already too late, then it’s simply not enough now in 2016! Banks need to be trumpeting the details of how they are going to dump coal financing for good.


Bankruptcy looms for world's largest private coal miner

Missed payment on outstanding debt of $6.3 billion

Frik Els

Mining.com

16 March 2016

Falling demand and prices for coal used in power generation and environmental crackdowns have seen a string of bankruptcies in the sector around the world.

The US's Alpha Natural Resources’ chapter 11 in August (the miner is still to emerge from bankruptcy protection) was the biggest mining sector default of last year at $4.5 billion followed by Walter Energy’s $3.7 billion in bonds and loans in July. Indonesian Berau Coal’s $950 million bankruptcy was the biggest public company mining bust in Asia while state-owned and small-scale coal mine closures in the region number in the thousands.

The coal slump may be close to claiming its biggest victim.

Peabody Energy, the largest non-state owned coal miner in the world, said Wednesday it may have to seek bankruptcy protection after it missed a $70 million interest payment which was due yesterday.

In its filing the St Louis-based company which traces its history back to 1883 said a recent audit report raised "substantial doubt about our ability to continue as a going concern" and that it may need to seek protection under Chapter 11 of the code.

At the end of last year the company had total outstanding debt of $6.3 billion, but only $261 million in cash on hand. According to S&P Capital IQ data Peabody's bonds due in 2018 were trading at just 2.75 cents on the dollar. After a swift recovery following the global financial crisis Peabody's market value hit a high of $19.5 billion in April 2011. On Wednesday the counter was worth $40.5 million.

Peabody owns North America's largest mine, North Antelope Rochelle in Wyoming which in 2015 produced 99.1 million tonnes of steam coal. Around 9% of US electricity in 2014 was produced using Peabody coal.

With 29 mines the US and Australia and operations in India, China, Germany and elsewhere the company sold 213 million tonnes of coal last year and has 7.5 billion tonnes of coal reserves.

In the US coal miners have been particularly hard hit by power plants substituting with natural gas. According to a report by the US Energy Information Administration 2016 will be the first year that natural gas overtakes coal as the largest energy source in the US.

Between 2000 and 2008, coal was significantly less expensive than natural gas, and coal supplied about 50% of total US generation, but that will fall to less than a third in 2016.


 

JP Morgan Chase Cuts Coal Financing, Joins Majority of Largest U.S. Investment Banks

Rainforest Action Network Calls on Banks to End Financing for all Coal Mining and Power

Rainforest Action Network (RAN) press release

7 March 2015

SAN FRANCISCO - JPMorgan Chase & Co. (JPMC) has released new commitments to cut financing for the global coal industry. The policy promises a transition away from financing for coal mining companies, and an all-out end for financing of new coal mines, responding to a global call by Anote Tong, the president of the climate-vulnerable small island nation of Kiribati, for a global moratorium on new coal mines. JPMC’s policy also includes a prohibition on financing new coal-fired power plants in high income countries, and a recognition of the global commitment in Paris last December to limit climate change to 1.5 degrees.

JPMC’s commitment follows public pressure from climate activists as part of a campaign launched by Rainforest Action Network (RAN) last summer, the latest in a series of RAN campaigns to hold U.S. banks accountable for their financing of the coal industry. Now five out of the six largest US investment banks have committed to move away from financing coal mining, including Bank of America, Citigroup, Morgan Stanley and Wells Fargo.

The policy change is a step in the right direction of moving away from some of the dirtiest carbon-based fuels. However, with the historic global Paris agreement last December, much more is needed to reach the goal of keeping climate change to 1.5 degrees. The bank, along with other financial institutions, cannot wait on political leadership for true climate action. These institutions must act quickly and lead the transition away from fossil fuels, starting with an immediate halt to investment in coal mining and coal-fired power globally.

"In order to have a chance at stabilizing the climate, we need financial institutions to follow these commitments on coal mining with further steps to end coal financing altogether,” said Ben Collins, Senior Campaigner at RAN. “It's time for the financial sector to step up and lead the just transition we need to a clean, renewable future.”

This policy announcement comes less than three months after the historic Paris climate talks, where 195 nations agreed to lower greenhouse gas emissions and to pursue efforts to limit the global average temperature from rising more than 1.5°C. Given those commitments, it is clear that business as usual in financing fossil fuel energy must radically shift to transition the world to a green economy and climate stability.

--

Ben Collins
Senior Research and Policy Campaigner
Climate and Energy Program | Rainforest Action Network
425 Bush Street, Suite 300 | San Francisco, CA, 94108
T: 415-659-0514 | C: 617-697-0277
ben[at]ran.org | www.ran.org


Arch Coal funded US ‘libertarian’ think tank and ALEC

by Bob Burton

http://endcoal.org/2016/03/arch-coal-funded-us-libertarian-think-tank-and-alec/

2 March 2016

Arch Coal, the second largest coal company in the US, has revealed that it has been a secret funder of the Ludwig von Mises Institute, a self-proclaimed “libertarian” think tank which has been a part of the global echo chamber of groups opposing action on climate change.

The filing also reveals the coal company was a behind-the-scenes funder of the American Legislative Exchange Commission (ALEC), a US-based group which drafts corporate-sponsored legislation and brokers its introduction via a network of conservative legislators.

Arch Coal’s recent 579-page filing (large pdf) with the US Bankruptcy Court listed the Ludwig von Mises Institute as one of the company’s creditors which are owed money. However, no details are provided on how much Arch Coal has paid the libertarian think tank or when any payments were made.

On its website, the Alabama-headquartered institute states it champions a “free-market capitalist economy and a private-property order that rejects taxation, monetary debasement, and a coercive state monopoly of protective services.” The institute obliquely notes on its website it receives funding from businesses but provides no details on who they are.

In 2014 the Ludwig von Mises Institute’s annual return to the US Internal Revenue Service revealed it had total revenue of US$3.8 million. While the institute has been a part of the US conservative echo chamber railing against regulations to tackle climate change, it has at best been a bit-part player.

Arch Coal operates 11 mines across seven states of the US. On January 11 Arch Coal filed for ‘Chapter 11’ bankruptcy protection in the US which allows the company to restructure its debt while continuing to trade. Arch Coal estimates that in 2015 it produced 118 million tonnes of coal for both the US and export markets.

Nick Surgey noted in PR Watch that another of the coal company’s creditors is the Energy & Environment Legal Institute (E&E Legal), “a group best known for filing lawsuits seeking climate scientists’ personal emails.”

The company’s bankruptcy filing also lists ALEC (p. 17) as one it its creditors. ALEC has controversially carved out a niche in the US as a production house for corporate-sponsored ‘model legislation’ which the group brokers with a network of supportive politicians from a range of US legislatures. An estimated 108 companies have cut their ties with ALEC as controversy has raged over its role in promoting legislation sought by sponsoring companies.

Coal industry lobby groups around the world are also among the potential financial losers from the collapse of Arch Coal.

The international coal industry’s lobby group, the London-headquartered World Coal Association, is amongst the company’s creditors. Another is the Global Carbon Capture and Storage Institute (GCCSI) based in Australia, which promotes carbon capture and storage as a ‘solution’ to greenhouse gas emissions from coal-fired power plants.

A collection of US national and state coal lobby groups are also listed as creditors. National coal lobby group creditors include the Washington DC-headquartered National Mining Association, the National Coal Council and the American Coal Council. State-based coal industry lobby groups on the creditors list include the Illinois Coal Association, the Kentucky Coal Association, the Montana Coal Council, the West Virginia Coal Alliance, the Western Virginia Coal Association and the Western Fuels Association in Colorado.

Some of the top 30 largest creditors are other major coal industry service and equipment suppliers. There are railroad operators, BSNF Railways and Union Pacific Railroad Company, as well as Kinder Morgan Terminals, which operates coal terminals. Other top 30 creditors include mining equipment suppliers Cecil I. Walker Machinery Co, a dealer of Caterpillar equipment, earthmoving equipment supplier Komatsu Equipment and Joy Global, which supplies equipment for underground coal mining.

A hearing for Arch Coal creditors is scheduled to be held in Missouri on March 10.

Minor creditors – such as lobby groups like the World Coal Association and groups like the Ludwig von Mises Institute – are likely to be very low in the financial pecking order and unlikely to be considered sufficiently important to warrant continued support.

Bob Burton is the Hobart-based Editor of CoalWire, a weekly bulletin on global coal industry developments.

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