Peabody gets a second shot May 17 at big PRB coal reserve

The U.S. Bureau of Land Management office in Wyoming has scheduled a May 17 second auction for the South Porcupine coal tract in the Wyoming end of the Powder River Basin that a unit of Peabody Energy (NYSE: BTU) needs for its neighboring North Antelope Rochelle operation, the nation’s largest coal mine.

This coal lease sale is being held in response to a lease by application (LBA) filed by BTU Western Resources. South Porcupine was previously offered for sale on Feb. 29, but the lone bid for the tract of $361.7m, filed by BTU Western, was rejected for not meeting BLM’s secret estimate of the fair market value for this reserve, BLM noted in an April 16 Federal Register notice.

The coal resource to be reoffered consists of all reserves recoverable by surface mining methods in 3,243 acres of lands located approximately 1 to 4 miles north of the Campbell/Converse county line, adjacent and up to 2 miles east of the UP/BNSF joint line railroad, and adjacent to the western and northern lease boundary of the North Antelope Rochelle mine. The LBA 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. It is also adjacent to federal leases to the west across the mainline railroad, which is part of Cloud Peak Energy Resources LLC’s Antelope mine. It is adjacent to additional unleased federal coal to the west.

The tract contains surface mineable coal reserves in the Wyodak-Anderson coal zone currently being recovered in the adjacent, existing mines. On the LBA tract, there are two mineable seams, the Wyodak-Anderson 1 (Anderson) and the Wyodak-Anderson 2 (Canyon), located in the southern portion of the LBA that merge into a single seam in the northern portion. The total coal thickness averages about 77 feet with the shallower Anderson seam slightly thicker than the deeper Canyon seam where two seams occur. The two seams can be separated by as much as 80 feet of interburden. Overburden depths to the Anderson range from about 160 to 460 feet thick.

The tract contains an estimated 401.8 million tons of mineable coal, which is less than four years of coal at North Antelope Rochelle’s production rate of 109.1 million tons in 2011. The total mineable stripping ratio of the coal in bank cubic yards per ton is approximately 4.8:1. The South Porcupine LBA coal is ranked as sub-bituminous C. The overall average quality on an as-received basis is 8,905 Btu/lb containing about 0.2% sulfur.

Due to this exceptionally low sulfur content, mines in this southern area of the Wyoming Powder River Basin are seeing especially strong demand as power generators look to comply with ever-tighter air emissions limits.

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.