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Day in Gillette

Brandy Wallett wraps her arm around her daughter, Ashlynn, while her husband Rory speaks about life after the Blackjewel layoffs in July. The sale of the Wyoming mines to coal company Contura Energy has yet to be finalized.

Nearly two months after a pair of Wyoming coal mines ground to a halt, coal operator Blackjewel returned to federal bankruptcy court Wednesday afternoon to amend the approved sale of some of its mines to coal giant Contura Energy. A judge ruled the company can proceed with the sale of a West Virginia coal mine separately from the sale of the Eagle Butte and Belle Ayr mines in the Powder River Basin.

Though the judge already approved the transfer of three Blackjewel mines to Contura earlier this month, the company has been embattled in negotiations with the federal government over the deal. An agreement has yet to come to fruition. Various federal agencies objected to unpaid royalties and contested leasing terms of the western mines.

Contura will fork over $1.1 million in cash to finalize the sale of the Pax Surface Mine out east, according to the court documents. In the original sale agreement, the company had agreed to pay about $1.6 million for all three mines. The initial sale agreement also included an $8.1 million purchase deposit.

“The Debtors (Blackjewel) continue to work diligently with all parties in interest to finalize the sale of the Western Assets to Contura,” counsel for Blackjewel said in its motion. “The Debtors believe that allowing the sale of the Pax Assets to move forward at this time ... is in the best interest of the Debtors’ estates, creditors, and other stakeholders.”

But for hundreds of out-of-work miners in Campbell County eager for resolution and a return to normalcy, the approved changes in the sale of Blackjewel mines to Contura was just one more grim setback.

“What this means for the long-term situation — whether (Contura) will operate the mines or not operate the mines — unfortunately, we’re not any closer to seeing that resolved,” said Rob Godby, an economist at the University of Wyoming closely tracking the Powder River Basin coal industry. “But the sad fact is that every day those mines are closed, it makes it more likely they won’t reopen.”

‘Dead’ sale?

The decision comes on the heels of revealing court documents submitted Tuesday by a senior creditor alleging Blackjewel considered the potential sale of its two Wyoming mines “dead,” according to a court filing from counsel of Riverstone Credit Partners.

To Godby, Riverstone was likely “posturing” to pressure Contura and expedite a final agreement with the federal government.

“It was pretty inflammatory,” Godby said. “(Riverstone) was likely putting that in front of the judge to make sure their interests are protected.”

Blackjewel owes Riverstone, a senior creditor, $38 million, plus $3 million for an additional loan the lender awarded the insolvent company after filing for bankruptcy. Riverstone would likely receive a majority of that sum back if the sale of the mines proceeds.

But in an emailed statement to the Star-Tribune, Blackjewel pushed back on Riverstone’s characterization of the sale.

“Contrary to the statement made by one of Blackjewel’s lenders that a sale of Blackjewel’s Western operations to Contura is ‘dead,’ Blackjewel continues to work toward a viable transaction with respect to its Western operations, including with Contura,” said David Beckman, acting chief restructuring officer for Blackjewel. “Several alternatives are under active consideration.”

The company declined to comment, as negotiations with the federal government continue.

The recent comments from Riverstone, layered on top of the request to separate the Wyoming mines from the sale, are dark signs for the mines’ future and workers, according to Clark Williams-Derry, director of energy finance at the Sightline Institute, an environmental think tank advocating a transition to green energy.

“Riverstone is trying to put pressure on Blackjewel and Contura to get a deal done,” Williams-Derry said. “... It’s trying to force some clarity sooner rather than later. To me, it feels like crunch time.”

Citizen complaint

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In the meantime, a landowners group filed a citizen complaint Wednesday morning alleging Contura — the coal company holding the permits at Eagle Butte and Belle Ayr — and Blackjewel have violated both state and federal law by failing to submit required updates outlining the status of the two mines.

In Wednesday’s complaint, the Powder River Basin Resource Council urged the state’s Department of Environmental Quality to act or risk a federal investigation of the two mines.

A spokesman for the state agency said in a statement Wednesday it received the complaint and planned to respond to the landowners group.

Although Blackjewel still owns and operates the mines, Contura, their former owner, holds the permits. That means both companies have reporting responsibilities under the Surface Mining Control and Reclamation Act if a mine has idled for more than 30 days, according to the complaint.

“This violation is significant,” the complaint states. “The update to the annual report is required to provide notice to the (Department of Environmental Quality), mine employees and the community of the permittee’s plans, including how long the temporary cessation will last.”

To Shannon Anderson, a staff attorney for the landowners group, the lack of reporting on the idling mine leaves the landowners, miners and regulators in a lurch and potentially threatens the environment.

“When you idle a mine of this scale, there’s a lot of consequences that could happen on the ground,” Anderson explained. “... It’s really important for it to be in writing with regulators what is the plan here and how the company is dealing with site stabilization, environmental monitoring and reclamation that needs to happen.”

“More broadly what is the long-term plan, how long is this cessation going to last?” Anderson added.

What’s in store

Trouble began when coal operator Blackjewel filed for bankruptcy July 1 but failed to secure interim funding to keep its Wyoming mines operating. Since filing for bankruptcy, Blackjewel’s 32 mines across the country have ceased producing coal.

The upheaval came less than two weeks after the basin’s two biggest players — Peabody Energy and Arch Coal — announced they would combine operations of their coal mines under one roof in the Powder River Basin. In the midst of the Blackjewel bankruptcy, neighboring coal company Cloud Peak Energy auctioned off its two mines to an out-of-state company.

Demand for Powder River Basin coal has also taken a hit in recent years as cheap natural gas and renewables have leaped into the electricity market.

Even with the closure of the fourth- and sixth- largest producing mines this summer, however, the market for the type of coal produced by Blackjewel has barely budged. The lack of noticeable change in thermal coal prices during Blackjewel’s monthslong closure underscores the reality that too much coal is being pumped out, and the basin needs to consolidate, several analysts said.

Yet, even in a season of decline, the basin can still maintain a healthy coal industry, said Godby, the economist. But it will take more than just reopening a mine to set the basin on a sustainable path.

“It’s possible that at this point, maybe that path requires that the Blackjewel mines are the ones that close,” Godby said. “... I’m not cheerleading this in any way, but maybe we have to face that reality and get on to the long-term questions.”

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