Cloud Peak sale wins final OK

GILLETTE — While much of the Powder River Basin’s coal industry was monitoring a U.S. Bankruptcy Court sale hearing for Blackjewel LLC’s Wyoming coal mines in West Virginia on Wednesday, another bankruptcy court also was approving the sale of Cloud Peak Energy’s three active Powder River Basin mines to Navajo Transitional Energy Corp.

Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware signed an order Wednesday giving final approval of the sale of the Antelope and Cordero Rojo mines in Campbell County and Spring Creek mine in Montana.

“We are pleased to have this final order approved and look forward to assuming operations in Montana and Wyoming in mid-October,” said NTEC CEO Clark Moseley in a press release announcing the order. “As a company, we have a solid record of returning mines to profitability and doing so as an industry leader in safety and reclamation.”

The sale makes NTEC the nation’s third largest coal producer.

The Native corporation based in Farmington, New Mexico, will take over mines that employ about 1,200 people and pay about $230 million annually in federal and state taxes and royalties.

NTEC was selected as the winning bidder for Cloud Peak’s major assets in an August bankruptcy sale.

During a short Friday morning status hearing with Judge Gross, Cloud Peak attorney Paul Health said the company anticipates an Oct. 18 closing date for the sale and that NTEC has agreed to retain virtually all of the company’s employees.

“They are taking all but six of our employees, and we’re very, very happy with that,” Health said. “We’re pleased to report the NTEC sale is on track.”

Navajo Transitional Energy is buying the mines, along with the Sequatchie Valley reclamation project, for $15.7 million cash to be paid as a deposit upon closing the sale. NTEC also will assume a $40 million second lien promissory note and pay up to $20 million in post-petition debts accrued during the bankruptcy process.

The company has agreed to pay a 15-cent per ton royalty for five years on coal produced at the Antelope and Spring Creek mines, and the same royalty on coal produced over 10 million tons at the Cordero Rojo mine.

The native corporation also has agreed to pay any pre- and post-bankruptcy federal, state and local tax liabilities Cloud Peak has outstanding and assume all reclamation obligations.

That’s good news for Campbell County, which wasn’t paid $8.3 million in production tax that was due just hours after Cloud Peak filed for Chapter 11 bankruptcy protection on May 10.

Navajo Transitional Energy also owns the Navajo Mine in the Four Corners area and is organized under the Navajo Nation.

It’s that relationship with the Navajo Nation that has brought up questions about the sale to NTEC. The company’s only shareholder is the Navajo Nation, but it operates independently under its own board of directors.

Allegations that NTEC undertook the bidding for and purchase of the Cloud Peak mines without consulting the Navajo Nation Council is the subject of a Sept. 27 news story in the Navajo Times newspaper.

In that report, Shiprock, New Mexico, delegate Eugenia Charles-Newton says the sale “is a deal that cannot and should not be supported by the Council.”

Those rumblings “suggests that the community there probably is not entirely behind this deal,” said Rob Godby, director of the Center for Energy Economics and Public Police at the University of Wyoming. “You have to wonder what’s going on there, and there is some noise coming out about it. But whether it’s just smoke and not much else or there’s a real fire there we just don’t know.”

The Blackjewel sale of the Eagle Butte and Belle Ayr mines to Eagle Specialty Materials was given its final OK by the court on the same day the NTEC sale was signed. It means that four large Wyoming coal mines representing 24% of 2018 Powder River Basin production were essentially sold on the same day.

It also could mean an end to an at-times tumultuous summer for Campbell County coal miners and the industry, Godby said.

“Wyoming has spent this summer learning from the school of hard knocks,” he said, referring mostly to a messy Blackjewel bankruptcy that saw hundreds of workers put out of work without notice.

It also raises some questions for the future of coal in the PRB, he said. That’s because the basin continues to post production losses and less demand as coal-fired electricity generation shuts down around the country.

“I’m still interested to see at what scale Belle Ayr and Eagle Butte reopen to,” he said. “As for NTEC, it’s easy to see why they want Antelope and easy to see why Spring Creek represents an investment for anyone. Cordero Rojo, though, is a burden with the lowest grade coal of any of them.”

Along with a pending merger of coal giants Arch Coal and Peabody Energy, all the mines in the PRB continuing to operate in the long run seems unlikely, Godby said.

“The way current conditions are, somebody’s got to blink in all of this eventually,” he said.

Overall, however, the news seems better for all involved, he said.

“For once, there’s at least some short-term good news in the Blackjewel case and the Cloud Peak one is progressing as it should, despite some reports of internal dissension in the tribe,” Godby said.

News of PacificCorp’s plans to shut down its coal-fired power plants earlier than anticipated is a warning that “in the longer term, we’re going to be seeing more of this,” Godby said, adding that for now, Campbell County residents can breathe a little easier.

“In the short term, this is good news for the community of Gillette,” he said. “But for the long term in the state, it’s kind of like ‘Groundhog Day.’ It’s going to keep happening.”