Colorado coal production slips to 20-year low

Colorado coal production — hobbled by mine closures and a weak market — slipped to a 20-year low in 2014, according to state data. The state's eight mines produced just under 23 million t of coal in 2014, a 5% drop from 2013.

Colorado coal production is down 39% in the last 10 years.

There was also a nearly 20% cut in mining jobs to 1512 in 2014, according to the state Division of Reclamation, Mining and Safety.

The loss of 345 mining jobs in 2014 followed a cut of more than 150 jobs in 2013.

"For the state, it doesn't amount to much. But for Western Slope communities, it is big," said Martin Shields, director of the Regional Economic Institute at Colorado State University. "These are well-paying jobs — an average of US$80 000 — in places where good jobs are scarce."

The losses will ripple across the local economies in Routt, Delta and Gunnison counties — to restaurants, car dealerships and stores, Shields said.

The key driver in a nationwide decline in coal production is low natural gas prices, said Brandon Blossman, a managing director at the energy investment bank Tudor, Pickering, Holt & Co.

This has led utility companies, the major consumers of coal, to switch to natural gas turbines, Blossman said.

"It is pure economics, pure pricing," he said.

Still, regulatory changes may also make coal less attractive, said Harrison Fell, a Colorado School of Mines economist.

According to the Denver Post, the federal Environmental Protection Agency (EPA) has issued new regulations to limit the amount of mercury — a dangerous heavy metal — that power plants can emit.

The EPA is also drafting rules requiring power plants to cut emissions of carbon dioxide, a gas linked to global climate change. Burning coal creates almost twice as much carbon dioxide as natural gas, according to federal figures.

"Coal is getting squeezed by the market and by regulation," Fell said.

Part of the Colorado decline is due to operating problems. The Elk Creek Mine in Somerset was closed in December 2013, after underground fires made the mine too dangerous for miners.

In 2012, before the fires, the mine produced 2.9 million t of coal, and, in 2013, 436 383 t, according to state data. In 2014, no coal was mined.

Louisville, Ky.-based Bowie Resource Partners LLC announced in October that it was laying off 150 miners and cutting production at its Bowie No. 2 mine near Paonia.

Those cuts were the result of the termination of a contract to supply coal to the Tennessee Valley Authority and weakness in the regional market, the company said in a statement.

The 150 layoffs represented 40% of the mine's workforce of 355.

Production at the mine dropped to 2.4 million t in 2014 from 3.3 millions t in 2013.

"I don't discount market forces, but if all the proposed regulations go through, there are going to be more cuts," Colorado Mining Association president Stuart Sanderson said.

Despite the drop in production, the Rocky Mountain Basin, which includes Colorado and Utah, is faring better than some other coal region, said Blossman.

"Colorado is in the middle of the basins — not the worst, not the best," he said.

One of the things handicapping US coal is that global markets are saturated as more production came on to supply Asia, just as its economies slowed down. The story in Colorado is just part of a wider tale of woe for the US coal industry as a whole, which has seen steady decline over the past few years.

Not only are market forces pressing on coal, but the industry is also facing a crunch call as leading scientists release definitive reports showing that 80% of coal reserves must remain in the ground if the world is to avoid exceeding 2°C of global warming and thus experiencing the potentially catastrophic effects of climate change such warming would bring.

Nonetheless, not everyone in Colorado is pessimistic about the current state of play.

"Colorado coal is a very nice export product," Blossman said. "It doesn't burn quite as hot as the Powder River Basin Coal (from Wyoming), but it is hot.”

"They can put it on rail cars, ship it from the Gulf once the market is there," he said.

Edited from various sources by Sam Dodson

Read the article online at: https://www.worldcoal.com/coal/11022015/colorado-coal-production-slips-to-20-year-low-1873/