December 6, 2012 in Region

Montana coal deal could boost exports to Asia

Matthew Brown Associated Press
 

BILLINGS — A pair of coal companies have struck a deal on a disputed Montana mine that both sides said could boost Asian exports through the West Coast, but won’t prevent up to 75 layoffs in the short term.

The deal calls for Australian-based Ambre Energy to gain full control of the Decker mine near the Wyoming border for $57 million. The company wants to ramp up production and ship fuel overseas through a pair of Columbia River ports.

Cloud Peak Energy would sell its stake in Decker and receive 1,200 acres of nearby land and rail easements to help develop a new Wyoming mine.

Cloud Peak also gets an option to move 5 million tons of coal annually through the Millennium Bulk Terminal port proposal in Washington state, which is co-owned by Ambre and Arch Coal, Inc.

The Decker deal is expected to close in early 2013.

“I think that it’s really a good deal for both sides,” said Ambre spokeswoman Liz Fuller. “For us, this is a really great step in the direction of being able to export coal.”

Those export plans are being fiercely fought by conservation groups and others in Montana, Oregon and Washington. They warn that a spike in coal train traffic could increase rail congestion and disrupt communities across the Pacific Northwest and that burning coal will worsen climate change.

Coal companies and their backers contend the claims are overstated. The industry is counting on exports as a lifeline in the face of a domestic market that’s on the decline as many coal-burning power plants are shut down.

Cloud Peak and Ambre currently each have a 50 percent stake in the 162-worker Decker mine. They had been fighting over control of the operation through dueling federal lawsuits.

The newly-announced deal includes a settlement of those claims and provides for dismissal of pending litigation, the companies said.

Despite the uncertain outlook for U.S. coal consumption, Ambre hopes to continue selling Decker’s coal into the domestic market and also is exploring possibilities for a coal-to-liquid fuels plant, Fuller said.

However, production at the mine is expected to remain relatively flat at just under 3 million tons in 2013, she said.

Decker was once one of the largest surface mines in the U.S., producing more than 10 million tons of coal annually. A supply contract with major customer Detroit Edison Company expires next year, according to court documents.

The 75 layoffs announced last month were part of what Decker’s owners referred to as “ongoing expense management activities.”

The mine operated at a $21.1 million loss in 2011, according to court documents. Yet, Ambre contends there are tens of millions of tons of coal still in place at Decker that could be economically mined.

Fuller indicated the company remains optimistic about future growth. It co-owns with Anadarko Petroleum a second mine, Black Butte, in Wyoming, and in April announced a deal to supply up to 5.5 million tons of coal per year to a pair of utilities in South Korea.

“There’s an opportunity to increase production (at the Decker mine) in the future, and of course we’d like to hire folks back,” Fuller said.

Ambre said its proposed Morrow Pacific port along the Columbia River near Boardman, Ore., could be operational as early as 2014, with the larger Millennium port ready by 2016.

Cloud Peak president and CEO Colin Marshall said in a statement the deal with Ambre “positions both our companies to meet anticipated future growth in Asian thermal coal demand.”

Cloud Peak spokesman Bob Green said the land and rail easements in the agreement would give the company better access to the Young’s Creek coal tracts just across the border in Wyoming.

Those were bought in July for $195 million and contain an estimated 450 million tons of coal. Regulatory filings indicate Young’s Creek is permitted for mining of 14 million tons annually by 2019.

The company is still working on a development plan for mining that coal and no timeline has been established, Green said.

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