Peabody Energy warns it may file for bankruptcy protection

Peabody Energy headquarters in St. Louis, Mo. Jeff Roberson/AP file photo

At least 150 coal workers lost their jobs this week. Two of the state’s largest coal producers notified employees they would be cut due to a declining market, raising concerns about the future of coal in New Mexico.

Beth Sutton, a spokeswoman for Peabody Energy, confirmed Thursday the company was laying off 65 employees from the El Segundo and Lee Ranch mines in Cibola and McKinley counties. She attributed the cuts to “continued difficult market conditions and customer actions.”

The two Peabody mines, which had been staffed with more than 340 workers before the layoffs, produced 6.4 million tons of coal in 2015 — a 2 million-ton drop from 2013 production levels.

The San Juan Coal Mine in Farmington, recently acquired by the Westmoreland Coal Co., also will lay off workers, with 85 salaried and hourly workers given notice this week, Westmoreland Executive Vice President Joe Micheletti told the Albuquerque Journal.

The layoffs mark the second round of cuts at the San Juan Coal Mine in the past few months. The first round came in March, shortly after the mine transferred hands Feb. 1 from BHP Billiton New Mexico Coal to Colorado-based Westmoreland for $127 million. In January, PNM Resources, the parent company of the Public Service Company of New Mexico, the mine’s sole buyer, announced it had financed the lion’s share of the purchase, putting up $125 million.

New Energy Economy, a clean energy advocacy group in Santa Fe, objected to the purchase, saying it unfairly tied New Mexico residents to a risky and unsustainable energy source.

Westmoreland did not respond to requests for comment Thursday, but its most recent letter to investors notes that energy demands have been lower than expected in the first months of the year following the purchase of the New Mexico mine.

The Peabody layoffs come just two months after the company filed for Chapter 11 bankruptcy. At that time, spokeswoman Kelley Wright said the company had “no intention of impacting operations or jobs with this action.”

Sutton said Thursday that the market slump, and not the Chapter 11 filing, was the main reason for the cuts this week.

“Peabody empathizes with employees and their families over the impact this action creates in the Cibola and McKinley County area and has taken steps to help ease the transition,” Sutton said, adding that workers would be offered severance packages, counseling and placement services. Those nearing retirement were offered voluntary severance last month, she said.

In April, a week before filing for bankruptcy, Peabody laid off 235 workers from its mining operations in Wyoming. It is the largest coal company to face financial hurdles, file for bankruptcy and lay off workers this year, joining St. Louis-based Arch Coal and Alpha Natural Resources of Virginia.

The large-scale struggles of the coal industry have led international banks, including JPMorgan Chase & Co. and Wells Fargo & Co., to no longer provide financial banking for operators.

As banks decline to finance coal, environmental groups and some lawmakers are raising concerns about how cash-poor coal operations will impact taxpayers. They fear that once the mines are no longer lucrative, the companies will declare bankruptcy, abandon mining sites and leave taxpayers to shoulder the burden of millions — and sometimes billions — of dollars in cleanup costs. New Mexico has an estimated 15,000 abandoned mine sites.

Environmental groups, lawmakers and even U.S. Secretary of the Interior Sally Jewell also have objected to an increasingly common practice of states allowing coal companies to self-bond cleanup work, which means they pledge their own financial stability rather than purchase bonds to ensure they have funds to cover reclamation costs. Opponents say self-bonding leaves taxpayers liable for the costs if a company does file for bankruptcy.

Peabody is maintains a self-bonding agreement with the state of New Mexico for its reclamation responsibilities here. Fernando Martinez, director of the state’s Mining and Minerals Division, said in a letter dated March 30 that the department had assessed the company and found it financially secure enough to continue to self-bond. Less than two weeks after his decision, Peabody filed for bankruptcy.

U.S. Sen. Martin Heinrich, D-N.M., a member of the Senate Energy and Natural Resources Committee, recently signed on to the Coal Cleanup Taxpayer Protection Act of 2016, which seeks to prohibit the federal government or states from allowing coal companies to self-bond.

“The state is shouldering tremendous risk,” said Jeremy Nichols, the climate and energy director of the Santa Fe-based environmental group WildEarth Guardians. “It’s heartening to see Heinrich be willing to step up to confront industry and ensure the public isn’t on the hook for cleaning up Peabody’s mess.”

Nichols said the state is “on track to see one of its worst years for coal in recent history. If ever there was a time for the Western U.S. to get serious about moving away from coal, now is the time. Things only seem to be getting worse for workers and communities.”

Heinrich, when asked about the state’s agreement with Peabody in a recent interview, said it is important to address “who cleans this stuff up.”

“This is the chickens coming home to roost,” he said.

Contact Rebecca Moss at 505-986-3011 or rmoss@sfnewmexican.com.