GILLETTE (AP) — Rereading a chapter from a favorite novel can often reveal new insight. For Campbell County, Wyoming, Chapter 11 of the Powder River Basin coal industry’s nonfiction tale reads more like a recurring nightmare from a prolonged horror saga.
Cloud Peak Energy Corp.’s recent Chapter 11 bankruptcy filing has local and state officials worried about the future of the company’s three basin mines and the more than 1,000 people who work at them. They’re also scrambling to get in line to salvage even a small fraction of the millions of dollars left owed to the people of the county and state.
The company filed for bankruptcy May 10, which also was the deadline for paying $8.3 million Cloud Peak owed Campbell County in ad valorem taxes for the last half of 2017 coal production. Without strong legal protections at the state or federal levels, it’s anyone’s guess as to how much — if any — of that money will ever be collected.
Because those tax collections are about 18 months behind the actual production of coal, the county also may not see any money for coal mined in all of 2018, which based on 2017’s production could come to about $17 million or more.
That’s a potential $25 million-plus the county may never collect, not counting tax on coal mined through the first six months of 2019. It’s a huge amount of money for any entity to have to write off, said Commissioner Mark Christensen.
“We’ve seen this before and didn’t do anything about it [at the state level] to rectify the potential for these bankruptcies,” he said. “Whether we want to admit it or not, we did this to ourselves to a large degree. And at this point, there really is not much we can do.”
When Alpha Natural Resources filed for Chapter 11 bankruptcy in 2015, the company left about $19 million in unpaid ad valorem taxes owed to Campbell County. While Alpha spun off its two Powder River Basin mines — Eagle Butte and Belle Ayr — into another company and left Wyoming, the bankruptcy reorganization did not include paying any of that debt.
What followed were years of legal wrangling, negotiations and lawsuits that saw Campbell County hire an outside law firm to pursue the money. Eventually, Alpha paid some of the taxes it owed, then came to a settlement last spring to pay all but $4 million of the balance. With the $1 million it cost the county to force the settlement, about $5 million was left on the table.
When coal giants Peabody Energy and Arch Coal Inc. filed for bankruptcy shortly after Alpha, they made a point of keeping up their ad valorem taxes, Christensen said. Those different experiences leave the county unsure what to expect from Cloud Peak’s bankruptcy.
“The best case? They pay up like they’ve always done and like [Arch and Peabody] did,” Christensen said. “The worst case is they don’t pay anything, and we have to get in line.”
Because counties don’t have any secured claims to the debt owed, they won’t get anything until the company’s secured debt holders are paid. The chance for there to be anything left for claims like the county’s is negligible.
It’s a problem not only for coal, but for other extraction industries in Wyoming, like oil and natural gas, said state Sen. Michael Von Flatern, R-Gillette.
Faced with possibly eating millions of dollars in unpaid taxes is a situation the county and state shouldn’t be in, he said. That’s because the Legislature came close to changing state law in 2014 to eliminate the 18-month gap between production and paying the tax.
In 2014, a bill had been drafted that would have required mineral extraction companies to pay their ad valorem taxes monthly, Von Flatern said.
The state of Wyoming already collects severance taxes from companies based on monthly production, so making the county taxes on that same production due on the same schedule seems a logical fix. The main point the coal companies object to is that making the transition to monthly payments will create an 18-month period when they’d be required to essentially make double payments.
While that argument worked in 2014 and the sponsor of the bill dropped it, Von Flatern said it’s unlikely to work now. The state Joint Revenue Interim Committee is expected to draft another bill calling for a change to monthly production tax payments to counties to present in the next session. Even if it passes, it’s still years too late to save counties tens of millions of dollars and expensive legal battles, he said.
“Had that passed in 2014, this would be in effect now and [counties] would be collecting taxes on a monthly basis,” Von Flatern said. “Now we’re stuck with not getting that money from them because they can take 18 months before we can even get a file on them.”