A federal judge considered the sale of two idling Wyoming coal mines operated by bankrupt coal giant Blackjewel on Monday afternoon, but he did not render a final decision before adjourning. The hearing will reconvene at 7 a.m. Mountain Time on Tuesday at a U.S. District Court in West Virginia.
If approved, the sale of the mines to Contura Energy could pave the way for the reopening of Eagle Butte and Belle Ayr mines, bringing back about 500 employees, Blackjewel attorneys said in a statement. Contura would also assume ownership of Pax Surface Mine in West Virginia as part of the proposed agreement.
The sales hearing comes exactly five weeks after Blackjewel filed for bankruptcy and closed its mines across four states, fueling weeks of volatility in the nation’s coal industry.
Half a dozen other companies also placed successful bids for other Blackjewel coal mines peppered throughout the Appalachian region. The judge approved the sale of the selected Eastern mines, excluding the Pax Surface Mine, during Monday’s sales hearing.
Contura initially extended $20.6 million to assume ownership of two Wyoming mines and one West Virginia mine on July 26.
The amount offered in the initial bid was almost equivalent to the sum of money given to Blackjewel to purchase the mines from Contura in 2017.
But at a three-day auction of Blackjewel’s 32 mines beginning Thursday, Riverstone Credit Partners, a senior secured creditor, submitted a credit bid of $20 million for equipment on the Wyoming mines, challenging Contura’s first proposed bid. Contura increased its bid to nearly $34 million.
“In theory, Riverstone could have purchased those (Western) mines and just shuttered them. Then, Contura would have been on the hook for cleanup,” said Clark Williams-Derry, director of energy finance at the Sightline Institute, an environmental think tank in Seattle. “Riverstone absolutely had Contura over a barrel. They were able to use their credit bid to squeeze more cash out of Contura.”
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If the judge approves Contura’s bid, Blackjewel will funnel $24 million of the sale to Riverstone Credit Partners along with up to $16.4 million in royalties. At the time of filing for bankruptcy, Blackjewel owed Riverstone $34 million, according to court documents.
The auction ultimately brought in $54 million in total sales, including royalties, Blackjewel attorney Stephen Lerner said Monday. But only about $1.65 million of that amount will likely go toward the debtor’s estate and therefore its creditors.
The relatively low return on the auction sales increases the likelihood a majority of the creditors — from Campbell County to vendors and workers — will see little to no return from Blackjewel on outstanding debts, even if the sales all move forward, Williams-Derry said.
Rob Godby, an economist at the University of Wyoming, called the auction results “unimpressive.” He predicted the county and state economies would likely not see much of their debts repaid.
“If the sales go through, the devil will be in the sale’s details,” he said Monday morning by phone, pointing to the steep tax and reclamation liabilities often associated with the declining mines.
Blackjewel also owes the Interior Department more than $60 million in royalties. The federal government typically sends about half of collected royalties back to states. And in its most recent court filing, Campbell County said Blackjewel was liable for “tens of millions of dollars of ad valorem property taxes on coal production within the County.” The company also owes the Wyoming Department of Revenue taxes to the tune of $11.6 million, according to court filings.