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Patriot Coal Asks Bankruptcy Court to Terminate Retiree Health Benefits

On Thursday, Patriot Coal Corp filed a lawsuit against Peabody Energy Corp to ensure that Peabody does not use Patriot’s bankruptcy to evade Peabody’s own obligations to certain retirees.

While Patriot has filed the lawsuit to ensure that Peabody, from which Patriot branched off in 2007, does not neglect its own obligations for health benefits towards retirees, in a statement late Thursday, Peabody pointed out that its contract with Patriot “appropriately states that, should Patriot’s benefit obligations decrease, our funding would proportionately be reduced. Patriot is taking the untenable position that our payments should continue in full in the future even if Patriot’s expenses are reduced.”

Actually, what lay beneath the surface is that Patriot has already asked a bankruptcy court to terminate retiree health benefits for thousands of its unionized U.S. mine workers as part of its plan for Chapter 11 bankruptcy.

Patriot has submitted to the bankruptcy court that the labor costs of the United Mine Workers of America are not competitive with other coal producers and that other mines operated “under more flexible work rules and a significantly lower labor cost structure.”

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The CEO of Patriot, Bennett Hatfield, while commenting on terminating about $1.6 billion in retiree health benefits said, “The actions we have taken today are necessary for the survival of Patriot and the preservation of more than 4,000 jobs.”

As an alternative, Patriot has also proposed the creation of a trust which would have an initial cash contribution of $15 million and would include profit sharing of up to a maximum of $300 million.

Cecil Roberts the President of the union said in a statement, “These demands by the company are totally unacceptable, and unnecessary for the company’s survival.” The UMWA thinks Patriot would use the bankruptcy laws and restructuring to do away with pension costs and retiree healthcare benefits.

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