This is appalling. Amid all the “jobs, jobs” cheers from Northwest coal export proponents, two of the biggest players in the debate have embarked on a scheme to weasel out of paying retirement and health benefits to their workers.

In a nutshell, Peabody Energy and Arch Coal spun off companies that became Patriot Coal, saddled them with as much of their worker-benefit and environmental liability as they could get away with, and then watched as Patriot went bust. Now, the United Mine Workers union is calling them out in court.

Here’s the nickel version of events via the Charleston Gazette:

UMW officials say Patriot was essentially a “company created to fail,” to give Peabody Energy and Arch Coal a way to shed obligations to fund union pensions and health-care benefits in the nation’s eastern coalfields, while profiting from their giant, non-union surface mines out west.

Five years ago, Peabody formed Patriot as a spin-off company where Peabody tucked union mines in West Virginia and the Midwest, along with pension and health-care obligations for union retirees. Patriot later bought another company, Magnum Coal, which had been similarly spin-off by Arch Coal when it got rid of most of its Appalachian operations and their related pension and health-care liabilities.

  • “When Peabody Energy and Arch Coal spun off their union operations into companies that eventually became Patriot Coal Company, they also spun off more than $1.3 billion in promised health care obligations to coal miners who put their lives and health at risk every single day working for Peabody and Arch,” the union said in a petition circulated at this week’s meetings.

    The magazine In These Times has a must-read account of events pointing out that:

    Oddly, for a 5-year-old company, Patriot wound up with nearly three times as many retirees as active employees, more than 90 percent of whom never worked for the company. Overburdened by its debts, in July of 2012 Patriot declared bankruptcy.

    In bankruptcy court, Patriot is seeking to be released from its pension and retirement obligations to some 10,000 UMWA retirees, covering more than 20,000 beneficiaries which total more than $1.3 billion.

    The investor community is also taking note of the scam. The website Seeking Alpha has an aptly-titled article, “Patriot Coal: The Vulture Has Landed” acknowledging the same features:

    The primary legacy liabilities that are of concern at this point include postretirement benefit plans, workers comp, selenium water treatment obligations, end-of-mine closure costs, reclamation obligations, underfunded pension and obligations to an industry fund.

    In short, the now-bankrupt Patriot is asking the courts to lift the very obligations to workers and legally mandated environmental cleanups that it cleverly took off the books from Peabody and Arch.

    Keep in mind that Peabody would be the main beneficiary of the coal terminal proposed for Cherry Point, while Arch has a 38 percent stake in the facility planned in Longview.

    It’s one thing to make rosy promises about new coal-handling jobs and another to examine the facts about the industry. The truth is that Powder River Basin coal mining is 90 percent non-union; coal infrastructure investments create very few jobs; and the major coal industry backers of these proposals do not treat their workers honorably.

    As Seeking Alpha sagely notes:

    There is a lot to be learned from the Patriot Coal experience. Investors should continue to be diligent in their analysis and not believe this situation is an anomaly for the coal industry.

    That’s a lesson Northwest port communities should take to heart.


    Update: Fairness at Patriot, an organization sponsored by United Mine Workers of America, has produced a couple of damning TV spots now running in St Louis, “We’re People” and “The Best Years.”