Colorado coal production up for 2011, but long-term trend downward

Coal mining rebounded in Colorado in 2011 even as payrolls increased and the state returned to the ranks of the top producers nationwide.

Production remains well below levels of six years ago, however, and the outlook remains uncertain given the threat of government regulations that could curtail the use of coal in power plants to generate electricity.

“There is no reason to presently conclude, given current market conditions, that 2011 performance represents a reversal of the longer-term trend,” said Stuart Sanderson, president of the Colorado Mining Association.

According to the latest report from the industry organization, coal production in Colorado in 2011 totalled 26.8 tons, a 6 percent increase over 2010. The sales value of 2011 production topped $1 billion.

The report was based on the results of a CMA survey of coal producers. The increase pushed Colorado up two places to rank ninth among coal-producing states.

Employment at Colorado coal mines also increased in 2011 to 2,504, a 13 percent increase over 2010. The gain was attributed in large part to the opening of a new mine in Southern Colorado to produce coal for metallurgical use.

Mining remains one of the few industry sectors in the United States that have added jobs since the recession, Sanderson said. “Colorado coal mine employers deserve a great deal of credit for keeping employment levels steady notwithstanding significant declines in mine output over the past several years and the challenges going forward.”

A total of nearly 2,200 employees worked at nine Colorado mines that produce coal to fuel power plants. In 2011, they earned average annual wages and benefits worth $115,000, the CMA reported.

Taxes and royalties on Colorado coal production also increased in 2011. Taxes topped $116 million. Federal and state royalties topped $65 million.

Coal production also contributes to the Colorado economy in terms of the equipment, supplies and services mines purchase. In 2011, those purchases totalled nearly $319 million.

Increased coal production in 2011 followed a year in which production fell to its lowest level since 1996, Sanderson said. “2011 production was 30 percent below 2005 levels with the most significant declines occurring in the export markets to other states, which have fallen 59 percent in seven years.”

Coal production in Northwest Colorado, the principal mining region in the state, has dropped 30 percent since 2005. One mine there cut production in half because of difficulty in securing a long-term contract that would justify expansion. Another mine reported no production in 2011, he said.

Sanderson blamed the long-term decline in coal production in Colorado on the threat of government regulations that could curtail the use of coal in power plants.

New federal regulations limiting carbon dioxide emissions could effectively ban new coal-fired power plants, he said. Other federal regulations limiting mercury emissions could force utilities to close existing coal-fired plants.

In Colorado, state legislation led to a proposal to close down and convert to natural gas coal-fired power plants on the Front Range.

The Colorado Public Utilities Commission approved Xcel Energy plans to close a total of five units at three plants in Denver and Boulder, convert two more units from coal to natural gas, construct a new gas-burning unit and install additional emission controls at power plants in Brush and Hayden.

If those changes are implemented, Sanderson estimated they could displace up to 4 million tons of coal sales annually in Colorado, Sanderson said. Based on 2010 consumption data, coal constituted the fuel for about 68 percent of electrical production in the state.

The Associated Governments of Northwest Colorado — an association of cities and counties in Garfield, Mesa, Moffat, Rio Blanco and Routt counties — has filed a lawsuit against the PUC challenging its ruling.