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Arch sues government over imposition of Patriot's black lung liabilities

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Essential Energy Insights - January 2021


Arch sues government over imposition of Patriot's black lung liabilities

Arch Coal Inc.is suing the U.S. Department of Labor seeking relief from the government's effortsto impose liability for Patriot CoalCorp.'s black lung claims after Patriot's liquidation.

Arch is currently in the midst of a Chapter 11 bankruptcy reorganization.In an April 8 filing in the U.S. District Court for the District of Columbia, Archasked a judge to provide declaratory and injunctive relief from a final agency actionit says violates the mine operator liability provisions of the Black Lung BenefitsAct.

Arch sold several of its subsidiaries to Magnum Coal Co. in December 2005. Prior to Arch's sale toMagnum, Arch said the government had approved self-insurance of its own black lungbenefits liability.

As part of the sale, Magnum assumed the liabilities associatedwith the subsidiaries Arch divested. Magnum would later become a part of Patriot,now liquidated after its second bankruptcy reorganization.

Patriot, which was formed in 2007 as a spinoff from , was weighedheavily by assorted worker liabilities from its largely unionized workforce centeredin Appalachia. The company filed bankruptcy in 2012 and again in in 2015.

When Patriot sold most of its operating assets to and the ,neither company was obligated to assume the black lung benefits under an agreementapproved by the bankruptcy court.

Arch argues that the benefits should be covered by the BlackLung Disability Trust Fund and said the Department of Labor is reaching beyond authorityprovided by regulations in imposing liability on prior stockholders or owners tocover the liability of an insolvent operator.

The April 8 court filing said Arch has been informed of at least70 claims of potential liability stemming from Patriot's self-insurance authorization.Arch estimates it costs $10,000 each to defend the claims.

Black lung has remained a persistent health issue for many underground miners. TheU.S. Mine Safety and Health Administration, a branch of the Department of Labor,recently released a new ruleaiming to lower dust exposure and is in the process of rolling out the full setof regulations included in that rule.