July 23, 2008

The Utah Geological Survey (UGS) has released Circular 107, Annual Review and Forecast of Utah Coal: Production and Distribution for 2007.

Utah’s coal industry experienced a difficult and tragic year in 2007. The terrible circumstances surrounding the unexpected closure of the Crandall Canyon mine, followed by the idling of the Aberdeen mine, resulted in a 7.1 percent decrease in Utah coal production to a total of 24.3 million short tons. These closures also resulted in a 5.3 percent loss in mine-related employment.

In addition, difficult mining conditions at Canyon Fuel Company’s SUFCO and Dugout Canyon mines contributed to production declines. On the brighter side, Canyon Fuel’s Skyline mine, with a full-year of longwall operation, increased its production by 45.4 percent and UtahAmerican’s West Ridge mine increased its production by 34.3 percent.

Also noteworthy are record production for both Carbon County and State lands, and a 20-year high in the average price for a short ton of Utah coal: $25.18. Distribution of Utah coal decreased slightly in 2007 to 24.5 million short tons, while out-of-state coal imports hit a 20-year low of only 1.5 million tons.

Utah’s coal production will increase slightly in 2008 to a total of 25.4 million short tons. New longwall production at C.W. Mining Company’s Bear Canyon mine, as well as production increases at the Dugout mine and Hidden Splendor’s Horizon mine, should offset production losses resulting from the closure of the Aberdeen mine.

Of particular note, Utah will produce its one billionth ton of coal in the 3rd quarter of 2008, a major milestone for the state’s coal industry. Coal-related employment in 2008 is projected to decrease by 134 individuals to a total of 1,754 employees. The average price of Utah coal is expected to increase by 6.7 percent to $26.87 per short ton, the highest price in nominal dollars since 1987.

Utah coal distribution should increase slightly to 24.9 million short tons, and imports, mostly Colorado coal going to the Bonanza power plant, are also expected to increase to 2.2 million tons.

One major issue facing Utah operators is increasingly difficult mining conditions, which often results in a higher ash product. To help mitigate this growing problem, two new coal-cleaning facilities have been built, Canyon Fuel’s Castle Valley Coal Preparation Plant and Headwater’s Wellington Cleaning Facility, both located near Price, Utah.

Utah mines are also faced with significant reserve depletion and the hazards of mining at increasing depths of cover. As a result, operators are looking to other areas to increase their reserve base.

UtahAmerican Energy recently received the necessary permits to open the Lila Canyon mine in the southern part of the Book Cliffs coal field, Alton Coal Development is pursuing permits to open the Coal Hollow surface mine in the Alton coal field in southern Utah’s Kane County, and Arch Coal was recently awarded the State-owned Cottonwood lease located in the Wasatch Plateau coal field. These proposed operations will replace production losses at current mines and keep Utah’s production levels near the 25 million ton mark for the foreseeable future.

Another area of concern for coal companies, which could curtail coal demand, is the possibility of carbon constraints. "In fact, all planned coal-fired power plants in Utah are on hold pending permit challenges or financing problems. Furthermore, Rocky Mountain Power has announced that it will not build another coal-fired power plant until regulators develop carbon mitigation strategies," said Michal Vanden Berg, UGS Project Geologist. A slowdown in local markets may be offset by a dramatic increase in foreign demand, which could benefit Utah if prices remain high.

The 2007 Utah Coal Report is available at the Natural Resources Map & Bookstore for $12.95, 1594 West North Temple, Salt Lake City (801-537-3320, or 1-888-UTAHMAP; geostore@utah.gov). The report can also be viewed on the UGS website at http://geology.utah.gov/online/c/c-107.pdf.