Asset impairment and restructuring

12 Months Ended

Dec. 31, 2020

Asset impairment and restructuring

Asset impairment and restructuring

5. Asset impairment and restructuring

The following table summarizes the amounts reflected on the line “Asset impairment and restructuring” in the Consolidated Statements of Operations:

	Year Ended
	December 31,
Description	2020
	(In thousands)
Coal lands and mineral rights	$	33,197
Plant and equipment		43,197
Deferred development		76,807
Parts and Supplies		8,639
Equity Investment		36,167
Severance Pay - VSP		13,373
Other		10,000
	$	221,380

During the third quarter of 2020, the Company determined that indicators of impairment existed with respect to certain of its thermal long-lived assets or asset groups. The Company’s thermal coal segments have experienced reduced demand as a result of sustained low natural gas pricing, reduced utilization and retirement of coal-fired power plants, the increased use of renewable energy sources, and the impact of COVID-19. The reduced demand has led to lower production levels, higher unit costs, and lower realized prices, which have contributed to operating losses at certain of the mine complexes. Further, on September 29, 2020 the U.S. District Court upheld the FTC’s decision to block the Company’s proposed joint venture.  These conditions have resulted in changes to the Company’s expectations for projected future volume levels and the overall longevity of the mines. As a result, the Company recorded impairment charges during the three and nine months ended September 30, 2020 of $51.8 million related to the Coal Creek Mine within the Powder River Basin Mining segment, $33.5 million related to the Viper Mine within the Other Thermal Segment, $41.6 million related to the West Elk Mine within the Other Thermal segment and $36.2 million related to the Company’s equity method investment in Knight Hawk Holdings, LLC.  The impairment charges were calculated based upon discounted cash flows that were based on estimates of future sales volumes, coal prices for unpriced volumes, production costs and a risk-adjusted cost of capital. These estimates generally constitute unobservable Level 3 inputs under the fair value hierarchy.

In the fourth quarter of 2020, the Company recorded additional charges including $32.8 million related to the Company’s Coal Creek Mine due to accelerating the mine closing date and the associated reclamation work to be performed. Additionally, the Company recorded a $10.0 million charge related to a land lease obligation from a prior equity investment.

The Company recorded $13.4 million of employee severance expense related to a voluntary separation plan during the year ended December 31, 2020. During the first and second quarters of 2020, 254 employees from the Company’s thermal operations and the corporate staff accepted the voluntary separation package.