Alpha Closes Mines as Coal Industry Faces ‘New Normal’

Alpha Natural Resources Inc. (ANR), the second-biggest U.S. coal producer, is shutting mines in Kentucky and closing U.S. regional offices as cheap natural gas and clean-air rules slash demand from electricity generators.

Operations will end at eight mines in the state, including four owned by affiliates and four contract facilities, and production will be cut at others, Bristol, Virginia-based Alpha said today in a statement. The moves will reduce thermal-coal shipments by 2 million tons this year and 4 million tons in 2013, Alpha said. About 150 jobs will be eliminated.

U.S. demand for coal in electricity generation will drop 9.7 percent this year to the lowest level since 1984, according to the U.S. Energy Department. Some power plants have switched to using gas after surging output from shale rock sent prices in April to the lowest in a decade. Alpha said a U.S. Environmental Protection Agency proposal to limit greenhouse-gas emissions from power plants will further erode demand.

“This year, utilities in the U.S. are expected to burn the least amount of steam coal than at any time in the last 20 years,” Alpha Chairman and Chief Executive Officer Kevin Crutchfield said in the statement. “The U.S. coal industry is confronting a ‘new normal,’ and we want to be sure we have the appropriate operating model, talent and agility to not just survive but emerge a winner.”

Four regional offices will be shut and staffing at other locations will be reduced to cut expenses by $50 million to $60 million a year, Alpha said.

The production cuts are consistent with reduced guidance issued on May 3, the company said.

Peabody Energy Corp. (BTU), based in St. Louis, is the largest U.S. coal producer ranked by revenue.

To contact the reporter on this story: Jack Kaskey in Houston at jkaskey@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net