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Montana, Wyoming see increase in coal production

Montana, Wyoming see increase in coal production

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Signal Peak coal mine

The Signal Peak coal mine south of Roundup.

Coal production is increasing in Montana and Wyoming as demand in the Asia Pacific ratchets up.

Coming off a volatile year in 2020, which saw mine closures and furloughs, Montana’s mining industry has turned out 20.3 million tons of coal in the first nine months of 2021. That’s a 2% increase of 524,000 tons over 2020, when the state had two more mines operating than it does currently. Production numbers through Oct. 2 are reported by the U.S. Energy Information Administration. Wyoming production is up 11.8 million tons compared to the first nine months of 2020, a 7% increase.

Exports have been a main driver in Montana coal production, explained Steve Read, who manages coal sales for Signal Peak. Exports are the mine’s bread and butter. If there’s coal on a train from Signal Peak, it’s on its way to British Columbia for shipping and most likely bound for Japan.

“We have spent years developing the Japanese market and that is our most reliable market. It is the highest valued market for our product,” Read said.

Exports of U.S. steam coal, the kind used in power plants, were up 46.9% through the first half of the year compared to the first six months of 2020. It’s the kind of coal Montana and Wyoming produce. Part of that dramatic increase is because energy demand globally crashed in 2020 as COVID-19 shuttered industry. Thermal coal is benefitting from a sharp increase globally in natural gas prices.

Buyers in the Asia Pacific region accounted for 62% of this year’s exports, with 1.9 million tons going to Japan and 2.3 million to South Korea in the first six months. Both nations are primary destinations for Montana and Wyoming coal. India was the region’s biggest buyer with 7.9 million tons.

Export markets fueled a coal boom in Montana and Wyoming during the first six years of the past decade. Coal companies like Cloud Peak Energy and Lighthouse Resources, once the heavy hitters of Montana coal, attempted to build their own coal ports, arguing that there wasn’t enough shipping availability in the Pacific Northwest to keep up with demand. They also signed multi-million checks for mine development rights benefitting communities like the Crow Tribe.

But those big plans fell through, in part because in the Asia Pacific, Western U.S. coal companies are disadvantaged by distance. The world’s biggest exporter of all coal types, Australia, is much closer and benefits from lower shipping expenses. So does Indonesia, which is the biggest exporter of steam coal. U.S. coal exported well when prices were high, but when the market softened U.S. coal was often the odd man out.

Cloud Peak filed for bankruptcy in 2018, two years after having to suspend coal exports because of uneconomical export prices. The companies biggest mine, Spring Creek in southeast Montana, sold to the Navajo Transitional Energy Company, which hasn’t pursued exports aggressively like Cloud Peak. Spring Creek is also Montana’s largest mine. Cloud Peak had planned to build a coal export terminal near Bellingham, Washington.

Decker Mine, a short walk from Spring Creek was to be a primary source for Lighthouse Resources exports. For years, Lighthouse pursued developing a coal port on the Columbia River near Longview, Washington. The port was mired in environmental litigation. Lighthouse filed for bankruptcy in December 2020. Decker has shut down.

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