Mine shutdown comes as coal industry faces challenges

Kelly Sloan

Kelly Sloan

Kelly Sloan, The Business Times

The idling of a Western Colorado coal mine following a fire comes at a time when lower prices and stricter regulations already pose challenges to the coal industry.

Oxbow Mining announced plans to idle its Elk Creek Mine near Somerset, laying off another 115 employees.

The move follows a fire in the underground mine last year that damaged million of dollars worth of longwall mining equipment and led to the layoffs of 142 employees in October. A skeleton crew of 20 remains on staff to maintain the mine site.

At the height of its production in 2008, the Elk Creek Mine employed more than 350 people and produced more than 6 million tons of coal a year at what was one of the largest underground coal mining operations in the country.

In 2012, the mine employed around 285 people and produced nearly 3 million tons of coal — about 10 percent of overall production in the state, according to the Colorado Mining Association.

Coal extracted from the mine, like most deposits in Western Colorado, is low in sulphur and mercury, making it some of the naturally cleanest coal in the world.

The vast majority of production at the Elk Creek Mine was attributed to longwall mining equipment that strips away coal along an 8-foot front and uses piston-supported pillars to shore up the roof to prevent collapse. The temporary roof advances with the mining equipment. Longwall technology allows for a far greater rate of coal production than conventional means.

It was this longwall equipment that was lost when mine officials decided to seal the shaft following a fire last year. Efforts to recover the equipment, which is estimated to cost between $50 million and $100 million, were unsuccessful and the company made the difficult decision to abandon it.

In a statement announcing the decision, Oxbow Mining President Mike Ludlow indicated the company plans on replacing the equipment and resuming operations, although it’s unclear how long that could take. “We are idling the mine until we are able to install a replacement longwall and other equipment,” Ludlow stated. “We are working on the engineering and procurement of a replacement longwall and other equipment as quickly as possible.”

It’s expected the mine shutdown, however temporary, will have a significant effect on the local economy and Delta County.

The Elk Creek Mine is estimated to have generated $36 million per year in wages and contributed about $90 million annually to the local economy. The average pay for a miner at Elk Creek was two to three times the non-mining average in the region.

“I am deeply concerned about the effect the Elk Creek Mine closure will have on the families supported by this mine as well as the North Fork Valley community as a whole,” State Rep. Don Coram, R-Montrose, said in a statement.

The shutdown comes at a time when the future of the coal mining industry is uncertain. Colorado coal production fell 20 percent in the first half of 2013.

World coal prices have dropped to $12 to $14 a ton  due to an abundant supply. But more damaging, industry officials say, is a threatening regulatory environment.

Renewable energy standards that require that a minimum portion of electricity be generated by such renewable sources as solar and wind power have affected an industry that supplies fuel to coal-fired power plants.

In Colorado, legislation enacted in 2013 doubles the proportion of electricity that must be provided by renewable energy sources to 20 percent by 2020 for cooperative electric associations serving more than 100,000 meters and utilities that generate and supply power to electric associations. Renewed discussion of a federal renewable energy standard also concerns coal industry officials.

Meanwhile, the U.S. Environmental Protection Agency is in the process of developing carbon-reduction regulations targeting existing power plants, which could have the effect of shuttering coal-fired plants around the country.

Moreover, coal mines face legal pressure from environmentalist groups. The Elk Creek Mine itself has in the past several years faced lengthy delays in obtaining permits for mine expansions due to environmental organizations suing the U.S. Bureau of Land Management over permits.

The Colorado Mining Association acknowledged these challenges in a statement concerning the Elk Creek Mine shutdown. “The mining business is challenging enough without government intervention in energy markets, either through state legislation or federal initiatives designed to curb coal use and award markets to higher cost and less competitive energy sources.”

State Rep. Ray Scott, R-Grand Junction, said that while he hopes the mine will be back in operation quickly, he recognizes it could take a considerable amount of time. “While the mine closure was reported as temporary, the process to re-establish a mine site can be lengthy.”

Scott called on the state government to streamline the permitting process for the mine, noting that similar measures were undertaken in areas affected by this year’s flooding. “I hope the state of Colorado and the government entities involved can use that knowledge and experience to expedite the permitting process to get this mine back to operation as soon as possible.”

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Kelly Sloan is a Grand Junction resident, freelance journalist, small business owner and Centennial Institute fellow on energy and economic policy. He specializes in public policy and political communications.
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Posted by on Dec 17 2013. Filed under Business News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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