Court approves Blackjewel mines sale
August 1, 2019
GILLETTE — Contura Energy Inc. plans to reinstate about 500 jobs immediately at the locked out Belle Ayr and Eagle Butte coal mines now that it's been given a green light to buy the mines from bankrupt Blackjewel LLC on Tuesday.
The sale was approved at about 2:15 p.m. Tuesday. The only things standing in the way of the Wyoming mines and the Pax Surface Mine in West Virginia from reopening under Contura’s banner is a final hearing with the U.S. Bankruptcy Court for the Southern District of West Virginia and an agreement with the federal government over assuming federal coal leases associated with the Wyoming mines.
“The U.S. government has the authority to agree or not agree to the assignment of leases,” said Blackjewel attorney Stephen Lerner of Cincinnati-based Squire Patton Boggs during Tuesday’s sale hearing. “That’s the law.”
He said Contura “has been eminently reasonable” in negotiations so far with the federal government, along with other major creditors like Campbell County. Most of those disputes have been resolved.
Lerner also sent a message to the White House about promises President Donald Trump made to the coal industry leading up to his election in 2016.
“The Trump administration has repeatedly said it wants to do everything it can for the nation’s coal miners,” he said, adding that lack of an agreement on the leases “may be what kiboshes this deal. … If the Trump administration wants coal miners to go back to work, it needs to reach an agreement and needs to reach an agreement right away.”
If the sale to Contura is held up, it will be the second time the company has owned the Eagle Butte and Belle Ayr mines. Contura was created from a group of Alpha Natural Resources creditors that bought the mines as a stalking horse bidder during Alpha’s 2015 bankruptcy. Contura sold the mines to Blackjewel in late 2017, but still retained the state mining permits and about $250 million in reclamation obligations.
Contura sees buying back the Wyoming mines, along with the Pax mine, as a “win-win,” said Damian S. Schaible, a New York-based attorney for the company. “Contura has certain reclamation liabilities and will take care of those reclamation liabilities.”
He said Contura also is focused on getting workers back on the job and producing Powder River Basin coal.
All the affected companies and agencies mostly “all are now on board” with the deal, Schaible said.
That includes Campbell County, which was owed more than $37 million by Blackjewel and Contura from its first time owning the mines. During Tuesday's sale hearing, an attorney for the county said the county and Contura have come to an agreement about those taxes, but the specifics about that deal weren't immediately disclosed.
Going forward, Schaible said Contura is committed to paying its taxes owed in full and will “reinstate about 500 jobs immediately, along with creating a $5 million benefit fund for the miners going forward.”
The Contura deal also survived an objection from Komatsu, which owns a pair of large coal shovels at the Belle Ayr and Eagle Butte mines and are worth a combined $22 million to $24 million. During a break in the sale hearing Tuesday, Komatsu and Contura resolved the dispute over the equipment, so the objection was withdrawn.
Overall, about 1,700 Blackjewel workers at the company’s 32 operations were abruptly locked out of their jobs July 1 after the company filed for Chapter 11 bankruptcy protection. When emergency financing to keep the mines operating through bankruptcy fell through, Blackjewel shut down the mines, affecting about 580 at the Eagle Butte and Belle Ayr mines in Campbell County.
Since then, an unprecedented and accelerated Chapter 11 case has unfolded, including several failed attempts to secure emergency financing and a deal that forced the resignation of former Blackjewel CEO and president Jeff Hoops Sr.
Lerner also asked that if Hoops stands to receive any money that goes back to the Blackjewel estate to be distributed to its debt holders, any payments to Hoops be held in an escrow account to pay any potential lawsuits against him that may rise from the Blackjewel bankruptcy.
Tuesday’s sale hearing was a continuation from Monday, when Judge Frank W. Volk approved a few sales of mostly non-producing assets.
After approving the Contura sale, the judge also gave a green light to selling most of the company's Eastern assets to a pair of bidders.
The hearing was continuing at the time of this update and the judge hasn’t yet ruled on a pair of bids for Blackjewel's Eastern assets.
Kopper Glo Mining LLC will buy the Black Mountain and Lone Mountain mines in Kentucky for $7.55 million in cash and royalties with a net present value of $9.1 million as a credit bid. It also will assume $38.4 million in asset retirement obligations (ARO).
Rhino Energy LLC's bid to buy Blackjewel's Virginia Subdivision assets was approved. Rhine will pay pay $850,000 and $208,000 in royalties, and assume $6.07 million in ARO.
Through a marathon three-day auction that began Thursday and ended late Saturday, Contura’s stalking horse bid for the Western assets and Pax increased by more than $13 million to $33.75 million. That includes an $8.1 million deposit Contura paid at the time it was approved as the stalking horse bidder. Another $24 million will go to pay Blackjewel’s main credit holder, Riverstone Credit Partners.
For Wyoming Blackjewel employees who haven’t worked or been paid in more than a month, the financial situation is beginning to get dire for some. Waiting on the results of last week’s auction and the two-day sale hearing has been difficult, said Melissa Peterson-Worden, a locked out Blackjewel employee from Gillette.
“We’re so, so, so anxious,” she said. “We just keep waiting, so when it’s finally approved, we’re probably going to have this moment where we can’t believe if it’s really true. … When and if it goes completely through … I won’t be at ease until I’m sitting at my desk.”
In the end, Blackjewel’s workers are desperate to see a resolution, Peterson-Worden said.
“It’s down to the wire,” she said. “We need these court proceedings to go well for everyone.”
A hearing to close the sale has been scheduled for Wednesday, and if approved Contura will be the new owner of the mines.