Patriot Coal Corp’s bankruptcy may leave competing US mining companies Peabody Energy Corp and Arch Coal Inc liable for expenses related to Patriot operations they once owned.

Peabody, the largest US coal producer ranked by sales, may be responsible for liabilities for the treatment of black lung disease that were assumed by Patriot when it was spun off from Peabody in 2007, according to a February filing. Peabody may be responsible for the liabilities, which are expected to be less than 150 million, should Patriot be unable to fund them, according to the filing.

Arch, the fourth-biggest producer, may have to cover contracts from Patriot unit Magnum Coal Co., according to Arch filings.

Patriot filed for protection in US Bankruptcy Court in Manhattan. The St Louis based company, whose Chapter 11 petition listed USD 3.57 billion in assets and USD 3.07 billion in debts, is the biggest casualty so far of the slump in the US coal industry, which has cut tens of millions of tons of production following a mild winter and after natural gas prices dropped to their lowest in a decade.

A New-York based analyst with Nomura Securities International Inc., said that Patriot’s reorganization may accelerate the closing of some of its high cost Appalachian mines, reducing the region’s surplus of production, Curt Woodworth.

Mr Lucas Pipes an analyst at Brean Murray Carret & Co in New York said that if Patriot fails to deliver 10 million tonnes from Magnum under contract, Arch will have to do so. The deliveries would cost Arch less than USD 100 million citing conversations with the company.

Source - Bloomberg

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