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Wyoming, Montana bankruptcy sale of coal mines OK’d by judge

(Ryan Dorgan | The Casper Star-Tribune via AP file)Rail cars are filled with coal and sprayed with a topper agent to suppress dust at Cloud Peak Energy's Antelope Mine north of Douglas, Wyo., in January 2014. A judge on Monday approved the sale of three mines in Wyoming and Montana owned by a bankrupt coal company, helping to keep the mines open and allow repayment of debt.

Gillette, Wyo. • A judge on Monday approved the sale of three mines in Wyoming and Montana owned by a bankrupt coal company, helping to keep the mines open and allow repayment of debt.

New Mexico-based Navajo Transitional Energy Co. will pay Wyoming-based Cloud Peak Energy Corp. $15.7 million under the deal approved by U.S. Bankruptcy Judge Kevin Gross in Delaware.

The company owned by the Navajo Nation will assume Cloud Peak's debts. That includes a $40 million, second-lien promissory note and up to $20 million in debts accrued since Cloud Peak filed for Chapter 11 reorganization bankruptcy May 10, the Gillette News-Record reports .

Navajo Transitional also will pay Cloud Peak's tax liabilities, make royalty payments and assume all obligations to reclaim the mines if they close.

Cloud Peak owns the Antelope and Cordero Rojo mines in northeastern Wyoming and the Spring Creek mine in southeastern Montana. The sale also includes Cloud Peak's Sequatchie Valley reclamation project in Tennessee.

Several recent bankruptcies have roiled the Powder River Basin region, which is the largest U.S. coal producing area. The bankruptcy of Milton, West Virginia-based Blackjewel closed two top-producing mines in the basin since July, putting 600 miners out of work.

The Cloud Peak mines, which employ about 1,200, will operate as normal until the sale closes, Cloud Peak President and CEO Colin Marshall said in a statement announcing the winning bidder.

The sale is encouraging because it might enable Campbell County, where the Wyoming mines are located, to collect $8.3 million in unpaid taxes, Campbell County Commissioner Mark Christensen said.

"It looks to me like they want to be a good neighbor and I think that's all really exciting," Christensen said. "This is really the best possible option we could have had."

Navajo Transitional has not disclosed its plans for the Wyoming and Montana mines but agreeing to pay future royalties hints that the mines will remain open, said Rob Godby, director of the Center for Energy Economics and Public Policy at the University of Wyoming.

The Navajo Nation could benefit from tax advantages that make the coal operations more competitive, Godby said.

"They probably have favorable tax status for Native corporations," he said.

A Navajo Transitional mine supplies coal to the Four Corners Power Plant in New Mexico, which is scheduled for shutdown in future years. The Powder River Basin mines could replace some of that lost revenue.

“They clearly have experience in Western coal,” Godby said. “This is basically investing in the best coal basin in the country and potentially keep them in coal.”