Cloud Peak looks to explore new Antelope coal reserve

The U.S. Bureau of Land Management said in a March 15 Federal Register notice that it is looking for parties to share exploration expenses and results with the Antelope Coal LLC unit of Cloud Peak Energy (NYSE:CLD) on 6,572 acres of coal reserves in Campbell and Converse counties, Wyo.

Invitations to share exploration programs for federal coal reserves are required but rarely taken up, though this one might be, since this property is not only next to Antelope Coal’s existing Antelope mine, it is also near Peabody Energy’s North Antelope Rochelle mine. It has become common for Cloud Peak, Peabody (NYSE:BTU) and Arch Coal (NYSE:ACI), which owns the nearby Black Thunder mine, to share exploration programs in this area of the southern Powder River Basin.

On a south-north basis, Antelope is the southernmost operating PRB mine, North Antelope Rochelle is to the north of that, Peabody’s planned School Creek mine is to the north of North Antelope Rochelle, and Black Thunder is to the north of School Creek. Then there is a big gap between Black Thunder and the next mine to the north.

Antelope, North Antelope Rochelle and Black Thunder not only produce the highest heat value coal (+8,800 Btu/lb) in the Wyoming end of the PRB, they also produce an ultra-low-sulfur coal that is not found at other PRB mines and is becoming especially valuable as U.S. power generators scramble to comply with new U.S. Environmental Protection Agency air regulations.

“The mine extracts thermal coal from the Anderson and Canyon Seams, with up to 44 and 36 feet, respectively, in thickness,” said Cloud Peak about Antelope in its Feb. 17 annual Form 10-K report. “On June 30, 2011 and August 11, 2011, we entered into two separate federal coal leases with the BLM. These leases increased our proven and probable reserves by approximately 383 million tons, but are currently subject to pending legal challenges against the BLM and the Secretary of the Interior by environmental organizations, which could impact our ability to mine the coal subject to those leases and/or delay our access to mine the coal. With the acquisition of the federal coal leases, we also gained access to approximately 81 million tons of coal in an adjacent state of Wyoming coal lease that we controlled but was not previously included in our coal reserve estimates, resulting in a combined total increase of 464 million tons. Other potential large areas of unleased coal north and west of the mine are available for nomination by us or other mining operations or persons. Based on the average sulfur content of 0.52, the reserves at our Antelope mine are considered to be compliance coal under the Clean Air Act, and this coal is some of the lowest sulfur coal produced in the PRB.”

Cloud Peak sold 37.1 million tons of Antelope coal in 2011, up from 35.9 million tons in 2010.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.