Patriot Coal Deal Reached, But Fight Still on Against Peabody Energy

Patriot had incentive to compromise: A strike by the UMWA could have sunk the struggling company, forcing Patriot sell off its assets one by one instead of re-emerging from bankruptcy intact.

Both sides applauded the contract after Friday’s member ratification.

​“The membership has made it clear that they are willing to do their part to keep Patriot operating, keep their jobs and ensure that thousands of retirees continue getting the healthcare they depend on and deserve,” UMWA International President Cecil E. Roberts said in a statement released Friday after the vote. ​“This has been a difficult and uncertain year for our members. But I believe that in the end, they understood that we had done a lot to improve what the judge had ordered. They also understood all that was at stake and resolved to move forward in a positive way.”

​“Ratification of these agreements provides labor stability and ensures cost savings essential to Patriot’s plan of reorganization,” said Patriot Coal President and Chief Executive Officer Bennett K. Hatfield in a statement. ​“These agreements should set Patriot on a path to emerge from bankruptcy by the end of 2013.”

Under the judge’s ruling, Patriot Coal could have imposed wage cuts of up to $7 an hour, but under the final agreement, it will cut wages by only $1 an hour. Starting in January of 2015, workers will be eligible for a $0.50 yearly wage increase.

The deal maintains workers’ dental, vision, life and accident insurance plans, along with their right to bid for higher-paid jobs based on seniority, all of which could have been cut under the bankruptcy court’s ruling. These gains did not come without concessions, however. Patriot eliminated several paid holidays and vacation days for Patriot Coal workers and imposed a cap of $1,600 a year on out-of-pocket medical coverage and a cap of $800 on out-of-pocket prescription drug coverage.

Perhaps the most contentious issue going into negotiations was the fate of retiree healthcare and pension benefits, a problem that, according to the UMWA, goes back to the founding of Patriot Coal. Patriot was spun off from Peabody Energy in 2007. The following year, the fledgling company purchased Magnum Coal, a spin-off of Arch Coal. That mean that Patriot started out with three times as many retirees, inherited from Arch and Peabody, than active employees. The union claims that Patriot was created by Peabody and Arch to fail, in order to free them from more than $1 billion in retiree pension and healthcare obligations. After the bankruptcy court stripped Patriot’s retirees of their pensions and healthcare, the union sued Peabody and Arch on behalf of the 20,000 beneficiaries and began a public campaign, including letter-writing, advertising buys and rallies outside the bankruptcy court in St Louis.

In the agreement with UMWA, Patriot Coal resolved the pension issue by choosing to continue paying into the existing multiemployer pension plan. It will cover retired workers and their family members, as well as current workers hired before January 1, 2012. But workers hired after that date will be put into a new 401(k) rather than the guaranteed pension plan.

On the issue of retiree healthcare, Patriot agreed to make an initial contribution of $15 million to help fund a new Voluntary Employee Benefits Association (VEBA) plan to provide healthcare for its 20,000 retirees and family members. Patriot will also pay a $0.20 royalty fee per ton of coal mined. Lastly, Patriot Coal has agreed to give the UMWA a 35 percent stake in the company that the union can sell off in order to fund the VEBA once Patriot emerges from bankruptcy. That offer provided additional incentive for the union to reach an agreement rather than striking and risking Patriot’s dissolution.

​“If the company liquidates, [our stake] is worth nothing. I have to report to you that we do not have the resources in the VEBA to guarantee retiree healthcare forever,” said UMWA President Cecil Roberts in a 28 minute long Youtube address explaining the tentative deal to members before the Friday vote. ​“The only way we can do that is to continue our legal and public campaign against Peabody and Arch and get legislation passed in Congress to extend the Coal Act to those affected by this bankruptcy.”

In addition to suing Peabody and Arch, the UMWA is pushing legislation that would extend federal protections from the 1992 COAL Act to miners who retired after 1992 and transfer unused funds from the federal Abandoned Mine Land funds to the UMWA pension fund for retirees.

Notably, as part of the contract deal, Patriot Coal will give $2 million dollars to the United Mine Workers of America to continue their legal fight against Peabody and Arch to recoup money for the retiree healthcare and benefit funds.

​“The fight is most definitely still on to keep pressure on Peabody,” says UMWA Communications Director Phil Smith. ​“We’ll be back in St. Louis on the 27^th and after. We are working on new TV spots, new print ads and new approaches to highlight Peabody’s (and Arch’s) responsibilities here.”

​“You know, as I sat listening to [UMWA Secretary-Treasurer] Dan Kane explaining the proposal yesterday I could not help thinking that when Arch and Peabody investors sat in a board room in ​‘05 or ​‘06, conspiring to eliminate all of their union mines east of the Mississippi River, they unwittingly invoked the law of unintended consequences,” says retired coal miner Larry MIller. ​“We are coal miners and as such we are used to being handed junk and making it work under adverse conditions. So, when Cecil [Roberts] was handed this piece of junk judge’s order, he and Dan and many others went to work to Frankenstein a deal to save our union; it will work.”