Court approves sale for many Blackjewel mines, promising some upfront cash and jobs

A bankruptcy judge in Charleston approved the sale Tuesday of a substantial portion of Blackjewel LLC’s coal mines in a deal that promises at least some upfront cash and jobs for Kentucky miners who were left out of work in wake of the company’s bankruptcy.

The approval allows Blackjewel to move forward with the sale of the Black Mountain/Lone Mountain division of the company, which includes mines in Harlan and Letcher counties, to Kopper Glo Mining, LLC. It also allows them to move forward on the sale of mines in Wyoming, West Virginia and Virginia.

Kopper Glo has promised $450,000 as part of the deal to pay former Blackjewel employees for their unpaid wages, as well as a per-ton fee that will accumulate up to $550,000 over the next two years. That money would also be distributed to former Blackjewel employees.

The total $1 million promised in Tuesday’s deal is likely less than half of the total unpaid wages of Blackjewel’s former Kentucky workforce.

Sam Petsonk, a West Virginia attorney who is representing miners in a class action suit against Blackjewel, said Kentucky miners likely never received about $2.5 million of wages for work they already completed as Blackjewel employees. Citing Kentucky labor laws, Petsonk argues that the company owes employees double.

Regardless, the amount of upfront cash promised in Tuesday’s deal will be just a fraction of what miners are owed, he said.

Miners do have a priority lien on the purchase price, which will provide an opportunity to receive further compensation as negotiations continue, said Ned Pillersdorf, a Prestonsburg attorney who has assisted in the class action suit.

“While it is unclear at this point how much we will receive, it does give us the opportunity to make the miners whole,” Pillersdorf said.

Most Blackjewel employees in Kentucky received their last paycheck June 28. Some cashed the checks; others deposited them in checking accounts and used the money to pay bills.

But after the company declared Chapter 11 bankruptcy July 1, the checks bounced. That left many employees with overdrawn bank accounts and concerns over their finances.

Tuesday’s hearing marked a major step in the case, which has left Kentucky miners in limbo over their unpaid wages and whether they will be able to return to work.

Stephen Lerner, an attorney with Squire Patton Boggs, which represented Blackjewel in the bankruptcy, said hundreds of miners in the company’s Eastern Division will likely see their jobs come back, but he could not provide a specific figure.

On the employees’ unpaid wages, Lerner said the company “had our hands tied behind our back” because Blackjewel had limited financing and liquidable assets, such as mines and equipment.

Lerner said he was happy with the judge’s decision to allow all three sales to move forward, and said the company hopes to find more financing going forward that it could possibly dedicate to miners’ wages.

“We’re thrilled, actually,” Lerner said. “It’s been a very long month.”

Lerner said he is unsure if Blackjewel will continue to produce coal on the mines it hasn’t put up for sale. Going forward, the company will focus on monetizing its assets and balancing its accounts, he said.

In total, the sale of the company’s three main divisions could bring in more than $50 million if the sales are able to be finalized later this week.

Pillersdorf said analysts working with him estimate the company has a total of about $100 million in credit obligations.

The main hangup for Blackjewel going forward will be the federal government’s approval of its Western Division sale to Contura Energy Inc., which, at $33.75 million, is by far the most valuable of the three divisions — Kopper Glo offered $6.35 million in cash for the Black/Lone Mountain Division; Rhino Energy, LLC, offered $850,000 of cash for the Virginia Division.

The Contura sale’s success is contingent on the federal government’s approval, Lerner said.

During Tuesday’s hearing, Lerner lambasted federal officials for objecting to the sale, saying the government was preventing coal miners from returning to work.

“If the Trump Administration wants to bring coal miners back to work, it needs to reach an agreement, and it needs to reach it right away,” Lerner said.

Fred Westfall, who represented various U.S. government agencies, said the sale would allow Contura to not assume federal leases or make payments on past royalties.

According to court filings, Blackjewel owes federal agencies tens of millions of dollars, including $60 million to the Department of the Interior and $10 million to the Department of the Treasury.

Westfall said Lerner’s attempt to blame the government for miners not going back to work would be “disingenuous,” and said Blackjewel’s past management “basically drove this company to the ground” despite not paying millions in taxes to federal and state governments.

The federal Labor Department leveraged some support for miners on Monday when it asked a judge to block the shipment of a train load of coal in Harlan County until employees of Blackjewel get paid for mining it.

Kentucky workers have been blocking the tracks for days in protest, and the department alleged in a court motion that Blackjewel did not pay miners the federally-mandated minimum wage for the time they worked in June to mine the coal, violating federal law. The company also didn’t pay miners for overtime they worked in June, which is also a violation, the agency alleged.

Miners also found support from the Richard and Leslie Gilliam Foundation, which promised $1 million to pay Blackjewel miners in Central Appalachia.

Each miner will receive about $2,000, regardless of how the court orders Blackjewel to divvy up money in the bankruptcy case, according to a Facebook post from Harlan County Judge-Executive Dan Mosley.

“I am overwhelmed by this amazing gesture of love and generosity toward our miners by the Gilliam Foundation,” Mosley said on his Facebook page. “This amount alone will provide a significant boost to our miners to help get their finances back on track.”

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.