(The following article by Dustin Bleizeffer was posted on the Casper Star- Tribune website on January 12.)
GILLETTE, Wyo. — Although total U.S. coal consumption declined by 1.2 percent in 2006, Wyoming coal production spiked by more than 10 percent due to a rush to replenish stockpiles of Powder River Basin coal at electric utilities.
Wyoming coal mines shipped about 446.1 million tons of coal in 2006, according to a Casper Star-Tribune survey and data from the U.S. Department of Energy’s Energy Information Administration. That’s a 42.7 million-ton increase over production in 2005 and an unusual high-water mark for the industry.
Back-to-back derailments on the Powder River Basin’s main triple-track rail line in 2005 choked deliveries that year and spurred BNSF Railway and Union Pacific Railroad to launch a massive effort to expand export capacity out of the region.
“The biggest reason (for the 10 percent increase in 2006) is better railroad capacity. 2005 should have been a bigger year, if not for the derailment problems,” said Marion Loomis, executive director of the Wyoming Mining Association.
Now the big question for the industry in the year to come is whether its utility customers will demand the same volume of coal, or if softened demand will result in the first annual decline in more than 10 years. One certainty is that BNSF and UP have proven they can ship coal at 446.1 million tons and beyond. In fact, the railroads are working with four major producers in the southern portion of the basin to coordinate systemwide expansions to accommodate an annual statewide production level of up to 600 million tons by 2012, according to UP.
That doesn’t provide much peace of mind for Buck McVeigh, administrator of Wyoming’s economic analysis division. His job is to help forecast Wyoming’s revenues, of which coal is a main contributor.
“The (railroad) flow is currently adequate, but it’s also very subject to problems,” McVeigh said. “All it takes is one derailment or slight disruption and that flow gets (interrupted) real quickly.”
Still, a 10.5 percent increase in coal production translates into good economic news for a state that receives most of its government revenues from minerals. Severance taxes, federal mineral royalties and coal lease bonus bid payments from the coal industry exceed $600 million annually, according to the state’s economic analysis division.
And that doesn’t include sales and use taxes, secondary business or the more than $600 million in annual payroll.
Coal mines also added more than 650 new jobs in 2006, bringing the total number of people directly employed in Wyoming’s mining industry to more than 5,300.
That increase represents a reverse in a trend that had stuck in the industry for several years: As mines added larger equipment, they needed fewer employees to operate. Now after more than 30 years of large-scale surface mining in the Powder River Basin, mines are still adding bigger equipment, but they are also adding more truck-and-shovel fleets and more people because they have to dig deeper and deeper each year to reach the coal.
Some strip ratios in the basin are 5 to 1, according to the Bureau of Land Management — meaning that five units of soil must be removed for every unit of coal produced. And coal companies continue to nominate huge tracts of coal that dip deeper into the earth as shovels chase the 60-foot-thick coal seams westward.
Having just leased more than 2 billion tons of coal, federal land managers are considering a new round of nominations for an additional 4 billion tons in the Powder River Basin, which would open 35,000 acres to open-pit mining.
Notable increases were made at Peabody Energy’s Rawhide mine and Arch Coal Inc.’s Coal Creek mine. Production resumed at Coal Creek this year after being idled in 2001. The mine is expected to continue to ramp up its output.