
| A sculpture stands in the center of Trinidad, Colo., as a monument to coal miners. The state's coal production dropped by 10.5% year over year to 6.3 million tons in the first half of 2019. |
After a brief uptick in Colorado coal production in the first half of 2018, output has since resumed its decline more, dropping by about 10.5% in the first half of the year from the year-ago period and by 9.4% from the back half of last year.
Coal mines in the Centennial State produced about 6.3 million tons of coal during the first two quarters of the year, less than half of the state's output in the first six months of 2012 when miners produced 13.9 million tons, according to data compiled by S&P Global Market Intelligence.
Stan Dempsey Jr., president of the Colorado Mining Association noted that it has been a tough year for fossil fuels in Colorado given several bills the Democrat-controlled legislature passed this spring as well as Democratic Gov. Jared Polis' campaign promise to generate 100% of Colorado's energy from renewable resources by 2040.
"I think looking forward in 10 years we're going to be concerned about coal production and whether we'll maintain these levels or not due to public policy reasons," Dempsey Jr. said.
Gregory Marmon, a Wood Mackenzie senior research analyst, said any future growth in the state will be tied to the export market, noting that few domestic power plants will likely be operating in the state in the 2030s. Wood Mackenzie expects a "significant decline" in Colorado coal output in the long-term, but those miners can maintain the current level of production until several power plants retire units in the mid-2020s, he said.
Colorado coal miners are projected to produce more than 10 million tons annually until 2025, when the Comanche plant plans to retire its second unit and the Craig plant closes its unit 1. Several other coal units are slated to retire in the 2030s.
"There's going to be a wave of retirements of the domestic Colorado coal-fired power plants in the next 10 years with only a handful left," Marmon said.

Colorado coal producers could sell their fuel to other states, especially given the fuel's low-sulfur qualities that blend well with high-sulfur coal, he said. But Wood Mackenzie does not view that as a viable option to maintain current production levels.
The proposed joint venture between Peabody Energy Corp. and Arch Coal Inc. may allow both companies to optimize their Colorado assets in the export market for the future, Marmon said. Peabody's Twentymile, or Foidel Creek, mine does not export coal, but Arch's West Elk mine ships its high-quality, low-sulfur bituminous coal to the Newcastle market. The joint venture may allow Peabody's Twentymile mine to access some of that infrastructure amidst plant retirements, he said.
However, the deal, which is subject to regulatory scrutiny, is not likely to affect other coal producers in the state, Marmon said.
"The other companies are probably going to be more affected by the scheduled retirements, considering that's going to happen in the next ... six years," he said. "I think they're probably preparing for that."
A senior credit officer and lead coal analyst with Moody's Investors Service said combining the companies' assets in the state is unlikely to "fundamentally change export economics." Combining their sales efforts would allow them to serve customers out of either mine and blend coal differently, Benjamin Nelson said, but it would yield a benefit more so on the margin.
Several of the coal mines in the state do not sell much of their coal beyond a nearby power plant, while the Twentymile and West Elk mines sell outside of Colorado as well, said Andy Blumenfeld, head of market analytics for Doyle Trading Consultants. The Twentymile mine also has a significant long-term contract with the Hayden plant nearby, which it sold about 1.1 million tons to in 2018.
The two companies can combine their overhead costs and sales efforts, creating an advantage especially on the export side, Blumenfeld said.
"My worry about the mines though right now is the current situation," he said. "... These mines are already running at low levels and it's difficult to run a longwall at these small volumes. They've done a good job managing it so far, but that's going to be the challenge for the joint venture."
