How The Alpha Bankruptcy Could Lead To Change In The Law
In the second hour of a fluorescent-lit Board of Commissioners meeting in Campbell County, Chairman Mark Christensen introduces "the long-awaited Alpha Natural Resource payment."
He’s audibly relieved to be entering the final step of a lengthy battle with Alpha Natural Resources, which went bankrupt in August of 2015. The dispute was over the coal company not paying ad valorem taxes; a one-time extraction payment to counties that fund local services, hospitals, and school systems. In 2016, Alpha owed Campbell County over $20 million. The county believed it should receive all the taxes owed to it. The other two coal companies, Peabody Energy and Arch Coal, that went bankrupt alongside Alpha paid those taxes quickly.
"They didn’t try to stiff us or stiff anybody else. And then this company looked for every possible loophole they could find," Christensen said.
Alpha doubled down on not paying its debt and it had a lot of arguments on why it shouldn’t.The companyargued a big chunk of the taxes owed was debt from before filing for bankruptcy which would return pennies on the dollar. Alpha’s position was strengthened by arguing county taxes aren’t a priority in debt payment, allowing it to paytheir firstcreditors and banks first, at the expense of county taxes. Legally, that’s true. But Christensen said it’s still abnormal.
"No other company's ever taken that position becauseit'salways been well established that the taxes came due and they traditionally were paid after the actual product was extracted,” he said. “I find what they did and tried to do and their behavior a little bit reprehensible."
The settlement allowed Alpha to avoid paying $4,373,610.10 in taxes. Of the remaining $11,373,610.10 by settlement, the company agreed to pay $7 million of it. Half of it has already been paid, with the other half expected the first of October. The full settlement summary of both tax years can be found here. Alpha’s Steve Hawkins had little to say in response to all this:
"Only thing I could say on behalf of the company is we’ve gone through the full process of bankruptcy and the case is ready for closure. I think that’s about it," he said.
The arguments made by Alpha would not be possible without a few laws that people have been trying to change for years. Ones that have systematically caused counties to lose out on millions. Between 2006 and 2016, 12 counties have missed out on about $42 million. That’s according to areport from the Powder River Basin Resource Council.
One of the laws enables a slow collection process. Companies don’t have to pay ad valorem taxes for up to 18 months. That allows time for things to go wrong, like say, bankruptcy. Christensen said monthly collection would have resulted in a lot less back tax from Alpha. The other loophole is a county’s lackof priority in the lien process. Most other states have made their taxes superior to all other liens, according to Deputy Campbell County Attorney Carol Seeger.
Mark Christensen said, "this isn’t something that’s just crept up. That's why we’ve tried to address it for such a long time. What’s getting worse though,is at least some of the companies looking for all these loopholes to basically take advantage of it."
Many legislators cite pressure from banking and oil and gas lobbyists in preventing changes to these laws. One bill in 2017 tried to move counties to first priority in debt collection. It passed with flying colors in the house, but was never assigned in the senate, largely from lobbyist pressure. Bruce Hinchey, president of the Petroleum Association of Wyoming, explained moving county liens ahead of banks would be a problem.
"That would be a big issue for any mineral whether it’s us or coal or anybody because then you wouldn’t be able to get bank loans if they did that," he said.
There’s also been discussion of speeding up the 18-month collection timeline,which many legislators see as a threat to a company’s health. Gillette Representative Scott Clem said changing that would force them into paying double ad valorem taxes at some point.
"That’s a huge burden. They’re not strong enough within our existing economy to be able to do something like that. And so, it really hurts them and in turn, it hurts Wyoming," he said.
But Gillette Senator Michael Von Flatern said if there’s a time for a law change, it’s now. He sees the Alpha case as the tipping point.
"The mines themselves can no longer say we’ve always paid our taxes. It’s a terrible thing to have to happen that we lose $4 or $5 million before somebody wakes up and says‘Oh, wait a minute,’" Von Flatern said.
He added this is the biggest loss of tax money the county has ever seen. and there’s still a lot more unpaid mineral taxes on the book. About$15 million owed in Campbell County, over $2 million in Sublette County primarily from one company, and more around the state.
"If nothing is done, you will have this reoccurring in next year, 5 years, 10 years from now," Von Flatern said.
The legislature is expected to discuss the 18-month timeline for ad valorem taxes in a revenue committee hearing in September.