Déjà Vu — Blackjewel Mines Sold Again
By Greg Johnson
October 3, 2019 - A U.S. Bankruptcy Court judge has approved the sale of the Eagle Butte and Belle Ayr coal mines in Campbell County, Wyoming to Eagle Specialty Materials.
The ruling by Judge Frank W. Volk in Charleston, West Virginia, clears the way for ESM, a subsidiary of Alabama-based FM Coal, to reopen the Powder River Basin mines and operate them for the foreseeable future.
The sale also relieves Contura Energy Inc. of about $230 million worth of reclamation obligations and allows ESM to begin hiring back as many as 500 coal miners to resume operations as soon as feasible. Under the terms of the sale, ESM will mine as a contractor for Contura until it can secure transfers of state and federal permits and leases in its name.
What that means for former Blackjewel coal miners who have been out of work since July 1 is that those who haven’t already found other jobs or want to come back to work will be called back, said a spokesman for FM Coal when contacted after Wednesday’s court hearing.
“As soon as possible we will be calling people back, that’s the plan,” he said.
The question of how many workers would be offered a job with Eagle Specialty Materials and how long the company plans to operate Eagle Butte and Belle Ayr, which were the nation’s fourth and sixth most productive coal mines in 2018, was Judge Volk’s No. 1 question.
“In comparison with how many miners were at work (at the time Blackjewel abruptly locked them out) versus the plan that ESM might have now, what are we talking about with respect to the net loss of jobs?” he asked.
The sale motion filed by Blackjewel says up to 500 could be rehired or hired, said Blackjewel attorney Stephen Lerner. More specifically, all hourly employees who were at both mines will be offered an opportunity to return, he said.
Filings with the federal Mine Safety and Health Administration showed Blackjewel’s Wyoming operations employed about 580 people as of July 1.
What Wednesday’s ruling also means is that a short but volatile history with Contura Energy, Blackjewel LLC and the Wyoming mines may be coming to a close.
Contura was formed by former Alpha Natural Resources creditors to buy the mines as a stalking horse bidder during Alpha’s Chapter 11 bankruptcy reorganization. It operated the mines until December 2017, when it turned them over to Blackjewel in a transaction that didn’t include any cash, but called for Blackjewel to assume mine-related debt.
Blackjewel failed to pay those debts as well as many of its own, rolling up more than $100 million in unpaid royalties, taxes and other invoices, finally filing for bankruptcy July 1. Although Blackjewel had taken over operation of the mines, Contura remained on the hook for about $230 million worth of reclamation obligations with the state of Wyoming.
Contura was approved Aug. 6 to buy the mines back from Blackjewel for $33.75 million, contingent upon reaching and agreement with the federal government over unpaid royalties and transfer of the mine leases. Nearly two months later, the parties weren’t able to reach a consensus and Contura made it clear it didn’t want to reopen and operate the mines; instead, it wanted out from being responsible for reclamation.
As part of the deal with Eagle Specialty Materials, Contura will pay ESM $90 million to assume those liabilities. It also will pay Campbell County $13.5 million of $15.1 million it owes in back production taxes.
Eagle, in return, will:
- Pay Blackjewel $16.2 million in cash.
- Pay Blackjewel’s senior debt holder, Riverstone Credit Partners, $24 million. Blackjewel will also pay Riverstone another $8 million to satisfy that debt.
- Pay any unpaid bills and debts incurred during the bankruptcy up to about $4.3 million.
- Pay any unpaid wages and benefits owed to employees, including for time worked between their last paycheck and shutting down the mines and for contributions to their 401(k) and health insurance accounts that were withheld from workers’ pay but not deposited by Blackjewel.
ESM also has negotiated with Campbell County on a settlement for the more than $37 million it’s owed by Contura and Blackjewel. Contura will pay $13.5 million, and excluding the $1.6 million Contura won’t pay the county, Blackjewel’s part of the bill is about $22 million.
Eagle has agreed to a five-year plan to repay about $8.7 million, or about 50% of the production taxes owed for the first half of 2019, and 50% of the taxes that will be owed for coal mined by Blackjewel in the second half of the year through Oct. 4, when it's expected to officially take over the mines.
While both the failed sale to Contura and Wednesday’s sale to Eagle Specialty Materials include a $24 million payment to Riversone, the ESM deal is much better in the long run for all parties involved, Lerner said.
“One major difference is with the mine plan,” he said. “Contura’s interest was only to mine for possibly 15 months,” whereas ESM has committed to operate Eagle Butte and Belle Ayr for the life of their existing mine plans, which is more than 10 years.