Big coal woes: Largest U.S. producer declares bankruptcy

The largest underground coal mining company in the United States declared bankruptcy on Monday morning. Murray Energy Corp. filed for chapter 11 protection. Company founder Robert Murray is a staunch supporter of President Trump and has enjoyed a close relationship with the Trump administration.

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Murray is giving up two of the three titles he holds – he will step down as president and CEO while he remains chairman. His nephew, Robert Moore, will be president and CEO. The shift in leadership is a part of the restructuring agreement.

Murray Energy is the eighth coal company to file for bankruptcy in the last year. The coal sector is in decline and that is nothing new.

Robert Moore, who is succeeding Mr. Murray as chief executive, said markets for thermal coal have deteriorated significantly in the past several months. The decline stems from the closure of coal-fired power plants, record production of inexpensive natural gas and the growth of wind and solar power. according to a declaration that Mr. Moore filed in bankruptcy court.

He also said Murray Energy was hit by the “recent trade war driving Russia to increase exports,” as well as depressed demand for U.S. coal from international utilities.

Natural gas and renewables are cleaner sources of energy. Trump, when he ran for the presidency in 2016, campaigned hard in coal country on the promise of bringing back coal mining jobs. Robert Murray appeared at rallies with him and has maintained a relationship with the Trump administration. Murray has lobbied for a federal bailout of the coal industry. The Trump administration has rolled back some regulations for coal-fired plants but has declined to support Murray’s bailout proposal. Natural gas is cheap and abundant, as well as cleaner burning than coal.

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The recent run of failures comes as the thermal coal market has continued to shrink despite action by President Trump to roll back Obama-era environmental restrictions on coal-fired plants. The sectorwide decline has been driven largely by a record production of inexpensive natural gas and growth of wind and solar energy, which has displaced coal used by U.S. power plants. Natural gas prices hit 20-year lows for June and July, averaging $2.40 and $2.37 per million British thermal units, respectively, according to the U.S. Energy Information Administration.

“I think that a lot of the management and boards of the coal-mining companies were unwilling to admit that this was really going to happen,” said Karla Kimrey, a former vice president at Cloud Peak, which had roughly 1,235 employees when it filed for bankruptcy in May.

The Trump administration has been somewhat successful in efforts to help the coal industry – some deregulation and pushing for subsidies for coal-fired power plants, for example – but the list of bankruptcies continues to grow. Robert Murray has been a leading voice in advancing proposals for the Trump administration’s consideration.

At Murray’s headquarters in St. Clairsville, Ohio, there’s a photo in the lobby of Murray with President Trump, who’s giving two thumbs-up. And in Murray’s big corner office there’s a replica of Air Force Two, signed on the wing by Vice President Pence.

A few months after Trump was sworn in, Murray met with Energy Secretary Rick Perry and delivered an “action plan” for helping coal. It included 16 proposals that became a “to-do list” for the Trump administration, including replacing former President Obama’s Clean Power Plan and withdrawing from the Paris Agreement.

But the Trump administration hasn’t been able to give Murray everything he wants. Earlier this year the Tennessee Valley Authority voted to close a large coal-fired power plant that bought coal from Murray, despite pressure from Trump to keep it open. And last year the Federal Energy Regulatory Commission rejected a proposal to subsidize coal and nuclear plants that Murray supported.

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Murray donated $300,000 to Trump’s inauguration and presented an “action plan” to save the coal industry to the Trump administration after the inauguration. Murray has had mixed results. He’s still actively supporting President Trump and last held a fundraiser for him in July.

Mr. Murray has been a generous political donor to President Trump and hosted a fundraiser for the president in West Virginia in July. After Mr. Trump took office in 2017, Mr. Murray drew up an “action plan” for the White House that pushed for eliminating a tax credit for windmills and solar panels, repealing President Obama’s Clean Power Plan, withdrawing from the Paris climate accord and cutting staff at the Environmental Protection Agency by at least half.

Mr. Murray also lobbied for regulations that would force utilities to favor coal over other power sources, stressing coal as a more “reliable” part of the nation’s fuel mix.

Mr. Trump repealed the Clean Power Plan and pulled the U.S. out of the climate accord, though he didn’t repeal the wind and solar tax credits or satisfy other elements of Mr. Murray’s action plan.

A big focus of Energy Secretary Rick Perry has been to find markets for coal and other U.S. energy. He is currently in the news for his meetings in Ukraine where he was doing just that – promoting deals to sell coal to Ukraine. Ukraine buys American coal. Selling coal to Ukraine eases that country’s dependence on less desirable countries for their energy needs – like Russia.

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In a statement released by Murray, he said the company will finance its operations throughout bankruptcy with cash on hand and access to a new money debtor-in-possession (DIP) financing facility. The move is necessary to provide liquidity.

“We appreciate the support of our lenders for this process, many of whom have been invested with the company for a long time,” Moore said in a statement. “I am confident the DIP facility provides the company with adequate liquidity to get payments to our valued trade partners and continue operating in the normal course of business without any anticipated impact to production levels.”

Murray added that “although a bankruptcy filing is not an easy decision, it became necessary to access liquidity.”

This all comes toward the end of a life that is the embodiment of the American dream. Murray, now 79 years old, started in coal mining as a teenager working in the mines. In the 1980s he started his own company by purchasing one mine in Ohio. He built it into the largest underground coal-mining company in the country. Murray operates 13 active mines in the U.S. and in Columbia.

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Jazz Shaw 9:20 AM | April 19, 2024
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