Patriot Coal bankruptcy Story Archives - West Virginia Public Broadcasting

W.Va. Regulators Sue Coal Operator ERP, Here’s Why It Matters

The West Virginia Department of Environmental Protection Thursday filed a lawsuit against coal operator ERP Environmental Fund, Inc. alleging the company has racked up hundreds of violations, laid off employees, and walked away from its mining operations, leaving environmental obligations unfulfilled.

According to documents filed with the Kanawha Circuit Court on March 26, ERP holds more than 100 permits at numerous mine sites across West Virginia. With the exception of one permit, all were acquired in 2015 from Patriot Coal Corporation during the company’s second bankruptcy.

DEP says it has issued 160 notices of violations and 118 failure to abate cessation orders to the struggling company. It argues ERP’s failure to comply with surface mining and water pollution laws poses “existing and ongoing threats to the public health and safety and the environment.”

High Stakes

Of greatest concern, the agency says, is the Tygart River Mine complex located in Marion County. The abandoned underground mine, often known as the Martinka mine, requires constant water pumping and treatment, which costs $900,000 annually.

Without it, water will rise in the mine. If a blowout occurs, DEP says water would contaminate the Tygart River, a source of drinking water for thousands of West Virginians.

“The situation at Martinka represents the proverbial canary in the coal mine and signals the serious issues involved in the Defendant’s cessation of operations,” the motion states. “Without immediate funding and effective management oversight of its environmental liabilities and operations, any one or all of the Defendant’s mine sites in West Virginia could soon become the next Martinka, placing the environment and the health and safety of many thousands of West Virginians at significant risk on a much broader scale.”

Clarke Enterprise

ERP is associated with the Virginia Conservation Legacy Fund, a nonprofit operated by Virginia businessman Tom Clarke. Clarke, whose background is in healthcare, has faced scrutiny from conservation groups for his plans to reduce the environmental impacts of coal mining by planting trees on reclaimed mines. In addition to the Patriot mines, Clarke has purchased coal mines including from Cleveland Cliffs, Walter Energy and Alpha Natural Resources. In some cases his attempts were rebuffed.

According to the West Virginia Secretary of State, ERP’s president is former Patriot mining engineer Matt Cook. Clarke is listed as the company’s treasurer.

A representative for Clarke did not respond to a request for comment.

Erin Savage, central Appalachian senior program manager, with Appalachian Voices, said she was not surprised to see state regulators take this step.

“Tom Clarke had put together a scheme that we’ve seen other companies do as well, that they take on a lot of struggling mines out of bankruptcies and they have some plan that seems not fully thought out that will somehow allow them to succeed when the previous company did not,” she said. “I’ve been skeptical of Tom Clarke’s ability to clean up these mines and fund reclamation for years now.”

Receivership Compromise

During the years after the purchase, DEP officials say ERP received little funding and struggled to keep up with its required environmental obligations. It asked the agency for access to money set aside for reclamation work, which the agency did not grant. DEP did allow ERP access to $1 million earmarked for water treatment at former Patriot mine sites.

By late 2019 or early 2020, the documents state, ERP was out of cash. Officials say the company has performed only limited essential activities since February, and as of March 19, laid off all employees and ceased operating.

But the DEP also stated it doesn’t have the resources to revoke all of ERP’s permits and do the reclamation by itself.

The agency says transferring more than 100 permits to the state’s Special Reclamation Fund “would overwhelm the fund both financially and administratively, with the result that the actual reclamation and remediation of the ERP mining sites could be delayed.”

ERP has $115 million in surety bonds, which would be forfeited if the agency revokes the company’s permits. DEP says instead of taking that “drastic” step it has been in communication with the surety bond issuer, Indemnity National Insurance Company.

“To put the matter bluntly, neither DEP nor the surety is willing to permit the Defendant to continue its operations and attempt environmental compliance under its current organization and management structure,” the motion states. “Each is willing, on the other hand, to fund and facilitate the Defendant’s compliance with its environmental obligation under the supervision and control of a qualified and capable receiver.”

Savage, with Appalachian Voices, said this situation highlights the systemic challenges with how regulators allow coal operators to bond their mines.

“Having pool bonds and bond amounts that are potentially not sufficient to cover actual reclamation costs, having a single surety company cover so many permits — these are all red flags that could have been dealt with years ago, but as this point it’s hard to change the bonding structure,” she said.

The agency is seeking a temporary restraining order and temporary injunction compelling ERP to do its environmental remediation. DEP is also asking for the appointment of a special receiver to take control of ERP’s mines and assets.

The receiver, Doss Special Receiver, LLC, would take control of ERP’s mines and carry out its reclamation requirements. In a press release issued Friday, the agency said Imdenmity has agreed to provide $1 million in funding to Doss to fund its operations for an initial period of 90 days.

Motion for TRO, Et Al (PDF)
Motion for TRO, Et Al (Text)

Can Donald Trump Save Miners' Health Benefits?

Would you go into a dangerous profession if you were assured that you and your dependents would have healthcare and pension for life? For thousands of West Virginia coal miners, the answer to that question was yes.

“When we all started in the mines, we were promised healthcare for life – cradle to grave,” said Roger Merriman. He’s referring to a deal struck between the United Mine Workers of America and the federal government in 1946. Union miners who put in 20 or more years were promised lifelong health benefits.

But in October, 12,500 miners, including Merriman, received notice that without Congressional intervention their benefits would be terminated at the end of the year. On Nov. 1, another 3,600 miners received notices. Next year, an additional 6,500 miners will be affected.

That’s because when Merriman’s company, Patriot Coal, filed for bankruptcy in 2012, then again in 2015, a federal bankruptcy judge granted its request to shed retirees’ benefits.

Merriman said this will have a huge impact on him and his family.

“We’ll have to make a choice,” he said, “of … going to the doctors and buying prescriptions, or paying bills and eating. It’s a life and death situation realistically is what it is.”

Patriot is one of five major coal producers in the United States that has sought bankruptcy protection in the last five years. Each time the companies sought to shed employee and retiree benefits.

After the Patriot bankruptcy in 2012, the UMWA negotiated a $400 million payment to shore up the retirees’ benefit funds. But it was not a long-term solution. Existing companies pay into a UMWA fund for retirees, but as those mines close, there is less money going into the pot. The number of retired miners who are drawing from it, though, is increasing. And the fund is about to run out of money.

“We have tens of thousands of miners who are scheduled to lose their health insurance at the end of the month and more next year,” said West Virginia Senator Shelley Moore Capito. She and Joe Manchin are two of 22 bipartisan Senators calling for the passage of the Miners Protection Act.It’s unclear whether the House will support the bill.

“It passed out of committee – bipartisan – and we’re going to keep working hard, but there is no fallback position if it doesn’t pass this year,” she said.

The Miners Protection Act moves money from the Abandoned Mine Reclamation Fund into the UMWA pension and health benefits program.

The wildcard is Senate Majority leader Mitch McConnell of Kentucky. Although McConnell says he does not oppose the bill, he has yet to bring the bill to a vote. In an email, a McConnell representative did not clarify the Senator’s position, beyond stating “there are no scheduling announcements to be made at this time.”

So what role does President-elect Donald Trump play in all this?

“Looking forward, we have a President-elect who has promised to get our coal miners working again,” said West Virginia University law professor Patrick McGinley. McGinley said Trump is in a position to make a huge difference in the lives of about 120,000 miners and their widows.

“I think a strong and forceful statement by [the] President-elect to Senator McConnell could move this bill along to passage.”

McGinley added if Trump does put coal miners back to work, more money could come from the active mines to shore up the retirees’ pensions and benefits. But until then, without intervention, thousands of miners, including Roger Merriman, may be forced to make some tough choices in the coming year.

Appalachia Health News is a project of West Virginia Public Broadcasting, with support from the Benedum Foundation.

Miners Rally to Save Health Benefits and Pensions

Jennings Harrison worked in a coal mine for 36 years, over which time he accumulated back problems, neck problems, carpal tunnel in his wrist and precancerous nodules on his lungs.

“If we didn’t have the healthcare, we’d be hurting,” he said.

By this time next year, not having healthcare could be a reality for him, though.

That’s because Harrison worked for Peabody Energy, then Patriot Coal. Both companies filed for bankruptcy in the last four years.

A little background. In 2007, Peabody created Patriot Coal. Peabody assigned Patriot 13 percent of its coal reserves and 40 percent of its health care liabilities. In a nutshell?

“Peabody was attempting to shed enormous amounts of its existing liability by creating Patriot,” said West Virginia University law professor Patrick McGinley in a Skype interview. McGinley is co-editor of a treatise on coal law and regulation.

“And whether or not Patriot would survive was the question, but there’s a fairly good argument that that’s what Peabody was trying to do at the time,” he said.

As part of a union contract, miners who have put in 20 or more years were promised lifelong health benefits.

But when Patriot filed for bankruptcy in 2012, then again in 2015, a judge granted Patriot’s request to shed retirees benefits. The United Mine Workers of America stepped in and negotiated $400 million from Patriot and Peabody. The companies came up about $100 million short. Those band aid funds will run out by the end of this calendar year.

Without healthcare benefits, Harrison said he could be forced to declare bankruptcy himself.

“I mean after working all your life in the mines and I was promised healthcare and stuff, pensions and stuff, it’d be a shame to lose that when you really need it,” said Harrison.

Carl Egnor drives past an old Patriot mine now owned by Black Hawk in Boone County.

Harrison is just one of almost 22,000 retirees and their dependents from seven states who are slotted to lose their benefits by the end of the year. Today, thousands of these active and retired coal miners from seven states are expected in Lexington, Kentucky, for a United Mine Workers of America rally to fight for those benefits.

“They are going to have to make some very, very difficult and frightening choices,” said Phil Smith, Director of Communications and Governmental Affairs for the United Mine Workers of America.

“Are they going to be able to buy the drugs that they need or pay rent? Are they going to be get the healthcare they need – go see the doctor – or buy food?”

In 1946, United States Government and the UMWA signed an agreement that guaranteed miners with 20 or more years on the job benefits for life. Smith said this is the only such agreement that has ever been signed between the U.S. government and a union.

The miners are rallying today to ask the government to honor that promise.

“What is required at this point is legislation that we are looking at in Congress that would preserve these healthcare benefits for these people that will lose them as a result of these bankruptcies, said Smith.

Protections for miners’ health care and pensions were included in a December 2015 bipartisan budget plan. The plan itself made it through both chambers of Congress, but did not include the additional funding aimed at protecting miners’ health care and pensions. It’s not completely clear why, but Senate majority leader Mitch McConnell opposed the provision. However, it is well known that McConnell has repeatedly clashed with the UMWA.

An emailed statement from a McConnell spokeswoman said he “has been and remains committed to helping ensure the retirement security of our nation’s retirees, including coal miners.”

Smith is worried that “if Congress does not act, if Congress fails to act, to do its job, to keep its promise that the United States government made to these retirees 70 years ago, then the money will run out and those folks will be without their healthcare because there is no other money to take care of it.”

Five major coal producers in the United States have sought bankruptcy protection in the last five years. Each time they sought to shed employee benefits.

“Members of Congress, politicians, it’s their responsibility to fix laws when they are misused in the sort of way that many believe have occurred not only with Peabody and Patriot, but with other corporate entities as well in the coal industry and other forms of business,” said McGinley. “Congress really has to take a look at bankruptcy laws and fix it.”

Peabody did not respond to request for comment and the PR company who worked for Patriot declined comment. No other Patriot spokesperson could be found.

Editor’s Note: An earlier version of this story reported that the miners’ health care and pensions were part of a bill that was approved in 2015. This story has been corrected to show that proposal was part of a budget plan.

Appalachia Health News is a project of West Virginia Public Broadcasting, with support from the Benedum Foundation.

Marshall Health Buys Patriot Coal Headquarters

The former corporate headquarters of Patriot Coal in Scott Depot has been sold.

Marshall Health expects to start converting the three-story office building into medical offices this summer. Marshall Health is the faculty practice plan of Marshall University’s medical school.

Marshall Health paid $5.3 million for the building.

The university says in a news release that the purchase will allow Marshall Health to locate its existing Hurricane offices under one roof and start offering more specialty services in Putnam County by early next year. It also will increase the capacity for medical students and residents to train in an outpatient setting.

Patriot filed for bankruptcy protection last year. Many of its coal assets were acquired by Lexington, Kentucky-based Blackhawk Mining.

Ex-Patriot Coal Workers Apply for Jobs with Blackhawk

Former Patriot Coal workers have begun applying for jobs with Blackhawk Mining.

Lexington, Kentucky-based Blackhawk will take over six of Patriot’s mining complexes in West Virginia later this week. Blackhawk was the winning bidder for the majority of Patriot’s assets.

Blackhawk began the rehiring process Monday at the Charleston Civic Center. Blackhawk vice president Jesse Parrish told The Charleston Gazette-Mail that the company expects to rehire about 1,400 former Patriot employees.

Parrish says the company hopes to resume mining at the West Virginia mines as soon as possible.

Miner Mark Watts says he was told that his hours would be reduced and that a pay cut is expected.

Scott Depot-based Patriot filed for Chapter 11 bankruptcy protection May 12.

U.S. Bankruptcy Judge Plans Approval of Patriot Coal Assets

A federal bankruptcy judge plans to approve the sale of West Virginia-based Patriot Coal’s assets.

A federal website says a hearing could be held in Richmond on Friday if parties in the case don’t agree on language in the judge’s confirmation order.

Scott Depot, West Virginia-based Patriot says most of its operating assets will be sold to Lexington, Kentucky-based Blackhawk Mining LLC. The Virginia Conservation Legacy Fund plans to use Patriot’s other mines and mining permits for purposes of water quality improvement and reclamation.

CEO and President Bob Bennett says the sale represents “the best possible outcome for Patriot and its stakeholders.”

Patriot said earlier this week that it expects the sale to result in the layoffs of more than 2,000 workers in West Virginia.