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Arch planning for Black Thunder mine’s closure as U.S. coal demand continues to shrink

February 24, 2021

S&P Global Market Intelligence ($):

The owner of the second-largest coal mine in the U.S. by production volume is planning for the asset’s closure as retirement dates approach for several plants that burn much of the mine’s fuel.

Coal demand in the U.S. has been declining for years, and Arch Resources Inc. announced Feb. 9 that it would be winding down its thermal coal operations, including those at Black Thunder, a Wyoming mine that produced 12.7 million tons of coal in the fourth quarter of 2020. Black Thunder production represented about 9.7% of the coal mined in the country in that period, according to an S&P Global Market Intelligence analysis.

A substantial amount of Black Thunder’s 2020 deliveries went to plants that do not yet have public plans to retire, while several of the plants with plans to retire have closure dates set beyond 2030. However, pressure continues to mount for utilities to achieve net-zero emissions in alignment with international climate goals.

In the third quarter of 2020, about 43.0% of the coal from the Black Thunder mine was delivered to U.S. power plants that have retired or have scheduled a retirement date, based on available fuel contract data from the U.S. Energy Information Administration. More than a quarter of the coal delivered from Black Thunder to plants with a set retirement date during the first three quarters of 2020 went to power operations facing closure by the end of 2025.

Some of the buyers of Black Thunder’s coal have set net-zero emissions targets, including DTE Electric Co., Ameren Corp. and Xcel Energy Inc. As pressure builds to meet those targets, some companies could move coal plant retirements forward. For example, DTE had already announced plans to retire its 1,270-MW Belle River power plant and its 3,086-MW Monroe power plant in 2030 and 2040, respectively. However, DTE President and CEO Jerry Norcia said on a Feb. 19 earnings call that the company is looking to accelerate both closures.

The stark reversal in trends has Arch talking about its thermal coal assets in the Powder River Basin differently in 2021. During a recent earnings call, executives laid out plans for a near-term closure of the company’s Coal Creek mine in the basin and an “accelerated” closure of the much larger Black Thunder mine. “Our focus is on reducing the footprint while simultaneously producing that coal, generating cash and using that cash generated to shrink the footprint,” Arch President and CEO Paul Lang said of the Black Thunder mine.

[Taylor Kuykendall]

More ($): Arch Resources winding down massive U.S. coal mine as customer base dwindles

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