Montana’s top coal producer expects to cut Asian exports
BILLINGS – Montana’s largest coal producer expects to reduce shipments to Asia next year through a West Coast port, as exports of the fuel from the United States continue to slide and coal producers face mounting pressure because of new pollution regulations and cheap natural gas.
Cloud Peak Energy Inc. announced Wednesday that it had re-negotiated its long-term agreement to ship coal through British Columbia’s Westshore Terminals. The Gillette, Wyoming-based company said production volumes at its Spring Creek Mine near Decker, Montana would be reduced accordingly.
The lost shipments could reduce state tax revenue by up to $15 million in 2016, Montana Coal Council executive director Bud Clinch said.
U.S. coal exports peaked in 2012. The most recent federal data shows they have since fallen by almost 50 percent on a monthly basis. The domestic market for the fuel contracted since peaking late last decade as power plants across the nation have been shuttered by companies that did not want to install expensive pollution controls or could not compete with low natural gas prices.
“My God, what else can come our way?” Clinch said. “It’s got to be an environmentalist’s dream. It’s everything they could ask for to make it as difficult for the industry as possible.”
Cloud Peak exported more than 4 million tons of coal last year from Spring Creek.
The 260-worker mine’s total production topped 17 million tons. It’s located in the Powder River Basin, which spans the Montana-Wyoming border and boasts some of the largest coal reserves in the world.
Under Cloud Peak’s contract with Westshore, the company was obligated to ship a steady volume of the fuel through the port. Under the re-negotiated terms of that deal, the volume obligations were eliminated beginning next year through 2018, in exchange for a series of payments from Cloud Peak to the port.
Company representatives declined to disclose the amount of those payments. They said the contract between Westshore and Cloud Peak remained unchanged for the years 2019 through 2024.
Company Vice President Jim Orchard said the new terms will give the coal company flexibility for when the market picks up again, something he said will happen when the current supply glut gives way to growing demand.
“Does the world still need coal? We say yes,” Orchard said, pointing to coal plants still being constructed in Asia.
Cloud Peak President Colin Marshall said in a prepared statement that the company also was in discussions with BNSF Railway over its contract to transport fuel by train from the mine to Westshore Terminals. He said the company was hoping to “reach a mutually acceptable agreement” with the railway.
Cloud Peak on Tuesday reported third-quarter earnings of $8.9 million on revenue of $302 million, exceeding analysts’ expectations.
The company’s stock price rose more than 10 percent to $3 a share Wednesday on the New York Stock Exchange. It remains down sharply from last year’s peak of almost $22 a share.