A firm with a checkered history in Montana is part of a group hoping to buy the vacant site that was once intended for Two Elk, a failed energy project that drew in state and local leaders, universities and federal money before ending in fraud charges for its primary developer.
Black Diamond Holdings is part of a group, Wyoming New Power, looking to license and build a coal treating facility on the Two Elk site in Campbell County. But Black Diamond owes about $19 million in reclamation bonds and $5 million in local taxes in Montana stemming from an idle gold and zinc mine that the company is trying to bring back online.
The new facility would dry out Powder River Basin coal, making it burn hotter so developers can sell it for a higher price. The higher-quality coal has a better chance of competing in the global market, proponents say.
The online magazine WyoFile first reported Tuesday that the managing director of Black Diamond, Patrick Imeson, petitioned Campbell County commissioners Monday for $100 million in industrial development bonds as part of the effort to build the facility.
Imeson told the Star-Tribune his company’s Montana operations should not cast a negative light on the firm’s involvement in Wyoming. The company knowingly inherited the mine’s debt when it bought the company. Buying distressed properties to flip is part of his companies’ portfolio, while the bonds are simply a way to attract investors to a potential boon for the Cowboy State, Imeson said.
“Sometimes you don’t run businesses that are free and easy,” he said of the gold mine. “We are trying to do some good things in Wyoming.”
Wyoming is allocated millions of dollars in tax-exempt bonds every year to spark investment in local projects that are often unused.
The previous occupier of the Two Elk site successfully sought those bonds, but they came to nothing.
More than two decades ago, developer Michael J Ruffatto seized on the idea to find new uses for waste coal. Over time, the project morphed into another titillating venture, jumping on the carbon capture research trend. Despite a number of high profile partnerships, federal grants and tax-exempt bonds courtesy of Wyoming, nothing came of the hype except a bad reputation.
Two Elk was proposed in 1996 as a 300-megawatt power plant that used waste coal. The project was plagued by delays and questionable spending of state and federal funds.
The saga is now limping to a close. Ruffatto admitted last year to defrauding the federal government out of millions to pay for his lavish lifestyle. Sentencing has since been postponed five times at the request of Ruffatto’s lawyer as the developer attempts to pay back the federal government. The hearing is now set for Jan. 31.
As of now, the site is little more than a windswept plain with some active storage drain permits and concrete pads. But it’s centrally located in the heart of coal country.
Enter Wyoming New Power, a group of partners that filed as a business in the state in early 2017. The group announced months later that it was raising $80 million in financing, with the help of investment bank Piper Jaffrays, to lease a coal upgrading technique and build a facility in Wyoming. The construction is likely to be done by Kiewit Corp, according to New Power. Kiewit is the parent company of the Buckskin mine in the Powder River Basin and has dabbled in coal drying techniques before.
A spokesman for Kiewit’s infrastructure arm was unfamiliar with the project and deferred comment to the mining group, which did not return a call for comment.
Coal upgrading techniques have been floated in Wyoming before, but so far have failed to result in a successful business opportunity for the state’s coal sector. The drying technique may be feasible, experts say, but has run into issues with large-scale treatments. Dried coal can self-combust when it reabsorbs moisture.
Clean Coal Technologies, which would lease its technique to Wyoming New Power, says it has cracked the code with a test facility in Oklahoma that uses Powder River Basin coal. Black Diamond has been a significant investor in Clean Coal Technologies for years.
CEO Robin Eaves said the troubled history with Two Elk has no bearing on his company, which is simply licensing the technology. New Power, meanwhile, is simply looking for a site to do business, he said.
“Wyoming New Power has some pretty reputable guys from Gillette in the company and Piper Jaffray behind them,” Eaves said. “So, I think that anyone that tries to make a story out of the background of Two Elk is really on the wrong track.”
Building the coal facility there takes an ugly story and turns it around, he said.
Eave’s company recently partnered with the University of Wyoming’s School of Energy Resources to further develop its technology.
The university’s Richard Horner said in a statement last month that the school had done its due diligence considering Clean Coal Technologies and believed the company’s aims could fit well within coal refining studies that the school was doing.
The Campbell County commissioners have not agreed to the bonding request yet. They are waiting to review New Power’s final application.
Campbell County Commissioner Mark Christensen said he didn’t see a reason why the bonds wouldn’t go to New Power. Imeson’s assurances to the commission that the new venture has no ties to Two Elk or Ruffatto satisfied his chief concern.
“I don’t think there is necessarily reluctance,” he said of the commissioners’ stance. The bonds don’t make the county liable for anything. Two Elk is one of a handful of ventures that have sought the bonds at no risk to the taxpayers or local government, he said.
Christensen was not aware of Black Diamond’s dealings in Montana.
The state of Wyoming, Campbell County and the city of Gillette have invested in a number of local businesses that are looking at other uses for coal or ways to improve its viability given the recent downturn. Coal also faces challenges from competitive fuels, like natural gas, and environmental regulations.
The county commission has scheduled a decision on the bonds for its Nov. 21 meeting. New Power has until Dec. 10 to file its application with the state.
As for Black Diamond’s gold mine, the company is working through the liabilities it owes, Imeson said. Its officials are hopeful that the market has improved and that the Wyoming project will soon get off the ground.
“We’ve shown a commitment to Clean Coal Technologies through some very adverse times (for the coal sector),” he said. “We took on a fairly high risk … and we think it has huge benefits.”