Court lets Blackjewel transfer KY coal mines. Some with violations could be abandoned.

Bankrupt coal company Blackjewel has reached an agreement to transfer most of its mine permits to other companies, but the deal leaves open the potential for abandoning some permits, which could leave Kentucky responsible for millions of dollars in reclamation costs.

Whether any permits will ultimately be abandoned remains uncertain, but an attorney representing citizen groups said it is a concern.

Stephen Lerner, an attorney representing Blackjewel, said the company could not take on or pay for reclamation at the mines due to the financial situation of the company. None of the permits have an immediate threat to the health or safety of the neighbors of mines, he said.

Blackjewel will continue to work to find third parties to purchase the remaining permits in the next six months to complete the reclamation work, Lerner said. After six months, the permits will be abandoned.

The state has approved the plan to liquidate Blackjewel after lengthy negotiations to resolve the state’s concerns, Gov. Andy Beshear and Energy and Environment Cabinet Secretary Rebecca Goodman said in a statement.

The plan preserves the state’s right to seek payment of reclamation costs and penalties. The bankruptcy court will hear those claims later, according to the statement.

Beshear and Goodman said they understand the environmental and financial issues in the bankruptcy and are committed to getting the best outcome for Kentuckians.

“It is not acceptable for individuals to profit by bankrupting mining companies, putting miners out of work, and leaving Kentucky holding the bag for reclamation and environmental liabilities,” they said in the statement.

Blackjewel’s bankruptcy gained national attention in 2019 after the company left hundreds of Kentucky miners unpaid for weeks of work, leading to a two month-long protest that blocked a coal train in Harlan County.

Blackjewel’s plan transfers permits in Kentucky, Virginia, Tennessee and West Virginia to several buyers, including Bell Energy, Eagle Specialty Materials, Kopper Glo Mining, KAMCO and Black Mountain Resources. Blackjewel has 170 permits in Kentucky.

Revelation, the parent company of Blackjewel, was unable to find a buyer for 33 permits across Eastern Kentucky. All of those permits were previously bought from bankrupt coal companies.

These permits have an estimated reclamation cost of more than $41 million. After proceeds from bonds, the state could be left to pay an additional $28 million if all are abandoned. The company has more than 500 environmental violations in Kentucky.

Mary Cromer, an attorney at Appalachian Citizens’ Law Center who represented citizen groups in the case, said she has concerns about how the shortfall will play out.

It’s also not certain that all of the permits with a buyer will ultimately be transferred. Some of the companies have already indicated problems with bonding and liquidity, Cromer said.

Cromer said waiting another six months for potential buyers could cause conditions on the permits to degrade significantly and increase the cost of reclamation.

Sierra Club senior attorney Peter Morgan raised a concern about Blackjewel not being the last coal company that will leave others to clean up after it.

“Unfortunately, this is likely the start of a trend where bankrupt coal companies dump their coal mine cleanup obligations onto communities and taxpayers who simply don’t have the money to pick up the tab,” Morgan said.

One of the permits in question is Frasure Branch in Floyd County. The permit has 17 environmental violations, including backfilling and grading, contemporaneous reclamation, disposal of excess spoil, sedimentation ponds and water monitoring. The reclamation cost estimate is more than $10 million. The permit has a performance bond and supplemental assurance of a combined total of less than $2 million.

Another permit is Cumberland No. 17. The mine has two environmental violations. If abandoned, the state would be left with $11 million in reclamation costs.

Last September, Bankruptcy Judge Benjamin A. Kahn ordered Blackjewel to fix violations on a permit, Foresters No. 25, that had caused routine flooding at Wallins Creek in Harlan County.

According to the Energy and Environment Cabinet, Blackjewel fixed the immediate problem. But as of last month, the permit still had 36 environmental violations remaining, such as backfill and grading, impoundments, sedimentation ponds and off-permit disturbances. The permit also has no buyer.

Also, the cabinet requested an emergency hearing last month against Blackjewel regarding its failure to clean up its KY9 No. 9 mine at Stoney Fork in Bell County, which they warned could cause imminent danger to the health and safety of nearby citizens. Kahn did not side with the cabinet’s request to order Blackjewel to repair its violations, but he did tell the coal company to treat substandard water and remove sediment from the ponds that were on the verge of breaching. The permit has 23 violations.

“Only weeks ago, one of Blackjewel’s mines was severely eroding and leaching harmful pollutants that threatened the downhill community of Stoney Fork, and now Blackjewel is free of any responsibility at any of its mines that similarly endanger nearby communities,” said Matthew Taylor, a Sierra Club member in Millstone.

This story was originally published March 23, 2021 at 10:38 AM.