Under the deal’s amendments, Cloud Peak will now make an upfront payment to Westshore as well as quarterly payments during the three-year period instead of its previous deal for take-or-pay commitments.
CPE said both parties will meet quarterly over the next several years to discuss market conditions as well as any potential shipments and terms. Officials noted that they expect if export shipments do not occur, it expects that the Spring Creek mine in Montana, which supplies the tonnage, will see its production volumes reduced accordingly.
“If this amendment were in effect as of September 30, our outstanding, undiscounted port take-or-pay commitments at that time would have been approximately $454 million through the remaining term of the agreement if we do not ship any export tons,” the producer said this week, adding that, except as amended, the original throughput agreement will remain in place through the end of 2024.
“Westshore is a critical part of our effort to build a viable long-term Asian export business,” CPE President and CEO Colin Marshall said, noting that it values Westshore for its willingness to work with them in light of the issues at hand.
“We believe in the long-term opportunity for Asian exports of Powder River Basin coal as oversupplies of seaborne thermal coal are rationalized,” Marshall said. “We are also engaged in active discussions with the BNSF regarding potential modifications to our rail take-or-pay commitments for our Asian export business. We are hopeful we can reach a mutually acceptable agreement with the BNSF and will provide an update on the outcome of those discussions as appropriate.”
The announcement comes just days after reports that U.S. Magistrate Judge Carolyn Ostby decided in federal court that the U.S. Department of the Interior (DOI) should not have approved the expansion of Spring Creek mine three years ago without examining its environmental impact in greater detail — but also that the expansion work already under way at the operation will not be shut down immediately.
According to the Associated Press, the judge recommended last Friday that the DOI reconsider the effects of the mine’s growth. The environmental issues are longstanding; several groups first sued the DOI in 2012 when it approved CPE’s growth plan.
Cloud Peak spokesman Rick Curtsinger said October 26 that the company is disappointed in the judge’s decision and had planned to work with federal officials to defend the expansion, which would have added 2,042 acres and 117 million tons of coal — permitting the Decker, Montana, operation to mine through 2022 or even longer.
“Spring Creek mine is an important part of America’s energy supply and Montana’s economy,” Curtsinger said.