A new report from the U.S. Government Accountability Office revealed that shoddy government enforcement has allowed coal companies to transfer $865 million of disability liabilities to taxpayers during bankruptcies in recent years.
With several more-recent coal company bankruptcies looming in Eastern Kentucky, West Virginia and elsewhere, it is unclear how many millions of dollars of liabilities those companies may soon transfer to taxpayers.
The issue revolves around the Black Lung Disability Trust Fund, which exists to ensure that black lung victims receive workers’ compensation payments if their employer becomes insolvent or otherwise fails to provide those payments.
While some companies buy insurance to cover those claims, others are self-insured, and post collateral with the federal government to ensure that the companies’ black lung claims do not transfer to the trust fund.
The GAO’s report, however, showed that the collateral posted by self-insured companies is sometimes woefully inadequate.
Coal companies pay into the fund via a tax on the coal they produce, but the fund also borrows billions of dollars from the U.S. Treasury. In fiscal year 2019, it borrowed about $1.9 billion, according to the GAO report.
Alpha Natural Resources, James River Coal and Patriot Coal posted a combined $27.4 million of collateral before each declared bankruptcy between 2014 and 2016. The companies had hundreds of millions of dollars of liabilities, though, and shifted $865 million of those liabilities to the trust fund.
Findings from the GAO report showed that the Department of Labor has, for years, failed to take steps to prevent this liability shift to taxpayers.
“This is a failure on multiple fronts across multiple administrations,” said U.S. Rep. Alma Adams, D-N.C., during a congressional subcommittee hearing Wednesday.
“What we’re 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.”
“In other words, the costs of black lung disease have been socialized, and the gains from DOL’s failed oversight have been privatized,” Adams said.
The department declined to use enforcement tools to force the company to post adequate collateral, failed to regularly review the financial condition of the coal companies, and did not factor in the companies’ future benefit liability amounts, according to the report.
Several other self-insured coal operators have since declared bankruptcy, including Murray Energy, Westmoreland Coal and Cambrian Coal, which was previously operated by Jim Booth, a coal baron from Martin County who previously served as a University of Kentucky board trustee.
