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Patriot Coal bankruptcy case moved to St. Louis

CHARLESTON, W.Va. -- A federal judge ruled Tuesday that the bankruptcy reorganization case of Patriot Coal will be moved from Manhattan to St. Louis, saying the transfer will "balance" the interests of the company, lawyers involved and Patriot miners who are closely following the proceedings.

U.S. Bankruptcy Judge Shelley C. Chapman rejected many of the arguments made by the United Mine Workers union, which wanted the case moved from New York to Charleston.

Patriot is headquartered in St. Louis, as are the two companies from which Patriot was formed, Arch Coal and Peabody Energy. And about 50 percent of Patriot's unionized retirees are located in the Illinois Basin coalfields, the judge noted in a 61-page ruling.

"While St. Louis may not be as convenient as Charleston for some employees and retirees, it is by no means remote from coal country," the judge wrote.

"Indeed, the evidence reflects that more Patriot retirees live in the Illinois Basin than in West Virginia or any other location," the judge wrote. "St. Louis is accessible by car or bus from southern Illinois, southern Indiana and Kentucky. St. Louis is also a convenient and accessible transportation hub for the many parties-in-interest and professionals who will be required to travel to hearings."

Seeking to move the case to Charleston has been part of the UMW's campaign to avoid having Patriot shed liabilities for retiree pensions and health-care benefits -- not to mention its union contract at several large active mines -- as part of its Chapter 11 bankruptcy reorganization. Patriot filed the case in July in New York, citing the location there of two subsidiaries that were formed only weeks before the filing.

"Though we would have preferred this case to be moved to Charleston, W.Va., moving it to St. Louis puts it on the front porch of Peabody Energy and Arch Coal," said UMW President Cecil Roberts. "We filed this case so that it would be moved away from a place where no coal has ever been mined to a place where people are familiar with the coal industry."

Michael Freitag, a lawyer for Patriot, said the company "respects the court's decision."

"We remain focused on using the reorganization process to ensure the company's future viability as a competitor and employer in a challenging market environment," Freitag said. "We anticipate that the new court will become familiar with our case very quickly, and we remain committed to completing the reorganization as soon as possible and preserving the nearly 4,000 jobs at risk."

Two weeks ago, Patriot announced it was phasing out the use of mountaintop removal and other large-scale strip mining as part of a move to focus on using underground mining methods to produce high-priced steel-making coal and stay profitable as the U.S. market shrinks for coal burned to produce electricity.

In their fight with Patriot, UMW officials say the firm was essentially a "company created to fail," to give Peabody Energy and Arch Coal a way to shed obligations to fund union pensions and health-care benefits in the nation's eastern coalfields, while profiting from their giant, nonunion surface mines out west.

Five years ago, Peabody formed Patriot as a spin-off company where Peabody tucked union mines in West Virginia and the Midwest, along with pension and health-care obligations for union retirees. Patriot later bought another company, Magnum Coal, which had been similarly spin-off by Arch Coal when it got rid of most of its Appalachian operations and their related pension and health-care liabilities.

Patriot employs about 2,000 active union members in West Virginia and Kentucky, and the company is currently responsible for more than 10,000 retirees and another 10,000 dependents, most of them in West Virginia, Indiana, Illinois, Kentucky and Ohio.

In her decision to move the case to St. Louis, the judge noted handwritten letters the court received from miners and their families worried about pensions and health-care benefits.

"Many of the enclosed family pictures, or lists of ailments and medications," the ruling said. "Some of them asked for a personal response. All of them were respectful, and compelling.

"This decision reflects the court's attempt to craft a just and balanced solution to the question of which bankruptcy court will become the next custodian not only of these cases, but also of these letters."

Reach Ken Ward Jr. at kward@wvgazette.com or 304-348-1702.


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