Carlyn Rehbein never worked for Patriot Coal Corp.
For nearly three decades, the Mascoutah resident worked in two of Peabody Energy’s Illinois mines, laying the wire for underground trolleys that pulled men and equipment through the complexes.
Rehbein was promised health benefits and a pension when he retired, and the checks came steadily after he hung up his helmet around 1999. But about eight years ago, the Peabody name stopped appearing on his medical and pension forms.
“All of a sudden, everything I get in the mail is ‘Patriot Coal company,’ ‘Patriot Coal company,’” Rehbein, 79, said.
It didn’t matter at first. But it soon would.
Now, Patriot is working through its second bankruptcy since 2012, and the ripples again threaten the benefits Rehbein and thousands of other retired miners are counting on.
Patriot Coal assumed responsibility for thousands of Peabody Energy retirees in Appalachia and the coal-rich Illinois Basin after Peabody spun it off in 2007. Two years ago, Patriot concluded its first bankruptcy in St. Louis with a deal to reduce its health care and pension obligations to retirees.
The deal committed Peabody to paying about $310 million toward a special trust for retiree health claims. Patriot committed about $90 million to the trust, known as a Voluntary Employees’ Beneficiary Association, or VEBA.
But after Patriot filed its second bankruptcy this year in Richmond, Va., this time to sell itself off in pieces rather than reorganize, Peabody argued it was no longer on the hook for the remaining $145 million it promised to the Patriot VEBA.
The reason: The Virginia bankruptcy court allowed Patriot to get out of making payments to the VEBA. Peabody, in court filings, said that made its agreement with Patriot void. Patriot’s bankruptcy plan was confirmed by the court last week.
Peabody has a $75 million payment to the VEBA due in January. Without it, the trust will likely run out of money, said Phil Smith, director of communications and governmental affairs for the United Mine Workers of America.
“The VEBA would run out of money sometime in January,” Smith said. “The amount of money that was going into that was about equivalent to what it cost per year for those benefits.”
The UMWA says there are just over 2,000 people in Illinois who depend on the Patriot VEBA and close to 2,800 who do in Kentucky. It pays benefits for about 12,000 retired miners, surviving spouses and dependents in all. Smith said about 3,500 of the 12,000 came from Arch Coal before the Creve Coeur-based company spun off some of its Appalachian operations into a company Patriot acquired in 2008.
Thousands of miners showed up in St. Louis frequently in 2013 to protest and try to force Peabody to help pay for the benefits it originally promised many of them. They thought they had staved off the worst.
“You ask yourself how in the world this can be happening again,” said Terry Politsch, who worked in Peabody’s Marissa mine and is now the recording secretary for the UMWA’s Local 2412. “Something needs to be changed in these bankruptcy laws to protect people’s rights.”
For Rehbein, the health insurance supplement covers his $1,600 in monthly drug costs. His medical bills will go up a lot more if he has to go back for chemotherapy for his lung cancer, currently in remission. Medicare Part D will, hopefully, cover some of the drug costs if the miner health benefits go away. A Medicare supplement to cover doctor visits and other care would run $350 to $400 more per month in premiums.
“I ate coal dust and rock dust for 27 years and was promised all these benefits, and now they’re trying to back out,” Rehbein said.
NOT JUST THE UNION
Managers and other nonunion workers also had their retirement benefits transferred to Patriot Coal, formerly based in Creve Coeur until it moved to West Virginia in January.
Ronald McKenzie, a former maintenance foreman who worked in Peabody mines in Southern Illinois, said he got a letter a couple weeks ago telling him his medical benefits would lapse at the end of October.
“I’ve been getting my Medicare supplement through Patriot Coal,” said McKenzie, who lives about 20 miles south of Belleville. “Now all of a sudden, with six or seven days notice, they say, all right, we’re done with you.
“I gave Peabody Coal Co. 28 years and they gave me seven days notice.”
While he has since had to find and pay for a new Medicare supplement, he also learned nonunion retirees will receive some compensation. Peabody agreed to pay $16 million — half of the estimated lifetime value of its promised benefits — over five years to a fund that will reimburse retiree health expenses, according to a letter from the Patriot Coal Retiree Committee appointed in the bankruptcy case.
According to the letter provided by McKenzie, Medicare-eligible retirees will get about $2,500 a year to offset the cost of insurance. But the fund will only last five to seven years before it runs out of money.
McKenzie said he found a supplement that costs close to $300 a month, about double what he was paying before.
“It’s not a terrible hardship,” he said. “It’s just not the way you planned to be treated by some company that you worked for.”
Peabody, in a statement, accused Patriot of breaching its obligations under the 2013 settlement agreement. Specifically, Peabody said Patriot has not repaid $22 million it borrowed, while also arguing the agreement will lapse once Patriot dissolves.
“Peabody must protect the interests of its employees, retirees, shareholders and other stakeholders in this process,” the company said in a statement.
While the former miners say they suspect Patriot was merely a vehicle to unload their benefits onto, Peabody argued that Patriot was “highly successful” after its spinoff but that it faced market forces outside of its control.
Kris Inton, a financial analyst at Morningstar, said no one expected coal markets to get as bad as they have, including Peabody. If Peabody was just trying to unload costs onto Patriot, it would not have then loaded up on debt to buy its Australian mines, he said.
“It’s not like they knew something no one else did,” Inton said.
For union retirees dependent on the VEBA, they need a longer-term fix even if Peabody does make its remaining $145 million in payments. The trust estimates it will run out of money to pay benefits sometime in 2017, according to its website.
Smith, the UMWA government affairs director, said the union is pushing legislation on Capitol Hill to add the Patriot VEBA beneficiaries to an existing health plan created by Congress decades ago.
It would also shore up the miners’ pension plan, which continues to lose company contributions and is buckling under a ratio of some 12 retirees for each active worker, according to Smith.
Smith said the Senate version has 12 co-sponsors, including Sen. Dick Durbin, D-Ill. The House version has 58 co-sponsors, including Reps. Rodney Davis and Mike Bost, both Illinois Republicans representing Southern Illinois and the Metro East. Rep. Lacy Clay, D-St. Louis, is also a co-sponsor.
“We’re working very hard to try and get something done by the end of the year,” Smith said.
The bills in Congress are HR2403 and S1714.