By Camille Erickson
June 29, 2020 - Nearly one year ago, two of the largest coal mines in the nation ground to a halt when the owner abruptly filed for bankruptcy and failed to secure interim funding. Hundreds of Wyoming workers were sent home indefinitely.
The Eagle Butte and Belle Ayr mines in the Powder River Basin have since come back online under new ownership. But the turbulent bankruptcy case involving coal firm Blackjewel continues and appears far from fully winding down. Several outstanding issues — from fraud allegations to a lingering dispute over shovels and unhappy creditors — have prevented the debtors from formally exiting Chapter 11 bankruptcy.
On Wednesday, the U.S. Bankruptcy Court for the Southern District of West Virginia held a status conference on the case, advancing some matters to evidentiary hearings and once more underscoring just how complicated a bankruptcy case can become.
According to recent court filings, parties involved in the case have yet to reach a “consensual plan of liquidation,” or agreed upon terms under which the bankrupt company can formally exit bankruptcy and distribute its assets to the creditors it owes money to.
The Star-Tribune continues to track the outstanding issues Blackjewel faces in bankruptcy court.
Back in January, debtors and other creditors involved in Blackjewel’s bankruptcy saga petitioned the court to investigate the company’s former CEO Jeffrey Hoops for allegedly stealing tens of millions of dollars for personal gain, a claim he has denied.
When Blackjewel filed for bankruptcy last July, the court ordered Hoops to step down before the restructuring process could continue.
Now, attorneys for the debtor Blackjewel have accused Hoops of a fraudulent money transfer during his time as CEO of the insolvent company. Counsel for the company contends Hoops illegally transferred $34 million to one of his other companies and family trusts, Clearwater Investment Holdings LLC, according to court documents filed June 11.
Clearwater Investment Holding continues to construct the Grand Patrician Resort in Milton, West Virginia as of March, according to reporting by the Herald-Dispatch.
Hoops has denied the allegations, saying in January he had in fact loaned millions of dollars to Blackjewel from Clearwater. The case remains ongoing.
Another dispute left over from last summer’s unprecedented bankruptcy involves Komatsu Mining Corporation, an equipment company with multiple locations in Wyoming.
For months, the equipment company has demanded the Wyoming coal mines’ new owner, Eagle Specialty Materials, provide compensation for use of two of Komatsu’s gargantuan coal mining shovels built especially for the mining facilities.
When Blackjewel filed for bankruptcy, and later sold the Eagle Butte and Belle Ayr mines to Eagle Specialty Materials, the October sales agreement stipulated that Komatsu and the mines’ new owner would “work in good faith to attempt to reach a consensual agreement with respect to ESM’s acquisition of some or all of the Shovels.” In other words, the shovels weren’t included in the $40.2 million mine sale, but the companies would smooth out the details later.
But months have gone by and that agreement has yet to come to fruition due to an ongoing dispute over exactly how much money Eagle Specialty Materials owes to Komatsu for maintenance contracts related to the shovels.
Now, Komatsu wants its shovels back. But Eagle Specialty Materials has warned repeatedly in court documents the coal facilities would grind to a halt if the company lost the two industrial shovels.
On June 11, the court ruled it would lift the automatic stay on the shovels, allowing Komatsu the chance to reclaim the shovels or pursue the millions of dollars the company claims it’s owed from the former owner, Blackjewel, in bankruptcy court. At the court hearing Wednesday, the judge agreed to an evidentiary hearing.
When Blackjewel filed for bankruptcy last July 1, it did so with a pile of unmet land, water and safety fines at several of its over two dozen facilities. Blackjewel has continued to not comply with the Surface Mining Control and Reclamation Art or the Clean Water Act throughout the country, several conservation groups and environmental regulators allege in court documents.
After failing to secure sufficient interim funding to keep its coal facilities operational during bankruptcy proceedings, Blackjewel shuttered 32 mines across Wyoming, West Virginia, Virginia and Kentucky.
The company has since auctioned off several of its coal mines, but hundreds of mining permits remain in the insolvent company’s hands. The neglected permits — dotted throughout West Virginia, Virginia and Kentucky — carry steep liabilities.
In a motion filed in bankruptcy court this month, Kentucky environmental regulators contend Blackjewel has hundreds of outstanding environmental and mining violations at several mine sites in the state. The Commonwealth of Kentucky’s Energy and Environment Cabinet cited 13,125 violations of the Kentucky Pollutant Discharge Elimination System by Blackjewel. The cabinet sought a preliminary injunction to require Blackjewel to bring the idling mines into compliance.
In addition, the Appalachian Citizen’s Law Center, along with many other conservation and landowner groups across the nation, have sent letters to the bankruptcy judge, accusing the company of “severe” environmental violations at its idling coal mines out east. The groups also cite a lack of progress on the transfer of permits to new owners.
“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,” a June 17 letter from the by Appalachian Citizens’ Law Center stated.
Both Blackjewel and Eagle Specialty Materials filed objections to the claim.
The Commonwealth of Kentucky’s Energy and Environment Cabinet’s motion was continued to a later date in August during the latest bankruptcy hearing.
Attorneys representing hundreds of coal miners in Wyoming and other coal-producing states reached a settlement in March in a class action lawsuit brought against bankrupt coal operator Blackjewel, pending final approval by a federal judge.
The lawsuit alleged the coal operator violated federal labor law by failing to notify or compensate hundreds of workers before suddenly closing down its mines last summer. The court has yet to release details of the settlement and they remain sealed. The judge will need to issue a decision on the settlement first, according to Kentucky attorney Ned Pillersdorf.
“The settlement we reached is still judicially sealed, and it is not in the miners’ interest if one of their lawyers violates a court order and reveals what is sealed,” Pillersdorf said in a June 15 post on Facebook to a group of former Blackjewel miners. “The settlement the team of lawyers representing the miners negotiated is in the best interest of the miners.”
The class action lawsuit was filed on behalf of out-of-work Blackjewel miners and any other “similarly situated” workers who were affected by the coal mine closures last year. The intent of the lawsuit was to cover roughly 1,700 workers from former Blackjewel mines across the country.