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e d i t o r 's n o t e Unsustainable Legacy Costs R etirees from Patriot Coal Co., who are represented by the United Mine Workers of America (UMWA), are rallying against coal companies in St. Louis. Who couldn't see this one coming five or six years ago when Peabody Energy decided to spin off Patriot Coal? A bankruptcy judge in St. Louis is now faced with making a very complex decision that could have widespread ramifications, not only for the UMWA, but for organized labor. The roots of this debate can be traced back to a 1946 agreeBY STEVE FISCOR / EDITOR-IN-CHIEF ment between U.S. President Harry S. Truman and UMWA President John L. Lewis that offered lifetime health benefits to resolve a nationwide strike. Back in those days and even into the early 1980s, the UMWA had clout—the kind of clout that would rattle a Chicago machine politician. Today, the UMWA represents about 20,000 active miners (25% of the hourly coal mining workforce) and more than 100,000 retired miners and their dependents. Annually, it pays out about $1.2 billion in benefits divided evenly between pension and health care. The UMWA rally has not made headlines outside of St. Louis and West Virginia. Patriot Coal has asked the U.S. Bankruptcy Court for the Eastern District of Missouri to modify how benefits are handled for 10,000 retired miners and 13,000 dependents. Who are these people? Most of them are not Patriot people. Patriot is only six years old. They are your uncles, fathers and grandfathers, who worked for great companies like Eastern Associated Coal Corp., Southern Ohio Coal Co., etc.— companies that Peabody Energy acquired prior to the "unbundling" of Patriot Coal. Many of these retirees are not 65 and they can't collect on Medicare. Patriot was originally formed from a collection of mostly Peabody union mines in West Virginia. Then it acquired several more properties when it purchased Magnum Coal. Today, roughly 40% of Patriot's miners are represented by the UMWA. Patriot Coal wants to create a $300 million trust from future profit sharing to fund health care benefits. Its current liability is estimated at $1,600 million; Patriot spent approximately $14 million on retiree benefits in 2012. The company is also asking a judge to allow it to pay approximately $7 million in bonuses to mid-level managers, not the CEO or any other executive management. The company believes it needs the bonuses now more than ever to retain key employees and keep the company intact. The UMWA sees the bonuses as an insult. Patriot has also filed a suit against Peabody Energy seeking confirmation from Peabody officials that they will continue to fund retirees' benefits despite the latter's previous assurances; Patriot officials maintain benefits for 23,000 people are in danger and that these moves will save more than 4,000 jobs. This decision will affect the entire coal industry. Patriot's retiree health care and pensions are currently paid from a multi-employer plan established by the UMWA Wage Agreement funded mostly by union coal operators (signatory companies). If the judge allows Patriot to reduce or eliminate the amount of money it pays into the fund, the other signatories have to make up the difference. Patriot Coal should be held accountable for its liabilities. If, however, the company defaults on its obligation, the situation with underfunded liabilities will only further unravel. www.mining-media.com Mining Media International Editorial Office 11555 Central Parkway, Suite 401 Jacksonville, Florida 32224 U.S.A. Phone: +1.904.721.2925 Fax: +1.904.721.2930 Editor-In-Chief—Steve Fiscor, sfiscor@mining-media.com Western Field Editor—Russ Carter, rcarter@mining-media.com European Editor—Simon Walker, simon.iets@btinternet.com Latin American Editor—Oscar Martinez, omartinez@mining-media.com Associate Editor—Gina Tverdak-Slattery, gtverdak@mining-media.com News Editor, Mining—Joseph W. Kirschke, jkirschke@mining-media.com Assistant Editor—Jennifer Jensen, jjensen@mining-media.com Graphic Designer—Austin St. Clair, astclair@mining-media.com Mining Media International Corporate Office 8751 East Hampden, Suite B1 Denver, Colorado 80231 U.S.A. Phone: +1.303.283.0640 Fax: +1.303.283.0641 President/Publisher—Peter Johnson, pjohnson@mining-media.com Vice President of Sales & Marketing—John Bold, jbold@mining-media.com U.S. & Canada Sales Manager—Victor Matteucci, vmatteucci@mining-media.com Scandinavia, UK and European Sales Manager—Colm Barry, colm.barry@telia.com German Sales Manager—Gerd Strasmann, info@strasmann-media.de Classified Advertising—Norm Rose, nrose@mining-media.com Show Manager—Tanna Holzer, tholzer@mining-media.com Ad Traffic Manager—Erica Freeman, efreeman@mining-media.com Coal Age, Volume 118, Issue 3, (ISSN 1040-7820) is published monthly by Mining Media Inc., 10 Sedgwick Drive, Englewood, Colorado 80113 (mining-media.com). Periodicals postage paid at Englewood, CO, and additional mailing offices. Canada Post Publications Mail Agreement No. 40845540. Canada return address: Station A, PO Box 54, Windsor ON N9A 6J5, Email: circulation@mining-media.com. Current and back issues and additional resources, including subscription request forms and an editorial calendar, are available online at www.coalage.com. SUBSCRIPTION RATES: Free and controlled circulation to qualified subscribers. Non-qualified persons may subscribe at the following rates: USA and Canada, 1 year, $56.00, 2 year, $96.00, 3 year, $162.00, Student, $16.00, Outside the USA and Canada, 1 year, $77.00, 2 year, $137.00, 3 year, $225.00 surface mail (1 year, $145.00, 2 year, $257.00 airmail delivery). For subscriber services or to order single copies, write to Coal Age , 8751 East Hampden, Suite B1, Denver, CO 80231 USA; call +1.303.283.0640 (USA) or visit www.mining-media.com. ARCHIVES AND MICROFORM: This magazine is available for research and retrieval of selected archived articles from leading electronic databases and online search services, including Factiva, LexisNexis, and Proquest. For microform availability, contact ProQuest at 800-5210600 or +1.734.761.4700, or search the Serials in Microform listings at www.proquest.com. Steve Fiscor, Coal Age Editor-In-Chief sfiscor@mining-media.com POSTMASTER: Send address changes to Coal Age, P.O. Box 1337, Skokie, IL 60076 USA. REPRINTS: Mining Media Inc, 8751 East Hampden, Suite B1, Denver, CO 80231 USA phone: +1.303.283.0640, fax: +1.303.283.0641, www.mining-media.com PHOTOCOPIES: Authorization to photocopy articles for internal corporate, personal, or instructional use may be obtained from the Copyright Clearance Center (CCC) at +1.978.750.8400. Obtain further information at www.copyright.com. 2 www.coalage.com COPYRIGHT 2013: Coal Age, incorporating Coal and Coal Mining & Processing. ALL RIGHTS RESERVED.