A federal bankruptcy judge hasdenied a petition from former Blackjewel coal executive Jeff Hoops to liquidate the company. The decision means the reorganization of the company will continue under Chapter 11 bankruptcy as former employees, creditors and state agencies seek to recover millions owed by the company.
Hoops cited “permanent negative cash flow” at his former company, which has accrued at least $80 million in administrative and other expenses since its bankruptcy filing on July 1 last year.
The nearly 3,000-filing-long Blackjewel bankruptcy docket demonstrates an 18-month scramble by the company’s creditors to recuperate as much money as possible from a too-small pot. According to court filings, Blackjewel also has multiple outstanding permit violations, an unknown amount of outstanding environmental reclamation liabilities, unpaid taxes totaling $2 million, tax liabilities of untold amounts, and millions in unpaid employee healthcare claims.
The request to liquidate, according to coal bankruptcy expert Josh Macey, was yet more proof that Blackjewel’s future was grim. “Given how long this bankruptcy has dragged on, how poor conditions for coal are right now, how speculative and unprofitable Blackjewel’s assets have been, it isn’t surprising that it’s moving to a liquidation,” Macey said.
Federal Judge Benjamin A. Kahn did not explain in his order why he was denying Hoops’ petition to liquidate. But environmental advocates had previously objected to the request, arguing that a liquidation would make it less likely that certain of Blackjewel’s mining permits would be reclaimed.
Federal agencies, including the Internal Revenue Service and the Department of the Interior, also objected to the petition to liquidate. “The United States believes that the best course of action is to allow the Debtors [Blackjewel] additional time to develop a plan that would meet the requirements of Chapter 11 of the federal bankruptcy laws and not require the Debtors to convert to a Chapter 7 liquidation,” attorneys for the agencies wrote.
Blackjewel made headlines last year after its abrupt collapse left hundreds of Kentucky and Virginia coal miners out of work and without pay. Environmental advocates remain concerned that some coal mines will put strain on state mine land reclamation funds or go unreclaimed altogether.
Hoops has been sued in the same bankruptcy court over alleged financial mismanagement of Blackjewel and associated companies.
Allegations of financial misconduct by Blackjewel’s former CEO have surrounded the company’s bankruptcy case since it began last July. But a December 10 court filing lays out specific allegations against ousted CEO Jeff Hoops: webs of shell companies and secret royalty schemes that allegedly enriched Hoops at the expense of coal miners, the environment, and his companies.
The filing, by Blackjewel and related companies, instigates a civil lawsuit against Hoops, a major escalation in a protracted case with wide-ranging implications for the once-mighty coal industry overall.
The bankruptcy sparked a protest by out-of-work miners, who since the beginning blamed Hoops for their misfortune. A graphic often seen at miners’ months-long coal-train blockade featured a feisty Calvin, of the Bill Watterson comic “Calvin and Hobbes,” urinating on their former boss.
The December 10 filing lays out in the clearest detail yet the manner in which Hoops allegedly defrauded his fossil fuel empire. It alleges that Hoops arranged for a Blackjewel-affiliated company to grant royalties to companies owned by him and members of his family. Hoops also arranged for grazing rights associated with Wyoming coal mines to benefit him, rather than Blackjewel, according to the filing. Triple H, the Hoops-affiliated company that received the grazing rights, allegedly expected to earn $251,000 from those permits in 2019 alone.
The total amount of money Hoops earned from these alleged misdeeds is unknown, but is likely to be in the tens of millions. Funds recovered from Hoops through the litigation would be used to repay creditors in the Blackjewel bankruptcy.
Hoops did not respond to a request for comment.
“This is a pretty big deal,” said S&P Global Market Intelligence senior mining and energy reporter Taylor Kuykendall. “It’s not something that we’ll end up seeing having a big change in the outcome of how the bankruptcy will go, it isn’t going to make Blackjewel magically come back or change a lot about how that affects operations or reclamations. But it is a big deal for Hoops, obviously.”
Hoops began his mining career with Consol Energy at just 17, according to a 2016 profile by Marshall University when it named Hoops a member of its Business Hall of Fame.
Hoops worked his way up in the industry, eventually becoming vice president of operations of Arch Coal in 1992. From there, he founded an array of companies, including Blackjewel, Triple H Real Estate, Lexington Coal, Construction and Reclamation Services, and Active Medical. The Hoops Family Foundation’s charitable funding includes a Christian orphanage in India and student dorm at Appalachian Bible College in Beckley, West Virginia.
Hoops also recently went into the resort hotel business. Despite the ongoing allegations of wrongdoing in the Blackjewel bankruptcy, construction is ongoing at the Grand Patrician resort in West Virginia, named for Hoops’ wife, Patricia.
Hoops’ alleged self-dealing, which the plaintiffs in the civil suit call “intentional, willful, and wanton,” belies the posture of beleaguered apologia the former executive has held since the beginning. In an August, 2019 phone call with the ReSource, Hoops said he was “really sorry that it’s reached this point,” and told his laid-off workers, many struggling to keep the lights on, “No one is hurting more than me.”
Bankruptcies like Blackjewel’s are “becoming a little more common in the Appalachian industry, because the really big, well-capitalized players aren’t in the space anymore in Appalachia,” said S&P’s Kuykendall. “With these smaller companies [like Blackjewel], there’s a question about whether they have the financial wherewithal to handle these operations anyway.”
Hoops recently petitioned the court to change the bankruptcy from a Chapter 11 restructuring into a Chapter 7 liquidation, spawning a flurry of objections from federal agencies including the Department of Labor and the Internal Revenue Service, and advocates like Whitesburg, Kentucky’s Appalachian Citizens’ Law Center.
Of Blackjewel’s pre-bankruptcy holdings, 45 mining permits have not been sold and 187 have not been transferred to their new owners, leaving their eventual reclamation, which the Kentucky Energy and Environment Cabinet expects to exceed the available pot of money by tens of millions of dollars, in doubt.
The convoluted bankruptcy of coal company Blackjewel has hit another turn of events as the company’s former CEO moved to liquidate the company. A federal judge is considering a motion submitted last week to convert the bankruptcy from Chapter 11 to Chapter 7.
That would mean that instead of exiting bankruptcy as a new company with less debt, Blackjewel L.L.C. would effectively cease to exist.
Former Blackewel CEO Jeff Hoops, who is currently under investigation for mismanagement of the company, said in a filing that Blackjewel had only $146,000 in unrestricted funds, and could not pay millions in back taxes, reclamation fees and employee healthcare expenses.
“Given [Blackjewel’s] lack of operating assets, permanent, negative net cash flow, and continuing financial losses, there is no reason to continue this proceeding as a Chapter 11 and incur the substantial and unnecessary administrative expenses attendant to doing so,” Hoops and other filers said in the November 25 motion.
“It’s pretty common for companies to shift from a Chapter 11 to a Chapter 7 when they’re struggling like Blackjewel is,” said University of Chicago School of Law assistant professor Joshua Macey, a coal bankruptcy expert. “Given how long this bankruptcy has dragged on, how poor conditions for coal are right now, how speculative and unprofitable Blackjewel’s assets have been, it isn’t surprising that it’s moving to a liquidation.”
Still, Macey said, the move is another recognition by the coal industry’s major players that mining it is rarely profitable.
According to court filings, virtually all of Blackjewel’s assets have been sold, and the company’s only remaining assets are $146,243 in unrestricted cash and existing claims against Hoops, his wife and children, and a handful of other parties.
Attorneys for Blackjewel attempted to sell Blackjewel’s equipment and mining permits in Kentucky, West Virginia, Virginia and Wyoming soon after the company filed for Chapter 11 bankruptcy protection in July last year. Some permits were successfully sold, but others did not sell, due in large part to the declining market for “steam” coal, which is used to generate electricity. The assets that did sell were recouped for far less than their value: Blackjewel sold an estimated $357 million worth of assets for just $44 million.
Blackjewel accrued $80 million in administrative and other expenses from July 1, 2019, through October 31, 2020.
According to court filings, Blackjewel also has multiple outstanding permit violations, an unknown amount of outstanding environmental reclamation liabilities, unpaid taxes totaling $3.2 million, tax liabilities of untold amounts, $14.9 million in unpaid employee healthcare claims, unfunded pension obligations totaling $11.9 million, and tens of millions due to the legal teams that have administered the bankruptcy.
It is not clear how much of those debts will be repaid, but given the Blackjewel estate’s dire financial straits and the proposed conversion to a Chapter 7 plan, it seems that a significant portion of those debts will not be recovered.
The Chapter 7 petition comes nearly a year and a half after Blackjewel abruptly filed for bankruptcy last July, leaving hundreds of Appalachian coal miners out of work and unpaid, and spawning one of the largest labor protests in the region in decades.
Correction: This story was edited on Dec. 3 to make clear that the judge has not yet approved the Chapter 7 conversion proposal.
Environmental advocates worry a coal company liquidation plan will leave dozens of coal permits in eastern Kentucky unreclaimed, according to filings in the bankruptcy proceedings of Blackjewel L.L.C.
The bankruptcy case has dragged on since last July, when the once-mighty coal company’s Chapter 11 filing left hundreds of Appalachian coal miners suddenly without work, and without weeks of pay. Now the company has until the end of 2020 to exit bankruptcy, and to do that, it needs the court to approve the very liquidation plan that has environmentalists concerned.
Mine land that is not reclaimed or improperly reclaimed can leave behind highwalls of cut rock, stripped land subject to erosion and runoff, and potential water pollution. Blackjewel accrued hundreds of environmental violations in the months following its bankruptcy.
Filed September 25, the plan, if approved, would dissolve the entity once known as Blackjewel, LLC, and would place the responsibility for reclaiming any unsold permits onto a newly formed Reclamation Trust.
Funding for the trust would come from surety bonds. The Appalachian Citizens Law Center, which is one of the entities expressing concern about the plan, estimates those surety bonds to be worth about $40 million.
It is not clear how many permits would fall into this category. The Kentucky Energy and Environment Cabinet recently revised its count from 43 to 38. There are likely more permits in a similar condition in Virginia and West Virginia, other states where Blackjewel operated.
Mary Cromer, an attorney with ACLC, believes that the many mining entities involved with the permits means even more of them are likely left with no responsible party.
The plan would also “extinguish” the unsold permits themselves, but does not require the Reclamation Trust to apply for new permits. That could mean the federal government would have less power to force the Trust to complete reclamation projects. It would also mean citizens would have less recourse to sue if unreclaimed mine land caused damage off-site.
Other environmental groups concerned with the plan are Kentuckians for the Commonwealth, Citizens Coal Council, Appalachian Voices, the Sierra Club, and the Powder River Basin Resource Council.
Blackjewel has not yet responded to the groups’ filing.
A plan confirmation hearing is scheduled for later this year, where Blackjewel’s creditors, as well as interested parties such as the Appalachian Citizens Law Center, can present objections before the court. ACLC has not confirmed whether it will present formal objections at that time.
It wasn’t too long ago that Michael Farmer, a pastor in Charleston, West Virginia, received an email asking him a question that was already on his mind: “As a Black Southern Baptist pastor in West Virginia, what is my role in telling our stories?”
The email was from Ashton Marra, the managing digital editor of a news organization called 100 Days in Appalachia. Marra was inviting Farmer to be a part of a new project, the Appalachian Advisors Network.
“The Advisors Network is really three parts,” Marra said, “And the first part is a database of creators.” This way, Marra said, rather than national or international news outlets sending a journalist from New York City or Los Angeles to cover rural Appalachia, those same outlets could hire a freelance journalist rooted in those same communities, who could tell a more nuanced story.
“The second part is a resource guide,” Marra continued. That way, if those outlets insist on sending an outsider to write about Appalachia, at least that journalist can read a pamphlet or listen to a podcast on their flight in.
The third part, the one for which Marra was reaching out to Farmer, is meant to address a problem journalism industry insiders call “parachute journalism.”
“National media parachute into our region, tell stories about Appalachians that were predetermined. ‘I’m going to go into Appalachia and tell a story about a laid off coal miner who’s gonna vote for Trump.’ And nobody else’s stories [get] told,” Marra said.
To counter that, Marra and her colleagues assembled the Appalachian Advisors Network: a group of 14 Appalachian community leaders from Pennsylvania to Alabama who have agreed to help journalists gain more perspectives on the full diversity of the region.
The project launched in early September, 60 days before the presidential election, and has already fielded inquiries from outlets including PeopleMagazine. (Disclosure note: 100 Days in Appalachia is an occasional collaborator with the Ohio Valley ReSource, and distributes ReSource content.)
The Advisors Network is not the only new venture in Appalachian journalism making waves this election season. Investigative journalism outlet Mountain State Spotlight launched September with bombshell reporting on the coal empire of West Virginia’s billionaire Governor Jim Justice. In Pennsylvania, two college students are launching a student-run journal of Appalachian stories. And in Kentucky, an oral historian released a podcast documenting the lives of rural LGBTQ people across the country.
F. Brian Ferguson
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Mountain State Spotlight was founded to produce investigative journalism for West Virginians
Capital Concerns
It’s no coincidence we’re seeing a flurry of new journalism emerging out of Appalachia right now, said Penny Muse Abernathy, Knight Chair in Journalism and Digital Media Economics at the University of North Carolina at Chapel Hill.
“I think what we’re seeing is the collapse of the for-profit model that sustained most local newspapers for 200 years,” she said.
Abernathy is the author of a new report laying bare the threats facing news outlets. Between 2004 and 2020, the report found, one in four newspapers closed or merged with another paper. Still more reduced their reporting staff, leaving what Muse-Abernathy called “ghost papers,” outlets that were still printing news, but lacked the staff or the resources to thoroughly report on the community.
Most of those papers were in communities that were in deep economic distress.
Newspapers die for a number of reasons, but the extinction event of the modern age is largely attributable to the decline of the ad-based for-profit model. For 200 years, Abernathy said, most newspapers relied on subscriptions from community members and on advertising from local businesses. Both those revenue streams have slowed to a trickle: According to the Pew Research Center, the number of people subscribed to a print or digital news outlet is at its lowest since 1940, the first year for which data is available, and ad revenue fell by 62 percent between 2008 and 2018. Of the $71 million spent on digital ad revenue (on all websites, not just news sites) in 2019, more than half went to just two companies: Google and Facebook.
Today, one out of every five journalists lives in New York, Los Angeles, or Washington, D.C., leaving many rural people in “news deserts,” communities where no journalists have their eye on the county executives or members of the local development board.
“When you lose a local newspaper, you lose a reporter who’s going to cover a local board of education meeting. The county commission meeting,” Abernathy said. “When you lose a regional newspaper, you lose reporters on those bigger beats like education and the environment, which impact thousands of people across a whole region.”
Abernathy believes the future of media lies in nonprofit journalism, outlets like nonprofit investigative newsroom ProPublica and networks like National Public Radio that get their funding from grants and individual donations.
Ken Ward Jr., a reporter at ProPublica and co-founder of Mountain State Spotlight, prefers to call it civic journalism.
“It harkens into all the other civic institutions we think of in our community, whether it’s a public library or a public school. An important part of civic life is news, is information about the issues that you and your neighbors are facing.”
With a staff of less than a dozen, Mountain State Spotlight is financed by individual donations, by foundations, and by ProPublica, which pays Ward’s salary.
Not a Monolith
The flurry of new nonprofit Appalachian journalism is not only motivated by pursuing new funding models, but by elevating the voices and perspectives of those who have not traditionally been represented in mainstream media.
“Country Queers is an ongoing multimedia oral history project that I founded in 2013,” said project founder Rae Garringer, who uses gender-neutral they/them pronouns, “Out of a pretty intense personal need to find and connect with other rural queer people.”
The Country Queers podcast, which is supported by crowdfunding, premiered this spring with an eight-episode season.
(Disclosure: Garringer is a former staff member at WMMT, a radio station that is a member of the Ohio Valley ReSource collaborative.)
Garringer isn’t sure they would consider Country Queers journalism, though the boundary of what does and doesn’t count as such can be imprecise. Rather, Garringer said Country Queers is “In the vein of cultural organizing around narrative shift, a cultural shift. To reclaim our history and our elders in these spaces, because of the way that systems have kept us from each other. The way that homophobia has kept us from each other.”
Another publication, the student-run Review of Appalachia, also aims to diversify whose voices get heard.
Friends and co-founders James Henderson and Jack Alex White are sophomores at the University of Virginia and Harvard University respectively. “Once you go to a college that’s a little further away or in an urban atmosphere, you get a little introspective about where you’re from,” said White, a first-generation college student from a coal-mining family.
“I have people in my family line who were illiterate, who couldn’t read,” White continued. “They clocked out at maybe a fourth, fifth-grade education. Brilliant people if you talked to them. People that contemplated the world, that had personal philosophies, that enjoyed consuming art, that were creative. And the rest of the world totally misses that, and opens and shuts the book at poverty, mostly white people, uneducated.”
Though the Review of Appalachia is new and has not yet published any work, Henderson and White hope the publication can be a journalistic or literary home for Appalachian young people who don’t want to have to leave their hometowns to express their intellect.
A similar interest motivates Michael Farmer, the Southern Baptist preacher who is a member of the Appalachian Advisors Network. “Many times, as an African American male in West Virginia, I’m considered to be the monolith for everybody in my community. And I have to pull back and say, I’m not that person. I just have one perspective. But I can give you that perspective, and there’s value in that perspective.”
