Reform bankruptcy loophole; Exiting Appalachia, Peabody and Arch leave retired miners in the lurch

Henderson police last week prepared to arrest United Mine Workers of America President Cecil Roberts and others protesting Patriot Coal's plans to slash promised retirement benefits.
Henderson police last week prepared to arrest United Mine Workers of America President Cecil Roberts and others protesting Patriot Coal's plans to slash promised retirement benefits. AP

After dumping 22,500 pensioners and their dependents, the two largest U.S. coal companies hightailed it out of Kentucky and West Virginia, using Patriot Coal as their get-away vehicle.

On May 29, a federal bankruptcy judge in St. Louis, where all three companies are headquartered, upheld this robbery of union members who earned pension and health care benefits by working in Peabody Energy's and Arch Coal's mines, where many developed black lung, cancer and lifelong injuries.

Ninety percent of retirees whose benefits will be slashed never worked for Patriot, which was created by Peabody in 2007. In court, the United Mine Workers of America offered evidence that Peabody gave Patriot 11 percent of its assets, 43 percent of its retiree liability and a bunch of underwater coal contracts.

In 2008, Patriot bought Arch-spinoff Magnum Coal. The UMWA says Arch gave Magnum 12 percent of its assets and 96 percent of its retiree health-care liabilities.

At stake in Kentucky: $72 million a year in health care for 6,000 people.

Whether these two corporate giants, which can well afford to keep their promises to workers, intentionally shed their pension obligations by spinning off a company destined for bankruptcy was irrelevant to Judge Kathy A. Surratt-States' decision. She wrote: "Was Debtor Patriot Coal Corporation created to fail? Maybe not. Maybe."

But the issue should be relevant to anyone who wants a fair economy and just laws.

Kentucky's congressional Republicans, who loudly proclaim their loyalty to miners while taking $130,000 from Peabody, Arch and Patriot in the last two years, should help make sure nothing like this happens again.

The bankruptcy ruling highlighted a path that other companies will surely follow. And miners won't be the only ones harmed if Congress fails to end the ability of employers to escape contractual obligations to workers by creating new corporate entities.

The plight of the Peabody and Arch retirees is also a cautionary tale of how the coal industry will try to avoid its legacy obligations, both to workers and the environment.

To understand why Peabody, the world's largest coal company, and Arch, a long-time mountain presence, unloaded high-cost Central Appalachian operations, look at the spot-market price of Eastern Kentucky and West Virginia coal ($67 a ton) vs. Wyoming coal ($10.55 a ton).

Appalachian coal burns hotter and cleaner, making it more cost-efficient for utilities, but not enough so to make up for the high cost of mining dwindling seams.

The outlook for Western Kentucky coal is better at $45 a ton, especially as utilities install sulfur-removing scrubbers.

In Congress, there's talk on both sides of the aisle of taking care of the Patriot retirees by tapping a fund for fixing damage from abandoned mines. Coal companies pay into the fund to repair landslides, polluted water, flooded pits, open portals and other hazards. Kentucky has more than $400 million in such needs.

Interest generated by the fund has long been used to pay the pensions of miners whose employers went bankrupt. In 2006 Congress authorized using general tax dollars when the interest on the fund falls short of coal pension needs.

If the Peabody and Arch retirees end up covered by the abandoned mine lands fund, the fee on industry should be correspondingly increased.

Otherwise, Peabody and Arch will not only have weaseled out of promises to their workers but also shifted their obligations onto coalfield residents and U.S. taxpayers.