Patriot has federal and state black lung occupational disease liabilities related to workers employed in periods prior to Patriot’s spin-off in 2007.

Upon spin-off, Patriot indemnified Peabody against any claim relating to these liabilities, which amounted to approximately $US150 million at that time, Peabody said in it latest quarterly result.

The indemnification included any claim made by the US Department of Labor (DOL) against the Peabody with respect to these obligations as a potentially liable operator under the Federal Coal Mine Health and Safety Act of 1969.

The definitive settlement agreement reached in 2013 included Patriot’s affirmance of all indemnities provided in the spin-off agreements, including the indemnity relating to such black lung liabilities.

The amount of the liability at March 31, 2016 was $130.6 million.

“While the company has recorded a liability, it intends to review each claim on a case by case basis and contest liability as appropriate,” Peabody said.

The amount of the Peabody’s recorded liability reflects only Patriot workers employed by former subsidiaries of the company that are presently retired, disabled or otherwise not actively employed.

The company cannot reliably estimate the potential liabilities for Patriot's workers employed by former subsidiaries of the company that are presently active in the workforce because of the potential for such workers to continue to work for another coal operator that is a going concern.

Peabody estimates that the annual cash cost to fund these potential Black Lung liabilities will range between $10 million and $15 million.