By Heather Richards

February 15, 2019 - Virginia billionaire Tom Clarke — a businessman-turned-environmentalist-turned-coal executive — is undergirding a stalking horse bidder for Wyoming’s Kemmerer mine, according to court documents filed Wednesday in the Houston bankruptcy court.

The prospective buyer — a recently created LLC in Virginia — will acquire the mine subject to key conditions regarding employees: that the bankruptcy court allows Westmoreland to dissolve the coal miners’ union contract and that it allows the company to end current retiree medical obligations, the filing notes. Western Coal Resource Partners’ guarantor is an affiliate company, Merida Natural Resources, the filing states. Merida is also an LLC based in Virginia and one of numerous firms owned by Clarke, a nursing home executive, hotelier and recent coal executive.

A stalking horse bidder is an agreed buyer announced ahead of a bankruptcy auction with the goal of raising bids for distressed assets.

Westmoreland filed for bankruptcy in October, claiming heavy debt in a distressed coal market. The coal firm, one of the oldest in the U.S., operates across the West and Canada. Its only venture in Wyoming is the Kemmerer mine, an operation more than 100 years old that provides fuel for a nearby power plant and employs a little under 300 miners.

News of the stalking horse bidder Wednesday was expected. The company announced a schedule for the announcement and a potential auction of the mine last month.

Coal Newcomer

While little information is available about the potential buyer of the Kemmerer mine, its financial guarantor is led by a man with a unique history in the coal business.

Clarke’s business deals have been headline news from Virginia to Minnesota since he bought into coal during the recent downturn. Coal mines were going for a song in the broken market for buyers willing to pick up cleanup obligations. Clarke’s nonprofit, for example, took on hundreds of millions in cleanup costs after acquiring a number of mines in West Virginia from bankrupt Patriot Coal, according to a New York Times profile on Clarke in 2016.

The unlikely new coal baron said he was inspired in his new venture by a desire to push and pull the industry in a green direction, according to the Times. Arguing that he could change the coal industry from within, he explained to the newspaper a scheme to take advantage of federal green credits during the Obama era by planting trees worldwide and attaching the green credits for that activity to every ton of coal sold to the power industry.

But the coal plus environmental credit tonnage model wasn’t popular, as of the time of the New York Times profile.

Clarke’s various business entities have found trouble in recent years, including the bankruptcy of an iron ore operation picked up by Clarke’s ERP Iron Ore in a 2016 bankruptcy auction. Clarke was ousted as executive of ERP and Chippewa Capital partners, both northern Minnesota firms, by investors a few years later, according court filings and reports from Business North, a Minnesota business newspaper based in Duluth.

Clarke was also the stalking horse bidder for Westmoreland’s assets in Ohio.

The Ohio Environmental Protection Agency and the state’s Department of Natural Resources objected to Clarke, and his wife Ana, as stalking horse bidders to Westmoreland’s coal assets in Ohio, the Oxford Mines and the Buckingham mine, questioning whether they could afford the reclamation costs associated with the mines.

An Ohio coal executive outbid Clarke for the Ohio assets days later.

A Contract Battle

The Kemmerer coal mine is a hyperlocal operation — in contrast to Wyoming’s Powder River Basin coal industry in the state’s northeast. It sells most of its coal to the adjacent Naughton power plant, owned by Wyoming’s largest utility, Rocky Mountain Power. Additionally, the mine supplies coal to a nearby trona operation.

Rocky Mountain Power filed an objection to Westmoreland’s original bankruptcy plan due to uncertainty over fuel supply from the Kemmerer coal mine. The utility argued that Westmoreland was placing corporate interests over the needs of the public utility and its ratepayers.

The Naughton plant closed one of its three coal-fired units recently to comply with federal haze regulations rather than upgrade the unit.

The mine is the largest revenue source in Lincoln County. It employed 296 miners as of December.

In its objection to the company’s plan to cut miner benefits included in the existing collective bargaining agreement, the miners’ union has argued that Westmoreland’s financial troubles are damaging an otherwise profitable operation.

The contract lays out working conditions agreed upon by the company and the union, from wages to health benefits and pensions for the mine’s retirees. Westmoreland has argued, since before filing for bankruptcy, that it must terminate its contract with workers, arguing that potential buyers of the mine would not take the assets loaded with a union contract. The company has also said the obligation to pensioners is too heavy a financial burden in the current coal market.

The union — the United Mine Workers of America — is fighting to retain the contract, arguing that it is a previously agreed upon obligation that cannot be broken in order for Westmoreland to get out of the business. Miners locally and nationally have criticized Westmoreland for payments, salaries and severance for executives in the year leading up to bankruptcy to the tune of $10.2 million. This week, a handful of Wyoming union miners are in Houston to attend hearings where a judge will decide if the contract will be axed, modified or upheld.

Miners report that the hearings have been slow moving and hope for a decision by Friday.