Wyoming Spring Coal Production Highlights an Unpredictable Basin

(Casper Star Tribune, August 14) – Coal production in Wyoming’s prolific Powder River Basin was full of surprises this spring as production slowed in some mines and shifted up in others, keeping overall losses lower than they could have been.

April to June is the shoulder season for coal buyers and, predictably, production in the basin fell by nearly 8 million tons compared to the first three months of the year. However, that relative stability basin-wide is not true in a mine-by-mine comparison. For the 12 mines that together produce nearly 40 percent of the U.S. coal market, predictability is out the window.

Wyoming coal production used to be steady. The bottom fell out of the market in 2015 as older power plants shuttered, winnowing out buyers for Powder River Basin rock. Company debt sank the largest firms operating in Wyoming into bankruptcy. Production dropped by about one quarter. Over the last two years, the coal market has stabilized as something smaller and more competitive. Long-term contracts that kept production even have been replaced by a fluctuating spot market.

Travis Deti, executive director of the Wyoming Mining Association, said the overall story is that the Wyoming coal industry is stable. The WMA represents many of Wyoming’s mining firms.

But the fluctuation from one company to another, or one season to another, is part of that new normal for coal, he said.

“It’s kind of all over the place,” Deti said of quarterly production. “It’s really hard to predict on a quarter-to-quarter basis. I think the big picture is you’re going to see relative stability.”

Production at the two largest surface coal mines in Wyoming, North Antelope Rochelle and Black Thunder, fell in the second quarter. Peabody Energy’s North Antelope complex produced nearly five million tons less in the second quarter than it did in the first.

Black Thunder’s smaller drop was expected. The mine’s owner, Arch Coal, announced earlier this year that it would voluntarily cut production at the mine by about 10 million tons to adapt to the smaller market.

While Wyoming coal faces the broader problem of weakened demand, the second quarter also threw a few curveballs at mining. A nesting golden eagle held up a Cloud Peak Energy dragline move for five weeks. The Gillette-based company’s Antelope mine, just south of Wright, shed 1.8 million tons as wet spring weather slowed down operations. CEO Colin Marshall said in a recent call with investors that the mine hoped to replace some of that lost tonnage.

Antelope, like other mines, has lost some of its vitality in recent years.

Before the coal downturn, Antelope would regularly hit 8 to 9 million tons per quarter. Between April and June, Antelope produced 4.9 million tons.

The company’s Cordero Rojo mine increased production this spring by about 747,000 tons compared to a dismal first quarter, but that mine, too, was significantly below historic norms, ending the second quarter at a little over 3 million tons.

Other mines fared somewhat better in the second quarter of the year. Blackjewel LLC’s Belle Ayr mine, Cloud Peak’s Cordero Rojo mine and Arch’s Coal Creek mine all experienced production increases since the start of the year.

A handful of Wyoming coal mines lie outside the Powder River Basin. Production fell at PacifiCorp’s Jim Bridger surface mine in Sweetwater County — which feeds the utility’s nearby coal-fired power plant — by nearly 40 percent. Its nearby underground mine increased production slightly.

A spokesman for PacifiCorp’s subsidiary Rocky Mountain Power, Spencer Hall, said the seasonal drop in production was expected as customers switch from heating their homes to cooling them.

He also noted that hydro power plants are often running at their highest during the spring months, offering additional cheap power. PacifiCorp’s coal fleet has come under fire in recent months as environmental groups argue they are more costly than other types of power and should be replaced by wind and solar.

Meanwhile, many in the coal industry are hoping that the wave of coal plant closures in recent years, which lowered coal demand industry-wide, has broken. The Trump administration’s pro-coal stance offers the industry a short-term respite despite long-term challenges, noted Deti of the mining association.

“Obviously there are some long-term hurdles to overcome when your country is not building any new coal-fired power plants,” he said. “But, I think it’s fair to say you’re not going to be seeing those existing plants closing overnight.”

Original article here.