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With a declining market for its coal, a Wyoming town deals with something new: uncertainty

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Kemmerer

A pickup parked along Kemmerer's central square on Feb. 11. While Kemmerer and its sister community Diamondville are quiet, out-of-the-way towns, the coal mine and PacifiCorp's Naughton Power Plant provide a solid base of dependable, good-paying jobs.

KEMMERER — Four men sat shoulder to shoulder in a back booth of Rosie’s bar on a frigid February night in southwestern Wyoming. They laughed loudly as the rounds progressed, at inside jokes about the coal mine where they’d worked for decades, about families and mutual friends around town.

When the conversation turned to the Westmoreland Coal Company bankruptcy, the laughter faded.

“I guarantee you that there is no one at that mine that has a goddamn thing to do with this bankruptcy,” said Kim McKee, a retiree who spent 41 years in the mines.

The frustration in Rosie’s was palpable. The bar, which had been a miners-only drinking hole generations back — had opened for a few hours so Kemmerer miners could talk to the Star-Tribune.

Kemmerer

Retired Kemmerer coal miners Mark Bartlett, Joe Fagnant, Kim McKee and Dave Hunzie sit at Rosie's bar on Feb. 11 in Diamondville.

A decision hadn’t yet been made in a Houston bankruptcy court as to whether Westmoreland could eliminate the union contract and cut retiree benefits like health insurance. That ruling— in the company’s favor — came a few days later.

But everyone in Rosie’s knew who was to blame for their predicament. And they all recognized their community faced a grim future.

“When that mine and that power plant shuts down out there, Kemmerer will be a ghost town,” McKee said.

Coal towns

Kemmerer appears suddenly, a town in the way of U.S. Highway 189 and a relief to the eyes in the blinding winter landscape. The road turns sharply to the left, skirts under high-powered transmission lines and falls into the folds of the western Wyoming hills. The old coal towns — Kemmerer and, to the south, Diamondville, sit hidden under blowing snow, living remnants of a coal boom in the late 1800s.

Diamondville is closest to the Hams Fork River, a crowded grid fit snugly into a valley. The humble architecture of the single story homes is recognizable. It’s the style of company towns throughout the country, and hints that nearby lies a smelter, a foundry, a mill, or in Diamondville’s case, both a coal plant and a coal mine.

These are houses that can fit a family of four or five, small enough that generations of kids in Diamondville have fallen asleep to the murmur of their parents’ voices down the hall, talk of unions and coal companies and mutual friends, fights over money, tempers flaring under the pressure of long days in hard jobs.

The town of Kemmerer surrounds Diamondville; it climbs away from the frozen river and up the bluffs, from the stately county courthouse surrounded by respectable homes of brick and clapboard to the newer ranch houses that crest the hills. The homes in Kemmerer are a story of equity and generational wealth, something solid and tangible that could be passed down to the next generation.

For 100 years this has been the deal in Kemmerer and Diamondville. The towns served coal and coal served the towns.

Until recently, the clamor to end coal use in the United States hadn’t undermined this bargain. Troubles had come in many forms — evidenced by the many little coal towns that no longer exist in the hills around the Hams Fork. Miners at the Kemmerer operation have gone on strike over health care or working conditions. Companies had come and gone. The community had swelled and contracted. But all the while, the deal persisted.

Locals kept mining the unusually dark rock of Lincoln County and burning it in the nearby Naughton power plant, losing little despite the decline in the U.S. coal market, the wind farms rising in central Wyoming, the layoffs and bankruptcies that hit large coal companies in the Powder River Basin just a few years ago.

So when bankruptcy came to Kemmerer in October, the blow was powerful and unsettling. A sense of unreality has descended over Kemmerer and Diamondville as they contemplate just what’s been lost in a matter of months — and whether the losses are over.

A company buckles

Westmoreland’s bankruptcy remains a point of contention in Kemmerer, as the local mine has never had a problem making money before, loyalists say. Local officials and miners say the company mismanaged the mine. For that matter, so does the investor planning to buy the Kemmerer mine – a former shareholder of Westmoreland. The company came in, ripped coal seams from the earth and had little skill or forethought in how they went about it, if you believe the miners.

Others have noted that Westmoreland’s greatest failing was a lack of financial diligence. The company overleveraged itself, buying up mining operations it couldn’t afford. When it filed for bankruptcy in October, the company carried $1 billion in debt.

A call to Westmoreland’s headquarters in Colorado Springs for comment on this story was not returned.

Kemmerer

A painted wooden welcome sign stands along Fossil Butte Drive on Feb. 12 in Kemmerer.

In its own defense, according to court documents, Westmoreland has argued that it wasn’t the only coal company to struggle in the new normal of coal. Nationally, the industry has declined precipitously since its height some 15 years ago, when coal supplied nearly half the power in the United States. Natural gas power, renewables and environmental regulations have dramatically changed the market.

That story has started to hit home in Kemmerer.

PacifiCorp, the company that owns the Naughton plant, shut down one of the coal-fired units at the plant in January, eliminating some 40 percent of the Kemmerer coal mine’s customer demand. The company has said for some time that the likely closure date of the Naughton plant is in 2022.

Without the plant, the coal mine will lose its main customer.

A stranger comes to Kemmerer

The latest twist in the story of Kemmerer is the arrival of a coal newcomer.

A Virginia businessman submitted the only bid for the mine and is set to take over the assets for $7.5 million in cash, a $112.5 million senior-secured promissory note and a $95 million junior-secured promissory note, once the numerous conditions of the sale are met. In contrast, Westmoreland bought the Kemmerer mine from Chevron Mining Inc. in 2011 for $74 million in cash and $118 million in assumed liabilities.

One of Tom Clarke’s conditions for buying the mine is the cause of the most immediate pain in Kemmerer: the elimination of retiree health benefits. Approximately one third of the 1,500 people receiving retiree health benefits from Westmoreland are now tied to the Kemmerer operation, according to the union.

Kemmerer

PacifiCorp's Naughton Power Plant is served by Westmoreland Coal Company's Kemmerer mine. Both are located just a few miles outside town.

It was an expense no one could afford, Clarke told the Star-Tribune in a recent interview.

Clarke has raised eyebrows in Kemmerer. He made his money in the health industry, owned retirement homes and hotels before getting into coal. He once waged a PR war against the current governor of West Virginia, Jim Justice, calling out the environmental violations at coal mines that were polluting waterways, Clarke said. The two have since become friendly, but that early campaign gave him a reputation for environmentalism, not to mention unusual financial ventures.

Clarke entered the coal business during the recent downturn, picking up Patriot Coal’s burdensome Appalachian assets and liabilities for cheap. He also bought into iron ore in the Midwest, purchasing operations from a bankrupt entity only for his iron ore company to end up in bankruptcy itself. In the case of Westmoreland, Clarke’s wife was a significant shareholder prior to the company’s bankruptcy. Clarke echoed the miners’ claim that the company was poorly managed.

Clarke seems himself as a problem solver, drawn to complex puzzles. That was, in part, what drew him to coal and the mining sectors, he said.

Clarke witnessed the devastation of the declining coal industry back home in Lee County, VA, he said, when the Lee County Regional Medical Center closed in 2013. Communities that are built around coal fall apart without it, he said.

“I feel like I’m playing a role nobody else is willing to play,” he said. “It hasn’t always worked. It’s cost us a lot of money when it doesn’t work.”

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Clarke balked at the idea that he was coming into the Kemmerer area as a “vulture,” noting that the union contract he’d asked the judge to eliminate would be reworked, and that in his view, changes for workers would be marginal.

The mine could make money and find new buyers of its coal, he said.

As far as the workers go, Clarke said there will be changes, hinting that some of those may be belt-tightening. But what is the alternative? he asked.

“I’ve witnessed (it) over and over again. Nobody comes to try to help in a closed mine situation,” he said, recalling when he first bought coal mines in Appalachia. “What that meant was everybody lost their job.”

A working class

Dave Crosland’s father still works at PacifiCorp’s Naughton power plant, 50 years after he got a job in construction there. Crosland, now a city councilman, and each of his six brothers found work at the plant at some point in their lives, he believes, during a break from school or to help with scheduled maintenance. The coal industry is the foundation of the town’s economy, he said.

“The mine and the power plant have fed the infrastructure for the entire region for at least a couple of generations,” Crosland said. “You are talking like the schools, the road, even down to the churches.”

But the jobs available at the mine, the plant and most of western Wyoming have also created a certain culture, the culture of shift workers.

It’s working class to the bone, he said. For the miners that means a strong union, and though not everyone is supportive of the union, most are supportive of the workers, he said.

Trying to describe the town where he grew up, Crosland said it’s the kind of place where people go to work in really cold weather.

Kemmerer

Cullen Pace, a worker at the Kemmerer mine who lives with his family in Randolph, Utah, stands for a portrait Feb. 11 at Rosie's bar in Diamondville.

“The only word that comes to mind is the people of Kemmerer are tough,” he said.

And that, in his opinion, means they’ll likely get through the changes on the horizon.

Long term, the coal industry is being pushed out, Crosland said. Though he has frustrations about the federal government’s role in that, he said he also understands that a lot of different factors are at play. Ever since the bankruptcy, everyone has opinions on why it’s happening, who is to blame, from the EPA to Warren Buffett, Crosland said, naming the billionaire investor whose empire includes the utility PacifiCorp.

He’s not sure any one thing is to blame.

But he doubts the doom and gloom that coal is going to disappear within the next decade.

“It’s a wake-up call,” he said of the bankruptcy. In his experience the mine and the plant hire in waves, and right now a wave of retirees are leaving work. That complicates what’s happened with Westmoreland, and even if the transition is only a short-term cost to families, it’s significant, he said.

But for the town, there is time to adjust and figure out what to do. Kemmerer is a family town with deep roots. It doesn’t have to crumble, he said.

Others are pretty sure that the town will fold up on itself if something isn’t done to keep the mine and the plant open.

The Kemmerer mine is the largest taxpayer in Lincoln County. Some of that money goes to Diamondvile, but with a population of around 730 people, the smaller town doesn’t depend on the mine revenue as much as Kemmerer, which has about 2,700 people.

But the biggest recipient of that coal cash are schools.

Last year, the mine owed about $10 million in taxes, said Lincoln County Treasurer Jerry Greenfield. The largest school district is owed about $4 million of that. In general, the schools take about 78 percent of all taxes, he said.

Greenfield said not everyone is aware of how big a player the mine and the power plant are in terms of local income. It’s a tremendous amount of revenue, particularly for education, he said.

But the fear about the two industries failing is also one of workers and population.

“Look at all the people it will displace,” he said. “What kind of effect will that have on our community? It would be devastating.”

A balance of power

Despite the new buyer, the Kemmerer mine’s bankruptcy is likely hard on the union, said Michael Duff, a labor export and lawyer at the University of Wyoming.

“Are they in a weakened position? Of course they are,” he said.

On one side of the bankruptcy, the union had a bargaining agreement hammered out over decades. Anything the company violated in that agreement could be grieved with potential arbitration. It was a deal and it was binding.

Now, the slate has been wiped clean in Kemmerer, because bankruptcy court is about restoring companies to viability. It’s not about the workers, he said.

“We’ve made a social judgement that the most important social policy to be pursuing is to restore the profitability of that entity, on the theory that ultimately this company will employ people, will provide goods, provide services and generally maximize the wealth for society,” he said.

Wyoming is not often union friendly and has a low union density despite its broad industry workforce. The majority of the coal workforce in Wyoming is not unionized.

A weakened union in Lincoln County is likely good news to some, who argue that unions are counterproductive. Some will argue that the union may have contributed to the Westmoreland bankruptcy, Duff said.

A counter-argument to union criticism is they play a role no one else is filling, Duff said. You hope that someone is standing up for workers’ rights, that the government will do it, said Duff. But that’s not the case.

“Unions, historically, are the only entity that has done that,” he said. “It seems to me that if you lose that kind of entity, that is going to have an impact on working people.”

Changes to come

The temperature in Diamondville fell below zero on Feb. 11, not even a record cold, but cold enough to freeze the dun colored carcass of a white-tail doe between the train tracks near the river. Just up the street, the miners at Rosie’s were still discussing the bankruptcy.

Cullen Pace, a current miner, noted with frustration that some people in town didn’t understand that the workers were losing benefits that they had bargained for. It was a deal, and the company was breaking it, he said.

Kemmerer

A water tower stands above Kemmerer on Feb. 11. Much of the city is built on a hillside that slopes down to the Hams Fork River.

“It’s not like we’re looking for handouts,” Pace said.

The Kemmerer miners are unique in Wyoming because of the union. The only other coal mines that are unionized are PacifiCorp’s Bridger mines outside of Rock Springs. The bulk of the state’s mining sector — located in the north — is nonunion. As a result, miners up in Gillette are paid far more than the workers in Kemmerer. But, they lack the benefits packages that the union has stuck to through many years of contracts.

That the deal could turn sour for the miners now had everyone in Rosie’s shaking their heads. They were angry.

The four retirees at the bar, McKee, Dave Hunzie, Mark Bartlett and Joe Fagnant, said the deal was a conscious choice and it was worth it.

The union jobs meant steady work, a house, a family and a pension someday. It meant a more modest lifestyle for these men and it meant that the town kept a certain culture over the years. As they spoke, miners’ kids skittered around the back of Rosie’s, a dad teaching them to play pool.

“Joe could have gone anywhere,” McKee said looking across the table at the oldest in the group, and praising Fagnant’s skill as an electrician. “He stayed because he figured, ‘Well, it’s locked in. I’ll have this medical when I retire and that’s a hell of a benefit.’”

Hunzie, a 24-year veteran of the mine, said it wasn’t about the money – his pension was unsecured at the time.

“It’s the principle. It’s about, you retired all this time ago and they can come back and say ‘We’re going to take this away from you.’”

For current miners too, the bankruptcy has threatened the certainty of the deal. It’s a fundamental change that’s filtered through the miners’ lives.

Pace’s son, Kanyon, has started to worry about money. There are things the family can’t afford right now, the 16-year-old reminded his father recently.

“It’s gut-wrenching,” Pace said.

Pace, a father of four, recently asked his family if they were OK with potentially moving. They consented, and he applied for a federal job in mining regulation.

He’ll leave the Kemmerer mine if he gets a better offer.

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Follow energy reporter Heather Richards on Twitter @hroxaner

Follow energy reporter Heather Richards on Twitter @hroxaner

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Energy Reporter

Heather Richards writes about energy and the environment. A native of the Blue Ridge Mountains in Virginia, she moved to Wyoming in 2015 to cover natural resources and government in Buffalo. Heather joined the Star Tribune later that year.

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