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A coal train rolls out of Gillette in 2016. 

Lawmakers on a special committee heard new evidence Monday of the damage recent coal company bankruptcies wrought on Powder River Basin communities before ordering up a suite of draft bills and legislative research in an effort to respond. 

The newly formed Select Committee on Coal/Mineral Bankruptcies asked for five initial bill drafts, largely on tax issues. Chief among the tax bills, and likely to trigger the most industry contention, was a measure to make mineral tax payments to counties due monthly. Committee members also asked for ideas for future bills that would allow Wyoming to intervene in federal bankruptcy courts to protect its energy workers from unpaid wages and benefits — as was the case with Blackjewel.

Though fixes for vulnerabilities in collecting taxes have been discussed by lawmakers over the years, statute to protect workers was a more complex topic the committee was not ready to put attorneys to work on. Instead, they asked Legislative Service Office attorneys to consult with Michael Duff, a UW law school attorney who testified before the committee, about potential bills the committee could advance.

Duff advocated for the state to get involved in bankruptcy court on behalf of its workers. Bankruptcy issues are “likely to intensify,” he said, “and I do think there’s value to articulating policy [for workers] through setting state standards.” But  he cautioned that it will likely prove difficult to intervene in a federal legal process that is designed to protect lenders and financiers. 

“Establish what your policy is going to be and if you have to defend it, so be it,” he said.

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A mine engineer stands next to an unearthed coal seam at the Jim Bridger Coal Mine in southwest Wyoming. 

The committee heard from a range of stakeholders. Testimony by a Campbell County school district superintendent, county officials, an out-of-work Blackjewel employee and officials with the Wyoming Department of Workforce Services opened new windows into the ways the volatile bankruptcy proceedings have hurt Wyoming coal country. Lobbyists for the coal, oil and gas industries appeared to express support for some reforms. But in debate with lawmakers that at one point turned testy, they argued the industry should not have to shoulder the burden for what Wyoming Mining Association Executive Director Travis Deti called “bad actors.”  

Meanwhile, the governor’s new energy advisor, Randall Luthi, urged lawmakers to proceed cautiously and find a “sweet spot” with regulation that would not burden a fossil fuel industry whose future he said the Gordon administration is optimistic about. 

New insight into losses 

Lawmakers heard from two parties that provided fresh insights into how bankruptcies have impacted Wyoming workers and government coffers, and particularly how the government propped up workers Blackjewel abandoned. 

The Department of Workforce Services has assisted out-of-work miners and their communities with everything from mortgage payments and rent to mental health services, agency director Robin Sessions Cooley told lawmakers. The department helped at least 60 miners find new jobs and assisted others in signing up for unemployment assistance and later, as the bankruptcy proceedings stretched on, health insurance.

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Legislative Service Office staff and a sprinkling of lobbyists listen toward the end of an Oct. 14 meeting of the Select Committee on Coal/Mineral Bankruptcies. Many lawmakers and stakeholders called into the meeting with the exception of Senate President Drew Perkins (R-Casper) and Sen. Michael Von Flatern (R-Gillette).

Officials from the agency have investigated 27 claims regarding unpaid wages and benefits, including overtime wages, unpaid overtime and deductions for 401k retirement accounts and health savings accounts that were taken from workers paychecks and never deposited. Through those 27 investigations, officials found a total of nearly $140,000 owed to workers. 

The actual number is likely much larger, said Kelly Roseberry, an administrator with the Labor Standards division. The U.S. Department of Labor found Blackjewel owed 506 Wyoming miners money in one form of another, she said. That agency estimated the total of lost wages and benefits for those workers was around $816,000.

The true total is likely much higher, Roseberry suggested, given that just the 27 employees her agency investigated account for $140,000 in losses. 

Though the agency attempted to file a claim with the bankruptcy court for the money owed, a federal trustee told Roseberry she did not have the standing, Roseberry told WyoFile. Subsequently, attorneys for Blackjewel wrote Roseberry and asked that the agency retract its claim, she said. 

Former Blackjewel miner Rory Wallett, who through the bankruptcy has become an advocate for fighting for coal’s revival, chimed in with a more personal assessment. His losses on the bankruptcy came to $5,500, he said, not to mention the months without work. He and his colleagues disagree about what was taken from them, he said. “The $5,500, I’d give it up in a second if they called me and said we’re going back tomorrow,” he said. “I know a lot of my colleagues feel the same about that. On the other side, a lot are die-hard set that they want that money.”

Public schools, which have taken cuts from the Legislature in recent years, are also being hurt by the bankruptcies, according to testimony. Though new buyers for Cloud Peak and Blackjewel mines offered some hope that Campbell County will eventually collect lost taxes, those collections are too distant to prevent some damages, officials argued. 

Because of the bankruptcies and lost taxes, Campbell County School District #1 is operating in the red and will be asking the state for a short term-loan of between $10- and $15 million to pay its bills, Superintendent Alex Ayers said.

While mineral ad valorem taxes are collected at the county level, the majority of the revenue collected in Campbell County is usually redistributed throughout the state, a testament to just how extensive the county’s mineral wealth is. Ayers’ testimony Monday suggested that relationship has flipped, at least for now. 

Early sparks on tax fix

Chief among the legislation lawmakers ordered drafted was a tweak to tax law that would force energy companies to pay mineral ad valorem taxes on a monthly basis, instead of more than a year after the tax debt is accrued. Ad valorem taxes are levied based on the assessed value of a mineral company’s holdings. The existing system has let mineral companies carry large tax debts into bankruptcy. 

Monthly payments would dramatically cut down the debt companies carry into bankruptcy, county officials and their tax reform allies in the Legislature have long argued, which could decrease the risks bankruptcies pose on county revenues. 

But the committee will have to contend with an energy industry that was far from thrilled about the proposal, which it argued would impose a sudden burden on its cash flow. The bill, based on ones that previously died, would call on energy companies to pay off accrued 2018 ad valorem tax payments while at the same time beginning to pay new ad valorem taxes monthly.

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Employee vehicles fill a parking lot at Belle Ayr mine in August 2016. Blackjewel LLC, which runs the mines, declared bankruptcy July 1 and sent nearly 600 miners home. 

Lobbyists argued the proposal would hurt responsible energy companies in order to punish those that have fallen into bankruptcy. The argument echoes claims coal companies have previously used to oppose the statute change. One of those opponents was Cloud Peak Energy, which carried significant tax debt — some tens of millions of dollars owed — into bankruptcy, according to county officials.

Deti acknowledged the commissioners’ subsequent criticisms of Cloud Peak on Monday, saying the company had “pushed” his group for its previous lobbying position against the change to monthly payments. “It makes it tougher to defend our position today,” he said. Deti said his group could be agreeable to monthly payments but oppose paying both new and previously owed taxes during a transition to the new law. 

A lobbyist for the oil and gas industry agreed.

“Some of those changes would be punitive but they’re not punitive to the companies that [county commissioners] are angry about,” said Pete Obermueller, executive director of the Petroleum Association of Wyoming.

Operators across all three of Wyoming’s fossil fuel industries are hurting, Obermueller said, citing low natural gas and oil prices alongside coal’s well-documented supply and demand woes. “If the state makes a policy choice that accelerates that demise, that would be a shame,” he said. “The state I believe has to go into it with eyes wide open to shoulder the burden of a policy shift like this.”

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Sen. Michael Von Flatern (R, SD-24, Gillette).

To get energy companies on board with the change to monthly ad valorem taxes, Obermueller suggested lawmakers allow them to write off the ad valorem taxes they owed on years past while immediately switching to the monthly payments. 

Otherwise, he said, the sudden tax burden would hurt the faltering industry and could even “accelerate” bankruptcies, he said. 

Though governments would write off hundreds of millions in tax debt, the proffered deal would not put holes in county and state government budgets because they’d begin collecting new monthly taxes that would replicate what they were projected to earn on prior years taxes, Obermueller argued. 

“You can get to the policy that everyone seems to want without hurting revenue at all or hurting industry at all,” Obermueller said in a phone interview after the meeting.

A fiscal impact note that accompanied the monthly tax collection bill stated public schools would earn a tax windfall from the proposal. In fiscal year 2020, school districts “would receive an estimated additional $284 million from 2019 [mineral] production on top of the 2018 production revenue,” the LSO estimated. Lawmakers suggested they could reduce any windfall by lowering payments made to public education from state severance taxes. 

Still, the idea of letting energy companies off the hook for a year and a half of taxes did not sit well with some lawmakers on the committee. Two Laramie Democrats, House Minority Floor Leader Cathy Connolly and Senate Minority Floor Leader Chris Rothfuss, pushed back on Obermueller’s suggestion. Rothfuss called it a “bold proposal.”

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Senate Minority Floor Leader Chris Rothfuss (D, Laramie).

A Republican, Sen. Michael Von Flatern (Gillette), argued that the lost tax dollars were coming from more than just a few bad actor coal companies. Campbell County has lost out on over $100 million dollars in ad valorem tax revenue to coal, oil and gas operators over decades, Von Flatern argued. 

Lawmakers ultimately asked their attorneys to research how the transition to a monthly tax payment scheme could be structured to spread out the burden on the energy industry. 

‘Coal is not dead’

Meanwhile, lawmakers received a rosier assessment of the oil, gas and coal industries’ future from the governor’s new energy advisor, Randall Luthi. 

“Despite reports to the contrary, coal is not dead,” Luthi said. He urged lawmakers to remain vigilant in a struggle against an “anti fossil fuel fervor” that threatens coal, oil and gas. Luthi also expressed optimism for the Gordon administration’s moves to continue efforts to find a technological way to reverse coal’s decline by capturing and using carbon dioxide emissions.

Luthi is a former Wyoming Speaker of the House who joined Gordon’s staff this summer as energy policy advisor, after a long career working for both the energy industry and federal regulatory agencies in Washington, D.C. He spoke optimistically about bankruptcies’ imminent resolutions, with buyers emerging for both the Cloud Peak Energy and Blackjewel mines in Wyoming.

In the meantime, Luthi said, the governor’s staff seeks to protect the state’s assets from bankruptcies without hurting solvent operators. Lawmakers will “hopefully find a sweet spot for both industry that have continued to pay their bills … and those that have gone through bankruptcy and hopefully we’re seeing the end of those,” Luthi said.

Asked by WyoFile if the governor’s office was committed to make sure taxes energy companies owe the state and county are collected, Luthi answered that “what we’re committed to is trying to find a fair solution.” The state, like Campbell County, is likely to give up half the taxes Blackjewel owes on the Eagle Butte and Belle Ayr mines, if a deal with a new buyer, Eagle Specialty Materials, goes through.

WyoFile is an independent nonprofit news organization focused on Wyoming people, places and policy.