From the Casper Star Tribune
Cloud Peak Energy, the coal giant that operates two Wyoming mines, filed for bankruptcy Friday amid mounting debt and declining demand.
The filing follows months of troubling signs for the Powder River Basin operator, which for a time avoided the economic difficulties of its competitors but had of late experienced growing financial challenges as the market for its product diminished.
The company chose not to make a $1.8 million debt payment on March 15 and received additional extensions in April. A new deadline to pay its debt was set for 11:59 p.m. Friday. Instead, the coal firm filed bankruptcy paperwork in federal court in Delaware hours before the deadline was set to expire.
“Over the past several months, Cloud Peak Energy has thoroughly evaluated strategic alternatives to address the challenging market conditions in our industry,” Cloud Peak President Colin Marshall said in a statement. “We believe, at this time, that a sale process in Chapter 11 will provide the best opportunity to maximize value for Cloud Peak Energy.”
The company’s filing indicated it had, as of the end of the year, nearly $929 million in assets and almost $635 million in total debts.
In its announcement, the company said its mining operations would continue as normal as it moves through the bankruptcy process. But the filing represents the latest concerning episode for coal, which has been one of the main drivers of the state’s economy, along with oil and natural gas.
Cloud Peak’s $300 million mistake
Friday’s announcement comes only days after Gov. Mark Gordon said he was optimistic about coal’s future. In a statement after the filing, the governor said coal is an integral part of the nation’s and the world’s energy portfolio and will remain so for years.
“That is a fact,” Gordon said. “The proof is in the global energy patterns from last year. I believe we need to find solutions that support coal energy and address climate change. This news about Cloud Peak reinforces why I have advocated so strongly to innovate and advance the conversation about coal energy beyond polarized political rhetoric.”
Powder River producer
Cloud Peak owns three Powder River Basin mines: the Antelope and Cordero Rojo in Wyoming and Spring Creek in Montana. The mines shipped 50 million tons of coal in 2018.
Cloud Peak is Wyoming’s third-largest coal producer, and its mines represent 20 percent of the state’s coal miners in the Powder River Basin.
A timeline of recent industry struggles in Wyoming’s coal country
Following the filing, speculation almost immediately began that Cloud Peak would sell its mines. Landowners group Powder River Resource Council called on the state of Wyoming to “aggressively participate” in the bankruptcy proceedings.
“We are gravely concerned that employees’ and retirees’ pensions and healthcare benefits will be taken away, and that millions of dollars of ad valorem taxes owed to Wyoming counties for coal already produced will be left unpaid,” the group’s vice chairman, Bob LeResche, said in a statement. “Our greatest fear is that reclamation of Cloud Peak’s large mines will cease, and that financial assurances required by law will prove inadequate.”
Unlike the nation’s other coal giants, Peabody Energy and Arch Coal, Cloud Peak avoided the bankruptcies and layoffs that followed the coal downturn in 2015 and 2016.
Wyoming coal is likely declining faster than expected
While those companies struggled, Cloud Peak enjoyed a reputation for making smart choices, focusing entirely on the Powder River Basin. When Peabody and Arch were struggling through bankruptcy in 2016, Cloud Peak turned a second-quarter profit.
Signs of distress
But the company has been under increasing financial pressure over the last year as its debts accumulated and its profits per ton of coal plummeted. Demand for coal weakened, and Cloud Peak did not have the debt relief that Arch and Peabody received when those companies emerged from bankruptcy.
Last year, Cloud Peak began showing more signs of financial distress: a June announcement that it would consolidate its offices, an October decision to cut retiree benefits and a warning in December that it would be delisted from the New York Stock Exchange.
Cloud Peak is the fourth major coal producer in Wyoming, the top coal-mining state, to file for bankruptcy in recent years. Bristol, Tennessee-based Alpha Natural Resources filed for bankruptcy in 2015, followed by top-producing Peabody Energy and Arch Coal in 2016. Westmoreland Coal, which operates the Kemmerer Mine in southwest Wyoming, filed for bankruptcy in October.
Inexpensive and cleaner-burning natural gas, and increasingly inexpensive wind and solar power, have become attractive alternatives to coal power in the U.S. None of the Powder River Basin’s huge, open-pit coal mines has had to close. But the outlook for thermal coal, the type used to fire power plants, has been bleak.
A federal government report released Thursday predicts coal in the months ahead will account for 25 percent of U.S. power generation, down by about half over the past decade. The trend continues despite President Donald Trump’s efforts to back away from a wide range of environmental regulations affecting coal.
Wyoming officials have meanwhile sought to encourage carbon-capture technology by funding research at a Gillette-area power plant. Any marketable results from that work remain years away from wide-scale use.
