TORONTO (miningweekly.com) – In dealing with continued weak coal markets and blaming increasingly strict government regulations, US coal producer Alpha Natural Resources said eight of its affiliates had late on Thursday afternoon given about 1 100 employees, working at 11 West Virginia surface mines, notice that they would be laid off in three months.

The Bristol, Virginia-based firm issued workers in its mines, preparation plants and other support operations with Worker Adjustment and Retraining Notification (WARN) Act notices that it would start idling its operations from mid-October.

Alpha joined a slew of other coal miners such as Consol Energy, Walter Energy and Patriot Coal that had, in recent months, either given notice to idle mines, or had shuttered operations, as producers battled low coal prices.

Alpha said its actions were triggered by persistent weakness in US and overseas coal demand and depressed price levels, along with government regulations that were causing electric utilities to close coal-fired power plants and forego new construction.

Excess worldwide coal supplies had also contributed to falling coal prices.

The international price of thermal coal, shipped to power plants in Europe, had been hovering at a four-year low, while prices for metallurgical coal, used in steelmaking, had declined more than 20% in less than a year, reflecting oversupplied markets.

Industry forecasts for 2015 have indicated that coal production from Central Appalachia would be less than half the region's output in 2009. A significant contributor to the demand erosion was competition from natural gas as an alternate fuel for electricity generation in the US, along with competition from other coal producing basins.

REGULATORY NOOSE

Further, Alpha said US Environmental Protection Agency (EPA) regulations were at least partly responsible for more than 360 coal-fired electric generating units in the US closing or switching to natural gas. Nearly one out of five existing coal-fired power plants was closing or converting to other fuel sources, while Central Appalachian coal had been the biggest loser from the EPA's actions.

Alpha argued that the EPA's new Mercury and Air Toxics Standards air emissions rule alone was expected to take more coal-fired power generation offline next year than in the previous three years combined. Much of that was in markets historically supplied by Central Appalachian mines.

“Many mines in the region have done a great job finding ways to reduce costs and remain economically viable in this unprecedented business climate, but some Central Appalachia mines haven't been able to keep up with the fast pace at which coal demand has eroded and prices have fallen. So, our operations managers have to [under]take a hard and serious examination [to determine] whether they can sustain a number of mines and related operations by finding additional cost reductions and whether the business will be there to support them in the year ahead,” Alpha president Paul Vining said.

"Over the next two months, they will continue to run forecasts for expected customer commitments for next year, along with anticipated pricing, and a determination will be made whether the overall economics make sense given the cost structures at these operations and the business we expect to secure," Vining added.

The mines receiving the WARN notifications produced 4.2-million tons of thermal and metallurgical coal through the first half of this year. Vining noted that both domestic shipments and shipments to Europe from Central Appalachia were expected to be cut back significantly, though it was too early to project exactly how much annualised production might be taken off line owing to the announcement.

"These actions are consistent with steps that we've taken in the past to build a smaller but more sustainable portfolio of mining assets across our three coal-producing basins. Altogether we've idled about 35-million tons of coal production in just three years, primarily operations with the highest cash costs. The result has been an improved cost structure, which bolsters our competitiveness in the face of challenging market conditions,” he explained.

The operations earmarked to be idled included Highland Mining's Superior, Reylas, Freeze Fork and Trace Fork surface mines, in Logan County, and the North surface mine, in the Mingo and Logan counties; Black Castle Mining's surface mine, in Boone County; Independence Coal's Twilight surface mine, in Boone County; Alex Energy's Edwight surface mine, in Raleigh County; Republic Energy's Republic and Workman Creek surface mines, in Raleigh County; Pioneer Fuel's Ewing Fork #1 surface mine, in the Kanawha and Fayette counties; and other technical and support services for these mine operations.