Victory for Mineworkers in Battle Against Patriot Coal and Peabody Energy

Mike Elk

Thousands of miners and supporters gathered in front of the Henderson County (Kentucky) Courthouse on June 4, 2013, after the bankruptcy court ruled that Patriot Coal was free of its obligation to provide retiree healthcare. (United Mine Workers of America/Facebook)

Last week, the Unit­ed Mine Work­ers of Amer­i­ca (UMWA) announced a set­tle­ment in its long fight with Peabody Ener­gy that will pre­serve health­care ben­e­fits for thou­sands of retired min­ers. Peabody has agreed to pro­vide more than $400 mil­lion to start a health­care fund for the 20,000 retired min­ers and ben­e­fi­cia­ries whose retire­ment plans had been threat­ened by the bank­rupt­cy of Patri­ot Coal, a Peabody spin-off (as I’ve pre­vi­ous­ly report­ed).

I am very pleased that we have been able to reach this agree­ment with Peabody and Patri­ot,” said UMWA Inter­na­tion­al Pres­i­dent Cecil E. Roberts in an offi­cial state­ment. This is a sig­nif­i­cant amount of mon­ey that will help main­tain health­care for thou­sands of retirees who earned those ben­e­fits through years of labor in Amer­i­ca’s coal mines. This set­tle­ment will also help Patri­ot emerge from bank­rupt­cy and con­tin­ue to pro­vide jobs for our mem­bers and thou­sands of oth­ers in West Vir­ginia and Kentucky.”

UMWA has con­tend­ed for years that Peabody Ener­gy cre­at­ed Patri­ot Coal to fail, as a vehi­cle to offload the par­ent company’s retiree oblig­a­tions. When Peabody Ener­gy found­ed Patri­ot Coal in 2007, Patri­ot assumed finan­cial respon­si­bil­i­ty for 40 per­cent of Peabody’s retiree health­care and pen­sions. The next year, Patri­ot acquired a compa­ny called Mag­num Coal, itself a spin-off of min­ing giant Arch Coal; Mag­num brought with it $500 mil­lion in Arch’s retiree oblig­a­tions. Patri­ot end­ed up with a retiree-to-work­er ratio of more than 3 to 1. When Patri­ot went bank­rupt in the sum­mer of 2012, the com­pa­ny suc­cess­ful­ly pressed a bank­rupt­cy judge to elim­i­nate retiree oblig­a­tions, leav­ing thou­sands of for­mer work­ers with­out viable safe­ty nets.

Months of nego­ti­a­tions ensued between Peabody, Patri­ot, UMWA and an out­side invest­ment firm, Knight­head Man­age­ment LLC. A deal on retiree pen­sions was struck ear­li­er this year, but health­care remained up in the air until last Wednes­day, when the par­ties announced a mul­ti-part deal.

Knight­head Man­age­ment agreed to invest $250 mil­lion in Patri­ot Coal and man­age its emer­gence from bank­rupt­cy. Addi­tion­al­ly, Peabody Ener­gy will pro­vide Patri­ot with a $140 mil­lion line of credit.

Most sig­nif­i­cant­ly, Peabody Ener­gy will pro­vide more than $400 mil­lion in cap­i­tal to fund a Vol­un­tary Employ­ee Ben­e­fit Asso­ci­a­tion (VEBA) plan that will now be respon­si­ble for pro­vid­ing retiree health­care to Patriot’s 20,000 beneficiaries.

In exchange, UMWA has agreed to relin­quish its rights to the 35 per­cent of Patri­ot Coal that it was grant­ed as part of a deal with Patri­ot ear­li­er this year. UMWA will also stop its cam­paign and class-action law­suit against Peabody Energy.

Arch Coal is also named in the law­suit, and the UMWA is also nego­ti­at­ing an end to the legal cam­paign against Arch, accord­ing to an Arch Coal press release. The min­ers union says it is push­ing Arch Coal to con­tribute more mon­ey to the VEBA.

The UMWA points out that despite the $310 mil­lion for the VEBA from Peabody — as well as anoth­er $15 mil­lion from Patri­ot, and $60 mil­lion in roy­al­ty fees won as part of an ear­li­er deal in August with Patri­ot Coal — the VEBA still is not finan­cial­ly secure enough to be fund­ed into perpetuity.

UMWA spokesman Phil Smith says that bipar­ti­san leg­is­la­tion cur­rent­ly in the House would trans­fer unused mine recla­ma­tion funds to the VEBA, which could main­tain the cur­rent lev­el of retiree ben­e­fits into per­pe­tu­ity. UMWA is lob­by­ing for such a bill, and Smith says that leg­is­la­tion could be tak­en up as soon as the log­jam caused by the gov­ern­ment shut­down is resolved.

This set­tle­ment, as sig­nif­i­cant as it is, still does not pro­vide the lev­el of fund­ing need­ed to main­tain health­care for these retirees for­ev­er,” Roberts said. That is why we are con­tin­u­ing our efforts to pass bipar­ti­san leg­is­la­tion in Con­gress that will put these retirees under the Coal Act, mean­ing their long-term health­care ben­e­fits would be secured at no addi­tion­al cost to taxpayers.”

The set­tle­ment with Peabody must be approved by the Patri­ot bank­rupt­cy court; a hear­ing is sched­uled for Novem­ber 6.

Mike Elk wrote for In These Times and its labor blog, Work­ing In These Times, from 2010 to 2014. He is cur­rent­ly a labor reporter at Politico.
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