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Coal production cuts accelerate for biggest mines in Powder River Basin


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Coal production cuts accelerate for biggest mines in Powder River Basin

Coal production continues to fall at Powder River Basinmines, with output from the 12 months ended in the first quarter of 2016dropping 14.4% compared to the prior-year period.

In the first quarter of 2016, production was down to approximately69.1 million tons from nearly 105.8 million tons in the first quarter of 2015,according to U.S. Mine Safety and Health Administration data.

Arch CoalInc.'s Black Thunder mine in Wyoming decreased the most inproduction, dropping from nearly 26.3 million tons in the first quarter of 2015to almost 15.2 million tons in 2016's first quarter. The mine's full 12-monthproduction dropped 15.2% from around 104.2 million tons in the end of the firstquarter of 2015 to less than 88.4 million tons in the year ending after 2016'sfirst quarter. Arch's smaller Coal Creek mine also dropped by 16.4% compared tothe prior year.

Peabody EnergyCorp.'s North Antelope Rochelle mine in Wyoming — the mostproductive coal mining operation in the U.S. — saw the second-largest drop intotal production tonnage this quarter compared to last, falling by more than 10million tons in the first quarter compared to the same quarter last year.Full-year production decreased by nearly 20 million tons, the largest full-yeardrop in the PRB compared to the prior year. Twelve-month output fell from morethan 118.3 million tons to approximately 99.1 million tons this year.

Peabody's smaller Rawhide mine also decreased production by14.1% in the 12-month period, though its Caballo mine in Wyoming continued lastquarter's trend,increasing to more than 11.2 million tons this year compared to less than 8.9million tons in the 12 months ending in the first quarter of 2015.

These drops occur the same year these two companies have hitbankruptcy. Peabody filed for Chapter 11 bankruptcy protection April 13 dueto "unprecedented" challenges facing the industry while Arch Jan. 11. The Eagle Butteand Belle Ayr mines owned by Alpha Natural Resources Inc., which is alsorestructuring in bankruptcy court, also dropped in year-long production by 7.1%and 1.1%, respectively.

Cloud PeakEnergy Inc. saw significant drops this quarter, including thelargest year-long drop by percentage at its Cordero mine: 36.1%. Output at thatmine fell by more than 11.6 million tons from around 32.3 million tons in theprior year to more than 20.6 million tons this year. Production at its Spring CreekCoal Company mine fell 20.3% from more than 18.3 million tons in the yearleading up to the end of the first quarter of 2015 to about 14.6 million tonsthis year.

Colin Marshall, Cloud Peak Energy president and CEO, said inan earnings call thatthe company didn't expect first-quarter shipments to be so slow. "Thewinter has been exceptionally mild with energy used for heating 34% belowaverage, and electricity demand down 5% from last year. These are very largedecreases by any measure," he said. "We are currently adapting tooperating in an environment where shipments vary significantly from quarter toquarter."

Other mines that saw cuts in production include the Buckskinmine owned by Peter Kiewit Sons'Inc., the Absaloka mine owned by Westmoreland Coal Co., the Wyodak mine owned byBlack Hills Corp. andthe Decker mine owned by Lighthouse Resources Inc.

The Buckskin mine produced around 2.4 million tons less inthe first quarter of 2016 compared to the first quarter of last year. The PeterKiewit Sons' mine dropped 29% from more than 15.8 million tons in the yearending after the first quarter of 2015 compared to more than 11.2 million tonsthis year.

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The Absaloka mine in Montana cut production 26.3% from morethan 6.7 million tons in the year ending with the first quarter of 2015 toaround 5 million tons this year.

Besides Peabody's Caballo, two other mines saw jumps inyear-long production this year compared to last year. Westmoreland's Rosebudmine in Montana increased output by 7.4% to nearly 9.6 million tons this yearwhile Western Fuels AssociationInc.'s Dry Fork mine increased output by 6% to around 6.2 milliontons.

The Rosebud mine is the only mine in the PRB to produce morein the first quarter of 2016 than in the first quarter of last year, increasingtonnage by 1,000 to around 2.2 million tons.

The Dry Fork mine serves coal to the adjacent , acoal-fired power plant completed in 2011 in Wyoming and with technology to curb sulfurdioxide, mercury and nitrogen oxide emissions.