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EIA forecasts export decline; Cloud Peak starts clock on possible bankruptcy

The U.S. Energy Information Administration projected this week that coal exports in the thermal and metallurgical coal sectors will decrease this year from 2018 levels.

The agency expects metallurgical coal exports to fall 15.6% to 51.9 million tons in 2019 while thermal exports sink by a more modest 9.8% to 48.8 million tons. In 2018, coal and petroleum coke exports rose 13.2% year over year, reaching 144.7 million tons. Analysts told S&P Global Market Intelligence that India is expected to continue driving opportunities for U.S. producers in 2019.

"India is going to be the location that's best available for growth options," said Gregory Marmon, a Wood Mackenzie senior research analyst. "The main risk, of course, is their domestic supply."

Cloud Peak Energy Inc. also announced another development in its financial struggle this week with its decision not to pay a $1.8 million interest payment due March 15. The move triggered a 30-day grace period before the company defaults and the debt's maturity accelerates. The Powder River Basin coal company said in a March 15 filing that it does not have the liquidity needed to repay the principal balance if the debt is accelerated, and it may file for Chapter 11 bankruptcy if it cannot pay by April 14. Cloud Peak also reported a $718 million net loss for the year March 15, announcing its earnings in a Form 10-K without holding a call with analysts.

Hallador Energy Co. reported its fourth-quarter and full-year 2018 earnings this week as well. While some Illinois Basin coal producers have taken advantage of the strong export market, Hallador has capitalized on the domestic market and tightening supply in the region by selling coal to several new customers. The company raised its 2019 sales guidance from 7.3 million tons to 8.2 million tons.

U.S. coal companies idled fewer mines in the second half of 2018 than in the first. Forty-four mines were sitting idle by the end of the fourth quarter of 2018 compared with 66 by the end of the second quarter. Producers idled mines responsible for 1.9 million tons of output in 2018 in the fourth quarter, most of which were in Central and Northern Appalachia. Operations responsible for 3 million tons of coal over the 12-month period ending June 30, 2018, halted output in the first half of the year.

On the federal level, the agency responsible for mine safety could be a step closer to merging its handling of the coal and metal/nonmetal mining divisions. President Donald Trump's fiscal year 2020 budget request included funding to help consolidate the U.S. Mine Safety and Health Administration's two divisions, though they have historically been separated.

"The new enforcement structure would provide the flexibility to address industry changes and maximize the efficient use of MSHA's resources," according to the March 11 document.

The U.S. secretary of labor's office also filed a limited objection to Mission Coal Co. LLC's Chapter 11 bankruptcy reorganization plan because it does not include provisions to pay health claims incurred but not reported after it winds down operations. Without the provision, Mission's employees could be at risk of their insurers not paying for their medical treatment claims, the Labor Department said in its filing.

Murray Energy Corp. did not fare well in a federal appeals court this week. The U.S. Court of Appeals for the District of Columbia Circuit upheld a 2017 National Labor Relations Board finding that four of Murray's subsidiaries in West Virginia interfered with workers' rights to partake in union activity by directing them not to file safety complaints, among other violations. The court also said it did not find merit in Murray's arguments against the allegations and denied the producer's petition for review.

Upcoming events

Carbon capture: The Global CCS Institute and members of the private and public sector will discuss decarbonizing the American economy to combat climate change at the 8th Annual D.C. Forum on CCS on March 19 in Washington, D.C.

National Coal Council: The NCC will hold its spring meeting and 35th-anniversary celebration April 11-12 in Washington, D.C.