ESM Eagle Butte

A lone excavator moves materials around at the Eagle Butte Mine.

Three months after being called back to work at a pair of shuttered Powder River Basin coal mines, the jobs of hundreds of workers at the Eagle Butte and Belle Ayr mines hang in the balance as Eagle Specialty Materials spars with Komatsu Mining Corp. over a pair of industrial shovels.

ESM is digging in against Komatsu and its parent company, Joy Global Surface Mining Inc., over claims that ESM continues to operate shovels belonging to Komatsu without permission and without compensation. Komatsu seeks court approval to lift an automatic stay on assets that prevent the company from reclaiming its property.

ESM bought the mines from the estate of bankrupt Blackjewel LLC and claims in a Tuesday bankruptcy court filing that the shovels are part of their deal to buy the mines. The company also warns that a ruling for Komatsu “would be a devastating result” for ESM and the former Blackjewel miners who operate Eagle Butte and Belle Ayr.

“If the automatic stay is lifted, the two Wyoming mines will not be able to operate and hundreds of coal miners and related workers will immediately be out of work, leaving their financial future in doubt,” Eagle Specialty Materials says in the response to Komatsu’s motion. “The shovels are absolutely essential to the operation of the mines in Wyoming. At all times, the shovels were considered part of Blackjewel’s assets.”

ESM’s response acknowledges Komatsu is owed money and consideration as a Blackjewel creditor, but “disagrees with the amount Komatsu claims is owed on the liens.”

The companies have “engaged in extensive discussions,” but so far “these talks have not been successful.”

In its motion, Komatsu says it needs “an immediate hearing” on the matter “because the shovels in question are each being operated (by) ESM approximately 16 hours a day, including holidays, with no payment to Komatsu from ESM or (Blackjewel) for maintenance or use of the shovels.”

In a Tuesday evening statement to the News Record, Komatsu says the company has “worked to come to a mutually agreeable resolution but have complete trust in the court to decide what is fair to resolve this matter.”

The statement also said the company won’t comment more on the issue with the court case pending.

A new operator

Eagle Specialty Materials, a subsidiary of Alabama-based FM Coal, bought the Wyoming mines from Contura Energy and the Blackjewel estate in October after Contura’s attempt to buy the mines failed when it couldn’t come to an agreement over unpaid federal coal royalties.

In the end, Contura paid ESM $90 million to assume more than $200 million worth of reclamation obligations attached to the mines. In return, Eagle paid Blackjewel $16.2 million in cash and $32 million to Blackjewel’s senior debt holders. ESM also agreed to pay up to $4.3 million in unpaid bills and debts incurred during the bankruptcy case and unpaid wages and benefits to employees.

The sale also included an agreement to pay about half of the outstanding production taxes owed to Campbell County, estimated to be at least $11 million.

Since October, repeated messages and calls to FM Coal’s top executive Michael Costello and ESM Chief Operating Officer Jeoffrey Pilon have not been returned or promises to respond not followed through with.

Greater good argument

ESM said it is open to paying a settlement over the use of the shovels, but that rather than saying what it would settle for, Komatsu instead filed a court motion “effectively saying: ‘We want the shovels back,’” according to its court filing.

Any other claims by Komatsu over what it’s owed by Blackjewel in unpaid bills and contracts should be filed as a creditor with other claims under bankruptcy rules, ESM says.

But even if Komatsu is entitled to ownership of the disputed shovels and/or compensation for their use, the court also needs to consider the greater good, ESM says in its response.

“Even if Komatsu had met its burden of showing that there is cause to lift the automatic stay — which it has not — the motion should be denied because any cause to lift the automatic stay is outweighed by the burden such relief would place on Blackjewel, its estate, other creditors and the mining operations in Wyoming.”

The dispute over the shovels is one of a number of items on the docket for a Wednesday hearing in the U.S. Bankruptcy Court for the Southern District of West Virginia.

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