WASHINGTON (CN) – Arch Coal sued the U.S. Department of Labor in a dispute over liability for coverage of coal miners’ black lung disease.
Arch Coal is the nation’s second-largest coal producer, after Peabody. Its 32 active mines with 5.5 billion tons of proven reserves supply 15 percent of the coal for the U.S. market. One-third of that coal powers electric plants.
Arch Coal filed for bankruptcy protection in January, seeking to shed $4.5 billion in debt. Coal prices have fallen by 50 percent in the past five years. With Arch Coal’s filing, producers of 25 percent of U.S. coal were in bankruptcy proceedings.
Peabody filed for bankruptcy protection today (Wednesday) in St. Louis.
Arch Coal’s April 8 federal lawsuit claims the Department of Labor unfairly imposed liability on it for Patriot Coal’s black lung claims under the Black Lung Benefits Act, or BLBA (30 U.S.C. §§ 901-945.
Congress enacted the Black Lung Benefits Act in 1969, as a federal workers’ compensation program for coal miners and their families for total disability or death from pneumonoconiosis, or black lung disease, an occupational hazard.
The BLBA requires each coal operator to qualify as a self-insurer approved by the Labor Department, by posting a surety bond or negotiable securities or cash set by the Labor Department, or by creating a self-insurance trust. If a mine operator fails to secure adequate insurance coverage under the BLBA, its officers are subject to fines and penalties.
If a surety bond required by the Labor Department does not suffice to pay benefits awarded in a case, the benefits are paid by a Black Lung Disability Trust Fund, which is financed by a manufacturer’s excise tax on coal.
Patriot Coal filed for Chapter 11 bankruptcy protection in May 2015, selling most of its operating assets to Blackhawk Mining.
In approving the reorganization, a bankruptcy court ruled that Blackhawk was not responsible for any of Patriot’s black lung claims. Patriot’s reorganization plan became effective on Oct. 26 that year and the coal company informed the Labor Department that it would no longer administer, pay or defend black lung claims after Oct. 31, 2015.
On Nov. 12 that year, the Labor Department issued a bulletin on approved, accepted, pending and newly filed claims affected by Patriot’s bankruptcy.
The bulletin directed Labor Department staff to determine whether commercial coverage exists for the Patriot subsidiary involved in the claim, whether the claim is covered under Peabody Energy’s self-insurance or a Peabody Energy commercial insurance policy, or by Arch Coal’s self-insurance, provided the last coal mine employment took place before January 1, 2006.
The bulletin identified three Patriot subsidiaries that were under Arch Coal’s self-insurance authority or were covered at some point in time by a commercial insurance policy: Apogee, Catenary, and Hobet.
In its lawsuit, Arch Coal claims this edict is a departure from the Labor Department’s previous policy.
“The Department of Labor has not previously sought to assign liability to former stockholders or owners of assets later acquired by the insolvent operator,” the complaint states.
“The Department of Labor’s regulations do not authorize the imposition of liability on prior stockholders or owners. More than fifteen years ago, DOL promulgated criteria for determining a responsible operator.”
Arch Coal claims that Labor Department regulations state that the responsible operator is the one that most recently employed the miner for at least one year. If that operator is not able to provide benefits, the responsible owner is the company that next most recently employed the miner.
Arch Coal says the bulletin’s mandate contradicts that policy.
“It instead imposes such liability on owners and stockholders that transferred all such liability to successor corporations which, in turn, fully secured those liabilities as ordered by the Department of Labor,” the complaint states. “The sellers were fully and legally absolved of any such liability and could not have anticipated that the Department of Labor would seek to reimpose it without prior notice of such obligation or an opportunity to secure any kind of insurance for that liability.”
Arch Coal claims the Labor Department has notified it of at least 70 claims, which cost an average of $10,000 each to defend.
Arch Coal spokeswoman Logan Bonacorsi told Courthouse News in an email that the health and safety of its employees are important and that it has and will continue to administer black lung claims for its employees.
“We firmly believe that employees are entitled to file federal black lung claims,” Bonacorsi said. “In this case, the Department of Labor has wrongly imposed liability for Patriot Coal Corporation’s federal black lung claims on Arch. We believe these liabilities should be the responsibility of the Black Lung Disability Trust Fund in accordance with the law. This lawsuit will not affect the benefit entitlement of any miner or miner’s family.”
Arch Coal asks the court to prohibit the Labor Department from assigning Patriot Coal’s black lung claims to it. It is represented by Mark Solomons with Greenberg Traurig.
The Labor Department said it does not comment on active litigation.
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