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Uinta Basin coal production slides YOY in Q1'18 after recovery in 2017

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Uinta Basin coal production slides YOY in Q1'18 after recovery in 2017

After experiencing a slight recovery in 2017, coal production in the Uinta Basin slid 5.6% in the first quarter of 2018 from the same period last year and 12.5% from the previous quarter.

The decline occurred despite growth at some of the basin's largest mines and a 4.8% increase in production for the 12-month period, according to data compiled by S&P Global Market Intelligence.

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The western region, which includes mines in Colorado and Utah, has faced pressure from declining demand from utilities in recent years but recently enjoyed some relief from extensions given to some coal-fired power plants it counts as customers.

The basin's highest-producing mine, Arch Coal Inc.'s West Elk, reported increases in production over the year-ago and previous quarters with 1.3 million tons in the first quarter. The mine also saw a 3.1% increase for the 12-month period, with about 5 million tons. The company recently told investors the mine had benefited from exposure to the export market.

Arch increased output in the Uinta despite continued pressure from stagnant thermal markets and apprehension from investors. After the company reported lower production in the Powder River Basin and operational challenges on April 26, its share price tumbled 14.5% from the previous day's closing and has continued to decline.

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Mines owned by Galena Pvt Equity Resources Fund LP and Cedars Energy LLC, and operated by Bowie Resource Partners LLC, saw mixed results in the first quarter. Output at the Sufco mine declined from both the most recent and year-ago quarters, falling to 1.1 million tons, but increased 2.9% for the 12-month period.

The decline came roughly a year after the U.S. Department of the Interior approved a lease for the company adjacent to the Sufco mine that contained an estimated 55 million tons of recoverable coal. The 6,175-acre Greens Hollow tract was expected to extend the life of the mine for several years.

The drop in production moved the Sufco mine out of the basin's top spot for the quarter, though Galena saw slight increases at both its Skyline No. 3 and Dugout Canyon mines.

One of the largest increases in production was at Murray Energy Corp.'s Lila Canyon mine, which increased output from 409,000 tons in the first quarter of 2017 to 754,000 tons in the most recent period. The facility also reported a 15.1% increase for the 12-month period over last year.