GILLETTE — As Powder River Basin coal continues to take a pounding with production down about 22% last year compared to 2019, the local industry quietly passed a milestone that represents the importance of thermal coal to the region.
The 12 Campbell County mines managed to produce nearly 207 million tons in 2020 as a prolonged weak market for PRB coal continued and the COVID-19 pandemic delivered a near knockout punch.
They also surpassed 8 billion tons mined in the basin since 1998.
The 8.1 billion tons produced over those 23 years averages out to more than 356 million tons a year, a number that shows coal’s heyday of a decade ago while also highlighting an accelerated downward trend.
Not only is last year’s overall production the lowest by far of the last 23 years, it’s also the lowest with the basin’s current buildout of 12 operating mines.
There’s a reason the 8 billion mark, while notable, isn’t something to celebrate, said Travis Deti, executive director for the Wyoming Mining Association.
“Well, 2020 was a tough year, and came on top of other tough (recent) years,” Deti said. “I don’t think they can get any tougher. We were continuing to see the customer base contracting and we all know production drives demand, which drives employment.”
The COVID-19 pandemic also was a gut-punch to the industry, Deti said. That’s because months of shutdowns taking manufacturing offline and curtailing business activity overall greatly reduced the nation’s demand for electricity.
“Those shutdowns across the country commanded the lower demand for electricity,” Deti said, adding that it still hasn’t recovered.
Given the outlook halfway through 2020 when the shutdowns were still on and power companies continuing to move away from coal-fired generation, Deti said the only positive to take from last year’s numbers is that production cracked the 200 million mark. Last summer, it didn’t look like that would happen.
“Going forward, I’m glad we broke 200 million tons, which is probably the best we could’ve hoped for in a struggling industry,” he said. “It’s frustrating and it’s confounding when you look at what’s going on today, but nobody’s going to build a new power plant.”
While the pandemic helped hasten the downfall of thermal coal in the United States, it was already moving in that direction, said Rob Godby, director of the Center for Energy Economics and Public Policy at the University of Wyoming College of Business.
While it’s been anticipated for the past several years, 2020 also is notable because it finally confirmed contraction of the Powder River Basin through mine closures. After the Decker mine in Montana ceased operations during the bankruptcy of its parent company, Lighthouse Resources, Arch Resources Inc. announced the impending closures of its Coal Creek and Thunder Basin mines in Campbell County.
While Coal Creek has been moving toward closure for a couple of years, Black Thunder continues to be one of the world’s largest producing thermal coal mines. Last year, Arch’s mines produced 52.3 million tons of coal, or about 25% of the PRB’s overall production.
That a large player like Arch is throwing in the towel on thermal coal is a turning point, Godby said.
“The larger companies like Arch and Peabody (Energy Corp.) can kind of manage themselves better,” he said.
“The smaller companies … can’t really do anything that reduces revenues. NARM (Peabody’s North Antelope Rochelle mine) and Black Thunder can produce for a different market and they don’t need to get into a situation where it’s a cutthroat competition.”
NARM, perennially the world’s No. 1 producing coal mine, dug 66.1 million tons in 2020. That’s far and away the most from the PRB but a fraction of the record 118 million tons the mine produced in 2014.
Overall, coal production was down nearly 60 million tons from the 266.8 produced in 2019, or about 22%. Compared to 2011 when the PRB produced 426.4 million tons, last year’s final tally represents a decline of 219.5 million tons, or more than 51%.
By comparison, during the “bust” of 2016 that saw several high-profile coal bankruptcies rock the Powder River Basin and create mass job losses, the basin’s production was down 21%.
Another number worth noting, Godby said, is that Black Thunder and NARM combined to produce 116.3 million tons in 2020, or about 56% of the PRB’s overall output. Historically, however, those large mines have typically accounted for more than 60%, which shows their hold as the anchor mines of the basin is slipping.
The trigger likely was the final federal denial of a proposed joint venture between Arch and Peabody, Godby said.
“What people miss with the joint venture is there was clearly a front-seat player and a backseat player there, and the backseat player wasn’t going to be the active manager of the mines,” he said.
He was referring to a plan that would have merged the companies’ Western assets with Peabody as 66% owner and operator. With a minority 33% share, Arch could step back and let someone else deal with its thermal coal assets. Without the joint venture, Arch has made it clear it has no intention of maintaining a long-term commitment to the PRB.
“If you look at what Arch was willing to do in that joint venture, they were really looking to reduce their involvement in the PRB,” Godby said. “When that didn’t happen, Plan B kicked in.
“The headline out of 2020 is the production decline and COVID. But if you look beyond the headline, I think had COVID not happened, we’d have had continued contraction. What COVID did was it accelerated existing trends.”