CHARLESTON, W.Va. -- The bankruptcy case of Patriot Coal is starting to heat up, as the United Mine Workers union becomes increasingly concerned about what plans Patriot has for miner pension and health-benefit plans.St. Louis-based Patriot has said among its biggest financial problems are what it calls "unsustainable labor-related legacy liabilities" related to UMW pension and health-care programs.Patriot employs about 2,000 active union members in West Virginia and Kentucky, and the company is currently responsible for more than 10,000 retirees and another 10,000 dependents, most of them in West Virginia, Indiana, Illinois, Kentucky and Ohio.In its bankruptcy filing, Patriot complains the company is responsible for benefits to more than three times the number of retirees as its coal operations currently employ as active miners."Especially in an era of declining demand and price for coal, there is a mismatch between the cost of [Patriot's] legacy obligations and [its] ongoing ability to generate revenue," the company said. "[Patriot's] return to long-term viability depends on [its] ability to achieve savings with respect to these liabilities."But in the latest issue of the UMW Journal, union officials argue that "Patriot was a company created to fail.""In 2007, Peabody Energy put all of its union mines and some non-union mines in West Virginia and the Midwest, along with the retiree health-care and pension obligations from operating and closed union mines, into a single entity and spun it off into a new company called Patriot Coal," UMW President Cecil Roberts said in the Journal article. "This was Peabody's way of trying to get out of its obligation to pay for the pensions and health care of thousands of people who spent their lives working for Peabody.
"But Peabody wasn't the first company to do that," Roberts said. "A year and a half before Patriot was created, Arch Coal sold off its union operations in West Virginia -- along with the long-term obligations that went with them -- to a company called Magnum Coal."So here we had two new companies, each with a large burden of long-term financial obligations and not a lot of production capabilities to pay for those obligations," Roberts said. "Then someone came up with the bright idea to merge these two companies into one, which created an even greater level of long-term contractual obligations."The Journal article continues, "At the same time, Patriot was borrowing money at higher than normal interest rates to meet operational needs and other obligations. The high price of coal, over the past several years meant that Patriot could continue making enough money to meet that debt burden and could keep its stock price high."But when the bottom dropped out of the coal market, this house of cards -- purposely created by Peabody and Arch in an attempt to get out of their responsibilities to their retired and active UMW workers -- collapsed. And that is just what Peabody and Arch intended to happen."Lawyers for the UMW have intervened in the Patriot bankruptcy case, and are seeking to have the case moved from Manhattan to West Virginia. They noted that Patriot's bankruptcy filing in New York is based at least in part on two New York-based subsidiaries, both of which were created only in June.West Virginia Attorney General Darrell McGraw and the Obama administration's Justice Department have also urged that the case be moved to federal bankruptcy court in Charleston.This week, the UMW has meetings scheduled in Charleston and in Evansville, Ind., to discuss the Patriot situation with members who work for or are retired from the company. The Charleston meeting is set for 10 a.m. Thursday at the Charleston Civic Center.Reach Ken Ward Jr. at email@example.com or 304-348-1702.