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UPDATE 1-Coal miners settle $100 mln fraud suit with W. Virginia

(Adds details of the settlement and comment)

By Tracy Rucinski

Nov 29 Coal mining companies Alpha Natural Resources Holdings Inc and Contura Energy Inc have settled a lawsuit filed by a West Virginia regulator that accused them of engaging in a $100 million fraud, according to a court filing on Tuesday.

The West Virginia Department of Environmental Protection (DEP) had accused executives of Contura, which bought Alpha's best mines in its bankruptcy, of failing to account for $100 million in liabilities that were discovered after Alpha emerged from bankruptcy.

The regulator filed a lawsuit on Nov. 17 and said it was concerned that the undisclosed liabilities threatened Alpha's viability and thus hundreds of millions of dollars of mine cleanups in the state of West Virginia.

In exchange for West Virginia dropping its lawsuit, Contura will provide the regulator a $4 million letter of credit and up to $4.5 million guaranty on Alpha's cleanup obligations.

In addition, Alpha will grant the regulator a mortgage in property that was last appraised at $6.3 million a year ago as part of the settlement, which is subject to approval by the U.S. Bankruptcy Court in Richmond, Virginia.

DEP cabinet secretary Randy Huffman said in a statement the agreement provides the state with added assurance Alpha will carry out its mine cleanup work. "It also helps to ensure that Alpha will remain a viable operating company with sufficient resources to perform required land reclamation and water treatment," Huffman said.

Three of Contura's top executives, including Chief Executive Officer Kevin Crutchfield, were scheduled to give depositions on Dec. 2 and Dec. 3 as part of the West Virginia lawsuit.

The executives had been with Alpha until it emerged from bankruptcy in July.

In separate statements, Alpha and Contura said they were pleased with the resolution.

"We have always been of the view that Contura's officers had acted in good faith in all respects, including in connection with the Alpha plan process, and we welcome this positive resolution," Neale Trangucci, independent director of Contura, said in an emailed statement.

Alpha Chief Executive David Stetson said that approval of the settlement, along with a 2017 mining plan that takes advantage of a stronger coal market and maintains a focus on cost savings, "will keep Alpha sustainable in the long run."

Alpha filed for bankruptcy in August 2015 and emerged a year later, after selling its best mines to its lenders who formed Contura Energy.

(Reporting by Tracy Rucinski; Editing by Tom Hals and Tom Brown)

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