Cloud Peak Energy (NYSE: CLD) said Dec. 1 that its Cloud Peak Energy Logistics LLC subsidiary entered into an amended transportation agreement with the BNSF Railway to eliminate both parties’ coal volume obligations for the period 2016 through 2018 in exchange for a series of payments.
Under the amended agreement, Cloud Peak Energy made an upfront payment to BNSF and has the right to make payments from 2016 through 2018 replacing the previous take-or-pay commitments during this three-year period. The total reduction in potential payments if Cloud Peak does not ship any export tons during this three-year period is substantially comparable to the reduction under the export terminal throughput amendment announced in October by Cloud Peak Energy. Except as amended, the original transportation agreement remains in place through the end of 2024.
The parties will continue to meet regularly going forward to discuss market conditions and any potential shipments and the terms for any shipments, Cloud Peak noted. If export shipments do not occur, it is expected that Spring Creek Mine production volumes will be reduced accordingly. Spring Creek is Cloud Peak’s only mine in the Montana end of the Powder River Basin and is the company’s primary source for exported coal.
“We appreciate our constructive relationship with BNSF and their willingness to work with us in recognition of current extremely depressed international prices,” said Colin Marshall, Cloud Peak Energy’s President and Chief Executive Officer.
Cloud Peak Energy is headquartered in Wyoming and is one of the largest U.S. coal producers and the only pure-play Powder River Basin coal company. The company owns and operates three surface coal mines in the PRB, the lowest cost major coal producing region in the nation. The Antelope and Cordero Rojo mines are located in Wyoming and Spring Creek is located in Montana. In 2014, Cloud Peak Energy shipped approximately 86 million tons from its three mines to customers located throughout the U.S. and around the world.