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Patriot Coal Sues Peabody, Asks Bankruptcy Court To Relieve Pension Obligations

(Adam Allington/St. Louis Public Radio)

St. Louis-based Patriot Coal Corp. has asked the U.S. Bankruptcy Court to modify collective bargaining agreements with the United Mine Workers of America, allowing the coal company to cut health care coverage for retired miners.

Patriot was created by St. Louis-Based Peabody Energy Corp., as a stand-alone company in 2007.  In creating Patriot, Peabody also transferred a hefty chunk of Peabody’s outstanding pension obligations onto Patriot’s books.

Patriot said in the filing on Thursday that the action is necessary to save more than 4,000 jobs. Patriot also seeks to change wages, benefits and work rules for existing workers in an effort to make the company more competitive.

“Our labor and retiree benefit costs have risen to levels that simply cannot be sustained given the challenges facing the Company and our industry,” Patriot’s Chief Executive Officer Bennett K. Hatfield said in a statement. "The requested cuts will save more than 4,000 jobs and health care for 23,000 employees, retirees and dependents," Hatfield said.

Union leaders have been anticipating the move for some time, holding protests in St. Louis last month that drew more than 1,000 people. UMWA President Cecil Roberts has claimed that Peabody created Patriot Coal with the sole intent of using the spinoff company as a means for Peabody to divest itself of legacy pension costs.

“A company that has been in existence since 2007 is carrying liabilities all the way back into the 90s, that just doesn’t make a lot of sense.  There is no justification for this,” says Roberts.

To compound the matter, in 2008 Patriot went on to acquire another company—Magnum Coal, at the time a subsidiary of Creve Coeur-based Arch Coal. 

Roberts claims the loss of benefits would cause financial ruin and threaten the health for thousands of retirees.

“Patriot is paying the obligations of two of the largest coal companies in the world and people who never worked for Patriot are asking me…'how can Patriot going into bankruptcy?'” Roberts says.

Patriot filed for bankruptcy in July.  The company also announced that it is filing suit against Peabody.

That suit is asking the bankruptcy court to declare that Peabody must continue to pay for the health care costs of certain retirees who were employed by Peabody entities that were transferred to Patriot when the company formed.