CASPER — A string of bankruptcies have ravaged Wyoming coal country this year, as operators erase outstanding tax, labor and reclamation debts during court proceedings, leaving counties and taxpayers facing unexpected budget shortfalls.

But state lawmakers have begun to investigate ways to mitigate the harm caused when mammoth coal companies spiral into insolvency. Meeting Monday as a select committee, the lawmakers convened with the goal of considering effective policy changes that could protect the state and counties from the outbreak of bankruptcies.

Half-a-dozen cash-strapped coal companies that operate in Wyoming have filed for bankruptcy since 2015 as demand for coal sinks nationwide. Hefty legal fees, along with unpaid labor and tax obligations, have wound up leaving some coal-dependent communities in the red. This summer, Campbell County witnessed the closure of two mines when coal supplier Blackjewel ran itself into debt and failed to secure interim funding to continue operation of its mines during its bankruptcy proceedings. The company sent some 600 workers home on July 1 indefinitely and left behind millions of dollars in unpaid taxes. Though a new limited liability company called Eagle Specialty Materials agreed to purchase the idling Eagle Butte and Belle Ayr facilities, the mines have yet to resume full operation due to issues over permit transfers and reclamation liabilities.

Wyoming-based coal company Cloud Peak Energy has also been navigating through bankruptcy since May, leaving behind approximately $8 million in unpaid ad valorem, or mineral production, taxes. The sale of its three Powder River Basin mines to out-of-state bidder Navajo Transitional Energy Company has yet to close.

“There are no winners when a company goes into bankruptcy, particularly when a coal company becomes bankrupt,” said Randall Luthi, chief energy adviser for Gov. Mark Gordon. “...No one is made whole in a bankruptcy … we have remained united in our position that the best result would be to have the miners return to work.”

Multiple people at Monday’s meeting urged lawmakers to consider resurrecting a 2016 bill that would have required coal companies to dish out mandatory mineral production taxes to counties on a more regular, monthly basis (similar to the state’s severance tax). The annual tax payment plan in place enables struggling coal companies to fall behind on the payment, advocates of the 2016 proposed bill reasoned.

“That (tax) money — that is actually owed revenue from minerals that have been sold a year to one and a half years prior; that coal is gone and has been burned,” said Rusty Belt, chairman of the Campbell County Commission. “That money is not really theirs. It’s taxes.”

Lawmakers ultimately withdrew the bill. Energy groups protested the legislation given the disruption in cash flow it would cause if enacted. But it may have a second chance this session, as committee members mull over ways to soften bankruptcy blows.

About 73 percent of the money collected in Campbell County from mineral taxes is funneled to school districts statewide, Belt added.

“We’re trying to collect money on behalf of the schools,” he said. “It does impact the whole state. And that is something that we have to continue to (remember).”

According to Alex Ayers, superintendent for Campbell County School District No. 1, the “environment of large bankruptcies” has imperiled school budgets — not just from the loss of county taxes, but also federal royalties. Wyoming receives approximately half of all federal mineral royalties collected by the Office of Natural Resources Revenue. The vast majority of those funds are dedicated to the state’s K-12 funding.

Blackjewel owed the federal government about $50 million in unpaid federal royalties when filing for bankruptcy.

To Ayers, cash flow issues from the unexpected losses in extraction taxes will likely crop up in the spring, placing his district in the red during March, April and May.

“Recapture districts generally have cash flow issues, but bankruptcies and lack of payments contribute to that,” Ayers explained. “We will have to, for first time in several years, borrow money (from the Department of Education’s school foundation account) in the coming spring. We are anticipating a loan necessary probably between $10 and $15 million.”

Campbell County Commissioners approved a significantly reduced tax payment plan for Eagle Specialty Materials on Oct. 1. Under the agreement, the county will require the new owner to pay just half of the $17.5 million in taxes owed by Blackjewel. The decision brought Wyoming’s newest company one step closer to purchasing Eagle Butte and Belle Ayr mines.

Eagle Specialty Materials, a limited liability corporation formed this month, will pay 50 percent of the outstanding mineral production taxes over the course of five years without interest, according to the agreement reached with commissioners.

The commissioners approved the tax payment plan, but the majority made clear any agreement remained contingent on the company fulfilling its promise to compensate workers for unpaid benefits and wages. Contura Energy, which holds the permits to the mines, also agreed to pay $13.5 million of the $15.1 million it owes Campbell County in production taxes.

“What we would really like to see that go forward, not just because we want to see all employees go back to work, but we have to remember Blackjewel is shipping out coal as we speak,” Belt, the county commissioner, said. “Maybe one or two trains of coal a day. For every coal train leaving we will only get 50 percent of that back. And that’s really concerning to me and should be concerning to everybody.”

When coal companies file for bankruptcy, it’s unlikely a county will have its debts fully repaid.

To Jeff Leisemer, the attorney for Campbell County Commission during multiple bankruptcy proceedings, the county is at a disadvantage when it comes to collecting its debts during bankruptcy cases. Current policy makes it difficult for a county to perfect its liens, or obtain the authority to seize a debtor’s property. If a bankrupt company does not file for delinquency with a county before it goes bankrupt, a county’s lien is at risk of not being honored. In other words, a coal company can argue that a lien was never attached to its coal property.

A new law passed this year aims to change that loophole. The legislation perfects a county’s lien as soon as extraction of coal occurs, opening up more options for a county (the creditors) to pursue unpaid tax money from a company. But the new law does not go into effect until January 2021, leaving Leisemer worried.

“I think (Senate File 118) is an important change and it will be helpful for Jan. 1, 2021,” Leisemer said. “The problem is, as of right now, for any bankruptcy that is filed within the next 15 months or so, we’re still under a different statutory construct that requires the county to file the notice of lien in order tvo perfect it ... It really shouldn’t be that way.”

“Counties of Wyoming need and deserve clarity on this subject,” he added.

But industry groups — both coal and oil — argued law-abiding operators should not be penalized with burdensome changes, especially when the majority of operators in the state have been diligent taxpayers.

“No change suggested today would solve these (bankruptcy) problems,” said Pete Obermueller, president of the Petroleum Association of Wyoming. “Some of those changes will be punitive, and they are not punitive against the companies who the commissioners are mad at ... The state I think needs to go in with eyes wide open to see the burden of a policy shift.”