Virginia businessman backs out of Kemmerer coal mine deal

By Heather Richards

Casper Star-Tribune

Via Wyoming News Exchange

CASPER — The Virginia businessman who’d planned to purchase and operate a troubled coal mine in western Wyoming has backed out after a failure to secure bonding ahead of a deadline.

Bankrupt Westmoreland Resource Partners was set to sell the Kemmerer mine in western Wyoming to Tom Clarke — a businessman from Virginia who first made his fortune in the health industry but has dabbled, sometimes controversially, in mining operations in recent years.

The bankruptcy court approved a sale of the Kemmerer mine to Clarke in March for $7.5 million in cash and more than $200 million in secured promissory notes.

Westmoreland lenders, however, objected to Clarke’s acquisition of the Kemmerer operation soon after, arguing that Clarke was attempting to close the sale without having first provided collateral or surety for reclamation liabilities in southern Wyoming.

If Clarke had not taken over that responsibility, it would have remained with Westmoreland’s first-in-line lenders.

In a meeting Tuesday in Texas to discuss the objection, it was disclosed to the parties in the bankruptcy that Clarke had rescinded his offer, following an extension and failed attempts to come to an agreement on bonding with Zurich Insurance, according to sources included in the meeting.

A call to Clarke on Tuesday afternoon was not immediately returned.

Peter Morgan, a senior attorney for the Sierra Club, said in an emailed comment Tuesday that Clarke’s failure to secure bonding is indicative of larger issues in coal and should be noted.

“The companies that operate these mines, and the lenders who have invested in them, are pretending like everything’s fine and the industry isn’t going through a historic shift as demand plummets,” he said. “But the surety bond providers who will bear the cost to reclaim these mine sites, if and when they fail, are now taking action to protect themselves.”

Westmoreland Resources Partners — the arm of Westmoreland that owns the Kemmerer mine — filed for bankruptcy late last year. As part of the bankruptcy process, Westmoreland cut retiree health benefits and voided the union contract between Kemmerer miners and the company. Those decisions were justified before the judge, by Westmoreland, as necessary due to prospective buyers’ inability to carry the financial weight of the legacy health responsibilities of former miners.

Clarke arrived promising that with tightened belts the Kemmerer mine would be able to hold on in a challenged coal market.

“Clarke came in on a big old white horse and drove around town for a couple of days,” said Mike Dalpiaz, vice president of United Mine Workers of America District 22, which represents Kemmerer. “He was like Santa Claus. Santa Claus left in April.”

The Kemmerer mine is not Clarke’s first failed business venture in the mining industries.

Clarke was criticized by the Ohio Environmental Protection Agency and the state’s Department of Natural Resources earlier this year when he attempted to buy Westmoreland assets in that state.

State officials were “highly concerned whether the buyers of the Oxford Mines and the Buckingham Mine have the assets to fund all reclamation and surface water mitigation requirements,” the state’s attorney wrote in an objection to the sale.

Clarke backed out of that buy.

In an interview with the Star-Tribune earlier this year, Clarke said his offers in the Ohio mine sale had pushed up other bidders, winning Clarke favor from Westmoreland as he sought to buy the Kemmerer mine.

Through companies formed in Wyoming, Clarke and his wife, Ana, had obtained the lease to mine the Kemmerer operation but had not yet concluded the permit transfer — the final step in a mine sale to a new operator in Wyoming in which the reclamation obligations have been taken up by the buyer, to the satisfaction of Wyoming regulators.

Kemmerer became the second coal mine operating in Wyoming with one company holding the leases to mine and another carrying the reclamation responsibilities.

Blackjewel LLC, a private Appalachian company owned by Jeff Hoops, currently holds the leases for the Eagle Butte and Belle Ayr coal mines. Hoops does not yet have permits for those mines. Contura Energy does.

Contura was formed by first lien holders in the Alpha Natural Resources restructuring in 2016 to take over the Eagle Butte and Belle Ayr mines. Contura and Alpha have since remerged, while the permits for those two mines are still held by Contura.

The Kemmerer mine’s trouble has driven uncertainty into a community of miners and former miners. Retirees from the Kemmerer mine wrote into the bankruptcy court last year asking the judge to protect their health benefits and pensions.

Two bills in D.C. have been proposed that would protect the Kemmerer retirees, but they have yet to attract the support of Wyoming’s delegation, according to a report Tuesday by news website WyoFile.

The United Mine Workers of America continues to bargain a new contract in Kemmerer to replace the one broken by the bankruptcy.

Dalpiaz of UMWA, who is bargaining on behalf of the Kemmerer workers, said it matters little from their perspective that Clarke is out of the picture.

“To be real frank, we didn’t have a dog in the hunt,” he said. “Whoever we get dealt, we play with them.”

Regardless of the buyer, Wyoming’s coal industry appears to be in serious trouble, Dalpiaz said, from Kemmerer to the Powder River Basin.

Kemmerer employed nearly 300 miners at the end of the year. The mine’s largest customer is the nearby Naughton power plant. The utility that owns the plant, PacifiCorp, reported recently that early closure of the Naughton plant and plants in Wyoming and Colorado by 2023 would benefit customers to the tune of $12 million.

PacifiCorp closed one of the older coal units at Naughton earlier this year, cutting a significant portion of the Kemmerer mine’s demand.

Clarke had said he hoped to find new industrial consumers in the region to deal with the decline in existing demand and keep the mine operating at least in the near term.

The Kemmerer mine has operated for more than 100 years.

Documents with further details are expected to be filed in bankruptcy court in the coming days, with a hearing set for late May that may reveal the next steps for Kemmerer’s ownership and future operations, according to those familiar with the case.