Colorado coal production drops almost 40 percent in 2016
Colorado coal production last year plummeted by nearly 40 percent, a low not experienced since the late 1970s, according to one measure of the industry’s activity.
The U.S. Energy Information Administration said Thursday that the state’s 2016 production was 11.4 million tons last year, down from 18.9 million in 2015, or a 39.5 percent decline.
Nationwide production was likewise down, falling 17.6 percent, to 739 million tons.
The EIA data is an estimate, and the year-end production numbers that the Colorado Division of Reclamation, Mining and Safety tally based on activity at each mine aren’t yet available. Its latest monthly production report for last year, which includes figures through November, shows 11.6 million tons of production for the first 11 months of the year.
By either measure, the sharp downward trend is the same. DRMS showed 18.7 million tons of Colorado production in 2015. Colorado coal production is now at a low not seen for nearly 40 years, according to Colorado Geological Survey historical data.
Colorado has shown a continuing drop in production in recent years. State production in 2014 was about 23 million tons, DRMS reports. Production peaked in 2004 at just under 40 million tons.
“Coal production is down as utilities are saving money by shuttering aging coal plants in favor of cheaper and cleaner energy sources (cleaner burning, low-priced natural gas, as well as solar and wind), and as regulations that limit the damaging impacts of coal combustion (toxic mercury pollution, haze) take effect,” Ted Zukoski, an attorney with the conservation group Earthjustice, wrote in an email to reporters.
Last year’s drop in Colorado production is explained in part by the idling early in the year of the Bowie No. 2 Mine near Paonia due to poor market conditions. Bowie produced about 1.6 million tons in 2015 and just 33,400 tons last year before its idling.
The state’s two highest-producing mines — Arch Coal’s West Elk Mine in the North Fork Valley and Peabody Energy’s Twentymile Mine in Routt County — also have seen continuing slips in production. West Elk produced 3.5 million tons for the first 11 months of last year, compared to 5.2 million tons for all of 2015. Twentymile produced 2.5 million tons through November of last year, compared to 4.1 million tons for all of 2015.
The owners of both mines dealt with bankruptcies in 2016. Arch Coal has emerged from bankruptcy reorganization proceedings while Peabody continues working toward doing the same. Peabody also had sought last year to sell its Twentymile facility to Bowie before that deal fell through when Bowie apparently couldn’t come up with financing.
Also during the first 11 months of last year, the Colowyo and Trapper mines produced 1.65 million and 1.67 million tons, respectively. Both mines send their coal to the nearby Craig Station power plant in Moffat County. They produced 2.3 million and 2.1 million tons, respectively, in 2015.
The Deserado Mine in Rio Blanco County produced 1.4 million tons in the first 11 months of last year, and about 2.4 million tons the prior year. Deserado supplies a power plant just across the Utah border.
No other mine in the state has produced more than a million tons last year or the year before.
DRMS reports that 1,089 coal miners were employed in Colorado at the end of November, compared to 1,326 at the end of 2015.
Logan Bonacorsi, an Arch Coal spokesperson, said in an email that “while demand for energy-producing coal has been under pressure due to high utility stockpiles, we continue to see interest from domestic power generators and industrial customers that prefer West Elk’s high-Btu, low-sulfur coal. In addition, West Elk is highly regarded by international power generators, and when the economics make sense this coal moves well into international thermal markets.”
Thermal coal is burned to generate steam for power generation.
Arch Coal also has been encouraged by the recent reinstatement of the North Fork Valley coal exemption to Colorado’s roadless rule for national forests, following additional court-mandated environmental review. The company is looking to expand mining into a roadless area.
“The reinstatement of the North Fork Mining Area exception of the Colorado Roadless Rule is a positive step in the process that will extend the life of West Elk, and a positive development for the local communities that benefit from the operation. Beyond the reinstatement, there are still a number of items that will need to be accomplished before any mining takes place in that area,” she said.
In its quarterly report for the period ending Sept. 30, Peabody cited EIA data showing domestic electricity generation from coal fell 13 percent for the first nine months of 2016, compared to the same period in 2015.
“U.S. electricity generation from coal was unfavorably affected during that period by coal-to-gas switching due to comparatively low natural gas prices during the first quarter of 2016, high coal stockpiles, and lower heating-degree days due to mild winter weather,” it said.
But it pointed to some factors shifting in favor of the industry.
“We expect U.S. thermal coal supply and demand to rebalance in 2017 as natural gas prices increase, coal consumption grows, exports stabilize and stockpile drawdowns continue,” Peabody said.
It said China coal imports strengthened beginning in March “following policy measures in China that have reduced domestic coal production and … stronger than expected China steel production and power generation.”
Clark Williams-Derry, director of energy finance for Sightline Institute, a sustainability think-tank based in Seattle, said China cut domestic coal mining because overproduction was driving prices too low for mines. But prices surged high enough that Chinese power plants, steel mills and other consumers started looking to international coal as they have in the past.
But he said China since has relaxed its domestic production quotas after seeing what has happened.
“The bottom line is this surge in (China) coal prices seems to have subsided for the moment,” Williams-Derry said.
He said it’s hard for U.S. coal producers to build a long-term strategy for coal exports when Pacific Rim coal prices are subject to whatever political and economic decisions China makes.
Ironically, President-elect Donald Trump, who campaigned in support of domestic coal mining, could worsen prospects for U.S. coal exports to China if he continues with the anti-trade rhetoric he has engaged in, Williams-Derry noted.
“In an environment where trade tensions are rising, it’s very, very unlikely China will make decisions beneficial to the U.S. coal industry,” he said.