A judge has ruled that Patriot Coal can cut health care and pension benefits that were promised to coal miners through collective bargaining agreements with the union.
Last summer, Patriot Coal filed for bankruptcy. The company is a spinoff that included some Peabody Energy and Arch Coal operations in Appalachia, and Patriot said it couldn’t handle the estimated $1.6 billion liability for retiree health care costs it inherited from the other companies.
Arch and Peabody are still around, but this week’s decision by a bankruptcy court judge in Saint Louis means that about 23,000 coal miner retirees, spouses and widows could lose all of their health care benefits. Most of these people never worked for Patriot, but were covered under union agreements at Arch and Peabody mines.
United Mine Workers of America spokesman Phil Smith says that’s what’s different about this bankruptcy case.
“The companies who made these promises to these retirees, are not the ones who are in bankruptcy court,” he said. “The companies who made these promises are Peabody Energy and Arch Coal. They dumped those promises, frankly, and walked away from them.”
Smith says the union is planning to appeal the decision, and wants Peabody and Arch to live up to their promises to union coal miners—many of whom are dependent on their health insurance to cover work-related diseases like black lung and musculoskeletal problems.
“When you work in an environment like a coal mine, all sorts of bad things happen to you over a 30 year period,” Smith said. “That’s why these people negotiated these health care benefits, took less in wages, because they knew that when they needed these benefits when they retired, they wanted them to be there.”
Coal miners who retired from Peabody or Arch before September 30, 1994 won’t be affected by the ruling. They fall under the Coal Act, which covers their benefits. But those who retired after that date will face cuts in both health care and pension.
Here’s how Reuters summarized the agreement:
Patriot’s current proposal would cease pension contributions and convert healthcare to a voluntary employees’ beneficiary association, or VEBA, funded by $15 million in up-front cash and $300 million in profit-sharing contributions. The union would receive a 35 percent equity stake in post-bankruptcy Patriot, which it could sell to help fund the VEBA. The company’s proposal would also reduce wages and decrease paid time-off.
That means the decision could also affect current union miners employed by Patriot.
Patriot says the bankruptcy decision will allow the company to stay in business.
“This ruling represents a major step forward for Patriot, allowing our company to achieve savings that are critical to our reorganization and the preservation of more than 4,000 jobs,” said Patriot CEO Bennett K. Hatfield in a statement. “The savings contemplated by this ruling, together with other cost reductions implemented across our company, will put Patriot on course to becoming a viable business.”
The UMWA doesn’t have much of a presence in Kentucky anymore, but still represents workers at a Patriot coal mine in Western Kentucky. They also still represent retirees who worked for Peabody operations throughout the state. The union is planning a demonstration in Western Kentucky next week to protest the potential loss of benefits.