In re Alpha Natural Resources Inc.

544 B.R. 848, 74 Collier Bankr. Cas. 2d 1707, 2016 Bankr. LEXIS 181, 2016 WL 270030
CourtUnited States Bankruptcy Court, E.D. Virginia
DecidedJanuary 20, 2016
DocketCase No. 15-33896-KRH (Jointly Administered)
StatusPublished
Cited by19 cases

This text of 544 B.R. 848 (In re Alpha Natural Resources Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Alpha Natural Resources Inc., 544 B.R. 848, 74 Collier Bankr. Cas. 2d 1707, 2016 Bankr. LEXIS 181, 2016 WL 270030 (Va. 2016).

Opinion

Memorandum Opinion

Kevin R. Huennekens, UNITED STATES BANKRUPTCY JUDGE

On August 3, 2015 (the “Petition Date”), Alpha Natural Resources, Inc., and 1491 of its direct and indirect subsidiaries (each a “Debtor” and collectively, the “Debtors”) commenced these bankruptcy cases by each filing a separate voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Virginia.2 The Debtors continue to manage their properties and operate their businesses as debtors in possession pursuant to §§ 1107 and 1108 of the Bankruptcy Code. No trustee or examiner has been appointed in these Chapter 11 cases. On August 5,2015, the Court entered an order authorizing the joint administration of these Chapter 11 cases.3

This matter came before the Court on a motion filed on December 7, 2015, by the Debtors for approval of a compromise pursuant to Federal Rule of Bankruptcy Procedure 9019 between the Debtors and the [851]*851state of West Virginia (the “Motion”).4 The Debtors operate coal mines and mining-related properties throughout the state of West Virginia. The settlement was executed by authorized representatives of the Debtors and the state of West Virginia (the “West Virginia Settlement”). The West Virginia Settlement involves certain bonding obligations that the Debtors have under the West Virginia Surface Mining and Reclamation Act.

On December 14, 2015, the Sierra Club, the West Virginia Highlands Conservancy, and the Ohio Valley Environmental Coalition (collectively, the “Environmental Parties”) filed an objection to the Motion on the grounds that the West Virginia Settlement violated certain provisions of West Virginia and federal law. The United States Department of Interior, Office of Surface Mining Reclamation and Enforcement (“OSM”), on behalf of the United States of America, filed a reservation of rights but did not object to the Motion or the terms of the West Virginia Settlement. On December 17, 2015, the Court conducted a hearing on the Motion (the “Hearing”). At the conclusion of the Hearing, the Court overruled the objection of the Environmental Parties and granted the Debtors’ Motion. Accordingly, the Court entered an order granting the Motion and approving the West Virginia Settlement on December 22, 2015 (the “Settlement Order”). This Memorandum Opinion sets forth the Court’s findings of fact and conclusions of law supporting the Settlement Order in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure.5

Jurisdiction and Venue

The Court has subject matter jurisdiction over this contested matter pursuant to 28 U.S.C. §§ 157 and 1334 and the General Order of Reference from the United States District Court for the Eastern District of Virginia dated August 15, 1984. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A). Venue is appropriate in this Court pursuant to 28 U.S.C. § 1408.

Factual Background

The Debtors operate an extensive network of coal mines and mining-related properties throughout the state of West Virginia. The Debtors employ approximately 4,100 individuals in West Virginia and hold more than 500 mining permits throughout the state.

In connection with their coal mining operations throughout West Virginia, the Debtors are subject to regulation at the state level by the West Virginia Department of Environmental Protection (“DEP”).6 DEP is responsible for enforc[852]*852ing the various reclamation obligations that stem from West Virginia’s Surface Coal Mining and Reclamation Act (the “Act”). See W. Va.Code. § 22-3-1, et seq. In the mining context, reclamation obligations generally require miners to return land to its natural state following the completion of mining operations. See, e.g., id. § 22-3-10. Under the Act, a mine operator must obtain a mining permit from DEP before any surface mining operations can begin. Id. § 22-3-8. After DEP approves a mining permit, but before the permit is issued, a mine operator must post a penal bond payable to the state of West Virginia to secure its obligations under the Act, including obligations relating to reclamation. See id. § 22-3-11. The amount of the bond ranges between $1,000 and $5,000 per acre or fraction thereof. Id. The bond may take the form of a surety bond, collateral bond, escrow bond, or a combination of escrow and surety bonds (each a “Commercial Bond” and collectively, “Commercial Bonds”). See W. Va.Code R. § 38-2-11.3 (2015). “The period of liability for bond coverage begins with the issuance of a permit and continues for the full term of the permit plus any additional period necessary to achieve compliance with the requirements in the reclamation plan of the permit.” W. Va. Code § 22-3-11. A Commercial Bond is necessary unless the mining operator satisfies certain requirements and can “self-bond.”

In lieu of a Commercial Bond backed by a third party, DEP may allow for a mining operator to self-bond if the operator can demonstrate to DEP “a history of financial solvency and continuous operation sufficient for authorization to self insure.” Id. DEP has promulgated the West Virginia Surface Mining Reclamation Rule (the “Rule”) which enumerates the self-bonding criteria. See W. Va.Code R. § 38-2-11. To qualify for self-bonding under the Rule, an operator must meet one of the following requirements: 1) have its own corporate bonds rated as “A” or higher by Moody’s Investor Service or Standard and Poor’s Corporation; 2) have a tangible net worth of at least $10 million, a total liabilities to net worth ratio of 2.5 times or less, and an asset to liabilities ratio of 1.2 times or greater; or 3) fixed assets in the United States totaling at least $20 million, a total liabilities to net worth ratio of 2.5 times or less, and an asset to liabilities ratio of 1.2 times or greater. Id. § 38-2-11.3.d.2.C. DEP is authorized to initiate forfeiture proceedings for a mining operator’s bond in the event the operator’s mining permit is revoked. See W. Va.Code § 22-3-17(b). DEP is authorized to enter into consent agreements following the initiation of any enforcement action against a permit holder. See W. Va.Code. R. § 38-2-20.4.J.

Approximately two weeks prior to the Petition Date, the Acting Director of DEP notified the Debtors that due to their vulnerable financial condition, DEP would no longer permit the Debtors to satisfy any further bonding obligations through self-bonding. DEP stressed to the Debtors that it recognized the economic pressures on the coal industry, and that it would work with the Debtors to transition from self-bonding to another acceptable form of bond.

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544 B.R. 848, 74 Collier Bankr. Cas. 2d 1707, 2016 Bankr. LEXIS 181, 2016 WL 270030, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-alpha-natural-resources-inc-vaeb-2016.