By Taylor Kuykendall

Less than two years ago, former Patriot Coal Corp. CEO Bennett Hatfield touted the company's new look as a leaner, reorganized and newly private coal operator. In the months that followed, Patriot was plagued by a union strike, infrastructure failures, fatal accidents and persistently weak coal markets that ultimately resulted in the company again filing for Chapter 11 bankruptcy reorganization May 12.

Shortly after the company announced deals and settlements sealing its emergence from bankruptcy, Hatfield told SNL Energy that the reorganized Patriot "epitomize[d]" what he called "a successful reorganization" and said the company was on the path to positive outcomes in the coal sector. With what Hatfield said would be "one of the strongest balance sheets on the playing field," Patriot was planning to shut down some of its higher-cost Central Appalachia thermal coal production and increase production at the Highland complex in the Illinois Basin.

"Our company has industry-leading mining complexes, high-quality reserves, loyal customers, a strong safety culture, and hard-working employees," Hatfield wrote in an October 2013 letter to employees. "We have made substantial progress through our reorganization and positioned Patriot for a bright future."

Hatfield's optimism glossed over the fact that, by Patriot's own projections, the company would report annual net losses through 2018, according to a 2013 bankruptcy filing.

Many have speculated that Patriot was "doomed to fail" — a product of bad assets and liabilities spun off to the benefit of progenitor companies Peabody Energy Corp. and, to a lesser extent, Arch Coal Inc. Even Hatfield, who was working for another company when the spinoff was first announced, has lent credence to the claims that Patriot stood little chance of survival.

Peabody and Arch dismissed such claims, and a "fraudulent transfer" investigation into the companies was dropped ahead of a settlement between the companies and other parties. An October 2013 court filing shows that Patriot chose not to pursue the investigation as it was deemed to be too risky with the alternative of a settlement on the table.

It did not help that one of the company's strategies, shifting from thermal coal to metallurgical coal, was stymied by ongoing weakness in the met coal market. While some coal operators and investors were surprised to find the met coal market weakness to persist as long as it has, analyst Mark Levin of BB&T Capital Markets was warning in November 2013 that a "serious" oversupply problem was expected to continue to keep met coal prices down

"We believe, in many respects, Patriot has made changes that others in the industry haven't made and I think will eventually need to make to survive this downturn," Hatfield told SNL Energy in December 2013 just after the reorganization. "I believe, in some respects, we're advantaged by being forced to incorporate dramatic cost improvement and make operational changes that have made us a much stronger company."

Post-bankruptcy timeline fraught with trouble

While market pressures certainly held Patriot back after exiting bankruptcy, the company also struggled with a string of environmental, safety and labor problems.

Coming out of bankruptcy, the company had already tied its hands on conducting new mountaintop removal mining due to a settlement with environmentalists, the result of concessions on Patriot's significant and costly selenium cleanup obligations. Hatfield had said the company was finding it increasingly expensive to utilize mountaintop removal and had hoped to move away from the process anyway.

Patriot could not exactly catch a break at its underground coal mines either. In October 2013, before the company could even complete its reorganization process, the U.S. Mine Safety and Health Administration marked Patriot's Brody No. 1 mine as one of three mines subject to additional scrutiny under the agency's newly revised pattern of violations, or POV, status.

Patriot opposed the designation and fought it in court, with several entities holding up Brody as a victim of what were framed as financially onerous new rules. It took nearly a year, but Patriot eventually was successful in getting a judge to toss the designation.

Between the time of the POV designation and a judge reversing that decision, Patriot was also cited over a double fatality that occurred at Brody when a pillar burst during retreat mining operations. Patriot appealed those citations resulting from an investigation that found Patriot had failed to recognize and control the factors that led to the miners' deaths.

The company faced even more challenges before its last bankruptcy case was even officially closed in March 2014. In November 2013, Patriot shut down its Guyan surface mine at one of its West Virginia complexes. Duke Energy Corp. filed a complaint against Patriot over unpaid rail charges in December 2013. An ongoing dispute with Keystone Industries over a failure to take delivery of coal stretched into the newly restructured Patriot's timeline.

Then, early Feb. 11, 2014, Patriot spilled an estimated 108,000 gallons of coal slurry into a creek in Kanawha County, W.Va., erupting concern in a community only a few miles from where another company spilled a chemical near a water intake on the Elk River just the month before. Patriot was fined $72,245 in penalties from the spill and committed $100,000 for spill prevention system enhancements. A spokeswoman said Patriot spent more than $1 million on containing the spill.

Labor strife, equipment failures add to Patriot woes

It was not Patriot's only infrastructure failure of the year. The company was forced to temporarily idle its Highland mine complex in the Illinois Basin after a portion of the top floor of a Kentucky prep plant collapsed a few months after the West Virginia spill. Patriot is suing the servicer of that prep plant, citing more than $14 million in lost business due to the collapse. A miner died at the Highland mine in December 2014 when he was struck by a coal hauler working underground.

Despite Hatfield's suggestion that the company would shift its focus to its Illinois Basin operations, the company announced on the last day of 2014 that it shut down two of its Illinois Basin mines, including Highland, and was looking to sell one mine in 2015. Alliance Resource Partners LP bought several of Patriot's coal contracts.

The shutdowns effectively ended Patriot's presence in the Illinois Basin, and Highland was the last union coal mine left in Kentucky. The announcement came just a few months after Patriot had said it was recruiting Central Appalachia miners for its Highland mine in the Illinois Basin and the Federal No. 2 mine in Northern Appalachia.

The Federal No. 2 mine may not have closed, but workers there were dealing with other issues. In October 2014, the union workers at that mine walked off the job, forcing a federal judge to order an end to the work stoppage. The United Mine Workers of America and Patriot eventually resolved their differences, which the union said were related to the use of contractors and a number of violations that "deprived bargaining unit employees of a safe workplace."

All of the safety concerns of 2014 — including three fatalities —followed what Hatfield called "one of the worst years in Patriot's recent history" when describing 2013's two fatalities. At the time, Hatfield speculated that miners may have been distracted over factors related to the bankruptcy and allowed safety to slip.

More safety problems were exposed in July 2014 when MSHA officials announced dozens of violations and " alarming conditions" exposing miners to serious hazards at the Eagle 3 mine that was jointly owned by Patriot and Rhino Resource Partners LP. Rhino, which was responsible for the operations of the mine at the time, later agreed to buy Patriot's stake in that joint venture.

Patriot has also been fighting off multiple environmental suits related to pollution from its mine sites.

All of the incidents affecting Patriot — compounded by both weak thermal and met coal markets — may have had a toxic effect on the company's production. Over the course of 2014 and even through 2015, the company made multiple announcements warning its employees that it would lay off workers at assorted mines in West Virginia and Kentucky.

Misfortune struck Patriot again in late March when the company had to announce that it was idling its Samples surface mine and the Winchester underground mine in West Virginia due to a service disruption on the rail line and continued weakness in the demand for coal. Less than two weeks later, Hatfield announced his resignation and rumors that Patriot had hired restructuring advisers surfaced.

According to MSHA data, in the first quarter of 2015, Patriot's active mines produced 4.1 million tons of coal — down 15.1% from the year-ago period.

Patriot not looking to try again

A news release from Patriot says the company will be looking to sell instead of reforming. While it expects its customer shipments and mining operations to continue during the restructuring process, it said it is "engaged in active negotiations for the sale of substantially all of the company's operating assets to a strategic partner."

"In light of the challenging market conditions, and after a comprehensive review of our alternatives, the board and management team have determined that this process represents the best path forward for Patriot and its stakeholders," said CEO and President Bob Bennett.

While most companies in the sector are hugging tight to liquidity and struggling to manage their assets, several big players could be in the running. Westmoreland Coal Co. has recently completed a number of major acquisitions, and in a recent earnings call Westmoreland CEO Keith Alessi expressed interest in bolting on accretive acquisitions. CONSOL Energy Inc. is in the process of rolling out a new thermal coal master limited partnership and initial public offering of its met coal division.

Alliance and Rhino have both made deals with Patriot in the past and both have footprints that somewhat overlap Patriot's. Alliance President and CEO Joseph Craft III recently said the partnership would consider anything "from small to large" as long as it would add to shareholder value.

Murray Energy Corp. bought up several longwall coal mines in West Virginia at the end of 2013 and has taken a significant interest in Foresight Energy LP, but neither of those companies focus on the Central Appalachia Basin as Patriot does. Most other major coal players may be in too tough a position financially to acquire Patriot's assets or operate outside of Patriot's primary footprint.

In a May 12 news release, the Sierra Club said the announcement from Patriot should serve as a warning to communities that depend on coal mining. Bruce Nilles, senior director of Sierra Club's Beyond Coal campaign, called on community leaders to look toward other economic options for coal region communities.

"Recent analyses show that about 72% of the coal from West Virginia, Kentucky and Virginia is mined at a loss, and companies are attempting to limit their financial burden by continuing to destroy mountains despite a dramatic and increasing market glut," Nilles said. "The overall decline of Appalachian coal is a result of a revolution in the energy sector that includes rapidly falling prices for other energy sources, overwhelming grassroots public demand for clean energy, and a dubious decision by the coal industry to pull out of the region and invest in non-union mines in other parts of the country."

Based on "the struggles the entire coal industry is facing right now," UMWA President Cecil Roberts said the union has been awaiting this announcement for "some time" and had already engaged bankruptcy lawyers and financial advisers. The UMWA's protest during Patriot's last bankruptcy process — largely aimed at Peabody due to the spinoff — dramatically increased the profile and coverage of the bankruptcy.

"Active and retired UMWA members and their families have already made great sacrifices to keep Patriot Coal afloat for the last 22 months," Roberts said. "Our active members took significant wage and benefit cuts after the last Patriot bankruptcy, and several hundred of them have lost their jobs entirely as the company has cut production, closed mines and sold off assets to raise cash in recent months. … It is not yet clear what Patriot's full intentions are in this bankruptcy, but I can promise this: We remain just as committed to fighting for our retirees' health care and pension benefits as we were in the last bankruptcy, and we remain just as committed to fighting for decent, safe jobs for our active members as we were last time."