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Trains carrying coal run through the prairie near Gillette on May 18. Two of the biggest coal companies operating in Wyoming enjoyed huge second-quarter profits. But rail troubles limited how much they could ship.
Coal is still enjoying renewed popularity.
Both of the coal giants operating in Wyoming — Arch Resources and Peabody Energy — on Thursday reported net income above $400 million during the second quarter of 2022. Arch brought in $407.56 million, an increase of one-third over last quarter, marking its third consecutive quarter of record earnings.
The company, which owns Wyoming’s Black Thunder and Coal Creek mines, posted numbers more than a dozen times higher than the same time last year. But its production costs have climbed along with its profits. Higher fuel prices are adding to the expense. So are problems with sending the coal to buyers as railroads, which curtailed operations as coal production declined over the last decade and then contracted sharply early in the pandemic, struggle to scale back up.
“What should be a very, very good year is getting stymied by the fact that we cannot get enough trains out of the Powder River Basin to move our coal to our customers,” said Travis Deti, executive director of the Wyoming Mining Association.
Rail service has been a challenge across all operations, Arch CEO Paul Lang said during a call with investors, but it’s worst in the West, where “progress remains painfully slow, and the situation is extraordinarily frustrating for all of our customers.”
Arch now expects some of the shipments planned for 2022 to be delayed until next year. Assuming rail conditions improve, it anticipates a lucrative 2023 in the Powder River Basin, where it aims to maximize revenue while continuing to set aside the funds needed to close and reclaim Coal Creek and Black Thunder in the coming years.
Peabody’s $409.5 million net gain, meanwhile, was its second quarterly profit since the start of 2020 and its best result in more than a decade. Its positive announcement followed a loss of $119.5 million in the first quarter of this year and $28.6 million in the second quarter of last year.
“During the quarter, we delivered increased sale volumes in every segment except the (Powder River Basin),” Peabody CEO Jim Grech told investors.
Western rail shortages also impeded Peabody’s coal shipments and contributed to its higher quarterly production costs, Grech said, adding that for the remainder of the year, “sale volumes will be dependent on rail performance.”
Unlike Arch, Peabody, owner of the North Antelope Rochelle, Caballo and Rawhide mines, plans to continue operating its Powder River Basin mines well into the future.
But it, like Arch, is encouraged by the outlook for 2023.
In the Powder River Basin, Grech said, “we have approximately 68 million tons priced at an average of $13.28 a ton.” This year, the company projects selling a total of 80-90 tons, depending how much coal it can transport, at an average of $13.00 per short ton.
The spot price of coal mined in the Powder River Basin — which tends to be higher than the prices set by long-term contracts — has settled closer to contract prices since it peaked in November at more than $30 per short ton, roughly triple its usual price.
“There’s more uncertainty, I think, in (Powder River Basin) price margins than there used to be, even with record-high prices per ton on the spot market,” said Shannon Anderson, staff attorney for the Powder River Basin Resource Council, a landowners’ group.
When natural gas costs at least $3 per million British thermal units, Powder River Basin coal becomes a competitive source of electricity. Last fall, as natural gas hovered between $4 and $5, electric utilities raced to expand their dwindling coal reserves before winter and drove the typically stable Powder River Basin spot price way up.
The extra demand boosts Wyoming’s revenue, but it hasn’t brought back the coal lease sales that long helped cover state expenses.
“This is just a blip, and it’s a relatively small blip, too,” Anderson said.
The spot price of Powder River Basin coal plummeted in December as utility stockpiling slowed and natural gas prices eased.
But in the months that followed, the price of U.S. natural gas benchmark Henry Hub soared. It climbed from under $4 at the start of the first quarter to about $5.60 at the start of the second, according to Insider, peaking above $9 in early June, propelled by low natural gas production, an uptick in exports and hot weather across the country. Coal’s spot price started to stabilize several dollars above where it started.
Market disruptions near the end of the quarter caused the price of natural gas to tumble briefly back into the five-dollar range. It rebounded quickly, jumping past $8 again last week.
Powder River Basin coal ended the second quarter at $16.55 per short ton — higher than any price in the decade before the rush.
A haul truck leaves from a shovel-truck pit with a full load Thursday, Jan. 9, 2014, at Cloud Peak Energy's Antelope Mine in Douglas, Wyo. The mine's haul trucks transport between 240 and 255 tons of coal on each trip from the pits to the mine's hopper, which breaks the coal into uniformly-sized chunks suitable for transportation.(Ryan Dorgan, Star-Tribune)
Antelope Mine Plant Manager Kim Elliott and Production Planner Rob Piippo make their way into one of two silos used to load coal into rail cars on Thursday, Jan. 9, 2014, at Cloud Peak Energy's Antelope Mine in Douglas, Wyo. Antelope Mine, about 60 miles north of Douglas, Wyo., is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012. (Ryan Dorgan, Star-Tribune)
A lunch box seen on Thursday, Jan. 9, 2014, at Cloud Peak Energy's Antelope Mine in Douglas, Wyo. Antelope Mine, about 60 miles north of Douglas, Wyo., is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012. (Ryan Dorgan, Star-Tribune)
Rae Osborn oversees the loading of coal into rail cars as they pass through one of two silos on Thursday, Jan. 9, 2014, at Cloud Peak Energy's Antelope Mine in Douglas, Wyo. Antelope Mine, about 60 miles north of Douglas, Wyo., is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012. Coal is loaded onto trains for export from the mine with each car holding an average of 121 tons of coal and each full train carrying over 15,000 tons of coal. (Ryan Dorgan, Star-Tribune)
Each rail car is loaded with an average of 121 tons of coal on its way out of Cloud Peak Energy's Antelope Mine north of Douglas, Wyo. The mine is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012. (Ryan Dorgan, Star-Tribune)
Antelope Mine's two silos tower above the rolling landscape of the Powder River Basin. Harvested coal is sent from the mine's open pits to the silos via a hopper, which crushes the harvested coal into a size suitable for transport by rail. (Ryan Dorgan, Star-Tribune)
Each rail car is filled with an average of 121 tons of coal and sprayed with a topper agent to suppress dust during transportation from Cloud Peak Energy's Antelope Mine north of Douglas, Wyo. The mine is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012. (Ryan Dorgan, Star-Tribune)
Rail cars filled with coal snake their way out of Could Peak Energy's Antelope Mine on Thursday, Jan. 9, 2014, north of Douglas, Wyo. Antelope Mine is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012. (Ryan Dorgan, Star-Tribune)
Each rail car is filled with an average of 121 tons of coal and sprayed with a topper agent to suppress dust during transportation from Cloud Peak Energy's Antelope Mine north of Douglas, Wyo. The mine is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012. (Ryan Dorgan, Star-Tribune)
A haul truck dumps harvested coal into a hopper, which crushes the coal into smaller uniform pieces and sends it to the mine's silos, where it is loaded into rail cars and shipped to its final destination. (Ryan Dorgan, Star-Tribune)
Each rail car is filled with an average of 121 tons of coal and sprayed with a topper agent to suppress dust during transportation from Cloud Peak Energy's Antelope Mine north of Douglas, Wyo. The mine is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012. (Ryan Dorgan, Star-Tribune)
Each rail car is filled with an average of 121 tons of coal and sprayed with a topper agent to suppress dust during transportation from Cloud Peak Energy's Antelope Mine north of Douglas, Wyo. The mine is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012. (Ryan Dorgan, Star-Tribune)
Heavy machinery is seen at work at Cloud Peak Energy's Antelope Mine on Thursday, Jan. 9, 2014, north of Douglas, Wyo. The mine is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012 from the Anderson and Canyon seams that span the mine's four pits. (Ryan Dorgan, Star-Tribune)
Haul and water trucks work in tandem on Thursday, Jan. 9, 2014, at Cloud Peak Energy's Antelope Mine in Douglas, Wyo. The mine's haul trucks transport between 240 and 255 tons of coal on each trip from the pits to the mine's hopper, which breaks the coal into uniformly-sized chunks suitable for transportation. (Ryan Dorgan, Star-Tribune)
Cloud Peak Energy's Antelope Mine, about 60 miles north of Douglas, Wyo., is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012. (Ryan Dorgan, Star-Tribune)
The process of 'shovel-truck mining' is seen on Thursday, Jan. 9, 2014, at Cloud Peak Energy's Antelope Mine in Douglas, Wyo. Antelope Mine, about 60 miles north of Douglas, Wyo., is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012. (Ryan Dorgan, Star-Tribune)
Cloud Peak Energy's Antelope Mine, about 60 miles north of Douglas, Wyo., is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012. (Ryan Dorgan, Star-Tribune)
Antelope Mine's dragline excavator is a massive machine used to clear rock and dirt known as overburden from the surface so that coal can be extracted from the two seams that span the mine. (Ryan Dorgan, Star-Tribune)
Each rail car is filled with an average of 121 tons of coal and sprayed with a topper agent to suppress dust during transportation from Cloud Peak Energy's Antelope Mine north of Douglas, Wyo. The mine is the county's fourth-largest coal mine having mined and shipped 34.3 million tons of coal in 2012. (Ryan Dorgan, Star-Tribune)
Rail cars loaded with coal are seen along Wyoming Highway 59 on Thursday, Jan. 9, 2014, north of Douglas, Wyo. Mines spread throughout the Powder River Basin supply roughly 40 percent of the country's coal. (Ryan Dorgan, Star-Tribune)
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Trains carrying coal run through the prairie near Gillette on May 18. Two of the biggest coal companies operating in Wyoming enjoyed huge second-quarter profits. But rail troubles limited how much they could ship.
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