It's possible, if not probable, that the fate of Patriot Coal was determined on Oct. 31, 2007. That's the day Peabody Coal created Patriot out of subsidiaries.
Patriot ended up with 11 percent of Peabody's assets, but 42 percent of the liabilities. In real numbers, Peabody's retiree health care liabilities fell by over 70 percent to $239 million.
Good deal for Peabody, bad deal for everyone else.
Patriot's creation was followed by an economic slowdown, a switch by many electricity power producers from coal to natural gas, and a regulatory approach by the EPA hostile to coal.
Meanwhile, Patriot bought Magnum Coal from Arch Coal, and once again, long-term liabilities of retirees, spouses and widows were shifted to Patriot.
All of that led Patriot, predictably, to bankruptcy court, in an attempt to restructure its contract with the United Mine Workers Union, save money, and get back on its feet.
Naturally, the union resisted. Rollbacks are antithetical to what the UMWA considers hard-won wages and benefits for dangerous, backbreaking work. UMWA President Cecil Roberts is particularly sensitive to the health care needs of aging retirees.
However, Judge Kathy Surratt-States concluded that without some relief, Patriot would be forced into liquidation.
"This, by all accounts, is the worst scenario," the judge said.
So the judge concluded the best way forward is a plan by Patriot to reduce wages and benefits for the company's 1,700 union miners. Another part of the proposal creates a trust to be funded by Patriot, profit-sharing, and royalty payments to cover approximately 8,100 retirees.
The union points out, justifiably, that 90 percent of the retirees never worked for Patriot, so they have a hard time understanding how that company's bankruptcy impacts their benefits.
However, as the judge recognized, "Unions generally try to bargain for the best deal for their members, however, there is some likely responsibility to be absorbed for demanding benefits that the employer cannot realistically fund in perpetuity."