The new owner of three Powder River Basin coal mines says it has established an agreement with the U.S. Interior Department to pay overdue mineral production taxes back to the federal government in installments, according to a statement from the company in response to a Star-Tribune article published last week.
Navajo Transitional Energy Company assumed ownership of the Antelope and Cordero Rojo mines in Wyoming and the Spring Creek mine in Montana from bankrupt coal firm Cloud Peak Energy last year. As part of the sale agreement, NTEC agreed to take responsibility for unpaid royalties accumulated “through an installment payment plan.”
The Navajo Nation-based firm therefore assumed approximately $94 million in pre- and post-petition liabilities, along with all cleanup obligations associated with the mines.
But a Jan. 16 administrative expense claim filed in court by the federal government stated the former owner of the mines owed $10 million in past-due royalties for coal mined at the facilities during September and October too. The deadline for the two months of royalty payments went by without the company paying the full amount owed. But NTEC said in a statement it had a payment plan worked out with the federal government and was therefore “not behind on payments,” as reported by the Star-Tribune Thursday.
The Star-Tribune contacted NTEC Thursday but did not receive comment by press time.
Coal companies must make payments to the government for all minerals extracted from public land. For strip mining, royalty payments are typically 12.5 percent of coal’s value. Approximately half of all federal mineral royalty funds flow back to Wyoming. Royalty payments are due by the last day of the month following the month the coal is mined, according to the Mineral Leasing Act of 1920.
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NTEC started paying outstanding royalty payments last month “in good faith,” paying $169,425 to the Office of Natural Resources Revenue on Dec. 30, according to court documents. But the Office of Natural Resources Revenue stated in the motion it will hold NTEC’s partial payment — less than 2 percent of the $10 million owed — in escrow, “unless and until (Office of Natural Resources Revenue) enters into a written agreement with NTEC regarding the payment of the reported royalties.”
“NTEC is committed to fulfilling all agreements, and requirements, as the owner of these mines,” the company said in a statement Friday. “NTEC and the Office of Natural Resources Revenue have entered into an installment agreement and NTEC made its first payment under the obligation in December.”
A spokeswoman for NTEC did not provide the Star-Tribune with documents revealing the nature of the agreement between NTEC and the federal government, saying NTEC was “not a party to (Interior Department’s) filing with the Cloud Peak estate.” But the Interior Department and NTEC “agreed in principle to payment terms for Cloud Peak Energy legacy debts in December,” she stated.
The U.S. Department of Justice attorney responsible for the Jan. 16 motion declined to comment on the matter.
Even though the new coal operator agreed to bear the burden of Cloud Peak Energy’s past-due taxes, the federal government has not let the former owner off the hook, due to its status as the lease holder.
“Although NTEC is willing to pay (these) royalty amounts over time, the Debtors (Cloud Peak Energy) are liable to Interior for timely payment of the royalties, following coal production, as the lessee of the Assumed Federal Leases,” the agency stated in court documents.
The sale of Cloud Peak’s assets to the out-of-state company ushered in a wave of speculation from analysts last summer. Many were hoping to understand the motivations behind the ambitious acquisition, which made NTEC the third largest coal company in the nation. The purchase has been met with both optimism and criticism on the Navajo Nation, where the company currently owns a mine and coal-fired power plant. But NTEC has stood by its decision, asserting its benefits for both the Navajo Nation and the U.S.
“If NTEC had not assumed ownership of the mines, (Department of Interior) would only be left to attempt to reclaim the fees through the filing process,” a spokeswoman for NTEC wrote in a statement. “NTEC’s agreement with (Department of Interior) assures that the fees will be paid regardless of the outcome of the court filing.”
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