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Uinta Basin coal output dives in Q1, down 34.7% from year-ago quarter

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Uinta Basin coal output dives in Q1, down 34.7% from year-ago quarter

Coalproduction at mines in the Uinta Basin continued to slide in the first quarterof the year, down nearly 900,000 tons from the period and 34.7% below the sameperiod in 2015.

For the12 months ending with the first quarter of the year, basin output was 29.3million tons, down about 26.5% from the same period last year.

Thisquarter's results continue a production slide that has plagued the westernregion, along with others, with Uinta mine output down nearly 3 million tonsfrom the first quarter of 2015, according to an S&P Global MarketIntelligence analysis of U.S. Mine Safety and Health Administration data.

Likerecent quarters, the basin's mines have been hardest hit by declining demandfrom domestic U.S. electricity generators and low cost natural gas, which hasspurred an increased number of utilities to shift to the lower cost option.

Thebasin decline was caused by lower output at all but four of the Uinta minesincluded in the analysis. Those reporting increased output during the firstquarter of the year were led by Bowie Resource Partners LP's Sufco mine, which continuedto lead the region in production with 1.6 million tons for the period.

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Despitechallenges in demand, Sufco grew from 1.1 million tons during the first quarterof last year and rose 12.2% for the 12-month period over the same period in2015.

Thebasin's other significant increase in output during the first quarter comparedto the previous year came at Murray Energy Corp.'s Lila Canyon mine, which ended thequarter with 280,671 tons over the 112,194 tons produced in the previous year'squarter.

Themine's increase waslikely due to it taking on production from the shuttered West Ridge facility.The company's decision to shift production to Lila Canyon was due to West Ridgedepleting its reserves resulting in no output reported for the quarter and a62.7% drop in output for the 12-month period. According to the companyspokesman, the West Ridge mine is "closed for good."

TheADDCAR System 18 HWM Serial No. 23018 mine also saw output at zero during the firstquarter. Owned by UGM MiningSolutions Pty Ltd, the mine finished the 12-month period down 33.7%from the previous period.

Theother two Uinta mines to report increases over the first quarter of 2015 wereRhino Resource PartnersLP's Castle Valley No. 3 and Alton Coal Development LLC's Burton No. 1, both of whichreported no output during the year-ago period.

Despiteseeing its output slide during the first quarter, Bowie's Dugout Canyonfinished the 12-month period with production up 1.5% over the previous year.Bowie mines in the Uinta are expected to be the most likely to benefit from aproposed coal export terminal in Oakland, Calif. Despite and financial support inUtah, where many of the company's mines are located, the project still facesstaunch opposition in California on the state and local level.

Oneof the most significant drops in production from the first quarter of last yearcame at Arch CoalInc.'s West Elk mine in Colorado, where output collapsed nearly650,000 tons from 2015 to 521,527 tons in the latest period. Mine owner ArchCoal filed for bankruptcy protection during the first quarter, thoughthe company has previously reported that it intends to continue production effortsduring its restructuring.

Archspokeswoman Logan Bonacorsi noted that West Elk's decline came as "coalconsumption is down across the country due to low natural gas prices andelevated utility stockpiles."

"Thatsaid, there continues to be interest in West Elk's high-heat, low-sulfur coal,and we are constantly working to expand the generator and industrial customerbase for the operation," she added.

OtherColorado mines reportedslides in production during the quarter, including the Trapper and Colowyofacilities, the latter of which had output fall by over half from 2015, endingthe quarter with 245,670 tons compared with 593,526 tons in the same period in2015. Both mines were the subject of legal challenges fromenvironmental groups and increased environmental scrutiny from federalauthorities focused on expansion plans. During the first quarter, the U.S.Office of Surface Mining Reclamation and Enforcement a "Finding of NoSignificant Impact" for each mine's expansion plans.

Inpreparation for abankruptcy filing of its own, Peabody Energy Corp. also cut production at some of itswestern mines, including the company's Foidel Creek mine, which saw productiondrop from 1.1 million tons in the first quarter of last year to 775,023 tons inthe latest period.

Themine finished the 12-month period with output down 39.8% from last year,reflecting the company's concerted effort to reduce output in the run-up to abankruptcy filing on April 13.

Thebasin's largest drop for the 12-month period was seen at Bowie's No. 2 mine,which finished the period down about 82%. The mine closed out the first quarterwith just 33,395 tons, down from 615,924 tons during the same period last year.