Atlas Carbon, the first company to commercialize a non-combustive use for Powder River Basin coal, has defaulted on a $15 million state loan and must open its doors and books to state auditors who will assess the company’s assets.
The State Loan and Investment Board on Thursday voted unanimously to find Atlas Carbon in default after several hours of testimony by company officials. The board directed the State Treasurer’s Office to “pursue any remedies established in the construction loan agreement as amended.”
The board is made up of Wyoming’s five state-wide elected officials: Gov. Mark Gordon, Secretary of State Chuck Gray, Auditor Kristi Racines, Treasurer Curt Meier and Superintendent of Public Instruction Megan Degenfelder.
The State Treasurer’s Office could seize the company’s assets that it offered as collateral, which include land, buildings and equipment at the facility located north of Gillette, as well as the company’s intellectual property, according to state documents. Treasurer Curt Meier, however, said he hopes to avoid such an action and instead devise other ways to ensure Atlas Carbon makes good on its loan obligation to Wyoming taxpayers.
“We’re hoping for a positive outcome for both Atlas Carbon and the interests of the state,” Meier told WyoFile on Friday.
Reza Hashampour, chairman and CEO of Polaris Asset Corporation, which manages finances for Atlas Carbon, said the company will work with the state to resolve the matter and that the company’s coal-refining plant will continue normal operations.
“As far as we are concerned, our operation is fully going forward and we are fully bringing product to our clients as we’re speaking,” Hashampour told WyoFile by phone on Friday. He added that Atlas’ loan repayment obligations to the state are “being addressed, and it’s going to get cured. It’s going to be a non-event for us.”
Atlas Carbon has also faced legal troubles.
New uses for coal
Atlas Carbon is among several companies courted by the state to develop new markets for Powder River Basin coal — an ambition that has eluded dozens of companies over several decades. Powder River Basin coal is primarily burned to generate electricity and is almost entirely dependent on the U.S. utility market, which is ratcheting down its use of coal in favor of renewable energy sources.
To help provide financial support to companies willing to pursue new markets for Wyoming coal, the Legislature passed Senate File 63 – Economic development programs-revisions in 2016. The law created the Economic Development Large Project loan program administered by the State Treasurer.
Atlas Carbon was awarded a $15 million loan in 2016 and the funds were disbursed in 2018. The loan came with a payment holiday of several years to allow the company to become profitable, Meier said. But when payments came due several years ago, Atlas Carbon asked for a series of extensions and loan modifications.
The state granted some of those requests, Meier said, including a lower interest rate. Still, to date, Atlas Carbon has made only a handful of payments to the state. Almost the entirety of the $15 million remains outstanding.
“It was necessary to declare a default,” Meier told WyoFile. “This was basically, I think, a wake-up call to say ‘We’ve gone as far as we can go and we need to have a very, very close look at this.’”
State Auditor Kristi Racines brought the motion to find Atlas Carbon in default of its loan obligations. Meier offered an amendment for a six-month holiday, but it failed for lack of a second.
“It was a tough day,” Racines told WyoFile. “Nobody wants to do that. But I felt that I couldn’t really see a path forward.”
Despite its financial troubles, Atlas Carbon “is a Wyoming story,” Hashampour told members of the State Loan and Investment Board Thursday. “Atlas is a Wyoming company. Atlas employs Wyoming people and it uses Wyoming coal as a main feedstock.”
Over the past two years, the company has moved from research and development to full commercialization serving dozens of clients, Hashampour said.
The company set up shop at the former Fort Union coal mine site north of Gillette, employing 27 workers. It refines Powder River Basin coal into activated carbon for water filtration as well as sorbent products to remove mercury from coal-fired smokestacks.
Currently, Atlas Carbon produces about 11 million pounds of activated carbon annually. The company is currently in talks with investors — which do not include the state, Hashampour said — to build a second refining plant at the Gillette location to add another 23 million pounds of annual production capacity.
The company has struggled with transportation costs and contract prices lower than the cost of production, Hashampour told state officials, but it continues to land new clients at higher pricing. The company’s plans for a second refining plant will vastly improve its margins, he added.
Atlas Carbon is also working through an increasingly challenging financial market where “environmental, social and corporate governance” — or ESG — policies forbid some companies from investing in coal, Hashampour said.
“All Atlas needs is a little bit of time,” he told board members. “Atlas is not asking to expand the amount of the loan or security that protects the state’s interest or otherwise put this state at risk. We simply need time.”