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Alpha Natural Resources closing eight mines, cutting hundreds of jobs

By Steven Mufson,September 18, 2012

Alpha Natural Resources will cut its coal production by 15 percent and immediately lay off about 160 mineworkers while idling eight mines in Virginia, West Virginia and Pennsylvania.

Alpha Natural Resources becomes the latest in a series of coal mining companies to trim output and jobs this year as domestic coal-fired power plants shut down in the face of cheap new U.S. natural gas supplies, a weak economy, and environmental regulations. The company ranks as America’s second-largest coal producer by revenue and third-largest by production.

The company said that while its cuts would affect 400 mineworkers, most would be given jobs that are currently vacant or done by contractors. However Alpha said an additional 800 jobs would be lost by early next year as it seeks to cut overhead by $150 million a year.

Alpha, which has 130 mines and 13,100 employees, still relies primarily on the U.S. market, where utilities have been closing aging coal plants and switching to shale gas made available by new drilling techniques, including hydraulic fracturing.

About a fifth of its output is metallurgical coal that goes into export markets and the company said it would shift its focus away from thermal coal used in domestic power plants to metallurgical plants used in steel plants abroad.

“With fundamental changes taking place in our business, we’re taking decisive actions that set the table for Alpha to compete successfully as a leader in the global coal markets for years to come,” Kevin Crutchfield, Alpha’s chief executive, said in a statement.

Alpha is already the third largest supplier of metallurgical coal worldwide.

“It’s never a good day when workers are laid off,” said United Mineworkers spokesman Phil Smith, who added that none of the Alpha layoffs affected union members. “These are the best paying jobs in their communities and whatever these people find will pay half or less than what they were getting.” Smith estimated that coal mining companies have laid off 3,000 or 4,000 people this year.

“There’s a combination of reasons” for the cutbacks, said Alpha spokesman Ted Pile. “There are some cyclical factors. The economy is certainly a factor. The advent of this disruptive technology has made gas abundant and cheap. And we’re also dealing with a regulatory regime that is determined to constrain the production and use of coal.”

Though Smith predicted that the price of natural gas would rise and make coal competitive again, an analyst report by FBR Capital Markets said Tuesday that natural gas would continue to pose a competitive threat in coal’s Appalachian stronghold. “As is painfully obvious now, coal generation is swimming in a pool of natural gas and inconveniently located on top of the Marcellus Shale, among other shale plays in the area,” the firm said in a report for investors.