The coal industry’s vision of a robust export market turned out to be a mirage.
And another one bites the dust…
Starting six years ago, Washington and Oregon found themselves besieged by a flotilla of massive, well-financed companies hell-bent on building coal export terminals to feed Asia’s allegedly insatiable appetite for coal. But the coal industry’s vision of a robust export market turned out to be a mirage: starting in early 2011, international coal prices peaked and then collapsed for five consecutive years. One by one, as the Asian coal bubble deflated, the export projects folded, the smart money fled… and the few remaining hangers-on sank into insolvency, many of them weighed down by their massive, ill-timed bets on coal exports.
But yesterday marked the end of that era: Arch Coal, the second largest coal company in America and last big name remaining in the coal export game, gave up the ghost. The company handed over its 38% share in the proposed Millennium Bulk Logistics Terminal in Longview, Washington, to the project’s last remaining supporter, Lighthouse Resources—a company that used to be called Ambre Energy North America until a financial collapse forced Ambre to cede its assets to its investors.
Arch itself declared bankruptcy in January, so it had to post details of its abandonment of Millennium on the company’s bankruptcy docket. (Here’s a pdf link to the original document.) Astonishingly, Arch got no money at all in return for “selling” its interest in the coal terminal. All Arch got out of the deal was a guarantee that Lighthouse would absolve it from all liability for the project, plus an option to use 10% of the port’s future capacity—if the port is ever completed, that is. Heck, Arch didn’t even get a price break on the port space, just an agreement that it would pay the same rate as other customers. And it’s likely that the option is worthless anyway: rival coal company Cloud Peak Energy has a similar option, but the company’s annual report shows that its auditors forced Cloud Peak to count that option as having zero economic value.
In a spin-soaked press release, Lighthouse portrayed Arch’s rush for the exits in the most positive light possible. Lighthouse expressed delight and confidence in taking full ownership of the project: Arch’s exit was simply “a logical next step in Arch’s involvement in Millennium!” The doublespeak would make Orwell blush.
Peeling back the layers of spin, though, it’s clear that this is a humbling defeat for everyone involved in Millennium. Arch Coal’s regulatory filings show that Arch had spent $57.5 million on Millennium by the end of 2015—a $25 million initial investment in 2011, followed by further cash advances totaling $32.5 million over 5 years. A previous bankruptcy filing showed that Arch paid $2 million to Millennium just in the 90 days leading up to the company’s bankruptcy; and its most recent filing admitted that weekly payments were ongoing. Given the dismal outlook for coal exports, the bankrupt company simply couldn’t bear the ongoing cost of keeping the project alive.
So in the end, Arch’s managers ponied up about $60 million to play in the Northwest coal export game and walked away with nothing but a worthless option, a handshake, and a promise that they wouldn’t be sued for their trouble.
Arch’s exit leaves precisely one player left in the coal export game in Washington and Oregon: Lighthouse Resources, which now stands as the only backer of Millennium and which also hopes to resuscitate its nearly-defunct Morrow-Pacific project in Oregon. Lighthouse owns a pair of struggling coal mines, one in Wyoming and the other in Montana, and its entire business model hinges on exporting coal into seaborne markets that are now badly oversupplied with cheap coal.
Lighthouse, in turn, is owned and controlled by Resource Capital Funds (RCF), an international private equity firm registered in the Cayman Islands. As we detailed a few years ago, RCF is a vulture capitalist firm that swoops into risky minerals projects all over the world, making big promises to nearby communities—and then swoops out as soon as it can find a bigger sucker. But although they’ve tried for years to find new investors to take Lighthouse off their hands, so far the biggest sucker at Millennium has been RCF itself, which has had to keep trickling money into Lighthouse just to keep the firm from going under.
There’s no telling whether RCF will want to keep Lighthouse alive or if it will soon pull the plug. Either way, the lessons of Arch’s exit from Millennium are clear: coal exports are now a sucker’s game, and the only investors who are still involved in the Millennium coal export terminal are the ones who can’t walk away.
Like what you're reading? Find out more about Arch Coal's collapse here.
Phil B.
Thank you Sightline, for your in-depth research & coverage of these coal export schemes.
The death of big coal is a huge win for the health of 96 pass-through communities from Spokane to Centralia. Dirty coal is financially bankrupt, morally bankrupt & left to inflating & spinning lies.
Thank you!!
Diane Dick
My thanks also for your in depth reporting, research, and commitment to tell it like it is. Your support on the coal issues has been huge and words cannot express my gratitude.
Thank you from Longview!!
Bob Simmons
Does it seem that the Lummi Nation in Bellingham saved SSA Marine from a similar financial disaster, by demanding that the Army Corps of Engineers reject SSA’s plan for the coal export terminal at Cherry Point? Wonder if the company executives involved were so used to being told “sure, go ahead,” that they couldn’t see the probability of failure.
Toni Montgomery
I am happy to say that the work of many people has paid off and been supported by the truth about coal. Just look at the devastating affects of coal on people who have had to breathe the black dust. Look at the miles of dust and chunks left along the
Columbia River. Will these bankrupt coal company’s be held responsible and pay for the clean up of the once pristine Columbia River basin?
The end is now for coal around the world. We are fighting for the earth and our lives. Thinking people know that climate change is going to be hard to stop and to reverse.
Thank you to those who recognize that this is a dead energy source. We can and will do better.
Stephan Michaels
I keep seeing this thought, “the work of many people paid off…” or as Re-sources says in it’s latest ask for money “We’ve defeated the Gateway Pacific Terminal after a six-year battle.”
NOT QUITE.
I’m not discounting collective effort, but its effectiveness. More than two hundred thousand comments submitted at scoping for GPT, and the Army Corps of Engineers testified it would NOT look at cumulative impacts. They did not listen to us. They listened to the Lummi Tribe.
The enviro groups need to step up their messaging and use media more effectively to reach beyond the its base along the rail corridor, because we might not have the Lummi to save us when the next proposal comes down the pike.
Yes, they can do better.
Robert Z
BNSF is the neighbor from hell. If you take all the negative effects of industry, dams, contamination and combined them they would be exceeded by the effect of having railroad lines operating on both banks of the Columbia River through the Gorge and upstream.
Railroads are like a razor across the throat of wildlife and human quality of life. They are a barricade preventing access to the life giving river. The Indians first learned about railroads when the railroads built their lines right through their fishing villages with impunity.
Railroads have their own police force and hundreds of lawyers who could care less about being a good neighbor. Its all about the bottom line, money. They rule with an iron hand and the toxic chemicals in their railroad ties, chemicals they spray to control vegetation, illegal toxic dump sites, and filthy litter line the tracks and into private properties all along their lines.
I have spent thousands of dollars cleaning up railroad litter and dangerous toxic materials with out even a thank you. I have been called names, threatened, yelled at, intentional horn blasting, threatening lawyers and more, and yet I am on my own property. The BNSF considers any property close to their R/W as theirs and they make sure you will not enjoy your own property if within site of their engineers.
Why worry about the ISIS when we have the railroad empire like a spider web across this country with vested rights that are exaggerated by their police force and a multitude of lawyers.
A BNSF road master said it best: “If I had my way we would burn down every house in town.” Apparently human habitation is fair game and now under Warren Buffett the locals are not allowed to go across the tracks to fish or enjoy the river even though they had that right for over 100 years.
It doesn’t matter what they ship as they destroy all life along the Columbia River except the birds. Death is their effect on all life close to their R/W’s including humans.
Mary Paynter
At the DEIS hearing on Tuesday May 24, the CEO of Milennium, the first speaker up, announced with relief that the DEIS said the burning of coal exported to Asia would have no adverse impact on climate change or global warming. (I believe it was a new thing for a DEIS to have to consider impacts beyond the site area–such as the burning of exported coal.) I was sitting in the audience with my 2-minute statement about the unquestionable adverse impact of the burning of this coal at a time when the U.S committed to reducing emissions at the Paris climate talks. I was stunned but decided to go ahead with my statement as written, and fortunately I drew a lucky lottery number that allowed me to speak. I went home and scrolled through the DEIS to see if I could figure out how in the world the CEO could draw such a conclusion. Guess what? I think he misread the headings, an easy mistake to make when reading something online. The “no adverse impact” conclusion was under the heading of the “No-build option.”
Clark Williams-Derry
That’s a fabulous story, Mary!!!
anne buck
Oh Happy Day!
Marjorie R. Nichols
I am very thankful and relieved there will be no coal terminal in Longview, WA! I had almost given up hope when our commissioners approved of the coal terminal and repeatedly would say at meetings that it was a done deal. I appreciate all the help from the Columbia River Keepers and people that came from out of town and out of state to defeat the coal terminal. The coal terminal was a bad idea right from the beginning. We can and and should do better!