Coal mines still idle as purchase talks continue

CASPER — Coal giant Contura Energy has yet to complete the purchase of two Wyoming mines from bankrupt operator Blackjewel, according to a quarterly report released Wednesday. 

Despite promising to “reinstate immediately” 500 jobs at the idling Eagle Butte and Belle Ayr mines, the company has yet to reach a necessary agreement with the federal government and resuscitate the mines, fueling further ambiguity throughout Wyoming’s coal country.

“Contura has been in diligent discussions with the debtor and the relevant federal agencies, though no agreement has yet been reached,” the company said in a statement Wednesday. 

Despite receiving approval from a federal bankruptcy judge on Aug. 6 to purchase three Blackjewel mines, Contura has not secured approval from the federal government to finish the sale. The company is battling federal agencies over unpaid royalties and contested leasing, according to statements made in court. 

“The federal government bargains tough in these situations and they have the cards,” said University of Wyoming economist Rob Godby. “About half of every dollar in the mineral royalties comes back to Wyoming. Our schools are depending on that.” 

Blackjewel owed approximately $60 million in federal royalties when it filed for bankruptcy. 

If Contura does receive approval to operate the mines, it will still need to enter a final order with a federal court. 

But Wednesday’s announcement suggested an agreement between federal agencies and the successful bidder could break down. 

“There can be no assurance that a settlement among the parties can be reached,” the company stated in its financial report. 

During a conference call Wednesday, Andy Eidson, Contura’s executive vice president and chief financial officer, recognized this possible outcome and said the company was prepared to reclaim the Wyoming mines if the sale fails. 

“The debtors are on a pretty tight clock in regard to day-to-day operating funds,” Eidson said. “It’s certainly not an absolute certainty that an agreement will be reached before the debtor could be forced to move to Chapter 7 and liquidate, which is a slightly different outcome.” 

Contura sold the two Wyoming mines to Blackjewel in 2017. Along with acquiring the mines, Blackjewel also received about $20 million from the former company. 

“Contura did want out of the basin,” Godby said. “They seemed to see thermal coal mining in the Powder River Basin as something they wanted to disengage to the tune of actually paying somebody to take them over.” 

In recent years, Wyoming’s coal industry has been hit hard as demand for coal wanes and utility companies turn to other energy sources, including natural gas and renewables. 

“From a strategic perspective, it’s not that surprising given the conditions in the basin,” Godby added. 

Eagle Butte and Belle Ayr shut down July 1 when the insolvent company filed for bankruptcy and lost a key creditor. 

Contura placed a nearly $34 million bid to acquire Belle Ayr and Eagle Butte mines in Wyoming, and Pax Surface Mine in West Virginia. As the former owner of the thermal coal mines in Wyoming, the seasoned coal operator still holds the permits, and therefore the reclamation, or cleanup, costs if the mines shut down. 

Contura holds about $237 million in reclamation bonds, but estimated the cost of cleanup would be significantly less. 

“The financial impact of this past month has been disastrous for Contura,” said Clark Williams-Derry, the director of energy finance for the Sightline Institute, an environmental think tank. “The way I read this, Contura did not really want these mines and is holding onto them not out of hope to generate profits and cash flows from these mines, but in a hope to avoid the reclamation costs.” 

In the days following Blackjewel’s bankruptcy, stocks for Contura energy plummeted. 

Despite contending with Blackjewel’s fall out, Contura did report a “strong economic performance” in the second quarter this year, bringing in over $24 million in profit, compared with $8 million the quarter before. 

In Wednesday’s financial report, the company referred to the Powder River Basin mines as “discontinued operations,” an accounting term meaning they have not generated profit for Contura. The mines have been considered “discontinued operations” by Contura since the company sold them in 2017. 

Given ongoing negotiations over the sale, Contura has not yet determined the future for the mines, according to the company. 

Contura has also stated its intent to reopen the mines and bring back workers. 

“If approved, upon a successful closing of the purchase of the Western Assets specifically, Contura will endeavor to hire the majority of the displaced Wyoming employees associated with the Belle Ayr and Eagle Butte mines and resume normal mining operations as soon as the company obtains the necessary legal and regulatory approvals to do so,” the company said in a statement on July 25. 

But for over six weeks, hundreds of out-of work miners in Campbell County have awaited definitive news on the fate of the mines. 

“I am very concerned about this,” Godby, the University of Wyoming economist, said of the mines’ precarious status. “... This is not the solution that miners or the town of Gillette were hoping for. Workers likely will continue on an emotional ride of uncertainty.”