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Alpha Natural Resources, Inc.

Company type	Public
Traded as	NYSE: ANR
Industry	Metals and Mining
Founded	2002
Headquarters	Abingdon, Virginia (Bristol mailing address)
Key people	Michael J. Quillan Chair Kevin S. Crutchfield CEO Kurt D. Kost President
Products	Coking coal
Revenue	$3,917.156 mil (2010)57% 89% coal,8.5% freight
Net income	$95.551 mil (2010)64.7%
Total assets	US$5.17928 bil (Dec'10)
Number of employees	14,000 (6,400 before Massey merger)
Divisions	Foundation Coal (since 2009) Massey Energy (June 2011)
Website	www.alphanr.com

Alpha Natural Resources is a large American producer of metallurgical and thermal coal. It also provides services relating to equipment repairs, road construction and logistics (terminals). It doesn't produce all of the coal it sells, some is purchased and resold. Alpha operates in Virginia, West Virginia, Kentucky, Wyoming, Utah, Illinois, Tennessee, and Pennsylvania. Clients include electricity producers and steel manufacturers (metallurgical coal is used industrially while thermal is the form of coal used to generate power). The 2009 takeover of Foundation Coal also gave it the Cumberland Mine Railroad to transport coal in Pennsylvania.

On January 31, 2011 Alpha Natural Resources acquired coal producer Massey Energy for US$7.1 billion (to be completed mid year) creating the second biggest coal miner by market capitalization. The merged company (54% owned by Alpha Natural Resources) will be the leading producer of metallurgical coal in the US and also have the second largest reserves of coal (5.1 billion tons). Merging operations with Massey is estimated to reduce combined operating costs by $150 million. 7,000 of the 14,000 employees are in West Virginia. In 2010 demand for thermal coal rose while metallurgical coal demand was flat (made up only 14% of coal sales down from 17% in 2009).

Alpha Natural Resources settled Massey's Upper Big Branch Mine disaster liabilities with the U.S. Attorney for $209 million on December 6, 2011. The settlement included $41.5 million to the survivors and families of the deceased. The Mine Safety and Health Administration additionally assessed a $10.8 million fine for 369 citations and orders, the largest fine for a mine accident in U.S. history.

History

The company as it exists today is the result of two mergers, one in July 2009 (Foundation Coal and Alpha Natural Resources, Inc.) and another January 31, 2011 (US$7.1 billion acquisition of Massey Energy). The takeover of Foundation Coal was a reverse takeover in that Foundation Coal was the company left standing and it was immediately renamed Alpha Natural Resources. Foundation Coal added 7.5 million tons of annual coal shipments to its Eastern Coal operations and expanded the company's presence in Wyoming. Although acquisitions helped Alpha expand rapidly since its founding in 2002, it burdened it with lots of debt ($185.6 million in 2004, $754.15 Dec. 31, 2010). Massey Energy became a takeover target after suffering large income losses and negative publicity following an explosion at West Virginia's Upper Big Branch mine that killed 29 employees (direct costs related to the incident amounted to $128.9 million). Federal regulators and the Mine Safety and Health Administration blamed the explosion on Massey's poor practices however the company contested the findings citing a methane leak.

The takeover of Massey Energy was completed in June 2011 after shareholders of both companies voted for the merger (99% of Massey shareholders voted for the deal (77% of them voted) while 98% of Alpha's shareholders supported it (83% of them voted). Alpha secured $3.3 billion in financing for the takeover from Citigroup and JPMorgan. The combined entity will be the world's number three producer of metallurgical coal behind BHP Billiton and Teck Resources.

On September 18, 2012, Alpha announced a plan to idle eight coal mines and the layoff 800 employees. The plan would reduce Alpha's yearly coal production by ~16 million tons and reduce costs by $150 million.

Alpha Natural Resources, Inc

Alpha was first established in 2002 by management (original CEO Michael Quillen played a major role) and First Reserve Stockholders (though it officially incorporated in November 2004). Around the same time it made its first major acquisition, The Brink's Company's Virginian coal business for $62.9 million (Virginia is currently a significant source of primary production). Immediately after that it took over Coastal Coal Company (Jan 2003) followed by American Metals and Coal International's coal business (March) and Mears Enterprises, Inc (November).

In December 2004 it filed for an IPO in an attempt to raise US$250 million to repay debt (strong coal prices also affected the timing of it). At the time coal was selling for about a quarter the price of natural gas ($1.5 versus $5.0 per million BTU) however since then (mid 2010) the ratio has become much smaller (coal has tripled in price to $4.63/mil BTU while gas is still at $5.189). (natural gas is used as an alternative to thermal coal in electricity production).

Operations

Only about 40% of coal is produced directly by the company, 60% comes from subsidiaries. Nearly half of the mines are underground operations. In 2008 the biggest source of coal production, the Powder River Basin (53% = 49.2mt) was home to only 32% of coal reserves (behind U.S. Northern Appalachia (35% = 800mt) and Central Appalachia (32%, thermal coal). After the merger with Massey the company will control 150 coal mines and 40 preparation plants which is up significantly from the 65 mines under its control at the end of 2007. For 2011 Massey expects to ship 10 to 14 million tons of metallurgical coal, about the same as Alpha (in 2010 was 11.88 million tons or 14% of total production). In its last annual report (2009) Massey Energy reported coal sales of 38 million tons (ranking sixth in the USA), that compares to 84.8 million tons sold by Alpha Natural Resources in 2010. In the fourth quarter of 2010 Massey Energy had a coal shipment shortfall of 1.4 million tons half of which was due to rail problems the other half a result of misproduction.

Mines

Before the merger with Massey Energy Alpha Natural Resources had over 60 active mines in 4 US states. After the merger the number of mines will reach 110-150. Notable ones include Belle Ayr Mine and Eagle Butte Mine (both in Wyoming). In coal river east, Kingston Mining, located in Kingston West Virginia is also i vary notable mines. With some of the worlds most sought after met coal.

• Black Bear Surface Mines (previously operated but more recently is one of the company's two land restoration projects, the project was featured on the discovery channel).

=Court rulings

In 1998, Hugh Caperton filed a lawsuit against A.T. Massey Coal Company alleging that Massey fraudulently canceled a coal supply contract with Harman Mining, resulting in its going out of business. In 2007, when the case came before the West Virginia Supreme Court, Caperton petitioned for Justice Benjamin to recuse himself. Benjamin declined and was ultimately part of the 3 to 2 majority that overturned the jury's $50 million verdict. In November 2008, the United States Supreme Court agreed to hear the appeal. Wal-Mart, PepsiCo, Intel Corporation, Lockheed Martin, Common Cause and Public Citizen filed briefs in the case urging the United States Supreme Court to reject the West Virginia Supreme Court's decision. The briefs contended that Justice Brent Benjamin was biased in the case. On June 8, 2009, The US Supreme Court agreed 5-4, sending the case back to the West Virginia Supreme Court, and forcing Justice Benjamin to recuse himself from the case. The New York Times opined that the case involved "egregious ethical myopia" on the part of Justice Benjamin. In February 2003 a judge ordered Massey to pay the residents of Sylvester, West Virginia $473,000 to settle complaints that coal dust from Massey's Elk Run Processing Plant had caused health problems and lowered property values in the nearby town. In addition the payment to the residents of Sylvester, West Virginia, Massey Energy was ordered to construct a cloth dome over their coal processing plant to reduce the dust. On September 16, 2004, a civil jury ordered Massey to pay $1.54 million in damages to 245 residents of Mingo County, W. Va., who lost their water wells after Massey had mined beneath the homes. The jury concluded that Massey acted “with malicious, willful, wanton, reckless or intentional disregard for plaintiffs’ rights.” In 2005, Wheeling, W.Va.-based steelmaker Wheeling-Pittsburgh Steel sued Virginia-based Massey Energy claiming Massey failed to deliver on a contract of 104,000 tons of coal monthly. In July 2007, a Circuit Court in Brooke County, W.Va. upheld the jury award of more than $267 million, including accrued interest. Massey appealed the case to the US Supreme Court, which declined to hear the appeal in December 2008. In 2005, some residents of Raleigh County, West Virginia, complained that Massey's Goals Coal Company was endangering the health and well-being of students at the adjacent Marsh Fork Elementary School. In July 2005, the West Virginia Division of Environmental Protection revoked a permit for construction of a coal silo near the school. However, some local employees and residents supported Massey Energy by arguing that the economic benefits received from the company outweigh the environmental impact to the area. 30 non-violent protestors were arrested, including actress Daryl Hannah, NASA climatologist James E. Hansen, and former West Virginia Congressman Ken Hechler . In June 2009, the West Virginia Supreme Court concluded that the Massey was allowed to build their second silo; "We therefore find that the circuit court did not err, and properly affirmed the decision of the West Virginia Surface Mine Board." In December 2008 residents of Prenter, West Virginia filed a lawsuit claiming that underground slurry injection from a Massey coal facility, and other coal preparation plants, contaminated their underground water supply. On June 12, 2012 a confidential settlement was reached between Massey Energy and the residents of Prenter, West Virginia. On Oct 30, 2009, Fayette County West Virginia Judge Paul Blake ruled in an age discrimination lawsuit that more than 200 miners who were not rehired after Massey Energy Co. bought a bankrupt West Virginia mine were entitled to a settlement of $8.75 million. The suit covers 229 miners, including 82 union miners. Massey has been ordered to rehire the miners. Under the terms of the settlement, the 82 union miners will each receive $38,000. The remaining miners will receive $19,000.

Environmental record

Massey Energy has a notoriously bad environmental record, and has caused many environmental disasters. In January 2008, the company agreed to a $20 million settlement with the U.S. Environmental Protection Agency (EPA) to resolve thousands of violations of the Clean Water Act for routinely polluting waterways in Kentucky and West Virginia with coal slurry and wastewater. Although this was the largest Clean Water Act settlement, the violations were estimated to have fines on the order of $2.4 billion.

===Martin County coal slurry spill===

In October 2000, a coal slurry impoundment owned by Martin County Coal Company, a Massey Energy subsidiary in Martin County, Kentucky, suddenly breached and released over 200 million gallons of coal slurry into two mountain streams, Coldwater Creek and Wolf Creek (see photo right). The Martin County coal slurry spill was called the worst ever environmental disaster in the southeastern United States by the EPA. The spill smothered all aquatic life in the streams and left residents with contaminated drinking water. Cleanup costs for the spill were approximately $50 million.

Mine safety

On February 1, 2006, bulldozer operator Paul K. Moss, 58, of Sissonville, West Virginia died when his machine ruptured a 16-inch (410 mm) natural gas line at Elk Run Coal Co.'s Black Castle surface mine. The bulldozer was immediately engulfed in flames. According to the Mine Safety and Health Administration report, operator Moss exited the cab but his body was found behind the blade. Massey Energy was fined $2.5 million after a federal judge accepted the company's guilty plea to 10 criminal charges for the fire. A U.S. District approved a plea deal despite a provision sparing Massey officials and the Richmond, Va., coal company from prosecution. The agreement also required Aracoma to pay a $1.7 million fine for civil violations found by the federal Mine Safety and Health Administration. On October 8, 2008 Steven Cain, 32, of Comfort, West Virginia was killed at Massey Energy's Independence Coal Justice No. 1 Mine when he was crushed by a railcar. A Mine Safety and Health Administration report concludes Cain was killed because Massey managers assigned him a dangerous job, although he had “little mining experience and minimal training.” In 2009, the federal Mine Safety and Health Administration cited Massey Energy's Upper Big Branch coal mine for 495 violations and proposed $911,802 in fines.

===Aracoma Alma Mine accident===

On January 19, 2006 a belt line fire killed miners Don I. Bragg, 33, and Ellery Elvis Hatfield, 47, at Massey's Aracoma Alma Number 1 Mine in Logan County, West Virginia. Efforts to fight the fire were hampered by inadequate fire extinguishers, fire hose couplings which did not match the water line, and a lack of water in the lines. On December 22, 2008 Massey Energy agreed to pay $4.2 million in civil and criminal penalties for the accident. It is the largest financial settlement in the coal industry's history. The Charleston (WV) Gazette reported on January 15, 2009 that Aracoma widows Delorice Bragg and Freda Hatfield urged U.S. District Judge John T. Copenhaver to reject Massey's plea bargain and fine for the accident. Widow Bragg stated that it was clear "that Massey executives expected the Alma Mine to emphasize production over the safety of the coal miners inside."

Upper Big Branch mine disaster

On April 5, 2010, an explosion at Massey owned Performance Coal Co. mine in Montcoal, West Virginia resulted in the deaths of 29 miners. The explosion, which has become known as the Upper Big Branch Mine disaster, is the worst mining disaster in 40 years, with a greater loss of life than in any mining accident since the 1970s. Mine safety investigators are still searching for an exact cause, though the methane explosion, largely preventable by proper ventilation, is being closely examined. Investigators are also reviewing the historical record of safety violations at the Upper Big Branch mine, which amassed more than 1,100 violations in the past three years, many of them serious, including 50 of them in March 2010 for violations including improper ventilation of methane and poor escape routes. Federal regulators had ordered portions of the mine closed 60 times over the year preceding the explosion. It was claimed, that the FBI had launched a probe investigating the possible bribery of federal officials overseeing mining industry regulation by Massey Energy. Questions about Massey Energy's mining safety practices, along with questions about CEO Don Blankenship's excessive spending on court appointment campaigns, are coming from the public, the Dept of Labor, and President Obama.

Protests

In 2009, there have been fourteen trespassing incidents at Massey mines in West Virginia in connection with mountaintop removal. Protests have involved activists going onto mine sites, chaining themselves to heavy equipment, blocking roads, occupying three trees to stop blasting, and putting up large banners. In June 2009, a Raleigh County judge granted a preliminary injunction to block anti-mountaintop removal activists from further peaceful protests on some Massey Energy sites.}}</ref>

Competition

Cliffs Natural Resources (coal producer of comparable size) and Patriot Coal Corporation (also mines in Appalachia and West Virginia).

See also

• Pittston Coal strike - Pittson Coal, which used to be the seventh largest US coal producer (1987) contracted in size substantially since a strike in 1990 by employees. In 2002 Alpha Natural Resources purchased what remained of its coal business.

References

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• Companies listed on the New York Stock Exchange
• Companies established in 2002
• Companies based in Virginia
• Mining companies of the United States