-----

Resources



Market News

 October 30, 2019
Ohio-based coal giant Murray Energy declares bankruptcy

 Murray Energy Corp., the largest underground coal mining company in America with a substantial footprint across the Ohio Valley, has filed for bankruptcy protection.

"Although a bankruptcy filing is not an easy decision, it became necessary to access liquidity and best position Murray Energy and its affiliates for the future of our employees and customers and our long term success," company founder Robert Murray said in a release.

In court documents filed Tuesday, the company said it faces billions of dollars in debt and liabilities, and tough market conditions for coal haven't improved and have in fact deteriorated.

The company noted its decision not to previously shed debt using the bankruptcy process --- as many of its competitors have --- has left Murray Energy saddled with the "weight of its own capital structure and legacy liability expenses."

The company reports $2.7 billion in debt and more than $8 billion in obligations under various pension and benefit plans. Murray employs more than 5,000 workers --- approximately 2,400 are active union members. Court filings show the company has $155 million in liability under the Black Lung Act, as well as for general workers' compensation, and owes millions of dollars in environmental cleanup obligations for its operations.

"As a result, Murray generated little cash after satisfying debt service obligations, paying employee health and pension benefits, and maintaining operations," the filings stated.

The company, founded in 1988, is among the largest coal producers in the country, with more than a dozen active mines, largely in the Ohio Valley and Illinois Basin.

According to the company's press release, the company expects to be able to continue day-to-day operations uninterrupted. Murray Energy says it will finance its operations throughout Chapter 11 with cash on hand and access to a $350 million new money debtor-in-possession financing facility, subject to court approval.

CEO Robert Murray, who founded the business in 1988, is stepping down. According to the release, a new entity, called Murray NewCo, will serve as a "stalking horse bidder" to acquire most of the company's assets. If approved by the court, the company expects all of its debt to be eliminated and Murray to be named Chairman of the Board of Murray NewCo.

Murray Energy prided itself on producing low-cost bituminous coal at mines located close to its customers --- largely coal-fired power plants. But as coal generators close, that has posed challenges for the company's bottom line.

Despite promises by President Donald Trump to revive the U.S. coal industry, demand for coal has fallen to its lowest level in 40 years, according to the U.S. Energy Information Administration.

Jamie Van Nostrand, director of the Center for Energy and Sustainable Development at West Virginia University, said low-priced natural gas and the falling cost of renewable energy have fundamentally changed the prospects for coal.

"The long term prospects for coal operators is not very good in the United States right now," he said. "I don't see the numbers turning around, and I think we need to really come to grips with the fact that there are parts of the country that are hit disproportionately hard and really start talking about a just transition."

Murray Energy is the ninth coal producer to seek bankruptcy during the Trump administration. Murray's declaration follows the chaotic and high-profile bankruptcy of West Virginia-based Blackjewel LLC and Kentucky-based metallurgical coal mining company Blackhawk Mining.

While bankruptcies are not new for the U.S. coal industry, the recent spate of restructuring may point to a fundamental shift for the industry, according to Seth Feaster, energy data analyst for the Institute for Energy Economics and Financial Analysis, a think tank that supports energy transition.

"The competitive environment that coal is facing is only looking to become more competitive, and so it's not really a temporary blip for them," Feaster said. "There are companies that are saying, 'well, we're going to survive this downturn and come out stronger on the other side,' but I'm not sure where the other side is for the coal industry at this point."

Trump Connection

The company's chief executive, Bob Murray, has enjoyed a close relationship with the Trump administration. Murray has often appeared with the president during his appearances in West Virginia. In July, he hosted a private fundraiser for Trump in Wheeling, West Virginia.

In February, Trump took to Twitter to urge the Tennessee Valley Authority to not shutter the Paradise Fossil Plant in Kentucky, which is largely supplied by Murray mines.

A vocal Trump supporter, Murray donated $300,000 to the president's inauguration. Weeks later, the coal executive shared a detailed "action plan" with administration officials that outlined a series of environmental rollbacks and policy changes that would benefit the U.S. coal industry.

The majority of Murray's wish list --- which included the repeal and replacement of the Obama-era Clean Power Plan, withdrawal from the Paris climate agreement, and staff cuts at the U.S. Environmental Protection Agency --- have been carried out by the Trump administration.

However, the White House has been unable to fulfill one of Murrary's chief requests --- to bailout struggling coal-fired power plants.

In 2017, FERC unanimously rejected a proposal by the Energy Department to subsidize coal and nuclear plants. Additional efforts --- largely driven by the Department of Energy --- have stalled.

Speaking last week at the EnVision Forum at the University of Kentucky Center, Murray told the crowd continued inaction by federal regulators, including the Federal Energy Regulatory Commission, or FERC, has resulted "in the destruction of America's coal industry, the reliability and resilience of the electric power grid, and the cost of electricity itself."

The country's largest regional grid operator, PJM Interconnection, which operates across a 13-state region including the Ohio Valley, has argued there is no need for federal intervention.

Murray also repeated his oft-cited nickname for the independent agency calling it "feckless FERC."

"Nothing has been done by FERC or anyone to save the American coal industry from extinction, and we are virtually extinct," he said.

Major Impact

Murray Energy's bankruptcy could have far-reaching impacts on the company's workers. Murray Energy is the last major company contributing to the pension plan for the United Mine Workers of America, and the bankruptcy is likely to accelerate the plan's fast decline into insolvency.

UMWA President Cecil Roberts said in a statement he fears the bankruptcy court will allow Murray Energy to renege on its collective bargaining agreements, which spell out pension and other benefits obligations.

"Now comes the part where workers and their families pay the price for corporate decision-making and governmental actions," he said. "We have seen this sad act too many times before."

Murray mining operations have also had a number of high-profile mine safety incidents over the years, including the disastrous collapse of a mine in 2007.

In August 2007, nine miners and rescuers died after the Murray-owned Crandall Canyon mine in Utah collapsed. The Labor Department fined the company $1.85 million for violating federal mine safety law. In 2012, the agency settled with Murray for a reduced amount. The settlement included acknowledgement by Murray Energy for its "responsibility for the failures that led to the tragedy."

Murray later told NPR "this settlement is not an admission of any contribution to the August 2007 accidents."

Murray was also sued by the Department of Labor after miners complained the CEO personally told workers in a 2014 meeting to stop making complaints to federal regulators. Under federal law, miners have the right to speak anonymously to government inspectors about mine safety concerns. Earlier this year, Murray lost an appeal in the case. The court upheld a decision that Murray must personally apologize.