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Coal bankruptcies dominate headlines in 2019

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PRB.

It’s a simple acronym for the Powder River Basin, which for decades has been one of the nation’s linchpin energy producing regions as the thermal coal capital of the world.

Continuing an industry slide that picked up steam several years ago, PRB in 2019 stood as much for “Powder River Bankruptcies” as it does our carbon-rich basin.

On the heals of several other high-profile coal producer bankruptcies that shook up the PRB prior to the beginning of the year, the 2019 Chapter 11 cases of Cloud Peak Energy and Blackjewel LLC have been Jekyll and Hyde examples of the best and worst in corporate management and collateral damage.

While the bankruptcies dominated headlines as the clear choice for the year’s top story, 2019 also had some other memorable moments. Those included devastating hailstorms that caused tens of millions of dollars worth of damage and a ransomware attack that “bricked” Campbell County Health’s computers and systems for the better part of two weeks.

Cloud Peak Energy

The company’s bankruptcy filing on the afternoon of May 10 was the beginning of the end for the Gillette-based coal producer.

Unlike previous Powder River Basin coal bankruptcies — Alpha Natural Resources, Arch Coal Inc. and Peabody Energy — Cloud Peak announced its goal was to shed debt and sell its assets rather than emerge as an ongoing company.

The company maintained it wanted to sell “all of its assets” and that Cloud Peak’s three PRB mines — Antelope and Cordero Rojo in Campbell County and Spring Creek in Montana — “will continue normal operations throughout the process.”

The filing ended months of speculation about Cloud Peak’s shaky financial footing, including failing to make interest payments on its debt, the company being delisted from the New York Stock Exchange and continued pressures of a depressed market for coal. Add a perfect storm of obstacles that impacted its production and expenses at the Antelope and Cordero Rojo mines in 2018, and the writing was on the wall that the company would be unable to satisfy the more than $300 million in debt it had coming due in the next few years.

Now the company is nearly at the end of the bankruptcy process and the PRB mines have a new owner in Navajo Transitional Energy Co. NTEC bought the mines for a financing package that included assuming about $94 million of Cloud Peak’s debt, paying a $15.7 million deposit and paying any debts accrued during the bankruptcy process up to $20 million. NTEC also is working to secure bonding to assume nearly $400 million in reclamation obligations that come with the mines.

Throughout the process, nearly 1,250 people employed at the mines continued working and producing business as usual and all were retained by NTEC upon its sale deal closing in early December.

Blackjewel LLC

The nearly 600 employees at Blackjewel’s two large Powder River Basin mines — Belle Ayr and Eagle Butte — weren’t as fortunate.

They were suddenly out of work after the company abruptly closed the Campbell County mines the afternoon of July 1, a Monday.

The shutdown came just hours after the company filed for Chapter 11 bankruptcy protection and minutes after failing to secure a $20 million line of credit for emergency funds to continue operations at its 32 properties across the country.

The sudden shutdown was a sad conclusion to a difficult four-day stretch for the company. It started when workers weren’t paid as promised Friday. They were paid with cashier’s checks Sunday, then were met with the bankruptcy news first thing Monday morning and reassured that it would be business as usual and production would continue. Hours later, they were called in and sent home in what would become a months-long lockout.

The lockout shut down two of the nation’s top 10 producing coal mines and left workers in dire financial straits, especially about 1,100 employees at the company’s 30 operations in Kentucky, Virginia and West Virginia. While the Wyoming workers were paid by cashiers checks on the payday before the lockout, those in Appalachia were paid by paper checks that bounced, in many cases leaving them not only without pay, but in the hole with overdraft fees from having their banks pull back the money.

What played out in the weeks and months following reads more like a corporate horror movie than a bankruptcy reorganization, so much so that even the judge in the case called it unprecedented and historically mismanaged.

Two days after the botched bankruptcy filing and shutting down its mines, Blackjewel CEO Jeffrey Hoops Sr. was forced out and replaced with an interim management team as a condition on a $5 million emergency loan to keep the company out of Chapter 7 liquidation.

An auction sale to Contura Energy, which initially sold the mines to Blackjewel in December 2017, was hung up when Contura couldn’t come to an agreement with the government over federal leases. Eventually, Contura and Blackjewel found another buyer for the mines in Eagle Specialty Materials, an affiliate of Kentucky-based FM Coal.

ESM called back as many former Blackjewel workers as it could and has reopened the mines, but still hasn’t secured its own reclamation and lease permits.

As for Blackjewel, it continues to set precedent with its messy bankruptcy as the judge continues to question its legal team over legal fees and a revelation in October that the company has been the focus of an ongoing federal investigation under the False Claims Act that began before its Chapter 11 filing.

Wacky weather

The only constant in Campbell County weather is change. But even by those standards, 2019 was a crazy year.

It started with three snowstorms in May. On the first day of the month, there were 2 inches of snow. In the last May snowstorm, snowfall was measured at 7 inches. It was a very wet spring, to say the least.

“I was behind the curve every time I wanted to mow my lawn, because it was always wet,” said Campbell County Emergency Management Coordinator David King.

Then there were the two severe hailstorms. The first one hit July 18, bringing tennis ball-sized hail and causing an estimated $20 million to $40 million in damage. Less than a month later on Aug. 12, another hailstorm hit. This one also had reports of hail the size of tennis balls.

Some residents were still sorting out the damage from the first storm when the second hit, including Kayla Theroux, who was about to go to sleep when the second hailstorm began.

“Instantly, I knew what it was,” she said. “My initial reaction was, ‘again?’”

Two weeks later, there was a torrential rainstorm that brought 70 mph winds and hurricane-like weather. Gillette Avenue was flooded and trees were destroyed. This time, there was only golf ball-sized hail.

King said Campbell County has had weather like this before, but there is usually a break of a few years between severe storms.

“But to get hammered three different times (in one year) was unusual,” he said. “That was the surprise.”

He admitted there were so many storms that “they’re starting to blur together.”

After the torrential rainstorm in late August, hundreds of residents went to the city’s wastewater treatment facility to drop off broken tree branches. Many of them were surprised by the weather, even though they’d lived in Gillette for a while.

“I don’t know if I’ve ever seen wind quite as hard as that,” Gloria Bicknese said then, adding that the strangest part was seeing her big trees “shifting all over the place.”

“It seems like once a year you have a storm that you have to clean up after,” said Chris Friedly. “It’s been a while since I’ve seen one with this kind of wind.”

Also in August, thousands upon thousands of grasshoppers hatched and invaded the county, taking everyone by surprise. The late hatch left residents and county officials scrambling.

The early cold and snow in October cut the already-quiet fire season short, King said.

“I don’t think we had any aerial attacks on fires this year,” he said. “None of (this year’s) fires were the big monsters that had crews on them for a week or two.”

In a county that’s used to wacky weather, 2019 may be the wackiest in recent memory. But how soon we all forget, King said.

“Everybody experiences the weather, so it’s a very common topic, everybody talks about it,” he said. “But most of us have fairly short memories.”

Ransomware attack

Julie Greco admits she wasn’t at her best Sept. 20.

Like other patients being treated at Campbell County Memorial Hospital that day, she was decidedly less than optimal while recovering from a surgery that ultimately kept her hospitalized for about two weeks.

She also had a bedside view to observe Campbell County Health staff and officials scramble in response to another emergency.

At about 3:30 that morning, the organization was hit with a catastrophic and total ransomware attack that locked out, or “bricked,” its entire digital framework. Computers, servers, specialized systems for state-of-the-art equipment and even email had been encrypted by a hacker demanding a ransom to release the lockout.

While some patients like Greco may not have noticed much stress from the staff and administrators at Campbell County Health in the days after the ransomware attack, it was plenty stressful, said CEO Andy Fitzgerald.

The organization had drilled and planned for potential cyberattacks on its computer systems, but it’s different when it actually happens, he said. Health care workers face high-stress emergency situations every day, which helped limit the confusion and frustration.

“Our IT department has literally worked night and day through this to where now we’re seeing a little light at the end of the tunnel,” Fitzgerald said about 10 days after the attack. It ultimately took about two weeks to get the hospital back online at near 100%.

Campbell County Health worked with local, state and federal law enforcement to investigate the hack and released little information about it, including about whether it paid a ransom to release its systems or what the ransom demand was. In other instances of public entities being targets of ransomeware, demands have varied from cash to bitcoin payments ranging from the thousands to millions of dollars.

While bringing its systems back online, Campbell County Health kept most appointments, but some patients were referred to other facilities in the region if they needed treatment from equipment that was affected.

The final cost of the attack hasn’t been released yet, but CCH reported its September revenues were down about $1.7 million mostly as a result of the hack. A projected $188,000 profit instead was a $1.5 million deficit.

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