Cloud Peak Energy Sale Closes, But Questions Remain

Oct 24, 2019

Logo for the Navajo Transitional Energy Company
Credit Navajo Transitional Energy Company

Cloud Peak Energy Inc. has successfully closed its sale of three coal mines to Navajo Transitional Energy Company, LLC (NTEC).

NTEC is owned, but not controlled by the Navajo Nation. In addition to the Navajo Mine in New Mexico, NTEC now operates the Cordero Rojo and Antelope mines in Wyoming and Spring Creek mine in Montana.

NTEC will pay the recently bankrupt coal company Cloud Peak $15.7 million upfront, with $40 million expected down the line, and royalty payments for the next five years on coal produced. NTEC is also expected to tie financial loose-ends from the bankruptcy, assume all reclamation - or clean-up - costs, and tax liabilities.

"With the acquisition of these mines, NTEC is thrilled to become a neighbor and important employer in Montana and Wyoming," said President and CEO of NTEC Clark Moseley in a press release.
 

Transitional expenses with the closure of the sale
Credit SEC Filings

In September, NTEC released a report explaining its interest in Cloud Peak's assets. The company feels it can be profitable considering the high-quality coal, the low cost of the mines, beneficial utility policies, and a plan to export significantly more coal to Asia.

As a result of the purchase, Cloud Peak reduced its Board of Directors from six members down to three. Colin Marshall was terminated from the board and from his position as President and CEO in favor of Todd Myers, the former Senior Vice President of Marketing and Business Development. Myers also served as president of Westmoreland Coal Sales Company.

Remaining Questions

NTEC has not successfully replaced surety bonds for any of the mines.

A recent piece of Navajo legislation sheds light on the ongoing issues, starting with the understanding that NTEC expects the Navajo Nation to back any surety bonds.

"The Navajo Nation has learned that certain sureties may seek to use the Nation's prior limited consent to the NTEC General Indemnity Agreements, which consent was intended solely for the financial backing of surety bonds for the Nation," it reads. "The attempt by these sureties to misuse the... agreements in this manner would mean the Navajo Nation's current leadership would not have an opportunity to decide whether or not to provide the Nation's financial backing or the Cloud Peak Mine's bonds."
 

A political cartoon published today in the Navajo Times
Credit Navajo Times

In other words, NTEC could have been trying to use a previous agreement to shoehorn new bonding. Now, the company will have to request new approval from the Nation. The legislature voted to table the legislation for 30 days that would terminate previous agreements.

Clark Williams-Derry, energy finance analyst with the Institute for Energy Economics and Financial Analysis, said, "the only reason NTEC was willing to make the bid on Cloud Peak assets when no one else was touching it [was] they thought they had a free pass from the Navajo Nation to cover the whole cost of the surety bonds. No one else could get that."

According to the bill, surety bonds could be valued between $350 and $400 million.

Sovereign Immunity

Today, employees were sent home from the Spring Creek Mine after Montana environmental regulators denied NTEC's permit. The company's sovereign immunity from its Navajo ownership would make it difficult for the state of Montana to legally challenge issues related to the mine. Sovereign immunity is a legal doctrine that shields certain entities from being sued without consent. The state is requesting the Navajo Nation waive that immunity.

In e-mails obtained from the landowner group, the Power River Basin Resource Council, Wyoming's Deputy Attorney General James Kaste has similar concerns.

"As you can imagine this issue is of interest to multiple state agencies, and so ultimately we would like to have a number of folks from outside DEQ participate in the discussions," the e-mail reads.

A story today published in the Navajo Times explained NTEC was deliberately created for the nation's pursuit of energy independence.

In the report, President Jonathan Nez said of NTEC, "they were granted certain authority. Maybe if they did it right they would have a good standing."

As of today, NTEC became the third-largest coal producer in the country with relocated headquarters in Broomfield, Colorado.

Have a question about this story? Contact the reporter, Cooper McKim, at cmckim5@uwyo.edu.