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Peabody Protests Continue as Report Concludes Patriot Was 'Designed to Fail'

Photo courtesy Cathy Sherwin

Working families are continuing to protest the actions of Peabody Energy, which they say is trying to abandon its responsibility to pay health care costs for thousands of retirees who worked for the company. Labor and faith leaders are joining workers and retirees in a St. Louis rally at the headquarters of Peabody.

Meanwhile, in a forthcoming report, Designed to Fail: The Case of Patriot Coal, Temple University finance professor Bruce Rader found that while Peabody Energy and Arch Coal transferred only 13.3% of its assets to Patriot Coal when it was created, it shifted 40% of its liabilities to the new company. The fact that Patriot has now filed for bankruptcy was almost a foregone conclusion, according to Rader:

However, even without the drop in natural gas prices and the development of fracking, it would have been nearly impossible for Patriot to remain solvent. The company’s business model could only make money if coal was priced at or above record highs. The market for coal is a very cyclical market—even in the best of times. Weather, transportation costs, environmental regulations, competing energy products, etc., adversely affect the coal market. It was unreasonable to assume that the price of coal would remain high and grow substantially higher.

....

Again, and let me emphasize—from a financial point of view this venture seems to have been created to fail in the long-run unless the most optimistic outcome for eastern coal was obtained. The bankruptcy of Patriot Coal can be traced to lower production of eastern coal, rising water treatment costs and the type of assets that the company was given in the spin-off.

The Rev. Dr. Martin Rafannan, former senior pastor at Resurrection Lutheran Church, said of the rally:

In this Lenten season, Christians are focused on how we can live a life of service and commitment, to lift one another up and strengthen our communities. It’s exactly the right time to join with people of all faiths to challenge the corporate executives at Peabody, Arch and Patriot. They are using financial and legal maneuvers to deny retired miners the health care they worked years to earn, and so richly deserve.

Mine Workers (UMWA) Secretary-Treasurer Daniel Kane echoed Rafannan's remarks:

Corporate executives seem to think that if they act behind closed doors, they can’t be held accountable. They’re wrong. 

The rally is being live-streamed from St. Louis.

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