Oxbow shifts to permanent shutdown of Elk Creek Mine

A coal silo in the town of Somerset owned by Oxbow Elk Creek Mine was taken down Friday. The silo, built in 1969, was used to load coal onto rail cars. It took 330 pounds of precisely placed dynamite to lay the 70-foot by 140-foot concrete structure away from Colorado Highway 133 and houses in the town.

Colorado Highway 133, where the firetrucks are pictured, was opened soon after the blast. No damage was done to the town or the highway.

Oxbow Mining has begun taking the steps to permanently close its Elk Creek Mine in Somerset, which up until late last year it had continued to hope to someday reopen.

“Our mine is sealed and we are demolishing coal handling facilities,” said the company’s president, Mike Ludlow.

Conveyors, coal and rail loadouts, and maintenance buildings are being removed in the first phase of reclaiming the mine site. On Friday, crews used explosives to bring down the facility’s coal silo, briefly requiring closure of Colorado Highway 133.

Oxbow ceased mining at the site in late 2013, after a mine fire about a year earlier that resulted in it being unable to recover its expensive longwall mining machinery underground. The mine once employed hundreds. As recently as last May, Ludlow had held out the possibility that the mine could reopen at some point, even though it was selling off mining equipment there. But Ludlow said a decision was made later in the year to start demolition of coal handling facilities, and the federal Mine Safety and Health Administration now lists the mine as abandoned rather than idle or inactive.

“Right now the outlook for the coal market is still poor for a number of years in our view and the holding costs of the mine are fairly high. To reduce or eliminate those holding costs we elected to go into reclamation,” Ludlow said.

He said all mine openings have been sealed with cement and dirt. Water hasn’t been pumped from the mine for years now and is likely accumulating in lower portions.

Reclamation will likely take about one or two years, with the final phase involving applying topsoil and reseeding, Ludlow said. After that, Oxbow will be required to continue maintaining the property and holding a reclamation bond for a 10-year period before being released from the bond, he said.

Ludlow said four Oxbow employees currently are working at the site, along with a contractor that is doing demolition work.

Oil and gas developer Gunnison Energy Co. is now using some of the offices and mine site property. It’s a sister company to Oxbow Mining, with both being owned by billionaire Bill Koch. Ludlow said the state Division of Reclamation, Mining and Safety has approved a revised reclamation plan letting the mine leave some buildings in place permanently near Highway 133 for commercial purposes. He said the Ragged Mountain Fire Protection District also has expressed interest in housing some equipment on the site.

Koch and Oxbow Mining at one point had hoped to acquire new longwall equipment to put back into the mine. That said, it wouldn’t have been there very long. Ludlow said the company “had depleted most of the coal that we thought was economically recoverable from this area.”

“This mine was scheduled to close soon, but not quite as soon as what actually happened.”

However, Oxbow Mining had hopes of opening a new underground mine with a longwall operation in the Oak Mesa area north of Hotchkiss, after drilling exploration holes confirming that minable levels of coal reserves existed there. But Ludlow said it has elected not to pursue mining there because of the current market.

Ludlow noted that it’s been a tough time for the coal industry recently, with more than 50 companies filing for bankruptcy. These include two major coal companies, Arch Coal and Peabody Energy, which respectively run the West Elk Mine near Somerset and the Twentymile Mine in Routt County. Last year those were the two most productive coal mines in Colorado.

Despite the industry’s challenges, Ludlow said he thinks coal will continue to have a place in the U.S. economy. Even if the Environmental Protection Agency’s Clean Power Plan survives a court challenge, it would only reduce the amount of coal used in power generation, not eliminate it, Ludlow noted.

Eventually, he said, he thinks domestic coal “supply and demand will reach equilibrium and the remaining companies will prosper.”


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