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Wed May 20, 2020, 07:25 AM

Bankrupt Coal Company Flouts Fed Orders To Pay Workers, Then Gets $2.7 Million From SBA

Coal company American Resources Corporation, which owns mines in Kentucky and West Virginia, is facing sanctions after failing to comply with a bankruptcy court’s orders, even after the company received $2.7 million in government aid meant for companies harmed by the coronavirus pandemic.

Indiana-based ARC purchased coal mines and equipment from bankrupt coal company Cambrian for $1 last September. The purchase came with a heavy debt burden that included environmental reclamation obligations, employee wages and health care costs, and utility bills. Almost immediately, ARC failed to pay those expenses, leading Eastern Kentucky federal bankruptcy court Chief Judge Gregory Schaaf to impose monetary sanctions against the company. Lack of payment to employees at ARC subsidiary Quest Energy led some employees to protest this January by blocking a Pike County, Kentucky railroad.


ARC received $2.7 million in loans from the federal government this April through the Small Business Administration’s Paycheck Protection Program, which was intended for small businesses. ARC attorney Billy Shelton told Schaaf the slump in energy usage brought on by coronavirus-related shutdowns had interfered with ARC’s ability to turn a profit off the newly acquired mines, but the judge said ARC’s failure to pay began long before the pandemic.

“I am at the end of my rope with your client,” Schaaf told Shelton in the same hearing. “And I guess you need to start by telling me why I should believe anything that ARC promises to the court.” The threat of jail time is a significant escalation in the efforts of bankruptcy judges to hold coal companies accountable for environmental and other liabilities, said Cornell University assistant visiting professor Josh Macey, author of “Bankruptcy as Bailout: Coal Company Insolvency and the Erosion of Federal Law” in the Stanford Review.



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