Bluefield Daily Telegraph, Bluefield, WV

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November 16, 2012

Patriot Coal to stop mountaintop removal mining

BLUEFIELD — After suffering through several set-backs during the past four years, West Virginia’s coal industry took its lumps on Thursday when word started to circulate that a major producer has entered into a tentative agreement to settle a civil complaint with several environmental activist organizations that includes a time-table to cease certain of its large area surface mine operations — also known as mountaintop removal mines.

In a news release dated Thursday, St. Louis-based Patriot Coal announced that “it has reached a proposed settlement agreement with the Ohio Valley Environmental Coalition Inc., the West Virginia Highlands Conservancy Inc., and the Sierra Club regarding claims under the Clean Water Act relating to surface mining activities in West Virginia.”

Patriot stated that as part of the proposed settlement, “the deadline for compliance with selenium effluent limitations at outfalls under the Hobet 22 permit will be extended from May 2013 until August 2-14.” The company added that the settlement also provides for a 12 month extension related to “compliance schedules under the global consent decree announced January 2012.

“In exchange, Patriot will agree to certain restrictions on large-scale surface mine activities,” according to the news release.

Bennett K. “Ben” Hatfield, Patriot president and chief executive officer was quoted in the press release as stating: “This settlement agreement allows Patriot to defer up to $27 million of compliance-related cash outlays from 2012 and 2013 into 2014 and beyond, which improves our liquidity as we reorganize our company and increases the likelihood that we will emerge from the Chapter 11 process as a viable business.”

Patriot has experienced a rocky year in 2012, announcing reduction of thermal coal production on April 20, the company’s filing for protection to reorganize under Chapter 11 Bankruptcy laws and its Sept. 14, announcement that it planned to reduce metallurgical coal production.

“Importantly, this proposed settlement allows Patriot to continue mining according to existing permits and is consistent with our long-term business plan to focus capital on expanding higher-margin metallurgical coal production and limiting thermal coal investments to selective opportunities where geologic and regulatory risks are minimized,” Hatfield was quoted in the news release as stating.

Thermal coal production from the Appalachian region has been stagnant through most of the year due to a milder than normal winter in 2011-12, as well as difficulty in obtaining mining permits in the Kentucky, West Virginia and Virginia region. Metallurgical coal production remained strong through the early part of 2012, but global financial uncertainty caused international customers of steel-making coal from the region to downshift their production, leaving hundreds of local coal cars sitting empty in area yards and sidings.

“You’ve got a company that’s reorganizing and has made some decisions to put it into position to come out of that restructuring on solid footing,” Bill Raney, president of the West Virginia Coal Association said. “The restructuring to get in compliance with the selenium effluent makes it difficult, but I know Ben Hatfield and I know Patriot and they wouldn’t spread selenium intentionally.

“The Sierra Club and other plaintiffs in the federal suit against Patriot have been quick to take credit for it, but I wonder if they’ve thought about all the people ... all the good people who work for Patriot, who will be out of work because of this,” Raney said.

“This was a unique situation, unique to the restructuring of Patriot Coal,” Raney said. “It doesn’t reach beyond Patriot. Journalists have reached beyond Patriot, but we still have Congressionally permitted surface mine operations in the state and we still have a Surface Mine Act that we’re operating under.

“The seams that are being mined with surface operations cannot be mined in any other way,” Raney said. “If those permits are taken away, it would render that coal sterile. When you read the Patriot press release, it’s a lot different from the spin that journalists are putting on it. This situation is unique to Patriot Coal.”

Patriot has 12 active mining operations in the Appalachian Region and the Illinois Basis and controls about 1.9 billion tons of proven and probable coal reserves. “The settlement remains subject to approval by the Federal District court for the Southern District of West Virginia following a public comment period, as well as approval by the Bankruptcy Court for the Southern District of New York,” according to the Patriot news release.

— Contact Bill Archer at barcher@bdtonline.com

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