Before the largest companies sought bankruptcy, before the layoff rumors proved true, before the Obama administration placed a moratorium on new leases, coal companies’ appetite for leasing opportunities began to fade.

They were pretty well-stocked for the time being, and the coal market was facing instability.

In 2013, Kiewit Mining Group asked the Bureau of Land Management to delay leasing Hay Creek II, a tract north of the Buckskin Mine near the Wyoming-Montana border, saying the coal market was getting worse.

It did get worse, as most in Wyoming know.

The bust hit in 2015, and firms absorbed the shocks of the market as it contracted. Wyoming suffered the consequences, losing jobs, revenue and the certainty of what had once been a bedrock industry for the state.

The coal industry is stable now at a “new normal.” Employment is down but not declining. Production, too, is more modest than it was, but much better than 2016, when power companies simply were not buying coal.

Company choice to lease or not had been taken away in 2015, by a temporary federal moratorium on leases during which the federal coal program was reviewed. Earlier this year, President Donald Trump reversed his predecessor’s moratorium.

The question is whether companies facing a different market and a more favorable political climate have regained an appetite for leasing.

They have, sort of. The trend that started as the coal market began to slide hasn’t reversed course, but there are tentative and modest expansions planned by Wyoming producers. The most loyal coal supporters, and environmental groups with less than favorable stances on the future of coal, agree. Despite the lifted ban, brand-new coal leases are unlikely. Firms are looking at shoring up their existing mines and improving their existing assets, not staking new claims or betting on a flush of demand for coal.

“Frankly, given the general poverty of the industry and prevailing market conditions, as well as the fact that such bids usually cost hundreds of millions of dollars, I don’t expect any of these types of leases (those for brand-new mines) in the near future,” said Richard Reavey, spokesman for Cloud Peak Energy, a Gillette-based firm with two mines in Wyoming.

Canceled plans

Wyoming is the leading producer of thermal coal — a lower-heat-value fossil fuel burned for electricity production. The problem the state is facing — and has been facing for some years — is competing with low natural gas prices.

Power companies are gradually shifting away from coal and focusing their resources on gas-fired plants and renewable sources. They are not only cheaper, they fall in line with existing, and potential, environmental regulations. New coal plants, meanwhile, simply can’t meet new environmental standards without deploying technology that isn’t viable for commercial use yet.

The fleet of coal-fired plants that exists right now is the market for Wyoming coal, and producers in the Powder River Basin are facing increasing strain as those coal-fired units are planned for retirement in coming years across the Rockies and the Midwest.

Xcel Energy, Colorado’s largest utility, recently reported its plans to retire two of its older coal units at Comanche Generating Station in Pueblo, while investing upward of $2 billion in renewables.

Comanche buys a significant amount of its coal from the Belle Ayr Mine, a Contura Energy operation just south of Gillette.

Coal producers are responding to this trend by scaling back on operations and in many cases retracting future leases.

Communication between the BLM and Wyoming mines in recent months, obtained in a public records request by the Powder River Basin Resource Council, reveals companies cancelling applications.

Contura Energy withdrew an application for Belle Ayr West on June 7. The tract of land straddles Highway 59 just south of Gillette. The previous month, Kiewit officially withdrew its application for a lease of Hay Creek II, just north of Buckskin Mine near the Montana border that was delayed in 2013.

Kiewit also sold Haystack late last year to a private firm based in Colorado. The mine had been idle since 2013, when the company closed down citing a challenging coal market.

The cancelled applications point to what environmentalists argue is a clear path of decline for Wyoming coal.

“It’s just more evidence that there may not be a legal moratorium anymore, but there is certainly a market moratorium,” said Shannon Anderson, lawyer for the Powder River Basin Resource Council. “That’s been in place for several years now, and it looks like it will continue into the future for most of these mines.”

There was a flush of coal leasing before the downturn. The reality is that the mines in Wyoming shored up sufficient mineral leases to last for decades, and if demand continues to drop, that’s all they will need, she said.

“What people don’t realize is Obama actually leased a lot of coal,” Anderson said. “These mines got fairly significant reserves and stockpiles of federal coal to take them through the next 20 years or so, and with that there is just not a need for new coal leases right now.”

A spokeswoman for the BLM said she couldn’t comment on how market conditions may have colored lease interest in recent years. There were seven lease applications in process with the agency before the moratorium.

“The coal moratorium in Wyoming didn’t necessarily affect what we were doing at the time, because those coal lease by applications came in before the moratorium,” said Kristen Lenhardt of the BLM. “We continued to process those as usual.”

Companies have been less active on the leasing front in recent years, according to BLM records. The BLM has not issued a new coal lease in five years. Between 2007 and 2012 it approved 11. It has also approved a handful of coal lease modifications in those years.

There are now five applications in with the BLM. The agency contacted the applying coal companies after the coal moratorium was lifted to verify continued interest.

Three canceled, as noted above, and one new lease application was submitted for Dead Man’s Wash in western Wyoming.

Changing the message

No one in the coal industry is denying that coal has been under significant pressure in recent years, but they refute predictions of eventual extinction.

The moratorium on new coal leases was a sticking point for Wyoming, both economically and politically, despite commonly understood challenges to new leasing. The state’s coal lease bonus money has built and maintained Wyoming public schools for years. That money is gone, so whether new leases were plausible or not, Wyoming wanted the opportunity to be there.

For others, the moratorium sent the wrong message to power companies who were buying the coal.

Coal doesn’t have to continue into decline, proponents say. But the moratorium and other policies in recent years made it appear as though that was the only likelihood, said Travis Deti, executive director of the Wyoming Mining Association.

That false flag has changed, he said.

New leases are being considered now, he argued, just not the billion-ton leases of years’ past.

“You are going to see an industry that is going to adapt to a new environment. With all of the gas coming online, with renewables coming online, that share of the pie is smaller,” Deti said. “So, some of those leases are going to be smaller. You are going to be looking to add on to existing mines.”

The BLM recently kicked off the scoping process for a 3,500-acre lease of 441 million tons of coal for Cloud Peak Energy. The lease is not a new mine but an expansion of Antelope, a mine that straddles Campbell and Converse counties.

“Obviously, there is huge investment in developing a mine. So once it’s up and running, economics requires that you maximize the assets and facilities at that mine by expanding the mine if possible rather than leasing and developing a new mine. In today’s market, this is even more true,” said Reavey, with Cloud Peak.

“We have a number of lease applications pending associated with the three mines that we currently operate, and all are designed to ensure the continued efficient operation of those mines now and in the decades to come.”

That’s likely the type of leasing that’s going to occur in the Powder River Basin, Deti said.

“It’s the nature of the industry,” Deti said. Additionally, the borders of mines owned by different companies are getting closer with expansions. Antelope sits just south of Peabody Energy’s North Antelope Rochelle Mine, which is adjacent to Arch Coal’s Black Thunder Mine.

“They are starting to butt up against each other,” Deti said. “So in the future you are going to see those leases become more competitive.”

For coal producers, the coal market isn’t as desperate as some have said. It’s just different — a perhaps smaller but viable industry in Wyoming.

“The ‘death of coal’ narrative being peddled by extremist, keep-it-in-the-ground groups is patently false,” said Reavey, of Cloud Peak. “Leasing, mining, and life in the Powder River Basin goes on.”

Follow energy reporter Heather Richards on Twitter @hroxaner

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Star-Tribune reporter Heather Richards covers Wyoming's energy industry and related issues.

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