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Sector shedding debt and reshaping itself amid familiar challenges

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Sector shedding debt and reshaping itself amid familiar challenges

The fuzzy picture of coal's near-term future got a littleclearer this week as another coal mining giant wrapped up its bankruptcyreorganization.

Arch Coal Inc.shed billions in debtand is ready to show off its portfolioof profitable and now less encumbered metallurgical and thermal coal mines. Thecompany returned tothe stock market Oct. 5 and enjoyed positivereception from at least one analyst.

The emergence came in a week of and reshaping the major and minorplayers in today's coal market.

Arch's restructuring was primarily a financial one, asopposed to Alpha NaturalResources Inc.'s strategy of transferring top assets into areshaped, leaner entity now known as ConturaEnergy, Inc. PeabodyEnergy Corp., the nation's largest miner, remains in the process ofreorganization, adding to what an S&P Global Market Intelligence discovered wasone-third of U.S. coal production coming from mines owned by companies thathave recently filed for bankruptcy protection.

All that stress is taking a toll. Coal associations acrossthe country are "takinghaircuts" to survive the misfortune that has struck theindustry.

"We just don't have thefunds to do the things we want," Ohio Coal Association Christian Palichsaid at a recent conference.

As coal's decline resonates through the coalfields, it willlikely be felt most intensely in Appalachia, according to a new Moody's report.The report found that while Wyoming is better able to weather a decline incoal, West Virginia and Kentucky will find it more to adapt due to differences inwealth levels and dependence on coal severance.

Perhaps that is whyemotions were high at a U.S. Senate field hearing Oct. 5 in WestVirginia where lawmakers heard an impassioned plea to address the "hopelessness"in coal communities due to lost jobs. There, coal-miner Jimmy "Bo"Copley asked for help from Congress, including Sen. Joe Manchin, D-W.Va., toallow West Virginia be able to mine what he believes is a God-given "energy source toprovide clean and affordable energy."

Manchin probably had at least one other coal miner on hismind this week. Former Massey Energy CEO Don Blankenship a wide array of materials fromprison insisting he was an "American political prisoner" who wasunfairly thrown in jail for his opposition to Manchin and other politicians.Blankenship was convicted of a misdemeanor and sentenced to one year in jailfollowing the investigation of a mine explosion that killed 29 coal miners.

While natural gas prices have to edge higher and promote arebound in coal markets, the industry's regulatory concerns do persist.

President Barack Obama sat down Oct. 4 for a chat with actor and climate changeactivist Leonardo DiCaprio who said those who do not believein climate change "should not be allowed to hold public office." Thecomments come as attorneys fighting for and against Obama's efforts to addressclimate change grapplewith a Clean Power Plan legal battle that has "more plot twists than Gameof Thrones."

Coal would have a difficult time complying withthe Clean Power Plan without carbon capture technology. However, the price ofthat technology looks increasingly out of reach as 's Kemper project againannounced more delaysand higher cost estimates for the project this week.

Meanwhile, liberal think tank Center for American Progressput forth a proposalto reform the nation's federal coal leasing program that would create acredit-auction system that allows companies to bid on a pool of carbon creditsto mine certain volumes of coal. National Mining Association spokesman LukePopovich said the report "recycles garbage" and "would simplyend long-term investment in federal coal production, the nation's largestsource of affordable coal energy used for electricity generation."

Globally, cargo prices for thermal coal are and China hopes to reach itsovercapacity reduction target in the coal sector before the year is over.Meanwhile, there were reportsthe World Bank is indirectly funding coal projects in Asia while solar energygeneration share recently beatcoal for the first time in history over in the United Kingdom.

Future events:

Met Coke World Summit: The event willbe held Oct. 18-20 in Pittsburgh.

Coal TradingConference: The American Coal Council will host Dec.5-7 in New York City.

S&P Global Ratings and S&P Global MarketIntelligence are owned by S&P Global Inc.