Ohio Valley Coal protests Patriot plan to deal with UMWA liabilities

The Ohio Valley Coal Co. and The Ohio Valley Transloading Co., two Robert Murray companies with unionized operations, filed an April 1 protest at the bankruptcy court for Patriot Coal over a Patriot plan to reclassify certain union obligations.

The Ohio Valley companies file a joinder to a motion to intervene by the United Mine Workers of America 1974 Pension Trust (the “1974 Plan”) and the UMWA 1993 Benefit Plan (the “1993 Plan”). Patriot, a major coal producer in West Virginia and western Kentucky, has been in Chapter 11 protection since July 2012.

On March 14, Patriot Coal and its bankrupt subsidiaries asked the U.S. District Court for the Eastern District of Missouri to let it reject collective bargaining agreements and to modify retiree benefits. “Pursuant to the Rejection Motion, the Debtors seek, inter alia, to (i) reject certain collective bargaining agreements, (ii) terminate retiree benefits for certain retirees, and (iii) withdraw from certain multi-employer pension plans, including the 1974 Plan,” the Ohio Valley companies wrote.

The 1974 Plan was established by the National Bituminous Coal Wage Agreement of 1974. It is a multi-employer pension plan that provides pension benefits to over 93,000 participants and beneficiaries. Certain Patriot subsidiaries in these bankruptcy cases are participants in the 1974 Plan with current collective annual contributions of approximately $22m, the Ohio Valley companies wrote.

“Ohio Valley Coal is also a participating employer in the 1974 Plan and, therefore, makes significant contributions to the 1974 Plan as well,” said the filing. The company operates a venerable Pittsburgh-seam longwall mine, Powhatan No. 6, in Ohio. “Ohio Valley Coal’s contributions to the 1974 Plan not only fund pension benefits for its own retirees, but they also help to satisfy the unfunded vested pension benefits of companies that have withdrawn from the 1974 Plan without fulfilling their contribution and withdrawal liability obligations.”

If the Patriot companies were permitted to withdraw from the 1974 Plan, they would be liable for approximately $959m in withdrawal liability, which represents their proportionate share of the unfunded vested pension liabilities, the Ohio Valley companies wrote. “Through the Rejection Motion, the Debtors propose to treat this withdrawal liability as an unsecured claim, meaning it would likely provide a fraction of Patriot’s total withdrawal liability to the 1974 Plan,” they added. “This diminished recovery will fall drastically short of fulfilling Patriot’s withdrawal liability, thus shifting the substantial burden to the remaining participants in the 1974 Plan, including Ohio Valley Coal. Recognizing the harm that will occur if Patriot is allowed to withdraw from the 1974 Plan, Ohio Valley Coal filed an Objection (the ‘Objection’) to the Rejection Motion on March 19, 2013. In the Objection, Ohio Valley Coal asserts that it is patently unfair for the Debtors to cease contributions to the 1974 Plan without paying the full amount of their withdrawal liability. Anything less than payment in full imposes a significant pecuniary burden on Ohio Valley Coal and the other remaining participants in the 1974 Plan. Accordingly, Ohio Valley Coal asked the Court to deny the Rejection Motion for failing to satisfy the section 1113 and 1114 requirement that all affected parties be treated fairly and equally.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.