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Mine shutdowns in top US coal region bring new uncertainty

The Eagle Butte mine is shown just north of Gillette last month. The company will present a new sales agreement Wednesday in bankruptcy court.

Bankrupt coal operator Blackjewel announced Tuesday it will once again attempt to sell its two Wyoming mines, but this time to a wholly new company: Eagle Specialty Materials. After failing to finalize a deal with the mines’ former owner Contura Energy, Blackjewel will present a new sales agreement to a federal bankruptcy judge at 11:30 a.m. Mountain Time Wednesday, according to court documents.

The progress on the new sales proposal comes as Campbell County Commissioners moved Tuesday to approve a new tax payment plan with the potential buyer, bringing the company even closer to sealing the deal on the two mines.

The new sales agreement hinges on the participation of three companies: Blackjewel, Contura and Eagle Specialty Materials.

Contura, the permit holder of the two mines, will pay Eagle Specialty Materials, an affiliate of FM Coal, $90 million to take over the mines. In addition to owning the mines, Eagle Specialty Materials will be responsible for the $237 million in reclamation liabilities and certain debts left over from Blackjewel.

Blackjewel intends to proceed with the sale without holding an additional auction and hopes to close the sale by Monday to avoid losing additional customers, according to court documents. The agreement also needs final approval from the federal government, a requirement that became a sticking point for Contura.

But if successful, the company said the reopening of the two mines will bring 500 employees back to work at Eagle Butte and Belle Ayr mines, the nation’s fourth- and sixth-highest producing mines.

“The specter of a conversion to chapter 7 (or liquidation of the mines) has hung over these cases since the beginning,” Blackjewel attorneys stated in court documents released Tuesday evening. “That the Debtors are now in a position to truly maximize the value of their estates is remarkable.”

The unprecedented closure of two Wyoming mines began when Blackjewel filed for bankruptcy and lost a crucial creditor on July 1. The company’s meltdown resulted in the closure of Campbell County’s Eagle Butte and Belle Ayr mines that same day. The company called back a limited crew on July 5 to maintain security and make limited shipments of coal. But hundreds of miners have remained locked out of work for the past three months as the insolvent coal supplier struggles to find a suitable buyer. After weeks of uncertainty, Blackjewel decided to try to sell its 32 mines speckled throughout the country, including its Wyoming mines.

Contura came forward in August to place the winning bid on Blackjewel’s two Powder River Basin mines. Though the deal received court approval, the federal government opposed the sale over leasing terms and unpaid royalties. As days turned into weeks, executives for Contura began to express their intent to sell off the mines to another company and shed the cumbersome environmental and labor liabilities coupled with the mines.

On Sept. 18, Contura announced it had a solution and would pay $90 million to Eagle Specialty Materials to take over the hotly contested mines. The payment comes in addition to the $8.1 million in emergency debtor-in-possession funding paid to Blackjewel to keep the mines afloat during the bankruptcy.

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This comes as the Campbell County Commissioners approved a significantly reduced tax payment plan for Eagle Specialty Materials on Tuesday. Under the agreement, the county will require the new owner to pay just half of the $17.5 million in taxes owed by Blackjewel. The decision brought Wyoming’s newest company one step closer to purchasing Eagle Butte and Belle Ayr mines.

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Eagle Specialty Materials, a limited liability corporation formed this month, will pay 50 percent of the outstanding ad valorem taxes over the course of five years without interest, according to the agreement reached with commissioners.

Eagle Specialty Materials will also cover $1.8 million in wages and benefits owed to employees from before Blackjewel filed for bankruptcy. The negotiating parties intend to finalize the sale of the two mines by Friday, said Carol Seeger, administrative director for Campbell County.

But before the young company can bring the mines back to full operation, the agreement also needs approval from the federal government, the bankruptcy court judge and key creditors.

Blackjewel and Contura did not immediately respond to requests for comment.

The commissioners approved the tax payment plan, but the majority made clear any agreement remained contingent on the company fulfilling its promise to compensate workers for unpaid benefits and wages.

“If (Eagle Specialty Materials) doesn’t make those employees whole, then I’m going to raise hell about it,” Commissioner Del Shelstad said.

Contura also agreed to pay $13.5 million of the $15.1 million it has yet to pay Campbell County in production taxes.

“Contura is holding firm at the $13.5 million,” Seeger commented. “I think that at this point, with the proposed closing this Friday, Oct. 4, it seems to me that we kind of got this agreement to the best-case scenario for the county. I don’t know if we are going to get anything more than what’s in front of you from the parties.”

Campbell County and the state of Wyoming would agree to dissolve claims against Contura over unpaid taxes or violations on the mines, according to a Secretaries and Exchange Commission filing. If the deal closes, the company would also not be held liable by the federal government for Blackjewel mine bonds, permits or violations.

To Shannon Anderson, an attorney with the Powder River Basin Resource Council, a landowners group, Contura has shielded itself from any future liabilities and violations related to the mines.

“We are concerned about language,” she said. “There is proposed language that would absolve Contura of any responsibility as a permit holder, and it prevents the (Office of Surface Mining, Reclamation and Enforcement) and (Wyoming’s Department of Environmental Quality) from taking enforcement action. There are things like that one can only hope are the source of negotiation.”

“This deal is really designed to let Contura walk away and it’s just a problem of our current legal system that they may be able to do that,” she added. “We hope that the legislature takes it seriously because this is a lot of money. It’s not just owed to Campbell County, it’s owed to schools around the state. “

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