^pCASPER, Wyo. — Cloud Peak Energy’s Cordero Rojo mine marked the shipment of its 1 billionth ton of coal Wednesday, amid a tightening regulatory environment and uncertainties over the industry’s future.
Few mines in the United States have achieved the 1 billion ton milestone, Cloud Peak executives said. Wednesday’s celebrations at the Campbell County coal mine are a testament to the quality of its reserves, service and, ultimately, longevity, they said.
Sun Oil opened the Cordero mine in 1976. The mine was merged with the Caballo Rojo mine in 1997 to create the Cordero Rojo mine. Cloud Peak has owned and operated the mine since 2009.
“It’s not like it is a milestone we’ve been shooting for and trying to achieve,” said Cordero Rojo mine general manager Joe Vaccari. “It’s one where if you meet your customers’ requirements and deliver the quality coal they’re looking for and can make some money doing it, maybe you can keep doing that.”
Still, the challenges ahead were underlined by Cloud Peak’s plans to cut production at Cordero Rojo by 10 million tons next year. Cloud Peak CEO Colin Marshall announced the move during a call with financial analysts in October, saying the reduction was a response to weak market demand.
Jim Orchard, Cloud Peak senior president of marketing and government affairs, said Wednesday that the company is observing a shift to slightly higher British thermal unit varieties of coal mined in the Powder River Basin.
Utilities are able to realize better returns on their investment on the higher Btu varieties, with high-Btu coals costing the same amount to ship as coals with lower energy content, Orchard said.
Cordero Rojo produces an 8,400-Btu coal. Cloud Peak’s Antelope mine, south of Gillette, and Spring Creek mine, in Decker, Montana, produce 8,800-Btu and 9,350-Btu varieties, respectively.
^pProduction at Cordero Rojo is expected to fall to 28 million tons a year, down from around 36 million tons in 2013. Cloud Peak does not expect any layoffs as part of the move. Employees will be reassigned to other mines as part of the reduction at Cordero Rojo.
^p“There is still a strong market for 8,400 coal, and Cordero Rojo, at 28 million tons, is still a big mine at PRB and global standards,” Orchard said. “We see it as an adjustment in our coal portfolio. It is not being represented as being a dramatic shift.”
The industry’s future has been the subject of considerable discussion since the release last month of proposed pollution standards aimed at curbing carbon dioxide emissions from coal-fired power plants.
The regulatory challenges come as cheap natural gas eats into coal’s market share. Natural gas is projected to surpass coal as the country’s largest fuel source for power generation by 2035, according to the U.S. Energy Information Agency.
The American market makes up the vast majority, or about 95 percent, of Cloud Peak’s business. And while the Gillette-based company continues to work to boost its Asian market, it remains optimistic about the domestic market going forward, Orchard said.
Coal is still expected to account for a about a third of the country’s electricity production.
“We continue to see the U.S. using lots of coal, particularly in the middle third of the country, particularly where Cordero coal has gone historically,” Orchard said. “That’s important to us because we continue to invest, employ and train people so we can supply the coal the country needs to generate cheap and reliable power moving forward.”
On Wednesday, the plan was to take a brief pause from work and gather around a rail car marking the 1 billionth shipment, Vaccari said. Sen. Mike Enzi, a Gillette Republican, was scheduled to attend.
Vaccari saluted the mine’s workers, saying their safety record is a big part of Cordero Rojo’s overall success. Few mines get the chance to celebrate such a milestone, he said.
“I don’t know that a whole bunch of folks appreciate that it is happening. Only those who track the numbers would be aware of it,” Vaccari said. “We realized it was approaching and didn’t want to let the occasion past without at least an acknowledgment that we’ve done that.”