The West Virginia Department of Environmental Protection filed a complaint on Nov. 16 against Alpha Natural Resources claiming the coal company did not disclose as much as $100 million in liabilities during its exit from bankruptcy earlier this year.
The complaint argued that had the $100 million cash burden been known, it might have derailed the approval of Alpha Natural Resources’ restructuring agreement, which involved the forming of a new company led by former Alpha executives, Contura Energy.
Contura bought Alpha’s strongest assets, the Eagle Butte and Belle Ayr mines in Campbell County, WY.
The Casper Star Tribune reported that the West Virginia regulators argue that Alpha Natural Resources and Contura Energy leaders and their top lenders likely knew about the undisclosed liabilities.
Alpha representatives denied the allegations, arguing in a rebuttal also filed Nov. 16 that the $100 million was not included in cash flow statements provided to the court, but was listed in other documents.
“It is hardly an indication of bad faith or misconduct that certain errors with respect to the projections may have been made during this complex process,” Alpha’s lawyers argued in a rebuttal claim. “It bears repeating that … the projections were never intended to be a guaranty.”
Regulators are asking the bankruptcy judge to revoke some of the agreements made with Alpha, Contura Energy, lenders and key leaders during restructuring — agreements that essentially allowed those entities to exit bankruptcy with a clean slate and obtain permits to operate coal mines.
The Appalachian state regulators are not seeking to dismantle the complicated restructuring agreement. However, revocation of the company and its leaders’ protections could pave the way for additional legal actions against Contura, one of Wyoming’s largest coal companies, some experts say.
The missing $100 million came to the West Virginia regulators’ attention three months after Alpha exited bankruptcy when Alpha, Contura and senior executives filed a settlement agreement, mentioning the previously unaccounted for liabilities. In the settlement Alpha, Contura and senior lenders agreed to share the $100 million burden.
West Virginia regulators filed an objection to that settlement on Oct. 31.
In Wednesday’s complaint, the regulators’ lawyer introduced the potentially incriminating allegation of intentional fraud.
Alpha’s financial position was “razor thin” even without the additional liabilities, regulators argued.
“The inclusion of some $100 million in additional cash demands on the reorganized debtors would only have exacerbated an already precarious reorganization by a factor of two or more,” regulators said.