Patriot Coal: Will industry have to pay its debts?

March 15, 2013 by Ken Ward Jr.

Whenever there’s any sort of action by the government or by environmental or citizen groups that might somehow — no matter how remotely — curb any practice of the coal industry, I can almost always count on watching my inbox fill up with statements from coalfield politicians criticizing that action and promising to stand up for the coal industry.

Well, yesterday evening, Patriot Coal finally made official what the United Mine Workers union has been warning for months was going to happen. As we reported in today’s Gazette:

Patriot Coal Corp. on Thursday asked a U.S. bankruptcy judge to throw out the terms of the company’s contract with the United Mine Workers union and modify the health-care plan covering thousands of retired miners.

Now, the public can’t really find out exactly what Patriot is proposing. Company lawyers filed this motion asking a federal bankruptcy judge to throw out its union contract, but that document contains few details — and Patriot’s attorneys also filed this motion asking Judge Kathy A. Surratt-States to allow them to file the more detailed proposal under seal. In a press release, Patriot explained its proposal this way:

Patriot’s UMWA labor costs are not competitive with other coal producers that operate under more flexible work rules and a significantly lower labor cost structure. The Company’s proposal seeks to adjust wages, benefits and work rules for its unionized employees to a level consistent with the regional labor market. The Company can no longer afford to pay above-market wages and benefits to its 1,600 union employees as compared to its 1,300 nonunion miners doing exactly the same jobs. As part of the proposal, Patriot intends to offer its union employees the same healthcare benefits it provides to nonunion employees.

Here’s what UMWA President Cecil Roberts had to say about it:

They’re demanding massive changes to the collective bargaining agreement, and they want to scrap the health care benefits our retirees earned through decades of blood and toil. These demands by the company are totally unacceptable to the UMWA, and unnecessary for the company’s survival.

The truth is that the depth of relief Patriot seeks isn’t needed. There is a path forward for the company that does not include drastic cuts at the level the company has proposed and we will demonstrate that in court.

Patriot Coal CEO Ben Hatfield had this to say for his company:

The actions we have taken today are necessary for the survival of Patriot and the preservation of more than 4,000 jobs. Without the cost relief we are seeking, all of these jobs will be lost and it will no longer be possible to provide healthcare for more than 23,000 employees, retirees and their dependents. Our labor and retiree benefit costs have risen to levels that simply cannot be sustained given the challenges facing the Company and our industry. All of our employees and retirees are being asked to make sacrifices to help Patriot emerge from bankruptcy. These sacrifices include reductions in compensation and benefits for salaried, union and nonunion employees.

What Ben didn’t mention was that this proposal comes just a few days before a hearing that’s scheduled on Monday, described by Cecil Roberts and the mine workers this way:

Patriot’s filings come just days before it goes into the bankruptcy court and argues it should be allowed to pay nearly $7 million in bonuses to executives and managers. “That $7 million would pay for a lot of oxygen bottles for the black lung sufferers. If Patriot is successful, these retirees will soon face a cruel decision between getting the oxygen they need to survive or eating,” Roberts said.

Keep in mind the stakes in this particular dispute, as outlined on the website of the UMWA’s Fairness at Patriot campaign:

About 2,000 UMWA members currently work at Patriot operations in West Virginia and western Kentucky. Additionally, more than 10,000 retirees, their dependents and surviving spouses receive health care benefits from Patriot. All told, the UMWA estimates the health care benefits for more than 22,000 people are potentially at risk.

But so far, I’ve only seen one coalfield politician have anything to say about Patriot’s move yesterday. Sen. Jay Rockefeller, D-W.Va., issued this statement:

Patriot’s decision is deeply disappointing, and incredibly unjust. These retirees worked day and night, risking their lives and their health, under a pledge that is now broken. Passing my bill to protect these union miners’ health benefits and pensions is now more than just the right thing to do – it’s imperative.

It’s not entirely clear yet if Sen. Rockefeller’s bill will fix all of the problem for UMWA members and pensioners, or if it will make Patriot be the one to pay these debts. And that’s really what this is all about — a major player in an industry that’s historically tried to externalize its costs of doing business onto its workers, the environment, the communities where it operates, and the global climate. As Temple University business professor Bruce Rader has explained, Patriot’s move here will:

… Ultimately will shift the burden to the general public or in a word socialize the health care benefits since the miner’s ability to pay will not cover this obligation and then the health care burden will be shifted to the government. In essence we will all pay the costs. This is a perfect example of the use of the legal system to socialize the costs and therefore lead to a transfer of costs to the general public from the shareholders of a company.

The question becomes, as a society, do we want to condone this? Should the profitability of these companies be enhanced at the general public’s expense, and what effect will this have on our system of allocating capital? Free-market capitalism is ultimately a system for the allocation of capital in a society and the efficient allocation of capital is the driving force behind the economic growth that this country has experienced. For this system to work, the participants must suffer the consequences and reap the benefits of their actions.

If you look more broadly at Patriot, you can see this … Take the selenium pollution from Patriot’s mountaintop removal mines (many of which — like its retiree health-care liabilities — Patriot inherited from other mine operators). With a series of carefully planned lawsuits, citizen group lawyers from Appalachian Mountain Advocates managed to force Patriot to internalize the costs of that pollution. The company went kicking and screaming at first, but eventually agreed not only to proper pollution treatment plans, but also to a longer-term plan that will get Patriot out of the mountaintop removal business altogether. Back when that announcement was made, Ben Hatfield had this to say:

Patriot Coal recognizes that our mining operations impact the communities in which we operate in significant ways, and we are committed to maximizing the benefits of this agreement for our stakeholders, including our employees and neighbors. We believe the proposed settlement will result in a reduction of our environmental footprint.

But remember that while Ben Hatfield became a household name because of the Sago Mine Disaster, he’s also  a veteran coal operator who worked for many years for Massey Energy’s predecessor, A.T. Massey Coal, a company whose efforts to break union contracts to reduce production costs and increase profits was in many ways the beginning of the sorts of maneuvers that Patriot is making now as part of its bankruptcy reorganization.

In West Virginia, the response to the Patriot selenium deal has been for state lawmakers to pass legislation aimed at ensuring that no other coal companies will have to take responsibility for their selenium pollution. Our House of Delegates couldn’t muster even one vote against that selenium bill — and not for nothing, but the United Mine Workers sent its lobbyist, Ted Hapney to a public hearing to support the industry’s bill.  And, as Taylor Kuykendall at The State Journal made clear in this story, the West Virginia Coal Association was certainly proud of its success with this legislation. Among those patting themselves on the back was Delegate Troy Andes, who used to handle public relations for Massey and Don Blankenship:

Andes said the Coal Caucus has allowed pro-coal legislators to educate the rest of the body on coal issues. As an example, Andes cited the selenium bill that the House passed unanimously March 8. He said the Coal Caucus was able to meet with about half of the legislative body on the bill before opponents were able to “flood the halls of the Capitol with misinformation.”

Andes also touted the major gains of the Republican Party and said that would bode well for the West Virginia coal industry.

“Today we have 46 Friends of Coal in the Republican Caucus,” Andes said. “Thanks to the 2012 election we grew from 35 members to 46 members. That translates to more seats on important committees.”

Rupert Phillips, D-Logan, works at White Armature Works, an electric motor repair company in Southern West Virginia that serves the coalfields. Hamilton said Phillips championed the passage of the selenium bill that recently passed the House.

“(The West Virginia Coal Association) gave me the car to drive,” Phillips said regarding the selenium bill. “I put it in four wheel drive and we took it to the top.”

So far, I haven’t heard any of these “Friends of Coal” talking about what they’re going to do to make sure Patriot lives up to the promises made to UMWA members and retirees. They seem perfectly content to allow the industry they champion to keep “externalizing” its costs onto workers and pensioners and, ultimately, the rest of us. Which brings me back to something that UMWA President Cecil Roberts said about how the union is continuing to fight Patriot in court and to call attention to the situation with protests in the streets:

Lawyers will do what lawyers do, courts will do what courts do,” Roberts said. “What working families do when they fight for justice is get out, get loud, and demand to be heard. We will continue to do that.

And as we do, more and more of our members are wondering which side national, state and local politicians, community leaders and religious leaders are on. For those who haven’t already answered that question, the time is now. Get off the fence and choose.

2 Responses to “Patriot Coal: Will industry have to pay its debts?”

  1. unbiased2 says:

    No, the “coal industry” will not have to pay Patriot’s debts.
    Patriot will do so or not just like any other bankrupt company.

  2. Ted says:

    The industry may pay a bit, but Mr & Mrs Taxpayer will certainly end up paying a lot of the costs associated with the loss of benefits for current retirees.

    I’d wager that a lot of the folks who decry welfare & disability benefits for workers have no problems supporting this prime example corporate welfare.

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