Colorado Coal: Down but Not Out, Officials Say

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Colorado's coal production has fallen by more than 68% since 2004. Five of the state's 13 mines have been closed since that year. Roughly 1,100 megawatts (MW) of coal-fired generating capacity in the state have been closed or converted to burn natural gas since 2011, pursuant to a state law. A recent settlement will close a 100-MW coal-burning plant and the mine that feeds it by 2022. It's expensive and logistically challenging to get Colorado's coal to overseas markets.

Attendees at the Colorado Mining Association's 119th National Western Mining Conference heard dour news about Colorado coal in a session February 20, yet CMA officials and members denied they were managing the decline of an industry. "There is a strong linkage between politics, policy and markets," CMA president Stan Dempsey Jr. said in an interview at the conference. "There are reasons to be optimistic. We may be at the bottom right now. We're trying to avoid the pitfalls that create negative market conditions."

"At least now we have an administration that is not openly hostile to coal," added Robert Burnham, president of Burnham Coal LLC (Arvada, Colorado). "It means that now we have a fighting chance."

Dempsey and speakers at the February 20 conference session referenced some bright spots. Earlier this month, President Donald Trump signed a congressional repeal of the Office of Surface Mining's Stream Protection Rule. That rule, while seeking to protect U.S. streams, could have put half or more of U.S. coal reserves off-limits to mining, James Mattern, president and general manager of Trapper Mining Incorporated (Craig, Colorado), told the CMA session. The repeal was possible because of the rarely used Congressional Review Act, which allows Congress and a president to overturn rules enacted in the last days of a prior presidency.

Another reason for optimism: Trump reportedly is readying a plan to yank the U.S. Department of the Interior's Programmatic Environmental Impact Statement (PEIS) that will guide a revision of the federal coal-leasing program. Then-President Barack Obama's plan to revise the terms of the federal coal-leasing program was strongly opposed by the mining industry but cheered by environmentalists. Earlier this week, The Washington Post reported the Trump administration was readying plans to terminate the review of the coal-leasing program.

A third reason for optimism: Last month, the Bureau of Land Management (BLM) (Washington, D.C.) granted a mining permit to Colowyo Coal Company to expand a coal mine in western Colorado. The Collum project will add between 70 million tons and 100 million tons of recoverable coal to Colowyo's overall resource base. Construction of the new infrastructure to support the Collum project will begin shortly, and the mine is expected to begin producing coal in August 2018. Annual production is estimated at 2 million to 2.5 million tons per year.

The coal will be burned at the Craig Station, a coal-fired power plant on Colorado's western slope, officials from Tri-State Generating & Transmission Association (Westminster, Colorado) and Colowyo Coal Company L.P. (Meeker, Colorado), told the CMA session.

Of course, the potential reversal of Obama's Clean Power Plan (CPP), now being litigated in the federal courts, would be yet another reason for optimism. Once a federal appeals court in Washington, D.C., hands down its decision, as is expected in the near future, the losing party is expected to appeal to the U.S. Supreme Court. So any final decision is still a ways away on that sweeping rule to lower carbon dioxide emissions from coal-burning generators.

In the meantime, Colorado coal miners must compete in difficult regulatory and market environments. The state's coal production has fallen about 68% since 2004, to 12.8 million tons in 2016 from 39.8 million tons in 2004, Mattern told the CMA session. That's a steeper decline than the U.S. market as a whole, which fell approximately 36% since 2004, to 739 million tons in 2016 from about 1,150 million tons in 2004.

Click on the images at right to see charts on declining coal production in Colorado and the U.S.



While regulatory actions have undeniably made life difficult for Colorado coal mines, market forces, chiefly in the form of inexpensive natural gas, continue to give coal-mining companies heartburn. Mattern discussed the dramatic expansion of gas production, and its accompanying price decline, at the CMA session February 20. About two-thirds of the gas produced in the U.S. comes from wells that have been hydraulically fractured, according to data Mattern cited from the U.S. Energy Information Administration (EIA) (Washington, D.C.).

Click on the image at right to see a graph detailing the price of natural gas at Henry Hub, Louisiana.

Mattern was followed by Robert Burnham, who discussed the bleak prospects for U.S. coal exports in general, and Colorado coal in particular. "Everyone agrees the market is there," Burnham said, citing export market-assessment data from several major coal companies. "But Western coal companies have a transportation disadvantage from mine to port, and a transportation disadvantage from port to customer."

What's Burnham's view on the outlook for Colorado coal exports? He quoted Greek philosopher Socrates: "There is nothing stable in human affairs. Therefore, avoid undue elation in prosperity and undue depression in adversity."

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