Briefly, a smile in the Powder River Basin coal fields

Market improves for Wyoming coal, but one of the two big companies continues to calculate its exit as coal plants in Colorado and elsewhere close

Arch Resources and Peabody Energy, the two big operators in Wyoming’s Powder River Basin, delivered news to investors last week that has become rare. They delivered profits, and handsome ones, in the telling of Wyoming media.

Coal can compete with natural gas when prices of the latter rise above $3 per million Btus. Last fall, natural gas prices have hovered between $4 and $5 and, in June, soared to more than $9.

Powder River Basin coal ended the second quarter at $16.55 per short ton—higher than any price in the previous decade, reported the Casper-Star Tribune’s Nicole Pollack in a story headline. Spot prices paid for Powder River peaked in November at more than$30 per short ton, roughly triple the usual price.

Both the Star-Tribune in its story, “Coal yields huge second-quarter but Powder River Basin troubles persist,”

and the story by Dustin Bleizeffer in Wyofile emphasized the downward trend for Wyoming coal.

“This is just a blip, and it’s a relatively small blip, too,” said Shannon Anderson, staff attorney for the Powder River Resource Council. Coal for all of the coal plants along Colorado’s Front Range – at Pueblo, Colorado Springs, Fort Collins and Brush — comes from the Powder River Basin, according to the 923 report issued in May by the U.S. Energy Information Administration. This includes purchase from both Arch and Peabody properties, but also those owned by Cloud Peak and Blue Grass Commodities. All those coal plants are scheduled to retire during the next 8 years and even the last one slated for retirement, Comanche 3, is projected to be used significantly less.

Tellingly, the coal companies made their money off the spot market but did not report new long-term contracts. That poses problems for Wyoming and the revenue structure of the state government.

The coal companies said they could have actually sold more coal but they couldn’t get the railroads to ferry all that was needed.

Wyofile’s Bleizeffer analyzed an even-more nuanced story under the headline of “Arch: Record earnings from Wyo coal doesn’t change exit plan.”

He talked with Seth Feaster, an energy data analyst with the Institute for Energy Economics and Financial Analysis. He stressed the contrast between the two companies. In theory, said Feaster said, they should be reporting somewhat similar results. “Instead, they’ve gone in two completely different directions.”

Peabody lost about 11 cents for every ton of coal mined in the basin. It owns the North Antelope, Rochelle, Caballo and Rawhide mines. It also continues to operate its mines and has continued to invest portions of its earnings back into future operations in the Powder River.

Arch, however, is not investing in future operations. Instead, it is setting aside earnings to close those mines and pay for required reclamation work. In the 18 months ending in June, it had reduced the asset retirement obligations at its Power River Basin operations by more than 20%, according to its report.

“Arch has been a little more clear-eyed about the long-term outlook for coal in the PRB,” Feaster said. “They’re positioning themselves very well to make money right now by not pouring more money into those mines.”

Arch plans to close its Coal Creek mine this year and had been preparing to close its flagship Black Thunder mine but has not indicated a target date.

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