After spending nearly $1 million in legal fees, Wyoming’s largest coal county has reached a deal with Alpha Natural Resources regarding more than $20 million in unpaid taxes.
The tax debt is linked to a rapid downturn in Wyoming’s coal industry in recent years. Alpha had tried to evade much of the tax burden during and after bankruptcy proceedings, but county officials hired local and out-of-state attorneys to fight for payment.
Alpha has now paid $1.6 million due in ad valorem taxes from 2015. It has paid half of the agreed upon balance due for 2016, $3.5 million, with the remaining $3.5 million due in October. The county had already held more than $7 million from Alpha for the unpaid taxes.
As the Star-Tribune reported on June 11, the settlement — signed by county commissioners in Gillette Tuesday — means Campbell County will get much of the unpaid tax dollars back. But not all.
Pushing for additional litigation to get the full amount was considered too risky and too costly.
“Though I feel confident in our position in litigation, the problem is that as we litigate this for two to three more years, and go through appeals ... we may find ourselves in a situation where we win and Alpha doesn’t have any money to pay us,” said Commissioner Mark Christiansen Tuesday.
The coal industry began a rapid decline in 2015. Large companies like Alpha Natural Resources had invested heavily in metallurgical coal — a product not mined in Wyoming —- only to witness those prices tank. Weighed down by debt, these firms were not well placed to deal with other market pressures, like low natural gas prices. Sustained low gas prices gradually shifted the mix of power from coal-fired to natural gas-fired, pulling the rug from under the thermal coal industry of Wyoming. Alpha was the first of three too-big-to-fail coal companies that operate in Wyoming to file for bankruptcy in 2015 and 2016.
Alpha has paid $1.6 million in 2015 taxes, as part of the settlement. Of the $19 million that the county said was owed in ad valorem taxes for 2016, the county settled for about $14.7 million.
Coal taxes largely go to fund public services including the Campbell County School District.
The unpaid taxes are tied to two mines in Campbell County: Belle Ayr and Eagle Butte.
Though the Alpha tax debt has been managed, those two mines now are linked to about $4 million new unpaid taxes.
Eagle Butte and Belle Ayr were transferred to Contura Energy — an offshoot of the Alpha bankruptcy. They changed hands again in December. Blackjewel LLC, a firm formed by Jeff Hoops, acquired the mines in a deal that obligated $50 million in deferred royalty payments to go to Contura. Contura in turn paid Revelation, a Hoops sister company, about $21 million to take the mines.
According to Campbell County Treasurer Rachael Knust, the taxes have been delinquent since May 10.
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The county sent delinquency notices to Contura, as the company still holds the firm responsible for these taxes. Contura disputes this.
An official for Contura told the Star-Tribune in earlier interviews that the firm paid Blackjewel $21 million during the transfer of ownership of the mines for the explicit purpose of paying taxes that had not yet come due.
Knust said the county has also reached out to its local contact for the mines, an employee who worked for Alpha, then Contura and then Blackjewel, to no avail.
Hoops did not respond to a request for comment on the unpaid taxes.
His firm is currently being sued by an Ohio bank for debt delinquency and allegedly defaulting on debt payments and transferring Eagle Butte and Belle Ayr to Blackjewel in breach of contract. Hoops has said the allegations are false. His firm has argued in court filings that the bank failed to communicate with the company.
Campbell County commissioners discussed their desire from the Legislature to address how difficult it is for counties to act on unpaid taxes.
A bill that passed earlier this year in the Wyoming Legislature gave counties the ability to deduct the cost of chasing unpaid taxes from the tax portion that belongs to the state. But other attempts to give counties more leeway to pursue delinquencies have failed.
“I hope this serves as a lesson to those in Cheyenne who have repeatedly refused to address the lien issues and timely payment of taxes that we have been bringing,” said Commissioner Mark Christiansen Tuesday.
Commissioner Rusty Bell piped up that he did appreciate the legislature’s work in getting counties deductions.
Unpaid industry taxes is an issue that not only affects larger counties like Campbell and Sublette— that likely have the resources and cash to go after unpaid taxes — but the smaller counties like Crook and Weston, he said.
Campbell is not the only county that has had trouble getting unpaid taxes. Sublette County recently won a case for more than $4 million due from an oil and gas firm. Though a bankruptcy judge ruled in the county’s favor, the company is appealing in Texas, according to Sublette County Treasurer Roxanna Jensen.
The landowners group Powder River Basin Resource Council published a report on unpaid taxes in February that counted $42 million in back taxes and fees in 12 counties. Among reforms suggested in that report, the group asked that automatic and perpetual liens on property be attached to minerals at the time of production in favor of the county – as proposed by Rep. Eric Barlow, R-Gillette, in a failed 2017 bill. Such a move has received some pushback from banking entities that also seek restitution through liens from defunct companies.
Commissioners Tuesday commended Carol Seeger, Campbell County deputy attorney, for her work pursuing the tax debt and noted their newfound expertise in tax disputes.
“When we have the next one, which we will have at some point, we know where to go, what to do,” Christiansen said. “I guarantee we have the most competent tax counsel out there.”