One week ago, Peabody Energy cried uncle.
The world’s largest privately-owned coal producer filed for Chapter 11 bankruptcy protection, following Arch Coal, Alpha Natural Resources, and Patriot Coal in begging the United States Bankruptcy Courts for mercy.
It would be easy for climate advocates to cheer the occasion as yet another signpost along the hard-fought road to a carbon-free future. But, unfortunately for many involved, Peabody’s bankruptcy could leave many vulnerable parties—from coal workers to Navajo tribes to students in St. Louis— suffering further.
Which is why activists from impacted communities gathered on Tuesday in St. Louis, home of Peabody’s headquarters, to demand that a “Just Transition Fund” is endowed as part of the bankruptcy proceedings before the “golden parachutes” are given out to reckless executives and the loans are repaid to the reckless banks that kept funding Peabody’s speculation.
One week ago, Peabody Energy cried uncle.
This year, two energy companies that have each received billions of dollars in subsidies and financial support from the federal government are going into bankruptcy. You might think, in this post-Solyndra political environment, that conservative commentators and politicians would be lining up at the Fox News studios to call for some heads to roll.
But, no. Even though these companies have benefited from enough federal subsidies to make the Solyndra loan look like pocket change, there's no outrage. Because they are coal companies (not solar), the story isn’t about how the federal government spent decades propping them up, it’s about how the president’s Clean Power Plan is taking them down.
For decades, however, coal companies have taken advantage of vast subsidies for extracting coal from public lands. The deals for mining this taxpayer-owned coal from American public lands were so good that some of the world’s biggest coal companies have relied on the cheap leases to survive as demand plummeted and the industry melted down.
Peabody Energy (BTU), the top miner of coal in the world, may soon file for Chapter 11 bankruptcy.
The news comes as Peabody's stock closed Wednesday at a six-month low of $2.19 per share — a 46-percent fall. Peabody noted its potential bankruptcy in the company's March 16 U.S. Securities and Exchange Commission (SEC) Form 10-K.
“If we are not able to timely, successfully or efficiently implement the strategies that we are pursuing to improve our operating performance and financial position, obtain alternative sources of capital or otherwise meet our liquidity needs, we may need to voluntarily seek protection under Chapter 11 of the U.S. Bankruptcy Code,” stated Peabody.
This is a guest post by Nick Abraham, originally published on Oil Check Northwest
Peabody Energy, the largest private coal company in the world, is one of the last remaining coal majors to still be floating above the bankruptcy tidal-wave that has hit the industry. But it now looks like that even this coal behemoth will likely go under. Languishing under the same over capitalization and changing market structures that have plagued the entire industry (more on that below) Peabody's stock has dropped 30% just since the final fiscal quarter of last year.
Peabody is now $6.3 billion in debt. Its Gateway Pacific terminal, just north of Bellingham, WA, (which if built would be the largest facility of its kind in North America) has been in a holding pattern as local communities weigh whether a project like this is in the collective interest.
Coal's demise has been well-reported. Once the standard bearer of our power grid, coal has dropped from providing a substantial 50% of the nation’s electricity to 29%. Just last week, the Oregon legislature passed a bill to transition off coal power completely. The result of this downturn is that many domestic coal companies were becoming heavily dependent on exported coal (and exports have been falling since 2012)—carried by train through American cities and towns—to make up the difference.
China has announced plans to close more than 1,000 coal mines in 2016, cutting production by 60 million tonnes. The move is part of a larger mandate to eliminate as much as 500 million tonnes of surplus production over the next five years, the government says.
When it comes to coal, China is king: it is the world's largest producer and also its largest consumer. Last year, the country's 10,760 mines produced 3.7 million tonnes of coal. Yet, it's estimated that over half (2 million tonnes) that capacity does not get used, every year. According to a Reuters report, demand has waned due to the combination of a slowing economy and government policy to curb pollution by moving away from fossil fuels.
In addition to the air pollution from burning coal that plagues Chinese cities and exacts huge costs on society, the country's coal mining over-production is a real problem. Last year the country's supply surplus drove domestic prices down by a third. Prices have dropped for five straight years thanks to a glutted market. Recognizing one of its most important economic sectors is in trouble, China hopes to stimulate the industry through consolidation. The government has plans to eventually shut down all mines that produce less than 90,000 tonnes per year. Under this policy 5,600 mines will be shuttered.
So far, 2016 has not been very kind to U.S. energy companies solely invested in coal production, and there is no indication that it's going to get better anytime soon.
With cheap natural gas substituting coal for electricity production, a sustained downturn in coal demand in China, and tough new regulations on greenhouse gas emissions in the United States, pure play coal companies like Peabody Energy (NYSE: BTU) and Arch Coal (NYSE: ACI), are having a horrible run of it.
St. Louis-based Arch Coal filed for bankruptcy protection on Monday, and that news saw trading immediately halted and proceedings undertaken to have Arch Coal delisted from the New York Stock Exchange. Over the last ten years, Arch Coal's share price dropped from a high of $104.45 per share, to trading at a mere 15.5 cents this week prior to the halt to trading.
The day before global leaders and diplomats passed a climate change deal in Paris at the United Nations climate summit, the U.S. House of Representatives — in a 256-158 vote — authorized the final text of a bill that has a provision preventing climate change to be accounted for in all U.S. trade deals going forward.
That bill, the Trade Facilitation and Trade Enforcement Act of 2015 (H.R.644), now may proceed for full-floor votes in both the House and the U.S. Senate after its conference report was agreed upon. A DeSmog review of lobbying records shows the bill has received heavy fossil fuel industry support.
An undercover investigation by environment group Greenpeace has found some of the world’s most vocal climate science denial groups were willing to accept cash from fossil fuel interests in return for writing articles and reports that reject the impacts of greenhouses gases.
Greenpeace operatives posing as representatives of coal and oil companies were told that while the reports could be produced, there were ways that the sources of funding could be hidden.
Academics affiliated with leading US academic institutions Princeton and Penn State universities are implicated in the Greenpeace research.
With the hottest October in world history recorded recently, a slew of advocacy groups have delivered 360,000 petition signatures to the U.S. Department of Justice, calling for a probe of petrochemical industry giant ExxonMobil's history of funding climate change denial despite what the company knew about climate science.
The groups ranging from 350.org, Food and Watch Watch, Climate Parents, Moms Clean Air Force, The Nation, Sierra Club and others have asked DOJ to investigate what ExxonMobil knew about climate change and when the company knew it, juxtaposing that insider knowledge, exposed by both InsideClimate News and The Los Angeles Times, with the climate change denial campaign it funded both in the past and through to the present.