Rain, rail congestion cut into coal output

2014-09-03T10:50:00Z 2014-09-04T06:19:08Z Rain, rail congestion cut into coal outputBy BENJAMIN STORROW Casper Star-Tribune The Billings Gazette
September 03, 2014 10:50 am  • 

CASPER, Wyo. — Cloud Peak Energy lowered its production estimates for this year on Tuesday, citing August rains and congested rail service.

Estimates for 2015 and 2016 include projections of further declines, the Gillette-based coal company said, as operations at the Cordero Rojo mine are scaled back.

Cloud Peak's estimates for 2014 were lowered to 83 million to 86 million tons. That was down from what the company projected in July, when it estimated annual production of 85 million to 89 million tons.

Colin Marshall, Cloud Peak CEO, said work to relieve congestion plaguing coal shipments from the Powder River Basin has not progressed to the point where the company could support its previous production estimates.

Rail traffic out of the basin has been snarled by rising oil shipments elsewhere in the country.

A late August rainstorm also contributed to the lower production estimates. The storm caused flooding and damaged equipment at Cordero Rojo, the company said.

Cloud Peak's overall production for 2015 and 2016 is estimated at 78 million to 84 million tons.

Those figures are largely a result of plans to cut production at Cordero Rojo by around 10 million tons starting in 2015. The reduction was initially announced by Cloud Peak executives last fall as a response to weak prices and tepid demand for the mine's 8,400 British thermal unit coal.

Cordero Rojo produced slightly more than 36 million tons of coal in 2013, according to the Mine Safety and Health Administration.

Layoffs are not expected as a result of the move, Cloud Peak officials have said. Workers at Cordero Rojo are expected to be transferred to the company's Antelope mine. A drag line is also being moved from Cordero Rojo to Antelope as part of the transition.

About 80 percent, or 65 million tons, of Cloud Peak's 2015 projected production has been sold already. Of that, 51 million tons was sold at an average fixed price of $13.12 per ton.

Cloud Peak also heralded its new deal to boost exports shipped through Westshore Terminals in Roberts Bank, British Columbia. The deal is expected to lift shipments by 25 million tons through 2024.

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