New company enters possible deal for idle Wyoming coal mines

GILLETTE, Wyo. (AP) — Another buyer has entered a potential bankruptcy deal that could allow two idle Wyoming mines to reopen but would in effect pay the coal company to do so.

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Bristol, Tennessee-based Contura Energy said Wednesday it reached a tentative deal to pay Jasper, Alabama-based FM Coal $90 million to take the Eagle Butte and Belle Ayr mines. Contura also would pay Campbell County $13.5 million for unpaid local taxes.

In exchange, FM Coal subsidiary Eagle Specialty Materials would settle certain outstanding debts to creditors and assume $237 million in reclamation bonds associated with the mines.

The proposal relieves Contura of future liabilities associated with the Powder River Basin mines while providing "long-term employment opportunities for hardworking miners" and government revenue, Contura Chairman and CEO David Stetson said in a statement.

"Contura has found a buyer to take over its obligations and it's effectively paying them to take them over," University of Wyoming economist Rob Godby explained.

Milton, West-Virginia-based Blackjewel filed for bankruptcy July 1 and shut down the two mines, putting some 600 people out of work. The Eagle Butte and Belle Ayr mines were the fourth- and sixth-most-productive U.S. coal mines in 2017, according to the U.S. Energy Information Administration.

A bankruptcy court in August approved the mines' sale from Blackjewel to Contura but the deal has been held up while the U.S. government seeks payment of federal mineral royalties. Contura, which previously owned the mines, still holds their Wyoming permits and bid nearly $34 million for the mines at a bankruptcy auction.

The new deal that would transfer the mines from Contura to FM Coal also would need approval from a bankruptcy judge and Contura's board of directors, the Casper Star-Tribune reports.

The proposal to pay FM Coal to take the mines does not bode well for mining in the Powder River Basin, the top U.S. coal-producing region, said Clark Williams-Derry, director of energy finance at the Sightline Institute, an environmental think tank.

"These two mines have been hot potatoes and you have to sweeten the pot with extra cash payments," Williams-Derry said.

But an FM Coal official recently told Campbell County commissioners the company planned to operate Eagle Butte and Belle Ayr long-term, Commissioner Mark Christensen told the Gillette News-Record without naming the FM official.

"He feels confident in their ability to make money, and if they can that's good," Christensen said.

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Information from: Casper (Wyo.) Star-Tribune, http://www.trib.com