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Colo. coal production jumps 18.6% in 2017 after years of decline

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A monument to coal miners in Trinidad, Colo. Coal production in the state rose 18.6% in 2017 compared to 2016.

Source: Associated Press

Approved lease expansions, a strong export market and tax royalty savings helped boost year-over-year coal production in Colorado 18.6% in 2017 after years of decline.

According to data compiled by the Colorado Division of Reclamation Mining and Safety, the state's mines produced 15.2 million tons of coal in 2017 compared to 12.8 million tons in 2016. The state's coal output has declined every year since 2012, when 28.6 million tons were produced.

"I think we're encouraged. We dropped 30% in 2016, and that was partly because of the [Bowie Resource Partners LLC] No. 2 mine closing. Obviously, the [remaining] mines showed some resiliency," Colorado Mining Association President Stan Dempsey said.

He said the Trump administration's initiative to revive the coal industry by modifying regulations from the Obama administration also helped. "The 2016 election totally made a difference. The Stream Protection Rule would have had disastrous effects everywhere."

Most of the increase came from upticks in production at the state's two largest mines: Arch Coal Inc.'s West Elk and Peabody Energy Corp.'s Foidel Creek, also known as the Twentymile mine.

Tri-State Generation and Transmission Association Inc.'s Colowyo mine and Deseret G&T Co-op's Deserado mine also saw significant boosts.

Dempsey said lease expansions or royalty reductions at some of the mines helped boost production levels. Data from the U.S. Bureau of Land Management shows that the Foidel Creek and Colowyo mines were authorized for lease expansions in 2016.

In August 2017, Gov. John Hickenlooper, D-Colo., threw his support behind Arch's request to pay lower royalty rates for the coal it mines at West Elk as long as the coal producer worked on a way to capture the methane released at the operation.

Arch CEO John Eaves said on a recent earnings call that West Elk, which ships coal for export to Asia via California, ran above capacity for most of the year to capitalize on high prices on the Newcastle price index.

"That's a mine that has many different customers, rather than other mines that are pretty much dedicated to one or two different power plants in northwest Colorado," Dempsey said.

Peabody CFO and Executive Vice President Amy Schwetz said on the producer's fourth-quarter 2017 earnings call that Foidel Creek also benefited from exports in 2017.

"That came dangerously close to the mine not being able to continue production," Dempsey said.

In January, the most recent month for which the Colorado agency has data, coal production stayed relatively flat year over year at 1.3 million tons, even though Western Fuels-Colorado LLC's New Horizon North mine is no longer producing.

Overall production in the Uinta Basin, which includes Colorado's biggest mines as well as operations in neighboring Utah, rose 13% in 2017 compared to 2016.