Blackjewel Mines Officially Have A New Operator

Oct 21, 2019

Blackjewel Belle Ayr sign
Credit Vikki Strande/Facebook

Eagle Specialty Materials, LLC (ESM) will soon become the operator of the Eagle Butte and Belle Ayr coal mines. The affiliate of FM coal will receive $81.3 million from Contura Coal West in order to take over all reclamation liabilities and operator-ship.

The U.S. Bankruptcy Court for the Southern District of West Virginia initially approved Contura to take back the two mines, but its executives later explained the company did not have long-term plans for the assets.

In 2017, Contura intended to remove itself from the west by paying Blackjewel to take over the two mines, but was unable to finalize the plan. This deal is more explicit in removing all responsibility from Contura in the case of bond forfeiture.

In order to do that, Contura will not only pay upwards of $80 million, but also an additional $8.7 for federal royalties, and $13.5 million to Campbell County in ad valorem back taxes.

"In our view, this transaction represents a best-case-scenario outcome to a lengthy and uncertain process, putting the mines in the hands of an operator with a long- term interest in the Powder River Basin, and getting hard-working coal miners back on the job," said David Stetson, Chairman and Chief Executive Officer of Contura.

On October 1, the Campbell County Commissioners held a meeting to negotiate the deal. The vote was 4 to 1 with Mark Christensen, chairman of the committee, against. He said Contura should be paying the full amount in back taxes.

"[Contura] has done everything they can to take advantage of us," he said earlier this month, mentioning the company would not pay the full $15.1 million owed in coal production taxes. "Contura is making record profits then screwing us for $1.5 million."

The other commissioners voted for it because Eagle Specialty Materials promised $1.8 million in order to pay back former mine employees in missed 401 (k) and Health Savings Account payments.

On October 8, the deal between Eagle Specialty Materials and Contura hit a snag. Lexon Insurance Company and Sompo International Insurance (Lexon) alerted ESM that it would not move forward with replacing surety bonds that guarantee reclamation costs unless certain conditions were met.

In order to protect itself, Lexon required FM coal to assume more than $100 million in reclamation obligations for a corresponding 135 mining permits in Appalachia. Once that happened, Lexon would agree to issue replacement bonds.

With ad valorem tax and reclamation issues taken care of, ESM and Contura have officially closed the deal. ESM can operate the mines during the transfer process though the permit transfer is still pending. No official timeline has been laid out. There is also no public info on how former miners will recoup lost payment from the proposed $1.8 fund.

Have a question about this story? Contact the reporter, Cooper McKim, at cmckim5@uwyo.edu.