(CN) - The United Mine Workers of America are challenging a federal bankruptcy judge's ruling that Walter Energy can void its collective bargaining agreements and stop paying retirement benefits to thousands of former workers.
Walter Energy of Birmingham, Ala. is one of the world's top producers of metallurgical coal, which is used to make steel.
The company and 22 of its U.S. subsidiaries filed for Chapter 11 bankruptcy on July 15, 2015 in Alabama. That same day the company announced it had reached a restructuring deal, under which the debt it owes its senior lenders will be converted to equity.
The company had $270 million in cash as of June 30, which it said in a statement would be enough to pay its suppliers and partners during the reorganization.
"In the face of ongoing depressed conditions in the market for met coal, we must do what is necessary to adapt to the new reality in our industry," CEO Walt Scheller said in the statement.
The company's lawyer was more straight forward about the forces behind the bankruptcy, according to the Wall Street Journal.
"The reason for this chapter 11 is a historic slump in coal prices," Patrick Darby, a Walter lawyer, told a judge during a bankruptcy hearing, according to the Wall Street Journal.
Darby works for Bradley Arant Boult Cummings LLP in Birmingham.
Coal reached an all-time high of $139.05 per ton in January 2011 and is now trading at the record low of $48.85, according to Trading Economics, a commodities market analyst
Walter Energy's finance chief William Harvey also blamed "crippling legacy labor costs, principally in the form of medical benefits and pension obligations, as well as insupportable hourly labor costs," the Wall Street Journal reported, citing court documents.
To shed its pension obligations, Walter Energy filed a motion to reject its collective bargaining agreement with the United Mine Workers of America and to "terminate retirement benefits" to 2,700 retirees and more than 1,280 active and laid-off employees who are members of the union.
More than half of Walter's 2,300 workers belong to the union, according to the Wall Street Journal.
U.S. Bankruptcy Judge Tamara Mitchell granted that motion shortly before New Year's Day, leading the union to appeal the order on January 12.
The union's attorney Jennifer Kimble with Rumberger Kirk & Caldwell in Birmingham did not respond to an email asking what is the total value of the lost pension funds and what relief the union is seeking.
Coal is essential for powering the country.
The two main types of coal are thermal coal, used for electricity generation, and metallurgical, or met, coal, used for iron and steel production.
Despite new regulations from lawmakers that will force coal-fired plant operators to install equipment to reduce their carbon dioxide, mercury and sulfur dioxide emissions, and the crusading of environmentalists, coal accounts for 34 percent of U.S. energy production, according to the Wall Street Journal.
Just as the current record low price of crude oil led 40 U.S. producers to seek bankruptcy protection in 2015, major coal producers are following Walter Energy to court.
Arch Coal, the second largest supplier of coal in the United States, filed for bankruptcy on January 11 with the goal of wiping $4.5 million in long-term debt from its books, the St. Louis, Mo.-based company said in a statement.
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