A pair of idling Wyoming coal mines found a new owner Wednesday, when a federal judge approved the sale of mines owned by bankrupt coal operator Blackjewel to Eagle Specialty Materials, an affiliate of FM Coal. The court’s endorsement clears the path for the Eagle Butte and Belle Ayr mines to resume full operation again after more than three months in limbo. The companies expect to close the sale no later than Monday after obtaining final approval from stakeholders to avoid losing key customers for the mines.
Eagle Specialty Materials plans to operate the mine for the foreseeable future and employ over 500 workers, according to counsel for Blackjewel, though an exact date for reopening the mines was not specified in court. Under the approved sales agreement, furloughed employees owed wages and benefits by the company will receive up to $1.8 million in compensation from the new owners. The young company will also take on pre- and post-medical claims made by workers before their health care was terminated, up to a certain amount.
“For the debtors, this is a significant moment because after months of uncertainty, we have reached an agreement and are about to sell our largest assets, and that’s the western assets,” said Stephen Lerner, an attorney for Blackjewel. “It is a very significant day for the debtors.”
The deal relied on buy-in from three coal companies: Blackjewel, Eagle Specialty Materials and Contura Energy. Under the approved sales agreement, Contura will pay $90 million to Eagle Specialty Materials to assume ownership of the two mines and all corresponding liabilities, including $237 million in reclamation bonds and unpaid debt. For its part, Eagle Specialty Materials will also pay the estate of Blackjewel $16.2 million.
Though Blackjewel has operated the two Wyoming mines since 2017, Contura still holds the permits and operated the mines before the debtor took control in 2017. Contura will also pay $13.5 million for outstanding production taxes to Campbell County. Eagle Specialty Materials agreed Tuesday to pay the county 50 percent of the ad valorem taxes owed by Blackjewel.
But several parties made concessions.
As part of the settlement approved Wednesday, the Office of Surface Mining, Reclamation and Enforcement will not hold Contura liable if mining violations occur before the permit is officially transferred to Eagle Specialty Materials.
In turn, the newcomer to the basin must post sufficient reclamation bonds and complete regulatory requirements to allow the expeditious transfer of any permits.
According to the proposed agreement, the exception would not set a precedent.
“The OSMRE Contura Settlement does not establish any precedent and cannot be used by Contura Coal West or ESM or any other organization in an attempt to justify similar terms in any subsequent (Surface Mining Control and Reclamation Act) case,” court documents stated.
But Shannon Anderson, attorney for the Powder River Basin Resource Council landowners group, is worried.
“There is some really problematic language in the agreement; the U.S. Department of Interior is waiving its ability to enforce standards against Contura,” Anderson said. “The deal says it doesn’t set a precedent, but it really does.”
Blackjewel still needs to obtain the official approval of the Interior Department, a requirement that ultimately doomed the sale of the mines to Contura. But counsel for Blackjewel expressed optimism about ongoing discussions with the federal government over the lease transfers and unpaid royalties. The mines will likely “go back into production” even as parties iron out the remaining details of the sale, Lerner said. Eagle Specialty Materials will be considered a “contract miner” in the time between the final sale and lease transfers.
“This sale is executable,” Lerner said. “The government will consent.”
Eagle Butte and Belle Ayr shuttered on July 1 after its owner, Blackjewel, filed for bankruptcy and lost a key creditor. The company sent 600 Wyoming miners home the same day. For three months, hundreds of workers with unpaid wages and retirement benefits have been largely left in the dark. At the end of August, the company slashed employees’ health care.
Blackjewel hired back a skeleton crew to ship a limited amount of coal and maintain security on the mines. The insolvent company continued to search for interim funding to resurrect the mines but failed to secure long-term debtor-in-possession funding.
In an attempt to maximize its assets during bankruptcy proceedings, Blackjewel placed its 32 mines up for auction in August. Contura placed the stalking horse bid for the Wyoming mines this summer and won.
But it soon became clear Contura had no intention of sticking around the Powder River Basin for long. Though it received approval from a federal judge in August to purchase the mines again, the sale stalled when negotiations with the federal government foundered.
By Sept. 18, Contura had pivoted and struck another deal. It would pay Eagle Specialty Materials $90 million for the young company to take over the nation’s fourth- and sixth-highest producing mines and all the associated reclamation, or clean-up, liabilities.
Riverstone Credit Partners, a top secured creditor, will receive $32 million under the terms of the approved agreement. The mines’ new owner will pay the lender $24 million and Blackjewel will pay $8 million.
“The approval of these sales is a significant step forward, but we want our stakeholders to know that this management team will not stop until the sale is complete, employees have received their pre-petition wages and we have closed the remainder of the chapter 11 process in a way that maximizes value for our creditors,” David Beckman, Blackjewel’s interim CEO and chief restructuring officer, said in a statement.
Protest from creditors
The approval of the sale of the two Wyoming mines to Eagle Specialty Materials did not come without protest, especially from the creditors owed money by Blackjewel.
In a strongly-worded objection, Komatsu Mining Corporation, an equipment company with multiple locations in Wyoming, reprimanded Blackjewel’s most recent proposed arrangement for its disregard of two Komatsu shovels. The companies came to a tentative agreement over the dispute at a break in Wednesday’s hearing but not before the company made its disdain clear in court filings.
“The Debtors’ attempt to sell the entirety of the Western Assets to a previously undisclosed buyer, with less than twenty hours’ notice while providing no financial background, represents an outrageous attempt to ignore, or circumvent, all semblance of adherence to the requirements of the Bankruptcy Code and procedural rules of this Court,” counsel for Komatsu wrote in its objection.
And though Campbell County Commissioners moved Tuesday to approve a significantly reduced tax payment plan for the potential buyer, counsel for the county also contested the expedited nature of the bankruptcy proceedings.
“Though we have been aware (of the agreement between Contura and Eagle Specialty Materials), for these two weeks, it wasn’t until pleadings filed after 7 p.m. yesterday evening that we were included,” counsel stated during the hearing. “We’re not objecting to this (agreement), but on the other hand it is just not practical to expect creditors to be able to assimilate this when they are not included in this process.”
Negotiations between the debtor and interested companies were conducted as a private sale and no additional auction was held. Coal billionaire and CEO of Aspen Coal & Energy LLC Tom Clarke also presented a deal to the negotiating table on Sept. 19. But in a footnote in its bankruptcy filings Blackjewel rejected the offer, calling it unacceptable and not in the best interest of the estate or creditors.
“The bankruptcy process has been essentially hacked,” said Clark Williams-Derry, energy finance director of the Sightline Institute, an environmental think tank. “Investors come out of the deal pretty much unscathed.
“The little guys better watch their wallets,” he added.
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