Coal Bankruptcy Story Archives - West Virginia Public Broadcasting

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.

Murray Energy Exits Bankruptcy, Rehires Union Miners

Coal mining giantMurray Energy Corp. has emerged from bankruptcy with a new name and a commitment to rehire all of its former union employees, according to a news release from the United Mine Workers of America.

UMWA President Cecil Roberts said on Wednesday that a new collective bargaining agreement has been finalized between the coal miners union and American Consolidated Natural Resources Inc., which took over Murray Energy’s assets.

“There is much to be concerned about for those of us associated with and working in the coal industry during these troubling times, but it is good that this process has finally been completed and our members can put the uncertainty of the bankruptcy behind them,” he said.

Murray Energy was formerly the largest privately-owned underground coal mining company in the country with a substantial footprint across the Ohio Valley. The company produced low-cost bituminous coal at mines located close to its customers — largely coal-fired power plants. As coal-fired generators have closed, that has posed challenges for the company’s business model.

Founder and CEO Bob Murray has close ties to President Donald Trump, including appearing at events in West Virginia with the president and donating $300,000 to his inauguration. Murray has helped shape the administration’s environmental agenda, including promoting policies that loosened restrictions on the U.S. coal industry.

The Ohio-based company declared bankruptcy last fall, citing billions of dollars in debt, healthcare and pension liabilities. In court filings, company executives said tough market conditions for coal was one of the major factors that pushed the coal giant toward bankruptcy.

The court process unearthed new information about spending by Murray executives, including multi-million dollar cash bonuses, and what some creditors described as a “disturbing pattern of self dealing and abuse of corporate resources.” UMWA officials have also been watching the bankruptcy process closely. Murray Energy was the last major company contributing to the union’s pension plan.

Coal Company Rhino Resource Partners Files For Bankruptcy

Kentucky-based coal company Rhino Resource Partners LP filed for Chapter 11 bankruptcy on Wednesday, joining a growing list of Ohio Valley coal producers seeking financial restructuring as the U.S. coal industry continues to struggle.

According to court documents, the company and its subsidiaries currently employ about 550 workers at underground and surface mines located in Kentucky, Ohio, Virginia, West Virginia and Utah. In 2019, Rhino Resources produced about 3.2 million tons of coal.

The company reports $162.1 million in liabilities. In April, Rhino received a $10 million Paycheck Protection Program loan under the COVID-19 relief bill, the CARES Act.

In court filings, the company said market forces pushed Rhino, like many of its competitors including Murray Energy, Blackjewel L.L.C. and Blackhawk Mining, into bankruptcy. In particular, Rhino cited a weakening in the market for metallurgical coal, or coal used to make steel, beginning in the fall of 2019.

Rhino subsidiary Jewell Valley Mining, purchased mines and other assets from coal operator Blackjewel. Last summer, the coal operator grabbed headlines when a group of miners spent nearly two months blocking a loaded coal train as a protest to demand payment of millions in owed wages.

“Rhino has been taking steps to improve both the performance and financial strength of our business,” CEO Rick Boone said in a press release. “While these strategies have gained positive momentum, they have not produced sufficient liquidity to continue operating our business and servicing our outstanding obligations.”

The company said it has entered into a stalking horse purchase agreement and reached an agreement to obtain a $11.75 million loan to help get it through the bankruptcy process.

The company, which was publicly-facing from 2010-2016, was previously run by the now head of the federal Mine Safety and Health Administration, David Zatezalo. During his tenure, Rhino racked up serious mine health and safety violations. He stepped down from the company in 2013.

Coal Executives Face Fines, Possible Jail Time Over Failure To Pay

Executives with Indiana-based coal company American Resources Corporation will face daily fines of $2,500 if they continue to flout court orders, according to filings in the bankruptcy case of Cambrian Coal.

The order comes after ARC failed to pay electric utility bills, employee back pay and benefits, and other liabilities it purchased from Cambrian last fall, even after receiving millions of dollars from the federal government’s coronavirus relief aid.

ARC must pay the daily fee if it fails to pay $1,067,736 in court-ordered payments by June 1. Executives would also have to appear in court to face additional sanctions, including possible incarceration. Incarceration for failure to pay is the highest sanction available to bankruptcy judges and is exceedingly rare.

ARC received $2.7 million in loans from the federal government this April through the Small Business Administration’s Paycheck Protection Program. The loan is forgivable if used on employee retention, so ARC would forego that loan forgiveness if it chose to spend the money on court-ordered payments.

ARC attorney Billy Shelton told the court earlier this month that the purchased mines had barely produced any coal, making it difficult to pay outstanding debts.

Coal miners employed by ARC subsidiary Quest Energy made news over the winter when they held a three-day-long railroad blockade to protest lost wages. ARC is among dozens of coal companies declaring bankruptcy amid a historic collapse of the coal industry in recent years. The coronavirus pandemic has hastened the decline in demand for coal.

Federal Judge Threatens Jail Time as Coal Company Flouts Court Orders

Coal company American Resources Corporation, which owns mines in Kentucky and West Virginia, is facing sanctions after failing to comply with a bankruptcy court’s orders, even after the company received $2.7 million in government aid meant for companies harmed by the coronavirus pandemic.

Indiana-based ARC purchased coal mines and equipment from bankrupt coal company Cambrian for $1 last September. The purchase came with a heavy debt burden that included environmental reclamation obligations, employee wages and health care costs, and utility bills.

Almost immediately, ARC failed to pay those expenses, leading Eastern Kentucky federal bankruptcy court Chief Judge Gregory Schaaf to impose monetary sanctions against the company. Lack of payment to employees at ARC subsidiary Quest Energy led some employees to protest this January by blocking a Pike County, Kentucky railroad.

“It’s hard to go to work between two rocks and not get paid for it,” a Quest miner who asked to be kept anonymous said at the time. “There’s men that’s getting their power bills cut off and men’s children starving.”

“There’s some concern that this is not an inability to pay, but an unwillingness to pay,” said Cambrian attorney Patricia Burgess in a May 14 hearing.

ARC received $2.7 million in loans from the federal government this April through the Small Business Administration’s Paycheck Protection Program, which was intended for small businesses.

ARC attorney Billy Shelton told Schaaf the slump in energy usage brought on by coronavirus-related shutdowns had interfered with ARC’s ability to turn a profit off the newly acquired mines, but the judge said ARC’s failure to pay began long before the pandemic.

“I am at the end of my rope with your client,” Schaaf told Shelton in the same hearing. “And I guess you need to start by telling me why I should believe anything that ARC promises to the court.”

The threat of jail time is a significant escalation in the efforts of bankruptcy judges to hold coal companies accountable for environmental and other liabilities, said Cornell University assistant visiting professor Josh Macey, author of “Bankruptcy as Bailout: Coal Company Insolvency and the Erosion of Federal Law” in the Stanford Review.

“For over a decade, coal companies have been getting rid of non-productive mines by giving them away. In a number of cases, coal companies have even paid another entity to acquire the mine. The acquirer tends to be underfunded,” Macey explained. “These transactions look like a way of offloading burdensome cleanup and retirement obligations. This has worked out reasonably well for both the buyer and the seller but not for local communities.”

Macey has documented a pattern of misuse of the bankruptcy process by coal companies, in which environmental reclamation and miners’ health obligations are loaded onto companies that have no ability to pay them, so the original companies can continue operating without the burden of those debts.

“I would expect [ARC] to liquidate given current market conditions and available liquidity. There is just not enough cash right now for them to keep operating,” he said.

The Trump administration has come under fire over the allocation of PPP funding. The first round of funding was quickly used up, with loans of more than $2 million accounting for some 25,000 loans while thousands of family-owned businesses went without.

Judge Schaaf is expected to decide later this week whether to kick the issue up to a higher court for adjudication.

LISTEN: Veteran Coal Reporter Provides Update On Murray Energy Bankruptcy

Last fall, Murray Energy — the largest privately-owned coal company in America with a large presence in the Ohio Valley — joined many of its peers in declaring bankruptcy. Murray faced mounting debt and a struggling coal market. Then the COVID-19 pandemic hit, tanking the global economy including energy markets.

S&P Global Market Intelligence senior reporter Taylor Kuykendall has been following the bankruptcy case closely. Late last week, he spoke with energy and environment reporter Brittany Patterson about the latest updates in the case.

***Editor’s Note: The following has been edited for clarity and length.

Kuykendall: I think it’s worth noting a few things about Murray Energy for those that might not understand how they got there. They were buying a whole lot of property. They bought longwall coal mines in West Virginia to expand, they bought coal mines from Armstrong Energy to expand into the Illinois Basin, and they bought a mine in Colombia recently. I mean, that sounds like a lot, even if you were just talking about a normal period for the coal industry. But this is at a time when the coal industry was really, really suffering. And most people were thinking more about downsizing their coal assets.

Patterson: What were some of the reasons that the company gave at the time that it filed?

Kuykendall: Murray used to criticize all these other companies that were filing for bankruptcy, because basically when you file for bankruptcy, you get rid of your debt, and you can compete a lot better afterwards. He called it dragging the industry into the bankruptcy sewer. Well, after, you know, months and months of complaining about being dragged towards the bankruptcy sewer, his company lands in the bankruptcy sewer.

The reasons are ones that we’ve all heard before: cheap gas, the growth of wind and solar energy is increasingly a factor, and an overall decline or flattish electricity demand. By the time that they got to the bankruptcy court, you’re talking about a company that’s the largest private coal company in the country, but they made about $540 million in earnings in 2018. On the other side of the balance sheet, carrying about $8 billion in potential actual legacy liabilities and about $2.7 billion and other debt obligations. They had way more debt on their balance sheet than they can handle. And not only was the market bad, but it wasn’t really showing a lot of signs of looking better anytime soon.

Patterson: What have we learned about Murray Energy?

Kuykendall: There’s been a couple of interesting things come out. I mean, I think some of the latest developments that we’re finding, which is just kind of mind boggling when you think about the scope of the company. They started the bankruptcy, about $300 million in liquidity. And that was supposed to last them through about the end of June, I believe … whenever they’re supposed to come out on the other side of bankruptcy, burned through $180 million in two months. They said that they have about $6 million in cash on hand. $6 million. Sounds like a lot. And it’d be a lot if I had $6 million stacked on my desk right now, but for the country’s largest coal company, $6 million is not a lot of money. And even Murray Energy themselves warned in their bankruptcy filings, you know, that this amount is insufficient to responsibly manage the business and this or any environment as a quote, they mentioned laying off something like 500 employees, the CEO is personally approving any expense over $25,000. That’s not a lot of money when you’re talking about coal mining. They’re really desperate here to try to save as much money as they possibly can. And we’re also kind of learning that management and just about anybody that’s involved in this bankruptcy doesn’t think that that’s going to improve, you know, in the next several months.

Patterson: Tell us a little more about what some of the documents have shown us about what top officials at Murray Energy have been paid and have been doing.

Kuykendall: Consol Energy kind of caught my attention. At first, I mean this as far as its bankruptcy goes on some filings earlier this month, and they just kind of hinted at a stunning inability to control costs, manage the market and you know, otherwise manage the business, wasn’t a lot of details when they first kind of put this filing out there it was this, this latest filing from the Committee of unsecured creditors. That’s basically people that Murray Energy owes money that are a little bit further down on the list of likelihood to see that money could pay back in a bankruptcy court. So as you can imagine, they do have some motivations here, and talking about the company, but what they describe is a “disturbing pattern of self dealing and abuse of corporate resources.” That’s mostly pointed to actions from Mr. Murray and Mr. Moore. Basically, they went through and reviewed board materials, financial information, emails, flight logs, those kind of things, from the period between 2016-2019.

And also to preface all this, Murray says the creditors did not interview him. He basically rejects all these statements. He disagrees with all of it. But, you know, some of the things that they found they say that the company was mostly insolvent during a lot of that investigation period they did an analysis of Murray and Moore’s compensation and compared that to other key executives. Well, they found between 2016-2019, these two executives earned about $100.4 million more than the average senior officer. They also mentioned cash bonuses around $24 million and $13 million respectively, for Murray and Moore. At the same time, company earnings were declining and flat. But they also point to these guys using the company aircraft for personal purposes. They say that they paid for vacations and sporting events. And you know, Murray’s pushback against these again, in his statements, he does say that he’s kept logs of that travel and is prepared to explain it.

Another thing that the creditors point out was $10 million in donations to charities. One of the big beneficiaries of that is the Boy Scouts. There’s a church, I believe, in St. Clairsville [Ohio] he donated some amount of money to. Creditors are maybe making an argument that that wasn’t the most financially responsible thing that they could have done.

Murray Energy’s a big priority, and the thing they’re pushing back on is, hey, we’re running out of liquidity. We don’t really have time for this argument. They’re trying to get through with reorganization and otherwise, and they’ve said this themselves, if you know that this isn’t done right, there very well might not be a company to restructure.

Patterson: And so if the company is forced to liquidate or go to Chapter 7 bankruptcy, what would that mean? This company employs thousands of workers, a lot in the Ohio Valley region, and as you mentioned, they have significant pension and healthcare obligations.

Kuykendall: So, that’s a really big question and one that we haven’t seen come up as much. So, it’s not really clear what a Chapter 7 liquidation would look like because different things could happen. Someone could buy the mines. If Consol Energy, for example, were to buy some of these longwall mines, I imagine they would want to keep operating them. And for a lot of the workers, maybe even some that have been there back when Consol ran the mines, there would be very little difference at all, it’d be like going back to that. But on the other hand, this is a really bad time to be trying to sell anything, let alone a coal mine. We’re talking about coal mines that have been just really painful to try to take to market and sell on an auction for the past 10 years. And nobody’s thinking that situation is getting any easier going down the road. And now they’re trying to do it in the middle of a global pandemic. We won’t know anything for a little while. I think that the next hearings aren’t for a couple weeks. There is kind of a tendency for courts to lean toward a Chapter 11 and restructuring and getting a company out on the other side. So even though Consol Energy is asking for liquidation, it doesn’t mean that it’s likely to happen.