Blackjewel LLC’s reorganization team says it’s working on a plan to secure financing to reopen dozens of shuttered coal operations in Wyoming, Kentucky, Virginia and West Virginia.
Every day the company extends the lockout of its mines and 1,700 workers, including 580 at the Belle Ayr and Eagle Butte mines in Campbell County, makes it more difficult and expensive to reopen them, said Rob Godby, director of the Center for Energy Economics and Public Policy at the University of Wyoming.
Now 10 days into Blackjewel’s effort to file Chapter 11 bankruptcy reorganization and shutting down operations, how difficult it’s going to be for the company to get its mines running again “is a really good question, which gets more difficult to answer every day that goes by,” he said.
“It’s going to depend on the on-the-ground condition of the mines,” Godby said. “First, they’ll need to make sure everything’s safe, like the walls are stable and things like that. Then they’ll have to be checking all the equipment.
“If they shut down in a way that presupposed reopening, I’m guessing that it shouldn’t be too difficult.”
While reopening may be more expensive and labor-intensive the longer the mines sit idle, there are other question marks that go beyond the ability to dig coal, he said. One is whether Blackjewel has violated any of its contracts and how much business it may have already lost to other mines in the Powder River Basin.
Another is the workforce. While most likely would return, it’s safe to assume that some have already found other jobs and those that haven’t will keep looking and may not be back for the long haul, Godby said.
“Those are the big questions, and really interesting ones,” he said. “Often times those coal contracts have a stipulation of you miss a shipment or something, you have to pay a penalty. Now, they don’t have any money to pay any penalties. … A week shouldn’t have changed things too much for them, but the longer this stretches out, the more (potential for) losing business.”
Because Blackjewel is a privately held company, there’s not as much transparency in its business dealings as there are with publicly traded companies like other large PRB coal pruducers Peabody Energy, Arch Coal Inc. and Cloud Peak Energy Inc.
Since Blackjewel took over operation of the Belle Ayr and Eagle Butte mines in December 2017, there have been reports it’s sold coal at extremely low prices to generate cash flow, regardless of whether the mines were actually making a profit on the sales, Godby said. The company’s bankruptcy documents seem to bear that out, telling a story of a company that was taking cash from one place and using it to pay bills at another.
“We’ve all heard those rumors, right?” he said. “The question is how badly do they need the business and how badly do they need to create cash flow. It’s a Catch-22 as well, because the more you open a mine, the more it’s going to cost. Do you have people who are going to need to be paid immediately? Are you stockpiling in anticipation of a sale?”
Whatever the business plan is going forward, getting the mines open sooner rather than later seems of paramount importance, Godby said. If the bankruptcy includes selling any or all of its mines, having them nonoperational is a huge hit on their value, he said.
“The longer this goes the more likely it is they’ll incur additional startup costs and they’ll lose more of the market,” he said. “I don’t know how much longer and what that timeframe looks like, but that’s the reality of the situation. I would guess the sooner they can start producing, even if it’s not at full capacity, the better it’ll be because they’ll start to produce some cashflow.’
Will they return?
Along with the financial obstacles of reopening the mines, the other big question is how many skilled coal workers the shutdown has cost the company, Godby said.
“Some of them already have other jobs and the longer they wait the fewer people they’ll be able to count on to come back,” he said.
Chase Patterson and his wife are two of those Blackjewel workers who say they’re moving on from the company and a profession that’s been good to their family.
The last 10 days “has really been a roller coaster of emotions, that’s for sure,” Patterson said. “The longer the lockout goes, the tighter the finances get.”
In addition to not working, Patterson said the company has been contesting unemployment claims and holding up access to 401(k) accounts.
“They’re handcuffing all of their employees here and back east,” he said. “Instead of being ‘laid off,’ they’re telling us we’ve been ‘furloughed.’ We can’t go to work and don’t have a return date.”
Patterson said he’s been actively looking for another job and would go back to Blackjewel if the mines reopened, but wouldn’t end his search. His wife already is pursuing avenues of higher education for a different profession.
“The company’s just too unstable,” he said. “Most people I talk to say they’re looking for other lines of work. … If they fired up right now, I think you would get about 80% (of locked out workers) back. Over the next months do I think that number would decline? Yes. It’s a slippery slope now because people have lost trust (in the company).”
That trust with its employees, creditors and reputation may be the largest price Blackjewel is paying with how the company has been run and how the bankruptcy has unfolded so far, Godby said.
“At this point, trust has left the building,” he said, adding that this is the difference between a public and private company. “It’s really hard to imagine this could’ve happened with a publicly traded company.”
Patterson said he and his coworkers have had an emotionally draining time the past 10 days.
“A week ago, it was more shock than anything,” he said. “Then it was sadness and as it’s progressed, you start looking at the community and other jobs this affects and it touches everywhere.
“The more I look at it, I’m in disbelief and I’m angry. It’s depressing, but I’m also angry about it because this company is hurting so many people. We did our part. We showed up for work and did a good job and worked hard.”
As disappointed as he is in the situation he and 1,700 other Blackjewel employees find themselves in now, Patterson said he’s been impressed with how the coal industry and affected communities have rallied.
“It doesn’t surprise me one bit that people are stepping up to help others even when they’re down,” he said. “That’s the attitude here: Give as much as you can when you can.”
While he won’t begrudge anyone who would return and stay with Blackjewel long-term, Patterson said that ship is sailing for him and others he’s talked to.“I think our management team out here (in Wyoming) is trying to give people hope,” he said. “They money is nice, but taking pride in what you do and liking who you work for and building bonds with these guys is where it’s at, too.”
After the past 10 days, Patterson said that “I just don’t know how much faith I can put into (Blackjewel). Prayer and faith are great, but they don’t pay my bills.”