- Associated Press - Friday, October 2, 2015

CHARLESTON, W.Va. (AP) - Patriot Coal’s latest reorganization plan is drawing opposition from the federal government, regulators in four states, creditors and others ahead of a bankruptcy court hearing on whether it should be approved.

Opponents say in motions filed this week that the plan is not feasible and contains provisions that violate bankruptcy law. A hearing on the plan is set for Monday in U.S. Bankruptcy in Richmond, Virginia.

Several environmental groups, the federal government and regulators in Kentucky, Ohio, Pennsylvania and West Virginia questioned how the company’s obligations, including the multimillion-dollar cost of cleaning up mine pollution, would be fulfilled once a substantial amount of its assets are sold to Blackhawk Mining. They also said provisions that would release future owners or operators from obligations, liabilities and causes of action are overly broad and violate bankruptcy law.

“No one is free to maintain a nuisance or endanger visitors to or neighbors of contaminated or defective property just because the contamination or damage originated prior to the purchase,” the federal government said in its motion.

Lexington, Kentucky-based Blackhawk Mining won an auction on Sept. 21 for a majority of Patriot’s assets. Coronado Coal LLC was designated the backup bidder.

The Virginia Conservation Legacy Fund is looking to acquire Patriot’s other mines and mining permits for purposes of water quality improvement and reclamation. If the acquisition is not consummated, these assets would be bought by a liquidating trustee and transferred to a trust, according to the plan.

Neither Patriot, the Virginia nonprofit nor the trust would have enough resources to meet the company’s obligations to “clean up the mess left behind by Patriot’s coal-mining operations, obligations that neither entity can simply shuck in connection with the proposed transactions or otherwise,” the West Virginia Department of Environmental Protection said in its motion.

Bob Bennett, Patriot’s chief executive officer, has said the company believes the assets sale to Blackhawk is in the best interest of the company, its employees and stakeholders.

“We look forward to obtaining confirmation of our plan and consummating this transaction, and are gratified to have a solution that preserves jobs in West Virginia, helps ensure environmental obligations are handled in a responsible manner and maximizes value for creditors. As we work to complete the sale process, we remain committed to operating safely and serving our customers,” Bennett said in a recent statement.

Patriot’s reorganization plan also is opposed by unsecured creditors and the United Mine Workers of America.

A motion filed by the UMW said the plan’s feasibility “remains a hope but not a reality” because of uncertainties surrounding both the asset sales and the collective bargaining agreements in principal that the union reached with Blackhawk Mining and an affiliate of the Virginia nonprofit.

The union represents more than 2,500 active and laid-off Patriot employees, along with more than 17,000 retirees and dependents.

Another motion filed by the committee of unsecured creditors said a significant amount of the assets to be sold to Blackhawk are unencumbered, which would benefit Patriot’s lenders but provide no consideration to unsecured creditors.

Scott Depot, West Virginia-based Patriot filed for Chapter 11 bankruptcy protection May 12. Patriot had emerged from an earlier bankruptcy case in Missouri in December 2013.

A disclosure statement filed with the reorganization plan said Patriot has faced several challenges since emerging from the previous bankruptcy, including slumping demand for coal, increased regulation, and reclamation and retiree health care obligations.

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