Despite objections by creditors and the federal government, a bankruptcy judge approved a request Friday from bankrupt coal operator Blackjewel to move forward with the sale of two idling Wyoming coal mines and a West Virginia mine.
“This appears at the present time to be the only path forward to get some of the ... value of these assets and to pull back what could be the majority of the employees that had employment in the industry,” U.S. District Judge Frank Volk said at the conclusion of Friday’s hearing.
“It makes good sense to approve the motion,” he added.
On Thursday, coal company Contura Energy offered to purchase Blackjewel’s Eagle Butte and Belle Ayr mines in Wyoming, as well as Pax Surface Mine in Kentucky, for $20.6 million. The company also agreed to supply $8.1 million in desperately needed funding to pay past due bills and continue maintaining Blackjewel’s mines throughout legal proceedings.
The sale could result in the reopening of Eagle Butte and Belle Ayr mines to full capacity, bringing back over 1,000 out-of-work employees for the next six to 12 years, according to attorneys for Blackjewel.
But Contura has not officially become the new owner.
The coal company’s offer must be approved at a final sales hearing on Wednesday. As the stalking horse bidder, Contura Energy set the minimum price for auction at $20.6 million, guaranteeing that there is at least one buyer during the sales process.
Other interested companies also have the opportunity to submit higher bids until the end of the month. An auction will occur the following day if multiple bidders come forward. If no additional companies submit bids for the three mines, Contura will make an additional cash payment of $12.5 million, in addition to the $8.1 million in immediate relief, according to a company statement.
To date, no other companies have submitted bids.
Retirement plan terminated
As a condition of the agreement, Contura will not assume responsibility for Blackjewel’s retirement plan for its employees, effectively terminating the plan.
At Thursday’s hearing, a federal trustee called the proposal to terminate retirement plans “unusual.”
“Terminating the plan will provide the greatest flexibility for employees with no significant cost involved,” a Blackjewel attorney said in response.
Attorneys for the company admitted Blackjewel owed Wyoming workers over $700,000 in unpaid wages and $900,000 in retirement funds. The company deducted retirement funds from paychecks but failed to deposit promised funds into workers’ accounts.
Several workers attempted to access their retirement plans following the closures for financial relief, but reported they could not gain access.
“That is one of the court’s primary concerns,” the judge said during Friday’s hearing. “Some may urgently need those (retirement) funds.”
But Blackjewel attorneys said terminating the plan altogether would be the most efficient way for workers to access those funds for pay-outs or transfers into an individual retirement account.
This month, Blackjewel attorneys submitted multiple requests for short-term debtor-in-possession funding to conduct minimal maintenance at the mines as they searched for long-term funding.
But efforts to secure the millions of dollars needed to reopen the facilities fell short, leading to the company’s decision to search for potential buyers earlier this week.
According to a budget dated Tuesday and submitted to the court by Blackjewel attorneys, the company projected it would have a $5.5 million deficit by Sunday. Blackjewel attorney Stephen Lerner also stressed the need to conclude Friday’s hearing by midday in order to wire transfer necessary funds to parties for overdue bills.
“The Debtors’ incremental debtor-in-possession financing liquidity has now been exhausted,” stated attorneys in court documents.
In a press release published Tuesday, Contura said it plans to immediately provide Blackjewel with an $8.1 million purchase deposit “to be used to facilitate an orderly asset sale process, as well as cover the Debtor’s near-term working capital needs and general corporate expenses.”
At the beginning of the hearing, Lerner asked the court to conclude the hearing on the bidding procedures order by noon Friday to ensure the timely filing of necessary wire transfers to settle Blackjewel’s past-due bills.
If the judge ultimately approves the sale, Contura will assume none of Blackjewel’s liabilities, except for the nearly $250 million in reclamation, or cleanup, obligations associated with the permits Contura already holds for the Powder River Basin mines.
Although the Powder River Basin Resource Council, a landowners group, said it was “relieved” Contura’s reclamation obligations for Eagle Butte and Belle Ayr mines would be upheld in the sale, the group considered unpaid county taxes and federal royalties, in addition to unpaid employee wages and benefits, as threats to the fiscal health of Wyoming.
During the two-day hearing, multiple parties also said the potential sale could result in the abandonment of reclamation liabilities at any of Blackjewel’s idling mines.
According to attorney Lerner, the counsel revised Blackjewel’s proposed motion, lifting a requirement that potential bidders take on reclamation liabilities associated with mines when making a bid.
“We will allow people to make bids without reclamation obligations,” he said.
However, the counsel would not look favorably on offers made without commitments to reclamation.
“They are not consistent with legal requirements,” he added.
Counsel for Campbell County also objected to the potential sale of the mines to Contura. The new company would not assume responsibility of the approximately millions of dollars in taxes owed by Blackjewel.
“These taxes go to fund schools, to pay teachers,” said a representative for Campbell County. “We’re not trying to protect the profit margin here.”
Bankruptcy after bankruptcy
Contura has assumed the role of stalking horse purchaser before. It submitted a bid to acquire the same two Wyoming mines in 2015 from the then-bankrupt coal company Alpha Natural Resources. It owned and operated the mines for about two years before transferring them to Blackjewel.
Blackjewel closed its Wyoming mines on July 1, after a previous lender had withdrawn during the company’s Chapter 11 bankruptcy financing. Hundreds of workers found themselves suddenly without work or pay as the mines idled.
A federal judge approved $2.9 million in short-term funding for Blackjewel during an emergency hearing on July 19. But the loan was not enough to bring the company’s mines back to full capacity and only provided enough relief to the company to make an insurance payment and settle past-due wages with current employees.
Only about 140 employees have been brought back nationwide for minimal maintenance and shipment of coal produced before the closures. The mines are not producing new coal at this time.
The fate of the rest of the company’s mines remain in question, leaving hundreds of workers in West Virginia, Virginia and Kentucky largely in the dark. No additional bidders have come forward to place bids on the other two dozen.