How much coal does a Wyoming coal miner mine? Quite a bit less than he used to, it turns out.
Regulations have received most of the blame for coal’s current downturn but that’s not the whole story; it’s also getting more expensive to mine in the nation’s largest coal producing state.
For the past few months, Cloud Peak Energy, one of the biggest coal miners in Wyoming’s Powder River Basin, has been in the process of moving a giant machine called a dragline from one mine to another.
“We had to cut it into several large pieces to move it down the country roads,” explained project engineer Ben Hawkes, standing next to the machine’s enormous crane, which is as tall as a 35 story building.
Even cut into pieces, it was still too big.
“We had PreCorp (the local utility) running in front of us lowering power lines, shutting off power to power lines so we could get under,” Hawkes said.
The whole process of disassembling, moving and reassembling the dragline is expected to cost Cloud Peak $20 million. That is a lot of money, but the company estimates the savings in capital expenditures alone will be upwards of $200 million.
Unlike coal in the east, which is far underground, the coal in the Powder River Basin is very close to the surface – sometimes just 40 or 50 feet below. That’s meant coal has always been cheaper to mine in Wyoming, four to five times cheaper, than West Virginia or Kentucky coal.
The dragline is used to scrape off the dirt, or overburden, on top of the coal seam. It can move several semi-trucks worth of dirt at a time, something that’s becoming more important.
“As the coal seam heads further west in the Powder River Basin, it gets a little deeper and deeper, so as we mine west, we have to move more overburden on top,” Hawkes explained. “And a dragline is the cheapest way to remove that overburden.”
It’s not just Cloud Peak that’s having to go deeper–a lot of the shallow, easy to mine coal has already been mined, and now, companies are finding they have to move a lot more dirt to get at the seams. An Inside Energy data analysis shows between 2001 and 2012 individual miner productivity in Wyoming dropped 32 percent.
The Antelope Mine, where Cloud Peak is moving its dragline, has the highest ratio of dirt to coal in the basin.
“This dragline will help offset the need to purchase an entire truck-shovel fleet to move the dirt,” Hawkes said.
Even so, the dragline isn’t actually going to boost productivity – it’s just going to allow Cloud Peak to stay on track. Those rising costs come at a bad time.
“The more expensive it is to get to the surface, the more you have to charge for it and the more likely there is a cheaper substitute for it out there somewhere,” explained University of Wyoming economist Rob Godby.
Those substitutes include natural gas, which has been on a streak of bargain basement prices. Combined with regulations like the Clean Power Plan, which would reduce demand for coal, it’s a losing trifecta.
“An increasing cost just makes one more challenge for a coal miner,” Godby said.
That means more challenges for the state. Even without federal regulations, Wyoming is going to have to address the fact that its largest industry could be losing its competitive edge.