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The Spring Creek coal mine in southeastern Montana will re-open after a two-day cease in operations, the Montana Department of Environmental Quality announced Friday evening.
A “short-term agreement” allows 283 mine employees to return to work while DEQ and NTEC negotiate a final permit, said DEQ Public Policy Director Rebecca Harbage. The agreement is good for 75 days.
The mine, the largest in Montana and eighth-largest in the United States, was abruptly shuttered Thursday morning after DEQ denied a permit to the Navajo Transitional Energy Company, which finalized its purchase of the mine from Cloud Peak Energy through bankruptcy court on Wednesday.
DEQ officials’ decision to permit NTEC, which is wholly owned by the Navajo Nation, hinged on whether the company would waive its tribal sovereign immunity, which allows tribes and tribal-owned companies to operate without being subject to state laws.
The agreement is an “interim” limited waiver of tribal sovereign immunity, Harbage said.
“While better planning and coordination by NTEC could have prevented costly and avoidable impacts to workers, I am very pleased we were able to reach this short-term agreement that will allow miners to get back to work at the mine while ensuring protection of Montana’s environment,” DEQ Director Shaun McGrath said in a press release. “MT DEQ looks forward to building a productive relationship with NTEC that allows for the continued responsible operation of the Spring Creek Mine.”
NTEC had initially agreed to a partial waiver of sovereign immunity allowing the state to enforce its laws, according to a letter sent to NTEC by DEQ and obtained by Montana Free Press. But “one principal area of disagreement” was that NTEC did not agree to be subject to citizen lawsuits, the letter said.
“NTEC appreciates the commitment and effort by Montana to keep Spring Creek miners working. We are thankful that we were able to reach a mutually agreeable position and look forward to continuing to build on a strong partnership with the state of Montana,” said Clark Moseley, chief executive officer at NTEC, in the release.
“The way we see it, the mines are profitable. The previous owner was hampered with debts. We purchased this at a very low cost, so we’re avoiding the debt that hampered the former owner.”—NTEC spokesman Erny Zah
Operations were uninterrupted at the Antelope and Cordero Rojo mines in Wyoming, which were also acquired by NTEC as part of the purchase. Those mines, the third- and eleventh-largest coal mines in the U.S. by production, were among the assets of Cloud Peak Energy, which declared bankruptcy in May. In bankruptcy court, NTEC agreed to pay $15.7 million in cash plus royalty payments on production and assumption of $40 million in high-priority debt for the assets.
While NTEC now owns the Wyoming mines, their operating permits are still held by Cloud Peak, pending a public permit transfer process, said Kyle Wendtland, administrator of the Wyoming Department of Environmental Quality’s Land Quality Division. Until that process is complete, both Cloud Peak and NTEC are accountable to Wyoming state law. Wendtland said conversations with NTEC about tribal sovereign immunity are ongoing.
A major concern raised by tribal sovereign immunity is whether Montana would be able to enforce NTEC’s reclamation bonds for the eventual clean-up of Spring Creek.
To date, NTEC’s reclamation bonds have been backed by the Navajo Nation, whose more than 350,000 members live in New Mexico and Arizona.
But the Navajo Nation Council is considering nullifying that backing in response to NTEC’s purchase of the Cloud Peak mines, according to the Navajo Times. The council voted Wednesday to table emergency legislation that would revoke 2013 and 2015 agreements allowing NTEC to purchase bonds with the nation’s backing. The council said it would take up the issue within 30 days.
Council delegate Carl Slater said he introduced the legislation to ensure that the Navajo Nation does not become responsible for the eventual clean-up if NTEC is unable to pay for it, the Navajo Times reported.
Concern over tribal bonding has been echoed by Shiloh Hernandez, an attorney with the Helena-based Western Environmental Law Center, which has previously sued NTEC over multiple matters.
“I’m familiar with the game that they’re playing. It bears noting that NTEC is being run by a lot of non-Navajo industry folks,” Hernandez said. “It seems to me that it’s really a pretty brazen attempt to operate outside the laws.”
NTEC spokesman Erny Zah said that NTEC’s “bonding is similar to that of other mining companies.” Reclamation is an NTEC priority, he said, pointing to awards the company has received for clean-up at the Navajo Mine.
“As a tribally owned company, we also understand that relationship with our Mother Earth in ways that other tribal societies can understand, and we believe in taking care of our mother, and we want to do that moving forward with these mines in the Powder River Basin,” Zah said.
In March, the Navajo Nation rejected an NTEC proposal to purchase the Navajo Generating Station, a coal-fired power plant, and an accompanying mine, which employ at least 800 Navajo workers in New Mexico.
At the time, Lori Goodman, a member of the Navajo environmental group Dine Care, declared that the tribe’s “transition from coal starts now.” Months later, Goodman is still lobbying against the tribe’s continued investment in fossil fuels and for more tribal investment in renewable energy.
“We thought that was clear and done,” Goodman said.
‘A RISKY BET’
The acquisitions are a major play for NTEC, which becomes the third-largest coal producer in the United States with the purchase. The tribe formed the company in 2013 to acquire the Navajo Mine in New Mexico, which, prior to the purchase of the Cloud Peak properties, was the company’s only asset.
At a Navajo Nation Council meeting earlier this month, NTEC Chairman Tim McLaughlin praised the “incredible opportunity” to purchase assets nominally worth hundreds of millions at a steep discount through bankruptcy court. Cloud Peak valued its assets at $630 million in an August court filing, but revised that number to $67.6 million in September, according to the Casper Star-Tribune.
Even so, coal market experts say the deal could be risky, given recent economic trends.
The purchase comes at a bleak moment in the industry. Combined, two companies that recently filed for bankruptcy, Cloud Peak and Blackjewel, operated half of the nation’s 10 top-producing coal mines. The country’s two largest coal companies, Peabody and Arch Coal, recently emerged from bankruptcy and are consolidating.
Bud Clinch, executive director of the Montana Coal Council, said the Blackjewel mines in Wyoming have been unable to sell their assets.
U.S. coal production has fallen from 1,172 million tons in 2008 to 755 million tons in 2018, according to the Institute for Energy Economics and Financial Analysis. In the Powder River Basin, production has fallen from 496 million tons to 324 million tons over the same time period. Much of that downturn is the result of power companies replacing coal fuel with cheaper natural gas, Clinch said.
NTEC believes domestic demand for Powder River Basin coal will remain above 250 million tons per year past 2030, said NTEC spokesman Zah, pointing to an economic analysis by Energy Ventures Analysis, an energy consultancy focusing on fossil fuels, calling the purchase “prudent.” Zah also said Spring Creek is well positioned to export coal abroad.
“The purpose of the purchase is to help support the Navajo Nation financially, and I think this is a pretty risky bet to make.”—IEEFA analyst Seth Feaster
“The way we see it, the mines are profitable. The previous owner was hampered with debts,” Zah said. “We purchased this at a very low cost, so we’re avoiding the debt that hampered the former owner.”
The Energy Ventures analysis counters one offered by IEEFA, which called the proposed acquisition “an ill-timed gamble.” Analysis co-author Seth Feaster said in an interview there’s little evidence that production declines won’t continue. Feaster said a change in presidential administrations could lead to even less demand for coal.
“I don’t see where the real big upside is here, but there’s a lot of potential for downside,” Feaster said. “The purpose of the purchase is to help support the Navajo Nation financially, and I think this is a pretty risky bet to make.”
Joe Aldina, director of global coal market research at S&P Global, a financial information firm, said any current investment in coal presents a risk that investors like NTEC could be saddled with the large reclamation and pension liabilities carried by many mines as production ramps down.
FUTURE IN EXPORTS
The Powder River Basin’s rail infrastructure makes the Wyoming mines better positioned to serve the domestic market, while Spring Creek is better positioned to supply exports to southeast Asia, which are currently shipped through a terminal in Vancouver, said Robert Godby, an economics professor at the University of Wyoming. In recent years, more than 70 percent of Spring Creek’s coal has been exported, according to IEEFA’s analysis.
The export market is considered critical to Spring Creek’s future. In August, the Montana DEQ initially approved a 72-million-ton expansion of production at Spring Creek, which would extend the mine’s life to 2031. A final decision is expected later this year.
In recent years, efforts to build new export terminals for coal — including efforts by a company called Ambre Energy that was once run by current NTEC CEO Clark Moseley — have been unsuccessful. With the downturn in coal production, most of Montana’s reserves are likely to become stranded assets, including the proposed Big Metal Mine on the Crow Reservation, Feaster and Aldina said. NTEC acquired the Big Metal mining rights in the bankruptcy sale, but is unlikely to develop it, Feaster said.
Cloud Peak had bet big on exports, according to Aldina, and lost money on exports in 15 of the past 21 quarters, IEEFA’s analysis found.
“I don’t know that I would stake my whole corporate strategy on [exports]. Obviously, it hasn’t worked to date,” Aldina said.
Clinch, of the Montana Coal Council, said exports remain the best bet for future coal development in the U.S., though he also foresees a stable domestic market providing continued demand.
“I don’t think coal is going to completely go away from Montana,” Clinch said.