DKRW's hopes sink with low oil prices

Project partner Arch Coal files for Chapter 11 bankruptcy

Bill Gathmannn, DKRW’s Senior Vice President for Finance, said that there hasn’t been much development at a Jan. 6 meeting.

“Our hearts are in it,” Gathmannn said after saying that the coal to liquefaction project doesn’t work with $35 per barrel oil prices.

Six months before, Gathmannn had stated that the oil industry doesn’t always look at the short term picture of oil prices, but since then, the price per barrel has plummeted, according to reports in the oil industry. With the drop in oil prices, there hasn’t been much development externally, Gathmannn said. DKRW is monitoring the oil prices, working on the project internally and trying to figure out how to make the project work.

“We haven’t had any substantive discussions with contractors or lenders, we really haven’t talked with the DOE (Department of Energy), with these types of oil prices, it just doesn’t work to be honest with you,” Gathmann said.

Gathmann referred to oil patches that are shutting down because of low oil prices. “Projects are being canceled or put on hold and we are kind of in that situation too, because of oil prices.”

“We are working on the permitting process and trying to keep that up to date,” Gathmann said. “It is not as though we are sitting back and letting the project die. We’re trying to keep it going.”

Gathmann said they continue to hold the meetings, as required by the Industrial Siting Council (ISC), and will have another one in May.

“For the next 12 months, we will continue to monitor where oil prices are going,” Gathmann said. “If oil prices allow it and we are able to come up with a construction contract and construction schedule, we will continue to work on the socio-economic report and submit that to the ISC.”

The day of the meeting, Arch Coal was facing an ominous future as reports of bankruptcy, after the company reports to be $5 billion in debt load last quarter, according to Forbes.com.

Arch Coal is a partner with DKRW in the coal to liquefaction project, and owns the mine that DKRW and Medicine Bow Fuel and Power had planned to mine.

Last quarter, Arch Coal elected exercise and interest payment grace period and was negotiating with their creditors, according to a news release that Arch Coal sent out on Dec. 15, 2015. The 30-day grace period was to end Friday.

On Monday, Arch Coal filed for Chapter 11 reorganization according to a press released on their website.

The Saratoga Sun contacted Arch Coal Monday. Late Tuesday morning the company sent their 58-page first day declaration stating that operations would run as normal. The declaration mentions their mines in the Power River Basin, but there was no mention of the inactive Saddleback mine near Elk Mountain.

The document was not available for full review as of press time.

If the permit expires, DKRW will have to re-apply for a new permit and there would be a cap on impact funds that was not in place before, which means towns like Medicine Bow would not get the same amount of funding, according to DKRW’s attorney Mary Throne. Medicine Bow has expected to be most impacted by the project and council members like Kinda Colman and Cindy Chace were both vocal about their support of the project. However, Colman stated they cannot continue to function on a wing and a prayer.

Gathmann admitted the things have never lined up for this project, as they have faced one challenge after another. “We never got the stars perfectly lined up,” he said.

 

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