Elk Creek coal mine fires half of workers
Oxbow Mining has laid off about half of its Elk Creek Mine workforce of nearly 300 workers after deciding it will have to abandon in place a longwall mining machine worth tens of millions of dollars.
The actions at the Somerset facility follow months of efforts by the company to try to recover the longwall equipment after issues involving spontaneous combustion arose in the mine in January.
“We have made a decision that it’s not safe to recover the longwall so it’s going to be sealed in place,” said Mike Ludlow, executive vice president at the mine.
He said there are no expectations that it can be recovered.
The company, which had about 285 workers, notified employees about the layoffs Tuesday. Ludlow said a federal law requiring advance notification of layoffs to be provided doesn’t apply because of the emergency nature of the layoffs, but employees were provided severance payments.
The spontaneous combustion problem was first detected through high carbon monoxide levels suggesting underground heating in the mine. The company withdrew everyone from the mine Jan. 9 and furloughed some people that month, but brought back workers later to do development work for mining in other areas where it’s safe.
Full-scale mining requires a longwall operation, however. Now that Oxbow has given up on recovering its equipment, it will be looking to buy another used or new longwall.
Ludlow said a longwall similar to the one Oxbow has been using costs probably between $50 million and $100 million.
During a tour of the mine several years ago, mine officials described the longwall as being 800 feet long and weighing 68 tons, with 139 piston-supported shields, and able to shear away at a wall to produce as much as 1,700 tons of coal per hour.
Oxbow’s production capacity is about 5 million tons a year but has been sharply curtailed this year because the longwall accounts for about 80 percent of production.
Ludlow said the layoffs are considered permanent.
But he added, “We’d like to think that our business would pick back up in the years going forward and then we would be able to build our workforce and production back to previous levels.”
Oxbow, owned by billionaire Bill Koch, has operated the mine since 2001. It operates along the border of Delta and Gunnison counties, along with other coal mines.
Delta County administrator Robbie LeValley said those mines are an important part of the area’s employment base. She said Oxbow has notified the county of the layoffs and its future plans.
“This represents a significant reduction that will be felt across Delta and Gunnison counties,” she said.
She said Delta County won’t feel the decrease in severance tax and federal mineral lease revenues until next year, but the production drop and layoffs have a more immediate impact on sales tax revenues.
While Oxbow hasn’t been producing any coal this week, it plans to get back to a limited amount of production, Ludlow said. Its coal is being shipped to the West Coast for transportation overseas.
Oxbow’s longwall problems are coming amid larger challenges for the coal industry as a whole.
“The domestic market and the international markets right now are oversupplied and sales prices are low both domestically and internationally,” Ludlow said. Increased competition from natural gas, warmer weather and the economic downturn all have reduced the demand for coal-generated electricity, he said.