Black lung disease has contributed to the deaths of more than 76,000 coal miners since 1968.In the early 1990s, the most severe form of black lung disease (known as progressive massive fibrosis), came back with a vengeance driven by higher silica exposure. \u00a0<\/span><\/strong><\/p><\/blockquote>\n In the early 1990s, the most severe form of black lung disease (known as progressive massive fibrosis), came back with a vengeanc<\/a>e driven by higher exposure to silica in coal mines. \u00a0In 2018, NIOSH reported one in five<\/a> long tenured miners in Central Appalachia was diagnosed with black lung disease\u2014a rate not seen in 25 years.<\/p>\n The 1969 Coal Act also included a national compensation system for miners suffering from black lung disease. That program, which is now administered by the Department of Labor (DOL), provides totally disabled miners and survivors with $738<\/a> per month plus related medical costs, and another $368 per dependent up to a maximum $1,475 for a family of 4.\u00a0 Obviously, no one is getting rich by winning a claim for preventable lung disease that suffocates its victims.<\/p>\n In general, mine operators are responsible for paying black lung benefits. But coal operators use bare-knuckle<\/a> tactics to fight miners’ black lung claims, making it an uphill battle for claimants to secure the benefits they have earned.[1]<\/sup><\/a><\/p>\n As part of the claims process, DOL identifies the miner\u2019s last coal mine employer (where the miner was employed 12 months or more) who is deemed the \u201cResponsible Operator\u201d liable to pay any black lung benefits awarded.\u00a0 \u00a0To ensure that mine operators have the funding to pay the miners\u2019 benefits, operators must purchase workers\u2019 compensation insurance to cover black lung benefits.<\/p>\n Or there is another option: mine operators are allowed to self-insure<\/em> — if<\/em> they can demonstrate to DOL that they have secured the necessary assets to cover their black lung liabilities.<\/p>\n That\u2019s an attractive option for many coal operators since self-insuring often costs less than buying workers\u2019 compensation insurance. \u00a0But how does DOL make sure that the self-insured operators have the full amount reserved for current and future benefits? And how can these assets be secured before<\/em> there is a bankruptcy?<\/p>\n Under current rules, to self-insure, operators must have been in the business of coal mining for at least three years, and must demonstrate to DOL that they have necessary assets to cover their black lung liabilities by obtaining collateral in the form of an indemnity bond, placement of assets in escrow, or a letter of credit in the amount necessary to secure payment of benefits.<\/p>\n That way if (or when) they go bankrupt, the funds are there to pay benefits \u2014in theory. \u00a0But who pays if the coal operator goes bankrupt and didn\u2019t have enough commercial insurance or secured assets (such as an indemnity bond) to pay black lung benefits?<\/p>\n In cases where no responsible mine operator could be identified, or the operator went of business, or filed for bankruptcy, the benefits are paid by the Black Lung Disability Trust Fund<\/strong> (Trust Fund), which was established in 1978 by the Black Lung Benefits Revenue Act of 1977.<\/p>\n The Trust Fund, which is based in the U.S. Treasury Department, is financed by an excise tax on coal tonnage amounting to $1.10\/ton for underground coal and $0.55\/ton for surface mined coal. The tax is paid by mine operators for coal sold domestically. \u00a0But the revenues from that tax have never been sufficient to cover the Trust Fund’s expenses. The Trust Fund is currently approximately $6 billion<\/a> in debt.<\/p>\n It is fair to say\u2014with limited exceptions\u2014that coal mining is a rapidly shrinking industry in the US.\u00a0 Bankruptcies have proliferated because there is only half<\/a> as much domestic coal mined as there was a decade ago.\u00a0 The excise taxes needed to fund the Trust fund are falling in lock step (and exported coal is exempt<\/a> from that tax).<\/p>\n But miners who contract disabling black lung\u2014and their survivors–will still need to receive benefits until death, even though the coal industry is shrinking.\u00a0 This liability \u201ctail\u201d could last as long as 50 years, according to a DOL memo from the Trump Administration.<\/p>\n The bad news is that if the Trust Fund is insolvent, it\u2019s the taxpayers \u2013 you and me \u2013 who end up paying benefits for miners with black lung instead of the coal companies that caused the problem in the first place.<\/strong><\/span><\/p><\/blockquote>\n The good news is that even if the Trust Fund does not have sufficient resources to pay benefits, miners’ black lung benefits are still OK because the Trust Fund is authorized to borrow from the U.S. Treasury if its short of funds.<\/p>\n The bad news is that ultimately, if the Trust Fund is insolvent, it\u2019s the taxpayers \u2013 you and me \u2013 who end up paying benefits for miners with black lung instead of the coal companies that caused the problem in the first place.<\/p>\n Congress stated clearly that coal operators, instead of taxpayers, would shoulder the cost of black lung when it set up the Trust Fund.\u00a0 The Trust Fund was intended to be a backstop for miners rather than a means for coal operators to underinsure their liabilities.<\/p>\n But over the past decades, many self-insured coal operators have perfected the art of dodging liability when it comes to coughing up (pardon the expression) the money to pay for black lung benefits,<\/p>\n This turned the purpose of the Trust Fund on its head.<\/p>\n According to the Government Accountability Office (GAO)<\/a>, instead of the Trust Fund serving as an emergency backup, it became the main means by which a number of self-insured coal operators have cleverly offloaded around $1 billion in their liabilities while providing as little as three percent in collateral.<\/p>\n Over the past decades, many self-insured coal operators have perfected the art of dodging liability when it comes to coughing up the money to pay for black lung benefits,<\/span><\/strong><\/p><\/blockquote>\n In January 2023, DOL estimated<\/a> that self-insured operators have another $700 million in self-insured black lung liabilities, but reserved only $120 million (17%) in collateral. For example, DOL authorized Alpha Natural Resources (ANR), one of the largest coal operators in the country, to post only $12 million in collateral for its self-insured liabilities. Yet, when Alpha filed for bankruptcy in 2015, nearly $500 million in black lung liabilities were transferred to the Trust Fund, according to the GAO<\/a>.\u00a0 That means that Alpha was off the hook for a mere 3% of its liabilities.<\/p>\n The GAO found big problems<\/a> with DOL\u2019s current rules because they do not require sufficient collateral to cover both current and<\/em> future black lung liabilities.\u00a0 DOL is not currently required to update coal operators\u2019 collateral levels on a regular basis to ensure that the coal operators have enough money set aside to fund their black lung liabilities.<\/p>\n But failing to reserve enough money to cover black lung benefits is only one way for coal operators and Wall Street to game the system.\u00a0 Another way is to transfer these liabilities to a spin off company, which, when it files for bankruptcy, makes the liabilities disappear.<\/p>\n Peabody Coal, for example, spun-off<\/a> a new coal company out of its eastern U.S. mines in 2007 and saddled the new company with an insurmountable burden of black lung, pension, and health care liabilities, but with far too few assets to pay the bills. This new, stand-alone enterprise was named Patriot Coal.<\/p>\n Through this two-step process\u2014a spin-off followed by an inevitable bankruptcy- (Patriot declared bankruptcy in 2015),-Peabody jettisoned decades of black lung liabilities from their balance sheet. \u00a0Although Patriot and the United Mine Workers of America (UMWA) contended Peabody\u2019s spin-off was a fraudulent conveyance<\/a>, in the end DOL was left holding the bag to the tune of nearly a quarter billion dollars in black lung liabilities. S&P Global reported<\/a>:<\/p>\n With the spinoff, Peabody rid itself of about $600 million of retiree-healthcare liabilities, along with hundreds of millions of dollars of other liabilities, including environmental-reclamation obligations and black-lung benefits.<\/p>\n The UMWA explained in their April 19, 2023, comment letter<\/a> to DOL:<\/p>\n Patriot inherited only 13% of the parent company\u2019s coal reserves, but according to one executive, the spin off meant that \u201cour retiree, health care liability and related expense will be reduced by about 40%\u201d and added \u201cthat workers\u2019 compensation liability will be cut by nearly 90%\u201d.\u00a0 As many as 13<\/a> self-insured subsidiaries were spun out of Peabody into Patriot.\u00a0 Patriot also acquired 3<\/a> operators from Arch Coal that had self-insured liabilities.<\/p>\n The Patriot boondoggle wasn\u2019t a big surprise: more like that bad dream where the train is bearing down on you, but your feet are stuck in molasses.<\/p>\n Even when DOL does periodically update operators’ required collateral levels, the operators are able to kick-the-can-down-the-road by filing appeals that languish for years in DOL.\u00a0 For example, DOL had seen Patriot\u2019s bankruptcy on the horizon in 2014 \u2013 a year before Patriot declared bankruptcy — and requested that Patriot increase its self-insurance collateral from $15 million to $80 million.<\/p>\n Patriot appealed. But DOL had no quick procedure to deal with appeals, so in the eight months while the appeal was languishing, Patriot filed for bankruptcy, and eventually transferred $230 million in black lung benefit liabilities to the Trust Fund. The $15 million in collateral amounted to only 6% of the collateral needed to fund their black lung liability, according to the GAO<\/a>.<\/p>\n Professional Wall Street creditors aren\u2019t dumb. They\u2019re rich. And there\u2019s a reason.<\/p>\n In this case, they have developed a clever workaround that allows them to handcuff DOL\u2019s ability to recover the cost of black lung benefits from self-insured operators in bankruptcy. \u00a0Of course, keeping DOL at bay means that creditors pocket more money from a bankruptcy.<\/p>\n It\u2019s a complicated \u2013 but ingenious –3-step process. So follow closely:<\/p>\n Under current law, DOL, as a Trustee for the Trust Fund, may only place a lien<\/em> (or legal claim) on assets if the self-insured operator defaults<\/em> on (or stops) paying benefits to miners.<\/p>\n And if there is a default, DOL gets the money first before other creditors in bankruptcy.<\/p>\n That\u2019s bad for the vultures of Wall Street, so their clever lawyers figured out how to empty out the money bag before DOL \u2013 and taxpayers — get to place a lien.<\/p>\n Step one:<\/u> After declaring bankruptcy, creditors and the operator get the judge\u2019s approval to keep paying miners\u2019 monthly benefits during the bankruptcy court proceedings. So, no default<\/em>\u2026yet.<\/p>\n Step two<\/u>: The operator waits to default on monthly benefit payments to miners until after<\/em> the bankruptcy court distributes all assets to the secured creditors.<\/p>\n “The winners are the coal operators and their Wall Street creditors. The losers are the American taxpayers.” — Rep. Alma Adams (D-NC)<\/strong><\/span><\/p><\/blockquote>\n Step three:<\/u> A couple of weeks after all the assets have been distributed–after the money bag has been emptied out–the operator notifies DOL that (oops!) they are unable to pay benefits to miners. \u00a0With this default<\/em>, DOL is now finally entitled to place a lien on the company\u2019s remaining assets.<\/p>\n The problem is that (presto!) there are no assets left. \u00a0All the Trust Fund gets is whatever insufficient collateral had been set aside prior to bankruptcy\u2026and a mountain of liabilities.<\/p>\n Alma Adams (NC-12), former-Chair of the House Subcommittee on Workforce Protections, noted at a February 26, 2020, hearing<\/a> on the Trust Fund: “What we are seeing here is nothing less than a gaming of the system. The winners are the coal operators and their Wall Street creditors. The losers are the American taxpayers.”<\/p>\n To head off these schemes to evade the costs of black lung, DOL issued \u00a0proposed rule last January that would tighten up its self-insurance rules by implementing most of the GAO\u2019s recommendations<\/a>.<\/p>\n The proposed rule<\/a> which would require self-insured operators to provide surety equal to 120% of their current and future black lung benefit liabilities.\u00a0 This reform would plug the leaky bucket and prevent the egregious abuse of the system.<\/p>\n However, this reform is causing no shortage of gnashing of teeth, if not hysteria, in the C-suites of the coal companies.\u00a0 The same coal companies that gamed the system are now claiming that the new DOL proposal will drive them to the brink.<\/p>\n The National Mining Association<\/a> (NMA), for example, contends that the added red ink (and the risk of more) is too insignificant to justify reforms to self-insurance.\u00a0 Nothing to see here folks.<\/p>\n New rules proposed by the Department of labor are causing no shortage of gnashing of teeth, if not hysteria, in the C-suites of the coal companies.\u00a0 The same coal companies that gamed the system are now claiming that the new DOL proposal will drive them to the brink.<\/span><\/strong><\/p><\/blockquote>\n Alpha Metallurgical Resources (the successor to ANR) in a joint letter<\/a> with Warrior Met Coal blasted the DOL\u2019s proposal as \u201cunsound legally and bad public policy\u201d and would \u201csubstantially decrease liquidity and interfere with current operations and financial position.\u201d<\/p>\n They argue that it\u2019s not fair for DOL to change the rules because they had already made \u201cirreversible business decisions based on DOL\u2019s historic practices.\u201d<\/p>\n In other words, we\u2019ve become dependent on your failed rules, so it\u2019s not fair to fix them now.<\/p>\n Unpacking these arguments, it appears these operators simply want to continue to under-insure, because it is cheaper, and they know the risk from under-insurance will just be transferred to the taxpayers, via the Trust Fund.<\/p>\n Given that the predecessor to Alpha Metallurgical Resources was able to shift nearly $500 million in liabilities to the Trust Fund while providing less than 3 percent collateral, what rational executive wouldn\u2019t want to keep this sweet deal?<\/p>\n Warrior Met is crying foul that DOL is proposing to boost their surety bonding from $21 million to $68 million. \u00a0But this company has been awash in cash in recent years, having transferred around $1.5 billion<\/a> in dividends to their shareholders and $50+ million in stock buybacks since 2017.<\/p>\n So cry me a river.<\/p>\n In an April 19, 2023, comment letter,<\/a> Peabody Coal criticized DOL\u2019s proposal requiring them to post collateral equal to 120% of their estimated liabilities, because this means they would have to set aside money that could go to its shareholders. And they are refreshingly honest about it.<\/p>\n Peabody says it has \u201c$1.3 billion in cash on the books\u201d, and just announced<\/a> a $1 billion stock buy-back plan. They argue that this rule would tie \u201cup cash and\/or Letter of Credit capacity that prevents the company from operating efficiently.\u201d\u00a0 Their loyalty is to their shareholders, not their ailing workers. So for Peabody executives, the current status quo is just fine.<\/p>\n Peabody also contends that they should be not have to post 120% collateral, because they \u201cpaid $32.4<\/a> million in black lung excise tax to fund the trust fund\u201d last year.\u00a0 They write:<\/p>\n \u201cIf the collateral [collected from operators] completely eliminates any possibility of the trust paying claims, then it calls into question the purpose for the fund and the excise tax.\u201d<\/p>\n Apparently, Peabody overlooked that the Trust Fund is $6 billion in debt, which includes close to $230 million in Peabody\u2019s black lung liabilities that were transferred to the Trust Fund via the Patriot Coal bankruptcy.\u00a0 Perhaps the Peabody executives wanted to skip over that inconvenient fact. Or maybe just forgetful.\u00a0 However, paying the modest excise tax is a good way to start repaying the debt and restoring solvency to the Trust Fund.<\/p>\n The United Mine Workers of America<\/a> (UMWA), the Appalachian Citizens Law Center<\/a>, the National Black Lung Association<\/a>, Appalachian Voices<\/a>, and a related citizens petition<\/a> signed by 4800+ individuals addressed many of the industry\u2019s objections (and suggested improvements):<\/p>\n The solvency of the Trust Fund is integral to the workings of the Black Lung program, and miners and taxpayers face multiple risks by allowing operators to pile more red ink on the taxpayers.<\/p>\n When the Trust Fund faced a growing mountain of debt in 1981, the industry won legislation to cut benefit eligibility in exchange for a higher excise tax rate. It took until 2010 when the Affordable Care Act was passed, to reverse these deep benefit cuts; but in that 30-year window far too many miners and survivors were denied benefits.<\/p>\n Last year, House Education & Labor Republicans offered an amendment during a mark-up<\/a> that could coerce miners into accepting a partial settlement<\/a> in lieu of full benefits. \u00a0The Black Lung Association<\/a> (BLA), which advocates for miners safety and benefits, warns that growing debt levels in the Trust Fund could once again be used by the industry as political cover to cut miners\u2019 benefits.<\/p>\n Evading black lung payment provides far less incentive for coal operators to control dust to a low enough level that prevents black lung disease over a lifetime of work.<\/span><\/strong><\/p><\/blockquote>\n The BLA points out that allowing self-insured operators to dodge payment for black lung benefits establishes a perverse incentive, whereby a significant cost\u2014compensating black lung disease from the failure to control harmful dust levels–is not included in the cost of coal production. While internalizing these costs will not ensure safer mines\u2014that requires much stronger standards and enforcement\u2014evading payment provides far less incentive for coal operators to control dust to a low enough level that prevents black lung disease over a lifetime of work.<\/p>\n Government permission to under-insure current and future benefits means the Trust Fund (and taxpayers if it is insolvent) will subsidize the cost of black lung disease. This creates a moral hazard where responsible coal operators have little\u00a0incentive<\/a> to guard against that risk because they are improperly allowed to shift the cost to taxpayers.<\/p>\n <\/p>\n As Senator Robert C. Byrd noted<\/a> in 2010, \u201c\u2026black lung benefits have been promised to coal miners who have acquired this totally disabling disease through no fault of their own\u2026[it would]\u00a0 not cost [companies] one additional dime, unless [these] employers took insufficient precautions to protect their workers from black lung disease.<\/p>\n [1]<\/a> For more information on how the coal operators fight miners black lung claims, read Soul Full of Coal Dust The True Story of an Epic Battle for Justice<\/em><\/a>, \u00a0a gripping story by award-winning investigative journalist Chris Hamby about how the coal industry, backed by their stable of the best attorneys and \u201cexpert\u201d doctor money can buy, cheated thousands of miners suffering from black lung, out of the compensation they deserved. You don\u2019t know whether to cry at the tragedy or feel gratified by the dedication of those who spent their careers fighting for the miners.<\/strong><\/p>\nWho is Responsible for Paying Black Lung Benefits?<\/strong><\/h2>\n
A Shrinking Industry<\/strong><\/h2>\n
Dodging Liability<\/strong><\/h2>\n
Gaming the Department of Labor<\/strong><\/h2>\n
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<\/p>\nGaming the Bankruptcy System: 3 Easy Steps to Escape Liability<\/strong><\/h2>\n
DOL Proposes a Fix<\/strong><\/h2>\n
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Why Do We Care?<\/strong><\/h2>\n
Political risk: Future Benefit Cuts?<\/strong><\/h3>\n
Perverse Incentives: More Black Lung?<\/strong><\/h3>\n
Moral Hazard: Taxpayers Pay for Operators\u2019 Cost Shifting? <\/strong><\/h3>\n
Footnote<\/strong><\/h2>\n