Tracking mines in the Blackjewel Bankruptcy

In July of 2019, Blackjewel, sister company Revelation Energy and other affiliated mining operations filed for Chapter 11 bankruptcy. The bankruptcy set off a chain reaction of news stories about miners not getting paid their due wages and losing health benefits. Environmental groups were also concerned about the impacts the abandoned surface mines would have on the environment. Appalachian Voices has created this page to help concerned residents, news media, and regulators get a regional sense of which permits have been sold, which of those permits have been successfully transferred, and which have not.

Many of the mines from this bankruptcy have been sold to other buyers, in many cases for no money. So far, 33 mines that were not sold have had their permits revoked ( 1 ). Of those “sold” permits, many have not completed the process of transferring to the new buyers, and so still remain with the bankrupt estate of Blackjewel, as the successful transfer of the permit is also required for the ability to mine the coal at any given site. The approved bankruptcy plan dictates that the entity Blackjewel be dissolved at the end of December ( 2 ). When this happens, there is no longer a viable permit to transfer from, which means many of these lingering, untransferred permits should become void.

Federal surface mining law requires surface coal mines to post a bond when they get their permit so that either the state mining agency or third-party surety bonding company has money to reclaim a site if the company goes bankrupt or otherwise fails to fulfill their cleanup obligations. In some states, including many Appalachian states, some or all of the reclamation bonding may be covered by a “bond pool,” where multiple coal operators pay a portion of the estimated cleanup costs into a shared pool. At mines where permits have not been transferred, the regulator who issued the permit will assume responsibility for completing reclamation.

Those regulators can foreclose on the reclamation bond or allow the bond-issuer to complete reclamation. The regulators can then cover any bonding shortfall by using funds from the bond pool. A large bankruptcy like this has the potential to put stress on these bond pools and may even wipe out all of the funds in the pool. This is particularly likely in Kentucky, where many of these Blackjewel and Revelation Energy mines are located.

What follows below are a series of maps that show all the mines from the Blackjewel bankruptcy and their transfer and bond forfeiture status.

The two largest mines by both area and coal production are both in Wyoming. Contura once owned these permits —despite selling the facilities to Blackjewel in 2017, Contura maintained the permits themselves and thus maintained the liability of those mines. Following Blackjewel's bankruptcy, Contura gave Blackjewel $90 million to assume the liability and then allowed a new company, Eagle Specialty Materials, to acquire subsidiaries of Contura and take over both the permit and mine facilities. Lexon Insurance Company, which holds the bonds for these two massive mines, objected to this deal unless Eagle Specialty also took over a large number of eastern mines as well. (More on those permits later.)

Blackjewel also held over 300 mines in Central Appalachia as well. The above map represents our best understanding of those purchases and if the permits have been successfully transferred to their new owners.

Kentucky had the highest number of Remain in Estate permits — mine permits that were not sold to any buyer. Over 29 Kentucky permits are in the Remain in Estate category. The Surface Mines Information System lists all of these permits with a “permit revoked” status rather than a “bond forfeited” status. The surety companies could possibly be doing the reclamation on these mines already which could account for this status.

Tennessee only had two mine permits affected by the bankruptcy. Both are Blackjewel permits, and it appears they are both part of the same mining complex, though separated as a haul road crosses the state line into Kentucky. The Office of Surface Mining Reclamation and Enforcement, the current regulator for Tennessee, has begun the bond forfeiture process on these mine sites.

Virginia has three permits that were not sold from the bankruptcy and are still part of the bankruptcy estate. Virginia Energy (formerly the Department of Mines, Minerals and Energy) has initiated bond forfeiture on these three mines but has not received the money from the surety bond provider Lexon. Virginia Energy has asked the Virginia Attorney General’s office to try and get the money for reclamation.

West Virginia has seven untransferred mine permits. These permits were shown to be in a revoked status, but recently it appears the West Virginia Department of Environmental Protection has reinstated these permits and transferred them to Keystone, a newly-created affiliate of the company that owned the mines prior to Revelation. Both Keystone and Revelation had numerous violations prior to the bankruptcy.

In one of the more confusing twists of this bankruptcy, following the sale of the Wyoming permits, confusion erupted about who actually owns 22 mines in Virginia. Two coal operators, Rhino Energy and Eagle Specialty Materials, each claimed the other owned the disputed mines, due to confusing language in a bill of sale. Further complicating matters is that Rhino Energy is undergoing its own bankruptcy process. Regardless of who owns them, these permits have not been transferred yet, which means as of right now Blackjewel is still liable for reclamation. If these permits are not transferred by the late December deadline, they will likely be voided which will lead either to bond forfeiture or to the surety taking over the reclamation ( 3 ,4 ).

Bell Energy is a complex of permits in Kentucky that were purchased in the original Blackjewel sale. However, the primary person who made the purchase of these mines passed away during the course of the bankruptcy, which would leave the ownership of the permits to be controlled by his estate. To date, none of the permits purchased by Bell Energy have transferred or even been started within the application process.

The company Inmet, also purchased many mines in both Southwest Virginia and Eastern Kentucky. While in Virginia Inmet has successfully transferred almost all of their permits, in Kentucky, they have been far less successful. According to the Kentucky SMIS, many of the permits are in various stages of completion but thus far none have fully transferred.

Circling back to the Eagle Specialty Materials’ purchases of the two large Wyoming mines in this bankruptcy, recall that ESM was required to acquire Eastern mines so that it could close its deal on the Western operations. ESM is working with a related mine reclamation company called Cardinal to complete the transfers of its mine applications. The mine owners of Eagle Specialty Materials are also the mine owners of Cardinal and FM Coal ( 7 ). Cardinal has had the most success of the companies completing transfer applications in Kentucky; of the 67 permits now being managed by Cardinal, 57 have completed the transfer process. ESM originally had more permits, but over the bankruptcy some of those have also been transferred to other companies.

Of the 67 Cardinal/ Eagle Specialty Materials permits that have not been transferred, Three such permits were listed as contested due to legal issues. These permit transfer applications have only begun within the past few months. One such mine shown in the map above was the subject of a hearing and has many many known water quality issues. Eagle Specialty Materials even claimed taking this permit may put them in violation of the Clean Water Act. As of right now, this permit has not been transferred.

So far at least 174 permits that were in the Blackjewel bankruptcy originally, have not been transferred.

As of December 1 at least 128 permits have been successfully transferred, the bulk of which belong to Cardinal, but also the Inmet mines in Virginia, and mines now owned by Civil, Jewell Valley Mining, and a few others.

Wrapping it all up

The Blackjewel bankruptcy is something of an inflection point in bankruptcies, as previous large bankruptcies did not result in companies walking away from large numbers of mines. In earlier bankruptcies, mine operators would sell both their non-producing assets as well as their coal-producing assets in sweeping sales under which the buyers would assume responsibility for all of the permits. But now, with mine reclamation liabilities mounting, that is getting harder and harder to do as companies simply no longer have the financial resources to cover the cost of reclamation on non-coal-producing mines.

Ultimately, we don't know how many of these mines will end up in bond forfeiture and how much stress that will put on each state's bonding system. But, we do know a Kentucky filing stated if just 20% of the permits went into bond forfeiture, that due to the on-the-ground conditions, reclamation costs would likely exceed the bonded amount by $38 million (8). As of right now, it looks like closer to two-thirdsor 67% of permits have failed to transfer in that state. With such a large amount of untransferred permits, it creates doubts about the solvency of the Kentucky pool bond. Unless the bankruptcy judge extends the time frame, it looks like many of these mines are in danger of being voided at the end of the year. This is particularly true in Kentucky. This means the responsibility to conduct mine reclamation will fall to regulators or surety companies that, depending on whether bond amounts are sufficient, may or may not have adequate resources to do the job well. The Blackjewel bankruptcy is something of an inflection point in bankruptcies, as previous large bankruptcies did not result in companies walking away from large numbers of mines. In earlier bankruptcies, mine operators would sell both their non-producing assets as well as their coal-producing assets in sweeping sales under which the buyers would assume responsibility for all of the permits. But now, with mine reclamation liabilities mounting, that is getting harder and harder to do as companies simply no longer have the financial resources to cover the cost of reclamation on non-coal-producing mines.

Ultimately, we don't know how many of these mines will end up in bond forfeiture and how much stress that will put on each state's bonding system. But, we do know a Kentucky filing stated if just 20% of the permits went into bond forfeiture, that due to the on-the-ground conditions, reclamation costs would likely exceed the bonded amount by $38 million (8). As of right now, it looks like closer to two-thirds or 67% of permits have failed to transfer in that state. With such a large amount of untransferred permits, it creates doubts about the solvency of the Kentucky pool bond. Unless the bankruptcy judge extends the time frame, it looks like many of these mines are in danger of being voided at the end of the year. This is particularly true in Kentucky. This means the responsibility to conduct mine reclamation will fall to regulators or surety companies that, depending on whether bond amounts are sufficient, may or may not have adequate resources to do the job well.