CONSOL Energy (NYSE:CNX) announced March 6 that it will idle the longwall at its Buchanan mine in southwest Virginia and reduce the operation’s continuous mining operating schedule to five days per week.
CONSOL said it is responding to market conditions primarily as a result of increased inventories and decreased international demand for the low-vol metallurgical coal produced at Buchanan out of the Pocahontas coal seam. It is not known how long the Buchanan longwall will be idled. CONSOL expects production to be reduced by about 295,000 tons per month on this reduced schedule. This action involves no layoffs, however most overtime and other non-essential work may be postponed until resumption of normal operations. Buchanan has 778 total employees, who were officially briefed on the situation March 5.
U.S. Mine Safety and Health Administration data shows that Buchanan produced nearly 5.7 million tons in 2011 and 4.7 million tons in 2010. While Buchanan is most known for its met coal, it does ship coal into the utility market, with U.S. Energy Information Administration data showing shipments in December 2011 to the Hudson power plant in New Jersey of Public Service Enterprise Group (NYSE:PEG). PSEG is one of the power companies that has recently said it is backing down coal in favor of cheap gas. Hudson has boiler restrictions that make it necessary to burn a relatively high-cost specialty coal like that produced out of Buchanan.
CONSOL on March 6 updated its sales guidance for the first quarter of 2012 as follows: low-vol and high-vol met coal sales remain about 1 million tons each; and thermal coal sales are expected to be a few hundred thousand tons below its prior guidance of 13.2 million tons. CONSOL will update its full year production and sales guidance for 2012 at a later date. The company said it will continue to monitor market demand and respond accordingly.
CONSOL had announced Feb. 28 that it will idle the longwall at its Blacksville No. 2 deep mine in northern West Virginia and reduce the mine’s continuous mining operating schedule to four days per week. CONSOL said the Blacksville No. 2 cutback is in response to market conditions primarily as a result of mild winter weather and low natural gas prices that have prompted widespread coal-to-gas switching.
Other coal producers, including Alpha Natural Resources (NYSE:ANR) and Patriot Coal (NYSE:PCX), have also recently said they are shutting in coal production this year for similar reasons. A number of power producers, including Michigan’s Consumers Energy and Florida’s Gulf Power, have said lately they are cutting back on coal-fired generation in favor of cheaper gas-fired power.
In 2011, Blacksville No. 2 produced 4.3 million tons of coal utilizing a single longwall and three continuous mining units. It is not known how long the Blacksville No. 2 longwall mining operations will be idled, however CONSOL expects production to be reduced by about 400,000 tons per month for as long as the mine operates on this reduced schedule.
CONSOL Energy, also a major producer of natural gas, has 12 bituminous coal mining complexes in four states. It has several other longwall mines that like Blacksville No. 2 produce coal from the Pittsburgh seam, including the larger McElroy, Bailey and Enlow Fork operations.