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A haul truck drives the coal seam at Eagle Butte mine (courtesy County 17)

GILLETTE – On Friday, Feb. 19, the U.S. Department of Interior, Eagle Specialty Materials (ESM), and the attorneys in Blackjewel’s bankruptcy case released a settlement agreement for unpaid royalties on federal coal leases mined by Blackjewel, and its predecessor, Contura, at the Eagle Butte and Belle Ayr mines in Wyoming’s Powder River Basin.

According to the legal filing, more than $32 million in royalties are unpaid at the Belle Ayr Mine and $27.8 million in royalties are unpaid at the Eagle Butte Mine, with hundreds of thousands owed in interest.

Powder River Basin Resource Council decries the sweetheart deal struck between the Department of the Interior and ESM, a company that was paid over $80 million to take over the Belle Ayr and Eagle Butte coal mines from Contura during the Blackjewel bankruptcy proceeding in October 2019.

The settlement of approximately $61.5 million debt of unpaid royalties and interest for a few cents on the dollar and insecure interest-free future payments and royalties has cost Wyoming and American citizens tens of millions of dollars. Wyoming receives approximately half of all federal coal royalties, so loses half of these unpaid royalties.

“This terribly one-sided settlement allows Belle Ayr and Eagle Butte to keep operating for now,” said Bob LeResche, a Resource Council Board member, “but it forgives tens of millions of dollars in royalties that should have been supporting Wyoming schools and other federal projects.”

“Interior has failed Wyoming and American taxpayers in two ways in this debacle,” LeResche continued. “First, the bond provided to guarantee financially shaky Blackjewel would pay their royalties was pitifully small. It covered less than 20% of back royalties the company didn’t pay. Second, Interior failed to collect as months went by and unpaid royalties accumulated, and allowed Blackjewel to escape into bankruptcy court before acting in the American taxpayers’ interest.”

“We hope that in the future the Department of the Interior will more aggressively meet their proprietary responsibilities to Wyoming and U.S. taxpayers. They need to manage the thousands of federal mineral leases in Wyoming in a way that collects the critically important revenues that are due.”

“As a miner, you expect the company you work for will make good on what they owe our communities in taxes and royalties. I’m disgusted that Blackjewel didn’t pay what they should have and disappointed that ESM isn’t being held responsible for what is owed,” said Lynne Huskinson, a retired Eagle Butte miner.

The settlement – made to allow Interior to transfer the coal leases from Blackjewel to ESM – collects only a small portion of the unpaid royalties. The deal:

  • Allows ESM to pay off the royalty debt owed by Contura over a ten-year period, interest free, in spite of Contura paying $8.7 million to ESM to hold in an escrow account for this very purpose as part of the October 2019 sale agreement;
  • Forgives ESM from paying all but $324,955 of the Blackjewel debt at the Belle Ayr Mine, leaving over $22 million left as unsecured claim in the bankruptcy proceeding, likely to remain unpaid given the bankruptcy estate’s insolvency;
  • For the $324,955, allows ESM to pay it off over a ten-year period, interest free;
  • Sets up a payment plan for $17.6 million of the unpaid royalties from the Eagle Butte mine, paid interest free, as an additional 1% or 2% royalty on the federal coal leases, dependent on future coal production;
  • Specifies that only $4.5 million of the unpaid Eagle Butte royalty debt can be left as an unsecured claim in the Blackjewel bankruptcy case, but as mentioned above, it is unlikely any of it will get paid;
  • Collects approximately $11.5 million from performance bonds held by Interior on the coal leases posted by Blackjewel, contingent on ESM replacing the bonds for the leases at an amount of $12.7 million.

Additionally, ESM is already in lengthy payment plans for back taxes owed to the state and Campbell County. Meanwhile, the mines have been reducing production and suffer the same economic challenges other Powder River Basin coal mines are facing. Coal plant closures across the nation are reducing production, which puts any future payments at greater and greater risk.

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