The U.S. Bureau of Land Management office in Wyoming said March 1 that it will reject a bid, for failing to meet the agency’s secret estimate of fair market value, from a Peabody Energy subsidiary for the South Porcupine coal reserve.
BLM held an auction for South Porcupine, which covers 3,243 acres and holds an estimated 401.83 million tons of mineable coal. BTU Western Resources, a subsidiary of Peabody, submitted a bid for $361,647,000, which the agency said did not meet BLM’s estimated fair market value of the tract and will be rejected. From here, BTU Western can ask for a second auction to be held, at which time it can offer more money in an attempt to clear the fair-market threshold. BLM said there was only one bid offered in the March 1 auction.
The coal resource offered consists of all reserves recoverable by surface mining methods. The tract is located two to five miles south of State Highway 450 and east of the BNSF Railway/Union Pacific joint line railroad. The tract is adjacent to federal leases to the east and south as well as a state of Wyoming lease to the north, all controlled by Peabody’s North Antelope Rochelle mining operation. It is also adjacent to federal leases to the west across the joint line, which is part of Cloud Peak Energy’s (NYSE:CLD) Antelope mine. It is adjacent to additional unleased federal coal to the west.
The fact that South Porcupine is on the other side of the BNSF/UP joint line apparently kept Cloud Peak out of the bidding for the tract. Last year, there was lease competition between Powder River Basin coal producers for new BLM coal reserves.
North Antelope Rochelle in 2011 was the nation’s largest coal mine, with production of 109 million tons. It produces low-sulfur, sub-bituminous coal that is sold to a number of power producers nationwide.