Despite the wave of bankruptcy announcements erupting from Wyoming’s coal sector in recent years, none of the coal companies shut down mines, until Blackjewel.
Blackjewel LLC is the sixth coal producer in Wyoming to file for bankruptcy since 2015. The majority are concentrated in the state’s lucrative Powder River Basin, a region that generated about 40 percent of the country’s coal for power generation last year.
But times have changed, as coal’s once-stable customer base has branched out to cheaper natural gas and renewable energy. Last year, coal consumption reached its lowest levels since 1979, according to the Energy Information Agency.
Tennessee-based Alpha Natural Resources filed for bankruptcy in 2015, followed by Peabody Energy and Arch Coal in 2016. Westmoreland Coal, which operates the Kemmerer Mine in southwest Wyoming, filed for bankruptcy in October. Coal giant Cloud Peak Energy, which owns the Antelope and Cordero Rojo mines, followed suit in May.
The recent merger of Peabody and Arch signaled an inevitable consolidation of the coal sector as output continued to eclipse demand, several industry experts said.
Despite the warning signs, the bankruptcy of Blackjewel added fuel to the fire, catalyzing an even steeper descent into uncertainty. Residents, lawmakers and coal operators suddenly faced the bitter reality of an industry in imminent decline.
On July 1, Blackjewel, headed by former CEO Jeff Hoops, filed for bankruptcy and sent hundreds of mine workers home.
“I think if this bankruptcy taught us anything, it’s just how complicated this could get really quickly when you’re dealing with a private company and processes that are opaque,” University of Wyoming professor of economics Rob Godby said. “It looks like this is an odd situation relative to what we’re used to on so many levels.”
Days have turned to weeks and the company has yet to secure long-term debtor-in-possession funding, or DIP funding, needed to fully reopen the mines.
What happened in the flurry of days following the closure of the Blackjewel mines warrants retelling, as developments from Blackjewel’s case in bankruptcy court continue to unfold and families across the country await answers.
July 1: A sudden surprise
On a clear summer morning like many others in coal country, hundreds of workers shuffled into Blackjewel's Eagle Butte and Belle Ayr mines to start their shifts.
But at around 3 p.m., the day took a turn for the worst. Hoops made a strange announcement to workers: The mines were closing. It was time for workers to head home. He offered few reassurances or additional details, according to several worker accounts. About 600 workers left the mines uncertain of what to do next.
Without any workers, the fourth- and sixth-largest producing coal mines in the country that produced over 34 million tons of coal in 2018, came to a screeching halt.
According to Rick Mansheim, manager of the Department of Workforce Services in Gillette, within a half hour of the closures, the first miner arrived at the agency to apply for unemployment benefits.
The sudden closure of Blackjewel’s mines in Wyoming, as well as West Virginia, Virginia and Kentucky, took several industry experts and workers by surprise.
Just a week before, the company had posted job openings on the workforce services website, according to Mansheim.
But court documents revealed the company had been sliding into a fiscal crisis for some time.
Beginning in January, workers started seeing paychecks, usually deposited on Fridays, delayed as the company spiraled further into debt and struggled to keep cash in hand. Several workers’ retirement payments started not showing up in their accounts about six weeks prior to the closures too.
Hoops transferred millions of dollars back and forth between personal and corporate accounts to avoid overdrafts, according to court documents.
But Hoops told workers their jobs at the mines were secure, many workers said. Do not believe the rumors, Hoops told them.
“He sat in front of all the Blackjewel employees (before the closures) and told everybody, ‘You are safe, there is job security,’ ... but he lied,” former Blackjewel worker Alisha Walker said.
By the time Blackjewel filed for bankruptcy, it owed about $146 million in unpaid taxes. And attorneys for the company would later admit the company owed Wyoming workers over $700,000 in unpaid wages and $900,000 in retirement funds.
July 2: Left in limbo
The two Campbell County mines nestled just beyond the outer ring of Gillette sat silent underneath a cloudless sky the morning after the closures.
About 160 workers had come through the doors of Gillette’s workforce services center in search of help by noon that day, the agency estimated. There may have been many more. Though no workers had been officially laid off, within 24 hours the office ran out of materials for miners seeking unemployment assistance.
Gov. Mark Gordon and other state officials met with Campbell County leaders and miners in Gillette that afternoon to discuss next steps for the community.
Gordon walked locals through the rapid response work that members of the Workforce Services and the Department of Environmental Quality had been conducting throughout the day, from educating out-of-work miners about retraining opportunities to offering financial assistance for job training. Gordon said he had not yet heard from the mine’s owner on any future plans for the mine.
“I look forward to his call,” Gordon said.
July 3: Denied, then approved
Although a federal bankruptcy judge denied the company $20 million in debtor-in-possession financing needed to fully reopen the mines, the judge later approved a smaller, $5 million interim funding package for Blackjewel on July 3. As a condition of the deal, Hoops had to resign.
The new funding source allowed the company to dodge Chapter 7 bankruptcy, or the liquidation of their assets and abandonment of the mines.
But the financing was not enough to fully resume operations at the mines and was exclusively for “essential” security at the mines, firefighting personnel, professional fees of up to $500,000 and other emergency expenses. The mines had stopped producing coal.
Hundreds of workers, as a result, remained uncertain what to do next. In the meantime, the company continued to negotiate additional financing.
July 4: A holiday in court
As Independence Day arrived, uncertainty continued to weigh heavily on Campbell County residents and officials.
Despite the holiday, the court convened after several Wyoming Blackjewel workers said banks had placed holds on their last cashier checks from the company, issued by United Bank in West Virginia.
In the aftermath of the bankruptcy, worker paychecks had been withheld and cashier checks were distributed instead.
Attorneys for United Bank later noted that Blackjewel did not have sufficient funds in the company’s bank account at the time checks were issued to workers.
A federal judge ordered the bankrupt company to honor all checks distributed to its hundreds of workers. The judge urged Blackjewel attorneys to ensure United Bank and other banks cleared the checks as soon as possible.
“I consider this matter to be of the greatest urgency,” he said.
In an email sent to Blackjewel employees on noon that same day, Hoops defended his actions related to the bankruptcy filing and said he loaned the company money to try to help it. Hoops said he took several steps to try to ensure his employees were paid, including flying more than 700 cashiers checks to Wyoming on his private airplane.
“There has not been one cent taken out of the mining company, the exact opposite I have loaned more money to try and get this company through these difficult times,” he wrote in all capital letters.
July 6: More hearings, more waiting
Representatives for Blackjewel were feverishly seeking additional funding to reopen its two shuttered mines, company lawyers said during a bankruptcy hearing held on July 6.
The company would present a new financial package to the court by July 12, or sooner, an attorney added. The judge, who had the authority to approve any new loan, said he would expedite the emergency hearing if Blackjewel secured additional money before that date.
If Blackjewel’s new financial proposal received approval, it planned to reopen its mines and employ at full capacity again, attorneys for the company assured the judge.
July 10: Workers sue
An out-of-work Blackjewel employee filed a class action lawsuit on July 10 alleging the bankrupt company violated federal labor law by failing to notify or compensate hundreds of workers before closing down its mines.
Worker David Engelbrecht filed the class action lawsuit on behalf of himself and other “similarly situated” workers who were affected by the coal mine closures that hit the two Wyoming mines and others in Kentucky, West Virginia and Virginia.
The lawsuit alleged the company violated the Worker Adjustment and Retraining Notification Act, also known as the WARN Act, because Hoops did not give sufficient written notice of the layoffs, nor did he offer 60 days of wages.
Under the WARN Act, the workers would legally be entitled to wages and benefits, attorneys representing the workers said.
July 11: A skeleton crew and a permit stay
Blackjewel announced that a skeleton crew of about 140 workers had been called back to maintain Blackjewel’s mines across the country, performing maintenance and preventing any additional damage.
But hundreds of Wyoming employees, as well as public officials, remained largely in the dark as the case slogged through federal bankruptcy court.
Due to the uncertainty, a state environmental council voted on July 11 to delay a key decision involving the company’s permits.
While Blackjewel owned and operated the Campbell County mines, the former coal operator Contura Energy still held the mines’ permits. The Wyoming Environmental Quality Council voted that day to stay the proceedings, or delay the vote to renew and transfer the permit until “sufficient clarity” is given by the West Virginia bankruptcy court.
“At this point, things are so up in the air I feel that we should stay and see what happens and we can come back to this when we have more clarity,” said David Bagley, who serves on the Wyoming Environmental Quality Council.
July 12: Workers send pleas for help
Several miners filed letters to the judge on July 12, including a group of Blackjewel workers in eastern West Virginia.
“We worked our butts off for this company and they don’t care about the men whatsoever,” the letter stated. “We have reached out to you for your help and would great (sic) appreciate it for you could help us get our pay (what we are owed).”
July 15: Half of funding depleted
A federal bankruptcy judge said the court could reconvene as soon as July 15 if Blackjewel secured long-term financing over the weekend. That did not happen, according to a status report from the company filed that day.
“These efforts are on-going but have not yet produced a final agreement,” attorneys for the company said in the report. “... The Debtors and their advisors will continue to pursue all reasonable alternatives for financing and will continue to keep the Court and interested parties informed.”
But the clock continued ticking as hundreds of out-of-work Wyoming employees awaited a more definitive answer on the future of Blackjewel’s two Western mines.
Halfway through the month, the bankrupt coal operator had already spent 60 percent of the $5 million in emergency funding.
July 17: No deal yet
Another anticipated update from the bankrupt coal operator offered familiar news to hundreds of out-of-work coal miners two days later. Blackjewel had not yet secured the long-term financing needed to reopen the mines, according to court documents filed on July 17.
“These efforts are on-going but have not yet produced a final agreement,” the debtors said in a status report.
In previous status reports offered to the West Virginia federal bankruptcy court, the coal operator offered a forthcoming date to expect additional updates. But the court documents filed July 17 noted that the hunt for additional funding was “on-going” and offered no such date.
“The fact that there’s no news is actually big news,” said Clark Williams-Derry, director of energy finance at the Sightline Institute in a statement. “Two and a half weeks into the Chapter 11 filing, and there’s still no bankruptcy financing deal. Even with Hoops gone from the picture, nobody on Wall Street — not even a distressed debt lender — has been willing to touch Blackjewel.”
July 19: Spoon-fed funding
A federal judge approved short-term funding once again for Blackjewel during an emergency hearing held on July 19.
The judge approved $2.9 million in interim debtor-in-possession funding from lenders Whitebox Advisors LLC and Highbridge Capital Management. The loan would not bring the company’s mines back to full capacity and only provides relief to the company for the following four days.
In a budget forecasting the company’s finances through Monday, the company reported insufficient funds to pay a $2.1 million insurance payment, along with $658,000 in unpaid payroll for employees that returned to work.
According to Blackjewel attorney Stephen Lerner, payments to the insurance company and workers were due that same day.
The two investment firms — Whitebox Advisors LLC and Highbridge Capital Management — are no strangers to the coal sector, or Blackjewel.
In 2017, Alpha Natural Resources transferred idle mines in Kentucky, Tennessee and West Virginia to former Blackjewel CEO Jeff Hoops’ Lexington Coal Company, a deal that included 250 permits and a multi-million dollar financial package to help clean up the mines.
“Whitebox helped finance this exchange and figured prominently as part of a $150 million financing deal,” Williams-Derry said. “The funding was intended to be used for cleaning up the mines and reclamation.”
But Hoops may have used some of the money given to Lexington Coal Company to pay for the operation of Blackjewel, Williams-Derry said, after reviewing court documents.
What’s more, Whitebox has a nearly 12 percent stake in Contura Energy, the former owner of Blackjewel’s Eagle Butte and Belle Ayr mines in Wyoming. Highbridge Capital Management has a 5.4 percent stake in the same company.
The company planned to wire transfer the money to workers before the end of the day.
“The bottom line is that the mines become less and less valuable as they sit idle. (It) increases that uncertainty and leads to more difficulty lining up financing,” economist Godby said. “... It’s critical that these families whose lives were disrupted so suddenly would at least have the opportunity to plan.”
July 24: Hints of a sale
Blackjewel announced it was actively soliciting interest from potential buyers for its assets throughout the country, according to a status report filed on July 24 with the court.
Blackjewel said it contacted more than 20 buyers to explore potential sales and was actively in conversation with eight parties who are “conducting due diligence” and have signed non-disclosure agreements.
July 26: Contura strikes back
Despite objections by creditors and the federal government, a bankruptcy judge approved a request on July 26 from Blackjewel to move forward with the sale of its two Wyoming coal mines and one West Virginia mine.
Coal company Contura Energy offered to purchase Blackjewel’s Eagle Butte and Belle Ayr mines in Wyoming, as well as Pax Surface Mine in Kentucky, for $20.6 million. The company also agreed to supply $8.1 million in desperately needed funding to pay past-due bills and continue maintaining Blackjewel’s mines throughout legal proceedings.
The sale could result in the reopening of Eagle Butte and Belle Ayr mines to full capacity, bringing back over 1,000 out-of-work employees for the next six to 12 years, according to attorneys for Blackjewel. But Contura has not officially become the new owner.
The coal company’s offer must be approved at a final sales hearing scheduled for July 31. As the stalking horse bidder, Contura Energy set the minimum price for auction at $20.6 million, guaranteeing that there is at least one buyer during the sales process.