Walter Energy’s natural gas operations in Alabama extract and sell coal bed methane gas from the coal seams owned or leased by the Company or others. Prior to May 2010, our natural gas operations consisted solely of the Black Warrior Methane Corp., an equal ownership venture with the E&P Company, a subsidiary of EP Energy, LLC. In May 2010, we acquired HighMount Exploration’s coal bed methane business. The acquisition of this business included over 1,300 conventional gas wells, pipeline infrastructure and related equipment located adjacent to our existing underground mining and coal bed methane business. In addition, these wells degasify methane from the area where our new Blue Creek Energy mine is located. As of December 31, 2012, we had 1,746 well that produced approximately 18.1 billion cubic feet of natural gas in 2012.The degasification operations have improved mining operations and safety by reducing methane gas levels in our mines.

Black Warrior Methane Corp.

In 1979, Jim Walter Resources, Inc. (JWR) began a pilot program to determine if it was economically feasible to degasify coal beds in advance of mining. Originally, five wells were drilled in the area of No. 4 Mine, located near Brookwood, Alabama, for the test. This pilot project was successful and in 1981 JWR and Enhanced Energy Resources formed the Brookwood Degasification Project as 50/50 partners.

On September 1, 1983, a new company, Black Warrior Methane Corp. was formed to replace Enhanced Energy Resources as operator of the degasification project. In 1988, Southern Natural Gas Company bought Enhanced Energy's half of the company. Today, Black Warrior Methane Corp. is jointly owned by Walter Energy and the E&P Company. In addition, Black Warrior Methane also owns Black Warrior Transmission Corp., which operates over 30 miles of gas pipeline used to deliver the methane gas.

Walter Black Warrior Basin LLC

Walter Energy acquired the assets of Walter Black Warrior Basin (WBWB) from Highmount Exploration and Production, LLC in May 2010. WBWB’s gas wells are spread over 230,000 acres in Tuscaloosa and Walker Counties in Central Alabama. Their 52 employees oversee the 1,442 methane gas wells Walter Black Warrior Basin operates.