Arch Coal had a sizable debt payment due in December, but opted to defer payment to mid-January in a desperate attempt to buy itself more time with debt-holders. The company worked out deal with some of its priority bondholders (folks who own almost $2 billion of Arch debt) which included a formal restructuring under the supervision of a bankruptcy court.
Why Did This Happen?
In the United States, coal has been losing ground to renewable energy, efficiency, and natural gas. And coal prices have plummeted globally, as China tackles its air pollution crisis and industrial overcapacity by cutting coal use. Like many of its peers, Arch made some terrible financial decisions in recent years, including purchasing nearly $3.5 billion in new mines at the peak of a seaborne coal bubble.
That’s like if a company went on a major real estate binge right before the 2007 housing market bubble burst. Since that peak, Arch’s stock market value has fallen more than 99 percent — so the writing has been on the wall for some time.
Is This a Good Thing?
Well, it depends.
Arch Coal has worked to gut basic environmental and public health protections and cheat miners out of benefits, all while while cooking the climate and destroying complex ecosystems across the country. When history is written, Arch will not be cast as a good guy. To the extent that today’s bankruptcy is another sign that the world is making a swift and permanent transition from coal to clean energy, then yes, this is a good thing.
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Unfortunately, bankruptcy proceedings are a bit more complicated in practice. Arch Coal owes a lot of debts — to miners who are counting on benefits, to communities that built local economies around the promise of sustained mining activity, to states that accepted an “IOU” for land reclamation responsibilities, and to U.S. taxpayers who own the vast majority of coal on Arch’s balance sheets.
But our legal and financial system doesn’t afford any of these groups the same protections as the bondholders who hold billions in Arch debt or the Arch executives who expect significant bonuses for running a company into the ground.
Over the few past years, nearly 50 coal companies have filed for bankruptcy, including the once-giant Alpha Natural Resources. Consistently, bankruptcy courts have paid out CEO bonuses while allowing companies to ditch pension and health care obligations, and there’s every reason to expect this could happen for Arch as well. As we speak, the state of Wyoming seems perfectly willing to offer Alpha Natural Resources a renewed mining permit — while it’s in the midst of bankruptcy and has no proven ability to pay for the reclamation of its existing footprint.
No wonder the official Chapter 11 press release reads more like celebration than a funeral announcement.
State and federal officials still have an opportunity to deliver a positive outcome for people and the planet. The Obama Administration should reject permits and leases for Arch’s pending mine expansions.
State agencies in Washington and Montana should similarly reject permits for massive proposed rail and coal export terminal projects — the market continues to speak on that front. And most importantly, elected officials at levels can get serious about making a just transition to renewable energy, which includes taking care of the miners and communities who will be hit the hardest along the way.