CTRA Coterra Energy Inc

By Jonathan Randles 

A pension fund covering about 90,000 coal workers and their families is on the brink of insolvency while hundreds of these miners also face losing medical benefits, part of mounting financial stress on the larger safety net meant to protect sick or out-of-work miners.

The United Mine Workers of America multiemployer pension plan is projected to become insolvent during its 2022 plan year if Congress doesn't authorize using public funds to buttress it for the first time in a history tracing back more than 70 years. Murray Energy, which filed for bankruptcy Tuesday, is the last major contributor to the fund.

Large U.S. coal producers have used bankruptcy as a tool to survive the industry's decadelong decline. Several companies have successfully argued in chapter 11 that they must walk away from pension and medical obligations to stay in business, keep mines open and save jobs, according to court records, testimony and interviews.

Since last October, at least eight coal companies employing nearly 16,000 union and nonunion workers have filed for bankruptcy protection.

The bankruptcies have coincided with a decline in the U.S. coal market, which has grappled with environmental regulations during the Obama administration and competition from alternative fuel sources such as natural gas and renewable energy.

A Growing Shortfall

The use of chapter 11 has nearly eliminated coal company contributions to the plan. During the 2018 plan year, the pension fund collected $30 million in employer contributions, dwarfing its $613.8 million in benefit payments. The fund's assets were valued at about $2.4 billion, compared with $6.6 billion in liabilities. For every active worker, the plan supports roughly 28 retirees, UMWA Health and Retirement Funds Executive Director Lorraine Lewis told House lawmakers in July.

The multiemployer pension plan was 38% funded, Ms. Lewis said at the time, a significant fall from 2008, when the plan was 93% funded before the financial crisis.

If the plan fails, it would likely mean cuts to monthly benefit payments that average $596 for all pensioners and $368 for surviving spouses. More than half of pensioners get less than $500 a month.

"Chapter 11 has clearly been used, by the coal industry at least, as a convenient way for people to get out of living up to their obligations," UMWA spokesman Phil Smith said.

Mining companies also have used chapter 11 powers to avoid the costs that come with withdrawing from the pension plan. For instance, Patriot Coal Corp, Alpha Natural Resources, Jim Walter Resources and Mission Coal Corp. -- all of which have filed for bankruptcy since 2012 -- have avoided paying nearly $4 billion in combined withdrawal liabilities, according to Ms. Lewis's testimony.

Murray Energy said in court papers Tuesday it paid about $15 million into the pension fund in 2018 and as a result of the previous bankruptcies faces liabilities upward of $6.4 billion if it withdraws from the plan. A restructuring support agreement backed by Murray's senior lenders calls on the company to negotiate modifications to its retiree benefits and reject collective bargaining agreements.

The UMWA said Tuesday: "Our retirees should understand that their health care will continue to be paid, at least until the bankruptcy process is completed."

Seeking Solutions

The decline of the pension plan has prompted Congress to consider remedies. The UMWA is lobbying Senate Majority Leader Mitch McConnell (R., Ky.) to take up legislative proposals that would send excess funds from an abandoned mine reclamation fund to the pension plan. Mr. McConnell's spokesman said he "is concerned about the insolvency issues facing a number of multiemployer pension plans and he supports the ongoing process to find a bipartisan solution for pension reform."

The Pension Benefit Guaranty Corp., the U.S. government's pension insurer, would step in if the UMWA pension plan goes insolvent. PBGC Director Gordon Hartogensis said the miners' plan is one of roughly 125 multiemployer pension plans expected to run out of money in the next 20 years, affecting nearly 1.4 million people. The PBGC has said its multiemployer pension program could itself run out of money by 2025.

Recent bankruptcies also have put medical benefits for hundreds of retirees who worked at Mission Coal Co. and Westmoreland Coal Co. in jeopardy. Former coal miners who spoke with The Wall Street Journal said they agreed to do hazardous mine work because they were promised a pension as well as medical benefits for after they retired.

"You put your life at risk every day you go underground. You don't know if you're going to make it out or not," said Westmoreland retiree Gary Wells, 76 years old. "You put your health and everything at risk for the company."

Westmoreland retirees and their dependents are expected to lose medical benefits by year's end if Congress doesn't add them to a UMWA health plan. The company's bankruptcy advisers said such a plan was needed to avert liquidation and preserve jobs. Lenders that took over Westmoreland provided $6 million to fund retiree benefits temporarily.

Westmoreland retiree Bethel Brock, 79, said he has been notified that he could lose medical benefits for himself and his wife at the end of the year. Mr. Brock said he has been diagnosed with a complicated form of black lung disease and relies on the Westmoreland benefits, UMWA pension, Medicare and Social Security. Westmoreland withdrew from the UMWA pension plan in 2004.

"When a coal company is through with you, you're just like a used piece of equipment," Mr. Brock said.

Black Lung Resurgence

Since 2014, coal bankruptcies also have transferred more than $310 million in corporate liabilities to the federal Black Lung Disability Trust Fund, which compensates workers diagnosed with black lung disease. The shift has come as researchers have documented a resurgence of a severe form of the disease in Appalachia.

"Our clients are younger and sicker than ever before," said Rebecca Shelton, coordinator of policy and organizing at the nonprofit Appalachian Citizens Law Center, which helps workers seeking black lung benefits.

An excise tax to fund this trust fund was scaled back at the end of last year because of Congress inaction, meaning the fund likely will need to borrow more public funds to continue providing benefits. A former miner could get between $660 and $1,320 in monthly black lung benefit payments depending on the number of their dependents, according to the Government Accountability Office.

"A lot of people that are drawing black lung [benefits], they're struggling to pay their bills," said Patty Amburgey, a member of a black lung association in southeast Kentucky who lost her husband to the disease.

Sen. Joe Manchin (D., W.Va.) has been a lead sponsor on proposed legislation that would add affected retirees of Westmoreland and Mission Coal to a UMWA health plan, direct excess reclamation funds to the pension plan and restore the higher black lung excise tax. That bill, introduced in January by Democrats, is co-sponsored by presidential candidates Bernie Sanders, Elizabeth Warren and Kamala Harris.

Write to Jonathan Randles at jonathan.randles@wsj.com

(END) Dow Jones Newswires

October 30, 2019 05:44 ET (09:44 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.