HUNTINGTON, W.Va. -- Patriot Coal has agreed to phase out mountaintop removal and other forms of strip mining, in a move Patriot officials say is in the best interests of their company, its employees and the communities where it operates.
In a deal with citizen groups and environmentalists, Patriot said it would never seek new permits for large-scale surface mining operations, according to details of the settlement that were made public in federal court Thursday afternoon.
St. Louis-based Patriot can continue some existing and smaller mining projects, but must also implement a cap on surface production and eventually stop all strip mining when existing coal leases expire.
Ben Hatfield, president and CEO of Patriot, said the plan should help his company emerge from bankruptcy, focus on underground mining, and curb mountaintop removal's effects on coalfield communities.
"Patriot Coal recognizes that our mining operations impact the communities in which we operate in significant ways," Hatfield told U.S. District Judge Robert C. Chambers. "We believe the proposed settlement will result in a reduction of our environmental footprint."
The deal does not require Patriot to immediately close any mines or lay off any workers. The company must cut corporate-wide surface production starting in 2014, and gradually reduce it to no more than 3 million tons annually -- less than half of 2011 surface output -- by 2018.
Patriot, the second largest producer of surface-mined coal in West Virginia, becomes the first U.S. coal operator to announce plans to abandon mountaintop removal, a controversial practice linked to serious environmental damage and coalfield public health problems.
"Patriot's decision that mountaintop removal and other large surface mines are not in its best interests is the inevitable conclusion for any mining company that actually has to pay the costs of the environmental harm it creates," said Joe Lovett, an Appalachian Mountain Advocates lawyer who negotiated the deal with Patriot on behalf of the Sierra Club, the West Virginia Highlands Conservancy and the Ohio Valley Environmental Coalition.
Lawyers for both sides unveiled the settlement -- which has quietly been in the works for months -- during a surprisingly low-key hearing in U.S. District Court in Huntington.
Unlike most developments involving West Virginia's coal industry, elected officials and other government leaders did not rush Thursday to issue public statements offering their views on the Patriot settlement.
The settlement still faces a review by the U.S. Justice Department, and needs approval from Chambers and from the judge overseeing Patriot's bankruptcy case.
After being briefed on the deal, Chambers said it "sounds to be a pretty fair result, which seems to be to the benefit of both sides of this litigation and, hopefully, to the people of the state of West Virginia."
The settlement grew out of efforts to resolve issues surrounding more than $400 million in liability Patriot faces to clean up selenium pollution that scientists believe is damaging water quality and harming aquatic life downstream from the company's operations.
Patriot had already agreed to a deal to clean up dozens of illegal selenium discharges at three major mining complexes in Southern West Virginia. But since filing for bankruptcy reorganization in July, Patriot has been at odds with citizen groups over the company's efforts to delay its compliance deadlines.
The settlement gives Patriot the additional time, bumping back compliance deadlines from May 2013 until August 2014. Hatfield said the move allows the company to defer up to $27 million of compliance costs from 2012 and 2013 to 2014 and beyond, improving Patriot's liquidity as it tries to complete bankruptcy reorganization.
"Importantly, this proposed settlement allows Patriot to continue mining according to existing permits and is consistent with our long-term business plan to focus capital on expanding higher-margin metallurgical coal production and limiting thermal coal investments to selective opportunities where geologic and regulatory risks are minimized," Hatfield said.
Details of the broader deal on mountaintop removal were spelled out in a 15-page "global settlement" document made public Thursday: