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The dragline at Black Thunder coal mine near Wright is seen through heavy fog in March of 2017. Coal companies around the state are looking to sell to Asian markets, where there is a demand for exports.


Energy
Hope for coal exports grows in unstable market, but challenges remain firm

In a week of disappointing news from coal firms, Cloud Peak Energy, the only pure Powder River Basin coal company in Wyoming, had one highlight to catch the attention of Wyoming. Despite a $7 million loss starting out 2018, the company was pleased by its export prospects, carrying Powder River Basin coal to Asia.

Wyoming has gazed longingly toward countries like Japan for years. The subject comes and goes, a potential savior for Wyoming coal that never pans out. As the state settles into the new normal of diminished coal demand, talk of exports has resurfaced, from bars in Gillette to the state buildings of Cheyenne.

Many conversations revolve around a coal port on the Washington coast that’s struggled to come to fruition in the six years since it was proposed. The company proposing the Millennium Bulk Terminals is still pushing to get the environmental approvals needed to take an industrial site on the bank of the Columbia River and turn it into a gateway to the Asian coal market.

Companies, miners and Wyoming politicians are all for it. But whether Wyoming coal will ever feed Japanese or South Korean power plants is no clearer today than in previous years with or without a Washington port. As coal economics become more difficult, and hopes increase for a solution, some argue the dream will never come true.

***

In an earnings call Thursday, Colin Marshall, the CEO of Cloud Peak turned the conversation to Japan.

“The overall outlook for Asian demand remains strong,” he said.

Cloud Peak has contracts to sell coal to two Japanese coal plants, announced last year. It has a number of coal test burns at plants in the country and a number of talks for more tests from other utilities, Marshall said.

Indeed, Asian coal is the one bright spot in the company’s earnings of late. Though only planning to send 5.5 million tons overseas of up to 56 million tons of planned production in 2018, exports are a consistent part of Cloud Peak’s sales pitch.

It’s the one aspect of the business not trounced by market upheaval in the U.S.

“The whole business has changed, and we are having to adapt to that,” Marshall said of reduced coal demand domestically.

A spate of coal plant closures following the coal downturn that hit hard in 2015 has troubled even the strongest firms. And though those closures may have abated for the time being, the long-term likelihood of contained retirements is a reality, Marshall said.

Asian demand, however, is not falling.

***

Cloud Peak is not the only one selling the value of Asian markets.

Millennium Bulk argues that the opportunity in Asia is unquestionable.

“The market is robust and it’s long-term,” said Wendy Hutchinson, vice president of public affairs for Millennium.

The big draw is Japan, but also South Korea, she said. Those countries are the closest to the U.S. and have to import most of their energy needs. Though members of the Paris Climate Accord, a multi-country promise to reduce carbon dioxide emissions, both countries continue to use significant amounts of coal. Japan in particular has built a number of new coal fired plants and it’s collaborating with Wyoming on research and development in carbon capture.

Cloud Peak was once more closely affiliated with the Millennium Bulk Terminals, and had to write off a significant amount of investment dollars in contracts that didn’t pan out. For now it ships coal north to Canada in order to breach the Pacific divide. The added distance costs money and cuts into the slim margin of profitability Asia provides.

***

The hitch for Wyoming watchers, is that the Powder River Basin coal headed up to Canada isn’t from Wyoming. It’s from Montana.

All of Cloud Peak’s coal for Asian markets is coming out of its Spring Creek mine, across the border.

Lighthouse Resources, which operates the Decker mine in Montana and is part owner of the Black Butte mine in Wyoming, is also sending coal across seas. But not from Black Butte.

West from Millennium has an answer for this. She said the coal port has applied for permits for up to 44 million tons of exports.

“When you look at who can supply that, obviously Montana coal is coming first,” she said.

It’s closer to coastal ports and Western Montana is connected to the Canadian port by the Burlington Northern rail line. Millennium would be served by BNSF as well.

If the port in Washington were to open, some of the challenges in getting Wyoming coal to Canada would dissipate and Montana alone isn’t going to supply all that coal, she said.

“That kind of volume is going to have come out of Wyoming,” she said.

***

Others are skeptical of the newest rush of export fervor. The economics are just not there for Wyoming coal, said Clark Williams-Derry, a coal market analyst for Sightline Institute of Seattle, a think tank advocating for a transition to clean fuels.

“I always felt it was a little bit strange about Wyoming’s excitement about ports,” he said.

Lately, people are likely looking for a reason to hope, he said.

“When everything is going south or sour, you look for a savior. (Or,) you look for a scapegoat,” he said.

Millennium has suffered from bad economics, but for many the denial of permits for environmental reasons is an easy way to blame the state of Washington or regulators, he said.

***

Lighthouse Resources, parent company for Millennium Bulk, is suing Washington over permitting for the port, with local politicians and BNSF joining the protest as well. They take issue with a number of assumptions made by regulators that have held up the permits. Some in Wyoming would like to add the state’s voice to the opposition.

Sen. Chuck Gray, R-Casper, proposed a bill this legislative session that would set aside money to sue Washington state for holding up the coal port. The bill would have asked a lawyer to argue that Wyoming is economically disadvantaged by Washington’s choices. The bill failed, but the frustration with Washington remained.

Whether coal exports are a vain hope or an opportunity, Wyoming politicians from Gov. Matt Mead to Sen. John Barrasso are on board.

Barrasso made a point to talk about exports earlier this year at a coal meeting in Gillette and in later interviews with the Star-Tribune.

The Trump administration and Congress are working to remove the restrictions that have blocked coal export terminals in the past, he said in an email.

The senator did not respond to a question regarding the likelihood of Wyoming coal making it to Asian markets given economic constraints.

“Exporting more coal means more jobs in Wyoming and more money for state, local and federal governments,” he said. “I will continue to pursue every legislative option available that expands trade opportunities and reduces regulatory barriers on exporting Wyoming coal to overseas markets.”

Williams-Derry said it’s just not likely to happen, because there’s not enough to save Wyoming coal from the pressures happening domestically.

“PRB coal only prices into Asia when seaborne coal prices are on the high end,” he said. “The PRB is often described as a ‘swing’ or ‘marginal’ producer, slipping into and out of profitability.”

When a storm hits Indonesia or supply is disrupted in Australia, Powder River Basin coal has a shot. But it’s a long way to send coal, which means the coal needs to be valuable enough to carry the cost of all that distance, he said.

Right now, the Wyoming mines are barely breaking even, he said.

***

Thursday, Arch Coal announced that it was reducing production for 2018 by 10 million tons at the Black Thunder mine outside Wright. It’s one of the largest surface mines in the country, but Arch has opted to keep the coal in the ground until the return is higher, executives said Thursday.

Cloud Peak reported the same day a disappointing cash margin of $1.26 per ton.

Across the Wyoming coal industry companies are adapting to a new, more tumultuous, reality for coal. Coal production depends on a hot July or a supply disruption that spikes the price of natural gas or beating out a neighboring mine for diminished demand.

The market has changed, Marshall said Thursday.

What hasn’t changed is Wyoming’s hope for exports. As the market pressures increase, a few million tons of coal traveling overseas is enough to keep the fires burning.


International
AP
North Korea offers to give up nukes if US vows not to attack

SEOUL, South Korea — North Korean leader Kim Jong Un told his South Korean counterpart at their historic summit that he would be willing to give up his nuclear weapons if the U.S. commits to a formal end to the Korean War and a pledge not to attack the North, Seoul officials said Sunday.

Kim also vowed during his meeting with South Korean President Moon Jae-in on Friday to shut down the North's nuclear test site in May and disclose the process to experts and journalists from South Korea and the United States, Seoul's presidential office said.

While lingering questions remain about whether North Korea will ever decide to fully relinquish its nukes as it heads into negotiations with the U.S., Kim's comments amount to the North's most specific acknowledgement yet that "denuclearization" would constitute surrendering its weapons.

U.S. national security adviser John Bolton reacted coolly to word that Kim would abandon his weapons if the United States pledged not to invade.

Asked on CBS' "Face the Nation" whether the U.S. would make such a promise, Bolton said: "Well, we've heard this before. This is — the North Korean propaganda playbook is an infinitely rich resource."

"What we want to see from them is evidence that it's real and not just rhetoric," he added.

The long awaited meeting between the United States and North Korea is likely to occur before the end of May, President Donald Trump suggested Saturday evening during a rally in Michigan.

“I think we’ll have a meeting over the next three or four weeks,” Trump said. “It will be a very important meeting.”

“Whatever happens, happens,” he said of the meeting, noting he may go in and ultimately leave. “I’m not going to be a John Kerry who makes a horrible Iran deal.”

Seoul officials, who have shuttled between Pyongyang and Washington to broker talks between Kim and President Donald Trump, said Kim has expressed genuine interest in dealing away his nuclear weapons.

But there has been skepticism because North Korea for decades has been pushing a concept of "denuclearization" that bears no resemblance to the American definition. The North has long vowed to pursue nuclear development unless Washington removes its 28,500 troops from South Korea and the nuclear umbrella defending South Korea and Japan.

During their summit at a truce village on the border, Moon and Kim promised to work toward the "complete denuclearization" of the Korean Peninsula but made no references to verification or timetables.

Kim also expressed optimism about his meeting with Trump, Moon's spokesman Yoon Young-chan said.

"Once we start talking, the United States will know that I am not a person to launch nuclear weapons at South Korea, the Pacific or the United States," Kim said, according to Yoon.

Yoon also quoted Kim as saying: "If we maintain frequent meetings and build trust with the United States and receive promises for an end to the war and a non-aggression treaty, then why would we need to live in difficulty by keeping our nuclear weapons?"

The Korean Peninsula technically remains in a state of war because the 1950-53 Korean War was halted with an armistice, not a peace treaty.

In another sign of warming relations between Seoul and Pyongyang, South Korea said it will remove propaganda-broadcasting loudspeakers from the border with North Korea.

Seoul's Defense Ministry said today it will pull back dozens of its frontline loudspeakers on Tuesday and expects Pyongyang to do the same.

South Korea had turned off its loudspeakers ahead of last Friday's summit talks, and North Korea responded by halting its own broadcasts. Seoul had blasted propaganda messages and K-pop songs from border loudspeakers since the North's fourth nuclear test in early 2016. The North quickly matched the South's action with its own border broadcasts.

The closing of the nuclear test site would be a dramatic but likely symbolic event to set up Kim's summit with Trump. North Korea already announced this month that it has suspended all tests of nuclear devices and intercontinental ballistic missiles and plans to close its nuclear testing ground.

Still, Adam Mount, a senior defense analyst at the Federation of American Scientists, said Kim's comments were significant because they are his most explicit acknowledgement yet that denuclearization means surrendering his nuclear weapons.

"Questions remain about whether Kim will agree to discuss other nuclear technology, fissile material and missiles. However, they imply a phased process with reciprocal concessions," Mount said in an email. "It is not clear that the Trump administration will accept that kind of protracted program."

Analysts reacted with skepticism to Kim's previously announced plan to close down the test site at Punggye-ri, saying the northernmost tunnel had already become too unstable to use for underground detonations following the country's sixth and most powerful test blast in September.

In his conversation with Moon, Kim denied that he would be merely clearing out damaged goods, saying the site also has two new tunnels that are larger than previous testing facilities, Yoon said.

Some analysts see Moon's agreement with Kim at the summit as a disappointment, citing the lack of references to verification and timeframes and also the absence of a definition on what would constitute a "complete" denuclearization of the peninsula.

But Patrick McEachern, a former State Department analyst now with the Washington-based Wilson Center, said it was still meaningful that Moon extracted a commitment from Kim to complete denuclearization.

"The public conversation should now shift from speculation on whether North Korea would consider denuclearization to how South Korea and the United States can advance this denuclearization pledge in concrete steps in light of North Korea's reciprocal demands for concrete steps toward an eventual peace agreement," McEachern said in an email.

North Korea has invited the outside world to witness the dismantling of its nuclear facilities before. In June 2008, international broadcasters were allowed to air the demolition of a cooling tower at the Nyongbyon reactor site, a year after the North reached an agreement with the U.S. and four other nations to disable its nuclear facilities in return for an aid package worth about $400 million.

But the deal eventually collapsed after North Korea refused to accept U.S.-proposed verification methods, and the country went on to conduct its second nuclear test detonation in May 2009.


Casper
Casper City Council discusses contract with CAEDA

The Casper City Council is re-examining its relationship with an economic development organization that annually receives about $400,000 in public funds.

The Casper Area Economic Development Alliance works to bring new businesses to Casper and to help existing businesses improve their profitably. The public funding is directly given to the Economic Development Joint Powers Board and then trickles down to CAEDA.

The city’s current contract with the powers board isn’t scheduled to end until 2025, but some Council members want to terminate the long-term agreement and establish another contract that would need to be renewed on an annual basis.

“I think we would be doing a service to our taxpayers and our future councilmen,” said Councilman Dallas Laird.

The councilman, who has frequently criticized CAEDA for failing to provide enough information about how it spends public money, said the city should be able to review the organization’s contributions and plans each year before deciding whether to provide the funding.

Councilman Chris Walsh agreed with Laird, and said he would support applying this policy to all agencies.

But other council members firmly objected.

Councilman Bob Hopkins said it was unreasonable to expect the development alliance to operate from year-to-year without knowing if they could depend on public funds. Long-term contracts are not unusual and the city has lengthy agreements with many different agencies.

“This is a business standard,” said Hopkins.

Vice Mayor Charlie Powell also said he didn’t have any concerns about the city’s relationship with CAEDA. Powell credited the development alliance with helping to diversify the city’s economy, which he said will soften the effects of the next bust cycle.

Given that the city has long-term contracts with other groups, Councilman Shawn Johnson said he thought it was unfair that only CAEDA was being directly mentioned.

“Why is CAEDA the scapegoat?” he asked.

The Council ultimately decided to continue discussing the issue at a later work session.

CAEDA drew ire from some council members, including then-Mayor Kenyne Humphrey, last summer for failing to report how it spends public dollars.

Charles Walsh, the president and CEO, told the Council in July that the organization solicits private funds to use for investments in amounts that dwarf the public contribution. CAEDA officials are therefore concerned that fully opening the group’s books would sink confidential negotiations to recruit businesses to Casper.

“I told you guys we needed numbers,” Humphrey told Walsh. “I’m disappointed we didn’t get those.”

Walsh came before the Council again in December and presented a one-page document outlining the organization’s budget for financial year 2018.

He also provided a document listing some of CAEDA’s recent achievements, which included hosting site visits with prospective businesses and promoting Casper during the Wyoming Eclipse Festival.

Some council members, including Mayor Ray Pacheco, thought the documents provided a sufficient amount of information. But others weren’t satisfied.

Laird and then-City Councilwoman Amanda Huckabay criticized the report for being too vague and said they wanted a more detailed listing of expenses.

“People have to be responsible with city money,” Laird previously said. “You shouldn’t give anybody 10 cents of city money unless they tell you exactly what they’re going to do with and how it’s going to benefit the taxpayers.”