GILLETTE — Blackjewel LLC says the three-week old negotiations between Contura Energy Inc. and the federal government continue and a potential sale of two large Wyoming coal mines is not “dead.”

Stephen Lerner, a Blackjewel bankruptcy attorney from the Cincinnati, Ohio, law firm of Squire Patton Boggs, said the wording in a Tuesday afternoon court filing that claimed the deal “is dead” was “unfortunate.”

That Contura’s negotiations with the government over federal coal royalty payments have stalled is “not the case, from the Debtor’s perspective,” Lerner said Wednesday during a hearing in the U.S. Bankruptcy Court for the Southern District of West Virginia.

The hearing was a request to break the Pax Surface Mine in West Virginia out of the original deal with Contura, which agreed to buy the Pax mine along with Blackjewel’s Western assets, the Eagle Butte and Belle Ayr coal mines in Campbell County.

As the only bidder on the three mines, Contura bid $33.75 million for the assets, which included an $8.1 million sale deposit and $24 million to Riverstone Credit Partners for equipment at the Western mines.

Judge Frank W. Volk approved carving the Pax mine out of the original deal and sell it alone to Contura. Under the new deal, Contura will pay $1.1 million and a little more than $5 million of its initial deposit will be allocated to buying the West Virginia mine.

While Riverstone didn’t object to the Pax sale, it did raise concerns that carving it out of the overall deal for Pax and the Wyoming mines could reduce Contura’s motivation to close the sale of Eagle Butte and Belle Ayr. In that case, Riverstone wouldn’t get the $24 million, which it was to accept as a settlement on more than $38 million it's owed as a senior Blackjewel debt holder.

Riverstone’s court filing Tuesday claims Blackjewel had informed Riverstone that the sale to the Western assets “is dead.”

While Lerner said that’s not the case and other possible transactions are being discussed, it’s also clear that as of now, Contura is not going to buy all three mines as a package.

Asked by Judge Volk at what stage the talks with Contura and the government are, Lerner didn’t have any specifics, only that there are “active discussions.”

Not only does the potential sale of the Wyoming mines have nearly 600 local Blackjewel employees in limbo about whether or not they may be called back to work, breaking Pax off of the deal is concerning for Campbell County.

Steven Thomas, an attorney representing the county at the West Virginia hearing, said that the sale of the West mines becomes more suspect as time passes and that Riverstone’s revelation in its court filing that the sale “is dead” is worrisome.

“We noted with some alarm the comment in the Riverstone reservation of rights (court filing),” Thomas said.

He also wanted to make sure the court was aware that if the sale ultimately doesn’t happen, the county still reserves its rights as a senior lien holder on Blackjewel assets. That’s because when the company filed for bankruptcy July 1, it owed the county more than $37 million in unpaid production taxes.

In the end, Campbell County agreed to settle those tax debts and not stand in the way of the sale in the interest of Contura’s promise it would call back as many as 500 local employees.

If that’s not going to happen, then Campbell County has “very large concerns,” Thomas said, and that “if the sale doesn’t go through, Campbell County has liens on Blackjewel assets.”

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