A federal judge approved a plan for coal company Cloud Peak Energy to exit bankruptcy Thursday, bringing the Wyoming-based company one step closer to resolving a Chapter 11 case that began in May.
Though the bankruptcy court accepted the company’s disclosure statement and plan during a confirmation hearing Thursday, Cloud Peak Energy still has additional steps to take before the case can officially close.
The Wyoming coal operator owned three Powder River Basin mines — Antelope and Cordero Rojo in Wyoming and Spring Creek in Montana — and owed about $400 million in outstanding debt when it filed for bankruptcy in May. After filing its petition, the publicly traded company turned to the auction block.
It sold off its most valuable assets: the three Powder River Basin coal mines.
A Navajo Nation-based coal firm secured the winning bid for the mines and began operating them in October. In purchasing the three coal mines, Navajo Transitional Energy Company also assumed $94 million in pre- and post-petition debts left behind by Cloud Peak Energy.
Though the new owner received a license to mine from Wyoming and Montana, it has yet to complete permit transfers, leaving Cloud Peak Energy on the hook for over $400 million in reclamation, or cleanup, obligations.
“The technical end of bankruptcy is far from the end of problems for Cloud Peak Energy, Wyoming and Montana,” said Bob LeResche, board member for the Western Organization of Resource Councils and the Powder River Basin Resource Council, in a statement. “Notably, until NTEC provides financial assurances and waives sovereign immunity to receive state mining permits and federal coal leases, Cloud Peak is still responsible for all reclamation costs at the mines.
“We will continue to be vigilant to ensure protection of the public interest through strong reclamation bonding standards, no matter who owns these mines,” he added.
Cloud Peak Energy could not be reached for comment.
Though the insolvent company will likely resolve its bankruptcy case in the foreseeable future, it won’t technically dissolve, nor will it cease to exist.
“If it formally dissolved, then any outstanding liabilities go to the owners of the company,” explained Joshua Macey, a professor at Cornell Law School. “They would much rather keep the company alive so that way they have protections. ... You don’t want to get rid of limited liability. It will likely become an empty shell.”
The company first emerged in the Powder River Basin in 2009 when international mining corporation Rio Tinto made moves to leave American coal production and sell its mines. Its financial turbulence had brewed for months before it filed for bankruptcy. Last year, on top of layoffs, the company slashed retirement and health care benefits for its workers. In March, the New York Stock Exchange went so far as to block the company from trading, based on the company’s abysmal financial track record.
A string of bankruptcies have ravaged Wyoming coal country this year, as coal companies face declining demand for coal and overcapacity in the Powder River Basin.