Contura makes deal to reopen mines
September 19, 2019
GILLETTE — Contura Energy Corp. has announced it has an agreement that will allow Eagle Specialty Materials LLC, an affiliate of FM Coal LLC, to operate the Belle Ayr and Eagle Butte coal mines, which have been shuttered since July 1.
Under the agreement, Contura will pay Eagle Specialty Materials $90 million to take over the mines. Contura also will pay Campbell county $13.5 million of the $15.1 million it was assessed in back ad valorem taxes, according to a Contura press release announcing the deal. The other $1.6 million will be paid to the county by Eagle through a royalty on tons produced when the mines reopen.
Eagle also will make a "specified cash payment" to Blackjewel, which wasn't given, and assume Contura's $237 million worth of reclamation obligations for the Powder River Basin mines. It also will pay off other Blackjewel debts related to its bankruptcy, including unpaid royalties, taxes and Abandoned Mine Land fees.
The deal is subject to completing agreements with other private and government interested parties and the U.S. Bankruptcy Court, but if it goes through will allow Eagle Specialty Materials to operate the mines on a long-term basis.
Contura has been seeking a deal with the federal government over unpaid royalties and coal leases since it was approved as the winning bidder for the mines, which were sold by Blackjewel LLC through a bankruptcy auction. That approval was given by the court Aug. 6.
Contura's agreement with Eagle will allow it to reopen the mines and begin mining and selling coal.
"We've been clear that operating long-term in the PRB was not in Contura's strategic plans and that the best possible outcome for all interested parties would be for another responsible operator to step up that was interested in doing just that," said David Stetson, Contura's chairman and chief executive officer in a statement announcing the deal.
"We are extremely pleased that this deal outlines a path to relieve Contura from any go-forward liabilities related to these assets, while also providing long-term employment opportunities for hard-working miners and ongoing revenue to local, state and federal governments."
When the mines were closed by Blackjewel, nearly 600 Wyoming coal miners were abruptly put out of work, along with about 1,100 workers at dozens of other operations in Appalachia.
It wasn't immediately clear how many of the former Blackjewel workers may be called back to work for Eagle Specialty Materials or when that could happen.
While Campbell County still won't reclaim about $23.6 million of the $37.1 million of unpaid production taxes owed by both Contura and Blackjewel, the deal with FM Coal and Eagle Specialty Materials is good news for Gillette and the PRB, said Campbell County Commissioner Mark Christensen.
"At the end of the day, some people are going to get to go back to work, and that's wonderful," he said.
Wednesday afternoon's announcement also comes a day removed from an FM Coal official meeting with commissioners about its plans to reopen the mines and operate them for the long haul, Christensen said. The meeting went well and he said he believes the company genuinely wants to make a go of it mining coal in the PRB.
"I will say that the gentleman with FM met with us and said he had a deal with the feds and the state and was trying to come up with something with the county," he said. "He feels confident in their ability to make money, and if they can that's good."
After years of dealing with Contura Energy and Blackjewel, he said the most welcome news is the potential to not have to do business with either company again.
"Those people are the biggest dirtballs ever," Christensen said about Contura Energy. "That's because on their way out, they can't help but screw us over one more time."
He was referring to the $1.6 million difference in production taxes it won't pay as part of the agreement. The difference will be made up by Eagle Specialty Materials, which will pay a royalty on tons produced to make that up.
He also said that Contura has "screwed over" Campbell County, the state of Wyoming and its employees as much as Blackjewel has.
"I'm glad to (potentially) be done with Contura," Christensen said. "I have very little respect for that group, because they decided to play victim here, but they knew who (former Blackjewel CEO) Jeff Hoops was when they got into bed with him."
While he doesn't know much about FM Coal overall, which is based in Alabama, Commission Chairman Rusty Bell said he was encouraged by the company's representative who met with commissioners Tuesday, Mike Costello.
He said the county wants a company that's committed to being a good community partner, something Contura and Blackjewel weren't.
"Really, what I want to know is a couple things," Bell said. "I wanted to know whether they wanted to be a part of our community or not. Contura did not want to be part of our community. Heck, they didn't even want to meet with us. Blackjewel was the same. They just wanted to soak us and take it all out of here."
He said FM Coal has said the employees "are the most critical to them," Bell said. It also wants to not only make whole any financial losses for employees who return, but for all Wyoming Blackjewel employees.