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Arch Coal Writes Off Investment In DKRW Coal-To-Gas Project

In the latest sign of a shaky future for the nation’s first coal-to-gas conversion plant, one of the project’s major investors has written it off as a loss. Ben Storrow of the Casper Star-Tribune has been following the development and spoke with Wyoming Public Radio energy reporter Stephanie Joyce about what it means for the future of the project.


STEPHANIE JOYCE: So, to start, for any of our listeners who might be at little fuzzy on the details of the DKRW Advanced Fuels project, can you give us the 30-second overview of its history?

BEN STORROW: So, basically, what’s going here, is that we have DRKW Advanced Fuels, which is a Houston company, and they’ve proposed building a plant that would essentially take coal and turn it into liquid petroleum products. So that could be anything from butane and ethane to gasoline itself.

JOYCE: And so this week the news is that Arch Coal has written off its investment in this project as a total loss. Can you tell me more about that?

STORROW: So, basically, this project has been going on for a really long time. If I’m not mistaken, DKRW announced this first in 2002 and it’s sort of been an off-again, on-again kind of thing for the following 12 years. And so what came out recently was that… Arch Coal is a 25 percent investor in the project. They are a St. Louis company. They were going to basically provide the coal to the plant. And back in 2006, they put down, I believe it was $24 $25 million, to secure their share, if you will. So the news this week is that Arch, in their 2013 annual report, it listed this as an impairment loss. That’s an accounting term, and what it means is that when you’re a public company, you have to tell your investors the value of your assets, and what Arch Coal is saying when they call this investment an impairment loss is that they’re telling their investors they don’t expect to see a return from this project.

JOYCE: Arch Coal was intended to supply the coal to the facility. You can’t have a coal-to-gas conversion facility without the coal part of that. What does this signal in terms of Arch’s plan to actually provide coal for this project?

STORROW: Arch didn’t say in their release or in their communications with us that they were pulling out of the project. But they were also very delicate in how they phrased it in saying that they listed this as an impairment loss because they felt that was the responsible thing to do. So, my answer is a little bit of reading the tea leaves and I think what it means is that they’re still involved in the project, they’re just telling their investors that they don’t expect to see this thing make any money for them any time soon.

JOYCE: And so what does Arch Coal’s decision signal in terms of the overall viability of the coal-to-gas conversion plant?

STORROW: You know that’s a really good question and I’m not sure I totally know the answer. The thing about this is DKRW has applied for a $1.75 billion loan guarantee from the US Department of Energy and it’s a $2 billion project overall. They’re very much reliant on this government money. The Department of Energy isn’t telling us where their review of this project is. And so going back to your original question about what’s significant about this Arch Coal development: here we have an investor in the project telling us that they don’t expect to see a return out of that, and so that is one of the first real signals of the project’s financial health that we’ve had. There’s been a lot of suspicion because DKRW has said, well we’re going to start construction, for instance, last summer. It didn’t happen. They got sort of into hot water with the state Industrial Siting Council, which nearly revoked their permit before giving them an extension. And throughout all of this DKRW officials have ‘you know, this is a big project, we’re talking about a $2 billion project here, it takes a lot to get it off the ground.’ But, you know, after a while I think people have started to question, you know, okay, it is a big project, but it seems to be taking a long time.

JOYCE: And has there been any response from DKRW to Arch Coal’s decision to list this as an impairment?

STORROW: We called them yesterday to ask them that, and we haven’t heard back from them yet.

JOYCE: Alright, well, we’ll looking forward to hearing more. Thanks for chatting, Ben.

STORROW: Thanks, Stephanie.

That’s was Casper Star-Tribune reporter Ben Storrow speaking with WPR’s Stephanie Joyce.

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