Sunday, December 26, 2010

Arch Coal Mining Company may have a logical reason to leave Wyoming

The Reason?
Economic Uncertainty.

Rising costs of doing business and government regulations that have no end in sight.  That and once you scrape the cash off the top, it is a lot harder to get at.

Even though the Powder River Basin holds 77 billion tons of coal, 150 years supply at the current levels of demand, it may just be easier, and less costly, to go somewhere else.

Companies, because they are cutting costs just like every other business, are starting to look elsewhere.  For example, "the Xinjiang region of northwestern China, an area the size of Iran that's estimated to hold 2.2 trillion tons of coal" or, closer to home, Montana ... a very specific 18,000 acres in southeast Montana that hold an estimated 1.5 billion tons of coal.

Considering the economic boom Wyoming has seen in surge in the last decade, one might be wise to consider buying property in Montana in anticipation of their short lived boom.
If coal mining companies in Wyoming are given any more incentive to leave, and do, Wyoming will dry up.  And with a state government that has become so comfortable with spending tax payer dollars, no doubt Wyoming will become the federal specimen for complacent puppetry; Wyoming becoming a briefcase minion for the Jeff Dunham show.

Wyoming has two years to find her ass with both hands, Obama manipulating the left, Matt Mead taking reigns on the right ... what chance do we have to even have a state in 4 years?  10 years ... 20 years ... ?

Bleak outlook?  Possibly.  And yes, very bleak.
But what is Wyoming really is doing to greater the incentive of doing business here?
Rather, governmental tools are seeking to do the opposite - raising the costs of all things by raising the fuel tax before reigning in government spending.
With that track record, Wyoming might become known for the state that was.

The fuel growing government, mainly greed - having government provide service for government on the premise that, 'we are not as bad as other states' - rather than lessen the burden of government legalized theft reminds us of Obama and the great excuse, "it could have been worse" statement rather than something from Wyoming, what coulda woulda shoulda be a free and prosperous state.

Yes. It could always be worse.  Much worse.  Very true.
But if we don't make it better, it IS getting worse.

It would be more comforting reading about Coal Mining Executives saying things like, "Wyoming is treating us mighty fine, we have no reason to leave.  In fact, it is better for us financially if we stay" rather than quotes that suggest the consideration to seek out new outlets of conducting business elsewhere.

Coal companies follow the trail west
Powder River Basin output has continued to climb, aided by rules that forced utilities to reduce emissions.
BY JEFFREY TOMICH  - stltoday.com

Wright, Wyoming - Toward the end of the 1990s, Arch Coal executives stared into a troubling future — the steady bleeding of market share from its Central Appalachian mines to rapidly growing rivals in Wyoming.
Arch chief executive Steven F. Leer soon reached a realization that would transform the company: Arch couldn't win. In Wyoming's Powder River Basin, other companies were feasting on strip mines, peddling more easily unearthed and cleaner-burning coal to an eager market. Meanwhile, Arch struggled in mountainous terrain to grow the company in a region about to peak.

"We decided if we weren't going to win the battle, we'd better well join them," he said. "We concluded that the PRB was going to continue to take market share, and it was the greatest energy resource in the United States, potentially the world."

In 1998, Arch bought Atlantic Richfield Co.'s western coal mines for $1.14 billion, growing the Creve Coeur-based company into the nation's second-largest coal producer. The maneuver paralleled a more gradual westward shift for the U.S. coal industry — a trend that continues today.
Powder River Basin output has continued to climb, aided by sweeping new rules approved in 1990 that forced utilities to reduce emissions of acid rain-causing sulfur dioxide. Many Midwestern utilities — including Ameren Corp. in St. Louis — coveted western coal because its low sulfur content allowed them to avoid installing expensive pollution controls.

CHASING EASY COAL

Set between South Dakota's Black Hills and the Big Horn Mountains, the basin covers more than 20,000 square miles of northeast Wyoming and southeast Montana. Its rolling grasslands are dotted with sagebrush and teem with deer and antelope. Less obvious is a layer of coal, up to 100 feet thick in places, that underlies much of the land.

Executives at Arch and Peabody Energy Corp., the basin's two largest producers, say the biggest driver of demand is the decline in coal output in West Virginia and Kentucky, the epicenter of the coal mining business going back to the Industrial Revolution.

Simply put: The easy coal is gone. Remaining coal seams are thinning, hurting productivity and increasing costs. Meanwhile, federal regulators are ratcheting up mine inspections in the wake of the explosion that killed 29 workers at Massey Energy's Upper Big Branch mine. And the Obama administration is taking a hard line on the practice of mountaintop coal mining — a controversial practice that involves blasting off mountain peaks to expose coal seams and dumping leftover rock and dirt in surrounding valleys.

Arch, still one of the region's largest producers, predicts this year's output in Central Appalachia will be 60 million tons, or about 25 percent lower than 2008 levels.

REPEATING HISTORY?

No one questions the richness of the Powder River Basin reserves. Based on data in a 2008 study of the U.S. Geological Survey, the area contains 77 billion tons of coal that could be tapped with today's mining technology — or about 150 years supply at current levels of demand. "We haven't even scratched the surface of that deposit," said Ken Cochran, president of Arch's Thunder Basin Coal subsidiary.

But some critics question how much longer it will remain cheap, given increasingly higher costs of both mining and burning coal.

The price of Powder River Basin coal has risen about 50 percent this year. And operating costs in the basin have doubled since 2003, as prices for labor, fuel, commodities and explosives have risen. So, too, have royalty and tax payments to the state of Wyoming and federal government.

Another reason: Every ton of coal is a little harder to unearth than the last.

Strip mining in the Powder River Basin began on the far eastern edge, where the coal seam outcropped from the ground. For every ton of coal extracted, early miners here had to move a cubic yard of dirt. As mining advanced westward, the coal layer dipped. Today, the average 'stripping ratio" requires moving 3.5 yards of dirt for every ton of coal. In a few years it will be 4-to-1, or greater, raising costs.

The Big Dipper

Companies are combating the cost pressures with supersized equipment, capable of digging up coal far more efficiently.

Trucks used 40 years ago held 100 tons. Today, the trucks hold 300 or 400 tons.

Then there's the king of earthmoving machinery: the Ursa Major dragline at Arch's Black Thunder mine. At 15 million pounds, the so-called Big Dipper stands 240 feet tall and weighs as much as 150 Boeing 737s.

Miners are also increasingly using technology. At Peabody's North Antelope Rochelle mine, GPS-enabled equipment is choreographed from a central control room where employees in front of flashing screens watch tire pressure, brake temperature, speed, fuel and other metrics through wireless computer networks.

Logging all of this data on a fleet of heavy equipment may seem obsessive. But consider that a single tire on any of dozens of the company's 400-ton trucks costs $50,000.

Jeane Hull, a Peabody Energy vice president who oversees western U.S. operations, said the company isn't done squeezing out inefficiencies.

"I think there's a real misperception that we're a dinosaur industry that's outdated," she said. "We're nowhere close to hitting the wall on that."

MOVING TO MONTANA

Meanwhile, Arch and Peabody continue searching for coal's next frontier. For Peabody, the world's largest private-sector coal company, it could mean opportunities in the Xinjiang region of northwestern China, an area the size of Iran that's estimated to hold 2.2 trillion tons of coal. For Arch, it could be closer to home: Montana.

In two transactions in November 2009 and March, the company paid more than $150 million for rights to 18,000 acres in southeast Montana that hold an estimated 1.5 billion tons of coal.

In Montana, Leer sees the same coal quality sought by utilities, along with favorable geology that made the southern Powder River Basin so attractive decades earlier.

Arch faces numerous regulatory and logistical hurdles in Montana, too. But as sure as Leer was in 1998 about Arch's Wyoming bet, he's equally confident of reaping profits in Montana.

"If everything went perfectly, … you could see the mine start to go into production in year five or six," he said. "Our expectation is that it could be very good timing."
Read the article from the #1 St. Louis website ... Coal companies follow the trail west

More Reading ... 
Upper Big Branch Mine Disaster - More Massey workers face license-forging allegations
Black Thunder Coal Mine - Wyoming
Yes, the one that Obama politically exploited, that one - Obama eulogizes West Virginia miners
Ursa Major at work - VIDEO
For how long? - AOL News - While Most of US Struggled, Good Times Rolled in Wyoming

August - 2009 ...
Xinjiang to reach 226 million tons of annual coal production

Xinjiang has an estimated 2.19 trillion tons of coal, accounting for
40% of China’s total reserves. The proven coal reserves in Xinjiang had
reached 199.2 billion tons as of the end of 2008.  Xinjiang produced
nearly 67.7 million tons of coal in 2008 and is expected to produce 80
million tons this year and 100 million tons in 2010.
October 9, 2010 ...
Four killed in coal mine collapse in northwest China's Xinjiang

Arch Coal :
St. Louis-based Arch Coal is the second largest U.S. coal producer.  They contribute about 16% of America’s coal from 11 mining complexes in Wyoming, Utah, Colorado, West Virginia, Kentucky, and Virginia.

2009 coal sales reached 126 million tons.
Arch Coal provides U.S. utilities with the fuel for roughly 8% of the nation’s electricity.

Arch Coal has a vast domestic reserve base totaling 4.7 billion tons. Of that total, 88% is low in sulfur and nearly 83% meets the most stringent requirements of the Clean Air Act without the application of expensive scrubbing technology.

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