A Bankrupt Coal Company Plans Huge Executive Bonuses — And Steep Cuts to Employee Benefits

Less than six months after Virginia-based coal company Alpha Natural Resources filed for bankruptcy in federal court, the feds have issued an official objection to a company announcement that they intend to pay executive bonuses of $11.9 million in 2016.

This Tuesday, the US Trustee division of  the Department of Justice, which oversees Chapter 11 filings, issued an objection to a US bankruptcy court in Virginia, noting that the intended payments, to be made to 15 of the company's most highly compensated executives, was not only likely to violate bankruptcy laws, but that such payments could not be justified, given the reportedly dire financial state of the company.

"Alpha seeks relief while at the same time incurring more than $1.3 billion in losses for 2015," the document noted, adding that Alpha would, in addition, be seeking "to cut off the health and life insurance benefits to some 1,200 rank and file retirees because it claims it desperately needs to save $3 million a year."

The potential bonuses to be paid by Alpha in 2016 were higher, in fact, than those paid to executives in the years leading up to the bankruptcy filing, the objection noted.

The US Trustee also questioned the calculations that Alpha was using to generate the cash needed for bonuses, noting that the metric being used was "so easily met that Alpha has managed to do it most of the time it has been in bankruptcy, even while generating over $100 million in losses during the same period."

The company, who declined to comment for this story, recorded its last profit in 2011. With an estimated 8,800 employees in 2014, Alpha operates 50 active mines and 20 coal preparation plants in Virginia, West Virginia, Kentucky, Pennsylvania, and Wyoming.

Joining the US Trustee to swiftly condemn the announced payouts was the United Mine Workers of America, whose international president Cecil Roberts called the proposed bonuses an example of "greed in its most raw and ugly form."

With four of the nation's largest coal companies filing for bankruptcy in the last six months, Roberts and the UMWA believe corporate obligations, moving through Chapter 11 filings, should be to workers, not the executives that "presided over a bankruptcy."

"The outrageous bonuses Alpha intends to pay will be based on how much executives cut costs, which will provide extra incentives to cut hourly workers' jobs and eliminate long-term obligations to retirees," Roberts said in a statement, responding to the news. "These are not bonuses. They are bounties for destroying workers and retirees lives."

Related: Obama Halts New Coal Mining Leases on Federal Lands

In its own court filings, Alpha argued that the million dollar bonuses to executives were necessary not only for "retentive effect," but that they were narrowly tailored to incentivize the retention of key employees "who are vital to the Debtor's successful restructuring and the maximization of value for the benefit of all parties in interest."

While the company originally requested the approval of bonuses of $14.8 million, the renewed proposal filed last week called for $11.9 million to be paid to 15 executives that the company has requested would remained unnamed.

When Alpha filed for bankruptcy last August, CEO Kevin Crutchfield noted that the "US coal industry is in an unprecedented period of distress," adding that increased competition from natural gas and historically low prices, in addition to tighter government regulation, had forced a transition away from coal-fired power plants. He called the period of uncertainty, experienced industry wide, a "transformational opportunity" for the sector.

But his pessimism could be weathered, in part, due to the fact that he is likely to receive a hefty paycheck throughout the restructuring process. According to the Casper Star Tribune, Crutchfield received $7.8 million in total compensation in 2014, despite major losses by the company in the same year.

"I am constantly amazed that our nation's laws allow the very people who drove a company into bankruptcy to get thousands, if not millions, of dollars in bonuses as part of the bankruptcy process," UMWA President Roberts said.

Ultimately, a federal bankruptcy court in eastern Virginia will decided on the bonuses, as well as the company's broader bankruptcy claim. A hearing is scheduled for next week.

Related: The Twilight of the American Coal Industry May Be Nigh

Follow Eva Hershaw on Twitter: @beets4eva

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