A Wyoming first: No bids for coal mining tract in Powder River Basin

2013-08-21T22:00:00Z 2013-10-06T20:28:04Z A Wyoming first: No bids for coal mining tract in Powder River BasinBy LAURA HANCOCK Star-Tribune staff writer Casper Star-Tribune Online

At 10 a.m. on Wednesday, U.S. Bureau of Land Management employees in Cheyenne gathered to unseal envelopes containing bids and checks from coal companies hoping to score the rights to dig in the Powder River Basin.

But there were no envelopes to open. No companies bid on the coal lease, said BLM spokeswoman Beverly Gorny.

“This is the first time it’s happened in Wyoming,” she said.

Minutes later, Gillette-based Cloud Peak Energy Inc., which owns the mine that had first asked the federal government to lease the coal tract nearly seven years ago, released a statement saying mining the coal wasn’t economical. The tract is near Cloud Peak’s Cordero Rojo mine.

The Maysdorf II North Coal Tract is slightly larger than two square miles and contains 148.6 million tons of mineable coal. The tract is also near the Belle Ayr Mine, owned by Alpha Natural Resources of Bristol, Va., which also didn’t bid.

Cloud Peak CEO Colin Marshall said in the statement that the company evaluated the coal tract and declined to bid due to current coal market conditions and the uncertain political and regulatory environment for coal and coal-fired electricity. Company executives had previously said they were considering reducing production at Cordero Rojo, south of Gillette.

“Due to the configuration of the North tract and surrounding land ownership positions, we believe a significant portion of the BLM’s estimated mineable tons would not be recoverable by us if we were to be the winning bidder in the BLM’s competitive process,” Marshall said in Wednesday’s statement.

The energy value of the coal at Cordero Rojo is about 8,400 British thermal units, which is lower than that of the coal at Cloud Peak’s other mines, Marshall said. The company had previously said it can make more money selling the higher BTU coals.

In July, during a quarterly call with investors, Cloud Peak executives said that they were considering reducing production at the Cordero Rojo mine by 10 million tons a year, beginning in 2015.

“We will continue to evaluate any possible future lease sales by the BLM of these tons in the North tract as market conditions improve,” Marshall said in the statement.

In 2012, the mine produced 39.2 million tons of coal, according to the U.S. Mine Safety and Health Administration.

For the mine to continue producing at current levels, Cloud Peak would have to spend a lot of money on equipment and capital costs – including buying a new shovel fleet in 2014 to achieve 2015 production demands, executives said in July.

Current coal prices have been sluggish in part because natural gas prices are low and utilities are choosing to generate power using natural gas.

Gorny of the BLM said Cordero Mining LLC, which is now a subsidiary of Cloud Peak, nominated the tract Aug. 31, 2006. The proposed coal tract was originally 4,654 acres and contained 434 million tons of mineable coal.

BLM employees split the tract into two, which is common “to make sure that what they apply for doesn’t bypass any coal” that a nearby mine would want, Gorny said.

The BLM likes having more than one company bid on coal tracts so that the public, which owns the federal coal, “gets the best value for the resource,” Gorny said.

Although Marshall of Cloud Peak disagreed with the BLM’s assessment of the tons of mineable coal, Gorny said that the BLM decided upon the tract’s boundaries after analysis.

“Certainly, that’s a business decision by them and we believe that the tract as configured certainly was mineable and would be something that would advance their mine,” she said. “So clearly we have a difference of opinion on that.”

The BLM will not have another coal sale on the tract unless a coal mining company asks for one, Gorny said.

Copyright 2015 Casper Star-Tribune Online. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(12) Comments

  1. Valerie M Spencer
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    Valerie M Spencer - September 21, 2014 7:48 am
    Thanks for the post Laura. You are good to write about bids for coal mining tract in the Powder River Basin. I see a lot of articles on this but you have a lot of great data to know about it. With all these many people are getting the cheap essay writing service to make their content quality great and to write about this coal issue and the bidding.
  2. stickalose
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    stickalose - August 25, 2013 8:37 am
    Gotta remember where Cloud Peak came from... Rio Tinto, 2nd or 3rd largest mining company in the world. Their planners look 20 or 30 years down the road, evidently didn"t see a bright future for coal, regardless whether Dems or Repubs were in charge. I just hope Cloud Peak doesn't go "bankrupt" like Peabody/Patriot and shaft their retirees.
  3. pappy
    Report Abuse
    pappy - August 23, 2013 8:16 am
    They utilitiies are using cheaper coal, and switching to natural cheaper natural gas and I haven't seen my electric bill go down. I would bet no one else has either. Natural gas prices have creeped back up in the last year but are still very low and I'm paying the same rate as I did when they were double. I have never seen a utility go in and ask for a rate decrease.
  4. glendorealist
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    glendorealist - August 22, 2013 3:12 pm
    ir,so you think the government should make coal attractive to the marketplace to ensure someone a job ? sounds Like socialism to me. I learned new trades when neccesary, I didn't rely on the government to give me a job
  5. jc45
    Report Abuse
    jc45 - August 22, 2013 1:49 pm
    From a monetary standpoint, the lower BTU coal sells for less thus the mine has to produce more coal to turn the same income, and if they have to buy more equipment the price of mining the coal goes up even more. The utilities have to purchase more of the lower BTU coal to produce the same amount of electricity, have it shipped to the power plants, and since the cost of shipping is 3-4 times the price of the coal so it costs the power plant even more. With the price of natural gas what it is, it makes sense from an financial point of view to pass on this lease
  6. brianvmax
    Report Abuse
    brianvmax - August 22, 2013 12:46 pm
    You guys still haven't answered my question, what is the alternative? To train into a new job there first has to be new job's created correct? Give some examples please.
  7. IrishRaider
    Report Abuse
    IrishRaider - August 22, 2013 12:02 pm
    You leftists are all heart.......... NOT
  8. glendorealist
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    glendorealist - August 22, 2013 10:38 am
    when I entered the work force a long time ago, nobody guarenteed me the same job for life. I switched professions over six times to stay employable in the market place. what's wrong with coal miners doing the same. many people have had to do this. and yes it takes time to learn new skills and maybe you'll have to put the fishing pole away or miss an elk season to do it, but that is what it takes.
  9. ken
    Report Abuse
    ken - August 22, 2013 8:53 am
    Lest any of you Libby Dibby squirrel squeezin Eviros forget. This is the year the porcine "really Big Al Gore" told us the polar ice caps will have completely melted and the seas risen 25 feet! So much for science fiction. I think a safe prediction is this: less coal = less electricity = more rolling brown outs = libs getting their mouths sewn shut for lying all the time. Any questions? Why do they (the Libs) hate this Country so??? Why did the coal not sell? The rat bit lying coyote knows. Don't ya?
  10. irdrmr
    Report Abuse
    irdrmr - August 21, 2013 1:12 pm
    "And the cheaper the coal the cheaper the power bill i do believe"
    Tell that to the power companies.
  11. brianvmax
    Report Abuse
    brianvmax - August 21, 2013 12:14 pm
    So what is your alternative? layoff's, unemployement matching that of the rest of the country?
    what do you recommend? I take it you run your electricity off of solar power and wind? And the cheaper the coal the cheaper the power bill i do believe..
  12. Cody Coyote
    Report Abuse
    Cody Coyote - August 21, 2013 11:55 am
    Two things here.
    The coal companies extracting Wyoming one train car at a time are beginning to see the handwriting on the wall , that the world is growing increasingly hesitant to use more damp sub-bituminous coal. If they keep reading they will see that coal is going away sooner than they had planned. We're heading for the Bust.

    But my other point is a little more ominous. I think King Coal is sending the BLM a message that they are not willing to pay the minimum asked for coal. it's already nearly dirt cheap, but that isn't good enough for them...they want still cheaper coal. They are trying to jack down the price for federal coal.

    Good luck with that .

    We now return you to the Handwriting on the Wall : No mo coal.
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