- Patrick Semansky/Associated Press
Kentucky miners who were digging for coal late last year hit an unwelcome surprise: Someone else beat them to it.
U.S. Coal Corp. workers who began scraping off the surface of some eastern Kentucky land quickly realized that the earth below had already been carved out, probably sometime in the 1930s or 1940s. The miners would be extracting far less coal than they thought.
U.S. Coal Chief Executive John Collins said that the discovery was “one more thing” that added to the company’s financial headache as the coal-mining industry struggles to sell their resource while natural gas remains so cheap.
The company is now in bankruptcy and trying to find a way to repay about $75 million in debt.
Frustrating discoveries like this aren’t unheard of in eastern Kentucky and West Virginia where people have mined underground for more than a hundred years—well before state officials began keeping good records, said Bob Ferriter, a senior mine safety specialist at the Colorado School of Mines.
Forgotten coal mines can also be a terrifying hazard. In 2002, Pennsylvania miners broke into the wall of a flooded mine that wasn’t on their maps, trapping them for nearly 80 hours until rescuers—with an unblinking audience watching on 24-hour news channels—could figure out how to extract them. All nine miners survived.
U.S. Coal officials estimate that the company still has about 50.7 million tons of coal reserves in the central Appalachia region of eastern Kentucky (that is, assuming they don’t encounter any more forgotten mines).
New technology has made it easier to extract underground natural gas from shale deposits, upending the energy markets several years ago and making it tough for coal companies to profit. Last year, U.S. Coal sold about 2.6 million tons of coal for about $187.6 million, but it still lost about $6 million overall, according to papers in U.S. Bankruptcy Court in Lexington, Ky.
Several other coal miners have also turned to bankruptcy during the downturn, including Patriot Coal Corp., Trinity Coal Corp., James River Coal Co. and IBCS Mining Inc.
“The coal industry as a whole has been forced to reduce production, idle mines and lay off workers,” Mr. Collins said in court papers.
In earlier court papers, U.S. Coal said that about 290 workers remained after a round of layoffs before the company’s Chapter 11 case, which began with an involuntary bankruptcy petition that creditors filed against one of its subsidiaries in May.
Mr. Collins also said that U.S. Coal has had to put lots of money toward repaying its lenders “at high interest rates, rather than using those funds to reinvest in the business.” In 2012, for example, the company spent $15.3 million on its debts but only $9.4 million on improving its operations, he said.
Founded in 2006, U.S. Coal bought a collection of smaller mining operations with the goal of becoming a publicly traded company.
-Kris Maher contributed to this article.
Write to Katy Stech at katy.stech@wsj.com. Follow her on Twitter at @KatyStech.
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