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Coal Trains

Rail cars are loaded with an average of 121 tons of coal each during transportation from Cloud Peak Energy’s Antelope Mine north of Douglas. Cloud Peak asked the federal government for a pause on a lease application because it needs more time.

Coal companies used to grumble about how long it takes to get coal leased from the federal government. That’s no longer the case.

Applications to lease nearly 1 billion tons of coal are pending in Wyoming, not because the federal agency tasked with performing environmental analysis is moving slow, but because coal companies are.

Two of the lease applications were proposed more than a decade ago, a third was submitted in 2015. They are the last of a leasing push that poured millions of dollars into Wyoming schools, and their future is uncertain.

Last year, the Interior Department put out an order meant to solve the leasing and permitting schlep that fossil fuel companies experience in order to mine or drill. It placed a one-year time limit on environmental analysis.

But, coal’s outlook has changed since the recent downturn, with a focus on contraction rather than expansion as natural gas continues to dominate the electricity production market.

Three lingering lease applications for Powder River Basin Coal are on the books: West Antelope 3, North Highlight and Maysdorf II South. In May, Cloud Peak Energy asked the Bureau of Land Management for a pause on one of those — an expansion at the Antelope Coal mine.

The company said it needs more time to do baseline testing and consult with tribes, according to a letter obtained through a public records request by the Powder River Basin Resource Council, a Sheridan-based landowners group. Cloud Peak noted in its May letter that it supports the intent of the 2017 order from Interior, but that the company would need more time to work on the West Antelope 3.

The lease is for 441 million tons of in-place coal near the Campbell and Converse County border.

Cloud Peak also proposed Maysdorf II, a 233,550,000-ton application to lease adjacent to the Cordero Rojo mine south of Gillette. The company is currently “reconfiguring” that lease tract, according to the BLM.

A third lease application proposed by Arch Coal in 2005 is pending. The 468 million ton North Highlight lease was one of a handful of coal lease applications analyzed by the BLM in the Wright area. A court case forced the agency to reevaluate the impact that leasing the coal would have on increasing greenhouse gases. A reassessment of that impact is currently out for public comment.

It is unclear if Arch Coal will pursue those tons of coal going forward. A call to Arch Coal for comment was not returned.

President Donald Trump lifted an Obama-era ban on new coal leases last year as part of his pro-coal and anti-regulatory agenda. The move was supported in places like Wyoming as a change in favor of industry.

However, lower demand for Wyoming coal has all but stalled the drive for new leases. A rush of leasing that occurred in the second half of President Barack Obama’s tenure has provided Wyoming firms with reserves for years to come.

Peabody Energy, which operates the North Antelope Rochelle mine outside Wright, relinquished portions of leases at its Rawhide and Caballo mines in 2017 and 2018. A spokeswoman for the company said in a statement that the withdrawals were minimal, would have no impact on production and were largely mined out.

“Based on 2017 production levels, the mines have decades of reserves in their portfolio,” said spokeswoman Charlene Murdock in an email. “The small portions of federal leases submitted to the BLM for relinquishment may not be economical to mine, either due to coal quality or locality.”

Federal coal lease income was an incredible boon to Wyoming schools during the Obama years. Wyoming receives 50 percent of that revenue. Lease income is doled out to the state at a rate of 20 percent per year, over five years. It’s been used to fund major maintenance and new builds of Wyoming K-12 facilities.

The final coal lease bonus check came last year, and the challenge of funding school construction was a central topic in the Legislative session. No solution has been agreed upon.

Wyoming’s revenue forecasters at the Economic Analysis Division have been careful to avoid including pending lease applications in revenue estimates.

“At present, there is no timeline for the next federal coal lease sale in Wyoming,” the Census Revenue Estimating Group’s report in October noted. “Although there are a few coal lease applications in Wyoming that are being pursued, several factors … (leave) the outlook for and timing of future coal lease sales uncertain.”

Cloud Peak Energy announced in June that it would close its office in Gillette and move administrative staff to the Cordero Rojo mine south of town, part of an attempt to cut operating costs. CEO Colin Marshall noted in an email to staff at the time, which Cloud Peak shared with the Star-Tribune, that the Antelope and Cordero Rojo mines were increasingly being run as a single operation.

“As you are aware, the coal industry continues to be very challenging with reduced domestic demand, overcapacity and associated low prices, making it hard to make a decent financial return,” Marshall wrote. Despite the uncertainty caused by the office closure, he noted that the decision would help keep the company viable.

Editor's note: This story has been updated to clarify that the leases relinquished at the Rawhide and Caballo mines were relatively minor. 

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Energy Reporter

Heather Richards writes about energy and the environment. A native of the Blue Ridge Mountains in Virginia, she moved to Wyoming in 2015 to cover natural resources and government in Buffalo. Heather joined the Star Tribune later that year.

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