Coal producer Cloud Peak Energy has purchased a 49 percent stake in a proposed coal terminal at Cherry Point, according to a joint announcement by Cloud Peak and majority owner SSA Marine.
Cloud Peak paid $2 million up front and will pay up to $30 million in future permitting costs, according to the announcement Thursday, Aug. 13.
In the short term, SSA Marine gets an infusion of cash and some relief from what has already been an expensive permitting process. SSA Marine has paid more than $11 million so far for an ongoing environmental review that is scheduled to be completed next year.
Bob Watters, senior vice president of SSA Marine, said cost relief was not the reason for the deal, however.
“The real benefit for us is now we really get a strategic partner on the coal side of the business,” he said. “It really brings a strategic partner into the project that really understands, really helps us understand, the end users (of the coal).”
Cloud Peak spokesman Rick Curtsinger said the company acquired a minority stake in Gateway Pacific Terminal as a long-term investment.
“Cloud Peak Energy remains very confident in long-term, growing demand for (Powder River Basin) coal from Asian utilities,” Curtsinger said.
All of Cloud Peak’s mines are in the Powder River Basin in Wyoming and Montana.
“Certainly prices are low currently; however we continue to see demand growth, especially from South Korea, Japan and Taiwan,” Curtsinger said.
Cloud Peak has an agreement with SSA Marine to ship up to 17.6 million tons of coal per year out of Gateway Pacific Terminal. It has a similar agreement with the proposed Millennium Bulk Terminal in Longview to ship up to 7 million tons of coal a year.
Cloud Peak currently exports coal from Westshore Terminals near Tsawwassen, B.C., but has scaled back on shipments there to reduce its losses.
“Due to low prices, we did reach an agreement with Westshore to reduce our tonnage just for 2015,” Curtsinger said. “Again, the export terminals are designed to meet long-term, growing demand.”
Ross Mcfarlane, senior adviser at the Northwest clean-energy nonprofit Climate Solutions, used a familiar ship-disaster metaphor to characterize the deal.
“This announced deal is really just rearranging the deck chairs on the Titanic,” Mcfarlane said. “The fundamentals for the coal export business are terrible and are only getting worse. Cloud Peak is losing money on existing exports through facilities that have already been built. It is putting a small amount of money in to protect its sunk costs and its only possible growth story for investors. But the ship has already hit the iceberg and is going under.”
The ownership agreement potentially includes a third party. Crow Nation of Montana has an option to take a 5 percent stake in the terminal from Cloud Peak’s share. The tribe hasn’t made a decision yet whether to buy in.
Cloud Peak made a deal with the Crow tribe in 2013 to mine the estimated 1.4 billion tons of coal on the tribe’s reservation.
Lummi Nation, meanwhile, has asked the U.S. Army Corps of Engineers to reject the terminal project, saying it interferes with the local tribe’s fishing rights, acknowledged in an 1855 treaty.
“This isn’t in any way a Crow versus Lummi situation,” said Melissa Holds the Enemy, managing attorney for Crow Nation. “It’s just a matter of one tribe and tribal leadership wanting to look out for their constituents, who are looking out for their future and the well-being of the tribe.”
Lummi Chairman Tim Ballew said his tribe’s focus remains on its request to the Corps.
“In spite of all of the fluctuations on the proponent’s side, our position still remains the same — that the proposed project has impacts to the treaty rights that are insurmountable, and we’re waiting for the Corps to uphold its trust responsibility and make a determination on our request,” he said.