Bristol-based Alpha Natural Resources, Inc. plans to curtail mining in Kentucky and eliminate 150 jobs because of market pressures and the effects of new environmental regulations on coal-fired power plants.
In addition, the company plans to close four offices, including its Richmond office, by the end of the year, a move expected to cause more layoffs.
“This year, utilities in the U.S. are expected to burn the least amount of steam coal than at any time in the last 20 years, and the pressure’s been very intense on coal sourced from eastern Kentucky, particularly operations rendered uncompetitive due to fuel switching, relatively high rail rates and competition from Illinois Basin coal,“ Kevin Crutchfield, Alpha’s chairman and CEO, said in a statement. “Layoffs are an unfortunate last resort, and it’s tough for miners that want to work but are unable to because of factors beyond their control and the company’s control.“
Alpha’s Kentucky affiliates will discontinue mining at four mines and idle two coal preparation plants in Pike and Martin counties.
Production will be scaled back at several other mines, and four contract mines will close.
The cutbacks will affect 436 workers, of whom 286 will be offered positions at other operations in Kentucky, southern West Virginia and Virginia. Another 150 jobs will be lost.
Employees who are displaced will remain on the payroll and will receive wages and benefits for a 60-day period.
The company said it is examining its organizational model to ensure the company reduces overhead costs. By the end of this year, satellite offices will be closed in Richmond, Denver, Latrobe, Pa. and Linthicum Heights, Md.
Support functions will be consolidated, leading to staff reductions at other locations as well. These and other reductions are expected to save the company approximately $50 million to $60 million a year.
In its most recent quarterly earnings announcement, Alpha reduced its production guidance for 2012 in the face of declining thermal coal demand, mostly due to the mild winter and a wave of electric utilities switching from thermal coal to cheap natural gas to generate their power.
Future sales forecasts also are being affected by a series of regulatory actions by the U.S. Environmental Protection Agency, which has resulted in utilities announcing plans to shut down a number of generating stations that have traditionally used Central Appalachia coal.
“The U.S. coal industry is confronting a ‘new normal,‘ and we want to be sure we have the appropriate operating model, talent and agility to not just survive but emerge a winner,” Crutchfield said. “That means ensuring our thermal coal assets are sustainable through the business cycle, particularly in the onerous regulatory environment we’re confronting. It also means preserving and enhancing our valued metallurgical coal franchise, and maintaining the sound financial base we currently have as we maneuver through this tough environment.“
With $7.1 billion in total revenue in 2012, Alpha Natural Resources ranks as America’s second-largest coal producer by revenue and third-largest by production.
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