July 22, 2020 Read More →

Execs cashing out in coal bankruptcies, leaving taxpayers with cleanup costs

The New Republic:

Around this time last year, Jeff Hoops—CEO of Blackjewel LLC—was having a busy week. On July 1, 2019, he filed for Chapter 11 bankruptcy, abruptly closing the company’s Bell Ayr and Eagle Butte mines in Wyoming and laying off 700 workers. Construction had by that point begun on a $30 million “first phase” of the new Grand Patrician Resort he was building in his hometown of Milton, West Virginia, set to include a 3,500-seat replica of the Roman Colosseum. Within days, hundreds of Blackjewel miners in the Powder River Basin and Appalachia reported money “disappearing” from their bank accounts after paychecks had been deposited. On July 3, a bankruptcy judge granted Blackjewel $5 million in relief funds in exchange for Hoops stepping down as CEO. Blackjewel workers filed a lawsuit over stolen wages shortly thereafter. In Harlan County, Kentucky, they held a two-month sit-in on train tracks to block coal from their former employer from getting to market. Eventually, a court ordered that Blackjewel cough up the back pay.  Many say Blackjewel still owes them, and Hoops is under investigation. 

Similar stories could be coming soon to the notoriously overleveraged oil and gas industry, which has been struggling during the current pandemic but is already lavishing its executives with healthy payouts. In April, Diamond Offshore Drilling asked a bankruptcy judge to let it funnel $9.7 million in bonuses to its top executives, the same amount it had just gotten through a tax rebate created by the March stimulus package. Chesapeake Energy—the company that helped sell fracking to Wall Street—and California Natural Resources, the Golden State’s largest oil and gas company, have each filed for Chapter 11 bankruptcy within the last month, amid the Covid-19-sparked downturn in demand and investors’ cooling attitude toward a sector that has always struggled to turn a profit; hundreds more could be coming, as investor patience continues to wane and debt obligations come due. As bankruptcy—often a new lease on life for struggling companies—becomes a ubiquitous feature of the fossil fuel industry, who’s looking out for the workers and pensions it’s leaving behind? 

Coal’s declining fortunes have made bankruptcies a relatively common occurrence in that sector and created a wealth of case studies for how fossil fuel executives handle their shrinking prospects.

Bankruptcy also creates low-regulation buying opportunities for other firms. Blackjewel, for example, before filing for bankruptcy itself, had collected 71 percent of its mining permits by snapping up the assets of other bankrupted coal companies, Mary Varson Cromer, deputy director of the Appalachian Citizens Law Center, pointed out in a webinar on Tuesday organized by the Institute for Energy Economics and Financial Analysis. “Bankruptcy is a very flawed system. It allows a company that should not exist to continue to exist,” Shannon Anderson, of Wyoming’s Powder River Basin Resource Council, said during the same event. “These are companies that exist solely to get coal out of the ground. Their workers are liabilities and externalities that they don’t really think about.”

[Kate Aronoff]

More: For Fossil Fuel Companies, Bankruptcy Is a Bailout

Posted in: IEEFA In the News

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