Owners walk away from debt-ridden, unsafe Utah coal mine

Now-bankrupt owner of closed Horizon mine near Helper offers condominium in lieu of cash to fund cleanup of site’s ongoing threat to environment, public safety<br>

(Francisco Kjolseth | The Salt Lake Tribune) The owners of the Horizon Mine, a shuttered underground coal operation 10 miles west of Helper, have walked away from mine without reclaiming the site which poses a continuing threat to Gordon Creek. Utah regulators reached a deal with America West Resources to accept a Salt Lake City condominium to satisfy the company's financial obligation for the clean up.

Helper • Nearly five years after it was closed amid a swamp of defaulted debt and safety violations, Carbon County’s Horizon coal mine remains dormant while state regulators and federal land managers struggle to get owner Hidden Splendor Resources to pay reclamation costs and unpaid royalties.

The mine sits about 11 miles west of Helper up the Consumers Road along a tributary of Gordon Creek, where sections of coal debris known as fines descend into a dilapidated retention pond.

Before its abrupt closure in 2012, Horizon employed about 80 people tapping a 10-foot-thick seam of high-quality coal about 1,500 feet below the surface — while financial and regulatory problems dogged the operator and its corporate parent America West Resources, headquartered in Salt Lake City.

Eventually, the now-bankrupt operator lost its federal lease on the 16 million tons of coal that remained, due to its failure to pay the $8-a-ton royalty on its 2012 production. For the past several years, the Utah Division of Oil, Gas and Mining (DOGM) has insisted principal Alexander H. Walker III, a Salt Lake City attorney, and his family reclaim the site and address ongoing environmental violations. The Walkers’ responses, meanwhile, indicate they no longer consider themselves the responsible party.

Messages left by The Salt Lake Tribune at Walker’s law office this week were not returned. The Walkers took over the mine in 2003 from the bankrupt Lodestar Energy Inc.

Complicating matters was the lack of a bond, which would normally cover reclamation costs should an operator walk away from its obligations. Instead, the Walkers had posted a Salt Lake City condominium as collateral, which DOGM agreed to accept this spring in lieu of actual reclamation.

The condo’s $585,000 appraisal exceeded the $520,000 estimated cost for plugging the mine portal and returning the 9.5-acre site to a natural state, according to Dana Dean, the agency’s deputy director for mining.

The downtown residential unit recently sold for less than hoped — $498,000 — but Dean believes the sum will be sufficient.

Dean said the collateral bond arrangement, though allowed under agency rules, was “not ideal.”  But, she said, “we still think we have enough money to do a great job to fix the safety issues, and bury on-site or take coal refuse off-site and put topsoil back.”

The agency had planned to begin the five-month reclamation project this year, but because it could not be completed before winter, DOGM will now have to wait until next spring, Dean said.

In 2011, its last full year of operation, Horizon yielded 370,000 tons and its executives were promising investors a major boost in production. In filings with the Securities and Exchange Commission (SEC), the company said it was upgrading Horizon’s room-and-pillar operation with continuous-mining machinery, which would quadruple production. The same filings, however, stated the company experienced a net loss of $23.5 million with a capital deficit of $28 million that year.

“These conditions raise substantial doubt as to our ability to continue as a going concern,” the filing states. Yet, at the same time, then-CEO Dan R. Baker boasted the mine was poised for greatness with big plans for longwall operations.

“With the three continuous miners we have planned, our production rate would be between 1 and 1.3 million tons per year. With longwall mining unit, we can get into a rate of 5 to 7 million tons a year,” Baker told investment promoter George Jarkesy in an interview posted on Jarkesy‘s online program “New Captains of Industry.” “Our company is a diamond in the rough and we are the future for the Utah marketplace as well as the Asian marketplace.”

Jarkesy, a major America West Resources shareholder, wound up being barred from the securities industry because his efforts to promote investment in the Horizon mine and other businesses, regulators contended, amounted to fraud. In a 2014 cease-and-desist order, the SEC ordered Jarkesy and associates to return $1.3 million he had collected in fees and pay $450,000 in fines.

Around the time Baker gave the interview in February 2011, the federal Mine Safety and Health Administration was ordering costly changes to Horizon’s mine plan. After a Dec. 20, 2012, hearing in Price, a hearing officer affirmed penalties of $190,000 for numerous safety deficiencies at the mine, such as inadequate roof supports.

Two months after that order, Hidden Splendor filed for Chapter 11 bankruptcy in Nevada, listing liabilities totaling $51 million and assets worth $6.4 million. Among those liabilities were unpaid property taxes to Carbon County, which has auctioned the land to recoup the revenue.

But officials suspect bad luck rather than incompetence led to the mine’s failure. Hidden Splendor’s costs were rising as market prices of coal fell.

Another crucial challenge, Dean said, was getting fresh air to the mine’s inner workings.

Bureau of Land Management mine engineer Jeff McKenzie said “those were tough conditions. I won’t say they were poor miners. They certainly tried.”

Today, nearby Jewkes Creek remains culverted under the crumbling retention pond that serves as the only barrier between the Horizon mine’s waste and the watershed. The mine’s portal is covered with a chain link fence and steel plates whose seams are filled with sealing foam.

The passageway, according to McKenzie, needs to be permanently plugged with concrete, both as a matter of public safety and to preserve the coal deposits inside.

“We want to make sure it is sealed up so a range fire doesn’t get down there,” McKenzie said. “We want to protect the resource.”