Bankruptcy, coal experts voice concerns, takeaways

A group of lawyers, academics and coal bankruptcy veterans shared reservations about new coal companies entering the state, at a University of Wyoming School of Law conference Friday, and highlighted signs that the energy industry may have harmed its “social license” in Wyoming.

As two coal bankruptcies that have dominated the state’s energy discourse come to a close, the panel discussed lessons learned and voiced concerns about future coal troubles and how the state is prepared to deal with them. Neither the Cloud Peak Energy or Blackjewel bankruptcy led to permanent mine closures, as new companies snapped up the five affected mines — four in Wyoming and one in Montana.

But the new ownership shouldn’t necessarily reassure miners and officials, said Rob Godby, panel moderator and director of UW’s Center for Energy Economics and Public Policy. That’s because the problem facing Wyoming coal country, he said, is overcapacity.  

“As long as that overcapacity hangs over the [Powder River] Basin, we will be waiting for the shoe to drop and mines to close,” Godby said. “The longer it stays like that, the more unhealthy conditions get [and] the more we have to ask: ‘how are liabilities going to be handled when these mines close?’”

The event came in the wake of a newly formed special committee of the Wyoming Legislature that met earlier in the month to explore statutory fixes to protect Wyoming workers and tax revenue. 

The panel consisted of House Majority Floor Leader Eric Barlow (R-Gillette), who also co-chairs the new legislative committee; Campbell County Administrative Director Carol Seeger, a veteran of pursuing mineral taxes through court; Powder River Basin Resource Council attorney Shannon Anderson, who played a key role in the Blackjewel bankruptcy; and Joshua Macey, an assistant professor at Cornell University Law School and bankruptcy expert.

The group, which is generally skeptical of too much license for the energy industry, spoke at the Energy Law & Policy in the Rockies conference, historically an event headlined by industry lawyers and boosters.

Gov. Mark Gordon’s new energy policy advisor Randall Luthi gave the keynote address this year. Luthi’s speech touted fossil fuels’ contributions to society and Wyoming, and he offered an optimistic picture of coal’s future.  

“Coal is losing and I mean losing badly in the court of opinion,” Luthi said in his address. “The anti fossil fuel groups really should be recognized… I won’t say congratulated but recognized for running a much better campaign than the fossil fuel industry.”

Still, Luthi suggested that even an energy state like Wyoming might have to reassess its options. “We should dance with the one who brung us until we have good reason not to,” he said. “But once that decision is made, we are not limited to those who are on the dance floor.” 

Public opinion of the energy industry in Wyoming, as well as what Godby termed “social license” —  the trust regulators and the public place in the industry — were top-of-mind for the bankruptcy panel. 

Godby asked panelists if the energy industry’s social license had eroded in Wyoming. In recent years, turbulent bankruptcies here have seen energy companies drop obligations to workers and leave taxes unpaid.

Coal country still stands behind the industry that built it, Seeger said, but there is more skepticism now. “We are feeling a little bit bipolar,” she said. “I think we still totally embrace [fossil fuels] but there is no question that with what’s happened a little bit of your camaraderie and trust with industry is shaken.”

Barlow noted that when Blackjewel closed its mines, the company called in security because it was worried about theft by disgruntled workers. In the end, he said, it’s the employees who were robbed, and who are only beginning to be repaid. Barlow would like to see Wyoming find a way to hold energy industry executives accountable if they behave badly, he said. 

“The employees would have gone to jail for taking a tool box,” Barlow said. “And yet we have people that walked away and got off through the bankruptcy system, so far, and we don’t have any leverage to say ‘you victimized our citizens.’”

Barlow also recalled a previous effort to make mineral tax collections monthly, which the Legislature now intends to revisit. This change could have significantly reduced the tax losses to bankruptcies, Barlow said, but the effort failed after lobbying by the industry. “We were all called into the boardroom of a coal company and told ‘hey this will never happen, we will never do this,’” the Republican lawmaker said.  “We allowed too much social license to cloud our judgement.”

As House Majority Floor Leader, Barlow could play a key role in advancing or defeating new laws that seek to insulate the state from energy industry bankruptcies when the Legislature convenes in February. 

The panelists also expressed worry about both Navajo Transitional Energy Company and Eagle Specialty Materials, the companies that have taken over the Cloud Peak and Blackjewel mines, respectively. ESM is a legal entity created to acquire the Eagle Butte and Belle Ayr mines, Anderson said, and as such remains a relative unknown.

ESM acquired the two mines in a deal that saw Contura Energy handing it $90 million to take the properties — and an associated $220 million in environmental reclamation obligations — off Contura’s hands. The deal mirrors how Blackjewel acquired the properties; in that case, Contura payed Blackjewel $20 million. 

“I’m not sure if we’re off any better,” Anderson said of the new owners. “They have no financial disclosure, we don’t know what their books look like.”

Of NTEC, which bought Wyoming’s Cordero Rojo and Antelope mines and Montana’s Spring Creek Mine from Cloud Peak Energy, the panelists expressed worries about the company’s previous use of sovereign immunity as a legal shield. The company is owned by the Navajo Nation and managed by a board made up of coal industry professionals. The company has claimed the sovereign immunity of tribal nations when sued in the past, Macey said, and a major appeals court in California has upheld the claim. 

“If [more than] $500 million of reclamation obligations go to an entity that cannot be sued in federal court,” Macey said, “that is a very easy way to get around reclamation obligations.” 


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