Paychecks bounce, leaving Kentucky coal miners at bankrupt Blackjewel in a bind

A Blackjewel LLC mine in Harlan County sat idle on July 5, 2019, in the wake of the company’s bankruptcy.
A Blackjewel LLC mine in Harlan County sat idle on July 5, 2019, in the wake of the company’s bankruptcy.

It’s been an anxious week for coal miners in Southeastern Kentucky after their last paycheck from a bankrupt coal company bounced, leaving them short on cash and wondering when, or if, they’ll get paid or go back to work anytime soon.

Employees of Blackjewel LLC, which operated several mines in Harlan County, received a paycheck June 28.

Miners or their wives deposited the checks and paid bills, but after Blackjewel and affiliated companies filed for Chapter 11 bankruptcy protection July 1, employees found that their banks had deducted the money back out of their accounts.

Frank Volk, a federal judge in the U.S. Bankruptcy Court of Southern West Virginia, set an expedited telephone hearing for Saturday afternoon regarding the payment of Kentucky employees.

Melissa Cole, a Letcher County woman whose husband worked at a Blackjewel mine near Cumberland, in Harlan County, said she deposited about $1,800 where she banks in Hazard and paid some bills.

On Wednesday, she found the bank had subtracted the money, leaving her overdrawn by $1,088.

Cole said other Blackjewel employees also had their last checks charged back off their accounts. Several employees confirmed that to the Herald-Leader, but asked not to be identified out of concern that talking about the situation could cost them their job.

“Pretty much everyone’s account is negative,” Cole said. “It’s worrisome.”

Cole said her family doesn’t have enough savings to cover bills for very long without a paycheck.

Her parents own an apartment building and she’s been collecting rent this week and using that money in lieu of her husband’s check.

Blackjewel and Revelation Energy, a related entity, employ about 1,100 people in Kentucky, West Virginia and Virginia, mostly at underground mines and preparation plants, and about 600 people at two giant surface mines in the western U.S.

Charles Raleigh, the mayor of Cumberland in Harlan County, estimated that the companies employ between 200 to 300 people at its mines near Cumberland.

The companies were approved for a $5 million loan this week, which an advisor for Blackjewel said was necessary to prevent Chapter 7 bankruptcy, or the process of liquidating the companies’ assets.

Without the loan the companies would have had “no choice” but to liquidate, the advisor, Robert White, wrote in an affidavit.

However, the order approving the $5 million loan, granted Wednesday, does not specify that the money can be used to pay back employees.

According to the court order, the loan can only be used to pay for “security measures” at the mines, firefighting operations, “professional fees,” and other “essential emergency expenses.”

A court filing Friday from the bank that handles the bankrupt coal companies’ payroll account indicates that some Kentucky miners won’t be going back to work right away.

United Bank said in the court filing that Blackjewel and Revelation didn’t have money to cover checks to employees in Kentucky, West Virginia and Virginia when it issued them on June 28, but that it had reason to believe it would get the money.

When that didn’t happen as quickly as the company planned, banks deducted money from the accounts of Blackjewel and Revelation employees.

United Bank said the financing obtained by Blackjewel this week contemplates “reduced operating capacity” at its mines in Appalachia, which won’t require as many employees as the companies needed before the bankruptcy.

The bank said it believed Blackjewel and Revelation are contacting some employees with the skills needed for the reduced operating capacity.

The bank said its understanding was that the companies would use some of the $5 million approved this week to pay employees who come back to work.

Once the companies identify the employees, United will help process “pre-petition” wages to them, meaning wages earned before the bankruptcy filing.

The bank’s report didn’t say anything about pre-bankruptcy wages for Blackjewel employees not going back to work.

Attorneys for Blackjewel and Revelation did not respond to a request from the Herald-Leader Friday for information on what’s being done to make good on the bounced paychecks.

The situation has left miners angry at being shorted on wages for work already done, frustrated over the lack of information about when they’ll get paid or go back to work, and concerned over their future in a place with few other jobs.

People at two company mines in Harlan County and one in Letcher County said Friday morning that they’d been given no indication of when they would get paid or when the mines will reopen.

One man said he went to the the North Fork No. 6 mine at Partridge, in Letcher County, at 7 a.m. Friday in hopes of getting news on his check, but no one from the company showed up.

The potential loss of jobs is weighing heavily on the community as well.

At the smoky, sparsely decorated Back Street Bar in Cumberland, owner Debra Walters said the losses could devastate the town.

Many stores in Cumberland are vacant and dust covers the windows of a shut-down motel — a far cry from a time when the economy was better and customers crowded the sidewalks.

“You used to have to step on the road a bit, it was so crowded on the sidewalk,” Walters said.

At a liquor store down the street, owner Shelby Parrott said he wished there were laws to protect workers like those at Revelation and Blackjewel.

“It’s a shame,” Parrott said.

Jon Fields, the manager of a local furniture and appliance store, said the bankruptcy has been hard for his friends who worked at the mines. The uncertainty could lead more people to leave the area, he said.

“A lot of guys my age, maybe their wives don’t work, this is the only income they have,” Fields said. “I can’t imagine.”

Fields said his business has been affected by the decline of coal, and losing more jobs would make it even worse.

In a news release, Kentucky Attorney General Andy Beshear said his office has received numerous complaints about Blackjewel “ranging from clawed back paychecks to child support issues.”

“I have therefore instructed my office to use all of its powers and resources to seek answers for those who have been harmed,” said Beshear, the Democratic nominee for governor. “No Kentuckian should put in an honest day’s work only to have their paycheck taken away and their livelihood disrupted.”

White, the advisor who advocated for the loan, warned in an affidavit that Blackjewel and Revelation did not have enough money to continue mining operations or pay their debts without additional revenue.

“Most critically, I understand that the (companies) are required to make a payment in the amount of approximately $6 million to fund their employees’ salaries, taxes, and benefits on the first day of the chapter 11 cases (July 1),” White wrote in his affidavit.

The companies had a total cash balance of just $100,000 as of July 1, and no available sources of financing other than the loan, according to White’s affidavit.

“Without immediate access to funding, the Debtors believe that they will have no choice but to convert their cases to Chapter 7 cases and liquidate their assets, with the attendant loss of thousands of employees’ jobs,” White wrote.

Blackjewel and Revelation are co-debtors in the same bankruptcy case.

According to an affidavit by Jeff Hoops, Blackjewel’s president and CEO, Blackjewel purchased most of Revelation’s equipment and mining rights in 2017.

In exchange, Revelation took on liabilities for mine reclamation, continuing to operate “in a reclamation only capacity” and holding a limited number of permits, Hoops wrote.

Together, the companies are one of the largest coal producers in the nation.

Hoops blamed adverse market conditions for the companies’ financial woes. In particular, he pointed to competition from natural gas and renewable energy, declining demand for thermal and metallurgical coal, and stringent federal regulations.

Revelation and Blackjewel’s case comes just two weeks after the Chapter 11 bankruptcy filing of Cambrian Coal, LLC., which oversees multiple mining operations in Kentucky and Virginia. According to a news release, Cambrian said it expects its mining operations to continue throughout the bankruptcy.

Will Wright is a corps member with Report for America, a national service project made possible in Eastern Kentucky with support from the Galloway Family Foundation. Based in Pikeville, Wright joined the Herald-Leader in January 2018 and reports on Eastern Kentucky.