Editor’s note: The information in this story was current as of Sept. 1.
Coal mines in the Powder River Basin have weathered a tumultuous summer. Two mines in Campbell County were abruptly shut down after Blackjewel LLC declared bankruptcy, leaving the mines unattended and hundreds of workers jobless. Cloud Peak Energy is under new ownership after also declaring bankruptcy and securing a purchase agreement while remaining in operation.
Blackjewel filed for bankruptcy July 1 and immediately closed Eagle Butte and Belle Ayre mines, both near Gillette. Approximately 600 workers were abruptly sent home. The Casper Star-Tribune reported that when the mines were shut down, the company owed $146 million in unpaid taxes, $700,000 in workers’ wages and $900,000 in retirement funds.
While company officials appeared to conceal the severity of the financial distress of the company, a letter from the Powder River Basin Resource Council and 19 other environmental watchdog organizations to the Office of Surface Mining Reclamation and Enforcement dated July 15 indicates they were expecting the company to fold.
“While Blackjewel/Revelation Energy’s bankruptcy took many by surprise, it did not surprise our organizations, as we have been closely watching the companies and have seen a troubling pattern and practice of environmental and workplace violations, as well as financial mismanagement,” it said. “The companies, and their affiliated entities, have dozens of outstanding Surface Mining Control & Reclamation Act (SMCRA) and Clean Water Act violations, along with almost $1 million in outstanding Mine Safety and Health Administration (MSHA) fines and penalties.”
Contura Energy, a previous owner of the same mines, offered to repurchase the assets for the minimum auction price of $20.6 million, as the company already had standing reclamation obligations estimated to cost the company as much as $100 million over the next decade.
“Absent another qualified purchaser for the assets, we have determined that the most prudent path forward is to reacquire these mines to reestablish operations, resume safe and responsible coal production, and bring hundreds of miners back to work,” Contura said in a press release July 25.
However, Contura CFO Andy Eidson expressed to Wyoming Public Media that he only had short-term expectations for the Wyoming mines. Approximately one month later, the company filed a motion in federal bankruptcy court to separate the sale of the two Wyoming mines from one other in West Virginia. U.S. Bankruptcy Court documents filed Aug. 27 describe the sale of the Wyoming mines as “dead.”
Contura filings suggest the wording of the cancelled deal as “unfortunate,” as there may be a possibility for active discussions to continue. However, at this time, Contura has not articulated any intention to purchase the Eagle Butte and Belle Ayre coal mines.
PRBRC Executive Director Jill Morrison said the abrupt closure of the mines has created an environmental hazard.
“Blackjewel just walked away from that mine and left it in an unsafe condition,” Morrison said, adding the vacant mine site had exposed coal, which can spontaneously combust. “Nothing has been followed in the regulations in terms of this abrupt closure of the mines.”
Morrison said regulations state that after a mine is idle for 30 days, the operator is required to submit notice to the DEQ and updated annual report.
“The DEQ is ignoring requirements for status of its mines and ensuring we know exactly what is going on. We are concerned about what’s happening,” she said.
Cloud Peak Energy filed Chapter 11 bankruptcy May 10, citing changing market conditions for its inability to continue operating. Its Spring Creek, Antelope and Cordero Rojo mines, also in northeast Wyoming, remained open during the filing. A federal judge approved Navajo Transitional Energy Company, based in Farmington, New Mexico, to purchase the mines Aug. 19.
According to a press release from CPE, the purchase agreement includes a $15.7 million cash payment at closing, a $40 million second lien promissory note and a five-year term royalty on future tons produced.
The sale of CPE assets was considered robustly competitive.
“Cloud Peak Energy had suffered in recent years due to very high levels of debt created by borrowing to finance certain acquisitions,” NTEC said in a press release. “Despite solid performance at the mines themselves, the company was unable to sustain the finance costs associated with this debt.”
In his announcement of the acquisition, NTEC Management Committee Chairman Tim McLaughlin called the purchase exciting and historic for the Navajo tribe.
“Since NTEC was created, we have shown that we can not only improve operations, become financially successful and support job growth, but also balance economic development and environmental protection. NTEC is able to do this because our decisions are based on more than just our bottom line. They are based on the people and land that we are connected to,” he said.
When complete, the purchase will qualify NTEC as the third-largest coal producer in the U.S. NTEC estimates the new acquisition of the three Wyoming mines combined with their existing Navajo mine will add over $1 billion for the Navajo Nation and its members.
The cycle of bankruptcy and resale of these mines is likely to continue because the coal industry, as a whole, seemed destined for an irreversible decline.
According to the Institute for Energy Economic and Financial Analysis, no new coal-fired power plants are being built in the United States, and others are expected to retire or convert to use natural gas. Gains in electrical machine efficiency and alternative energy sources and advances in battery capacity have also contributed to the decline of coal for energy.
IEEFA analysts issued a report Aug. 12 warning that economic volatility within the coal industry is far from over and described the regional coal market as being in a permanent, structural decline that began a decade ago and is set to continue.
Currently, the Powder River Basin generates approximately 40% of all coal used for power in the United States.