Legislative leadership voted Thursday to create a special committee of lawmakers to try and stem losses from future coal company bankruptcies for both miners and the state.

Priorities for the new committee include securing taxes owed to Wyoming counties, getting the Wyoming attorney general’s office to assist county officials in bankruptcy court and trying to stop companies from ditching their obligations to workers as they reshape and escape debt. This last objective could be a challenge given federal bankruptcy laws’ design to protect capital, not workers, a UW law professor said.

Coal bankruptcies have wreaked havoc on both Wyoming workers and state coffers this summer. Laws passed in the 2020 session won’t shape those ongoing bankruptcies, lawmakers said, but the state could strengthen its position for the future. Some lawmakers also suggested they’re preparing for oil and gas company bankruptcies as well, a dire suggestion for Wyoming’s energy-based economy and government.

The hazards of bankruptcy courts have “been brought to light by very large bankruptcies that happened to coal companies,” said House Majority Floor Leader Eric Barlow (R-Gillette), but “counties are dealing with some of these issues not just with coal but with oil and gas as well.”

The committee, formed five months before the February budget session is slated to begin, will be made up of eight lawmakers with two from the minority Democratic Party, the Legislature’s Management Council decided Thursday. The Management Council is composed of leading lawmakers from both houses and political parties. Speaker of the House Steve Harshman (R-Casper) and Senate President Drew Perkins (R-Casper) will pick the committee members. The new committee can meet for up to six days. Some of those meetings will likely be in Gillette, lawmakers said.

The committee will start with four goals, including the challenging task of protecting Wyoming miners from losing benefits and wages as their former employers go through federal bankruptcy court proceedings. Other priorities include making ad valorem taxes assessed on mineral holdings due monthly to lessen the state’s vulnerability when companies declare bankruptcy and declaring energy companies delinquent on their taxes sooner after they go unpaid.

Management Council convened on short notice — the meeting was scheduled just last week — and deliberated via telephone. The committee took public comment, but no lawmakers were present in the Cheyenne meeting room where some two dozen lobbyists and members of the executive branch listened to the solons debate on speakerphone.

No special session

At the start of the meeting, Speaker of the House Steve Harshman tamped down the idea of a special legislative session to address coal issues. Harshman had floated the idea of a special session in a July interview with WyoFile, saying lawmakers could convene either just before or after the budget session to address coal bankruptcy issues.

The state’s constitution dictates that during a budget session like the one that convenes Feb. 10, any bills besides the measures determining the state’s two-year budget require a two-thirds majority to be introduced to the House or Senate floor. Lawmakers on the Management Council said creating a special committee to write bankruptcy bills will give the legislation a better shot at meeting the two-thirds hurdle than bills brought by individual lawmakers.

There is urgency to the project that requires action even in a budget session, said Senate Majority Floor Leader Dan Dockstader (R-Afton). “We have to have some of these matters decided right now,” he said.

The constitutional restrictions have not stopped lawmakers from dealing with a range of legislation unrelated to the budget in previous sessions.

A greater challenge for lawmakers could be how much the Wyoming Legislature can influence federal bankruptcy courts, said UW law professor Michael Duff in an interview on Thursday. Lawmakers will have to take “great care” in drafting legislation to have an impact, he said.

Can the state protect workers?

Lawmakers suggested the state could write laws to give wages and benefits a higher priority in bankruptcy courts by establishing a “lien” similar to the authority a lender has to seize property if a company defaults on a loan.

But such efforts to protect workers will have to step around federal bankruptcy law or they’ll be outranked, Duff said. “Federal preemption is a formidable obstacle,” he said.

Any tightened lien the state puts into law for workers will likely still put benefits or wages owed to them behind the interests of hedge funds, banks and financiers, Duff said. “The problem comes through when you’re trying to affect the way the property will be distributed” in a bankruptcy proceeding, he said.

“I don’t care what the state writes,” he said. “To the extent it conflicts with the distribution of the property, it’s preempted.”

Still, “there are spaces where the state can regulate,” Duff said. Writing debt prioritization into state statutes governing tax debt or employee obligations could help put Wyoming entities in better shape to collect through the courts, Duff said.

Barlow pointed to a decision in the Cloud Peak bankruptcy case that left a county government in Montana better positioned to collect unpaid taxes than Campbell County.

“The bankruptcy courts do look to state law to say ‘what are the state guidelines?’” Barlow said in an interview Friday.

When it comes to wages and benefits for workers, lawmakers could tighten the criminal code to make prosecution or civil suits against a malignant company easier, Barlow said. In the Blackjewel bankruptcy, employees had money taken out of their paychecks to be deposited into 401(k) retirement accounts, but the deposits were often late.

“I don’t think it’s a reach of the imagination to say that if you take money from someone for a purpose and you don’t give it back to them, that’s a form of theft,” Barlow said. “Do people have to make private claims, wait on the federal government … or is its up to the state of Wyoming?”

Lawmakers could also try to give obligations to employees more prominence in state statute, and thus, hopefully, bankruptcy court, he said.

“Should Wyoming take a stance that a court can look at and say … ‘should that be a priority?’” Barlow asked.

Ad valorem taxes and AG help

The Wyoming Legislature could have a simpler fix when it comes to protecting the ad valorem taxes that are collected by county officials, though some members of Management Council noted it’s a topic lawmakers have debated before.

Current state law allows companies to delay paying ad valorem taxes for more than a year after they’re assessed. The loophole has let companies enter bankruptcy courts with tens of millions in tax debts.

“You don’t have as much lien concern if there’s not as much lien,” Barlow said.

Both Blackjewel and Cloud Peak Energy’s bankruptcies this summer have illustrated the difficulty of securing unpaid ad valorem taxes’ in court. The companies owed tens of millions in ad valorem taxes when they filed. Navajo Transitional Energy Company purchased Cloud Peak’s three Wyoming mines and agreed to pay the outstanding tax bills on them, though the company has capped the total amount of money it will put toward unpaid taxes at around $94 million.

It appears less likely Campbell County will get the $37 million in unpaid ad valorem taxes Blackjewel carried into bankruptcy, though the details of a deal between the company and government officials has yet to be revealed.

Now, lawmakers are considering making the taxes due monthly, like state severance taxes or federal mineral royalties, lessening that vulnerability in bankruptcy court.

But the Legislature has considered making ad valorem taxes a monthly collection for years, and never passed the measure. “These have been discussed numerous times in different committees,” said House Mineral Chairman Mike Greear (R-Worland), who voted against the creation of the special committee. Greear suggested individual lawmakers could bring bills to fix the problem.

Though ad valorem taxes are collected at the county level, they benefit public education statewide. State officials, however, have a history of leaving counties to fend for themselves, according to WyoFile reporting this summer.

That too will be a subject of discussion. The new committee will look into statutes regulating the kinds of cases the Wyoming attorney general’s office can get involved in.

Barlow hopes the select committee can increase the attorney general’s ability to support counties in bankruptcy courts, he said.

“Counties are out here battling for themselves,” he said, “but the majority of the ad valorem taxes are education money.”

Lawmakers could “put it in books and say that there’s a state interest” to collect unpaid ad valorem taxes, Barlow said.