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Mine Closures

The entrance to Eagle Butte mine remained closed July 2, one day after the mine's owner declared bankruptcy and sent home hundreds of employees. Contura Energy announced Wednesday it had reached a tentative deal with FM Coal to transfer ownership Eagle Butte and Belle Ayr mines.

Coal company Contura Energy announced Wednesday it had reached a tentative deal with FM Coal to transfer ownership of two idling Wyoming coal mines, the latest development in a bankruptcy case that has rattled coal country for months.

The agreement hinges on approval of a federal bankruptcy court and the board of Contura. But if successful, the sale could lead to the reopening of Eagle Butte and Belle Ayr coal mines under a new owner. Eagle Specialty Materials, an affiliate of FM Coal, would operate the mines and assume full liability for the thermal coal mines, including reclamation obligations.

“Contura has found a buyer to take over its obligations and it’s effectively paying them to take them over,” University of Wyoming economist Rob Godby explained.

The pair of coal mines have been idling since July 1 when bankrupt coal operator Blackjewel filed for Chapter 11 and failed to secure necessary funding to keep the mines operational. The shutdown left hundreds of miners out of work.

“We are extremely pleased that this deal outlines a path to relieve Contura from any go-forward liabilities related to these assets, while also providing long-term employment opportunities for hardworking miners and ongoing revenue to local, state and federal governments,” said David Stetson, Contura’s chairman and chief executive officer.

If the sale closes, Contura says it will pay the newcomer to the basin $90 million in cash. It will also pay Campbell County $13.5 million for unpaid ad valorem taxes. In exchange, Eagle Specialty Materials would settle certain outstanding debts to creditors and assume the $237 million in reclamation bonds associated with the mines.

As a former owner of the mines, Contura holds the permits to the Eagle Butte and Belle Ayr mines, the fourth- and sixth-largest producing mines in the nation (Contura transferred the ownership of the two mines to Blackjewel in 2017). But it returned to the fold, when it placed the winning bid during an August auction on Blackjewel’s Western mines. Though a bankruptcy court endorsed Contura’s purchase of the two Wyoming mines, the sale hit a roadblock when the federal government objected to outstanding mineral royalties and lease terms.

But the deal still has a long way to go before coming to fruition, Godby said. In addition to court approval, the company needs to settle any objections raised by creditors and obtain myriad permits.

“The devil is in the details,” Godby said of the agreement.

Contura and the interested company continue to negotiate with the federal government for its ultimate approval, according to the filings.

In addition, Campbell County and Wyoming agreed to dissolve any remaining claims against Contura over unpaid taxes, according to a Securities and Exchange Commission filing. If the deal closes, the company would also not be held liable by the Interior Department for the mines’ bonds, permits or violations, the filing stated.

“Contura expects to ... be released of any and all remaining claims against the company with regard to past federal and state royalties; federal, state, and local taxes; or other fees associated with the Western Assets,” the company stated.

Though Contura applauded federal agencies and the Trump administration for supporting the coal industry, Wednesday’s announcement brought little clarity to the hundreds of out-of-work Blackjewel miners waiting for the facilities to come back to life. The workers had their health insurance and other benefits stripped away on Aug. 31. Many have had few options but to endure the whims of their employer throughout the bankruptcy process.

To Clark Williams-Derry, director of energy finance at the Sightline Institute, an environmental think tank, the failure of the mines’ bankrupt owner Blackjewel to secure a new owner nearly three months after the mines initial closure signals trouble for the Powder River Basin — a region where a dozen of Wyoming’s mines operate.

“Contura is paying $90 million to walk away from a financial mess,” he said. “These two mines have been hot potatoes and you have to sweeten the pot with extra cash payments."

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