Coal companies are withdrawing applications for federal releases offering nearly 2 billion tons in reserves this year… just showing how unsure they are of the production of coal in the future.
America’s largest coal company, Peabody Energy, decided to withdraw its inquiry for the Antelope Ridge lease in October. The area near the North Antelope Rochelle Mine is roughly 8,200 acres and has reserves of about 1 billion tons or according to current production levels, a 10 year supply.
Arch Coal previously made the decision in January to abandon its pursuit for a 957 million ton lease near Black Thunder Mine.
The two developments come as firms try to accept cash in the face of a historic downturn that has caused three major coal companies not having enough money to file for bankruptcy this year.
Wyoming’s future mining industry is being reshaped by the decisions these companies make. In the long run, it’s going to be a very different industry than it was 40 years ago. Not everyone is worried about these new decisions though; Environmentalists are calling the withdrawn lease applications a boom for the climate.
If the applications hadn’t been abandoned in 2015, 3.2 billion metric tons of carbon emissions would occur during the time the projects would go on, equal to the emissions of nearly 674 million cars, said Jeremy Nichols, climate and energy program director at WildEarth Guardians, an environmental group.
Withdrawing is a big step, getting closer and closer to cleaner energy. About 40 percent of coal is mined on land supervised by the U.S. Bureau of Land Management. Coal companies end up paying millions of dollars to mine on this federal land.
Cloud Peak Energy is the only company actively chasing after a new lease. In August, the firm based out of Gillette submitted an application for a 441 million ton lease. However, this was oddly unexpected and five lease applications with combined reserves totaling almost 2 billion tons are now on hold at companies‘ appeal.
Firms are unwilling to lease right now due to the uncertainty of the short and long term challenges to come in the future for the industry.
Natural gas is cheaper and becomes a new threat to the coal industry as it is expected to decrease 100 million tons in 2015 or roughly 11 percent, mostly due to utilities‘ preference for gas. Consumption will likely fall another 40 million tons in 2016, if the general way things are going continues.
President Obama’s “Clean Power Plan” plans to cut carbon emissions by a third in the next 15 years. There lies a long-term bump in the road for coal, learning toward the new trend of natural gas.
In the big picture, firms have little to lose by withdrawing their lease applications. The capital costs of mining mean lease sales often draw in only person who offers to pay for it, even in a time when stock prices are rising. Companies often bid on areas of land next to their current operations.
Peabody’s case is interesting of the changing industry. A company spokeswoman said Peabody withdrew its Antelope Ridge application with the understanding it could resubmit a changed version in the future. Its current leases consist of combined reserves of roughly 2 billion tons, or 20 years supply, by estimates from analysts.
Mining at Antelope Ridge would not likely have begun for years, but the company would have had to pay for the lease in advance. Analysts said Peabody would probably pay upwards of $1 billion for the lease, though payments would be spread out over a five year span. Peabody reported a loss of $304 million in the third quarter of 2015.
There lies the issue of not knowing what is going to happen in the next 20 years in the coal production industry, and many companies don’t find it worth it to lay down money at this point in time.