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.
A bankruptcy trustee’s allegedly aggressive questioning of a debtor’s English-speaking skills is the subject of a complaint on file with a federal bankruptcy watchdog, a legal publication has reported.
The New York Law Journal Monday reported that consumer bankruptcy attorney William Ward Saxton filed a complaint against bankruptcy trustee John S. Pereira, accusing him of berating a debtor about her ability to understand English at a meeting in her bankruptcy case last month.
The NYLJ (subscription required) describes the letter thusly:
According to Saxton’s letter, when the debtor’s attorney during the July 16 hearing requested an interpreter for the client, a U.S. citizen, Pereira demanded to know how the debtor was able to pass an American citizenship exam if she did not understand English.
He also demanded to know how the debtor was able to communicate with her attorney and understand and sign a bankruptcy petition in English, the letter said. A friend of the debtor told Pereira that she explained everything to the debtor in Spanish.
Saxton wrote that Pereira moved to adjourn the case. But Saxton, who was awaiting his client’s case to be called, stood up and told Pereira that he could not adjourn and that he violated the debtor’s civil rights.
The NYLJ further quotes Mr. Saxton’s letter:
“The trustee’s demeanor was rude as he loudly asked the debtor, ‘Do you understand ANY English??’” Saxton wrote. “The debtor appeared frightened and confused.”
Reached Monday, Mr. Saxton confirmed to Bankruptcy Beat that he filed such a complaint.
Mr. Pereira didn’t respond to requests for comment Monday or Tuesday. However, he told the NYLJ that he did nothing wrong. He said his questions weren’t aggressive behavior but were “follow-up questions.” He also told NYLJ that he has provided the bankruptcy watchdog that received the complaint, the U.S. Trustee Program, with his response and that they’ve “heard my side of it.”
A spokeswoman for the U.S. Trustee Program, which monitors all corporate and consumer bankruptcy proceedings for fraud and abuse, on Monday provided this statement to Bankruptcy Beat:
“Since 2009, when we launched our Language Assistance Program, we have worked hard to ensure that bankruptcy debtors with limited English proficiency have access to telephone interpreter services—funded by the U.S. Trustee Program and at no cost to the debtor—as needed to participate fully in the mandatory section 341 meeting of creditors. In FY 2013, private trustees made more than 26,000 calls to interpreters, with Brooklyn and New York City among the top 10 locations for use. The USTP continuously advocates for the use of the telephone interpreter service, trains chapter 7 and chapter 13 trustees on its use, and follows up on all complaints about trustees, interpreters, or others involved in the Language Assistance Program.”
Mr. Saxton said Monday that he hasn’t heard anything about the status of his complaint, which he said concerned a “traumatic” situation for the debtor and the attorneys involved.
“This needs to stop,” he told Bankruptcy Beat. “It’s not a criminal proceeding.”
Write to Jacqueline Palank at jacqueline.palank@wsj.com. Follow her on Twitter at @PalankJ.
