General Electric Capital Corp. (GECC), which owns equipment in some of Patriot Coal’s mines, asked Patriot’s bankruptcy court on July 26 for protection in case the company wants to shut some of those mines.
Patriot, a major producer of coal in West Virginia and western Kentucky, filed July 9 for Chapter 11 protection at the U.S. Bankruptcy Court for the Southern District of New York. One of its first acts was to ask for approval of procedures to let it reject unspecified executory contracts and unexpired leases, and for the abandonment of personal property.
“GECC does not object to expediting the rejection process by eliminating the necessity for hearings on uncontested rejections of contracts and leases and abandonment of expendable property,” the company said in the July 26 filing. “However, if the proposed Procedures are applicable to the closure of the Debtors’ coal mines, they need modifications to protect and preserve the rights of regulators and other parties-in-interest.”
GECC is currently the lessor under several unexpired leases of personal property to Patriot Leasing Co. LLC (PLC), one of the Debtors in these jointly administered bankruptcy cases. Another of the Debtors, overall parent Patriot Coal, guaranteed PLC’s obligations under the equipment leases and is primarily liable to GECC for the performance of all obligations under the leases. PLC leased certain mining and quarry equipment that is being used by one or more of the Debtors in the operation of their businesses. Most of this mining and quarry equipment is located underground, within mines operated by the Debtors.
“It is unclear from the Motion whether the Debtors intend to utilize the Procedures in connection with the closure of mines or the rejection of agreements relating to mining operations and equipment,” said GECC. “If not, the Procedures should be modified to provide that they are not applicable in such situations. However, if the Debtors do intend for these Procedures to apply to the closure of mines or the rejection of agreements relating to mining operations and equipment the Procedures should be modified to accommodate the unique regulatory requirements applicable to mine closures. The Debtors’ ‘first-day filings’ acknowledge that their mining operations are subject to numerous federal and state laws and regulations. Federal and state regulatory authorities impose obligations on the coal mining industry in a wide array of areas, including employee health and safety, permitting and licensing requirements, environmental protection, the reclamation and restoration of mining properties after mining has been completed, surface subsidence from underground mining and the effect of mining on surface and groundwater quality and availability.”
GECC added: “In particular, the closure of underground mines imposes numerous environmental and regulatory obligations on mine operators. Presumably the Debtors do not intend for the Procedures to affect their compliance with these regulatory obligations. Therefore, the Procedures should be modified to provide that, notwithstanding anything contained therein, the Debtors shall comply with all applicable laws and regulations with regard to the proposed discontinuance of mining operations or the abandonment of equipment that could affect the environment.”
The rejection motion, and GECC’s partial objection to it, are due to be heard at an Aug. 2 court hearing.
Another item that had been due to be heard at the Aug. 2 hearing was a motion by the United Mine Workers of America union, which represents about half of Patriot’s miners, to transfer the bankruptcy case to the U.S. Bankruptcy Court for the Southern District of West Virginia, closer to the company’s unsecured creditors and miners. The unsecured creditors committee has joined with the UMWA in that change of venue motion. But a notice was filed July 25 with the court that the venue motion has been pushed back from the Aug. 2 hearing, to a hearing scheduled for Sept. 11.
In 2011, St. Louis-based Patriot sold 31.1 million tons of coal, of which 76% was sold to domestic and global electricity generators and industrial customers, and 24% was sold to domestic and global steel and coke producers. Its major mines include the Federal No. 2 longwall operation, working the Pittsburgh coal seam in northern West Virginia.