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Lighthouse Resources asks bankruptcy court to reject coal union contract

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Lighthouse Resources asks bankruptcy court to reject coal union contract

Lighthouse Resources Inc. asked a bankruptcy court to reject a collective bargaining agreement with the company's union workforce at the Decker coal mine in Montana.

In a Jan. 20 court filing, Lighthouse asked the court to reject an expired 2012 collective bargaining agreement the company is obligated to comply with until it reaches a new deal. Lighthouse told the court that it could not afford its obligations to a pension plan with an estimated unfunded liability of approximately $2.7 million.

The company and the union are in the middle of negotiations, but the coal producer explained to the U.S. Bankruptcy Court for the District of Delaware that it filed the motion in its Chapter 11 bankruptcy reorganization in case it can not reach an agreement. Lighthouse employs 28 active union employees and 18 nonunion employees at its Decker mine.

Union contracts and their associated pension plans and other liabilities have been a frequent target for cost cutting in the steady stream of coal company bankruptcies over the past few years. Courts have generally given the companies the leeway to reject past agreements with the workers to shed liabilities and complete financial restructuring.

The company's bankruptcy plan establishes a reclamation trust to satisfy the Decker mine's environmental obligations at a projected cost of $95 million. Decker plans to fund the cleanup with a sinking fund fueled by remaining collateral held by sureties, a portion of the proceeds of asset sales and a percentage of distributions from the Black Butte mine, where a Lighthouse subsidiary owns 50% of a joint venture and receives fees for managing operations at the Wyoming coal mine.

"The proposed trust, which already requires additional savings to complete the reclamation of the Decker mine, cannot afford the $2.7 million liability imposed by the pension plan, let alone the additional financial risk associated with the plan," Lighthouse wrote.

Lighthouse said it already cut back its labor expenses through layoffs and furloughs and the remaining workforce is needed to continue its current operation level. The company plans to close the mine and begin reclamation efforts as its last supply contract expires in 2021, leaving the company with no other coal buyers.

"Continuing to operate the Decker mine is not economically feasible," the company wrote.