Campbell County, NTEC have deal for back coal taxes

GILLETTE — After extensive negotiations and legal wrangling, Campbell County finally seems to be on track to begin receiving tens of millions of dollars in unpaid coal production taxes.

The Campbell County Commission on Tuesday morning unanimously approved a payment plan agreement with Navajo Transitional Energy Co. on an estimated $44 million in back ad valorem taxes owed for production from the last half of 2017 through last year.

NTEC bought the Antelope and Cordero Rojo mines in Campbell County from Cloud Peak Energy Corp., which sold the mines — along with the Spring Creek mine in southern Montana — to the Navajo Nation-owned company in a Chapter 11 sale last year.

As part of the bankruptcy court-approved sale, NTEC agreed to pay Cloud Peak’s back production taxes to Campbell County. That includes $8.3 million owed for the last half of 2017 production that was due last May 10 just hours after Cloud Peak filed for bankruptcy. It also covers $17.7 million for coal mined in 2018 and close to the same for 2019, based on production.

Since the sale of the mines to NTEC was finalized in October, NTEC and the county have been talking to work out a plan for paying the back taxes, said Campbell County Administrative Director Carol Seeger.

Those talks have been fruitful and a deal has been hashed out, she said.

The agreement calls for NTEC to make one payment right away, then monthly for a year, she said. After a year, the company will continue to make installments on the balance due through the end of 2026.

The announcement of the deal to pay the back taxes comes on the heels of NTEC striking an agreement with the state of Wyoming on a waiver of its sovereign immunity as a native corporation. The waiver allows the state Department of Environmental Quality to enforce regulations associated with coal mining, including holding NTEC accountable for nearly $300 million in reclamation obligations.

The company has operated the mines for more than four months and continues to search for private bonding to cover reclamation. Once it does that, it can apply for a state permit to mine. It’s now operating as a contractor covered by Cloud Peak’s bonding.

ESM could be a trend-setter

As the county prepares to finalize it agreement with NTEC, it’s also on the verge of setting what could be an important precedent for Wyoming’s energy production industries.

Eagle Specialty Materials, which bought the Eagle Butte and Belle Ayr coal mines from Blackjewel LLC last year during its bankruptcy sale, is set to make its first ad valorem tax payment to Campbell County for coal it mined in the last few months of 2019.

What’s significant about that payment is it will be the first time a coal producer has paid its county production taxes monthly on the same schedule it pays its state severance taxes.

ESM is “prepared to make their first monthly payment” this week, Seeger said.

Paying its ad valorem taxes monthly instead of on an 18-month delay that’s currently allowed in Wyoming is something Eagle Specialty Materials agreed to when it negotiated to buy the mines from Blackjewel.

“It’s never been done before,” Seeger said, adding that if the payment comes in this week as promised, it will send an important message to the 2020 Wyoming Legislature now in session.

One of the high-profile bills on the table this year is House Bill 159, which would amend state law to allow counties to collect ad valorem production taxes monthly.

One of the major talking points surrounding the bill is an assertion from the energy industry that it’s too much of a financial burden to implement because it means companies would be paying extra money they can’t afford during the time they’re paying monthly and making up their 18-month backlog owed under the current system.

That ESM is already doing it shows it can be done, Seeger said.

Along with making monthly payments, ESM already has a payment plan in place to pay some of the back taxes Blackjewel left on the table during its bankruptcy, she said.

After Contura Energy  a $13.5 million settlement on taxes it owed for coal it mined before selling the company to Blackjewel, ESM agreed to make up 50% of the balance owed by Blackjewel, which comes to about $11 million.

ESM  $1.7 million of that within three days of its sale to buy the mines closing. It will then pay out the balance in either annual or monthly installments from 2021-2024.

Along with the ad valorem schedule, the Legislature also is expected to discuss closing a loophole in state law that would help avoid another disastrous bankruptcy like what happened with Blackjewel last year.

In that case, the company abruptly shut down and locked out nearly 600 Campbell County coal miners. At the time, they were owed back wages and contributions to their retirement and health savings accounts, along with numerous problems with their health insurance.

Had the state required companies to have employment bonds as a safety net for a worst-case scenario like what happened with Blackjewel, the lockout may have been easier for the workers and state to weather.

Employment bonds would mean workers would not have to rely on the state and federal governments to recover the wages and benefits owed them when a company goes bankrupt, state Rep. Eric Barlow, R-Gillette, has said.

Prior to the start of the legislative session, Barlow said closing the loophole at the state level would send a strong message.

“You don’t get to rip off our folks,” he said. “And if you do, we’re going to come and investigate and get what they’re owed back.”