Blackjewel LLC and Eagle Specialty Materials LLC reached an agreement with the U.S. government and other stakeholders that will settle a dispute over unpaid royalties and allow Eagle Specialty Materials, which bought Blackjewel's mines during a bankruptcy restructuring, to take over federal coal leases in the Powder River Basin.
The settlement, detailed in a motion for approval in the U.S. Bankruptcy Court for the Southern District of West Virginia on Feb. 19, involves federal coal leases associated with Eagle Specialty Materials' Belle Ayr and Eagle Butte mines in Wyoming. Including interest, the government lists $61.5 million in payments owed from activities connected to the two mines, but the settlement guarantees less as a substantial amount of the debt will be treated as unsecured claims against Blackjewel as it proceeds through bankruptcy reorganization.
"This terribly one-sided settlement allows Belle Ayr and Eagle Butte to keep operating for now, but it forgives tens of millions of dollars in royalties that should have been supporting Wyoming schools and other federal projects," Bob LeResche, a board member of the Powder River Basin Resource Council, said in a statement. The council is a Wyoming agriculture and conservation organization.
Contura Energy Inc., now using the name Alpha Metallurgical Resources, previously owned the two Powder River Basin coal mines but sold them to Blackjewel. Later, Contura paid Eagle Specialty Materials $81.3 million in cash to take over the mines, including an additional $8.7 million paid into an escrow account to be used to make payments on a federal royalty claim. That deal also provided that Eagle Specialty Materials would indemnify Contura against reclamation obligations, taxes and other liabilities associated with the operations.
The new settlement sorts the government's claims into three liability periods: the period before leases were transferred to Blackjewel, the period between that transfer date and Blackjewel filing a petition for bankruptcy July 1, 2019, and the period between July 1, 2019, and Sept. 30, 2020. The settlement gives Eagle Specialty Materials time to pay off the various categories of debt owed to the government, including 10-year, monthly payment plans that waive interest on some of the claims.
The U.S. Interior Department will call Blackjewel lease bonds now in place at the Belle Ayr mine and will apply the proceeds of the $5.7 million principal to over $27.1 million in principal owed from the period before Blackjewel filed for bankruptcy. The remaining $21.4 million and associated interest become a general unsecured claim against Blackjewel as it proceeds through its bankruptcy restructuring.
Eagle Specialty Materials will pay $17.6 million in debt associated with the Eagle Butte mine across all three liability periods under the terms of the settlement. Eagle Specialty Materials is to pay that debt through two additional monthly royalty payments on coal produced of 1.0% and 2.0% each. The Interior Department will also call a lease bond now in place with Blackjewel for Eagle Butte and apply the $5.7 million in proceeds against the liabilities.
The settlement establishes that Blackjewel will still owe $4.5 million across the liability periods associated with the Eagle Butte mine. That amount will become an allowed general unsecured claim against Blackjewel as well.
Eagle Specialty Materials must also replace the $11.5 million in lease bonds posted by Blackjewel with $12.7 million in surety lease bonds.
