In what is the latest sign of problems for the U.S. coal industry, one of the country’s largest coal producers has filed for Chapter 11 bankruptcy protection.
West Virginia-based Revelation Energy LLC and its recently-formed affiliate, Blackjewel LLC, began the bankruptcy reorganization process in the U.S. Bankruptcy Court for the Southern District of West Virginia on Monday.
The companies, owned and controlled by Milton, West Virginia, resident Jeff Hoops, a longtime coal executive, employ about 1,700 employees across its Central Appalachian coal mining holdings and two large Wyoming coal mines, which were acquired in 2017.
In court documents, Revelation Energy listed 24 metallurgical coal mines and processing and prep facilities in Virginia, Kentucky, and West Virginia, as principal assets that employ 1,100 workers. The Appalachian mines have an estimated 600 million reserve tons of coal. Last year, the company mined 3.3 millions tons. The federal government’s Energy Information Administration said in 2017 that the companies’ combined output made them the country’s sixth-largest coal producer.
The companies owe millions of dollars in coal royalties, for goods and services and in taxes, which could affect government revenue in Kentucky and Virginia. According to court filings, in Kentucky state officials are owed more than $6 million in taxes. In Virginia, officials are owed $1.6 million in taxes.
The companies estimate they owe $156 million for goods and services across all properties, including $6.1 million to Rich Creek, Virginia-based United Industrial Services, Inc., and $2.7 million to Walker Machinery in Belle, West Virginia.
In a filing by Hoops in support of the bankruptcy petition, he said the companies turned to bankruptcy in large part due to adverse market conditions for coal. Hoops cited reduced demand coal-fired electricity due to the rise of cheaper forms of energy like natural gas and renewables, increased environmental scrutiny and an overall coal market downturn.
“The impact of the macro and regulatory environment is not isolated to the Debtors Performance,” he wrote. “The entire U.S. mining complex has been impacted by these events.”
However, Hoops also laid out a series of unique operational issues that have plagued the companies since 2017. For example, a November 2017 roof collapse at the Lone Mountain mining complex located in Virginia and Kentucky cost the company an estimated $1.4 million in lost revenues.
A 2017 change to Kentucky workers’ compensation laws resulted in an increase in workers’ compensation insurance rates that cost the company $20 million.
According to documents, the largest debts are owed in relation to Blackjewel’s two Wyoming properties — the Eagle Butte and Belle Ayr mines. The Hoops businesses owe $60 million in royalties to the U.S. Department of the Interior and $37 million in county taxes.
Blackjewel purchased the two Powder River Basin mines in late 2017 from Contura Energy, which was seeking an exit from the thermal coal industry. As part of the sale, Contura said it expected to write off more than $400 million in taxes and about $200 million in reclamation liabilities.
Wyoming environmental regulators temporarily blocked the sale of the Wyoming mines to Hoops, citing 42 mine permit violations at Revelation Energy’s Central Appalachia mines.
In a statement, Joyce Evans, chair of the Powder River Basin Resource Council said the bankruptcy announcement was not surprising. The nonprofit group opposed the sale of the Wyoming mines to Hoops in part due to his track record in Appalachia. In one example, a Hoops mine in Kentucky faced potential regulatory action for not addressing violations.
“The entire history of the company’s involvement in Wyoming has had red flags, starting with the fact they were essentially gifted the Belle Ayr and Eagle Butte mines by Contura to rid themselves of the liability,” Evans stated. “And importantly, Blackjewel’s owner, Jeff Hoops, is no stranger to both mine safety and environmental violations at his Appalachian companies, which is why we challenged them even being allowed to operate here.”
An April investigation by the Ohio Valley Resource, found Hoops is responsible for more than $926,000 in delinquent mine safety mines from citations from the federal Mine Safety and Health Administration.
Hoops began his career with Consol Energy at the age of 17, according to a biography on Marshall University’s website. The Hoops Family Foundation is known for its philanthropy in the area. The children’s wing at Cabell Huntington Hospital, for example, bears the Hoops name. The family is also involved in a multi-million dollar project to create a 189-acre resort in Milton complete with 100-room hotel, wedding chapel, horse stables and a nine-hole golf course.
The suit seeks to combine bankruptcy proceedings involving four companies — Revelation Energy LLC, Revelation Energy Holdings LLC, Revelation Management Corp. and Blackjewel Holdings LLC — into one case under the name Blackjewel LLC.
Chapter 11 protection makes a company free from threat of lawsuits from creditors while reorganizing finances. A majority of the company’s creditors must approve the reorganization plan.