Davis Graham & Stubbs LLP represents companies in all aspects of the coal industry. Our coal specialists include litigators, regulatory advisers, and transactional attorneys, including those who have served as in-house counsel for leading coal companies.
Coal-Industry Transactions Include:
- Acquisitions and divestitures of operating coal properties and companies
- Due diligence, negotiating and drafting purchase and sale documents
- Negotiating and documenting financing arrangements
- Long-term coal-supply agreements, including cost-plus, indexed, and market-based pricing contracts
Coal Mining-Related Litigation Includes:
- Commercial disputes
- Coal-supply agreement litigation
- Royalty and severance-tax issues
- Antitrust counseling and representation
DGS coal specialists have represented coal companies in administrative proceedings before state and federal agencies, including defending companies in administrative enforcement actions and assisting companies in the permitting process. We represent coal companies in proceedings before the Interior Board of Land Appeals, Federal Mine Safety & Health Review Commission, Office of Surface Mining Reclamation and Enforcement, Bureau of Indian Affairs, Bureau of Land Management (BLM), and Minerals Management Service.
DGS also advises coal clients on the full range of environmental issues affecting the coal industry, including those arising under the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, Surface Mining Control and Reclamation Act, and Toxic Substances Control Act. We have also played an important role in developing deal structures for cutting-edge technologies related to the coal industry, including synfuels, clean coal technology, and power generation projects related to coal development.
- A major western coal company in the sale of its Colorado mine through a creative, tax efficient, limited recourse financing and Rule 144A bond offering structure utilized by the buyer. The sale combined tax, coal, securities, mergers and acquisitions, and public lands expertise.
- A financial buyer in the leveraged acquisition of two major operating Powder River Basin coal mines. Negotiated all aspects of the purchase agreement, debt financing documents, and permitting documentation.
- A major international company acquiring a large western coal-producing property, with checker-board ownership of fee, state and federal lands.
- Peabody Western Coal Company in a challenge brought by the Navajo Nation, which sought to overturn a decision by the Office of Surface Mining (OSM) to terminate jurisdiction over a portion of Peabody’s Kayenta Mine. The Interior Board of Land Appeals upheld OSM’s termination of jurisdiction, holding that OSM’s jurisdiction concerned mining operations, and did not turn on the fact that its lease was issued by and on behalf of an Indian tribe.
- An NYSE-listed energy company in a commercial transaction with Arch Coal, to optimize the mine plan and accelerate the development schedule for a planned mine in Wyoming’s Powder River Basin. The entities exchanged blocks of Powder River Basin reserves to optimize each company’s mine plans, and the client purchased rail, loadout, and surface facilities, “box cut” mine development infrastructure, and other assets.
- A western coal producer in negotiating a series of agreements relating to the construction of a load-out facility, and related long-term coal supply and transportation agreements.
- Arctic Slope Regional Corporation’s negotiation with BHP Billiton Energy Coal related to a five-year coal exploration program and concept-level project evaluation on corporate lands in northwestern Alaska.
- Due diligence in Colorado’s Raton Basin, related to potential mine development.
- A U.S. coal company in selling two mines in the Powder River Basin.
- As part of a coal-company rulemaking proceeding before the Colorado Water Quality Control Commission, DGS successfully obtained revised water quality standards for a stream segment receiving treated effluent from one of our clients’ coal mine operations. The revised standards more accurately reflected stream use and background water quality conditions than those initially proposed by the state of Colorado.
- A Fortune 500 power utility’s divestiture of its coal operations in three Western states.
Western Coal Transactions: Special Requirements
While coal transactions are similar to other commercial dealings in relation to asset transfer, risk allocation, price determination, etc., there are other issues peculiar to coal transactions – particularly in the West. Coal property purchases or sales – which will almost certainly involve federal leases – present other complexities, including:
- Federal Lease Transfer. The BLM will not approve the transfer of a federal lease until after an acquisition is complete.
- Lease Ownership Limitations. Does the buyer own a common carrier railroad? Does the buyer hold a lot of federal coal?
- Diligent Development and Continued Operations. BLM coal leasing regulations impose rigorous requirements on a coal lessee to develop a coal lease and maintain operations on that lease. Failure to meet the requirements may mean the lessee loses its coal lease, and might lose other leases issued under the Mineral Leasing Act, including onshore oil and gas leases.
- Foreign Ownership. If the buyer is an individual, partnership or LLC with foreign ownership, it may not be able to hold federal coal leases. There are ways to structure around this limitation.
- Mine Plan and R2P2. If the buyer intends to use a new mine technology or a new mining sequence, the existing Mine Plan and R2P2 should be reviewed.
- Bonds. Getting replacement surety bonds in order prior to or as of closing may be difficult. There are several ways to allocate and address these risks.
- Ownership and Control. The Applicant Violator System can impede a transaction. At a minimum, making AVS disclosures is burdensome and time consuming. Understanding how to work with AVS is critical.
- Calculating the Economics. Long-term contracts, spot-market economics, legal attacks, and other factors dictate that potential buyers understand all the burdens that it will pay on a ton of coal, including state taxes, federal royalties, Abandoned Mine Land Reclamation fees and Black Lung tax, among others. Rail rates can also affect mine economics, so understanding the legal and economic landscape is critical.
- Due Diligence. Because of regulatory controls, due diligence is especially important in a coal transaction. A mine operator must comply with the full suite of environmental laws, plus SMCRA, MSHA, MMS, and BLM regulations.