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Lawyers for bankrupt coal mine operators Blackjewel LLC told a federal judge late Tuesday afternoon that it had secured new financing — a significant development after their previous lender backed out of a $20 million loan earlier this week.

“The Debtors have obtained additional debtor-in-possession financing from a new third party that is substantially final as to its terms and is subject to the third party’s final internal approval which is expected no later than (Wednesday) morning,” the company stated in court documents.

If the deal is approved by the judge, the company would avoid having to resort to Chapter 7 bankruptcy, which would result in the liquidation of two Wyoming mines — the Eagle Butte and Belle Ayr mines — and the loss of hundreds of miners’ jobs in Wyoming, something the company pointed out in its court filings.

The deal proposed in the court filings, Blackjewel’s lawyers argued, were something of an ultimatum, with the company saying that after hours of working to secure a lender, “no other option” was viable.

“As should be clear following the hearing on July 1, the Debtors stand at the precipice of conversion to chapter 7,” court documents said. “If these Debtors convert to chapter 7, the mines will be abandoned, equipment will be stolen or destroyed and the value of the Debtors’ assets will be devastated. As should be clear following the events of the hearing on July 1, these Debtors are out of options. Without the DIP financing now proposed, these Debtors’ cases will convert to chapter 7 cases and immense value will be lost.”

The emergency hearing — which was announced Tuesday afternoon — began at 2:30 p.m. Mountain Time. Attorneys for the company indicated at 5:30 p.m. that the hearing was still ongoing. As of press time, no word of a decision had been made public.

Immediate government response

This week’s news immediately put Wyoming’s government to the test, prompting an all-hands-on deck response from numerous state agencies working to mitigate one of the state’s largest, single-day job losses since March 2016, when the state’s two biggest mines laid off more than 460 workers.

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Within an hour of the first workers being sent home, the Gillette office of the Wyoming Department of Workforce Services already had clients seeking information on applying for unemployment. Within 24 hours, the office had already run out of information on the department’s “rapid response” programs and, by Tuesday morning, workforce services employees from both Cheyenne and Casper were en route to Gillette to assist with the increased workload.

Agency spokesman Tyler Stockton said the department would continue to maintain a presence in Gillette over the coming weeks, including hosting a job fair on July 10 and several information sessions for out-of-work miners looking to either apply for supplemental benefits or to pursue vocational training or a degree in higher education.

“They may not be jobs paying $100,000 a year,” Stockton said. “But they’re jobs. They may be entry-level, they may be mid-level, but when those companies are participating in these job fairs, it’s because they need to fill some slots.”

Though most miners are expected to be covered by unemployment insurance, needs that go beyond what that income covers can be made up in other ways, Stockton said. The community often comes together in instances like this to support the unemployed, while special situations — like unanticipated medical expenses, for example — can be made up for by crowdfunding, he said.

“When something similar happened in 2016, the folks in Gillette really rallied around the folks that were affected,” Stockton said. “It kind of inspired the ‘Gillette Strong’ motto that’s still around today. They’re hurting, but they’re a resilient community, and the Department of Workforce Services is doing whatever we can to help out, whether it’s finding people a new job or helping them with their unemployment insurance, all of that other stuff.”

Those efforts can only go so far, and the state can only do so much, said Sen. Michael Von Flatern, R-Gillette.

“I don’t think we can do anything,” he said. “It’s a private business. If it was a state business, we’d be all over this. But you can’t. This is a contract between private individuals. And the state — this state especially — won’t do anything.”

Revenue concerns

As the money from the mines disappears, so do the people.

When the layoffs hit the Campbell County mines three years ago, the school district there lost more than 450 students. It’s too early to tell if Gillette and Wright will face the same exodus they did then, Campbell County School District deputy superintendent Kirby Eisenhauer said.

“We’re obviously hoping for a quick resolution and to get everything settled and get those people back to work,” he said, adding that the Blackjewel news was “pretty sudden.”

In Wyoming, school funding is driven by attendance and is heavily reliant on minerals. The more students a district has, the more money it receives from the state. When enrollment falls, the district loses money. The funding itself comes to each district via a mix of local and state sources. Mineral-rich school districts like Campbell County typically produce more tax revenue than they require and send the leftovers to the state, to be distributed to places like Natrona County, which produce less local revenue than they need to survive.

If Blackjewel defaults on millions of taxes owed to Campbell County — and the district — it will have ripple effects statewide. It’s likely Campbell County schools won’t meet the minimum they’re guaranteed to meet their budget, let alone exceed it and helping fund other districts.

It’s unclear how much each Campbell County School District and the state will be short because of the Blackjewel news. Laramie Democratic Sen. Chris Rothfuss said the “order of magnitude” was around $17 million.

Campbell County will be made whole for whatever local revenue it’s short — but a year late, officials said. In the meantime, the district may need to dip into its reserves or take out a short-term loan from the state Department of Education.

On a state level, Blackjewel defaulting would mean the Legislature would have to take more out of its savings account to make up for the drop in what’s coming from Campbell County. In 2017, lawmakers passed a bill that essentially covers school funding shortfalls via the Legislature’s primary piggy bank. That’s where the drop in Campbell County revenue will be made up, Rothfuss said.

In other words: Campbell County may lose students, and it may almost certainly lose funding in the short term. But the state will make the district whole next year. If the district loses students, it may receive less money in the future as the funding model adjusts. But it’s too early to say.

Asked if the demise of Blackjewel and two of the largest coal mines in the nation would prompt legislators to consider diversifying how Wyoming funds education, two lawmakers seemed doubtful.

“It does make me think about it,” said Rep. David Northrup, the chairman of the House Education Committee and a Powell Republican. “The probabilities of it happening are very slim because nobody wants to raise taxes in Wyoming. No legislator wants to raise taxes. Until the piggy bank is broke, nobody is going to have any desire to do anything. Because, you never know, maybe uranium will come back. Maybe lithium will come back. That’s the attitude that prevails in the Legislature. That’s the prevailing attitude in the Legislature. It certainly isn’t my attitude. I like to have my ducks in a row a little sooner.”

The talk of diversifying how the state pays for education was prominent two years ago, when the bust then left schools in Wyoming facing a deficit that — at its worst — was estimated to top $1.8 billion by the beginning of the coming decade. That deficit has dropped significantly now, thanks in part to significant budget cuts, and the discussions around changing how schools are funded have tapered off.

“I’ve never stopped talking about it, and this doesn’t change my view of the future, honestly, in any way with regard to education funding because we have been expecting declines in our mineral revenue,” Rothfuss said. “And there’s no reason to believe that the trend will go any other way than either gradual decline, a steep decline, with maybe some bumps along the way that help us out like the last year or so.”

Rothfuss said his focus was on the community of Gillette and ensuring it was capable of handling the news. But he added that the Legislature has “to find some meaningful taxation outside of the mineral sector” and hopefully the Blackjewel news would “serve as an unfortunate wake-up call” for legislators who opposed new taxes.

Von Flatern believes this to be a too-optimistic view of the Legislature, which often uses quarterly upticks in the state’s revenue streams as an excuse to decline taking up bills to generate revenues beyond those produced by coal or gas.

He said that despite the visibility of a mine’s closing, the revenue effects on the state would likely be negligible, saying that utilities likely won’t shut a power plant because their supplier runs out of coal — they’ll just go to another supplier.

“It won’t change the conversation because we’ll have the same revenues,” Von Flatern said. “They’ll just be coming out of Peabody or Arch’s pocket, rather than Blackjewel.”

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Politics Reporter

Nick Reynolds covers state politics and policy. A native of Central New York, he has spent his career covering governments big and small, and several Congressional campaigns. He graduated from the State University of New York at Brockport in 2015.

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