Two mines named Elk both increased production in 2022. But long term? By the simple numbers, the outlook does not favor their prospects.
Colorado’s largest and smallest coal mines both have Elk in their names and are reached by winding, mountain roads amid smile-inducing scenery. New Elk and West Elk, the two mines, also bucked the long-term decline of coal last year. They actually increased production.
How long will they tilt against this industry trend?
Production in Colorado since 2003 has paralleled the downhill contour of a black-diamond ski slope, sliding from 39.9 million tons to 12.3 million tons.
Tonnage will almost certainly fall further. Nearly all of this coal clawed from the mines is burned to heat water and hence generate electricity. That era is passing. A coal-burning unit at Pueblo went dark in December, and Colorado’s remaining nine units will close by the time a fifth-grade student graduates from high school, maybe sooner.
Wyoming’s Powder River Basin has supplied some of these coal plants. A major operator there, Arch Coal, has changed its name to Arch Resources. It plans to leave Western coal in coming years, including its lone operation in Colorado, the West Elk Mine, located near Paonia. For now, though, it’s riding the wave of higher coal prices and investing just enough to keep going.
In 2022, West Elk production rose nearly 25 percent to nearly 4.4 million tons. On my late-night walks, I believe I have seen some of that coal rolling down the railroad line from the Moffat Tunnel through metropolitan Denver. I doubt these coal trains will be permanent.
The last “coal-powered power plant in the United States was built 10 years ago. And the average age is creeping up to 47-48 years,” said Paul Lang, the Chief Executive of Arch, during a 2022 call with investors. “I think we’ll see slowdown and retirements over the next two or three years. This thing is heading toward a pretty fast decline rate.”
West Elk as of 2021 had proven reserves of almost 47 million tons, according to a U.S. Securities and Exchange Commission filing. That coal has high energy, superior to that of the Powder River Basin.
Clark Williams-Derry, an energy financial analyst with the nonprofit Energy Institute for Economics and Financial Analysis, told me he can see West Elk bumping along with the production of 2.5 to 4.5 million tons per year, depending upon market prices. Or ramping down production to 1 to 3 million tons, delaying the outlay necessary for cleanup. Or, conceivably, finding somebody else to buy the mine.
Keep in mind, the reserves are limited. It can continue for 10 to 12 years at current rates of production. Arch has laid plans to expand the mine. The Colorado Department of Public Health and Environment has been slow to process an air pollution permit application. Environmental groups have been nipping at the Polis administration’s heels. They want a chance to kill expansion plans and avoid the disturbance of a roadless area. “We think this mine has outlived its usefulness,” says Jeremy Nichols, Climate and Energy Program Director for the Denver office of WildEarth Guardians.
Arch does see a future in metallurgical coal, which is used to produce steel from iron ore. The company has several such mines in West Virginia. They deliver 10 percent of the company’s coal volume but 52 percent of its revenues.
Metallurgical coal was the premise for New Elk, a mine that had mostly been closed since the 1980s. It was reopened in 2021 by Australian owners with the declared intention to supply Asian steel-makers.
It’s in a beautiful location, about 30 miles west of Trinidad, with a backdrop of the Sangre de Cristo Mountains that holds your eyes hard. Coal from the mine was originally hauled by railroad to the steel mill in Pueblo. When the Pueblo mill began using electric-arc furnaces, the coal was sold for thermal purposes. The mine closed in the 1980s and the railroad tracks were yanked.
The Australian owners said they intended to reinstall the railroad tracks, but that has been postponed. Meanwhile, the Trinidad Chronicle-News reports setbacks. One was the difficulty in attracting experienced coal miners. Trinidad, if lacking Front Range prosperity, still has insufficient housing. Go figure. New Elk also shifted sales from overseas markets to domestic coal plants.
In Boulder, a new company is trying to create a chemical process for making steel that will bypass the need for metallurgical coal. Maybe this company will succeed, maybe not. As for the Pueblo steel mill, it sits amid a sea of solar panels. Electricity has enough heat to repurpose recycled steel.
Coal will be with us for decades yet, particularly in Asian countries. Here, we’re moving past the fuel that made our lives so much easier. We have cheaper fuels — and yes, they pose less risk of pollution to our atmosphere.
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