Judge approves UMWA agreement with Patriot

Appellate court says Peabody still must pay

By TIM ROWDEN

Associate Editor

A judge presiding over Patriot Coal Corp.’s bankruptcy case approved the company’s request to enter into a new labor agreement with the United Mine Workers of America (UMWA) and modify health benefits for thousands of union retirees.

The judge approved the request just days after 1,800 unionized Patriot miners voters overwhelmingly to approve the settlement, ending months of hard fought negotiations between the UMWA and Patriot and setting the coal producer on a path to emerge from bankruptcy.

“I am pleased that U.S. Bankruptcy Judge Kathy Surratt-States has approved the settlement we worked long and hard to reach with Patriot Coal,” UMWA International President Cecil Roberts said. “The terms and conditions of this settlement are a significant improvement over the company’s original proposals, while still giving Patriot the stability and certainty it needs to move forward.

The judge’s order authorizes Patriot and UMWA to enter a new collective bargaining agreements and establish a health care trust fund for thousands more retirees, most of whom never worked for Patriot.

Created by St. Louis-based Peabody in 2007, Patriot was spun off from the coal giant with 43 percent of Peabody’s liabilities but just 11 percent of its assets.

Arch Coal created Magnum Coal in 2005 and unloaded $560 million in retiree health care liabilities onto the new company. Patriot acquired Magnum and its liabilities in 2008.

The agreement reached between the UMWA and Patriot, and approved by the bankruptcy judge, will help the company save $130 million a year over the next four years, more than 85 percent of the $150 million in cost savings Patriot executives have said they need to avoid running out of cash and exit bankruptcy.

PEABODY STILL RESPONSIBLE

Roberts noted that the settlement with Patriot does not provide enough resources to fulfill the promise of lifetime health care benefits that Peabody and Arch agreed to provide to retirees from those companies.

But the UMWA won another round in its battle to get Peabody to live up to its obligations last week when a federal bankruptcy appellate court reversed a decision by Surratt-States that would have allowed Peabody to stop paying health care benefits for some 3,100 retirees that it had assumed in the spinoff of Patriot Coal.

The strongly-worded decision by the three-judge panel means that Peabody continues to hold responsibility for paying the health care benefits for this group of retirees, who are mostly in the Midwest.

“Peabody has spent years trying to get rid of its obligations to the thousands of retirees who made it the richest coal company in the world,” Roberts said. “This decision foils part of that plan. And it makes us even more determined to keep fighting to make sure the company lives up to its entire obligation to these miners.

In preparation for the spinoff of Patriot, Peabody signed a 2007 agreement with Heritage Coal Co., which was at the time a Peabody subsidiary that Peabody included in the Patriot spinoff. That agreement allowed Peabody to reduce its contribution levels for retiree health care benefits to the same level as Heritage (Patriot) would pay if such levels were modified in the future.

Peabody argued that since Heritage (Patriot) was relieved of all its obligation to pay for retiree health care by Judge Surratt-States, that Peabody should be relieved of its obligation as well. Judge Surratt-States agreed, and issued a ruling in Peabody’s favor on May 29.

Patriot and Heritage appealed the ruling. Their appeal was supported by the UMWA.

“There is still a long way to go before retired mine workers receive all of the health care benefits they earned during their years in the mines,” Roberts said.

“Make no mistake: Peabody Energy and Arch Coal created this problem. They made the promises of lifetime health care to our members, and we will continue our efforts to hold them to their word.”