Trains loaded with coal wait in queue to return the southern Powder River Basin "joint line" for delivery to U.S. utilities. (Chris Carroll/Colorado Geological Survey)

Losses continue to mount among Powder River Basin coal producers, signaling a potential shakeup in an industry that supports some 17,000 jobs in the state and makes up 11 percent of all revenue to state and local governments.

St. Louis-based Arch Coal Inc., operator of the Black Thunder coal mine south of Wright, Wyoming reported this morning a net loss of $168 million and a 9.7 percent decline in revenue for the second quarter of 2015. Shares in the company traded at 19 cents on Thursday.

Peabody Energy Corp., operator of three Powder River Basin mines including the massive North Antelope Rochelle Mine, reported a $1 billion loss in the second quarter. Cloud Peak Energy, the only operator with no mines outside the basin, reported a $53 million second quarter loss.

In a webcast this morning, Arch Coal president Paul Lang said that despite the company’s losses, its Powder River Basin operations — Black Thunder mine — remain “cash-positive.” The large-scale, low-production-cost mine realized a 58 cents per ton profit margin in the second quarter.

Low natural gas prices continue to put downward pressure in the U.S. thermal coal market in which Powder River Basin coal competes, Lang said. Arch believes Powder River Basin coal will continue to compete well in that market — particularly with its own higher-ranked 8,900 British thermal heating unit (Btu) coal compared to 8,400 Btu coal in the basin.

“The higher quality mines like Black Thunder will continue to remain strong,” Lang said during Arch’s Thursday morning webcast.

Arch Coal, whose board of directors include former Wyoming Gov. Dave Freudenthal and Casper-based oil and gas businessman Peter Wold, took on a lot of debt to bet on metallurgic coal several years ago — a bet that didn’t pay off, according to University of Wyoming economist Rob Godby.

Although Powder River Basin mines remain “cash positive” many industry experts doubt whether they are profitable enough to resolve the mountains of debt that top producers in the basin carry. Alpha Natural Resources is being delisted from the New York Stock Exchange, and reportedly is in discussions for a possible reorganization under bankruptcy. Lenders that hold 50 percent of some $1.9 billion in Arch’s loans are arguing against the company’s proposed debt swap to improve its cash position.

As the basin’s top producers continue to cut costs and prepare for weaker market demand, the industry also faces tighter carbon dioxide emission limits under the Obama administration’s Clean Power Plan. The administration is expected to roll out its final version of the plan on Monday, placing a CO2 cap on new coal facilities and CO2 reduction goals for the existing U.S. coal fleet.

Meanwhile, industry experts say there’s little chance of relief for Powder River Basin producers in the international export market.

While Wyoming’s elected leaders are focused on litigating against tighter emission regulations and attempting to revitalize research and development of cleaner technologies for coal’s long-term future, there’s little they can do to address market pressures and the bad bets some operators made on metallurgic coal.

“If anyone is waging a war on coal it’s the natural gas industry, and that’s been happening for several years now,” said Shannon Anderson of the Powder River Basin Resource Council, a Sheridan, Wyoming-based landowner advocacy group.

Anderson said her organization’s members are concerned whether Powder River Basin operators under debt can meet their mine reclamation obligations — which amount to nearly half a billion dollars for some operators. Their assets are not in balance with their reclamation obligations, she said, which currently are guaranteed under a self-bonding mechanism. The Wyoming Department of Environmental Quality has already called into question whether Alpha Natural Resources still qualifies to self-bond for its reclamation obligations, while the agency reviews the status of other operators that self-bond in the basin.

The situation leaves many to speculate on the future of Powder River Basin coal mine ownership if there are bankruptcies, and what it might mean for local economies and state revenue — not to mention jobs, pensions and retirement for coal miners and their families.

“It’s hard because there’s not easy answers,” said Anderson. “It’s a really challenging time, but we’ve got to face the reality” of a potentially diminished coal industry in Wyoming.

Dustin Bleizeffer

Dustin Bleizeffer is a Report for America Corps member covering energy and climate at WyoFile. He has worked as a coal miner, an oilfield mechanic, and for 22 years as a statewide reporter and editor primarily...

Join the Conversation

4 Comments

Your email address will not be published. Required fields are marked *

  1. Well, wouldn’t some be fine if all hydrocarbons were phased out, and a new fusion industry took hold, or some other great leap of progress took us to new dimensions. I saw the name Bill Werhli in Gerry Spence’s book on ‘Making of a Country Lawyer.” he was before the age of the internet, and googles, and most probably don’t know who he was, or even how to google him. Googling is a matter of the flow of the right key words. Werhli pops up in the Cow Gulch Case
    189 F.2d 311

    PFISTER et al.
    v.
    COW GULCH OIL CO. et al.

    No. 4133.

    United States Court of Appeals Tenth Circuit.

    I never studied that case in law school in the late 1960’s. It involved many issues on oil and land in Wyoming.
    Yet, in the “Sternberg incident” (2013 ), there was this great fuss created, over the Law school “TASK FORCE”, before that ex UW President resigned in Nov of 2013.
    Gerry Spence noted in his book, that the then Dean of the Law school in the late 1940’s issued forth that
    ” the rest of you will end up representing the dredges of the system- the poor and criminals(p 223, “Country Lawyer). That is as to the rest who do not represent large corporations.
    Some fail to realize that a fair % OF THOSE WHO GRADUATE FROM LAW SCHOOL, DON’T DO TRIAL WORK. or a very limited amount of that work. A very low % of cases filed in federal ever go to a jury trial, some put the figure around 2-3 %.
    Phil Anschutz has a big lock on the wind mill/ turbine market in Wyoming. The Current U S Senator for Colorado was deep in the Anschutz camp of advisors,(before the U S Senate), and sure knows which way the wind blows, even in Wyoming. Marcos is not exactly a dredge of society.

    Jim Hagood

  2. Does a self- bond(reclamation) claim really meet muster, if a company’s common stock falls from some high perch to near zero? See on the time of the great fall.
    Have some read the business news of power plants switching from coal to natural gas?The stock charts on coal companies are scary. First, the equity is zeroed out, or damn near, what next on the financial bonds?

    Latest Sept 2015 News on Arch COAL( F. Bloomberg NEWS)
    An Arch Coal Inc. creditor sued a group of lenders it says is seeking to block a plan to swap the struggling miner’s existing bonds for new securities with longer maturities.
    GSO Special Situations Master Fund LP, a New York-based investment fund that holds some of Arch’s unsecured notes, accused the defendants of making “improper and legally unsupportable efforts” to block the swap. The deadline for the exchange is Sept. 23.

    Jim Hagood

  3. While Barrasso, Enzi and Lummis fiddle in Washington and decry “Obama’s war on coal,” their time could be better spent trying to garner a large share of the wind turbine market, another resource Wyoming has a 100 year supply of. Our European allies have seen the handwriting on the walls and are moving forward to make Europe fossil fuel free.Wyoming legislators have the ability to move forward with nuclear power too and have taken some tentative steps to ease regulations for building nuclear but could do so much more. Too bad for Wyoming that our legislators always want to look backwards at what has been instead of forward and what could be.

    Jim Phillips

  4. Those ol’ mountain men thought that beaver would shine forever, but fashions way back east changed, and the market cratered. Then it was the buff’, so many they couldn’t be counted, until there were too few to count. Next was gold, but there were better strikes in the Black Hills and Californy. The Union Pacific dumped a lot of money, but the “Hell On Wheels” economy didn’t last either. Big cattle was the supporter of the territory until one whopper of a winter nipped that in the bud. Oil and coal might well have had their day. It’s only 11%. We have always moved on to the next thing and made the best of it.

    Keith Benefiel