DOGM Director Baza tells of cessation order for Hiawatha Coal Company

By PATSY STODDARD Editor

The Emery County Public Lands Council met in their May meeting. There were several federal and state agencies represented to give updates on their various projects and activities.
John Baza, the director for the Utah Division of Oil, Gas and Mining gave an update. He said oil and gas activity in the state has really slowed down, last month there were 18 active drilling rigs statewide and that number is now down to 16 compared with 50 last August. The problem when rigs are idled is they are hard to get back up again. DOGM estimates there will be 1,200 permits issued by the end of the year. Five are currently permitted in Emery County and last year there were 26 here. Baza reported all applications and permitting will be done online in the future and they are moving toward that end and hope to go paperless as soon as they can.
Under the coal program report, Baza said Bear Canyon Mine has been ordered to cease operations by the division. They can finish the current long wall panel on which they are working, but can do no work for future development. This panel has approximately three weeks left. The order to cease operations goes back to a compliance action from last year. The middle of last year the CW Mining Company sold the company to Hiawatha Coal company. They tried to transfer the permit and submitted an application, but the required paperwork and the posting of a bond in the name of the Hiawatha Coal Company wasn’t completed.
DOGM determined that with the CW Mining Company in bankruptcy court that DOGM wasn’t in a postion to do a permit transfer because the situation was too complicated. Actions were not being taken by the coal companies to complete the permit transfer, so DOGM felt they had no other recourse than to issue the cessation of operations order in February. “We didn’t feel like we could do anything else,” said Baza.
Hiawatha Coal Company is now prevented from working on the change of application and bond due to the cessation order. The bankruptcy court determined the trustees in the court case will now make the decision on whether to allow Hiawatha Coal Company to continue to mine the coal so the trustees will get their money or the trustees could determine to allow another coal operator to mine the coal. The bankruptcy court said the CW Mining Company did not properly sell the mine.
They allege the CW Mining Company sold the mine to Hiawatha Coal Company and then declared bankrupcy in order to avoid paying creditors. DOGM indicates they will work with the trustees to get the Hiawatha Coal Company permitted if that is the course they choose. The trustees have until the middle of June to make a decision on the coal operator. Baza said, “The mine will reopen, there is just too much coal there to just leave it.”
The lands council members noted there will be a lag time between when the mine would close and reopen of about a month or more. They wondered if any issues that may arise from this closure will be addressed. Baza said he has alerted his coal program director, Dana Dean to stay alert. Water issues could come up. Baza said they have also notified the Office of Mine Safety and Garth Nielson and advised him to keep track of the situation. Council members also wondered about the economic impacts of the mine being closed. Baza said he doesn’t have the exact number of employees, but any closure for any length of time will affect the economy of Emery County.
Baza said Norwest is the consultant for the trustee and is keeping the trustee pretty well informed.
Baza said DOGM is considering fee increases for the coal program. Proposals include $5,000 or $6,000 for a new application and an annual fee of $8,000 or $4,000. When DOGM met with the coal operators the fee increases were met with a cold reception said Baza. Discussion will continue on the subject of fee increases. Recent budget cuts from the legislature have made things difficult for DOGM. Currently they are down two people in the coal program, and it’s not known if these positions will be filled.
Baza commented on how well the Emery County Public Lands Council works and how few counties have anything in place that compares. “I will commit to have someone here each month at these meetings,” said Baza.
In the Nov. 25, 2008 issue of the Emery County Progress there was an article which talked about the bankruptcy of CW Mining and the following is a reprint of excerpts from that article to give some background information into the bankruptcy matter and what led to that action. In talking to Charles Reynolds, president of the C.W. Mining Company he states the company has been sold which will allow it to continue operating and employing miners as well as the related trucking companies that haul coal from the Bear Canyon mine. Reynolds said, “In October, 2007, Aquilla, Inc. was awarded a $24.8 million judgement against C.W. Mining Company, operator of the Bear Canyon Mine. “C.W. Mining Company attempted to negotiate a settlement with Aquilla, Inc. which would allow C.W. Mining Company to continue to operate and stay in business. Aquilla, Inc. refused to respond to any settlement offers, but instead garnished C.W. Mining Company’s bank accounts, notified all of C. W. Mining Company’s creditors that it was unable to pay its bills, and filed a petition for an involuntary bankruptcy against C.W. Mining Company, making it impossible for the company to continue in business.
“After several months of attempting unsuccessfully to settle with Aquilla, Inc., C. W. Mining Company sold the assets of the Bear Canyon Mine in an effort to keep the mine operating and protect the jobs of its employees. The mine was sold to Hiawatha Coal Company, the current owner of the old Hiawatha Mine. “The sale of the mine will allow the Bear Canyon Mine to continue to operate under the new ownership, protecting the jobs of the employees, since Hiawatha Coal Company is not a party to the bankruptcy,” said Reynolds in Nov. 2008.