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Front Page » February 21, 2006 » Local News » Utah, U.S. Agencies Forecast Expanding Coal Mining Industry
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Utah, U.S. Agencies Forecast Expanding Coal Mining Industry

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Carbon and Emery counties continue to dominate Utah's statewide coal production.

In general, the latest review data compiled by the Utah Geological Survey indicate that coal mines operating in the Castle Valley region and across the state struggled to meet growing demand in 2004.

But state and national analysts expect coal production in Castle Valley and Utah to significantly increase to 24.4 million short tons during 2005.

In addition, 236 new coal-related employees are expected to be hired and prices as well as revenues are likely to climb and 2006 predictions are even more optimistic.

In fact, coal mining operators are suggesting a statewide production of 27.5 million short tons, which would establish a new single year record, noted the Utah Geological Survey report.

The projection does not include production from proposed mines such as Alton, Columbia or Lila Canyon.

Statewide production totaled 21.8 million short tons in 2004, the lowest level posted since 1993.

Factors contributing to the decrease included temporary mine closures, labor problems, difficult conditions and development work for future longwall operations, explained the state agency.

By comparison, the United States Energy Information Administration reported that coal production increased by 3.7 percent to reach 1,111.5 million short tons nationwide in 2004.

In Utah, coal production hit a 10-year low in 2004, but is expected to significantly increase in 2005 and 2006.

The reopening of Skyline and Emery mines increased production at existing operations and the proposed opening of the Alton, Columbia and Lila Canyon mines suggest a stronger future for the coal industry in Castle Valley and Utah.

In the longer term, coal should continue to be the most important fuel produced in the U.S. for electricity generation.

Identified reserves of coal are expected to last more than 200 years, significantly longer than confirmed petroleum and natural gas deposits.

In Utah, crude oil and natural gas production activities are in long-term decline.

During 2005, coal-fired power generation is projected to supply more than one-third of the worldwide electricity demand.

In addition, coal-fired generation facilities are expected to provide more than 50 percent of the needs in the U.S. and about 95 percent of Utah's power generation.

Castle Valley and Utah will also continue to be net exporters of electricity. In recent years, air quality concerns and demand for peaking capacity have increasingly favored natural gas. However, more recent projections for a growing price differential between natural gas and coal appear to be moderating that outlook, and 1500 MW of new coal-fired power plant capacity is in the planning stage.

Emission standards remain a major issue for coal combustion. Research on clean coal technology is being vigorously pursued around the world, particularly in the U.S. The low sulfur content of most Utah coal is an advantage in the current market place. As of 2004, most of Utah's six coal-fired power plants are using upgraded emission controls or planning for upgrades in the future.

During the next 20 years, the EIA projects that coal prices in the U.S. should decrease from a 2005 price of $18.61 per short ton to around $17 by 2010 and remain near the lower level through 2020. The decrease is expected for several reasons, including a predicted moderate growth in demand, improvements in mining productivity and a continuing shift to low-cost coal from Wyoming's Powder River Basin.

After 2020, the price is projected to increase to about $18 per short ton by 2025 as predicted rising natural gas prices and the need for baseload generating capacity result in the construction of coal-fired generating capacity.

The FOB price for Utah coal decreased from $18.47 per short ton in 2002 to $16.64 in 2003, the lowest price in at least the last 25 years. Prices in 2004 increased 6.4 prcent to $17.70 per short ton and are expected to climb 7.2 prcent to $18.98 in 2005. The average price of Utah coal is influenced by low-priced long-term contracts. Some mines are selling coal for about $13 per short ton. Conversely, current spot prices exceed $30 per short ton and could be an indicator of upward pressure on the price for Utah coal in coming years. However, some coal-using companies have expressed concern about Utah's high prices compared with coal from the Powder River Basin. Despite Powder River's lower quality coal, competition with Wyoming affects Utah's future prices.

EIA's energy outlook predicts that U.S. coal production will steadily increase by 1.3 pecent annually and reach 1487.8 million short tons by 2025. Almost all of the increase is expected to come from western coal mines.

Projections for Utah show a significant increase in coal production. Operators predict a production total of 24.4 million short tons in 2005 and 27.5 million short tons in 2006 - a new record.

The forecast depends on production levels anticipated at the Skyline and Emery mines, Deer Creek's Mill Fork tract, Crandall Canyon and Bear Canyon. The 2006 projections do include production from the proposed Lila Canyon or Columbia mines. If the mines come online, Lila Canyon and Columbia could add three to six million short tons of coal at full production, pushing the state's total to 30 million short tons by 2007 or 2008.

In 2005, EIA's projected U.S. domestic consumption of coal for all uses will total 1,137 million short tons, an all-time high, of which 1042.0 million short tons will go to electric utilities. EIA predicts that U.S. consumption will increase by an average of 1.4 percent annually and total 1,508 million short tons by 2025, with

1,425 million going to electric utilities.

In 2004, Utah experienced a fourth consecutive year of decreased distribution, totaling 22.8 million short tons or 18.9 percent less than the state's record year 1996. The continued decline reflects deeclines in production levels rather than a decrease in demand.

For example, consumption for power generation in Utah totaled 16.2 million short tons in 2004, an all-time high accounting for 95.8 percent of all coal used in the state. For 2005 and beyond, distribution of Utah coal is expected to parallel predicted production increases.

Coal demand in Utah is expected to follow demand for electricity, which continues to increase. Proposed expansion of the IPP and Hunter power plants along with plans to construc of a power generating facility near Sigurd could increase demand for coal by 3.0 to 3.5 million short tons a year. In addition, there is renewed interest in coal-burning plants as a means to increase base-load generation capacity.

If Utah mines cannot meet the growing demand, power plants such as IPP with the ability to burn lower rank coals may opt to import fuel to operate the generating facilities from outside states like Wyoming.

The Kaiparowits Plateau is estimated to contain about 9.1 billion short tons or 64.4 percent of Utah's remaining recoverable coal reserves, but is unavailable for development due to the area's location within the Grand Staircase- Escalante National Monument. As a result, Utah coal production will continue to rely heavily on reserves in the Wasatch Plateau coal field, estimated at 1.3 billion short tons; the Book Cliffs coal field, estimated at 0.7 billion short tons; and the Emery coal field, with reserves estimated at 0.4 billion short tons.

Utah mining companies generally have 10 to 15 years of ready coal under lease. Beyond that, the Cottonwood and North Horn tracts may represent the last large tracts of quality, accessible coal that is not adjacent to an existing mine, remaining in the Wasatch Plateau. Combined reserves there could exceed 175 million short tons and provide 20 to 30 years of steady production for two longwall operations. As demand for

Utah coal continues to increase, reserves in other fields may become attractive to mine. For example, the proposed mine in the Alton coal field could produce up to 2.0 million short tons per year from a projected reserve base of 40 to 45 million short tons.

The gradual depletion of Utah's "easy" coal turns interest toward more difficult and/or lower quality reserves, some of which were partially mined in the past. In the northern part of the Book Cliffs field, reserves still held by Willow Creek may become attractive if prices and technology combine to make it profitable to deal with gassy conditions and deep cover. In fact, new main entries in ANDALEX's Aberdeen mine could access part of the old Willow Creek reserves, which may eventually yield as much as 80 million short tons.

The Emery mine has access to unleased reserves totaling more than 100 million short tons. The reserves may become more attractive if prices increase enough to overcome the transport and coal chemistry concerns, concluded the Utah Geological Survey's 2004 review and forecast report.

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