Another bites the dust: Arch Coal files for bankruptcy
Arch Coal had a large debt payment due in December, but elected to defer payment to mid-January in a desperate attempt to buy time with creditors. The company reached an agreement with some of its senior bondholders (people who hold nearly $2 billion in Arch debt), which included a formal restructuring under the supervision of a bankruptcy court.
Why did this happen?
It’s a pretty terrible time to be a coal company.
In the United States, coal has lost ground to renewables, energy efficiency and natural gas. And coal prices have fallen globally because China tackles its air pollution crisis and industrial overcapacity by reducing the use of coal. Like many of his peers, Arch has made terrible financial decisions in recent years, including buying nearly $3.5 billion in new mines atop a sea coal bubble.
It’s like a company going on a major real estate binge just before the housing bubble burst in 2007. Since that peak, Arch’s stock market value has fallen over 99% – so the writing is on the wall for some time.
Is this a good thing?
Actually it depends.
Arch Coal worked for basic environmental and public health protections and deceive minors running out of benefits, while baking the climate and destroying complex ecosystems across the country. When history is written, Arch will not be considered a good guy. If today’s bankruptcy is another sign that the world is making a rapid and permanent transition from coal to clean energy, then yes, that’s a good thing.
Unfortunately, bankruptcy procedures are a bit more complicated in practice. Arch Coal owes a lot of debt – to the miners who rely on the profits, to the communities that have built local economies around the promise of sustained mining, to the states that have agreed to an “IOU” for land reclamation responsibilities and to the US taxpayers who own the vast majority of the coal on Arch’s balance sheets.
But our legal and financial system doesn’t offer any of these groups the same protections as bondholders who hold billions in Arch debt or Arch executives who expect big bonuses for running a company. in the ground.
Over the past few years, nearly 50 coal companies have filed for bankruptcy, including the former giant Alpha Natural Resources. Consistently, bankruptcy courts have CEO bonuses while allow companies to waive their pension and health care obligations, and there’s every reason to expect that to happen for Arch as well. As we speak, the state of Wyoming seems quite willing to offer Alpha Natural Resources a renewed mining license – while it is in the midst of bankruptcy and has no proven ability to pay for the rehabilitation of its existing footprint.
No wonder the official Chapter 11 press release sounds more like a celebration than a funeral announcement.
State and federal authorities still have the opportunity to achieve a positive outcome for people and the planet. Obama Administration Should Reject Permits and Leases for Arch’s pending mine extensions.
Washington and Montana state agencies are also expected to reject permits for massive rail terminal and coal export projects – the market continues to talk on this front. Most importantly, elected officials at all levels can take a just transition to renewables seriously, which includes caring for the miners and communities who will be hardest hit along the way.
The end is near for the American coal industry. Now let’s take the next step and keep ALL fossil fuels where they belong: in the ground.