CASPER — After a searing summer for Wyoming’s coal country, new federal production data paints a troubling economic outlook for the Powder River Basin.

Coal production in the basin sank to a 20-year low last quarter, according to new data released last week by the U.S. Mine Safety and Health Administration.

The bankruptcy of coal operator Blackjewel dealt a staggering blow to the performance of the Eagle Butte and Belle Ayr mines during the third quarter. Production plummeted 82 and 91 percent, respectively, when set side-by-side to last year’s third quarter.

In Wyoming’s coal country, mines typically pump out the most coal over the course of July, August and September, courtesy of the high electricity demand from the sizzling heat. Companies start to stock up on coal during these months in anticipation of winter, too.

But compared to last year’s peak quarter, Powder River Basin coal production slipped 9 percent. What’s more, coal extraction has been cut in half since hitting a record 409 million tons in 2007.

In recent years, demand for thermal coal — the type of coal mainly used to produce electricity — has plummeted. Utility companies have pivoted away from coal to cheaper natural gas and renewable energy sources, mainly in the name of protecting ratepayers’ pockets.

As the coal market has contracted in recent years, bankruptcy has become a normal part of life in the Powder River Basin. Seven operators have filed for bankruptcy since October 2018.

But mines usually continue churning out coal even as an insolvent company slogs through Chapter 11 proceedings. Not so with Blackjewel.

After failing to secure desperately needed debtor-in-possession funding, or interim loans, to keep the mines operational, the company shut the gates of 32 coal mines across the country on July 1. A skeleton crew returned to Eagle Butte and Belle Ayr in early July, but the company was too cash-strapped to fully revive the facilities. A majority of the nearly 600 workers employed at the two mines had no choice but to stay home or look for other work.

According to data collected by the federal mining agency, only80 employees worked at Belle Ayr and Eagle Butte last quarter.

When the two coal mines owned by Blackjewel suddenly closed this summer, about 40 coal-fired power plants depending on bankrupt owner Blackjewel’s coal had to look at other options. Many of the power plants scattered across the country were built specifically for the coal spit out of Eagle Butte and Belle Ayr mines. The closures left some utilities to knock on the doors of other mines in the Powder River Basin. The need to offset coal supply lost from the partial shutdown of the Blackjewel coal mines could explain the uptick in production at neighboring mines, said University of Wyoming economist Rob Godby.

Coal production increased nearly 18% at Antelope mine and 10 percent at Black Thunder mine, in comparison to last year’s third quarter.

But Godby cautioned not to jump to conclusions too quickly.

“It’s also hard to tell if increases (in production) were due to the quarterly volatility that goes on, and the seasonal effect with summer production usually going up,” he noted.

Though Blackjewel could have aggravated the third quarter’s overall coal production rates in the basin, Godby called the coal company’s unprecedented bankruptcy, “a symptom of a wider problem from the coal industry.” Ultimately, the writing is on the wall. The industry is in decline, he said.

“We are all focused on getting the (Blackjewel) workers back to work, but if we don’t learn anything then eventually there will be another mine that has to close and it will be like ‘Groundhog Day,’” he warned.

 

By Camille Erickson

Casper Star-Tribune Via Wyoming News Exchange