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Collection: Coal Exports: Caveat Investor

Cloud Peak’s Coal Exports: The Red Ink Keeps Flowing

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A few weeks back, a reporter caught an unnamed coal industry executive in a stunning admission: environmental opposition to coal terminals has been a huge boon for the coal industry. “I believe these agencies and environmental groups are doing the coal producers a favor by not approving or supporting the approval of these terminals…If the terminals were already built and … Read more

Coal Exports and the Terrible, Horrible, No Good, Very Bad Week

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What a week! The bad financial news for coal export prospects in Washington, Oregon, and British Columbia has come almost too quickly to track. So for those of you who don’t follow the coal press as religiously as I do, here’s a brief summary of all of the goings-on in Northwest coal export finance over the last … Read more

Cloud Peak to Put Coal Exports on Hold

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After the stock markets closed yesterday, Cloud Peak Energy dropped a bombshell announcement: the company now expects to put all coal exports on hiatus from 2016 through 2018. It was shocking news, coming from a company that had long made Asian exports the centerpiece of its growth strategy. But what made the news all the more shocking was … Read more

Is the Coal Bubble Still Deflating?

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It’s funny to re-read the coal news from last year, full of confident “experts” predicting a rebound in international coal prices. Here’s one story, asserting that international coal prices had “hit rock bottom”. And another, predicting a “modest recovery” in coal prices by the end of 2015. And yet another, arguing that Asian coal demand was set for “a robust revival.” … Read more

Arch Coal Circles the Drain

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Another day, another coal company circling the drain. Today’s victim is Arch Coal, one of the two backers of the proposed Millennium Bulk Terminal coal export project in Longview, Washington. The company is in deep financial doo-doo, mostly because it took on massive debts to buy new coal mines at the peak of the coal bubble … Read more

More Bad News for BC Coal Exports

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In case you were wondering, the bad news for coal exporters keeps rolling in.  Take, for instance, the latest figures from the Ridley coal export terminal in northern BC: Clearly, the precipitous decline in coal exports from the terminal is still underway. Metallurgical (steelmaking) coal had been the mainstay of the terminal since 2010, accounting for more than … Read more

What Montana’s Tongue River Railroad Means for Coal Export

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A new railroad proposed in Montana offers a sneak preview of what’s to come for the Northwest coal export debate. The news is troubling.

The little-known Tongue River Railroad project would, if approved, build a new line through eastern Montana’s rangeland to allow development of a new export mine for Arch Coal. It has big implications for the proposed coal terminals in Washington: without the railroad and the mine it would support, the already troubled Millennium Bulk Terminals project at Longview may die. On the other hand, an industry-friendly permit review that ignores basic facts and blithely waves away objections would tip the scales in favor of coal.

And that’s exactly what we seem to be seeing in the recent draft analysis of the Tongue River Railroad.

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How Coal “Self-Bonding” Puts the Public At Risk

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Miles-long coal train

As the Wall Street Journal reported recently, creditors of coal industry giant Alpha Natural Resources just hired a team of advisers to help them “restructure” the company’s debt—financial-speak for “next stop, bankruptcy!” And as the Journal points out, questions about the company’s massive environmental liabilities have played a major role in the company’s recent financial woes:

The company, which has posted four consecutive annual losses, disclosed in May that a Wyoming environmental agency notified the company it no longer qualified for a “self-bonding” program that had freed the company from buying insurance to cover future mine cleanup costs…[Alpha’s] rapid cash burn and potential costs tied to the loss of self-bonding status pose challenges to its balance sheet.

A couple of weeks ago, I explained what self-bonding is and why it matters so much to a coal company’s financial health.

But it’s not just coal investors who should be paying attention to self-bonding. We all should. Because If a struggling coal company like Arch or Alpha goes bankrupt, the public could have to pick up the cost of cleaning up their massive coal mines.

Here’s why.

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South Korea to Boost Its Coal Tax

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South Korean flag
South Korean flag Image by Nudimmud used under CC BY-SA 3.0

If you follow Northwest coal export issues, you’ve probably heard that China’s demand for coal is sinking fast. Overall coal consumption in China fell a whopping 8 percent the first four months of 2015—an astonishing decline for an economy that’s growing as quickly as China’s. But imports really took it on the chin, with China’s customs department reporting that the country’s ports handled 38 percent less coal from January through May than in the same months of the prior year. China’s import decline has kept Pacific Rim coal prices in the doldrums, and completely deflated market expectations for ready profits from the international coal trade.

But what’s less well known is that China isn’t the only country that’s posing a challenge to coal exports. South Korea, which is the destination for much of the US coal shipped across the Pacific, is seeing many of the same trends.

According to the IHS McCloskey Coal Report, demand from Korean coal-fired power plants was slacker than expected over the winter and spring months. Even more troubling for would-be coal exporters, South Korean power companies recently axed plans for four new coal plants, and delayed several more. Industry analysts suspect that additional delays may be in the offing. Meanwhile, the country recently unveiled an energy plan that would reduce coal’s share in the nation’s energy mix from 37 percent, where it is today, down to 27 percent by 2029.

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An Explainer: Coal Mine Cleanup and “Self-Bonds”

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In case you missed the news, coal industry stock prices took yet another tumble on Friday, with all four of the largest US coal companies—Arch Coal, Alpha Natural Resources, Cloud Peak Energy, and Peabody Energy—closing at all-time lows. A Bloomberg analysis attributed the fall to new concerns about the financing of coal mine cleanups:

Two U.S. coal companies, Peabody Energy Corp. and Arch Coal Inc., sank to all-time lows amid concerns that they will have to pay more for insurance that covers environmental damage.

This, I’m sure, is the first time that many folks had ever read anything about coal mine cleanup, especially in the business press. So for newbies who just want an overview of the issue, have I got a treat for you: an FAQ covering the basics of the coal mine reclamation liabilities!!! (Please try to contain your excitement.)

Here goes…

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