GILLETTE — It didn’t take this past week’s bankruptcy and lockout of 1,700 Blackjewel LLC workers countrywide to convince Melissa Peterson-Worden that the struggling coal producer was reaching a financial critical mass.

“I knew it was coming and it was going to be bad,” she said. “I was like, ‘OK, the ship is going down.’”

Peterson-Worden has worked in various roles at Powder River Basin coal mines off and on for 18 years, including in the warehouse for Blackjewel starting just a few months ago. She helped organize supplies, equipment and maintenance for the company’s two Wyoming open-pit coal mines, Eagle Butte and Belle Ayr.

Lately, though, she said she and her coworkers in the warehouse have had too much free time.

“We’ve had so many vendors cut us off for nonpayment that sometimes we were, like, just sitting around twiddling our thumbs,” she said.

Blackjewel’s parts and equipment suppliers had cut the company off, so there were no parts coming in, along with other services necessary for keeping the business running smoothly, she said.

“We couldn’t get any parts, then we didn’t pay our computer vendor so they put us on hold and locked us out of our computer system,” Peterson-Worden said.

Along the way, workers have periodically had problems getting paid on time, having health insurance claims met and for at least the last couple of months, Blackjewel hasn’t deposited employee contributions to their own 401(k) retirement and health savings accounts, she said.

Court filings show about $1.2 million of employee money has been deducted from their paychecks but not deposited into those accounts.

“I’ve been here in the basin for 20 years and they always said that a mine will never close, that nobody could ever let that happen,” she said. “Now today’s the day that could never come.”

Like many of the 580 Wyoming Blackjewel employees locked out of their jobs, Peterson-Worden said she’s experienced a spectrum of emotions over the past week.

First, there was optimism Monday morning when supervisors gathered employees and announced the company was filing for Chapter 11 bankruptcy reorganization. This is a good thing, they were told, that would allow the company to emerge in a much better place to do business in a changing thermal coal market.

Hours later, they were called back for another meeting. Something went wrong with the bankruptcy, there’s no more money, you have to go home now then we’re locking the gates.

“It was just total shock,” she said. “It happened that day, then the next day came and I just went on autopilot filling out résumés and job applications.”

Peterson-Worden said about 24 hours after the lockout, she was having lunch with her husband at The Coop restaurant in downtown Gillette when the emotions of the past day finally caught up to her.

“Right there at The Coop, I just started sobbing,” she said. “It just hit me suddenly that never have I been at such a state of limbo in my life. There’s hope, but yet there’s no hope.”

The Blackjewel roller coaster

The ride began with that Monday meeting and Chapter 11 filing in U.S. Bankruptcy Court for the Southern District of West Virginia. Besides Belly Ayr and Eagle Butte, Blackjewel owns and operates 30 other other coal producing properties in Kentucky, Virginia and West Virginia.

The centerpiece of the reorganization plan was acquiring $20 million in emergency financing to continue operating through the Chapter 11 process. It wasn’t until attorneys showed up to court Monday afternoon to breeze through first-day motions that the company learned that United Bank of West Virginia, which had agreed to provide the $20 million, had backed out.

What followed has been a virtual soap opera in and out of the courtroom that has Blackjewel on the brink of having to change its filing to Chapter 7, which is a straight liquidation. Controversial President and CEO Jeffrey Hoops Sr. resigned and about 1,100 eastern employees are not only out of work, but holding bounced paychecks.

Some Wyoming workers also had problems with their final paychecks, which were supposed to be direct-deposited June 28 but were instead paid with cashier’s checks two days later. The eastern employees, however, were paid with paper checks June 28 and deposited them.

In the days that followed, their banks began pulling back the money because the paychecks were bouncing. That’s because the company, under the leadership of Hoops, basically floated those paychecks, counting on the $20 million in emergency financing to be available Monday.

When it wasn’t, company attorneys were left trying to explain to an angry bankruptcy court judge, Frank W. Volk, why their workers not only were locked out of their jobs, but left with rubber paychecks.

“I know this may be interfering with the holiday plans for some of you, but I’m sure you’d agree it’s minimal (compared) to what these employees are dealing with,” Volk scolded during an emergency hearing he called on the Fourth of July after he began hearing reports of people not being paid.

The company eventually secured a $5 million loan from Riverstone Credit Partners on Wednesday on the condition that Hoops and any of his family members resign from Blackjewel. A new chief restructuring officer, Dave Beckman, has been named. The money is enough to allow the mines to bring a few employees back to provide security and maintenance to equipment, but not to resume operations.

What it’s also done is give Blackjewel employees a glimmer of hope that their jobs may somehow be saved.

Also trying to keep a glass-is-half-full perspective is Gillette Mayor Louise Carter-King, who said the community unfortunately has recent experience with a similar situation when Peabody Energy and Arch Coal Inc. laid off a combined 500 mine workers in a 24-hour period in 2016. Coupled with a corresponding bust in the local oil industry, it sparked an economic downturn that the community has only recently began to rebound from.

“I think everybody knew Blackjewel was having troubles (as a company),” she said. “But the mines themselves were doing fine. Locking the gates was a shock to everybody, but I keep hoping for good news.

“I just hope these people can find jobs here and don’t have to leave,” said, referring to the 2016 bust that saw the city’s population dip by about 2,000 as people left for work elsewhere. “That’s a big concern, but I also realize they’ve got to go where they can get jobs.”

She’s also worried for the small, local businesses and contractors that rely on performing work at the mines, especially those that might have to cut staff or shut their doors because they haven’t been paid by Blackjewel.

“Losing 600, 700 jobs has quite a trickle-down effect,” she said.

Near the top of that trickle-down is a laundry list of Blackjewel vendors and creditors. About half of the company’s declared $500 million in financial obligations is reclamation for the Belle Ayr and Eagle Butte mines.

When it comes to unsecured creditors who may or may not recover any of the money owed them, unpaid government royalties and taxes accounts for nearly $120 million. That includes about $37 million listed as owing to Campbell County for ad valorem production taxes and another $11.6 million to the state of Wyoming.

The dichotomy of those numbers highlights a push for state lawmakers to change the way counties can collect production taxes. Now, taxes aren’t due until 18 months after the fact, which means since taking over as operator at the Belle Ayr and Eagle Butte mines in 2017, Blackjewel has never paid its county taxes on time.

The overdue bill came to a head in March when the company, behind $17 million for 2017 production, agreed to an installment plan to repay the county the back taxes and all the taxes for 2018 by April 2020. After paying $5 million in weekly installments through May, Blackjewel missed a $1 million payment June 28, then filed for bankruptcy three days later.

In contrast, because the state collects its production taxes monthly, the $11.6 million outstanding is considerably less than what the county’s on the hook for. Streamlining the process and allowing states to collect on the same schedule as the state is a change the Legislature has been pushed to make before, but hasn’t.

State Sen. Michael Von Flatern, R-Gillette, said lawmakers can’t wait to address the disparity any longer.

Less than two months ago when Cloud Peak Energy, another large Powder River Basin coal producer, filed for Chapter 11, it left a county bill of $25 million or more. Added to what Blackjewel owes and the county could potentially be out at least $52 million.

Requiring monthly payments at the county level “is what we should do,” Von Flatern said. “Instead, they continue to be behind and even now, every day they work and they work and they’re getting farther and farther behind.”

Whether the rest of the Legislature is willing to listen and make the change despite protests from coal companies is something Von Flatern isn’t as confident about.

He said after Cloud Peak’s bankruptcy, he sent an email to every state lawmaker about requiring monthly payments to counties and didn’t receive a single response.

“I’m a little disappointed in that,” he said, adding that “this is a perfect opportunity to do something about it. If this won’t instigate for people to have that ad valorem to be paid every month, it will never happen.”

Even if the company can secure financing to reopen and reorganize, it may not be enough to satisfy some of its critical vendors.

Wyoming Machinery Co. filed a motion with the bankruptcy court Friday outlining concerns that if Blackjewel’s Wyoming mines reopen, it may be contractually obligated to continue working for the company without any guarantee of being paid.

Wyoming Machinery is already owed $5.9 million in unpaid services at Eagle Butte and Belle Ayr mines and could incur expenses as much as $14,000 a day servicing heavy machinery at the operations. Without a guarantee of payment, Wyoming Machinery is asking the court to be let out of the contract and retrieve its equipment from the mines.

As Blackjewel employees close in on a week of being locked out, the company’s new leadership is telling its 1,700 workers that reopening the mines is still the No. 1 priority.

“The management team understands the severity of the impact those events have had on our employees and their families and apologizes for the hardships created by this unfortunate and unanticipated event,” says a statement to employees released Friday afternoon. “We assure you the company is working as quickly as possible to try to obtain the financing necessary to re-open the mines and bring our employees back to work.”

In Wyoming, another question is how many of those 580 workers will be willing to return. Since the lockout Monday afternoon, more than 400 Blackjewel employees have sought help and paperwork to file for unemployment benefits and other aid through the Gillette office of the Wyoming Department of Workforce Services, said office manager Rick Mansheim.

“It’s been pretty much nonstop,” he said of how busy it’s been, adding that like Blackjewel workers, his office had no notice it was suddenly going to have hundreds of out-of-work coal miners to help.

“It was just a shocker to us, too,” he said. But he and his staff can’t let their stress show. “They’ve got enough stress going on for themselves. We don’t want to contribute more stress on them.”

Peterson-Worden was the first person in line at the Workforce Services office. She went straight from being locked out to the agency. She said that was a deliberate decision, because she wanted to warn them about the lockout.

Like many of her coworkers, she said she’s frustrated and angry at Blackjewel and Hoops, and she understands that even if they’re called back, many won’t want to stay long-term if the company doesn’t operate better than it did under Hoops’ leadership.

When push comes to shove, Peterson-Worden said the Powder River Basin “most definitely is my home. Coal mining became who I am and the industry became a part of me. … That’s why if somebody comes in and wants to re-open it, then I’m going to jump on and be on that ship. It’s essential to our community that these mines don’t close.”