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Sufco Mine owner will pay less money to BLM and move offices to Utah

 

By Robert Stevens

Managing editor

11-8-2018

 

SANDY—The U.S. Bureau of Land Management, after reviewing a confidential filing, has agreed to reduce the level of royalties the mine owner must pay on coal extracted from the Sufco Mine in  Salina Canyon and potentially from the huge Quitchupah and new Greens Hollow leases near the Sanpete-Sevier County line.

The BLM decision should help preserve mining jobs and help create new ones in the region. But it means less revenue for the Utah Community Impact Board, the important state panel that uses royalties to support projects in mining-impacted counties.

The corporation that owns the Sufco, Skyline and Dugout mines, where hundreds of Sanpete County residents are employed, has been granted successfully filing a confidential request to pay less money to mine coal on Bureau of Land Management land in Sanpete, Se, the corporation that owns the Sufco, Skyline and Dugout mines has dissolved and re-emerged under a new name, new management and transplanted to the Beehive State.

The request for a reduction in the royalty percent was made earlier this year by Bowie Resource Partners, which owns the Sufco, Skyline and Dugout Mines, mines that employ hundreds of Sanpete residents. The confidential filings by Bowie cited unforeseen extraction expenses as the reason for the request.

The request was only made public after the Utah Division of Oil, Gas and Mining (DOGM) signed off on the request. In a letter from DOGM director John Baza said the coal would not be “economically recoverable” without relief from the standard 8 percent royalty they are required to pay.

The BLM granted Bowie relief in March by lowering the royalties to 5 percent for 15 million tons of coal extracted from the Sufco mine. The amount would add up to approximately $19 million in reduced royalty revenue, part of which would be lost to the CIB.

The BLM gave only the explanation that Bowie was facing “significant and adverse geological conditions.”

The rate reduction, which applies to coal in the Upper Hiawatha seam in Sufco’s Quitchupah and new Greens Hollow leases, is retroactive to Nov. 1, 2017 and expires after six years, according to the decision notice BLM Utah state director Ed Roberson sent to Sufco general manager John Byars. The document was filed with the DOGM earlier this year.

Ted Zukosky, an attorney with Earthjustice, an environmental litigation group who has challenged royalty reductions sought by other coal companies, says he thinks Utah residents are getting a raw deal by accepting the environmental impact inherent in coal mining and receiving less in impact fees to compensate for it.

Based on the standard formula for distribution of mineral royalties, the relief SUFCO is receiving could mean $9.5 million less funding coming into the rural Utah counties most closely associated with or impacted by local coal mining.

However, the company is subject to inspection by the BLM every six months. In each inspection, it must provide evidence of the need for continued relief, and the BLM can pull the plug early if two consecutive inspections don’t provide grounds to warrant the discounted fee.

Just a few months after the royalty reduction went through, Bowie appointed a new chief executive officer, and last month it announced it would change its name to Wolverine Fuels, LLC and move its headquarters from Grand Junction, Colo. to to Sandy.

Newly appointed Wolverine Fuels CEO James Grech said, “This move will allow the executive team to be closer to our mines, our workforce and our customers.  I want to thank everyone in Utah who encouraged and assisted us with this relocation, especially Gov. Herbert’s office and (Utah) Sen. David Hinkins.” (Hinkins represents Emery County where the Skyline Mine is located.)

In regards to the name and location, Grech said, “In conjunction with the recent management changes and recapitalization of the company, we wanted to offer our employees a fresh start and new identity with the name change.  Our workforce is tough and resilient, very much like a wolverine, so we think our new namesake will resonate very well with our employees and the communities in which we operate.”

The company’s Utah-mined coal is still tentatively slated for export through an Oakland-based export terminal. Developer Phil Tagami, who is financially backed by the company formerly known as Bowie, fought the City of Oakland in court to keep the port project alive. The city argued it didn’t want coal exports traveling through its streets and supposedly impacting the health of its residents, but a judge ruled in Tagami’s favor.

The city has pledged to appeal and continue fighting the export of coal through its city, citing health concerns as justification for spending taxpayer dollars in court.

Recently, Interior Secretary Ryan Zinke proposed the use of military bases to export coal to Asia. The proposal has met with opposition from the same critics of the Sufco royalty discount.