Looking at the Black Jewel bankruptcies four years later
Black Jewel was a coal company that operated in four states – Kentucky, Virginia, West Virginia and Wyoming – and this July marked the fourth anniversary of the company filing for bankruptcy. Many miners in all four states had no notice and were left without paychecks or jobs.
The bankruptcy also allowed the company to abandon a lot of mine sites, which it turns out is a pattern and even a strategy for some coal companies, particularly in the Appalachian region.
Award-winning journalist Ken Ward Jr. is based in West Virginia and has followed the story of Black Jewel. He recently published a story for ProPublica about the company’s mishandling, specifically focusing on Kentucky and West Virginia. He spoke with Wyoming Public Radio’s Caitlin Tan.
This transcript has been lightly edited for clarity and brevity.
Caitlin Tan: For those who haven't followed along, tell us a little bit about Black Jewel. In the last few years, it's earned a pretty troubled reputation. But it sounds like that wasn't always the case. You reported that the founder Jeff Hoops was somewhat of a local hero in West Virginia prior to the bankruptcy.
Ken Ward Jr: Jeff Hoops, the founder of Black Jewel LLC, grew up in West Virginia and had a hard time. Growing up, his father was an abusive alcoholic. But early on he was clearly a smart, striving sort of person who wanted to go places. He started off in the coal industry but went to school in the evenings and rose up to a management position in a large coal company. But, he actually left there to found his own operations and was very successful. He became quite a philanthropist.
But times got tough for Black Jewel as they had for a lot of the coal industry, and Black Jewel landed in bankruptcy in July of 2019.
That's kind of where our story picked up. [I] was looking at the fallout from Black Jewel, which was widely reported on and somewhat notorious, I suppose, in some people's minds, as an example of coal industry bankruptcies.
CT: It sounds like, from your reporting, it was a little bit of a surprise. I'm thinking back just in Wyoming, [and] there were about 600 workers left in limbo not knowing if they had jobs and paychecks – and benefits weren't coming through. Tell us about what that looked like over in West Virginia and Kentucky.
KW: In a number of operations, workers showed up for their shift and were told to go home. There were allegations made in court that they didn't receive any warning of their layoffs or the closures of their mines. Most famously in eastern Kentucky, a number of miners staged a sit down protest on the railroad tracks to block a coal train. One fellow we talked to had gone on vacation with his family to Myrtle Beach and his paycheck bounced and they had to come home from vacation.
The reality is there were lots of indications that Black Jewel was having problems in the run up to the bankruptcy. Of course, Black Jewel’s bankruptcy came as part of a massive wave of coal industry bankruptcies.
There was a lot of particular chaos around the Black Jewel bankruptcy, partly because there were some problems getting financing. Once the Chapter 11 was filed, what often happens in a reorganization is you get some sort of financing to allow the company to continue as a ‘going concern’ while it reorganizes. But some things came out during the bankruptcy hearing about payments that were flowing from Black Jewel to a different company that Mr. Hoops and his family controlled. There was litigation over that that was later settled. But the upshot was lenders and the bankruptcy judge wouldn't go along with a temporary financing plan for Black Jewel unless Mr. Hoops resigned as CEO, so he did.
CT: You detail this pattern of bankruptcy with companies like Black Jewel and you outline how this can be a strategy – you call it the ‘game of musical mines.’ Break this down for us and what this kind of pattern looks like.
KW: The way it's supposed to work in the coal industry is, when you get a permit to operate a surface mine, you have to post financial assurance, which will guarantee that if you go bankrupt or if you walk away, the mine will still be reclaimed. The land and the water will be put back the way that it was. But it's never really worked out that way. States and the federal government have not forced coal companies to post adequate reclamation bonds to cover the complete costs of reclamation.
That's sort of the original sin of the surface mining act – that it allowed the coal mine reclamation version of an insurance pool. This is where you post a certain amount of a bond and it goes into a state pool where the mine operator walks away or goes bankrupt. The state is supposed to use the money to clean up the mines, but there's nowhere near enough money. One of the things that happens and where this ‘musical mines’ concept comes from is we found that a number of mines, specifically in West Virginia and Kentucky, went through multiple bankruptcies. A permit would be part of the bankruptcy involving Alpha Natural Resources and then get bought by Black Jewel and then be part of Black Jewel’s bankruptcy. What we saw happening was these mines, often marginal mines where a lot of the coal had been played out, were more on the liability side of the books for these companies. They would still get passed around from parent company to parent company.
Well, at some point the music is going to stop in this ‘game of musical mines,’ and taxpayers in places like West Virginia and Kentucky are going to get stuck holding the bag. We're cleaning up the mess that the coal industry has left behind.
CT: So here we are sitting in 2023, four years later. In your reporting, you cover how a lot of these mines haven't been reclaimed and there's a lot of environmental damage. Can you talk a little more about that?
KW: With surface mines, what's supposed to happen is, when you're done mining the coal, the reclamation is done. You're supposed to be actually reclaiming contemporaneously – you're supposed to be cleaning up the mess from the mining as you go. But that often doesn't happen. And then what happens when you run into a bankruptcy is there's no money to have workers doing things like cleaning out sediment ponds. So the sediment ponds fill up, and when it rains really hard the sediment ponds overflow. And this has happened at Black Jewel sites in Eastern Kentucky.
Basically, there's a flood in the community that pours mud and dirt and debris into people's yards or damages a public road. We focused on Kentucky where most of the Black Jewel mines were – many of them were basically abandoned by the company. And there's a long process of the bonding company – the surety and insurance company essentially – deciding whether it wants to clean up the mine or if the state regulatory agency is going to forfeit the bond and use that money to clean up the site. Some of these mines in Kentucky are still working their way through the regulatory process until one day either the state agency, the surety or some other buyer actually accomplishes the reclamation.
So if you live near one of these mines and it's not really being maintained, the problem for you is that, unless there's immediate danger to life or property, the bankruptcy court can't do anything while the bankruptcy is going on. And as a lawyer for the Kentucky Environmental Cabinet pointed out, once there's immediate danger to people's life and property, it's too late.
CT: What's going on with Black Jewel now?
KW: Its bankruptcy case is still going on. There's something like $7 billion in claims against it. But it's really unclear from looking at the balance sheets that are filed in bankruptcy court whether who, if anybody, is actually going to get any money out of the bankruptcy.
CT: Can we circle back to the Black Jewel miners? I know in Wyoming a lot of these people were left without jobs and without paychecks, and a lot of them had to move away from Wyoming. What have you heard from miners over in Kentucky and West Virginia and how they're doing right now?
KW: A lot of them that I've talked to moved on to other jobs in other communities. What’s really important for people to understand is that the coal industry continues a downward spiral and it's difficult to find any analyst who really thinks that that's going to change. So communities in places like Wyoming, eastern Kentucky and southern West Virginia – where coal has been the lifeblood of these communities for generations – they're seeing that lifeblood continue to disappear. And these abandoned mines that get left by bankrupt companies are certainly not something that these communities are equipped economically or otherwise to clean up themselves. And I think that's really the most important part of the story, really, is what's the future for these communities? And what's being done to ensure that the financial burden of these messes doesn't fall on communities that are already having a difficult time getting by?
You can find more of Ken Ward Jr.’s reporting on the coal industry here.
Editor's Note: The story has been updated on Aug 1, 2023 to clarify that Ken Ward Jr's reporting on Black Jewel focuses specifically on Kentucky and West Virginia. Additionally, 'Wyoming' has been omitted from the statement "...taxpayers in places like West Virginia and Kentucky are going to get stuck holding the bag." To learn more about Wyoming's bonding and reclamation procedures click here.