WVDEP, Patriot Coal reach agreement


Staff Report



CHARLESTON, W.Va. — The West Virginia Department of Environmental Protection (WVDEP) announced Tuesday, Oct. 6, that it has reached an agreement with Patriot Coal Corporation that will set aside more than $50 million for the coal company’s environmental cleanup responsibilities. WVDEP reports that the agreement, which is subject to bankruptcy court approval, will not only pave the way for the reclamation of Patriot’s legacy liability sites in northcentral and southern West Virginia, it should also help ensure the continued employment of many of Patriot’s miners.

“Without this deal, Patriot could walk away from its reclamation obligations and leave that work to the state,” DEP Cabinet Secretary Randy C. Huffman said. “The DEP’s aggressive bankruptcy strategy ensures that significant funding will be provided for reclamation over and above the amount of Patriot’s mining bonds.”

In June, Patriot announced that it would sell substantially all of its ongoing operations to Blackhawk Mining LLC as part of its proposed bankruptcy plan. That plan, however, proposed to leave behind all of Patriot’s environmental legacy sites — including the Hobet, Apogee and Catenary mining complexes — in a liquidating trust without any funding to continue mining Patriot’s remaining operations or complete reclamation and water treatment. Because of this, DEP filed an objection to the plan with the bankruptcy court in Richmond, Virginia. The WVDEP reports the agreement announced Tuesday resolves that objection.

Under the agreement, the surety bonds Patriot posted to obtain its mining permits will remain fully in place, but Patriot will post an additional $12.5 million in cash as additional financial assurance for its reclamation and water treatment obligations in West Virginia. Patriot’s existing hedge fund investors will provide the additional cash needed to fund Patriot’s obligations under the agreement. Also, Blackhawk Mining has agreed to provide $7.5 million of reclamation services on Patriot’s former mining sites.

In addition to providing for the continuing reclamation of Patriot’s legacy sites, the agreement allows for the continued operation of Patriot’s Federal Mining Complex in northcentral West Virginia. Under the agreement, Virginia Conservation Legacy Fund, the entity expected to undertake and oversee the reclamation of Patriot’s former mining sites, will commit an additional anticipated $30 million or more from the operations of the Federal complex and other sources to perform reclamation of the legacy sites.

Virginia Conservation Legacy Fund expects to continue to employ Patriot’s union and nonunion employees both in the operation of the Federal Mining Complex and in the performance of its reclamation operations.

“This deal is a win-win for West Virginia, “said Huffman. “Fifty million dollars in additional funds will be devoted to reclaiming Patriot’s former mine sites, and a large portion of Patriot’s existing workforce, both union and nonunion, will continue to be employed in that effort.”

The agreement is subject to a number of conditions. The bankruptcy court must first approve Patriot’s bankruptcy plan, the sale to Blackhawk Mining and the transfer to Virginia Conservation Legacy Fund. A number of Patriot’s creditors continue to oppose approval of Patriot’s plan. Also, both Blackhawk and Virginia Conservation Legacy Fund will have to satisfy various sale conditions. If the bankruptcy court approves the deals, both transactions and Patriot’s plan should be completed by Oct. 23.

Staff Report

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