Montana Tunnels windfall

DECEMBER: Jefferson County received $5.1 million in payment of overdue taxes from the owner of the dormant Montana Tunnels near Jefferson City. Schools will get a big chunk of the windfall. A worker power-washes large equipment at the dormant Montana Tunnels mine near Jefferson City on Nov. 11.

In the wake of Montana Tunnels Mining’s Dec. 5 Chapter 11 bankruptcy filing, creditors are evaluating their options to collect their portion of the $29.64 million in unsecured debts owed by the owner of the shuttered Jefferson City-based mine.

The filing prevents creditors pursuing a payout while Montana Tunnels either liquidates or reorganizes.

The Montana Department of Environmental Quality is by far the largest creditor on the list filed by Montana Tunnels CEO Patrick Imeson on Dec. 19 with $16.23 million for the mine’s operating permit bond. Next on the list are Montana Tunnels investors: Elkhorn Goldfields Inc. for $6.63 million, Montana Goldfields Inc. for $3.86 million and Black Diamond Holdings for $1.82 million.

Clancy-based Lloyd Mining Services is also on the list of creditors with an unsecured claim of $148,410.67 for owner James Lloyd’s contracted role as the mine’s environmental and regulatory coordinator.

The Environmental Protection Agency also holds a $657,184 claim in the case for a Jefferson City yard site settlement.

Despite receiving more than $5 million from Montana Tunnels in the fall of 2021 for delinquent property taxes, the Jefferson County Treasurer’s Office has made two claims in the bankruptcy case: $2.98 million for mineral extraction taxes and $135,155 for property taxes, each listed as secured by the company’s patented claims and real property. 

Jefferson County Treasurer Terri Kunz told The Monitor that while the property taxes are secured, the mineral extraction fees are not.

“My understanding [is] that this bankruptcy is to reorganize their finances, not a total liquidation,” Kunz said. “It relieves them of paying their debts for a short time.” 

The county can file claims with the court, Kunz added, to collect the delinquent taxes, a process much different from the “arduous” methods used to receive Montana Tunnels’ 2021 tax payout, which prevented the county from claiming the property tax lien.

Other creditors have until March 17 to file a proof of claim in the Montana Tunnels bankruptcy case.

A Dec. 7 article in the Helena Independent Record cited concerns from multiple agencies that the bankruptcy could leave taxpayers shouldering the reclamation costs of Clancy Creek.

DEQ Public Policy Director Rebecca Harbage said the agency prepares a bond calculation to represent the total cost of the reclamation project if the state becomes responsible for the work, which was most recently estimated to be over $36.5 million.

Moira Davin, a public relations specialist for the DEQ, added that the agency currently holds about $21.5 million in bonds from Montana Tunnels towards that total.

“At this time, Montana Tunnels remains responsible for all required reclamation activities, including Clancy Creek,” DEQ public information specialist Kevin Stone told The Monitor.

Montana Tunnels has bigger ambitions than just the reclamation, according to Imeson. The company hopes to hear the booming of mine operations in Jefferson County once again.

In the month before the bankruptcy filing, Imeson appeared optimistic about the prospect of reopening the mine. “We are diligently working on the reopening plan for Montana Tunnels,” Imeson said in a November email with The Monitor.

What that plan looks like, is still unknown. As permitted in Chapter 11 filings, Montana Tunnels could liquidate its assets and pay off a portion of its debts, or it could reorganize and continue operations. 

If Montana Tunnels does reorganize, the DEQ has some say in what the reopening plan will include.

“Resumption of mining would require Montana Tunnels to post adequate bond in full and fulfill other DEQ requirements, such as the relocation of a segment of the Clancy Creek channel away from the pit,” Harbage said.

Montana Tunnels made progress towards the first task with a $500,000 payment towards the bond in April of 2022 and an additional $1 million in September, according to Harbage. The company did not submit its third incremental payment scheduled for November or complete the reclamation requirements on schedule.

While Imeson continues to pursue the mine, others think it may be time for new leadership.

“There’s nothing positive about the Tunnels’ bankruptcy, other than hopefully it opens the door for new ownership to come in and run the mine responsibly, which starts with paying the full bond and performing all necessary actions to make it a safe and productive operation,” Montana Mining Association Executive Director Matt Vincent said, adding that Montana bonding requirements have changed to make these instances illegal. 

Jefferson County Commissioner Bob Mullen expressed mixed feelings on the Montana Tunnels potentially switching hands.

“On the one hand, we know how hard Tunnels has tried to hold the mining endeavor together. We have developed a working relationship with the company principal – Patrick Imeson,” he said. “On the other hand, turning [the] property over to a new owner may result in reopening the mine more timely. We continue to hold out hope for employment opportunities and property tax increases resulting from reopening the mine.”

Fellow commissioner Cory Kirsch agreed with Mullen and said he hoped that the Mine could one day be operational and of economic benefit to the county.

Despite the mine being inactive since 2008, and its inactivity in the Montana Mining Association for decades, Vincent desires a timely resolution.

“The sooner the myriad of issues at Tunnels can be resolved, the better for everyone involved,” he told The Monitor. “MMA will continue to monitor the situation closely and looks forward to offering its expertise and assistance to the state however we can.” 

Montana Tunnels showed promise of reopening in fall of 2021 when the company paid a significant portion of its delinquent property taxes, preventing the county from seizing the tax deed.

“We sincerely appreciate the payment of the delinquent property taxes last fall by Tunnels. The past due taxes paid over $5 million to county government, schools and special districts,” Mullen said.

Creditors involved in the Montana Tunnels Mining bankruptcy case will meet via telephone on Jan. 17 at 10 a.m. to discuss their next steps.

“DEQ is assessing the implications of the Montana Tunnels bankruptcy filing and will participate in bankruptcy proceedings as deemed appropriate,” Stone said.

Christopher Wardell, spokesperson for the EPA, said the organization would continue to evaluate its options in the case moving forward.

Imeson told The Monitor he was unable to provide additional comments before the press deadline due to being out of the country.

(0) comments

Welcome to the discussion.

Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
PLEASE TURN OFF YOUR CAPS LOCK.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.