With skeleton crews working the Belle Ayr and Eagle Butte mines during the third quarter of 2019 as former owner Blackjewel LLC navigated a choppy Chapter 11 bankruptcy, the Campbell County operator still managed to mine and ship nearly 1.5 million tons of coal.

Blackjewel filed bankruptcy July 1 and shut down its 32 operations across Wyoming, Kentucky, Virginia and West Virginia, including Belle Ayr and Eagle Butte, respectively the nation’s fourth- and sixth-leading coal producing mines in 2018.

In figures published recently by the federal Mine Safety and Health Administration, the 39 people working at Belle Ayr produced about 470,000 tons in the quarter, a 91.2% drop from the nearly 5.4 million it produced in the third quarter of 2018. Similarly, Eagle Butte’s 829,000 tons were 86.6% less than the 4.66 million tons mined the previous year.

The reports confirm speculation over the summer that Blackjewel was still managing to ship a little coal while going through bankruptcy and that other Powder River Basin coal producers took advantage of the situation by adding staff and picking up their production, said Rob Godby, director of the Center for Energy Economics and Public Policy at the University of Wyoming’s College of Business.

Despite the Blackjewel drop, the basin’s 12 mines overall only dipped by 9.1% for the quarter with several showing significant increases in production, Godby said. The Buckskin mine increased from 3.8 million to 4.9 million tons, or 28.2%, and Black Thunder posted a 9.8% increase from 19.3 million to 21.2 million tons.

Even another bankrupt PRB coal operator, Cloud Peak Energy, took advantage of Blackjewel’s inability to produce coal during the quarter, he said. Its flagship Antelope mine hired about 60 former Blackjewel employees and increased production by 17.9%, from 5.8 million tons to 6.8 million.

The numbers “suggest that some mines in the basin likely increased production in part to offset the shortfall caused by the Blackjewel bankruptcy,” he said.

Without Belle Ayr and Eagle Butte producing as usual, the basin’s 71.5 million tons of coal produced was a 20-year low, and about 7.2 million tons fewer than the 78.7 in Q3 2018.

The MSHA report also shows that if the Powder River Basin were to produce the same as it did last year in the fourth quarter, 75 million tons, 2019 would finish at about 275 million tons of coal produced for a 6.2% decline over 2018.

More legal hurdles

Although the sale of the former Blackjewel mines to Eagle Specialty Materials is final and ESM is now operating Eagle Butte and Belle Ayr, the mines’ new operator is being called out for allegedly using equipment it doesn’t own or have permission to use.

A motion filed in the U.S. Bankruptcy Court of West Virginia by Komatsu Mining Inc. says that it owns a pair of large coal shovels, one at each Campbell County mine, and that the shovel at Belle Ayr is being used by ESM without permission or any compensation agreement with Komatsu.

The motion points out the court had earlier stipulated that the shovels are the property of Komatsu and that the sale of the mines did not include that equipment. It’s asking the court to order ESM to stop using the shovels and that about $1.1 million is owed in an accelerated contract termination agreement.

“ESM has no legal interest in the shovel, which remains estate property and should be immediately enjoined from any use of the shovel in which it has not interest,” the motion says. ESM “is operating shovel Serial No. ES41125 located at the Belle Ayr mine without any right, title or interest in either of the shovels resulting in a diminution in value.”

Komatsu also says that ESM has not sought to negotiate or reach an agreement for use of the shovels, “but rather has repeatedly demanded credit terms, one-sided concessions and modifications to the contracts in favor of … ESM.”

Because the shovels were not part of the sale to ESM, they are still technically part of Blackjewel’s estate and Blackjewel bears the burden of paying the “considerable expense” involved in the five-week process it takes to disassemble and move the shovels, the motion says.

A preliminary hearing on Komatsu’s motion about the shovels is scheduled for Wednesday in U.S. Bankruptcy Court.

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