The Register-Herald, Beckley, West Virginia

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August 27, 2012

Frasure Creek Coal says bankruptcy not in company’s plans

FAYETTEVILLE — Company officials report that bankruptcy is not a part of their plans at this time, but several significant changes are afoot at Frasure Creek Coal Co., a Trinity Coal subsidiary with surface and underground operations in Kentucky and West Virginia.

For one, the company is preparing to sell more than 180 pieces of mining and earth-moving equipment at auction next month.

They also confirm that their Fayette County operations have shut down temporarily for August, but say this is based on the request of their buyer and does not indicate any change in the scale of their operations going forward.

Still, rumors of a bankruptcy or sale swirl in Fayette County, where Frasure Creek currently holds permits for four surface mines, three underground mines, haulroads, a conveyer and prospects. Four surface mine permits are currently pending with the West Virginia Department of Environmental Protection (WVDEP).

David Stetson, Trinity’s chief of restructuring, would not comment on a possible sale or restructuring, but said that bankruptcy is not a part of the company’s current plan. Trinity’s chief operating officer, Mike Jamison, also says he knows of no plans in that regard.

Russ Hunter at the WVDEP says the announcement of the equipment sale raised some “concern” about Trinity, but both he and the Office of Surface Mining (OSM) say the company has not filed for a transfer, sale or bankruptcy.

“We’re just kind of keeping our eyes on that ball, but as far as anything being official or filed I haven’t seen anything,” says Hunter.

According to the OSM, Trinity previously filed for Chapter 7 voluntary bankruptcy in October  2005 and closed that process in January of the following year.

- - -

Frasure Creek met with the WVDEP at the end of July to discuss near-term plans for its Deepwater Complex in Fayette County, according to Keith Porterfield, Environmental Resource program manager at the agency’s Oak Hill office.

The company confirmed during the meeting that it would cease production for August, with the intention of resuming the following month. They indicated that their reclamation efforts would continue with five operators during that time, which the WVDEP confirmed.

“Our regulations do allow production to cease for up to 30 days as long as reclamation activities and property maintenance continues,” says Greg Adolfson, WVDEP sustainability officer.

If the stoppage lasts longer than 30 days, the company is required to formally request an inactive status from the agency.

“(The temporary halt in production) is related to an interruption in our coal supply agreement for the coal we sell off that property, similar to what other companies have experienced,” says Stetson. “The buyer of our metallurgical coal had asked for a month deferment on receipts and we agreed.”

But come September, it will be back to business as usual at the mines, he says, with operations reactivated.

Already last week, the company commenced highwall mining activity as it began to ramp the Deepwater property back up to the levels seen prior to the August shutdown.

Asked whether new permitting rules on valley fills are influencing the company’s operations, Stetson indicated that the company “continues to evaluate the ongoing issues with regulation.”

“My best answer is we’re in the process now of evaluating and determining what decisions we would make based on those, but we haven’t made any decisions at this time,” he says.

- - -

Fayette County Commission President Matthew Wender walked Frasure Creek’s Mulberry Fork Surface Mine with several locals last week. The permit application is currently in process, and citizens used the opportunity to request a site visit.

Wender says Frasure’s operation seemed to be “shut down,” and the only activity appeared to be loading coal that had already been mined into railroad cars for shipment.

“One could surmise that if the company were preparing to sell, that obtaining the (Mulberry Fork) permit is an effort to enhance the property’s value,” says Wender.

He said heavy machinery was lined up and appeared ready for the auction block.

An Aug. 1 press release from Canada-based Ritchie Bros. Auctioneers announces Trinity Coal Corp.’s sale of more than 80 crawler tractors, 35 rock trucks and 30 wheel loaders on Sept. 27 in Raleigh-Durham, N.C.

The statement calls the auction “a divestiture of non-strategic equipment from West Virginia-based Trinity Coal Corp.”

Stetson says the sale will rid the company of excess surface mining equipment, primarily from its Kentucky mines.

“We have operations in Kentucky that we have shut down and we are in the process of divesting our interests in the Kentucky property.

“We went from having multiple surface mines there to having no operations other than reclamation. It’s just equipment we don’t need.”

Along with Grizzly Processing, Frasure Creek is currently the target of a lawsuit over coal dust from its prep plant in Allen, Ky., where more than 50 citizens allege that mining activities have polluted their homes and environment.

In another suit, 30 citizens allege that inadequate drainage at Frasure’s surface mine operations created flooding and property damage in the community of Lost Creek, Ky.

- - -

West Virginia’s bonding system requires that all coal operators put up money when they begin mining, in order to cover part of reclamation costs if the company goes under or forfeits its permit.

In addition, on a quarterly basis they pay into a pool of money based on the tonnage they produce. These funds would also be used on reclamation efforts in such a circumstance.

If a company goes out of business, a legal process kicks in at the WVDEP to collect the bond or ensure that the company continues reclamation.

When a company changes hands, it is required to notify the state and submit an application to continue working the current permits, continuing reclamation in the meantime.

Dennis Boyles with the Office of Surface Mining says ownership and control requirements in state and federal regulations are in place to ensure that if a subsidiary goes under or forfeits a permit, its parent company can’t apply for any future permits until the situation is resolved. This is intended to prevent companies from creating operating subsidiaries and then killing those subsidiaries to make a clean break with the cleanup process.

“Quite frankly, you don’t have that situation occurring today,” says Boyles. “Today you have fewer operations, you have interstate companies, you have pretty large companies. The last thing they want is forfeiture.”

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