A bank is suing Revelation Energy in West Virginia for transferring ownership of the Belle Ayr and Eagle Butte mines in Wyoming to an affiliate company, Blackjewel LLC, while Revelation was in default on its loans.
Fifth Third Bank of Ohio alleges that the conveyance of Eagle Butte and Belle Ayr violated the terms of an agreement between the bank and Revelation which state that the bank would not enforce its right to collect its debt from Revelation if the coal firm followed a number of stipulations, like not transferring assets.
Revelation had failed to make payments on a $20 million loan and a $5 million loan, the bank argued. The firm broke the terms of its agreement with the bank by conveying mines that the bank believed were collateral against the defaulted loans, according to court documents.
The bank argues that Revelation owes $7 million in back payments, associated interest and late fees. The bank notes four attempts since 2013 to revise agreements with Revelation over the defaulted loans.
“Revelation and Blackjewel will use any additional time provided by this Court to further convey, hide and/or encumber the collateral until there is either nothing left or it is impossible or impracticable to track it down and execute against it,” the bank argued in court documents.
Jeff Hoops, the CEO of both Revelation and its affiliate company Blackjewel, called the bank’s claims “absolutely false” in an email to the Star-Tribune on Wednesday.
Revelation almost lost the case before it started. The court ordered a default when Revelation failed to respond to the initial claim. That default was later set aside by the district judge after Revelation countered that it has “meritorious defenses” to the bank’s claims and that its “minor tardiness” was a result of changes in legal counsel.
A status conference is scheduled for June 11 in West Virginia.
The two coal mines at the center of the legal battle were once called the “crown jewels” of Alpha Natural Resources, a coal firm that sold the mines to Contura Energy as part of an exit from bankruptcy in 2016. Contura held on to the mines for a little more than a year before paying Blackjewel LLC $21 million to take over the mines and their associated environmental and tax liabilities in December, 2017.
Wyoming’s coal industry has rallied since a two-year downturn of weak demand, competition with cheap natural gas and indebted firms. The industry has stabilized, but faces continued demand and competition challenges.
Production at both Eagle Butte and Belle Ayr fell in the first quarter compared to last year by 11 percent and 10 percent, respectively. The mines produce a lower-heat coal compared to some of the mines in Wyoming’s Powder River Basin. Low-heat coal appears the most vulnerable to current market changes, experts say.
Hoops has said in earlier interviews with the Star-Tribune that Revelation’s history in Appalachia, which included a number of violations from regulators over environmental issues, does not reflect on Blackjewel and its future in Wyoming. He has also said that the two mines still have incredible potential despite current challenges in the coal market.
Hoops’ various coal firms have spent the last few years picking up coal assets on a dime, in many cases getting paid in return for an assumption of environmental obligations and reclamation costs. According to S&P Global Market Intelligence, Hoops’ Lexington Coal Co. LLC was paid $204 million in cash and promised $112 million in installments as part of a deal with Alpha Natural Resources in which Lexington acquired 280 mining permits in Appalachia.
Wyoming regulators held up the transfer of coal leases from Contura to Blackjewel last year due to outstanding violations from Revelation in Kentucky and West Virginia. The company addressed those violations but has yet to submit a bond application to the Department of Environmental Quality in order to acquire the coal mining permits.
Until Blackjewel has proved it can financially secure the mines’ reclamation obligations in Wyoming, that liability stays with Contura, said Keith Guille, spokesman for the department.
The legal dispute going on in West Virginia would not necessarily influence Blackjewel’s ability to fully take over the Eagle Butte and Belle Ayr mines, he said.
“Our rules aren’t based on reputation. Our rules are based on actual financials ... Do they meet all the standards to be able to mine?” Guille said. “It takes a lot to get through that process.”