McClane gets royalty relief, but needs client

The Bureau of Land Management has approved a reduced royalty rate for the McClane Canyon Mine north of Fruita, but its prospects for reopening continue to hinge on finding a new customer.

The agency recently agreed to reduce the underground coal mine’s royalty rate from 8 to 5 percent for two leases covering 5,283 acres due to difficult geological conditions. The rate reduction lasts for five years or until 10 million tons of coal are mined, whichever comes first.

The BLM also says it has agreed to a rate reduction for the Colowyo Mine near Meeker, from the standard 12.5 percent for surface mines to 8 percent, also due to geological challenges. The agency also recently reduced the rate for some of Arch Coal’s West Elk Mine operations near Somerset for the same reason.

The BLM also recently proposed acceptance of a request to add 317 acres to an existing coal lease for the McClane Canyon Mine. That would add about 2 million tons of coal reserves for the mine, owned by CAM-Colorado, LLC. It also would let the company access as much as 16 million tons of coal within its existing lease area that otherwise might be unrecoverable, by letting it go around a wet, unstable section that is unsafe to mine.

Corey Heaps, the mine’s project manager, said the rate reduction applies to the same area of difficult coal.

The mine shut down in December 2010 after the closure of its only customer, the Cameo Power Plant. It hopes to reopen with a larger operation and ship coal to Eastern markets.

“Unfortunately we just don’t have a contract yet,” Heaps said. “I wish we did because we could hire some people and put them to work.”

He noted that the domestic coal market has been difficult. The coal industry says it has been hurt by electric utilities increasingly using natural gas and by tougher environmental regulations.

Colowyo’s rate reduction covers 6,867 acres and is limited to a six-year period or 16 million tons of coal. BLM spokeswoman Vanessa Lacayo said the company is dealing with challenges such as steep coal seams that are harder for machinery to mine. She said such reductions are intended to help companies be able to continue to mine. Colorado receives about half of the affected royalty revenues, but Gov. John Hickenlooper has supported all three recent reductions, citing the importance of preserving mining jobs.

Jeremy Nichols, with the conservation group WildEarth Guardians, said the BLM seems to be rubber-stamping rate reductions. He also wonders if the proposed McClane Canyon lease modification is linked to CAM-Colorado’s desire to open a new, much larger mine, Red Cliff, nearby, and has urged the BLM to consider the modification’s environmental impacts.


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