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Blackjewel Coal Moves To Liquidate, Leaving Millions Unpaid To Workers And Regulators

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 Risks Remain As Blackjewel Bankruptcy Nears Its End

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.

Blackjewel Miners Could Get More Money From Proposed Settlement

A proposed $17.3 million settlement of a class action lawsuit would provide additional payment for hundreds of Appalachian coal miners who were suddenly left jobless by the abrupt bankruptcy of the Blackjewel mining company.

The settlement must be approved by the judge overseeing the complicated Blackjewel bankruptcy case. Although it is not yet final, attorneys for the miners call the agreement a “major victory” in bankruptcy court, a venue that is often not favorable to workers’ claims.

Blackjewel miners made national headlines last summer with a nearly two-month protest that blocked a load of coal on railroad tracks in eastern Kentucky. The company’s sudden and chaotic bankruptcy left about 1,700 miners in Kentucky, Virginia, West Virginia and Wyoming out of work. Many of them found that their last paychecks had been “clawed back,” or removed from bank accounts.

The combination of protests, legal action, and intervention by the U.S. Department of Labor finally got most of the miners the pay they were owed. The proposed settlement filed Tuesday with the federal bankruptcy court would get each miner an additional payment — the equivalent of 44 days of pay — from the Blackjewel estate for penalties for violating a federal law known as the WARN Act.

“What our settlement focused on was penalties for the late payment of those wages and severance pay,” said Sam Petsonk, one of the lawyers representing the Blackjewel miners.

An attorney briefs miners attending the Blackjewel bankruptcy hearing.

“If we recover the full $17 million, that is almost unheard of in bankruptcy,” Petsonk said. “Even securing this [agreement] is a major victory for miners in bankruptcy court.”

Stern WARNing

The class action lawsuit Petsonk and other attorneys filed had sought penalties under the Worker Adjustment and Retraining Notification Act of 1988, known as the WARN Act. That law requires large employers to provide their workers with 60 days of advance notice before a plant closure or mass layoffs that would affect more than 50 people.

The WARN Act, first proposed by Ohio Democratic Sen. Howard Metzenbaum, is intended to give workers and their families time to prepare for the loss of a job, and it was viewed as an important labor victory in an era of growing global competition and declining employment in U.S. manufacturing. (One telling historical footnote: The bill became law without President Ronald Reagan’s signature.)

“This is probably the most flagrant WARN Act violation in history,” said Ned Pillersdorf, an attorney in Kentucky representing the former Blackjewel miners. “No notice, and they clawed back paychecks,” he said.

Petsonk, who is also the Democratic nominee seeking the attorney general’s office in West Virginia, said the WARN Act has become more important for coal-dependent communities as the industry declines.

“It is a powerful law and we use it a lot,” he said. Those cases have included instances where the mining company was the largest employer in a small town. A few of the WARN suits were against mines belonging to the family of West Virginia Gov. Jim Justice.

This story is part of a series revisiting themes, places and people in the new Ohio Valley ReSource book, “Appalachian Fall.”

“The WARN Act provides some cushion, it allows people to pivot,” by pursuing job training or education, Petsonk said. “When we use our laws we can really protect our people.”

Blackjewel’s Multifaceted Bankruptcy

The settlement agreement now awaits a hearing in federal bankruptcy court and then a ruling by the judge assigned to the Blackjewel bankruptcy case, Benjamin Kahn. The outcome is far from certain.

“It’s probably one of the most complicated bankruptcies,” Pillersdorf said. The court docket reflects hundreds of claims from vendors and other companies seeking millions of dollars in payment, and government agencies seeking millions more for unpaid royalties and environmental damage left behind by mining.

Several creditors in the case allege that former Blackjewel CEO, Jeff Hoops, drained company revenue into other accounts and activities. The settlement agreement includes a $125,000 payment from Hoops, his son, and another company associated with his family, Lexington Coal Company.

When the protesting Blackjewel miners were on the tracks last summer, Pillersdorf warned them that bankruptcy court was a bit like a funeral home. No one leaves happy.

Felicia Cress on the first day of the miners’ protest.

“The general rule is with wage earners in bankruptcy court, you get screwed,” he said. He is hopeful, however, that the settlement agreement will give miners a better chance. “This settlement, I think, is fair. The problem has always been figuring out what is left in the Blackjewel estate.”

This story is part of a series revisiting themes, places and people in the new Ohio Valley ReSource book, “Appalachian Fall.”

“No Pay, We Stay.” A Look Back At Miners’ Protest That Rocked Appalachia

It’s a quiet, foggy morning on Highway 119 in Cumberland, Kentucky. A railroad track runs along the highway, and here, Sand Hill Bottom Road crosses the tracks and turns to the right, leaving a rough triangle of gravel spattered with trash.

You can hear crickets chirping, birds twittering, cars passing on 119. A billboard advertises Portal 31, a coal town tourist attraction.

If you didn’t know any better, you’d think this was just a nondescript intersection in a nondescript bit of highway. But one year ago, this intersection played host to a two-month long protest of a kind that hadn’t been seen in coal country for decades.

Site of the Blackjewel protest in Cumberland, KY.

When Blackjewel went bankrupt, it left hundreds of coal miners in four states without weeks worth of pay. So for 59 days, coal miners and their loved ones blockaded this railroad track to prevent $1.4 million worth of coal from leaving.

“If they can move this train, they can give us their money,” miner Shane Smith said at the time.

The protest was sometimes monotonous, sometimes raucous.

The federal Department of Labor intervened, arguing the coal had been mined in violation of the Fair Labor Standards Act, and could not be moved until the miners were paid.

Threaded through thousands of densely worded bankruptcy court filings, it was revealed that Blackjewel’s former CEO Jeff Hoops had funneled money out of the company and into his own pockets and those of a close circle of associates.

The railroad blockade ended on September 26, 2019, with a whimper, not a bang. The last two protesters, miner Chris Rowe and his wife Stacy, cleaned up the last of the protest’s trash, climbed into their truck, and drove away. The miners had not yet been paid back for weeks’ worth of work that were now months behind them, but they had made a point. They had drawn attention to the decline in the coal industry and the painful impact it had on communities that had long relied on the black gold to survive.

Now, after witnessing the industry decline over the course of decades, Ohio Valley coal communities face a more urgent cliff, one caused by the same strand of RNA that is reshaping life around the globe: the novel coronavirus, COVID-19.

The Slow Decline

Coal production has been on the decline in central Appalachia for decades, faced with competition from coal from other regions, as well as cheap fracked gas,.says Hannah Pitt, a senior analyst at the research firm Rhodium Group. As the U.S. produced more of its electricity from natural gas and renewable energy, coal plants were shuttered and coal mines closed.

“A quarter of the U.S. coal fleet has retired since 2005,” Pitt said.

The closures led to a wave of bankruptcies. And with the bankruptcies came layoffs: Just 2,582 coal miners were employed in the eastern Kentucky coalfields in the first quarter of 2020, before the coronavirus-related economic shutdown had taken its full toll.

“Early on in this pandemic ⁠— March, April, and even into May ⁠— many of our members in the mines were working short weeks, they weren’t working full shifts,” said Phil Smith, a spokesperson for the United Mine Workers of America, the union representing coal miners. “Other mines were just completely furloughed.”

A supporter with a protest sign made from a pizza box.

Coal production in eastern Kentucky declined by 39 percent between the first quarter of 2019 and the first quarter of 2020, a trend industry watchers expect to accelerate in the coming months.

“In our scenarios where we look at what happens now that we find ourselves in this pandemic, coal is going to be hit even harder. So, out to 2030, we expect more than 50 percent of coal plants will retire,” Pitt said.

Pam Thomas, a senior fellow at the left-leaning Kentucky Center for Economic Policy, said the bankruptcies and layoffs had further downstream consequences on county budgets.

“With the coal companies withdrawing and a lot of them declaring bankruptcy or just not paying their taxes … I just think some of these counties are not going to be able to make it.”

A Quick Death

Blackjewel wasn’t the only coal company to declare bankruptcy in 2019: Cambrian Coal folded last June, and Murray Energy, a giant in the industry, also folded later the same year.

Now, nearing the anniversary of the Blackjewel protest that rocked Appalachian coal country, Kentucky-based mining company Rhino Resource Partners has also filed for bankruptcy protection.

Rhino was one of several companies that purchased assets from Blackjewel in its bankruptcy.

The trend is part of what University of Chicago assistant professor and coal bankruptcy expert Josh Macey has called “bankruptcy as bailout”: a pattern of misuse of the bankruptcy process in which environmental reclamation costs and miners’ health obligations are loaded onto companies that have no ability to pay them, freeing the original company to continue operating without the burden of those debts.

The industry is also seeking relief from Congress to help it muddle through the market challenges posed by the pandemic. The Ohio Valley ReSource reported in March that the National Mining Association asked Congress for $220 million in relief from taxes that support some coal miners who are disabled by their work in the mines. That relief has not been granted.

Coal companies have, however, received significant federal aid from the Paycheck Protection Program: 51 coal firms in the Ohio Valley alone received as much as $119 million collectively. Rhino received $10 million shortly before it declared bankruptcy.

What’s Left Behind

Eastern Kentucky is dotted with memorials to its coal-mining heyday: an underground museum, a tribute to those who died of black lung disease, countless bumper stickers proclaiming the driver a “Friend of Coal.”

The intersection of Route 119 and Sand Hill Bottom has no such marker.

Still, traces of the protest remain. By the tracks, blackened rocks mark what might once have been a campfire; on the rusted rail itself linger traces of spray paint that once read “NO PAY WE STAY.”

Reminders linger online, too. There’s an active Facebook group, 4,000 members strong, where former Blackjewel miners and their family members share gripes and victories, and answer one another’s questions.

Pain and anger linger, too. “Myself and my comrades at Blackjewel lost cars, lost homes, lost retirements, and many had to leave here to seek employment,” said Brandon Middleton, a former Blackjewel miner who spent time at the 2019 blockade.

Environmental Groups Tell Bankruptcy Court Blackjewel Continues To Skirt Obligations

A coalition of conservation and environmental groups is once again calling attention to pollution and unmet environmental obligations at mines controlled by now-bankrupt coal operator Blackjewel LLC.

In a letter submitted to the bankruptcy court on Wednesday, Appalachian Citizens’ Law Center and eight other groups said the majority of the companies’ surface mine permits in West Virginia, Kentucky and Virginia have not been transferred to new operators as the company promised.

The mines also continue to amass environmental violations, despite assurances by Blackjewel that mine reclamation and other environmental obligations would be taken care of by the new owners of the mines.

“It is unfortunately very clear that Blackjewel is allowing the mining operations for which permits remain in its possession to deteriorate and accrue mounting numbers of permit violations,” the letter states.

In Kentucky, the groups say the company has failed to transfer 149 of the company’s 213 permits. Fifty-nine transfers have been submitted. Only five permits have been transferred to new owners.

In Virginia, 34 transfers have been completed, while eight are in process. Of the 29 permits where no action has been taken, the groups note four were slated to go to Kooper Glo Mining.

In West Virginia, five of the 12 permits have been transferred.

“We are therefore very concerned that Blackjewel will seek to abandon those permits during the course of this bankruptcy,” the groups write.

According to their analysis of state and federal databases, Blackjewel mines continue to wrack up environmental violations, including complaints about water quality, sediment control and pollution exceeding discharge limits.

In Kentucky, the groups found the number of on-the-ground violations jumped from 42 in the first quarter of 2019 to 119 in the first quarter of 2020. The bulk of the violations occurred at mines where there have been no moves to transfer the permit to a new owner.

In West Virginia, the Department of Environmental Protection has issued 13 violation notices at Blackjewel mines still controlled by the company, the letter details. That includes serious issues reported at the Rush Creek mine complex near the Kanawha State Forest.

In a Tuesday filing, Kentucky environmental regulators echoed some concerns raised by the environmental groups. The state’s Energy and Environment Cabinet asked the court to force Blackjewel to bring its mining operations into compliance. The agency said the problem has escalated even after two court hearings addressed the issues earlier this year. It cited 606 outstanding violations of Kentucky’s mining laws and 13,125 violations of their state water quality permits, primarily the result of failing to submit discharge monitoring reports.

“Yet, instead of using the Estate’s limited resources to maintain their operations necessary to avoid causing harm to the affected land and water, the Debtors continue to spend millions of dollars on professional fees – an amount in excess of five million dollars ($5,000,000.00) for the third quarter calendar year 2019 alone,” the agency said.

In an email, a spokesperson for FTI Consulting, which is representing Blackjewel, said the company had no comment at this time.

Appalachian Labor Songs And Punk Rock Converge In KY Youth Empowerment

Girls Rock Whitesburg in Whitesburg, Kentucky is a music camp for female, gender-fluid, non-binary, and trans youth. Over the course of a week campers learn an electric instrument, form a band and write songs. At the end, they perform in front of a live audience. While the camp focuses on electric music instruction, participants also learn how music is tied to social justice.

Last summer, in a special report as part of the Inside Appalachia Folkways Project, Nicole Musgrave followed two campers who reinvented a traditional protest song to respond to events in their community. In 2018, Musgrave volunteered at the camp during its inaugural year.

Voicing Opinions Through Music

It was the second day of camp, and one of the newly-formed bands was experimenting with playing the song “Psycho Killer” by the Talking Heads. The drummer of the band was 18-year-old Sheyanna Gladson of Cumberland, Kentucky.

“I wanted to play music for a really long time … because I go to a lot of shows but I never played. Even though I obviously wanted to,” Gladson explained.

Her bandmate was 17-year-old Adeline Allison of Harlan, Kentucky. “I’ve always been drawn to music, but I’ve only played music with men. Which is fine. But I’ve never really met any other women who play music before,” Allison said.

Adeline Allison (left) and Larah Helayne during band practice. They were two of several campers who returned for the second annual Girls Rock Whitesburg.

Girls Rock Whitesburg launched in the summer of 2018, part of an international network that supports camps like this all over the world. This was Gladson and Allison’s second year at camp. They both said last summer was empowering.

“I was able to find some confidence musically and personally,” Allison explained.

“We don’t realize how much of a necessity that is to have confidence in ourselves. That’s not conceited, that’s not bad to love yourself, you know?” Gladson said.

Gladson, Allison and their third bandmate Larah Helayne were all camp interns in 2019, so they decided to call their band The Interns. Together, they wrote the camp’s theme song, which features lyrics that declare, “I take up space and use my voice. I’m not afraid to make loud noise.”

“It’s just such an important part for all these young girls to remember. Because so many girls feel like they don’t have room to talk. Or even if they do, no one’s going to value their opinion. But that’s not true at all,” Gladson said.

A motivational poster decorates the Boone Building in downtown Whitesburg, Kentucky where most of the Girls Rock activity takes place.

Voicing opinions, especially on social issues, is a big part of what Girls Rock Whitesburg is about. In addition to music instruction, campers participated in workshops on topics like sex ed and anti-oppression, and they discussed difficulties in their personal lives and conflicts happening in the world.

The camp schedule posted on the wall shows activities that include instrument instruction, sex ed, meditation, and an anti-oppression workshop.

This past year, some campers wrote songs about their experiences with bullying and sexism. In 2018, Gladson and her band wrote a song called “Melt the ICE,” to speak out against Immigration & Customs Enforcement detaining migrant children at the U.S.-Mexico border. In the song, Gladson wails, “Claustrophobic. There is no space. If it was your kid, then what would you say?”

Kudzu Punks

Girls Rock Whitesburg is part of a long Appalachian tradition of protest music written by women—women like Florence Reece. In the 1930s, Reece penned the well-known protest song “Which Side Are You On?” as a response to the bloody labor struggles she witnessed in her home in Harlan County. During the 1930s when Reece wrote it, other female activists in eastern Kentucky were also using music to speak out against injustices in their communities. In the song, an unaccompanied Reece condemns coal operators and law enforcement, and calls on miners to organize.

On the surface, songs like “Which Side Are You On?” that draw on the ballad and old-time music traditions might not seem to have much in common with the punk tradition that many Girls Rock campers and organizers draw from. But there is more in common than meets the eye. The common thread is dissent.

At Girls Rock Whitesburg, the traditions mix and meld. Organizer and music instructor Mitchella Phipps even has a name for it.

“I just like to call us kudzu punks … Whether it’s a fiddle or whether it’s an electric guitar, it’s kind of that same thing. We’re telling stories and we’re expressing things that happened to us in creative ways,” Phipps said.

Another instructor Carrie Carter explained the overlap between the past and present. “A lot of what happens in old-time music in the 1800s and early 1900s is fighting against oppression and fighting ‘The Man’ and fighting systemic issues,” Carter said.

Gladson said she hears similar strains in the music she and Allison are learning to play at Girls Rock. “Punk music’s just kinda saying what you feel and what you think should be said. Just expressing yourself. And you can do that where they can definitely hear you because you’re so loud, you know?”

Music Meets Activism

Following in the path of Florence Reece, the Girls Rock campers are learning the connection between music and activism. When it came time for The Interns to choose a song to cover during their final camp performance, they chose “Which Side Are You On?”

Gladson said they chose “the old song about the miners in Harlan. Just because of what’s happening right now.”

At the time of this interview back in the summer of 2019, dozens of coal miners and their families had taken up residence in the middle of a train track in Harlan County, just 20 miles from Whitesburg. They were blocking a shipment of coal to protest against their former employer, Blackjewel LLC, which had recently gone bankrupt, laid them off, and then failed to pay their remaining wages.

“My dad was playing that song when he was driving me home yesterday. We passed the protesters in Harlan. The miners who are protesting on the tracks in Cumberland. I’ve always loved the song.…So it’s kind of cool to see it be relevant again,” Allison explained.

Larah Helayne (left) wears a Girls Rock Whitesburg shirt while holding a banjo and a protest sign at the Blackjewel blockade in Cumberland, Kentucky. Helayne and several other Girls Rock campers visited the blockade to show support for the protesting miners and their families.

Which Side Are You On?

All of the Girls Rock campers join The Interns on the Mountain Heritage Stage in Whitesburg, Kentucky for a group performance of the camp theme song.

On The Interns’ final day of camp, a crowd gathered on a grassy hillside for the band’s final performance. The Interns played the camp theme song they wrote, along with a cover of the song “I Wanna be your Girlfriend” by Girl in Red. They closed their set with a performance of “Which Side Are you On?”

Along with electric guitar, drums, and bass, The Interns added fiddle and banjo to their version as a nod to the song’s place in old-time music repertoires. Girls Rock organizers and instructors Mitchella Phipps and Carrie Carter accompanied the band.

Once everybody tuned their instruments and found their place on stage, The Interns bandmember Larah Helayne introduced the song with words of support for the Blackjewel mining families: “Support miners. Support people over profits. Support these mountains. It is a place worth fighting for and not just a place worth leaving. So this one is called “Which Side Are You On?”

Larah Helayne, Adeline Allison, Mitchella Phipps, and Carrie Carter prepare to play their version of “Which Side Are You On?” Along with playing electric instruments, many of the Girls Rock campers and instructors are also old-time musicians.

This story is part of the Inside Appalachia Folkways Reporting Project, a partnership with West Virginia Public Broadcasting’s Inside Appalachia and the Folklife Program of the West Virginia Humanities Council. The Folkways Reporting Project is made possible in part with support from Margaret A. Cargill Philanthropies to the West Virginia Public Broadcasting Foundation. Subscribe to the podcast to hear more stories of Appalachian folklife, arts, and culture.