1441849--3/17/2010--CLOUD_PEAK_ENERGY

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Risks Related to Our Business and Industry The recent global economic downturn and disruptions in the financial and credit markets may have a material adverse effect on our business, financial condition and results of operations. Coal prices are subject to change and a substantial or extended decline in prices could materially and adversely affect our revenues and results of operations, as well as the value of our coal reserves. Our coal mining operations are subject to operating risks, which could result in materially increased operating expenses and decreased production levels and could materially and adversely affect our results of operations. Competition within the coal production industry and with producers of competing energy sources may materially and adversely affect our ability to sell coal at a favorable price. Excess production and production capacity in the coal industry could put downward pressure on coal prices and, as a result, materially and adversely affect our revenues and profitability. Decreases in demand for electricity resulting from economic, weather changes or other conditions could adversely affect coal prices and materially and adversely affect our results of operations. The use of alternative energy sources for power generation could reduce coal consumption by U.S. electric power generators, which could result in lower prices for our coal, could reduce our revenues and materially and adversely affect our business and results of operations. New and potential future regulatory requirements and public concerns relating to greenhouse gas emissions could affect our customers and could reduce the demand for coal as a fuel source and cause coal prices and sales of our coal to materially decline. Our business requires substantial capital investment and maintenance expenditures, which we may be unable to provide. If we are unable to acquire or develop additional coal reserves that are economically recoverable, our profitability and future success and growth may be materially and adversely affected. Because most of the coal in the vicinity of our mines is owned by the U.S. federal government, our future success and growth could be materially and adversely affected if we are unable to acquire additional reserves through the federal competitive leasing process. If we are unable to acquire surface rights to access our coal, we may be unable to obtain a permit to mine coal we own and may be required to employ expensive techniques to mine around those sections of land we cannot access in order to access other sections of coal reserves, which could materially and adversely affect our business and our results of operations. We may be unable to acquire state leases for coal, or to do so on a cost-effective basis, which could materially and adversely affect our business strategy and growth plans. Conflicts of interest with competing holders of mineral rights could materially and adversely affect our ability to mine coal or do so on a cost-effective basis. Our management team does not have experience managing our business as a stand-alone public company, and if they are unable to manage our business as a stand-alone public company, our business may be harmed. We are incurring increased costs as a result of being a public company, and the requirements of being a public company may divert management attention from our business. If we are unable to achieve and maintain effective internal controls, our operating results and financial condition could be harmed. We have identified material weaknesses in our internal controls over financial reporting that have contributed to a restatement of our 2005, 2006 and 2007 consolidated financial statements and June 30, 2008 interim consolidated financial statements. If not remediated satisfactorily, these material weaknesses could result in further material misstatements in our consolidated financial statements in future periods. Inaccuracies in our estimates of our coal reserves could result in decreased profitability from lower than expected revenues or higher than expected costs. If our highwalls or spoil-piles fail, our mining operations and ability to ship our coal could be impaired and our results of operations could be materially and adversely affected. Major equipment and plant failures could reduce our ability to produce and ship coal and materially and adversely affect our results of operations. Significant increases in the royalty and production taxes we pay on the coal we produce could materially and adversely affect our results of operations. Increases in the cost of raw materials and other industrial supplies, or the inability to obtain a sufficient quantity of those supplies, could increase our operating expenses, disrupt or delay our production and materially and adversely affect our profitability. Significant increases in the price of diesel fuel could materially and adversely affect our earnings. The majority of our coal sales contracts are forward sales contracts at fixed prices. If the production costs underlying these contracts increase, our results of operations could be materially and adversely affected. Our ability to operate our business effectively could be impaired if we fail to attract and retain key personnel. We rely on an affiliate of RTEA to provide us with certain key services related to our information technology systems. If we cannot replace such services with our own stand-alone systems prior to the expiration of the agreement, our business may be adversely impacted. Extensive environmental regulations, including existing and potential future regulatory requirements relating to air emissions, affect our customers and could reduce the demand for coal as a fuel source and cause coal prices and sales of our coal to materially decline. Extensive environmental laws and regulations impose significant costs on our mining operations, and future laws and regulations could materially increase those costs or limit our ability to produce and sell coal. Our operations may affect the environment or cause exposure to hazardous substances, and our properties may have environmental contamination, any of which could result in material liabilities to us. Extensive governmental regulations pertaining to employee safety and health impose significant costs on our mining operations, which could materially and adversely affect our results of operations. Federal or state regulatory agencies have the authority to order certain of our mines to be temporarily or permanently closed under certain circumstances, which could materially and adversely affect our ability to meet our customers' demands. We may be unable to obtain, maintain or renew permits or leases necessary for our operations, which would materially reduce our production, cash flow and profitability. Failure to obtain, maintain or renew our security arrangements, such as surety bonds or letters of credit, in a timely manner and on acceptable terms could affect our ability to secure reclamation and coal lease obligations and materially and adversely affect our ability to mine or lease coal. Because we produce and sell coal with low-sulfur content, a reduction in the price of sulfur dioxide emission allowances or increased use of technologies to reduce sulfur dioxide emissions could materially and adversely affect the demand for our coal and our results of operations. The risk that we cannot collect payments from our customers could increase if their creditworthiness deteriorates. Our ability to mine and ship coal is affected by adverse weather conditions, which could have an adverse effect on our revenues. The availability and reliability of transportation and increases in transportation costs, particularly for rail systems, could materially and adversely affect the demand for our coal or impair our ability to supply coal to our customers. Due to the long-term nature of our coal sales agreements, the prices we receive for our coal at any given time may not reflect the then-existing current market prices for coal. Changes in purchasing patterns in the coal industry may make it difficult for us to enter into new contracts with customers, or do so on favorable terms, which could materially and adversely affect our business and results of operations. If the assumptions underlying our reclamation and mine closure obligations are materially inaccurate, our costs could be significantly greater than anticipated or be incurred sooner than anticipated. If the third-party sources we use to supply coal are unable to fulfill the delivery terms of their contracts, our results of operations could be materially and adversely affected. Certain provisions in our coal sales contracts may provide limited protection during adverse economic conditions or may result in economic penalties or suspension upon a failure to meet contractual requirements, any of which may cause our revenues and profits to suffer. Upon the occurrence of a force majeure, we or our customers may be permitted to temporarily suspend performance under our coal sales contracts, which could cause our revenues and profits to suffer. Acquisitions that we may undertake in the future involve a number of risks, any of which could cause us not to realize the anticipated benefits. We do not currently operate the Decker mine and our results of operations could be adversely affected if the third-party mine operator fails to effectively operate the mine or if our joint venture partner fails to perform its obligations. In addition, our credit arrangements may limit our ability to contribute cash to the Decker mine. A shortage of skilled labor in the mining industry could reduce labor productivity and increase costs, which could materially and adversely affect our business and results of operations. Our work force could become unionized in the future, which could adversely affect the stability of our production and materially reduce our profitability. Provisions in our federal and state lease agreements, or defects in title or the loss of a leasehold interest in certain property or reserves or related surface rights, could limit our ability to mine our coal reserves. Terrorist attacks and threats, escalation of military activity in response to these attacks or acts of war may materially and adversely affect our business and results of operations. Risks Related to Our Indebtedness Our substantial indebtedness could adversely affect our results of operations and financial condition and prevent us from fulfilling our financial obligations. If we are unable to comply with the covenants or restrictions contained in the CPE Resources' debt instruments, the lenders could declare all amounts outstanding under those instruments to be due and payable, which could materially and adversely affect our financial condition. Provisions in our indenture could discourage an acquisition of us by a third party. Risks Related to Our Corporate Structure and Our IPO Structuring Transactions We are required to pay RTEA for most of the tax benefits we may claim as a result of the tax basis step-up we received in connection with our IPO and related IPO structuring transactions. In certain cases, payments to RTEA may be accelerated or exceed our actual cash tax savings. These provisions may deter a change in control of our company. Our results as a separate, stand-alone public company will be significantly different from those portrayed in our historical financial results. Rio Tinto may benefit from corporate opportunities that might otherwise be available to us. Our directors and executive officers have potential conflicts of interest with us and your interests as shareholders. Our agreements with Rio Tinto and its affiliates related to our IPO are likely less favorable to us than similar agreements negotiated between unaffiliated third parties. Third parties may seek to hold us responsible for liabilities of Rio Tinto that we did not assume. We are a holding company with no direct operations of our own and depend on distributions from CPE Resources to meet our ongoing obligations. Rio Tinto or its affiliates may have interests that differ from your interests as stockholders and they have specified consent rights in CPE Resources. Any future redemption by Rio Tinto or Cloud Peak Energy of common membership units in CPE Resources in exchange for shares of our common stock will significantly dilute your voting power. If we are determined to be an investment company, we would become subject to burdensome regulatory requirements and our business activities could be restricted. Future sales of our common stock or other securities convertible into our common stock could cause our stock price to decline. Anti-takeover provisions in our charter documents and other aspects of our structure, including Rio Tinto's substantial holdings in CPE Resources and its rights to approve a change in control of CPE Resources or us or a change in the manager of CPE Resources could discourage, delay or prevent a change in control of our company and may adversely affect the trading price of our common stock.

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1441849--3/17/2010--CLOUD_PEAK_ENERGY_INC.