This article was produced with ProPublica as part of its Local Reporting Network initiative. Sign up for Dispatches to get stories like this one as soon as they are published.

For years, West Virginia Gov. Jim Justice has been dogged by allegations that his family businesses haven’t paid their debts, including fines for environmental violations at their coal plants. One bank is even seeking to garnish his salary as governor to cover an unpaid personal guarantee of a business loan, court documents show.

But these disputes are likely to resurface in what will be one of the most hotly contested races for control of the U.S. Senate in 2024. Last week, Justice, who is immensely popular in the state, announced that he will challenge U.S. Sen. Joe Manchin, a Democrat who is often the swing vote on key legislation.

A review by ProPublica in 2020 found that, over three decades, Justice’s constellation of mining, farming and hospitality companies were involved in over 600 lawsuits in more than two dozen states. Many were filed by workers, vendors, business partners and government agencies, alleging they weren’t paid. Often, similar cases were filed in multiple jurisdictions, as lawyers for plaintiffs tried to chase down a Justice company’s assets to settle debts.

By late 2020, the total in judgments and settlements for Justice family businesses had reached $140 million, ProPublica and Mountain State Spotlight found.

Since then, his family business empire has faced more turmoil. Lenders are trying to hold him personally responsible for hundreds of millions in debt. Courts are ordering payment of long-standing environmental penalties.

Neither representatives for Justice nor the family’s businesses responded to a request for comment. In the past, Justice has said that he and his family companies always pay what they owe. The governor has said that his businesses don’t create any conflicts of interest and that he didn’t run for office to get anything for himself.

Justice inherited a coal fortune from his father and expanded it to an empire of agricultural companies and resort hotels, including The Greenbrier, a posh, historic resort located in a valley where southern West Virginia’s mountains meet western Virginia’s rolling hills.

Last week, Justice used The Greenbrier as the backdrop for his announcement that he would seek the Republican nomination, facing U.S. Rep. Alex Mooney in the GOP primary. (Manchin has not announced a reelection bid yet, but in response to questions about Justice he said, “Make no mistake, I will win any race I enter.”)

As we documented, the resort has been at the heart of various conflicts of interest, as major trade associations that lobby state government for their industries have held meetings and conferences there.

And just two days before Justice’s Senate announcement, another of his resorts, Glade Springs, was the subject of state Supreme Court arguments in a case in which the resort homeowners’ association is seeking $6.6 million in property upkeep fees from one of Justice’s companies, which owns lots at the resort.

When he became governor in 2017, Justice said he was turning control of his family businesses over to his adult children. But our investigation found that, while governor, he continued to steer the empire.

In his political campaigns, Justice frequently touted his experience as a businessman and said that his long career in coal and other industries made him suited for the role of West Virginia’s chief executive.

Justice’s coal operations have also been repeatedly pressed to settle allegations of significant pollution problems in deals with regulators, yet the environmental violations have continued. Last month, a federal appeals court ruled that Justice companies must pay $2.5 million in environmental fines. Lawyers for the companies had argued the fines were the result of a misreading of an earlier settlement.

In December, an industrial plant owned by Justice’s family agreed to pay nearly $1 million in fines after releasing excessive air pollution into Black neighborhoods in Birmingham, Alabama. An attorney who works with the Justice family said the consent order would “provide the certainty that the company needs to complete its evaluation of the plant’s future.”

For years, Justice had been considered West Virginia’s richest man and listed by Forbes as a billionaire. But in 2021, Forbes removed that listing. The magazine cited a dispute over $850 million in debt to the now-defunct firm Greensill Capital.

The Justice companies settled that dispute with a payment plan. But last week a longtime banking partner of Justice’s, Carter Bank & Trust, filed documents seeking to collect on a separate $300 million debt. Justice’s son, Jay Justice, said in a statement that the bank had refused a reasonable repayment plan.

West Virginia Gov. Jim Justice runs for Senate amid stacks of unpaid bills appeared first on Mountain State Spotlight, West Virginia’s civic newsroom.

On warm spring days, the forests of Cacapon Resort State Park sprout bushy, lime-green leaves as people walk along wooded trails, fish in the lake, birdwatch or share a meal at a picnic table.

For nearly a century, the park’s old forests, sweeping views and peaceful waters have attracted visitors, many seeking a nature-filled respite from the Baltimore-Washington D.C. rat race. But the park holds a particularly special place in the hearts of local residents who often gather there with friends and family.

“When I bring my grandkids over here, it’s the happiest time I can imagine,” said Craig Thibaudeau, who lives nearby. He recalls fond memories of playing with his grandchildren on the swing sets or beaches and fishing with his brother from Texas.

So when state officials announced plans to build a private RV campground in the park and one of the proposals included several hundred campsites, he was concerned.

“You lose the humanity of this park if you go corporate,” Thibaudeau said. “And that’s the bottom line. It’s the humanity that makes it so special.”

In public protests, he and dozens of others argued the environmental and social consequences of the development would be devastating.

The outcry eventually led the West Virginia Division of Natural Resources to abandon the current campground effort entirely, and the agency is now seeking public input on what facilities it should add to the park.

The fierce debate over the RV campground at Cacapon was the first test of a law passed last year allowing private development of facilities in almost all state parks. While the project is on hold, the law remains on the books and state officials could explore development at Cacapon or another park in the future, setting up another struggle over the role of private companies on public land.

Why a request for campground proposals sparked intense backlash

The dustup over development in Cacapon Resort State Park started in December, when the WVDNR put out a request for proposals from private companies interested in developing both campgrounds and recreational facilities at the park.

“The WVDNR welcomes community engagement for this development project and will work with local stakeholders to maintain Cacapon’s natural environment as currently enjoyed,” Commerce Secretary James Bailey said in a March statement releasing the three proposals received from different companies, all for a combination of RV campgrounds and other amenities.

One plan, by a Harpers Ferry-based company, would create 50 RV campsites and also provide a shuttle service. A second proposal by a Berkeley Springs-based company sought to partner with the park on the development of an RV campground on nearby private land.

The third plan by Blue Water Development in Maryland, contained a number of options, including the creation of as many as 350 RV campsites, a floating dock called an aquabana, mini-golf, and in one proposal, a “snowflex” that would involve using artificial snow to support year-round skiing and snowboarding.

Community members quickly rallied against this plan, launching local protests, community meetings, and an online petition to withdraw the request for proposals that received more than 1,000 signatures.

They argued that hundreds of campsites and the recreational facilities would create a disruptive amusement park-like atmosphere and advocacy groups raised concerns that some of the new amenities would affect the affordability of the park.

“Cacapon is a very unique, very mountainous area,” said Mike Jones, the public lands campaign coordinator for the West Virginia Rivers Coalition. “Putting in these kinds of mega-projects is just incompatible with that.”

In a letter to state officials, the Morgan County Commissioners said that a large RV campground would strain already struggling sewer and road infrastructure and “diminish many of the reasons that folks visit our park to begin with: the natural beauty, the historical significance, and the peaceful tranquility.”

State parks officials canceled a public hearing set for mid-April after a lawsuit brought by a citizen argued that they did not notify the public as required by law. Several days later, they announced that they would not be moving forward with any of the three proposals and would seek further public input.

Critics note a new state law allows for private development in parks

While plans for an RV campground at Cacapon have been put on hold for the time being, advocates pointed to the proposals as confirmation of their concerns around HB 4408, a bill passed in 2022 that allows for private companies to develop projects and facilities in all state parks, except for Watoga State Park, the state’s largest.

The proposal was heavily criticized by environmental and conservation groups when it was introduced last year, with local groups, and some former state parks employees arguing that the measure would lead to development projects that could irreparably damage the parks and would also effectively privatize significant parts of them.

“Our state parks, up until this administration, never seemed focused on being profit-making centers, at least not for private businesses,” said Angie Rosser, executive director of the West Virginia Rivers Coalition.

In an email, House of Delegates spokeswoman Ann Ali noted that the 2022 legislation was requested by the WVDNR. Del. Mark Dean, a Republican from Mingo County and the lead sponsor of the legislation, said in a statement that he supported the bill because he “thought it could provide a new opportunity for outdoor recreation to expand throughout the state, especially those activities with high start-up costs.”

Local residents and delegates however, have criticized the measure in recent weeks.

“I tried to talk it down. I changed about five or six votes,” Del. George Miller, R-Morgan, told a local online news outlet of his decision to oppose HB 4408 last year after initially backing it. “But it would have passed anyway. We have to deal with it now.”

Residents say environmental concerns are paramount

During recent protests against the proposed development, some residents held signs with sharp slogans, like “CCC does not mean Corporate Cash Cow” – a reference to the Civilian Conservation Corps. The New Deal-era employment program created millions of conservation jobs for young men and hundreds of state parks – including Cacapon.

The park’s roots in a movement intended to preserve public lands made recently proposed development all the more concerning to those living nearby. In addition to aesthetic worries about hundreds of new RV campsites, residents also had environmental concerns.

Development would’ve likely included cutting down trees on several acres of land, paving over soil with concrete and draining a wetland to create a beach. All of these measures can increase the likelihood of flooding, already a major concern for West Virginia due to its many mountains, valleys and river systems.

Five years ago, park visitors and nearby residents alike were evacuated when the Cacapon River rose more than seven feet above the flood stage.

“They evacuated my street. And it wasn’t voluntary. They stayed there until you left,” said Morgan County resident Dale Kirchner, who filed the lawsuit over the public hearing and lives very close to the park. “So now if you have acres more of runoff – not only for the campground, but the amenity areas – how much worse is that going to be? Do we really want to take a chance with global warming and the storms getting worse?”

Kirchner and others also expressed concerns about safety. If the park could suddenly host an additional thousand visitors, they worried there’d be more campfires and people partying. They worried that could lead to more injuries and forest fires. Just last week, multiple forest fires burned across more than 1,500 acres in nearby Pendleton County, eventually setting ablaze beloved environmental landmark Seneca Rocks.

Such a fire in Cacapon could endanger priceless resources. The park is home to two endangered species, the wood turtle and the harperella, a plant with white flowers that typically grows along shallow streams. It’s also home to old-growth forests, often described as irreplaceable because of their unique ability to provide a haven for biodiversity, reduce flood risk and mitigate the effects of climate change — in a way younger forests can’t mimic.

As state moves forward, local residents say their voices must be heard

After scuttling the current proposals for an RV campground, the state must now go back to the drawing board. The Division of Natural Resources has released an online survey about future development that will be open until late May.

Beyond that, it is unclear what will happen next — neither the WVDNR nor State Parks responded to questions about the now-scrapped proposals or future plans at the park.

But for Morgan County residents, the defeat of the RV campground bids presents a clear victory for local efforts to ensure community input in the park development process. And for critics of privatization efforts, the recent controversy likely provides ammunition for future debates over development in other parks.

Now with the new law on the books, almost all state parks, including Cacapon, could be chosen for private development, raising the question again of whether public lands should be altered for the sake of economic growth.

Public lands or private profit? West Virginia RV campground debate raises questions over role of state parks appeared first on Mountain State Spotlight, West Virginia’s civic newsroom.

This article was produced with ProPublica as part of its Local Reporting Network initiative. Sign up for Dispatches to get stories like this one as soon as they are published.

Whenever a hard rain fell on Harlan County, Kentucky, the mud, rocks and debris from the Foresters No. 25 mine pounded down the hillside into the community of Wallins Creek.

Local residents repeatedly complained about washed-out culverts and mud in their yards. Time after time, county work crews came out after a heavy rain to repair Camp Creek Road, a water line that runs alongside it and a local bridge. The strip mine’s owner, Blackjewel, fixed some problems, but when the rains came again, so did the muddy flooding.

Amber Combs, who lived down the hill from Foresters, recalled a day in August 2017 when “the water was rushing down and the yard was a muddy slush pond. It was literally like a river around my house.” Combs complained to Kentucky regulators, who fined Blackjewel $1,300, which it never paid. Overall, under Blackjewel’s ownership, Foresters would run up 17 violations and more than $600,000 in unpaid fines.  

Runoff from Blackjewel’s Foresters No. 25 mine damaged a road in Wallins Creek, Kentucky, in 2020. (Silas Walker/Lexington Herald-Leader)

Founded in 2008 by West Virginia native Jeff Hoops, Blackjewel grew in just a decade to become the sixth-largest coal producer in the U.S., partly by accumulating mines like Foresters that had gone bankrupt. By 2018, it boasted more than 500 mining permits in Kentucky, Virginia, West Virginia and Wyoming. Then, in July 2019, Blackjewel stunned the industry by declaring bankruptcy, with claims against it later estimated at $7.5 billion. 

That December, environmental groups where Blackjewel operated warned the bankruptcy judge that, while he was focusing on what they called the company’s “significant financial mismanagement,” he should also be aware of “severe environmental mismanagement problems.”

“Reclamation work, water treatment, and other expenses related to environmental compliance should be approved and prioritized” in the bankruptcy case, the environmental advocates wrote. 

Kentucky regulators agreed. But, citing longstanding case law, the judge rejected their request. Instead, bankruptcy trustees began divvying up the company’s assets among preferred creditors such as banks and hedge funds. Problems at Foresters and other Blackjewel sites persisted. By mid-2020, there were more than 600 outstanding violations of state mining and reclamation standards at the company’s mines in Kentucky, including 450 since the bankruptcy filing. On top of that, regulators had cited Blackjewel mines for more than 13,000 violations of Kentucky water quality rules, mostly for failing to monitor pollution discharges.          

The Blackjewel case, still unresolved and nearing its fourth anniversary this July, highlights the environmental toll of what has become a central feature of the coal industry’s business strategy: bankruptcy. Over the past decade, Blackjewel and other coal companies have found two ways to use bankruptcy to their advantage. First, they expanded their holdings by acquiring other companies’ bankrupt mines, which they hoped would turn a temporary profit during upticks in coal prices and production within the industry’s long-term decline.

Then they declared bankruptcy themselves, entering an arena where they didn’t have to pay all of their debts, and where environmental liabilities took a back seat to banks and other financial creditors. As more coal companies busted, hundreds of mines cycled through repeated bankruptcies. Some, like Foresters, are no longer producing coal, yet they continue to pollute their communities.  

A first-of-its-kind analysis by ProPublica and Mountain State Spotlight has documented that mines that have gone through multiple bankruptcies also tend to create more environmental damage. By combining data from federal bankruptcy court filings and state regulatory records, we identified mining permits that have been through more than one bankruptcy and compared the number of environmental violations they’d accrued to violations for mines that had not been through bankruptcy. We found that the median number of environmental violations for surface and underground mines that had been through multiple bankruptcies between 2012 and 2022 in Kentucky was almost twice the median number for mines that had not, and 40% higher in West Virginia. Blackjewel mines in Kentucky that have gone through multiple bankruptcies had more than twice as many violations as the state median for nonbankrupt mines. Our analysis could not determine if bankruptcy caused the environmental violations or was simply associated with them. Read about our methodology here.

The analysis suggests that the bankruptcy system is “keeping mines alive that are not viable and that are struggling to remain in compliance with environmental laws,” said University of Chicago law professor Josh Macey, co-author of a 2019 study on coal bankruptcies.

Blackjewel’s founder, Hoops, epitomizes how the story of the coal industry and its barons has become inseparable from bankruptcy. He built his empire on bankrupt mines. Then, as Blackjewel’s liabilities mounted, he began seeking new vistas. In the months before Blackjewel’s bankruptcy, according to court records, he transferred tens of millions of dollars into another company that is building a resort in his native West Virginia, part of a broader effort he has described as a noncoal empire he can leave to his children.  

Hoops, who declined requests for an in-person or phone interview, said in emailed answers to questions that he didn’t intend for Blackjewel to go bankrupt and that creditors forced him into it. “The model was never to bankrupt the company,” he wrote. “In no way have I benefited from the system.” He added, “I will not recover a cent of my valid claims.” Hoops said that Blackjewel complied with environmental laws and that when violations were issued, it took steps to address them.  

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Before his bankrupt company left a legacy of mud-shrouded roads and polluted streams, Jeff Hoops was a local hero. He rose from a dysfunctional family and a menial job in the West Virginia coalfields to create a regional economic engine and become a philanthropic pillar of his community. 

He and his wife, Patricia Hoops, were all smiles on the front page of the Herald-Dispatch of Huntington, West Virginia, in April 2014 when the newspaper named him its “Citizen of the Year.” The article recounted Hoops’ charity work close to home — a residence hall at Appalachian Bible College in Mount Hope, an indoor football practice facility at the University of Pikeville in Kentucky — and halfway around the world: distributing Bibles in Russia, financing construction of an orphanage in India, running a hotel for missionaries in the Dominican Republic. The children’s hospital in Huntington was named for him, thanks to a $3 million gift. So was a local soccer facility, after what the paper called a “generous donation.”

Despite his wealth and success, Hoops remained the modest and deeply religious man that his friends and neighbors had always known. As a major donor to Marshall University’s Thundering Herd athletic program, he would rate a perch in a luxury box at the stadium. But he said he prefers to sit in the stands, where he can feel the crowd’s energy and be closer to the action.

“I’ve invited him into the box but he says, ‘No, I’m okay,’” said John Sutherland, executive director of Marshall’s Big Green Scholarship Foundation.     

When Sutherland wants to talk Marshall sports with Hoops, they meet at Shonet’s Country Cafe, a family diner in Milton, West Virginia, for scrambled eggs and sausage, and sometimes a slice of pie.    

Born in 1956, Hoops grew up in Bluefield, deep in southern West Virginia along the Virginia border. Bluefield then had 20,000 residents; it counts less than half that many today. Historically, it was a financial hub and railroad center for the coal industry. Now, it promotes itself as “Nature’s Air-Conditioned City” (elevation 2,611), and the local chamber of commerce gives away cold lemonade whenever a summer day hits 90 degrees.

Hoops was the second oldest of five children of Roy Hoops, who worked as a clerk for the Norfolk & Southern Railroad, and Lucy Walker. Roy’s drinking, infidelity and physical abuse of Lucy strained the family, according to court records. Lucy filed for protective orders and divorce several times. When Roy promised to change his behavior, they reconciled.

“Certainly my childhood had its challenges, as my father’s life was controlled by alcohol,” Hoops said.

Hoops was a striver. He sang in the youth chorus at church and made the Bluefield High basketball team as a sophomore despite standing 5-feet-1-inch tall. He sprouted to what he called “a towering 5-8” by 1974, when he graduated from Bluefield and married his high school sweetheart, Patricia Johnson, a week later. He wanted to work right away, but he was only 17, and the minimum age in the coal industry was 18. So he altered his birth certificate and found a job running parts in an underground mine, he said.  

In 1975, Hoops joined the engineering department of a mining company, doing surveying and designing ventilation plans. He began going to college at night, eventually earning associate’s and master’s degrees and an executive MBA. Within a decade of high school, he became a top corporate engineer and then vice president of operations for United Coal, which became part of Arch Coal. After leaving Arch in the late 1990s, Hoops established and sold a series of coal companies. A former associate described Hoops as a workaholic driven by a competitive streak. “The joy of his life is coming out on top of a business deal,” the former associate said.

Hoops’ parents divorced in 1985, remarried in 1986 and divorced again in 1991. Roy retired from the railroad and owned an Exxon gas station from 1983 to 2002. On his deathbed in 2014, he called his son to apologize. “I forgave him, told him I loved him, and told him the most important thing was for him to make peace with God,” Jeff Hoops recalled. 

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When Hoops was growing up, coal was the most powerful business and political player in places like southern West Virginia and eastern Kentucky. But then, buffeted by skyrocketing natural gas production, cheaper renewable energy prices and efforts to reduce greenhouse gas emissions, the industry began to founder. 

Makers of everything from asbestos to opioids have used bankruptcy to avoid paying for damage they caused, but the sheer volume of coal bankruptcies outpaced any other sector. At least 60 coal companies went bankrupt between 2012 and 2022, including some of the biggest in the country. The environmental group Appalachian Voices warned in July 2021 that a wave of bankruptcies could leave 633,000 acres of coal mines in the eastern U.S. in need of cleanup, eroding the ability of communities to rebuild economically.  

In theory, bankruptcy doesn’t exempt a company from its responsibility to preserve the environment. The 1977 Surface Mining Control and Reclamation Act requires coal companies to clean up damage as they mine. When mining is over, the land must be put back to “a condition capable of supporting the uses which it was capable of supporting prior to any mining.” 

That’s not how it generally works in practice. Coal companies often fall behind on so-called mine reclamation and, with obligations also mounting for worker pensions and health benefits, file for bankruptcy protection. They lay off employees at mines that are no longer productive or profitable, ditch pension and health care liabilities and avoid paying for environmental damages.

For example, coal giants Peabody Energy and Arch Coal created a third company, Patriot Coal, and spun off their mines with environmental problems and pension obligations into it. All three companies eventually went bankrupt, ducking a combined $2.6 billion in liabilities, according to Macey, the University of Chicago law professor. Many of these mines have changed hands since then but still have not been reclaimed.

“Bankrupt coal companies dump their mine cleanup obligations onto communities and taxpayers who simply don’t have the money to pick up the tab,” said Peter Morgan, a Sierra Club lawyer who has tracked coal bankruptcies around the country.

The purpose of bankruptcy is to give desperate people and companies time and relief from creditors so they can get back on their feet. But not all creditors are treated equally. Bankruptcy law gives secured creditors such as banks, law firms, the Internal Revenue Service and equipment suppliers — but not environmental costs or fines — priority for payment. 

“Bankruptcy courts are not doing enough to stop conduct that allows coal companies to get out of their environmental responsibilities,” Macey said.

There’s a potential backstop to pay for environmental cleanup: reclamation bonds. Federal law requires coal companies to post these bonds to receive mining permits, as a sort of insurance. The amount that companies are required to put up varies from state to state; in West Virginia, it can be as much as $5,000 per acre of the permit. To secure the bonds, companies pay a surety firm a one-time fee — typically 20% to 50% of the face value, according to Hoops. If a mining company goes belly up, state regulators can revoke its permits and use the bond money to clean up whatever mess is left. Money from forfeited bonds, sometimes along with other revenue such as environmental penalties or coal production fees, goes into state reclamation funds to restore abandoned mine sites.

But the required bond amounts often aren’t enough to cover all potential costs. Cleanup costs have soared, partly due to larger surface mines that blew up or chopped off entire mountaintops, and partly because modern studies have increasingly identified water pollutants requiring lengthy and expensive treatment. According to a 2021 legislative audit, West Virginia’s reclamation bonds have covered only one-tenth of cleanup costs. Separately, the Appalachian Voices analysis projected cleanup costs in West Virginia alone as high as $3.5 billion.  

As a result, state officials are reluctant to revoke permits and take on the financial responsibility for cleanup. What often ensues instead is a game of musical mines. Knowing that they won’t end up on the hook for reclamation, other coal companies buy mines out of bankruptcy — and then often go bankrupt themselves. 

The ProPublica analysis identified 2,030 mines in Kentucky and West Virginia that have been through bankruptcy since 2012 — more than a third of all coal mines in those states. Of the bankrupt mines, 491, or 24%, have gone through more than one bankruptcy.  

Of the 210 bankrupt Blackjewel mines in our database, including 197 in Kentucky and 13 in West Virginia, almost half have gone through at least one other bankruptcy. The vast majority of those — 101 of 103 — are in Kentucky and had a median of 16 environmental violations, more than twice the median for nonbankrupt mines in that state. 

Since Blackjewel went bust in 2019, more than 100 of its Kentucky permits have been sold out of bankruptcy — many for the second time, according to court filings. Lawyers jokingly call the second round of bankruptcy “Chapter 22,” or Chapter 11 twice over. 

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In 1999, Hoops went out on his own with just one mine, the Hunts Branch Mine in Phelps, Kentucky. In 2008, he founded Revelation Energy. It grew, and Hoops changed the name to Blackjewel in 2017 as part of what he called “a strategic restructuring.” The plan was to shift away from providing steam coal for power plants and toward producing more metallurgical coal for steel mills, a market where prices were increasing.

Blackjewel assembled mines from the bankruptcies of James River Coal, Alpha Natural Resources, Arch Coal and others. Alpha paid Hoops $200 million in cash and more than $100 million in installments to take about 250 of its mining permits. Every acquisition “was based on a detailed economic model that demonstrated the mines could make money even in a down market,” Hoops said. 

The strategy, Hoops said, was working. Blackjewel expanded from central Appalachia to Wyoming’s Powder River Basin. It employed 1,700 miners and boasted 1.2 billion tons of coal available for mining, enough to keep going for many decades.

But in April 2019, two bankruptcy experts questioned whether Hoops would be able to honor his companies’ environmental obligations.

“Rather, his businesses have begun to exhibit a pattern,” Macey and Jackson Salovaara wrote in “Bankruptcy as Bailout,” an article in the Stanford Law Review. “Hoops takes over abandoned mines, receives cash from the company that wants to get rid of them, and then fails to actually remediate the environmental problems.” 

Three months later, Blackjewel declared bankruptcy. It cited a roof collapse at a Virginia mine, a spike in workers’ compensation costs and flooding that prevented railroads from moving coal out of Wyoming. It also blamed adverse market conditions, including the rise of cheap natural gas, greater use of renewable energy and increased regulatory pressures.

Energy industry researcher Clark Williams-Derry pointed instead to questionable business decisions, such as Blackjewel locking in prices for steel-making coal just before prices increased sharply. “The signs of financial distress have been evident to anyone who cared to look,” he wrote in a blog post titled, “Seven Bombshells in the Blackjewel Bankruptcy.” Hoops said that lenders forced the timing of the price locks on Blackjewel, costing the company millions of dollars. 

Hoops said that key lenders — United Bank and the investment firm Riverstone Holdings — cut off credit for Blackjewel, forcing the firm into Chapter 11. “They had managed to get my funds put on hold before and during the bankruptcy, as I would have never allowed the company to file but for their actions,” Hoops said. United and Riverstone declined comment.

In a press release, Hoops portrayed the bankruptcy as part of an effort to “position the company for long-term success.” But it didn’t feel that way to many Blackjewel miners. Some mines closed, sending workers home without any notice, and without their most recent paychecks. A mine in Wyoming was on fire, and Blackjewel was scrambling to pay employees to put it out.

Joseph Fox, who worked at a Blackjewel coal preparation plant in Virginia, had just taken his family on vacation to Myrtle Beach, South Carolina. Then, his paycheck bounced. Fox, his wife and their son and two daughters cut their beach trip short.

“They’re kids. All they wanted was a vacation,” Fox recalled. “They didn’t understand, and you don’t want to be telling them your paycheck bounced.”

In Kentucky, a group of miners who missed paychecks blocked a Blackjewel coal train in Harlan County. Hoops said that all of the miners have been paid. Still, they filed claims and lawsuits alleging that they were laid off without due notice. 

The bankruptcy trustee settled the lawsuits with a promise that miners would be bumped up in the ranking of creditors. But court documents suggest there will be little money to go around, maybe only enough to pay the lawyers, accountants and consultants managing the liquidation, lawyers monitoring the case said.

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By the time of the bankruptcy, Hoops was already preparing for a future outside coal. He set up a family holding company, Clearwater Investments, with his three sons as trustees. Its purpose was to “leave a financial dynasty to Jeff and Patricia’s heirs by investing in several businesses as well as by collecting royalties on various investment properties,” said an internal “executive overview” filed in the bankruptcy case.

Some of the listed holdings retain a connection to coal, including a trucking firm and a mining equipment sales service. Others don’t, like a wheelchair and brace sales firm with sales in 2018 of $8.7 million.

In January 2019, Hoops sent the Clearwater overview to his sons, Jeffrey Jr., Jeremy and Joshua. “I hope by the end of this year to have a nice package together that shows everything we own as it is a vast company now,” he wrote. “Love you guys …. Dad.”

It didn’t take long for Clearwater to surface in the Blackjewel case.

Creditors discovered that in the six months prior to Blackjewel’s bankruptcy filing, as the company was becoming increasingly insolvent, Hoops had transferred at least $34 million from Blackjewel to Clearwater. 

Hoops said that these transfers were appropriate because they represented partial repayment of $51.5 million in loans that he and his family had made to Blackjewel since January 2019 via a revolving line of credit. But this explanation didn’t satisfy creditors, who accused him of violating bankruptcy rules by putting himself at the head of the line.  

It was a “sweetheart deal,” then-bankruptcy trustee David Bissett told the judge during a July 2019 hearing. Hoops was “protecting his own self-interest” rather than Blackjewel’s employees or creditors, Bissett said.

Lenders were so outraged at Hoops’ money transfer that, as a condition for providing Blackjewel with emergency financing, they forced Hoops to step down as an officer of the company. They also blocked any Hoops family members from taking a management role. 

In a farewell email to employees, Hoops defended himself. “No one is hurting more than me over what has occurred,” he wrote. “There has not been one cent taken out of the mining company, the exact opposite I have loaned more money to try to get this company through these difficult times.”

The email continued: “I accept responsibility for being unable to lead this company through these difficult times.” Hoops wrote, “I know in my heart how hard I fought for each of you and this company and to have people threaten me and say I took money out of this company for other projects hurts more than words can express.” 

The liquidation trustee sued Hoops and seven family companies, including Clearwater, over the money he shifted from Blackjewel to them in the months before the bankruptcy. 

Last August, the trustee settled these cases. Few details were made public, except that as part of the deal Hoops dropped a $2.6 million claim for money he argued Blackjewel owed him. 

Hoops said only that the lawsuit was “resolved amicably.” The liquidation trustee declined comment. 

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Another bankruptcy court fight focused on the Foresters mine.

This wasn’t the mine’s first brush with bankruptcy. U.S. Coal, its original owner, went bankrupt in June 2014. By the time Hoops took over the permit in 2016, the mine was down to fewer than 20 workers, and production was a third of its 2013 peak of 550,000 tons. In 2018, it stopped producing coal altogether, and had only three employees, according to the federal Mine Safety and Health Administration.

A year into Blackjewel’s bankruptcy, a flood from Foresters eroded part of a local road and damaged a drinking water line. The rest of Blackjewel’s now-idled operations across Kentucky were also polluting their surroundings. Alarmed by the worsening conditions, the state’s Energy and Environment Cabinet sought the court’s help. In June 2020, the environmental regulator asked the judge to order Blackjewel’s trustee to bring all of the company’s permits into compliance with mining standards and pollution rules. 

In a court filing, agency officials warned that Blackjewel sites not only weren’t being restored to pre-mining conditions but weren’t even being maintained to prevent contaminated water from pouring downstream into water supplies. The agency warned of flooded holding ponds being at high risk of “discharging metals and suspended solids into adjacent rivers and streams” and of landslides “that could endanger the lives and the property of residences below.” 

In September 2020, a week after state inspectors again cited Foresters for erosion and drainage, U.S. Bankruptcy Judge Benjamin A. Kahn held a hearing on the regulators’ complaints. But the concerns about environmental fallout ran smack into a wall of decades-old law. While noting that crews were already responding at Foresters and other sites, the bankruptcy trustee argued that legal precedent gave the judge little scope to intervene. The judge agreed. Citing U.S. Supreme Court and federal appeals court decisions, Kahn instructed the trustee to clean up only “imminent” threats to public safety, not “speculative” threats.

Some problems at Foresters met this standard, and Kahn ordered them fixed. Still, violations for muddy runoff and sediment from holding ponds have persisted there.

Kahn deferred action at dozens of other Blackjewel sites with hundreds of environmental violations that he deemed less severe. Kahn’s analysis didn’t address the risk that if bankrupt mining companies can avoid routine maintenance and reclamation, speculative threats can turn imminent in a hurry. Once the judge’s criteria are met, “it’s too late,” said Lena Seward, lawyer for the Kentucky state regulatory agency. “The road is washed out.”

Kentucky also tried to forfeit bonds for some Blackjewel mines so that the state could begin cleanup. But that’s tied up in a legal challenge by the surety company, which contends that it has the right to restore the sites itself instead of losing the bond money. For other mines, the state and the bond company are still working out terms for cleanup. 

Meanwhile, the companies that bought most of the mines haven’t gotten very far with cleanup, sometimes because the state blocked final approval of the purchases due to unresolved violations at mines they already owned. Kentucky regulators acknowledged in an email that they “would like to have seen a faster transfer applications/reclamation process.”

As it acquired mines, Blackjewel posted a total of more than $500 million in reclamation bonds in four states. But that sum may not be enough. State regulators warned the bankruptcy judge in late 2020 that, for the 32 Blackjewel mines without buyers, conditions had deteriorated so much that cleanup costs were estimated at $20 million more than the bonds would cover.    

Hoops disputed that the bond amounts were inadequate. The regulators were “wrong,” he said, but he did not elaborate.

In February 2021, the Kentucky cabinet went back to the judge. A Blackjewel mine was showing severe erosion, with sediment ponds so full that they posed what an inspector called “an immediate danger to the public and environment downstream.”

Kahn ruled against the regulator again.

“The violations just continue to mount,” said Kentucky attorney Mary Varson Cromer, who represents coalfield residents in the Blackjewel case. “The whole system is not functioning, and it ends up costing more to reclaim, and it’s the residents and the community that are at risk.”

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The game of musical mines is slowing down. Across Appalachia, coal production is forecast to drop more than 20% over the next decade. In a market where coal production and prices continue to drop, there’s little demand for Blackjewel’s coal. Almost all its mines in Kentucky, including Foresters, have been sitting idle for four years. 

Blackjewel’s case has also bogged down in paperwork, or the lack of it. “The books and records inherited by the trust were woefully incomplete (and largely nonexistent in some instances),” the trustee complained in March 2023, explaining yet another delay. 

With Blackjewel behind him, Hoops is looking to the future. Clearwater is building a resort in Milton, where Hoops lives. The project is meant to invoke the splendor of ancient Rome. Hoops named it the Grand Patrician Resort. Patrician has a double meaning: It refers to the ruling class of ancient Rome and also honors Hoops’ wife, Patricia.

Hoops wept as he announced the resort project, which is located on the site of a former children’s hospital. His aunt and his brother-in-law had both been patients there, he told a local newspaper. “I get emotional,” he said. “To see God take something that was used to treat kids that were hurting, a lot of them crippled for life, he always takes something bad and turns it for good.”

The resort’s golf course had a soft opening last August. Construction of a luxury hotel continues. Local press accounts say the site will include a 400-seat steakhouse, a wedding chapel and ballroom and two indoor pools. A second phase is expected to feature another hotel, equestrian trails and a 3,500-seat outdoor arena modeled on the Roman Colosseum. This month, Hoops hosted a ribbon-cutting ceremony for a new hiking trail at the resort.

Even though Hoops left Blackjewel four years ago, one of his family-run businesses is still connected to its mines. The insurance company holding the reclamation bonds for the Blackjewel mines that weren’t bought out of bankruptcy has hired Lexington Coal to reclaim them. Its manager is one of Hoops’ sons. Lexington Coal “has not benefited in any way economically” from the reclamation contract, Hoops said. 

Joel Jacobs and John Templon contributed data reporting.

In the game of musical mines, environmental damage takes a back seat appeared first on Mountain State Spotlight, West Virginia’s civic newsroom.

For months, West Virginia lawmakers have said one thing repeatedly: the state has more than $1 billion in budget surplus. And when you look at the numbers, that’s largely thanks to the severance tax. 

That trend continued last week, as Gov. Jim Justice announced that the state had collected close to $800 million in severance taxes since July, far outpacing the roughly $250 million it estimated it would take in. This growth has fueled increased optimism about the state economy, and Justice and others have used it to help justify recent policy decisions like income tax cuts. 

But severance taxes — which are collected on natural resources extracted in the state — are extremely complicated and can fluctuate wildly. And as West Virginia touts its increased surplus achieved largely through this volatile tax, some policy experts are urging caution on how the state spends its money, particularly as it makes long-term decisions with what could turn out to be short-term gains. 

Here’s what to know about the biggest driver of the current revenue surplus — and how its role in state finances could change in the future.

What is the severance tax?

Around 34 states apply severance taxes to the extraction, production, value, and sale of finite natural resources that have been extracted — or “severed” — from the ground. That includes oil, coal, natural gas, limestone and sandstone, but in West Virginia coal and natural gas account for the bulk of severance tax revenue. In recent years, money from natural gas operations have made up an increasingly large share of severance tax collections. The state currently applies a 5% tax on natural gas and a smaller amount on various types of coal. 

Why are collections up right now?

West Virginia has made significantly more money from severance taxes since 2021, and experts say that the reasons behind this are complex. But one of the biggest factors is the ongoing war in Ukraine: Russia has long been one of the world’s top exporters of natural gas, but after the country’s 2022 invasion, many of Europe’s main consumers of natural gas have sought to find new sources. Because of this, demand for non-Russian natural gas has risen, contributing to a surge in natural gas prices in the U.S. 

That’s helped West Virginia bring in more money from natural gas in recent years.

“The high prices translate into higher severance tax collections almost immediately,” John Deskins, director of WVU’s Bureau of Business and Economic Research, said in a recent interview.   

In the 2020 fiscal year, West Virginia’s state and local governments collected roughly $343 million in severance taxes. Two years later, they collected $840 million. And for the current fiscal year, West Virginia has already collected $787 million in severance taxes, putting it on track to collect more than a billion dollars before the end of June.

How has the severance tax affected the state budget?

Severance taxes are applied at varying rates at both the local and state level and counties do receive some of the money collected under the tax. But a significant portion of the money, like other taxes collected by West Virginia, lands in the state’s general revenue fund, where it is then able to be used towards anything. And those collections have had a huge impact on West Virginia’s state budget in recent years, particularly when it comes to its surplus revenue, the amount of extra money compared to what the state estimated it would take in. 

Severance taxes as a whole have accounted for about half of the state’s budget surplus in the past few years.

With so much money on hand, the severance tax is playing a big role in the financial decisions being made by the state, including on the state Legislature’s recent move to cut the state personal income tax rate. That cut, which along with several new refundable tax credits is expected to reduce state revenue by more than $750 million in the coming years, has largely been justified by the state’s high surplus, with the argument being that with the extra money, the state can afford to return money to taxpayers.

Experts say the severance tax is volatile; what does that actually mean? 

As it has had an increasing impact on state budget revenue, particularly when it comes to the surplus, some policy experts have cautioned against West Virginia becoming too reliant on the severance tax as a source of consistent, long-term revenue. That’s largely because the taxes are highly volatile, and often go through boom and bust cycles.

This has been the case historically. In 2014 for example, West Virginia experienced a significant boom in the severance tax, with it accounting for 13% of the state’s overall tax revenue. But a year later as coal production declined and natural gas prices fell, the state soon found itself in a deficit that forced budget cuts to state agencies. 

That sort of shift is always possible with the severance tax, which is why some policy experts have criticized the state for some of its decisions when it comes to the budget surplus, especially the recent income tax cut.

“We are using the severance tax to build up this big surplus, this big surplus is being used to cut the income tax, which is the most stable source of revenue and the biggest source of revenue,” said Sean O’Leary, the senior policy analyst at the West Virginia Center on Budget and Policy. “So now we’re going to become more reliant on the severance tax.” 

“You’re really counting on this volatile, up-and-down source of revenue to become much more stable and stable at a higher level than it ever has been in the past,” he added. 

The volatility of this tax has been a concern in some other states that collect significant amounts in severance tax collections as well. In some of those states, like Alaska and Wyoming, there has been an effort to address the issue by moving part or all of the revenue into permanent severance tax trust funds that are then used to help fund certain state goals like infrastructure changes, economic development projects, or investments in education. West Virginia did have one such account, the West Virginia Future Fund, but no money was ever placed into it. Lawmakers passed a bill officially closing the account during the recent legislative session. 

What happens if severance tax revenue falls?

Because of how unstable the severance tax is, it is likely that the amount of money the state is collecting in severance taxes will begin to fall in the near future. And the state has little say in when that will happen. 

“Energy prices as a whole are really tied to global market forces,” O’Leary said. “There’s not really anything West Virginia can do to control natural gas prices.”

These prices are already beginning to decline, with forecasters predicting the price of natural gas will drop by at least 50% in 2023 when compared to last year. The West Virginia Center on Budget and Policy also notes that this year’s severance tax revenue is starting to trend downward from the highs of last year. While the state does have the extra money, the Center has argued that the current surplus would be better used providing additional support to address a number of ongoing state crises, and also backs giving additional surplus money to the counties that produce the highest amount of natural resources, some of which face significant financial difficulties.

“This extractive industry has not fulfilled its promises of economic prosperity in the areas where the actual extraction is taking place,” O’Leary said.

As of now, if severance tax revenue does decline, that combined with the recently-implemented tax cuts means the state will have less money to work with. Though it’s unclear exactly how that will play out, it could cause officials to have to make significant shifts in the future. 

And more broadly, as West Virginia continues to enjoy the boom of the current severance tax collections, there’s still no indication from state leaders how they are preparing to handle the inevitable bust.

Mountain State Spotlight explains: Why West Virginia’s reliance on volatile severance taxes is problematic appeared first on Mountain State Spotlight, West Virginia’s civic newsroom.