
|
A coal truck at the Eagle Butte mine in September 2017. |
Blackjewel LLC's two Powder River Basin mines continued to deliver coal at a reduced rate as other coal producers stepped up to supply additional coal to their utility customers, an S&P Global Market Intelligence analysis of federal fuel contract data shows.
The company abruptly shut down Belle Ayr and Eagle Butte, each among the most productive mines in the country by volume, shortly after Blackjewel stumbled on the financing initially proposed for its July 1 bankruptcy restructuring. The company has told the bankruptcy court that it maintained a reduced crew to protect its operations. Newly available data on July coal deliveries shows that coal from the two Powder River Basin mines dropped 75.9%, from 2.3 million tons in June to 562,074 tons in July.

Blackjewel, which mined roughly 11.1% of the coal extracted from the Powder River Basin in the second quarter, sent a Sept. 9 letter to employees suggesting a possible recall of furloughed workers, but it is not clear if that happened. Contura Energy Inc. was planning to buy the mines to avoid potential legal and financial risks at the time but has since agreed to sell the mines to FM Coal LLC affiliate Eagle Specialty Materials LLC.
Utilities typically stockpile several days or even months of coal supply on-site, shielding them from temporary supply disruptions. However, the Belle Ayr and Eagle Butte mines have been operating at a significantly reduced capacity for over three months, though a BNSF Railway Co. representative confirmed in a September email that its trains had been loading coal at both mines.
When contacted by S&P Global Market Intelligence in September about potential supply concerns, most of the utility customers declined to comment or did not respond. Those that did said they either had found new suppliers or otherwise did not see an impact on plant operations.

"Initially, the supply disruption was addressed solely by shifting coal supplies among or around our coal-fired generation fleet to backfill for any missed Blackjewel/Contura train loadings," Scott Reigstad, a senior communications partner with Alliant Energy Corp., said in September. "As the situation continued, we have been supplementing shifted supplies with spot purchases from other suppliers."
Blackjewel supplied coal to more than three dozen power plants in the U.S. throughout 2019, though some of those plants only bought coal in certain months of the year, according to federal fuel contract data. Of the Eagle Butte and Belle Ayr customers, the two mines accounted for a cumulative 24.6% of total coal deliveries in June. Through July, however, the share of those same customers' business dropped to just 5.6%.
Xcel Energy Inc. spokesperson Michelle Aguayo said in September that Powder River Basin coal is an essential source of coal supply for its Comanche and Pawnee coal-fired power plants.
Deliveries from the mine to customers dropped drastically for some of the company's top customers, including the Jeffrey Energy Center owned by Westar Energy Inc., where federal data does not list any other coal suppliers to the plant. The company tried to end its contract with Blackjewel through a bankruptcy court filing early in the reorganization.

Blackjewel's competitors that stepped up with increased coal sales between June and July include Arch Coal Inc., which went from shipping 1.5 million tons of coal to plants in common with Blackjewel to 2.4 million tons in July. Peabody Energy Corp. increased its sales to the same plants from 3.2 million tons to 3.8 million tons from June to July. Peter Kiewit Son's Inc., another coal producer in the Powder River Basin, boosted its sales to Blackjewel's customers from 1.1 million tons in June to 1.5 million tons in July.
Peabody and Arch recently announced a joint venture of their Powder River Basin and Colorado assets, a move they said would enhance their ability to make coal competitive against other energy sources. Peabody President and CEO Glenn Kellow said recent bankruptcies and challenges in the basin support the idea of a need to consolidate the operations.
"There has really been no change in pricing following either announcement as far as we can tell," Kellow said. "I think that just underscores the fact that, for us, this is about day-in-day-out competition versus natural gas and renewables."

