GILLETTE — Blackjewel LLC has reached a deal to sell the Belle Ayr and Eagle Butte surface coal mines in Campbell County along with a mine in West Virginia.
If approved, Contura Energy would become the stalking horse bidder for Blackjewel’s western assets, along with the Pax Surface Mine in West Virginia, according to a motion filed early Thursday morning with the U.S. Bankruptcy Court for the Southern District of West Virginia.
The linchpin of the deal is $20.6 million cash Contura will put down as a deposit that the company can use immediately to continue to keep up its shuttered coal production operations around the United States.
The agreement may be good news for the nearly 600 workers locked out of its Wyoming mines, but will still leave about 1,000 workers at 29 other Blackjewel properties in limbo. After three weeks of negotiating with creditors and potential buyers, it’s the only deal Blackjewel could get that allows the company to avoid filing a straight Chapter 7 bankruptcy liquidation.
The stalking horse sale will allow Contura or another entity that bids more to operate the mines “for an estimated minimum of six to 12 years,” Blackjewel’s motion says.
Blackjewel has asked for an emergency hearing at 12:30 p.m. Thursday to present its motion to the bankruptcy court. If approved, it could bring Contura Energy full circle with the Belle Ayr and Eagle Butte mines.
Contura was formed as a stalking horse bidder for the mines when they were sold during the 2015 bankruptcy of Alpha Natural Resources. It operated the mines until selling them to Blackjewel in December 2017 in a deal for no money, but in which Blackjewel assumed debt and liabilities associated with the mines.
Contura has a financial stake in seeing the mines remain open because it still holds the permit to operate the mines with the state of Wyoming and is still on the hook for guaranteeing nearly $250 million in reclamation obligations.
Blackjewel filed for Chapter 11 bankruptcy reorganization the morning of July 1, then hours later abruptly shut down its coal operations in Wyoming, Virginia, Kentucky and West Virginia. The move locked out about 1,700 employees and began a spectacle that’s seen failed attempts to secure financing to carry the company through bankruptcy, a coup by creditors to oust former president and CEO Jeff Hoops and more than 1,000 employees left with bounced final paychecks.
If approved by the court and Contura is the winning bidder, the deal won’t include any other money other than the deposit. Instead, it will assume the hundreds of millions of dollars in liabilities associated with the mines, including paying locked out employees for hours worked before the lockout.
The motion also asks the court to do away with the company’s 401(k) program, which means the operator will no longer be responsible for paying employees’ contributions through to their retirement accounts. It would not mean workers would lose the money already in their 401(k) accounts.
While not the outcome Blackjewel wanted and it still leaves big questions about what happens with its dozens of other shutdown properties and about 1,000 employees, the company said this has become the only viable option.
“The Debtors and their advisors have determined that the sale process … is the only opportunity to maximize value, avoid a permanent operational shutdown of the Western Mines and the Pax Surface Mine, return as many employees to work as possible and ensure that, ultimately, the necessary reclamation is undertaken with respect to those mines,” the motion says.
Contura also commits to bring back “the majority of employees” to the Belle Ayr and Blackjewel mines. It’s unclear how many employees are associated with the Pax mine. The federal Mine Safety and Health Administration shows employment there of about 100 people, but no coal production.
The condition that Contura puts down the $20.6 million deposit and that the company can use that money immediately “is absolutely critical,” according to the motion. “The stalking horse bid and purchase deposit allow the Debtors and their advisors the breathing room necessary to allow them to focus on what is important – achieving a successful sale (or sales) and getting as many people back to work as quickly as possible.”