Patriot Coal's second declaration of bankruptcy could spell bad news for Appalachia

When Patriot Coal declared bankruptcy last month—the company also declared bankruptcy in 2012—it was "perhaps the clearest signal yet that more stringent federal environmental regulations, coupled with weakened demand for coal as low-priced natural gas has stolen market share, are palpable enough to bring down even the most carefully structured Appalachian producers," Daniel Moore reports for the Pittsburgh Post-Gazette.

"The company’s plan going forward remains unclear," Moore writes. "But news of the bankruptcy sounded an alarm through a region that the [United Mine Workers Association] estimates has lost a staggering 18,000 mining jobs since 2012." UMWA spokesman Phil Smith told Moore, “In the course of any Chapter 11 bankruptcy process, workers come last." He said when those who are owed money from the company line up to get paid, "workers come at the end of that line.”

Patriot, born in 2007, "employed about 4,000 workers who dug more than 31 million tons of coal in 2011," Moore writes. "About three-quarters of that coal was sold to power plants; the rest went to steel mills and independent coke producers that use coal in steelmaking. It attracted more than 80 customers across 15 states and 13 countries." (Patriot Coal map: Patriot Coal operations)

"When Patriot first filed for bankruptcy in 2012, Mark Schroeder, then chief financial officer, wrote in court documents that some customers had canceled or delayed shipments of coal contracted for delivery, affecting 'hundreds of thousands of tons of coal from Patriot at prices favorable to Patriot,'" Moore writes. That led to Patriot slashing 1,000 positions.

Patriot appeared to be making a comeback, in 2013 selling "21.5 million tons of coal—roughly two-thirds of what it sold prior to bankruptcy," Moore writes. "It also shifted focus overseas, with exports growing from 29 percent in 2011 to 48 percent in 2013."

"But the same factors blamed in Patriot’s first bankruptcy were starting to unravel the company again," Moore writes. "In 2013, average sales price of coal fell 7 percent from 2012, according to the U.S. Energy Information Administration, and annual U.S. coal production dipped below 1 billion short tons for the first time in two decades."

U.S. power plants are also struggling to meet new standards on mercury emissions and other pollutants, Moore writes. A switch to cheaper, cleaner natural gas and a decrease in exports to Asia meant that coal accounted for only 33.5 percent of U.S. electricity in March of this year, down from 50 percent in 2005. At the same time, natural gas use has risen from 19 percent to 27 percent. (Read more)