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Powder River Basin

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This article is part of the Coal Issues portal on SourceWatch, a project of CoalSwarm and the Center for Media and Democracy.

The Powder River Basin is a region in southeast Montana and northeast Wyoming about 120 miles east to west and 200 miles north to south known for its coal deposits. It is the single largest source of coal mined in the United States and contains one of the largest deposits of coal in the world. Most of the active coal mining in the Powder River Basin actually takes place in drainages of the Cheyenne River. Because of the Powder River Basin, Wyoming has been the top coal-producing state in the United States since 1988. In 2007, the Powder River Basin alone produced 436 million short tons (396 million tonnes) of coal, more than twice the production of second-place West Virginia, and more than the entire Appalachian region.[1] Overall, the Powder River Basin accounts for about 37 percent of U.S. coal production.[2] The Black Thunder Mine is the most productive coal mine in the United States; in 2006 this single mine produced 84 million metric tons of coal, more than any state except Wyoming, West Virginia, and Kentucky.[3]

The majority of the coal mined in the PRB is part of the Fort Union Formation. Because of its low sulfur and fly ash content, this coal is exported outside the region and supplies of the coal in the region makes it very desirable. Coal supplies about half of the United States electricity supplies, with the PRB mines supplying around 40% of the coal that fuels those stations, mainly to the east of the Rocky Mountains.[4]

Contents

Reserves

The Powder River Basin coal beds are shaped like elongated bowls and as mines expand from east to west in the Powder River Basin, they will be going "down the sides of the bowl." As the stripping ratio (the ratio of rock that needs to be moved to get to a ton of coal) increases, coal becomes increasingly uneconomical to mine. For this reason, the amount of recoverable coal is far less than the total estimated resource of 800 billion US tons.[5][6]

In November of 2009 the bank HSBC released a report entitled, "The Green Side of Black" that made estimates about coal's involvement in the future of the U.S. energy economy. In it, the bank reported that coal, even under cap-and-trade, will be a lucrative industry in the future. The author of the report also stated that Wyoming's Powder River Basin will be growing faster than other coal regions in the United States. The HSBC report stated that in Arch Coal and Peabody Energy will be especially prosperous because of their extensive involvement in the Powder River Basin.[7]

Reassessment of the Gillette field

Virtually all the coal mined in the Powder River Basin (431 million tons out of the 436 million tons mined in the entire basin in 2006) comes from the Gillette field. In 2008 the U.S. Geological Survey released a detailed assessment of the coal resource in the Gillette field. USGS concluded that the portion of the recoverable coal that can be mined, processed, and marketed at a profit, based on conditions in 2007, including $10.47 per ton and assuming an 8 percent rate of return, is 10.1 billion short tons for the six coal beds evaluated.[8] This is about half the estimate arrived at by a 2002 study of the same field, which arrived at an economically recoverable resource of 23 billion short tons.[9] However, if the price of coal is assumed to be $14.00 per ton, matching the sales price of coal for the Gillette coalfield as of March 2008, the reserve would be 18.5 billion short tons, assuming no increase from 2007 operating costs.[10] If cost per ton rose to $60, the estimated reserve would rise to 77 billion short tons.

Coal mining companies currently operating in the Powder River Basin

Power plants fueled from Powder River Basin coal

Coalbed methane

Recent controversy surrounds the extensive coalbed methane (CBM) extraction in the region. In the last decade, nearly 7000 of these wells have been drilled. Extracting the gas requires water to be pumped to the surface in order to release the gas trapped in the coal seam. While some of the water is successfully utilized in agriculture production such as livestock water and crop irrigation, some waters are naturally high in salinity.

This high salt content has raised concerns in Montana's Custer County where water from the Tongue River provides irrigation for local farming operations. State regulators believe this high salinity content is at least partially to blame on coalbed methane operations in Wyoming where millions of gallons of water is pumped from coal seams to bring gas to the surface. The water is then discharged back into the Tongue, Powder and Little Powder rivers, all of which drain into Montana from Wyoming.[11]

In an attempt to decrease the salinity of the water, the EPA has backed Montana's attempt to regulate salt content of the rivers. However, in October of 2009 U.S. District Judge Clarence Brimmer in Cheyenne, Wyoming ruled that the EPA failed to review scientific studies made by the natural gas industry. Brimmer wrote in his decision that Montana's water quality standards "were not based on sound science." As of late October 2009, the EPA had yet to decide if it would appeal the ruling. Many believe that this dispute, along with others stemming from Wyoming's CBM discharges and Montana's regulations, may well be the setting of the region's next big water war.

Wyoming's CBM industry, as well as its large coal extraction economy, is booming. Over the course of the next two decades it is estimated that CBM firms will drill 77,000 new gas wells in addition to the already 30,000 existing wells. Most of these new wells will be located in Wyoming's portion of the Powder River Basin.[11]

Coal Gasification

On January 25, 2008, Peabody Energy and GreatPoint Energy announced that Peabody would be the primary supplier of coal for GreatPoint Energy's gasification stations, which GreatPoint plans to construct in the Powder River Basin. [12][13] As of spring 2009, GreatPoint had opened a large-scale pilot station at the Brayton Point power station in Somerset, MA and intends to take their coal gasification process to the commercial scale in the near future. [12]

Transportation

Rail transportation and coal-fired power generation are heavily interdependent, with railroads accounting for 70 pcercent of coal shipments to power plants nationally, and coal accounting for about 20 percent of rail business.[14] Alternative shipping methods include truck, barge, and conveyor. Truck shipping is considered uneconomical beyond 50 miles; barges are limited by the reach of navigable waterways, and thus is not an option in the Powder River Basin; conveyors only work in cases where the mine is adjacent to the plant.[14]

The cost of coal extracted from the mines would retail at the mines for around $5 a ton. However, the power stations and plants of the Eastern United States pay in excess of $30 ton - the difference made up by the cost of transportation.[15]

Due to the volumes and resultant cash flow from the coal that is accessible, there is a joint railway line owned by the BNSF Railway and the Union Pacific Railroad which runs the length of the southern section of the PRB. A third railroad, the Dakota, Minnesota and Eastern Railroad, has faced strong resistance from an unusual array of parties for its attempts to extend its rail line into the coal mining area - more so since its agreed purchase by the Canadian Pacific Railway.[16]

In the summer of 2009 the Dakota, Minnesota & Eastern Railroad began to abandon a massive rail expansion project in the Powder River Basin. The railroad project was set to expand the company's operations into the area to transport coal to regional coal-fired power plants. The economic downturn and rise in climate change awareness are noted as the reasons that led to the decision to back off the plan. Nonetheless, no decision has been made to permanently shelve the project.[17]

Joint Line

The 103 mile “Joint Line” in Wyoming, the artery through which most Powder River Basin coal reaches the rest of the United States, is the busiest stretch of railroad in the world. The Joint Line handles over 60 loaded coal trains a day, each train more than a mile long. After it passes through the Joint Line, coal then travels over a handful of rail corridors to power plants. Most Powder River Basin coal originates with the Union Pacific Railroad or the Burlington Northern Santa Fe Railway.[14]

History

Originally a single track Burlington Northern Santa Fe (BNSF) line, it ran south from Donkey Junction, Wyoming in the north 13 miles to Caballo, Wyoming; and then for 103 miles to Shawnee, Wyoming.[18] The Chicago and North Western Railway ran close to the northern section, as did the UP at Caballo.

Having already formed the Western Railroad to distribute PRB coal, in 1982 C&NW and the UP formed Western Railroad Properties, Inc. (WRPI), to acquire half interest in BN coal line from Shawnee Junction to Coal Creek Jct. On December 15, 1986 WPRI purchased 11 miles more of BN line from Coal Creek Jct. to East Caballo Jct. Beginning June 27, 1983, WPRI constructed six miles of new railroad from Shawnee Jct. to Shawnee, rebuilt 45 miles of C&NW line from Shawnee to Crandall, Wyoming and converted 56 miles of new railroad from Crandall to Joyce, Nebraska. The first commercial train ran on August 16, 1984. UP acquired ownership of C&NW in April 1995.[19]

By 1985, single track for almost its entire length it was handling 19 million tons of coal - but implementation of the second stage of the Clean Air Act (1990) meant that demand for Western low-sulfur coal would rise quickly. The C&NW was struggling to be able financially to upgrade capacity to dual track, which resulted in numerous failures on the line in 1994, and C&NW's absorption by the UP in 1995.[20] The UP spent $855 nillion over the next five years via the Project Yellow III from 1996, expanding capacity over its entire network to handle coal shipments from the PRB.[21] By 2005 the Joint Line capacity had grown to handle an all-time record 325 million tons, and was either dual or three track capacity for its entire length.

On November 3, 2009 it was announced that billionaire investor Warren Buffett's Berkshire Hathaway Inc. acquired 77% of Burlington Northern Santa Fe for $34 billion, prompting the Wall Street Journal to write that Buffett is betting on the continued role of coal in the U.S. energy supply. Burlington Northern transports coal that accounts for about 10% of the total U.S. energy supply, with 90% of that mined in the Powder River Basin.[22]

Present

As a result of various trackage and locomotive failures on the Joint Line, in late 2004/early 2005 the line failed to deliver the amount of contracted coal supplies, and electricity rates increased by 15 percent.[4] Coal customers threatened to look at alternate sources of energy and transportation, including the Arkansas Electric Cooperative Corporation. As a result, the 280 mile expansion of the DM&E was approved by the Surface Transportation Board, and in 2006 the Joint Line capacity was planned to be raised again via a $200 million investment to provide three track capacity for its entire length plus a fourth track added over the steepest sections, including Logan Hill. These improvements will enable the Joint Line to handle in excess of 400 million tons of coal.[23]

Presently more than eighty train loads of coal, which vary in size from 125 to 150 cars, are shipped from southern PRB mines each day. In 2006, Union Pacific set a record by hauling 194 million tons of coal — an 8 percent increase compared with 2005 tonnage. The company achieved this by increasing train size, with trains averaging more than 15,000 tons, a 200-ton weight increase compared with fourth-quarter 2005’s average.[24]

Demand for coal to generate electricity to produce steel in China and India has increased in recent years. Peabody Energy announced on October 20, 2009 that demand for coal in these countries will grow 7 to 8 percent annually over the course of the next five years. The company says that coal from Mongolia will supply China while coal from Australia will handle the increased Asian demand. Peabody president Richard Navarre noted that production at Peabody's mines in the Power River Basin will also help supply the growing market in China and India.[25]

On November 12, 2009 Arch Coal (ACI) announced that they are leasing 9,600 acres in southeastern Montana's Powder River Basin. It is estimated that the property holds 731 million tons of coal reserves. The company will pay Great Northern Properties five annual installments of $73.1 million.[26]

In late December, 2009, Montana Demcoratic Gov. Schweitzer, along with five other Democrats, voted to lease 610 million tons of coal over 9,500 acres near Ashland, Montana, known as Otter Creek coal, which will in part be paid for by Montana taxpayers.[27][28] Critics of the deal believe that, "The main beneficiaries of leasing Otter Creek coal won't be coal miners or schools or the Northern Cheyenne or the residents of Powder River County. It will be coal speculators and the proposed Tongue River Railroad."[29]

DM&E Project

In 1997, the Dakota, Minnesota & Eastern Railroad (DM&E), proposed in 1997 a new route into the Powder River Basin. The project would involve upgrading 600 miles of existing rail lines and building about 250 miles of new track. If completed, the DM&E project would open a new outlet for PRB coal into the Midwest, bypassing the Joint Line and the existing BNSF and UP main line rail corridors. The project has not yet secured financing. In February 2007 the Federal Railroad Administration rejected the project’s application for a $2.3 billion loan guarantee, concluding that the project was too risky to commit public funds. The project has been opposed by some landowners and towns along the proposed route, in particular by the city of Rochester, Minnesota, and the Mayo Clinic.[14]

Legislative proposals

The following are recent legislative proposals affect railroads:[14]

  • the Freight Rail Infrastructure Capacity Expansion Act of 2007 (S. 1125 and H.R. 2116)
  • the Railroad Competition and Service Improvement Act of 2007 (S. 953 and H.R. 2125)
  • the Railroad Antitrust Enforcement Act of 2007 (S. 772 and H.R. 1650).

Ownership

As shown in the map below of the Gillette field, the core production area of the Powder River Basin, the Federal government is the primary owner of coal.[30]

The mines in the Powder River Basin typically have less than 20 years of life remaining. Almost all of the coal in the Powder River Basin is federally owned and further mine expansions will require a series of federal and state approvals,[31] as well as large investments in additional mine equipment to begin the excavations.

small

State of Montana considers leasing mining rights in Powder River Basin

The state of Montana is considering leasing the rights to mine its 616 million tons of coal reserves known as Otter Creek in the Powder River Basin. Montana received the reserves from the Federal Government at the beginning of the decade. The State Board of Land Commissioners is set to make a decision on the leases in the middle of November, 2009. Montana Governor Brian Schweitzer, a proponent of coal development, sits on the board along with other Montana officials.[32] On November 16, 2009, the state Land Board said it would delay the decision on whether to lease its Otter Creek coal tracts until December 21. The bid package proposed by state officials includes a rental fee of $3 per acre and an upfront payment of between 10 cents and 35 cents per ton of coal, which translates to approximately $57 million to $200 million. Developers would also pay the state a royalty of 12.5 percent of the mined coal's market value if mining begins.[33]

Montana Land Board approves lease

On December 21, 2009, the Montana Land Board voted 4-1 in favor of leasing the mining rights to Otter Creek coal reserves.[34] The board set the minimum bid at 25 cents per ton, which is two-and-a-half times the amount Arch Coal agreed to pay in November for the rights to develop 730 million tons of coal on adjacent, private lands. Coal companies have until February 8, 2010 to submit bids.[35]

Resources

References

  1. ↑ N. R. Jones and others, "Wyoming," Mining Engineering, May 2008, p.134.
  2. ↑ Luppens, J. A.., Scott, D. C., Haacke, J. E., Osmonson, L. M., Rohrbacher, T. J., and Ellis, M. S., "Assessment of Coal Geology, Resources, and Reserves in the Gillette Coalfield, Powder River Basin, Wyoming," U.S. Geological Survey Open-File Report 2008-1202, 2008 (PDF file)
  3. ↑ E. Freme, Coal review, Mining Engineering, May 2007, p.52.
  4. ↑ 4.0 4.1 Rails cause utility fuel shortages, electricity rate hikeRail Cure - August 2005
  5. ↑ "Notice of Availability of South Powder River Basin Coal Final Environmental Impact Statement, Wyoming," US Government Bureau of Land Management, Dept of the Interior, December 24, 2003, (accessed 1/20/2008)
  6. ↑ Inventory of Assessed Federal Coal Resources and Restrictions to Their Development, U.S. Departments of Energy and Agriculture
  7. ↑ Bank predicts bright future for Wyoming coal under cap-and-trade, Erica Peterson, West Virgina Public Broadcasting, November 30, 2009.
  8. ↑ James Luppens et al, Assessment of Coal Geology, Resources, and Reserves in the Gillette Coalfield, Powder River Basin, Wyoming, US Geological Survey Open-File Report 2008-1202, 2008
  9. ↑ Ellis, M.S., 2002, Quality of economically extractable coal beds in the Gillette coalfield as compared with other Tertiary coal beds in the Powder River Basin, Wyoming and Montana: U.S. Geological Survey Open-File Report 02-174, 16 p.
  10. ↑ James Luppens et al, Assessment of Coal Geology, Resources, and Reserves in the Gillette Coalfield, Powder River Basin, Wyoming, US Geological Survey Open-File Report 2008-1202, 2008, p. 30 and Figure 66
  11. ↑ 11.0 11.1 "Coalbed Methane Decision Adds Salt to Mont. Farmers' Wounds", Scott Streater New York Times, October 29, 2009.
  12. ↑ 12.0 12.1 "GreatPoint Energy announces coal supply partnership with Peabody Energy and enters into agreement to build natural gas manufacturing facilities in Powder River Basin", "GreatPoint Energy" press release, January 25, 2008.
  13. ↑ "Peabody Energy acquires equity interest in GreatPoint Energy", "Peabody Energy" press release, January 25, 2008.
  14. ↑ 14.0 14.1 14.2 14.3 14.4 "Rail Transportation of Coal to Power Plants: Reliability Issues," Congressional Research Service, September 26, 2007
  15. ↑ "Coal: Dig It Up, Move It, Burn It - Wyoming's Powder River Basin", The Way of the Land: Center for Land Use Interpretation newsletter, Spring 2005, Volume 28.
  16. ↑ Fritz R. Kahn, "Railroad Battle Brewing", HGHExperts.com, undated, accessed October 2009.
  17. ↑ Joel Kirkland, "Big Coal Carriers Navigate a Risky Climate Track", New York Times, September 16, 2009.
  18. ↑ PRB Coal Update: BNSF Completes Third Main Track on Joint Line BNSF News - 5 November, 2007
  19. ↑ UP History - Western Railroad Properties, Inc.
  20. ↑ Western, Burlington Northern and Union Pacific railroads Railway Age - October 1994
  21. ↑ UP will expand PRB coal lines Railway Age - Nov, 1996
  22. ↑ Sioban Hughes and Mark Peters, Buffett's Burlington Bid A Bet On Coal's Continued Role, Wall Street Journal, November 3, 2009.
  23. ↑ UP, BNSF Announce Southern Powder River Basin Joint Line $100 Million Capacity Expansion Plan
  24. ↑ UP sets annual coal tonnage record in Southern Powder River Basin Progressive Railroading - January 16, 2007
  25. ↑ Steve James, "Coal Demand Soars as Asia economies rebound", Reuters, October 20, 2009.
  26. ↑ Arch Coal Leases Great Northern Properties' Land In Montana, Kathy Shwiff, Wall Street Journal, November, 12, 2009.
  27. ↑ Land Board looks at Otter Creek coal, Great Falls Tribune, September 21, 2009.
  28. ↑ "Land Board Says 'Yes' to Vast Coal Development ", Associated Press, New York Times, December 21, 2009.
  29. ↑ "Otter Creek Coal support based on false promises", Billings Gazette, September 20, 2009.
  30. ↑ James Luppens et al, Assessment of Coal Geology, Resources, and Reserves in the Gillette Coalfield, Powder River Basin, Wyoming, US Geological Survey, Open-File Report 2008-1202, 2008, Figure 63.
  31. ↑ Casper Field Office NEPA Documents Online
  32. ↑ Montana Weighs Sale of Otter Creek Coal Rights , Mark Peters, Wall Street Journal, November, 16, 2009.
  33. ↑ "Land Board delays action on Otter Creek coal leases," Missoulian, November 17, 2009.
  34. ↑ "Land Board Says 'Yes' to Vast Coal Development," Associated Press, December 21, 2009.
  35. ↑ "State Land Board says "yes" to vast Otter Creek coal development," Missoulian, December 22, 2009.

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