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The rise and demise of a West Virginia coal mine

On the day Victor Clark retired after 26 years at the Hobet coal mine in West Virginia, the bosses called him to the office for a surprise.

His wife, daughter, and sons Rocky and Tony, both miners, turned out for ice-cream, pop and a farewell toast for a man who had been at the West Virginia strip mine since the beginning. “You felt appreciated,” Clark, 87, remembered of that day in January 1990.

When son Tony left the same mine in 2012, there was no fuss. “They had my job posted before I was out the door,” Tony said.

In a generation, the Hobet mine transformed from a small, founder-run operation to a company cheered in three different incarnations by Wall Street and twice bankrupt — a twisting path mirroring the fortunes of a U.S. coal industry whose output is at its lowest level in decades. Operating 25 miles south of Charleston in the belly of West Virginia, Hobet is a case study of a once-rich industry in decline.

Coal supporters blame competition from natural gas, weak demand from China and government pollution controls they call a “war on coal.” All those forces hampered an industry where the largest investor-owned companies are mired in bankruptcy.

Yet there’s something more to the coal story and the fall of industry behemoths. Like the onetime family-run Hobet mine, the coal sector transformed from a blue collar bastion known for dirty, dangerous work to one noted for its dizzying mode of buy and sell.

Some coal insiders believe the industry’s quest for fast profits through corporate maneuvers brought peril, not promise. As companies sought new investments, they shed union mines and left worker benefits in jeopardy. Those same companies piled up debt as they acquired rivals.

Bob Murray, an outspoken coal baron who founded Murray Energy, believes a drive for short-term profits pushed publicly-traded companies to the brink.

“I watched it go on and shook my head,” Murray said. “Everyone was shoving liabilities to someone else.”

As a privately held company, Murray Energy did not face the same investor pressure for quick returns. Still, the industry’s larger challenges are testing the Ohio miner. Murray Energy said last month it may be forced to lay off thousands of miners.

Those cutbacks have some asking whether any coal company can survive this industry-rattling decline.

Since last year, Arch Coal, Peabody Energy and Patriot Coal have all gone bankrupt. Each was tethered, at one point or another, to the Hobet mine – a site with a history shaped by mining advances, near disasters, striking workers and market swings.

Investors applauded for years before those industry leaders reached the edge. Patriot Coal shares soared in the first years after it took hold of union mines once controlled by Arch and Peabody. Wall Street helped leading companies acquire rivals in a 2011 buyout binge that crashed a few years later.

Arch Coal and Peabody Energy declined to discuss past business deals for this story. The companies have previously said critics are misguided in second-guessing deals in hindsight. When Arch sold the Hobet mine to a private equity firm in 2005, the buyer was “a strong, well-capitalized” entity, the company said.

Today, Hobet is owned by a conservation group and no longer producing coal. The mine is a scene of rubble and retaining ponds where sycamore, pine and cedar forests once stood. Toxic runoff must be steered clear of tributaries that feed the Ohio River. A decades-long cleanup awaits.

There’s uncertainty, too, for miners.

For Andrew Adkins it’s a matter of leukemia medicine costing $1,200 a month. He could die without his pills, yet the health care plan for Adkins and about 800 other retired Hobet miners and their families expires at year’s end. Miners who went on strike in the 1990s to protect their health plan said they never expected this.

“They’re doing away with everything we were promised,” said Adkins, a Vietnam veteran who relies on the low cost and open access of his health plan. Adkins, 71, is eligible for Medicare, but that carries its own costs and limitations.

For mining families in West Virginia and beyond, a blur of Wall Street deals altered the industry’s decades-old pledge to mining communities.

DAWN OF A COAL MINE

The Hobet mine was born in 1974 under a man named Fil Nutter – part of a West Virginia prospecting family that controlled a construction company, limestone pit and small-time coal mines.

Nutter was a “typical coal operator” of the era with the charm and hustle needed to thrive in the mountains, said Homer Toler, an early employee. “He liked to party, get drunk and worked his ass off,” Toler said.

When a land speculator named Granville Lee “Jimmy” Linville acquired the right to a forested plot 25 miles south of Charleston, Nutter brought the financing and connections. They went into business together.

Underground mines were joined by strip mines: workers blasting, or ‘shooting,’ the surface until they reached coal and then pushed everything else down the mountainside.

“Shoot and shove,” in common parlance. The method left behind poisoned streams and peaks sheared in half.

Nutter, who died in 2009, knew the brutality of coal mining. One brother was killed in a bulldozer accident at a strip mine, and the Hobet workforce was shaped by defiance.

Just a few summits from the Hobet mine stands Blair Mountain, site of a bloody scene in 1921, where at least 10,000 miners stood down strikebreakers, sheriffs and coal bosses.

“If you owned a mine in this area, it was going to be union,” said Wayne Chambers, founding member of the United Mine Workers of America local at Hobet.

Hobet grew from a hill and valley called Dog Hollow. Soon one shift became two. Streetlights were installed so laborers could work around the clock to fulfill a contract with a power plant in the state capital, Charleston.

The less than 90,000 tons of coal produced in 1975 ballooned to nearly a half-million tons by 1978. Some miners say they dared believe Jimmy Linville’s prophecy: “Men, you’ll retire from this job.”

A NEW EARTH MOVER

In the coal patch that stretches from southern West Virginia to central Pennsylvania, miners must pull countless loads of worthless rubble out of the ground before reaching the precious black rock. Hauling that waste, or “spoil,” is a costly concern.

Nutter had a method that satisfied West Virginia officials, but then Congress set national standards with the Surface Mining Control and Reclamation Act of 1977. Mining companies were to take more care with spoil and restore vanished mountains to their “approximate original contour.”

New rules meant higher costs. The year the law was passed, Nutter sold out to Ashland Oil of Kentucky. The new operator attacked the problem of spoil with an audacious piece of equipment.

It was a dragline: a towering crane-and-bucket that could carry in one scoop what several dump trucks might haul.

The dragline came in pieces and took 18 months to assemble. The contraption grew to a 20-story tower and slung a giant bucket from a half-mile of steel cable.

At first sight, miners feared the dragline might end their jobs. But the mammoth machine is probably what kept Hobet running through market ups and downs over the years, those same workers say.

In 1984, the first full year of operating the dragline, Hobet produced 1.8 million tons of coal. That was more than double previous output, according to data from the Mine Safety and Health Administration.

Jobs were abundant, with over 200 miners, and spirits were high. Workers and bosses fraternized at the Hobet cookout each summer, the families fishing and tossing horseshoes.

In these flush times, miners were unafraid to strike.

From May until nearly Christmas in 1993, workers were off the job to protect their health plan. “We won that one. We won them all,” recalled former miner Adkins.

In the end, though, the health and pension plans at Hobet were difficult to sustain. Pensions had defined benefits, which relied on a share of miner wages going to pay retirees. Layoffs and cutbacks to the workforce could upend that model.

The Hobet health plan had uncommonly low deductibles.

“We took smaller pensions, smaller hourly wages to protect our health insurance,” said Ronald ‘Yogi’ Pauley, a United Mine Workers leader at the Hobet mine for 30 years.

Former managers agree the health plans were exceptional.

“These would have been called ‘Cadillac’ health plans,” said Ken Woodring, who started as a Hobet mine manager in the 1970s and retired as an Arch executive in 2004. “They were manageable when health costs were low in the 1960s and 1970s. But those costs kept rising.”

DEBT AND PROMISES

The fate of miners was closely tied to a changeable coal market known for long winning and losing streaks.

In September 1995, as Hurricane Opal crashed through the Gulf of Mexico, fear of a natural gas shortage drove coal prices higher.

Within months, utilities burned through coal inventories until they reached lows not seen since Fil Nutter put his claim on Dog Hollow.

Steady, reliable coal was proving itself again. Investors liked the turnaround story and Ashland helped conceive Arch Coal as a shareholder-owned company in July 1997. Hobet was now under Arch Coal’s corporate umbrella.

In the era of answering to Wall Street, Woodring said, mining knowledge could take a backseat to marketing. It was important that executives be comfortable with investors, analysts and stock pickers.

Steven Leer, 45 at the time, had helped market Valvoline motor oil for Ashland before leading the coal division. When Arch Coal was formed, Leer was tapped as chief executive and paid in Wall Street fashion, with bonuses, country club memberships and other perks. Much of his compensation was tied to the company’s performance. If the share price climbed, Leer could redeem stock options for cash.

Leer did not respond to interview requests.

Deals were one way to get investors’ attention, and Leer’s first big acquisition in 1998 was emblematic of a borrow-and-buy growth strategy.

Arch used more than a billion dollars in debt to take hold of new leases and rival operations in the West. Further deals would anchor the company in Wyoming’s Powder River Basin. There, union power was weak and mines had vast reserves of low-sulfur coal in demand under new pollution controls.

Still, Arch Coal had promises to keep at Hobet and other eastern mines where current and former workers were owed hundreds of millions of dollars in benefits. These were “onerous” liabilities, credit rating agency Standard and Poor’s reported.

Arch Coal could not shift its miner liabilities, so it tried to control them. With bigger machinery and longer hours, the Hobet mine could boost output without hiring more miners.

After five years under Arch, Hobet was producing a record 5 million tons of coal, according to government data. That was 1.5 million tons more than Ashland produced in its last year of management.

Production was up but the culture became more focused on the bottom line, some former miners say.

Hobet managers summoned to Arch’s St. Louis headquarters came back describing cost-savings and “the Arch Way” of management that kept a steady eye on spending, said Ronnie Vance, a Hobet manager.

In Novembers past, Ashland had tolerated deer season when more than 15 percent of the workforce sought an absence. No more.

COAL CRUSH

Coal fever spread through the 2000s. Asian demand rose with the economy and natural gas output was flat, keeping up demand for coal.

Amid record revenue, one cost remained a blot on the Arch Coal balance sheet: more than $400 million in miner health and pension costs.

By 2005, investor hunger for coal had spread beyond Wall Street. ArcLight Capital Partners, a Boston private equity group, wanted a toehold in the coal business and Arch Coal found a way out of some stubborn costs.

ArcLight bought Hobet and three other West Virginia mines and named the new enterprise Magnum Coal. The deal included the miner health and pension plans.

The welfare of thousands of miner families was no longer tied to the deep-pocketed Arch Coal. Miners fretted about their private equity bosses and the sector’s reputation for flipping companies for investors.

Could Magnum shoulder miner health and welfare plans? Miners had to wait and see. “The union leadership told us there was nothing we could do,” said labor leader Pauley.

The Magnum transaction “clears the decks” for more growth, Leer told analysts on a conference call in January 2006. Arch shares climbed 3.6 percent.

In 2007, Leer took a $10 million payout – his biggest in a career with Arch Coal that earned him more than $40 million, a Reuters review of securities filings found.

WALL STREET AND COAL

Peabody Energy, the nation’s largest coal company, conceived Patriot Coal in 2007 to house its union mines and about $750 million in worker liabilities. Eventually, Patriot Coal bought Magnum Coal.

By 2011, rising coal prices ignited a new spree of deals. This time coal companies borrowed big for industry-shaping buyouts.

Alpha Natural Resources acquired Massey Energy for $7.1 billion in 2011. In December, Peabody Energy acquired MacArthur Coal of Australia for $5.1 billion. Arch Coal bought rival International Coal Group in May for $3.4 billion, with Leer envisioning a “coal franchise poised for growth.”

In the end, the deals were poorly timed. Asian coal demand was tapering, and the new drilling technique of hydraulic fracturing, or fracking, pushed natural gas prices to 10-year lows.

Alpha Natural Resources declined to comment on the 2011 deals.

Mike Quillen, who founded Alpha in 2002, believes coal executives erred by trying to keep up with the steady rhythms of Wall Street.

“Debt will kill you in the coal business,” said Quillen, who stepped down as Alpha’s chairman in 2012. “And it’s cyclical. But everybody just got caught up in the idea that high coal prices would go on forever.”

The industry paid for that misjudgment.

Alpha Natural Resources filed for bankruptcy in August 2015; a federal judge in July approved its plan to exit bankruptcy. Peabody Energy filed for bankruptcy in April 2016. Arch Coal, which filed for bankruptcy in January 2016, suffered cost overruns at its Leer Mine of West Virginia, named after its executive.

“If it weren’t for those deals, these companies would be solvent,” said John Hanou, an independent coal industry analyst who helped lead market research at Wood Mackenzie and Hill & Associates in Annapolis, Maryland.

Quillen said that’s not so clear-cut. “Everything is negative for the industry right now. There’s no way of knowing how long any company might have survived,” he said.

The coal industry will come through this downturn smaller and with fewer publicly-owned companies, he said. “But I don’t think the major acquisitions were the single catalyst.”

TOXIC LEGACY

Today the remnants of decline are visible at the Hobet mine.

The weathered piles of spoil and valley fills are leaching selenium, a healthful nutrient in trace amounts but a toxin in larger doses. A 2008 study, presented in federal court, found deformed fish and warned of catastrophe, requiring a cleanup.

Patriot Coal, the last major operator at the Hobet mine, outlined more than $400 million in pollution liabilities after its first bankruptcy in 2012. At the same time, miners learned their health benefits would vanish.

The company-sponsored policy relied on cash from coal operators that are now bankrupt and so those contributions are due to end.

When Patriot went bankrupt again last year, the company was sold in pieces.

West Virginia Gov. Earl Ray Tomblin has said he hopes the Hobet site will be fit for commercial development. But there are no concrete plans yet.

On the land where the dragline first trod, there’s a slurry impoundment rather than the wildlife habitat promised by executives in the original permit. This summer, the dragline will be idled.

Britain’s last coal pit closes

Coal once fueled the British Empire, employed armies of men and shook the power of governments.

Earlier this month, workers at Britain’s last operating deep coal mine finished their final shift, emerging — soot-blackened and live on television news channels — to cheers, applause and tears.

Some of the men carried lumps of coal as mementoes from the Kellingley Colliery, 200 miles north of London. The last haul of coal from the pit is destined for a mining museum as a once-mighty industry fades into history.

“There’s a few lads shedding tears, just getting all emotional,” said miner Neil Townend, 51.

Defiant to the end, the Kellingley miners sang a hit by Tom Jones — the son of a Welsh coal miner — as they headed underground for the last time.

“This is what makes us very special, the mining community,” said Nigel Kemp, who worked at the mine for more than 30 years. “The men have gone down today singing ‘My, my, my, Delilah.’ Every single man on the cage, you could hear them 400 feet down singing.”

At its peak in the 1920s, Britain’s mining industry employed more than 1 million people, as coal powered trains, fueled factories and heated homes. After World War II, the country still had 750,000 underground miners at almost 1,000 coal pits, but the industry’s days were already numbered.

With gas and nuclear power on the rise, hundreds of coal mines had closed by 1984, when a showdown between the British government and the miners cemented the industry’s central — and contested — place in Britain’s national mythology.

Thousands of miners went on strike hoping to scuttle then-Conservative Prime Minister Margaret Thatcher’s plan to shut down 20 pits and lose 20,000 jobs in an effort to destroy the powerful mining unions, which for years had used their economic clout to extract concessions from British governments.

The bitter, yearlong struggle brought violent picket-line clashes and ended in victory for the government. Since then, changing economic demands and cheap imported coal have all but wiped out Britain’s mining industry.

Britain still gets a fifth of its electricity from coal, although that is giving way to cleaner alternatives. Almost half the country’s power now comes from nuclear or renewable sources like wind and solar, and Britain has agreed to sharply cut its greenhouse gas emissions under an international deal to limit climate change signed in Paris last week.

And it’s not just Britain _ the world as a whole agreed to move away from using fossil fuels, including coal, that are blamed for global warming.

With coal prices lower than they have been for years, it’s cheaper to import coal from countries including Russia, Colombia and the United States than to dig it out of British soil. Critics say some of those countries have lower wages and worse safety records than Britain.

Britain still has several open-cast mines as well as a handful of idle pits that could be reopened if needed, but Kellingley was the last deep mine producing coal on a large scale. Its closure marks the end of an industry that was dirty and dangerous but brought pride and purpose to close-knit communities.

“Everything spread from the pit,” said Andy Smith, acting director of the National Coal Mining Museum, which plans to put the last ton of coal from Kellingley on display.

“Community spirit came from working in the pit. If you didn’t work in the pit, you were involved in making mine machinery, or supplying the mine canteen with bread or pork pies. (There were) sports and social clubs,” he said. “Every pit that has shut over the last 50 years, the community has suffered.”

Old Arizona mining town approves civil unions

The Bisbee, Ariz., City Council on April 2 approved an ordinance to recognize civil unions for same-sex couples. The vote was 5-2 and came after a three-hour hearing.

Bisbee is the only city in the state where civil unions are considered legal – at least for now. The state attorney general has said the ordinance the council approved is unconstitutional and the state block implementation.

The ordinance states that the city – an old mining town that’s now a haven for artists – wants to end  “discriminatory practices against members of the lesbian, bisexual, gay and transgender community” and affirm their relationships.

Under the ordinance, same-sex couples can pay $76 at city hall – the price of a marriage license in the county – and receive a certificate for a civil union.

The certificate would not bring any state or federal benefits but would result in couples accessing local benefits that are afforded married couples.

About 100 people attended the meeting.

The U.S. Census reports that about 6,177 people live in Bisbee, which was founded as a gold, copper and silver mining town in 1880.

Gay couple credited with preserving Mineral Point

Along High Street, the steep thoroughfare that threads through hilly Mineral Point, mornings start quietly with a stirring of locals gathered for breakfast at The Red Rooster Café, 158 High St. The main street’s relative peace, flanked by quiet neighborhoods dappled with fall-colored leaves, make it hard to believe that back in 1830, this rural southwest Wisconsin community of 2,500 had a population greater than that of Milwaukee and Chicago combined.

In many ways, Mineral Point was the starting point for Wisconsin’s history, and that history continues in its impact today. Settled by Cornish lead miners in the early 19th century, Mineral Point in 1836 saw Henry Dodge sworn in as the first governor of the Wisconsin Territory, 12 years before statehood was granted. By 1857, mining and farming had combined to make the community a prosperous commercial hub and bustling railroad destination.

Times changed and commerce found other hubs to inhabit, eventually leaving much of the community’s historical buildings to decay and disrepair. But in 1971, Mineral Point became the first Wisconsin community listed on the National Register of Historic Places. The designation was due initially to the restoration of the miners’ stone cottages in what is now Pendarvis, 114 Shakerag St., one of the state’s most important historical sites. That designation was but a milestone in the community’s continued rebirth and renewal.

Mineral Point’s restoration efforts were first spearheaded by community native Robert Neal and Stoughton, Wis., native Edgar Hellum, who met at the Art Institute of Chicago. In 1935, they moved as a closeted gay couple to the community and began reviving areas that had fallen into ruin. Considered “eccentric” at the time, Neal and Hellum supported themselves by running Pendarvis House, a restaurant serving Cornish specialties. The eatery was a favorite of “neighbor” Frank Lloyd Wright.

But the couple was also busily reviving Mineral Point’s history. Since then, historic restoration efforts have continued along High Street, thanks largely to a community of artists, both gay and straight, who have made the Iowa County community both an artistic and historic destination. Those two emphases combine Oct. 14-16 when Mineral Point becomes the hub of the Fall Art Tour, an annual event that also encompasses artists in Baraboo, Dodgeville and Spring Green.

“This is the busiest weekend for our artists and provides a huge economic boost for the community,” says Joy Gieseke, who heads the Mineral Point Chamber of Commerce. “This is an opportunity for visitors to see the artists at work.”

Nearly 5,000 art aficionados are expected to descend on Mineral Point, home to more than 20 artists working in glass, pottery, painting, wood, photography, fiber, jewelry, collage, furniture, mosaics, sculpture, metal and other media.

“It’s the live demonstrations and personal invitations into home studios that make this weekend stand out,” Gieseke says.

Art and architecture combine as two of Mineral Point’s key attractions. Nineteenth-century immigrants brought with them stonemason skills that led to the construction of the sandstone and limestone cottages that characterize the community. Restoration efforts last year included the beautifully refurbished Mineral Point Opera House, 139 High St. The former vaudeville venue, designed and built in 1914 by noted Madison architects Claude and Stark, was restored last year to the tune of $2.25 million.

The venue, which originally seated 725, in its time hosted performances by Burns and Allen, Bing Crosby and even a speech by presidential candidate John F. Kennedy. Its successful restoration continues the efforts begun by Neal and Hellum more than 75 years ago.

“Most people around here would tell you that Neal and Hellum saved Mineral
Point,” says community resident Coleman, an out playwright and theater producer who operates Alley Stage. His production of Caleb Stone’s “Faux Poe” will appear at the Opera House over the Art Tour weekend.

“It was their drive that kept the community’s economic engine going and prevented all these wonderful old buildings from being torn down,” Coleman says of his gay predecessors.

The couple’s presence also helped lay the groundwork for an environment that some describe today as being among the state’s most gay-friendly. During their lifetimes, Neal and Hellum remained closeted, with their orientation largely unaccepted by the community. (Reports say many local teens were not allowed to wait tables at Pendarvis House because of the owners’ “eccentricities.”)

But the couple’s community impact has been undeniably felt, according to Coleman, who in 1998 moved with his domestic partner to Mineral Point from Chicago.

“Neal and Hellum instilled in this town a love of its own old architecture, and helped make the community a welcome home for artistic people,” he says. “Mineral Point is not anyone’s idea of a gay Mecca, and it’s not trying to be. It’s just a place where people are accepted for who they are, and it happens to have a lot of great artists, shopkeepers and farmers who do a pretty good job of getting along.”

Details: www.mineralpoint.com.