February 9, 2021 Read More →

U.S. energy transition hits Powder River Basin as coal production falls, mines close

S&P Global Market Intelligence ($):

A sharp decline in coal demand from the U.S. power sector is wreaking havoc on the Powder River Basin as mine operators in the region scaled back production during 2020 with few indications of improved prospects for volumes. Production in the country’s largest coal-producing basin fell 21.8% year over year in 2020, and two of the largest producers in the region have indicated that 2021 may not be much better.

Powder River Basin coal producers mined 230.1 million tons of coal in 2020, down from 294.2 million tons in 2019. Quarterly production slid from 59.9 million tons in the third quarter of 2020 to 58.4 million tons in the fourth quarter. The U.S. Energy Information Administration recently projected U.S. coal demand would bounce back 12% in 2021 after U.S. production fell to pandemic-driven lows in 2020, but production guidance regarding the coal basin has been less optimistic.

Arch Resources Inc. announced Feb. 9 that it is proceeding with an accelerated closure and final reclamation of the Coal Creek mine in the Powder River Basin after fulfilling its 2021 contracts. Another of the 16 mines in the region, Lighthouse Resources Inc.’s Decker operation, recently ceased production. The company filed for bankruptcy in late 2020 while noting the contract with the mine’s sole buyer expires in early 2021. Already, the company’s mining costs were exceeding its sale price, according to bankruptcy documents.

Only a few weeks apart, the Coal Creek and Decker announcements mark the first mine closures in the Powder River Basin in modern history.

While Arch Resources’ Coal Creek mine is one of the smallest mines in the region by production, the company said Feb. 9 that it is also “laying the groundwork for systematically reducing the operational footprint at its Black Thunder mine.” The Black Thunder mine is the second-largest coal producer by volume in the United States and produced 21.7% of the coal mined in the Powder River Basin in the fourth quarter of 2020.

Peabody Energy Corp. recently indicated its Powder River Basin thermal coal production is expected to remain flat in 2021. The company produced about 38.1% of the coal mined from the Powder River Basin in the fourth quarter of 2020. While Peabody does not expect its Powder River Basin demand to bounce back, it is also planning on reduced operations in 2021 at its other U.S. thermal coal mines due to coal plant retirements.

[Taylor Kuykendall and Gaurang Dholakia]

More ($): Closures, more volume declines hitting Powder River Basin coal region in US

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