Coal companies seek to extend mining operations

Phil Castle, The Business Times

A company plans exploratory drilling in the summer as part of efforts that could lead to the opening of a large underground coal mine that extends production in the North Fork Valley of Western Colorado.

A nearby mining company has similar plans to modify federal leases and explore for additional reserves to continue its underground mining operations.

The economic implications for the North Fork Valley and the region beyond loom large with potential capital investments of hundreds of millions of dollars and continued payrolls for mining jobs that pay on average $100,000 a year.

Steve Weist
Steve Weist

Environmental groups are expected to pursue administrative and court appeals that could delay those processes, however.

Steve Weist and Kathy Welt discussed the present and future of coal production in the North Fork Valley during an energy briefing hosted by the Grand Junction Area Chamber of Commerce.

Weist works as a manager overseeing the proposed Oak Mesa project for Oxbow Mining, which also operates the Elk Creek Mine near Somerset.

Oxbow Mining is a subsidiary of Oxbow Carbon. Welt works as an environmental engineer for Mountain Coal Co., which operates the West Elk Mine near Somerset. Mountain Coal is a subsidiary of Arch Coal.

The Oak Mesa Project involves a total of about 14,000 acres of public and private land about eight miles north of Hotchkiss under which could lie 100 million to 150 million tons of coal, Weist said.

Kathy Welt
Kathy Welt

To help determine the quantity and quality of that coal, the Oxbow plans to drill 43 exploratory holes in the area between June and September, he said.

Additional work already has been completed on a draft environmental assessment that included surveys of plants, wildlife and archeology, he said.

If it’s determined there’s sufficient  quantity and quality of coal to mine and market, the company will proceed on obtaining the necessary leases and permits and completing an environmental impact statement.

Weist said the statement could take a minimum of two years and more likely four to six years. “We have a huge amount of work ahead of us.”

The end result, though, could be a new underground mine that extends North Fork Valley operations for Oxbow for another 20 to 30 years, he said.

Depending on whether or not the company is successful in modifying one of its leases, there’s probably enough reserves to continue operations at the Elk Creek Mine until 2018, Weist said.

The new mine would offer long-term stability in operations that employ more than 350 people and pay

$36 million in annual wages and benefits, Weist said. And for every one person who works in a coal mine, an average of an additional 3.7 people are needed in regional businesses that support the mining industry, he added.

That’s not to mention the royalties as well as the property and severance taxes the company pays, he said.

The capital investment in a new mine is estimated at $400 million, Weist said.

The Elk Creek Mine ships what Weist called “super compliant” coal to power plants in the eastern United States that rely on the low sulfur content to help meet emission standards.

Welt said Mountain Coal also is working on lease modifications to extend production at the West Elk Mine as well as explore for new reserves.

The West Elk Mine produces about 4.8 million tons of coal a year and employs more than 350 people, she said.

The West Elk Mine is the biggest producer among four mines and a coal-to-liquids production facility operated by Arch Coal in Colorado, Utah and Wyoming, Welt said. Arch Coal ranks among the top five global coal producers and marketers. The company operates a total of 23 mining complexes in eight states that account for about 16 percent of the U.S.

coal supply.

Welt said she’s proud of the safety and environmental record of the West Elk Mine, efforts that have lowered reduction costs and garnered numerous awards for Mountain Coal.

The company has gone 12 years without a single notice of an environmental violation, she said. “That is probably a national record.”

Nonetheless, both Welt and Weist expressed frustration at the continued opposition their companies face from some environmental groups. They expect that opposition to delay efforts to modify leases and conduct exploratory drilling that could lead to continued coal production in the North Fork Valley.

“It’s a tough situation for us,” Weist said. “We have a tough battle ahead of us.”