MORGANTOWN, W.Va.—Coal producer Alpha Natural Resources is immediately closing eight mines in Virginia, West Virginia and Pennsylvania, cutting production by 16 million tons and eliminating 1,200 jobs.
The mine shutdowns start Tuesday, while the rest of the layoffs will be completed by the end of the first quarter, after Alpha fulfills current sales obligations, Chief Executive Officer Kevin Crutchfield said.
Alpha, which employs about 13,000 workers, said it is closing four mines in West Virginia, three in Virginia and one in Pennsylvania. They are a mix of deep and surface mines and are all non-union operations.
Though some miners will stay on to seal the operations, most will either be reassigned or laid off immediately.
Support positions will also be cut proportionally as Alpha reduces its operating regions from four to two, Crutchfield said, and two executives will retire Nov. 1.
Crutchfield said the shutdowns and layoffs are a necessary to ensure Alpha survives in a market where coal companies face a dual challenge: Power plants shifting to cheap, abundant natural gas, while companies like his face “a regulatory environment that’s aggressively aimed at constraining the use of coal.”
Bristol, Va.-based Alpha will cut production 16 million tons by early 2013 and reduce overhead by $150 million as it shifts away from thermal coal used in domestic power generation to concentrate on metallurgical coal used in steelmaking overseas.
Globally, “there remains a structural undersupply” of metallurgical coal, Crutchfield said, and Alpha expects to see demand grow by more than 100 million tons by the end of the decade.
Alpha’s $7.1 billion acquisition of Massey Energy helped create “one of the most valuable met coal franchises in the world,” Crutchfield said, effectively doubling its production potential. Alpha now has the world’s third-largest supply of coal, “more capacity than any of our peers.”
About 40 per cent of Alpha’s production cuts will come from high-cost eastern mines “that are unlikely to be competitive for the foreseeable future,” Crutchfield said, while about half will occur in the Powder River Basin. The balance of the cuts will come from lower-quality metallurgical coal.