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A third of western coal land left unreclaimed; Blackjewel targets former CEO

The first full week of what experts say will likely be another tough year for the U.S. coal industry concluded with a critical report from conservation groups outlining the magnitude of unreclaimed western mine land.

The Western Organization of Resource Councils wrote that more than one-third of western land mined for coal remains unreclaimed, amounting to about 150,000 acres, or 234 square miles. The council recommended that federal and state governments should ensure that coal producers restore the disturbed land before the operation shuts down, noting that coal mines tend to have the largest acreage of unreclaimed land when production stops, coinciding with reduced revenue from coal sales.

The report also pointed out instability in the western coal industry after Contura Energy Inc. and Cloud Peak Energy Inc. sold their Powder River Basin mines to companies with a less-proven mining track record. Notably, Contura transferred its western mines to Blackjewel LLC, which filed for bankruptcy earlier this year and sold off its assets.

Blackjewel, its affiliated debtors and the official committee of unsecured creditors asked a federal bankruptcy court to investigate former company President and CEO Jeff Hoops. They claim in a court filing that Blackjewel's financial woes were caused by Hoops transferring tens of millions of dollars' worth of assets to benefit himself over several years.

"Throughout Hoops' involvement with the debtors and despite the various fiduciary obligations he owed, it appears that Hoops acted with one guiding principle: to use the debtors and their assets to improve his personal, and the Hoops parties', bottom line — despite the harm it caused the debtors and their creditors," the filing states.

The Navajo Transitional Energy Co. LLC continued to work through a dispute with Montana state regulators last week related to mines purchased from Cloud Peak Energy last year. The new owners have since struggled with its operations amid a dispute with state regulators regarding tribal sovereign immunity.

While the producer and the Montana Department of Environmental Quality, which has required the company to waive its immunity to continue operations, have not reached a long-term solution, they agreed to an extension. The two parties extended an interim limited waiver of sovereign immunity for 65 days to keep the Spring Creek coal mine up and running while they continue negotiations.

Further evidence of the depressed coal space was evident in recent metrics from the railroads. From 2018 to 2019, American railroads hauled about 9.2% fewer carloads of coal, with shipments falling from about 4.4 million carloads to about 4 million over the period. BNSF Railway Co., which shipped the most coal last year, saw the smallest percentage decline year over year, while Union Pacific Corp. saw the largest among the top-four publicly traded U.S. railroads by coal volume.

While domestic demand for thermal coal declines, West Virginia Gov. Jim Justice discussed alternative uses for coal in an address last week. Ramaco Carbon LLC, an affiliate of Ramaco Resources Inc. working to turn coal into carbon products, will open a new facility in the state to research carbon-based products made from the fuel.

Last week, in bankruptcy news, a federal court approved Murray Energy Corp.'s plan for a bidding process to sell off its assets. The company's lenders will form an entity to act as the stalking horse bidder. S&P Global Platts also reported that the Oak Grove metallurgical coal mine in Alabama has been idled without details of a restart timeline. Murray Energy is a majority owner of the company that runs the operation.

S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.

Upcoming events

Coaltrans USA: The 2020 conference will take place Jan. 23-24 in Miami.

15th Annual Southern African Coal Conference: IHS Markit will hold a conference from Jan. 29-31, 2020, in Cape Town, South Africa.

American Coal Council: The ACC will hold its Spring Coal Forum 2020 March 3-5 in Fort Lauderdale, Fla.