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New Campbell County Attorney Vows To Go After Former Blackjewel CEO Jeff Hoops

in News/coal

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By Jennifer Kocher and Mark Christensen, County 17

New Campbell County Attorney Mitch Damsky is making good on his promise to look into some of the dealings of out-of-state coal companies, setting his sights first on former Blackjewel CEO Jeff Hoops.

On top of leaving the county on the hook for $16 million in ad valorem taxes after the company’s bankruptcy in 2019 that exposed the tangled – and allegedly deceitful – underpinnings of his fossil fuel empire traversing 32 mines, several states and an undisclosed number of shell companies, Damsky said that Hoops left a lot of ruined lives in his wake as he and his family profited handsomely.

For this reason, Damsky said he will take a closer look at potential criminal activity on the part of Hoops, whether that be fraud, theft or other crimes with the goal of procuring enough evidence to empanel a grand jury investigation in Campbell County.

“Let’s put it before the people and let them decide whether or not any criminal activity has been done,” he said. “If anyone has first-hand knowledge of secreting, diverting or subverting funds, we’d like to hear from them.”

Damsky feels there’s enough evidence based on his preliminary investigation, as well as the many red flags that continue to be unearthed through the complicated unlayering of the company itself, to justify a grand jury. 

He pointed to a July article in a publication by the Sightline Institute detailing what reporter Clark Williams-Derry described as seven bombshells. 

Of interest most pointedly to Damsky was Hoops’ own admission of the tight cashflow back and forth between Blackjewel and affiliate company Revelation Energy between 2013, during which they racked up hundreds of millions in unpaid bills, which Williams-Derry said either pointed to business failure or outright fraud.

This on top of Hoop’s breaking ground on a $30 million resort called the Grand Patrician, complete with a 3,500-seat arena modeled after a Roman coliseum, that was unimpeded by the bankruptcy filing.

Equally troubling to Damsky was bombshell No. 4 in the article which described the $79 million in transfers between Blackjewel and other bank accounts under his control, including his own personal accounts. 

In one instance, Hoops transferred $45 million into Blackjewel before extracting $34 million, which by Hoops’ accounting meant he was still owed $11 million among other discrepancies.

In short, Damsky would like to take a closer look for potential wrongdoing.

“It’s like a Chinese house with a 1,000 doors,” Damsky said, which he views as part of a larger pattern by other out-of-state coal companies who ‘blow and go’ through bankruptcies before selling to the next highest bidder – or the next company willing to take on reclamation liabilities – at the expense of the people of Campbell County.

A snake oil salesman

Rory Wallett, for one, was happy to hear that the county attorney is planning to delve into Hoops’ affairs. It’s about time somebody step up and do some investigating, he said.

Fresh off the night shift from Belle Ayr early Thursday morning, Wallett, a production technician, sipped an iced chai at The Local coffeeshop in downtown Gillette, as he recounted the stress that he and the 600 other local miners went through following the layoffs two years ago.

As a result of the layoff, Wallett lost his house and recalled the strain on both his family and his marriage. He knows of at least a handful of marriages that broke up as a result of those rocky times and just as many of his former friends and colleagues who were forced to take work elsewhere and move as a result of Hoops’ shady and inept business dealings.

This is the guy who flew out to Gillette, stood among workers in the breakroom and shook all their hands.

“He’s definitely a snake oil salesman,” Wallett said. “He knows how to sell the product he’s selling.”

A house of cards

On July 1, 2019, Blackjewel abruptly entered Chapter 11 bankruptcy along with its affiliated companies (County 17, Jul. 1, 2019). The filing caught many within the community by surprise, not because of Blackjewel’s financial status, but because of the chaotic nature of the process.

When the bankruptcies of Arch Resources, Peabody Energy, and Cloud Peak Energy had been announced, the firms simultaneously said they’d already secured debtor-in-possession (DIP) financing (a form of financing used by lenders in Chapter 11 bankruptcies that gives them priority over older debts). 

Those companies entered bankruptcy, but for employees and the community very little initially changed. The workers continued working, their paychecks continued coming and the companies continued relationships with vendors.

Blackjewel was different. Based upon conversations with Blackjewel employees, the morning of the bankruptcy, mine managers told employees about the bankruptcy, but said that things would continue as had been the case with the bankruptcies of the other PRB coal companies – their employment would continue and the operations would carry on producing coal.

Hoops was portrayed initially as Blackjewel’s savior, indicating that he and his family, and their entities, would provide the DIP financing Blackjewel desperately needed. Hoops delivered cashier’s checks by private jet from his West Virginia bank to PRB employees for the most recent payroll they hadn’t received.

Hoops’ proposal to the bankruptcy court for Blackjewel’s DIP financing would provide the company with $8,963,068.

The proposed loan, however, secured by the DIP priority and basically all of the Blackjewel assets, was for $20 million. 

The new cash would come from Hoops and a company he controlled. The proposed order, prepared by Hoops’ attorneys, took money that he had previously loaned personally and through other entities and categorized it as having been used “for valid business purposes” and noted that it was a revolving line of credit, not an equity contribution (important for priority in a bankruptcy, where equity is traditionally gone) and that the entire amount should be treated as DIP financing.

Hoops also included a reimbursement for the use of his private aircraft to fly the cashier’s checks to Wyoming at a value of $16,800.

Classification of all of the money as DIP financing would give Hoops and his companies super priority over other creditors, vendors, employees and local governments like Campbell County.

As the day drug on, no announcement on the DIP financing was made. Employees were finally told they were being laid off and to go home. Chaos at the PRB mines ensued as many employees had not been paid by Hoops for the current period and had never seen deductions from their checks for 401(k) accounts and health savings accounts (HSA) deposited for their benefit.

Judge Frank W. Volk of the Southern District of West Virginia held a hearing on July 1, but no decision was made. The hearing including many hours of testimony from Hoops and hearings were held the following day too.

It appeared to most that after alleged mismanagement and potentially fraud, Hoops was looking to use the bankruptcy to put himself above others and guarantee himself a payout. He also took the opportunity to imply to employees that the lack of approval of the DIP financing was because of a number of creditors, not serious concerns with his proposal.

On July 3, Volk denied the proposed emergency motion for post-petition financing (County 17, Jul. 3, 2019). In his ruling, Volk said that Blackjewel and the other Hoops entities failed to meet their burden of proof under Chapter 11.

“Moreover, I find that the proposed terms of the debt facility would unduly prejudice the rights of other parties and interests, in the majority of which have not had an opportunity to be heard, given the unusual circumstances that have been presented,” Volk said.

The same day he denied Hoops’ proposed post-petition financing arrangement, Volk signed an interim order granting emergency DIP financing priority for a $5 million loan from Riverstone Credit Partners (County 17, Jul. 3, 2019). Riverstone was already a Blackjewel creditor and their loan would address urgent needs at the mines in Campbell County – mainly fire watch since coal at rest and open to the elements can combust. As a condition of Riverstone’s loan, it moved to the top of the list of creditors.

Volk required one other thing. Hoops and his family were out of Blackjewel’s management.

The ramblings of a delusional man or a fraud who had run out of time?

One day after the Volk ruling on the emergency funding, Hoops sent a letter to Blackjewel’s 1,800 out-of-work employees (County 17, Jul. 5, 2019).

By this time Blackjewel’s PRB employees had missed a paycheck (those in the eastern U.S. were behind on multiple payroll payments) and found out that money withheld from their checks for 401(k) contributions and HSAs had never been deposited. Court records confirmed that more than $1 million in contributions had not been made. They were also unemployed with no sign of when some normalcy would return.

“No one is hurting more than me,” Hoops wrote in capital letters in a letter to employees, citing threats being made against him, his family and “anyone associated” with him “as a result of the misinformation.”

In his July 4 letter, Hoops vehemently denied any wrongdoing, and instead claimed that Clearwater Investments, which is owned by a Hoop’s Dynasty Trust “with many investments,” had loaned Blackjewel more than $11 million since January of 2019 due to flooding and missed shipments out West.

Hoops’ letter, written in all capital letters with long run-on paragraphs, read more like a desperate plea for apology than an explanation for employees who had worked hard for Blackjewel.

Mobilization of resources

While the bankruptcy court began digesting the Blackjewel case, Campbell County and Wyoming stepped in to help on the mine sites. The Wyoming Department of Environmental Quality (WDEQ) on its first visit to the site found explosives that had not been properly stored, shovels in precarious positions, and coal which had been sitting in a silo for too long. WDEQ acted, with the assistance of some Blackjewel employees, to make the mines safe (Wyofile, Jul. 3, 2019, reprinted on County 17).

Those who first visited the mines said it reminded them of the eerie photos seen after the Chernobyl nuclear meltdown, where a once active community was suddenly evacuated, leaving in place a full city, cars, clothes and parks with no people.

As employees chaotically left after being “laid off,” they vacated the two PRB mines in a similar eerie state. The mines’ huge shop doors, large enough to perform maintenance and work on giant haul trucks and other equipment were left open. All of the lights were on. Music from the shop speakers could be heard by those walking in front of the building. Coffee pots were left on, where a small amount of coffee that had been remaining evaporated and left a dark layer in the bottom of the pot.

Wyoming Governor Mark Gordon and his executive team, including the directors of WDEQ and the Wyoming Department of Workforce Services (WDWS), traveled immediately to Campbell County to offer support.

Gordon held a joint meeting with Campbell County Commissioners and Gillette Mayor Louise Carter-King, where the elected officials took questions from Blackjewel employees.

One miner asked the group, “Has anyone had contact with Hoops?”

Gordon and WDEQ director Todd Parfitt both said that they had not heard from the then reining CEO.

“I look forward to his call,” Gordon had said.

WDWS began working with employees on unemployment. Representatives from the Wyoming Community Development Authority (WCDA) were sent to help miners who might miss a home loan payment looking at options and potentially restructure their loans.

The earlier bankruptcies of Arch Resources, Peabody Energy, and Cloud Peak Energy, and their earlier layoffs, had a positive effect on the Blackjewel bankruptcy – the state had learned how to step in to help employees quickly.

The bankruptcy and previous behavior by Blackjewel had left many in Campbell County hurting – from employees to small business owners who were vendors of the company (WyoFile, Jul. 10, 2019, reprinted on County 17). Much of the hurt was a result of Hoops alleged double-dealing – a topic to be visited in depth by County 17 next week – and possibly Damsky’s best chance for prosecuting the former CEO.

But while Campbell County hurt, a big question came to the front of many people’s minds. What would happen to the two mines? Would they be reclaimed or would they remain as they were left? The discussion of reclamation brought another of the PRB mines’ previous operators back into the equation, Contura Energy.

A path forward?

Contura was born out of Alpha Natural Resource’s 2015 bankruptcy. Alpha’s senior creditors formed Contura to take the “lucrative” Wyoming mines off Alpha’s books, while Alpha continued operating mines out east (County 17, Dec. 11, 2017).

In December 2017, Contura announced the sale of its flagship Belle Ayr and Eagle Butte mines to Blackjewel, LLC, which was known only as a “private company based in the Kentucky Appalachians.”

Contura was to receive deferred compensation and some royalty payments. The biggest gain for Contura, however, was the requirement for Blackjewel to assume all permits and reclamation requirements associated with the PRB mines.

In what ended up being a stroke of luck for state leaders, the transfer of the mine permits and reclamation bonding for Belle Ayr and Eagle Butte from Contura to Blackjewel was never completed because of a challenge by the Powder River Basin Resource Council (PRBRC) (County 17, Nov. 29, 2018). Because of the hangups in transferring the mine permits, Contura still had responsibility for the mines and bonding in place.

As the bankruptcy case moved slowly, Wyoming’s Environmental Quality Council (EQC) delayed a decision on who held the mining permits for Eagle Butte and Belle Ayr pending information from the bankruptcy court.

As state Sen. Micheal Von Flatern, whose area includes the City of Gillette stated, “Thank God they didn’t [approve the permit] and kept Contura on the hook,” (WyoFile, Jul. 16, 2019, reprinted on County 17).

As Contura was still on the hook for reclamation at the two mines, which had been estimated to cost upwards of $250 million, the bankruptcy took an unexpected turn. Contura, who had only two years earlier happily sold off its PRB mines to place more focus on metallurgical coal, became the backup buyer for Belle Ayr and Eagle Butte after Judge Volk approved the stalking-horse agreement between it and Blackjewel. Parties interested in the assets could bid on them, but if no buyer came forward, the stalking-horse agreement terms would prevail (County 17, Jul. 26, 2019).

Under the agreement, Contura agreed to purchase what was referred to as the Western/Pax Assets including the Belle Ayr and Eagle Butte mines in the PRB and the Pax mine in West Virginia. The deal included an $8.1 million purchase deposit plus $12.5 million in additional cash to, in effect, finance the sale process.

That deal never happened. Riverstone Credit Partners, the firm who had provided the initial $5 million DIP financing for Blackjewel and jumped to the head of the line as a creditor, leveraged Contura’s reclamation obligation, to push the deal up to nearly $34 million (WyoFile, Aug. 13, 2019, reprinted on County 17). After initially making a loan to Blackjewel in 2017 at a 15% interest rate, the private equity firm would leave the ordeal largely unscathed, with remaining creditors, vendors, and local governments left out in the cold.

Enter Eagle

On September 18, 2019, Contura announced again the sale of its Belle Ayr and Eagle Butte mines. The owner this time would be Eagle Specialty Materials, LLC (ESM), an affiliate of FM Coal, LLC (County 17, Sept. 18, 2019).

“We’ve been clear that operating long-term in the PRB was not in Contura’s strategic plans, and that the best possible outcome for all interested parties would be for another responsible operator to step up that was interested in doing just that,” said David Stetson, Contura’s chairman and CEO. “We are extremely pleased that this deal outlines a path to relieve Contura from any go-forward liabilities related to these assets, while also providing long-term employment opportunities for hard-working miners and ongoing revenue to local, state, and federal governments.”

Under the terms of the deal, Contura agreed to pay ESM $90 million cash for taking over the two mines. Contura also agreed to pay Campbell County $13.5 million for back ad valorem taxes, though $15 million was due and assessed in Contura’s name exclusively (County 17, Oct. 1, 2020). ESM agreed to pay the county half of the tax debt owed by Blackjewel over a five-year period.

Happy endings?

Wallett was lucky, he said. He and his wife weathered the rocky times, and Wallett was among the first crew to be rehired that fall by ESM with a $2 per hour raise. In recent weeks, he said, some of his former coworkers have also begun returning.

So far, so good, Wallett said, when it comes to the mines’ new owner.

For the first time that he can remember, Wallett and staff will receive a $500 year-end bonus and ESM has also donated $20,000 to local community groups. Their signal, in his mind, that they intend to be part of the community. The company just celebrated its first year in the PRB in October with a company-paid dinner and stocking caps and gifts cards for all employees.

Despite the otherwise happy ending, Wallett was pleased to hear that charges may potentially be brought against the former Blackjewel CEO who had once sidled up to them as one of their own, while in his mind, lying directly to their faces.

He’s happy to spread the word that the new county attorney is looking into potentially pressing criminal charges. Anyone with information is asked to contact either the Campbell County Sheriff’s Office or the Campbell County Attorney’s Office.

If nothing else, Damsky would like to send a message to Hoops and others like him that Campbell County isn’t planning to sit still and take it anymore.

His message: Don’t screw Campbell County.

“I’m not afraid of his (Hoops’) money,” Damsky said. “If there’s any criminal activity of his part, I’m going to go after him with a vengeance.”

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Losing coal could cost Wyoming dearly, take decades to recalibrate labor force

in Energy/Jobs/News
coal industry labor force

By Ike Fredregill, Cowboy State Daily

Wyoming’s coal market has suffered devastating layoffs and mine closures in recent years, and by all accounts, the industry is shrinking. 

But, what if it dried up overnight? 

“If you were to instantly remove the coal industry, it would immediately cause job losses across the state,” said Robert Godby, the University of Wyoming director for Energy Economics and Public Policies Center and college of business associate professor. “You’re looking at about 5,000 miners directly involved in the coal industry. If you were to lose that all at once, people would feel that.”

It’s not just the miners, either. Godby said a sizable chunk of Wyoming’s labor market is reliant on coal.

“Approximately, there’s about 10,000 jobs directly or indirectly related to the coal industry — mining, electricity generation, railroads, plus all the businesses reliant on those workers’ wages,” he explained. “As coal declines in the state, we’ll have to transition those workers to other industries. And, there will not be enough jobs to absorb those workers.”

The good news, Godby said, is coal won’t disappear that quickly, but it could taper off sooner than Wyoming is prepared for. 

“In 2015, there were almost 5,600 miners in Powder River Basin, now there’s 4,400,” he said. “There are 12 mines up there that produce about 40 percent of the country’s coal. We could be below half of what we were producing in 2009 by the mid-2020s.”

High-paying careers

Data from the Department of Wyoming Workforce Services indicates once these workers lose gainful employment, many leave the state to work in the field elsewhere.

But, across the nation, there are fewer jobs for coal workers and retraining for other careers can mean starting all over.

“Those jobs pay really well,” Godby said. “It’s not only difficult to absorb and replace all those jobs, but you won’t be able to find jobs that pay nearly as well.” 

The average income for a coal industry employee is about $80,000 a year, he said. 

“The people who stay, if those jobs were to disappear, may have to do something else,” Godby said. “Many of those workers may have to accept the fact that unless they go back to school, retrain or re-skill, they won’t find jobs that pay as well.”

When a layoff occurs in any industry, Workforce Services deploys a rapid response team, agency spokesperson Ty Stockton said.

“In Wyoming, we don’t have very many businesses that have 600 employees that could get laid off,” Stockton explained. “We don’t have a real threshold for deploying the team. When Laramie County Community College (LCCC) laid off 17 employees in 2016, they went in for that.”

A team was also sent out in 2016 when about 500 workers were laid off from the North Antelope Rochelle and Black Thunder mines in Campbell County. More recently, Workforce Services deployed a rapid response team to Gillette when Blackjewel, LLC, abruptly laid off about 600 workers at the Belle Ayr and Eagle Butte mines in Campbell County.

“Rapid response is about giving those folks options and information,” Stockton said. “If they don’t have information, there’s nothing they can do.”

Teams can include mental health counselors, Wyoming Department of Family Services staff to help families, Wyoming Department of Health staff to help with health insurance questions and Workforce Services employees to discuss unemployment options and help laid off workers start the search for their next job, he said.

‘Generation of pain’

But all of those are stop-gap measures designed to lessen the blow to recently out-of-work families. 

In the long term, Workforce Services also provides funding for a number of vocational rehabilitation programs. 

“We’re trying to keep (the workers) here and give them some options,” Stockton said. 

The agency has access to about $2 million for retraining coal workers through the Partnerships for Opportunity and Workforce Economic Revitalization Grant, aka the POWER Grant.

“The only people eligible for the POWER Grant are the primary industries associated with coal-fired power plants and the coal mines,” Stockton explained. “But we also have the Workforce Innovation and Opportunity Act, and that covers everybody.” 

Additionally, Workforce Services helps fund some apprenticeship programs through grants. 

“Training an apprentice is expensive,” Stockton said. “The apprenticeship program was set up to help offset those costs, so if you need a few apprentices, you can apply for these grants and have their training paid for through the apprenticeship grant.”

About 80 trainees are currently enrolled in apprenticeship programs for electrical, plumbing and heating and cooling careers at LCCC and Northwest College, he said. 

Even with training programs already in place, Godby said recovery from the loss of an industry as big as coal would take years.

“To transition a labor force to work on anything else is going to take about at least about a decade,” he explained. “If we look at other industries like the furniture industry in the Southeast, soft wood lumber in the Pacific Northwest and the industrial decline in the Midwest, those transitions typically take a generation to overcome. That’s a generation — 20 to 30 years — of pain.”

Trade sector could use displaced coal miners, officials say

in Energy/Economic development/News

By Seneca Flowers, Cowboy State Daily

Business and government leaders around the Wyoming are scrambling to make sure Wyoming workers remain Wyoming workers as the jobs in the coal industry subside.

In 2016, nearly 7 percent of the state workforce was employed in the extractive energy sector, which includes coal, according to the U.S. Department of the Interior. But with Blackjewel’s recent layoff of nearly 600 people, the state will feel the shockwaves on multiple fronts. The immediate issue is figuring out how to re-employ displaced workers. The good news is skilled trade workers are in more demand than many may think, according to some officials around the state.

Rick Mansheim, manager for state Workforce Centers in Gillette and Newcastle, has been in the front lines of trying to get the miners back to work. He said he has heard that more than 100 miners may have found new jobs, but his organization has no way to know the exact number.

“We have a whole gamut of training we can do,” Mansheim said. 

He said that some of the Blackjewel employees are taking commercial driver’s license and other college classes. He added that in the past, his offices have also been able to help people into the nursing and welding fields.

After Blackjewel’s two mines closed, the Gillette and Newcastle Workforce Centers held information sessions at the Gillette College Technical Education Center that attracted more than 300 people from the mines. The centers also held career fairs with employers from the region that attracted nearly 500 job seekers.

Help wanted in the trades

Mansheim said many companies heard of the layoffs and reached out to him directly looking to fill the void of trade workers.

State Rep. Mike Greear, R-Gillette, said the state needs more trade workers. Greear is the co-chair of the Legislature’s Minerals, Business and Economic Development Committee and also the president and CEO of Wyoming Sugar.

As a CEO, Greear said he cannot recruit skilled workers. They just aren’t there. So he must develop and continuously look for them. He said he has heard similar stories from other businesses in the state.

“I think it is an unintended consequence of the Hathaway (scholarship) program, which is a wonderful program,” Greear said.

He said many young people have chosen to pursue a college education rather than enter the trade sector.

As a company president, he is soliciting high school students and offering them trade jobs with possible future opportunities that include welding or machinist certifications for those who would like to remain in their communities.

But he can only do so much as a business leader. As a state leader, he is also limited.

“The Legislature can do good things—it can set policy, it can help guide us over some bumpy roads, but in the end, it’s got to be up to the industry to be able to attract them,” Greear said. “The government can’t do everything for everyone.”

The disappearing coal job

For those workers who want to remain in their communities, finding coal jobs is going to be more difficult as the industry slows and transforms.

Economist Rob Godby, director for the University of Wyoming’s Center for Energy Economics and Public Policy, doesn’t see coal magically rebounding anytime soon because technology and the free market will naturally reduce coal’s demand.

“Coal is in real decline,” Godby said. “The (Blackjewel) bankruptcy this summer has demonstrated how disruptive that can be.”

Godby said he expects renewable energy sources such as wind and solar to become the dominant providers of energy in the future because of policy changes with climate change and technological advances that make renewable energy production more efficient.

Greear acknowledged renewables are part of an overall portfolio for energy, but they are often erroneously blamed for the decreasing coal demand.

“The real driver of coal moving out of being the more attractive option is low natural gas prices—plain and simple,” Greear said. 

He added that as coal’s share of energy production has declined, the share provided by renewable energy has increased. But renewables have revealed some reliability issues, according to Greear, so he sees natural gas as a more stable source of energy.

Godby said technology is to blame for cheaper natural gas, which he calls “the largest factor to coal’s decline.”

In addition, Godby said technological advances in natural gas production and renewable energy production have caused coal to lose its market share prominence. The impact will not likely reverse, he said.

“You can’t put those technologies back…you can’t put those genies in a bottle,” Godby said. “Once they are invented, they are really hard to forget. Technological progress happens all the time. It’s disruptive, and old technologies are replaced by new ones.

“Nobody’s building the coal-fired power plants,” Godby continued. “So eventually they are going to age out, be retired. And they are not being replaced with other coal-fired power plants.” 

Diminished local dollars from coal

Fewer coal-fired plants mean less revenue for the state and towns.

Coal production in Wyoming has declined 22.6 percent in last five years, 29.7 percent in last the 10 years, and 34.8 percent since its booming peak of 2008, according to the Wyoming Mining Association.

Coal is the second largest source of tax revenue to state and local governments, according to the WMA, with about $1 billion in tax revenue paid every year.

But the reality is that coal may not always be able to pay the bulk of the government’s bills—at least not in its current state.

Greear said state and local governments have some time to prepare for a downturn in revenues.

While coal-fired plants are shutting down, supply projections suggest production of 240 million to 260 million tons for the next 10 years.

Although Greear expects a slow, steady decline in production, he doesn’t count coal out of Wyoming’s revenue stream entirely.

Greear said there is demand for Powder River Basin coal among some Asian countries. However, efforts to build coal terminals in Washington that would allow shipments to Asian countries have failed.

Godby said even if the terminals were built, they wouldn’t likely be a long-term solution to the coal industry’s woes and may just prolong its demise.

He added even though a prolonged death may still be economically beneficial to the state in the short-term basis, the long-term outlook may not be positive.

“It’s far from guaranteed that the developing world is going to stick to coal for quite a while,” Godby said. “It is also the case that countries like China and others are turning to renewables and natural gas much more quickly than people expected.”

Blackjewel closures bad, but not the worst, officials say

in Energy/News
Gillette Wyoming coal

By James Chilton, Cowboy State Daily

GILLETTE – It’s been nearly a month since Blackjewel LLC abruptly shuttered its coal production operations, locking some 600 Gillette-area miners out of the Eagle Butte and Belle Ayr coal mines. And as Blackjewel continues to hammer out its fate in U.S. Bankruptcy Court, Gillette searches for silver linings to this latest economic cumulonimbus.

For as threatening as the Blackjewel storm cloud may be, the city has seen worse; and not all that long ago, either. Mayor Louise Carter-King said that during the Peabody Energy and Arch Coal bankruptcy proceedings in 2016, oil and natural gas prices were also bottoming out, leaving displaced energy sector workers with few places to turn locally for employment.

“Three years ago oil was down, natural gas was down, coal was down. It was like a perfect storm and it hit us very hard,” Carter-King said. “This time it was more due to (Blackjewel’s) mismanagement rather than the underlying economy, because both of these mines were profitable.”

While she expects the mine layoffs to have a ripple effect on the city’s sales tax revenues, it will be some time before that impact is seen because state remittance of sales taxes are backdated by two months. But Carter-King said she doesn’t expect any impact to be especially long-lived this time around, thanks to a stronger job market that’s provided fall-back opportunities for those who can’t afford to wait for the mines to reopen.

“I know some employees are holding out for that, but those who can get jobs that are equal or better are jumping ship,” she said. “The good news is, a lot of people have been able to find jobs.”

Rick Mansheim with the Wyoming Department of Workforce Services said the DWS Employment and Training office in Gillette took immediate steps to get information out about resources available to the displaced miners, as well as to address some of their most urgent economic questions. In addition, DWS called upon its community and statewide partners to swiftly assemble a job fair that brought in employers from across Wyoming and the Mountain West.

“Five days after the (mine) closings, we had a big job fair at Gillette College where we had 40 employers, not just local, but from Colorado, Utah, Arizona, Montana,” Mansheim said. “They saw over 450 people in one day; and I know a good percentage of people were actually offered jobs that day. So if there’s a bright side at all to this layoff or whatever you want to term it, it’s the fact there were jobs available and a lot of these people were able to find employment relatively quickly.”

For the rest, Mansheim said DWS has been helping walk people through applying for unemployment benefits and ensuring they know how to maintain their health insurance coverage.

“A lot of these people have never gone through something like this, so we’re helping them understand the unemployment process – because it is a process, it’s not something where you just come in, type in your name and that’s it,” Mansheim said. “We’ll probably do another job fair if we hear something about whether the mines are going to be bringing people back or not, and we keep in contact with the city and the county to make sure we’re on the same page.”

City Communications Manager Geno Palazzari said Gillette has also been working with nonprofits and social service agencies to marshal assistance in the aftermath of the mine closures. One of the first calls, he said, was to the Food Bank of the Rockies to enlist the aid of that group’s mobile food pantry, which will set up at Family Life Church, 480 S. Highway 50, from 1 p.m. to 6 p.m. July 29 and Aug. 19.

“They’re already mobilizing to get trucks up here,” Palazzari said. “We’ve also reached out to some of the social service agencies in the community we fund … to make sure they didn’t need an advance on the funding we provide them to make sure they can make it through these times.”

While Blackjewel has been an important contributor to the city’s tax revenue base, Palazzari and Carter-King said they don’t expect these latest closures to impact city services. That’s mainly because the city has been extremely conservative with its spending since the 2016 downturn, when it had to cut nearly four dozen positions and $60 million out of its budget.

“Those were tough days. We had to lay off people and we looked at everything with a microscope,” Carter-King said. “Three years ago woke us up and taught us that we’ve got to be prepared for things like this.”

Prior to 2016, the city had enough cash in reserve to keep things running for 90 days without any new revenues. In 2016, the city council voted to increase that to 120 days, and then to 150 days in September 2018.

“There’s approximately $14 million (of operating reserves) budgeted for Fiscal Year 2020,” Carter-King said. “Now, if not another dime came into this city, we could make it 150 days.”

Blackjewel layoffs could have ‘truly scary’ impact on economy

in Energy/News
Belle Aye Mine

By Ike Fredregill, Cowboy State Daily

With two of Wyoming’s largest coal mines closed pending Blackjewel LLC’s bankruptcy filings and approximately 600 laid-off workers warming the bench, legislators and state economists are contemplating the future of coal in Wyoming.

“Just because a coal mine stops producing doesn’t mean the demand for coal stops,” said Dan Noble, Wyoming Department of Revenue’s director. “Because most coal-fired power plants use Powder River Basin coal, those coal customers may switch to the other producers in that area. At which point, there’s not a significant drop off of coal produced.”

Wyoming Sen. Cale Case, R-Lander, explained coal-fired power plants tune their operations to coal products from specific regions of the world.

“Another mine (in the basin) might be able to pick up (Blackjewel’s) contracts,” Case said. “While that’s a reasonable story for the tax receipts, it’s not at all good for the laid-off workers.”

As the Senate chairman of the Wyoming Legislature’s Joint Revenue Committee, he said Blackjewel’s bankruptcy was concerning, but he pointed to the larger issue: The coal industry is withering away.

“We are looking at a general reduction in production of Powder River coal,” Case said. Revenue Committee House of Representatives Chairman Rep. Dan Zwonitzer, R-Cheyenne, added coal mining in Wyoming might grind to a halt in little more than 10 years.

“The modeling used to say we’d be good until 2050,” Zwonitzer explained. “Now, the modeling is saying 2030.”

The loss would be a major hit for the state, he said.

Reviewing only severance tax, which is imposed on the extraction of non-renewable natural resources intended for use in other states, Noble said coal production generated about $211 million in revenue for Wyoming in 2017.  

“The assessed value for all minerals in the state is (about) $10 billion,” he said. “And coal represents (about) 15 percent of all of the taxable value in the state.”

Labor force impact

While coal revenue could fill the state’s coffers for another decade, the Blackjewel layoffs might significantly hinder local economies in northeastern Wyoming.

“In May, unemployment (in Campbell County where the Blackjewel mines, Belle Ayr and Eagle Butte, are located) was down to 3.2 percent, which is pretty low,” said David Bullard, a Wyoming Department of Workforce Services senior economist. “We won’t have July’s numbers for a while yet, but just talking in round numbers, it could push unemployment (in the county) up to 6 percent.”

Wyoming’s average unemployment rate was 3.3 percent in May.

Campbell County’s labor force has trended downward in recent years with about 24,600 in May 2016 dropping to about 22,700 by May 2019, Bullard said.   

“In general terms, if these 600 (Blackjewel) jobs disappear, we would expect that to have a negative affect across the local economy, and to a lesser extent, the entire state,” he said.

With about 4,000 jobs catalogued by Workforce Services, mining is one of the largest employment categories in the county, and Blackjewel’s employees accounted for about 11 percent of the sector, according to the department’s data. If the company is not able to secure more funding for its Wyoming operations, Bullard said the community could suffer.

“I expect a significant number of (the laid-off Blackjewel workers) would move away for other opportunities in other areas,” he explained. “That would impact the local economy by lowering demand for services and retail as well as tax revenue for governments and schools.”

More than three decades ago, U.S. Steel closed its iron mine in central Wyoming, but Case said the memory is still fresh.

“I’ve been through it in Lander, and when the mine shut down, we lost 550 good-paying jobs,” he recalled. “It is a killer — these are good jobs. You got $70,000 (a year) household incomes coming out of those mines. That money is in those communities. It’s scary. It’s truly scary.”

The future

As coal revenue wanes, legislators are reviewing options to keep the state afloat.

“It’s revenue that Wyoming has depended on for over 100 years,” Zwonitzer said. “With that gone — it’s a sizable chunk of the budget. There’s a lot of concern in the revenue committee.” 

Increasing taxes on wind and solar energy is one possible avenue, but Zwonitzer said even the best estimates of potential revenue from renewable energy don’t come close to covering the gap left by coal.

“I think our two main options right now are a corporate income tax or a significant increase in property tax,” he added. “They may not be two good options, but they are the two palatable options right now.”

Case said some are looking to the oil and natural gas industries for answers.

“I’m just asking the question: what if oil were to go the same route?” Case posited. “We need to find a way to find long-term revenue for our state, our schools and our roads.”

As the era of coal-fired power plants nears its end, Zwonitzer said the revenue committee will continue to research ways of lessening the blow to Wyoming’s economy. But for now, the future is bleak.

“There’s no good news ahead,” Zwonitzer said. “It just keeps getting worse.”

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