A last-minute motion from Blackjewel LLC is asking the U.S. Bankruptcy Court to add a condition to the sale of the Eagle Butte and Belle Ayr mines in Wyoming to Eagle Specialty Materials.

While it’s not expected to affect the sale of Blackjewel’s Western assets, the late Monday motion adds another condition to the sale for ESM’s parent company, FM Coal, to also assume about $100 million worth of reclamation obligations on already-defunct Blackjewel Eastern properties.

That’s because Lexon, a bonding and insuring company, holds those Eastern reclamation bonds and is being asked by ESM to provide bonding for about $230 million worth of reclamation obligations attached to the Eagle Butte and Belle Ayr mines.

Lexon won’t take on all of that itself, so to free itself up for the Western bonding is requiring FM Coal to assume those permits in Appalachia.

It’s something FM Coal, Blackjewel and government agencies have been discussing for some time, said a person with knowledge of the negotiations who asked not to be identified.

While making those Eastern properties part of the deal for the Western assets wasn’t in the original plans, “It’s not a surprise,” the source said, adding that “it’s a collective desire of everyone to make sure the state isn’t left holding the bag. … The goal is to get all this stuff cleaned up and stop having this black eye on the industry.”

There are other terms involved, but those weren’t disclosed.

The bottom line, according to Blackjewel’s court motion and the source, is that the sale to Eagle Specialty Materials is still on track to close as early as Wednesday.

“Subject to the approval of this court, … an affiliate of ESM’s parent will acquire the Eastern permits and assume the associated reclamation obligations so that ESM can obtain the bonding needed to close the sale of the Western assets, which is now expected to take place on Wednesday, Oct. 9, 2019,” the motion says.

ESM was given final court approval to buy the mines last week in a deal that would see it receive $90 million from Contura Energy to assume the reclamation obligations. Eagle also will pay Blackjewel $16.2 million in cash; pay $22 million to Blackjewel’s senior debt holder, Riverstone Credit Parters; pay any unpaid bills and debts incurred during the bankruptcy up to about $4.3 million; make the employees whole by paying any unpaid wages and benefits owed.

Eagle also will repay 50% of the county production taxes Blackjewel owes.

Fraud probe

Monday’s late motion about the Lexon bonding comes less than 48 hours after a weekend court filing that confirms the federal government has been investigating Blackjewel LLC since before it filed for bankruptcy July 1.

The company has been subpoenaed in the government’s “investigating potential violations of the False Claims Act” by Blackjewel, according to court documents. Because the company continues to go through its bankruptcy process, the government is asking the court to extend a deadline to to allow the company to discharge all of its debts and dissolve through Dec. 4.

That Blackjewel is the subject of a federal investigation doesn’t surprise many in Gillette, said Campbell County Commissioner Mark Christensen. The company and its former CEO, Jeff Hoops, have been “acting in bad faith for quite some time,” he said.

When Blackjewel filed for bankruptcy, then abruptly locked out about 1,700 coal miners in Wyoming and Appalachia, it revealed a scheme of juggling money between its coal mines in a way that was bound to collapse, Christensen said.

“I am happy the feds are looking into it,” he said. “I still think Wyoming should look into this separately. We got screwed more than anyone. There was lots of money coming out of the mines here to pay for those back in Appalachia.”

Employees were given rubber paychecks, haven’t been paid for time worked and had their contributions to their own retirement and health savings accounts withheld. “It just scratches the surface of the malfeasance done here,” Christensen said.

That’s why the Campbell County Commission in August asked the county attorney if it could bring Hoops up on criminal charges. And while the government’s motion doesn’t mention Hoops specifically, he was leading the company during the time the alleged fraud happened.

“If you look at his track record, he’s never really run a mine successfully,” he said. “I think anything anybody can do to craw up his (rear end) is for our benefit.”

Hoops and other Blackjewel executives may not be let off the hook for how they tanked the company, which “should be a welcome bit of news for the employees,” he added. “That company wrecked all these peoples’ lives. … They just left a wake of complete (crap).”

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