UPDATE: This story was updated on Aug. 5 with the results of the Blackjewel auction. — Ed.
David Stetson, Contura Energy’s new CEO, stands to earn a $1 million salary, with the potential for a $450,000 bonus, and other valuable benefits in his first year of employment according to a company filing with the U.S. Securities and Exchange Commission.
Contura Energy is poised to reacquire two shuttered Wyoming coal mines it offloaded two years ago after a successful bid in a bankruptcy auction. The company made an initial stalking-horse bid of around $21 million for the two Wyoming mines and a metallurgical mine in the east.
Contura’s bid increased to more than $33 million over the course of the bankruptcy auction, according to bankruptcy court testimony on Monday. The court adjourned without the judge ruling on Contura’s bid, and is set to reconvene in the morning.
Stetson is experienced in managing struggling coal companies, according to industry press and various coal company statements. He’s shepherded several coal companies, including Alpha Natural Resources, through bankruptcy and its immediate aftermath. Alpha created Contura during its 2016 bankruptcy restructuring and spun its Wyoming mines onto the offshoot’s balance sheet.
Contura then sold those mines — Eagle Butte and Belle Ayr — to Blackjewel for no profit, in order to escape from financial obligations associated with the mines’ end of life, particularly mine reclamation obligations of nearly $230 million. But a state permitting challenge by the Powder River Basin Resource Council held-up up the deal and Blackjewel crashed into bankruptcy before the transfer was completed.
Now Contura, back on the hook for reclamation costs, seeks to reopen the mines, according to court filings made in the West Virginia bankruptcy court. That move is raising hopes of reemployment among miners, and fresh revenues among state budgeters, even as questions begin to emerge about Contura’s intentions and stability.
In industry news articles and company press releases, Stetson is described as a cost-conscious, conservative operator with a track record of restructuring troubled coal companies. Besides Alpha Natural Resources, he served as chairman for a spinoff from Westmoreland Coal Company when it emerged from bankruptcy earlier this year. The operation did not manage the Kemmerer Mine in Wyoming, owned by Westmoreland. Stetson also served as Chief Restructuring Officer for Trinity Coal during that company’s bankruptcy in 2013.
“People like myself understand you don’t overleverage yourself, you don’t overextend yourself,” Stetson told S&P Global, a business publication, in May 2017. “What we’re trying to do here is stay disciplined. We’re trying to focus our attention on our cost,” he said.
In later interviews with that publication, Stetson has favored metallurgical coal properties in the East over the thermal coal operations Wyoming depends on. In March, 2018, while managing Alpha — which after spinning properties off to Contura focused on mine reclamation and metallurgical properties — Stetson did not express optimism for thermal coal.
“You’re going to continue to see a tightening inside the United States in demand for the thermal product,” he said, though he said thermal coal markets could “remain strong in the short term.” Nor did Stetson say that the election of coal-friendly Donald Trump as president would halt the decline of the thermal coal industry.
“I did not believe, nor do I think President Trump ever suggested that he was going to create an atmosphere in the United States where you were going to start seeing a greater thermal burn,” Stetson said.
“What I think he was trying to do and what we’ve seen is trying to ease some of the regulatory burdens that we all have experienced in the past,” Stetson said.
Stetson’s focus on metallurgical coal matches that of Contura’s. In a statement announcing its bid for the Eagle Butte and Belle Ayr mines, the company conceded it had sold them to focus on metallurgical coal.
“Contura’s divestment of these [Powder River Basin] assets over a year and a half ago was a strategic decision to focus on our met-heavy eastern asset base, and while that remains our strategic focus, our considerations changed when Blackjewel declared bankruptcy,” said Andy Eidson, interim co-chief executive officer, in the company statement.
The company did not mention its remediation obligations in Wyoming, but alluded to not having great choices outside of restarting the mines. “Absent another qualified purchaser for the assets, we have determined that the most prudent path forward is to reacquire these mines to reestablish operations, resume safe and responsible coal production, and bring hundreds of miners back to work,” the statement said.
Though many Blackjewel miners have greeted Contura’s return with optimism on social media pages, the company is showing some signs of trouble itself. Wyoming Public Media has reported that Contura has lost money in three of the last five business quarters. Contura’s stock price also plummeted after Blackjewel announced its bankruptcy, presumably as investors saw the reclamation obligations in Wyoming hung back around Contura’s neck.
Stetson will be highly paid for trying to solve those challenges and figuring out the Wyoming mines’ futures. In his first year with the company, Stetson, 62, is eligible for a $450,000 bonus. The year following, Stetson could earn up to 125% and 200% of his base salary of $1 million a year — an up-to $2 million bonus, according to the SEC filing. Stetson, an apparent Florida resident, will also receive a $10,000 a month stipend for his car and house costs in Bristol, Tennessee, where Contura is based, along with three first-class flights a month between Bristol and Fort Walton, Florida. Stetson will also receive stock benefits, the SEC filing reads.
