Blackjewel’s bankruptcy looks like bad news for workers and mine cleanup

An Eastern Kentucky coal mine. Photo by Matt Wasson

On July 1, Blackjewel and Revelation Energy announced the companies were entering Chapter 11 bankruptcy. The announcement is the latest in a long string of bankruptcies plaguing the coal industry. This latest news is notable for a number of reasons — mines shut down immediately, workers had paychecks retroactively withdrawn from accounts, and Jeff Hoops, the founder and leader of the companies, was forced out within days.

The companies employed about 500 miners in Virginia, about 600 in Kentucky, about 30 in West Virginia, and none in Tennessee during 2018, according to the U.S. Mine Safety and Health Administration. Initially, the announcement focused on the closure of two large Wyoming mines, Belle Ayr and Eagle Butte, which employed around 700 miners. Reports of employees being shut out of mines and having paychecks retroactively withdrawn from their accounts have been coming out of all three states.

This bankruptcy looks different than others we’ve seen in the past. During previous bankruptcy reorganizations, mines have largely kept running. And when employees were laid off, they received adequate notice, which allowed them to file for unemployment. But not this time. Employees have been left with few answers and few solutions.

Jeffery Hoops is a well-known figure in the Central Appalachian coal industry, founding several large Central Appalachian coal companies, including Revelation Energy in 2008. He ventured into the western coal market when one of his companies, Blackjewel, acquired Belle Ayr and Eagle Butte mines from Contura Energy in late 2017. These mines were already subject to one bankruptcy proceeding when Alpha Natural Resources declared bankruptcy in 2015. Alpha’s stakeholders formed Contura, which took on the Wyoming mines, once referred to as the company’s “crown jewels.” But within two years, Contura “gifted” these mines to Hoops, in order to shed reclamation liability. Presumably, Hoops thought he could turn these mines around, but the gamble hasn’t paid off.

In the past, bankrupt companies have reorganized, transferred mines to other companies, and general kept mines active. Although in Central Appalachia, “active” often includes mines in “temporary cessation” — mines that are neither moving coal, nor completing reclamation, but are idled in hopes of future better market conditions. David Roberts of Vox put together a great summary of what led to Revelation’s current predicament. As Roberts aptly pointed out, “as the industry contracts, it’s a game of hot potato, as failing mines get passed around to increasingly fly-by-night companies that extract a little value before passing them along or going under.” Companies are dodging liability as states, communities, taxpayers and employees are left holding the bag.

So what does this all mean for Blackjewel and Revelation mines in Central Appalachia moving forward? According to data from state mining agencies and from the U.S. Office of Surface Mining Reclamation and Enforcement, Revelation Energy and its related companies have about 300 permits in Central Appalachia. One mine site may require multiple adjacent permits, making it almost impossible to identify a specific number of mines. Of these permits, 213 are in East Kentucky, 72 are Virginia, 12 are in West Virginia and 2 are in Tennessee. Since a permit may be anything from a haul road to a 1,000-acre surface mine, we’ve been digging into the permits to get a better sense of these companies’ reclamation liability in Central Appalachia. It’s tedious work — we’ll share what we’ve found so far and add more as we’re able to compile it.

Map displays mine permits held by Blackjewel and Revelation Energy and their subsidiaries, based on Appalachian Voices research as of July 7, 2019. Map created by Matt Hepler.

[ View our current table of Central Appalachian mine permits held by Blackjewel and Revelation Energy and their subsidiaries (updated July 29, 2019). ]

So far, I’ve only been able to put together a complete picture for Virginia. The 72 permits include about 2,700 acres in need of reclamation. Those permits are covered by $96 million dollars in reclamation bonds. Luckily, the vast majority of those bonds are full-cost surety bonds, meaning that a third party company provides the full cost of the bond. That amount would be directly available for reclamation if the company abandoned the permit, forfeiting the bond. Of the $96 million, $54.6 million is held by Indemnity National Insurance and $38.9 million is held by Lexon Insurance Company. Presumably the third-party bonds should represent the full expected cost of reclamation. But the last review of Virginia’s bonding system by OSMRE in 2011 found that the federal agency’s average bond calculations were 26 percent higher than those calculated by the Virginia Department of Mines, Minerals and Energy. If the state has been underestimating the real cost of reclamation, that could mean that sites don’t get cleaned up, or it could put taxpayers at risk of paying the difference.

In addition, five permits take part in Virginia’s pool bond, which allows companies to post only a portion of the needed reclamation cost. Those five permits are covered by $3.2 million in surety bonds, but they would also likely draw from the pool if the permits were forfeited. The Virginia pool bond currently holds about $9.2 million as of January 2019.

We haven’t finished compiling data on reclamation and liability in Kentucky and West Virginia, but so far, it doesn’t look much better. There are about 1,300 acres in need of reclamation in West Virginia. We have only compiled a subset of Kentucky’s reclamation need, but so far there are 3,400 acres unreclaimed. Bonding programs across Appalachia have been chronically underfunded. That doesn’t bode well for taxpayers and state coffers in Kentucky and West Virginia, either.

In addition, there’s the issue of Lexington Coal Company. The company lists Patricia Hoops, Jeff Hoops’ wife, as an officer and the company is referenced in the bankruptcy docket as being one of several entities to loan over $11 million to Revelation companies. Lexington Coal Company has an addition 297 permits in Central Appalachia, including 17 in Tennessee, 91 in Kentucky and 189 in West Virginia.

So what’s next? We’ll have to see how the bankruptcy proceeds. Right now, it is still technically possible that Revelation could reorganize, but it is also possible that the companies are too far gone. If the mines are truly abandoned, Virginia may be in the best position for reclamation, if the state has estimated reclamation costs accurately. With their pool bonds, Kentucky and West Virginia may be in a more precarious position. We plan to continue to collect data on reclamation needs and liabilities across the region for the Revelation companies and other Hoops-affiliated companies and make that available to the public.

About Erin Savage

While Erin prefers to be on rivers rather than at a desk, as our Central Appalachian Program Manager she devotes a lot of time delving through data to make it meaningful to others who care about the health of our waterways.