Coal Company Bankruptcies Empower Mine Workers But Highlight Rail Carriers’ Woes
By Ken Silverstein
September 10, 2019 - The decline of coal is giving rise to the labor movement while also helping take down the country’s major railway companies. Consider that the coal miners got shafted when Kentucky’s Blackjewell went bankrupt in July — a move that forced them to block the rail lines so that the coal operator couldn’t move its product.
In other words, a coal company goes bankrupt and is able to pay its top executives millions of dollars to help it reorganize but it is unable to compensate the little guy who slavishly worked to mine the very product on which it depends. In the case of Blackjewell, miners recently took their fight to Capitol Hill to try and win support from lawmakers — something that would not just protect their promised health and pension benefits but also their standing in the bankruptcy system.
Unemployed Blackjewel coal miners, their family members and activists man a blockade of the railroad tracks that lead to the mine where the miners once worked on August 24, 2019 in Cumberland, Kentucky.
Photo by Getty Images
In a speech last week to the National Press Club, Cecil Roberts, president of the United Mine Workers of America said the big problem is that these companies care more about paying tens-of-millions in bonuses to their top executives during bankruptcies than they do about fulfilling the promises that they made to coal miners. Those jobs are literally back-breaking.
“Slashing the health benefits of aged and medically vulnerable retirees with extremely limited resources, while lavishly rewarding white-collar employees, is neither fair nor reasonable,” writes the United Mine Workers, in court documents, in an earlier bankruptcy involving Peabody Energy, which had asked for permission to pay out $3.24 million in bonuses to 42 people while it had cut retiree health funds by $70 million.
Alpha Natural Resources, meanwhile, had received permission to shell out nearly $12 million to 15 executives. The Virginia-based company filed for bankruptcy in August 2015, a victim of what it has said is changing market conditions combined with a strict regulatory environment. Prior to re-emerging from bankruptcy, it lost hundreds of millions. To stop the bleeding, the company said it was forced to cut health and retirement benefits to miners.
There are 106,000 current and future retirees who are at risk of losing those benefits, says the mine workers’ union.
At the same time, the railways are getting swamped by the spillover effect. The U.S. Energy Information Administration says that it expects the demand for coal to drop 15% between 2018 and 2019, all because 13,000 megawatts of coal-fired power plants have shut down or will close this year, or next.
Blind Eye to Labor Laws
As a result, carloads of coal have fallen 6% this year when compared to those in 2018. That is according to the Association of American Railroads, which says that 2.3 million carloads were moved as of the end of July. The railroads could thus lose $5 billion in revenues over 10 years, says Moody’s. The major railway companies with the most exposure are CSX, BNSF, Union Pacific, Canadian National Railway and Norfolk Southern. They are providing 90 percent of all rail service, while three other Class 1 rail lines split the remaining 10 percent.
“I’d expect a future sell-off of some of these Class I rail company lines to short line railroads,” FreightWaves Market Voices expert and economist Jim Blaze told the publication. Coal “comprises about 14% of total U.S. rail freight carloads. But that volume has been shrinking since 2008 at about 25 percent year-over-year. The long-term shows a negative slope. However, month-to-month and year-to- year coal volumes by rail are up and down. The short-term demand pattern is irregular.”
Circling back to Blackjewell’s bankruptcy, it had failed to post a performance bond that would have ensured workers got paid for at least a month. In fact, the Kentucky Attorney General’s office says that there may be as many as 30 companies that have not posted the required bond. An exemption does exists if coal companies have been in business in Kentucky for at least five years.
All this empowering the labor movement: Blackjewell’s miners blocked the rail lines to prevent the company from transporting its coal until the company paid up. But the reality is that unions still have an uphill climb. Declining coal production means that fewer miners will ultimately be required. And the jobs that do exist are largely non-union, meaning that workers have less bargaining power and especially over workplace safety as well as fair wages and benefits, all while the federal government is shirking its duty to enforce labor laws.
“I accept responsibility for being unable to lead this company through these difficult times,” Blackjewell’s Chief Executive Jeffrey A. Hoops wrote in a letter to workers. “Know in my heart how hard I fought for each of you and this company, and to have people threaten me and say I took money out of this company for other projects hurts more than words can express …”
The coal industry’s financial distress has ramifications not just for its miners but also for the other key segments of the economy. Labor’s role is no doubt diminished but the miners are standing up for their basic rights — a stand that has, ironically, highlighted how closely rail carriers are linked to the coal sector.