Youngs Creek Mining Co. LLC, after a long delay, is again pursuing a Montana state approval for an easement for the rail line needed to access the planned Youngs Creek surface coal mine, located just across the border from Montana in the Wyoming end of the Powder River Basin.
The Youngs Creek mine was proposed last decade by partners CONSOL Energy (NYSE: CNX) and Pittsburg and Midway Coal Mining, but the project has languished since then. Pittsburg & Midway, now called Chevron Mining, exited active coal production earlier this year with the sale of its Kemmerer strip mine in Wyoming to Westmoreland Coal (NASDAQ: WLB).
CONSOL and P&M said Youngs Creek Mining received coal reserves and land totaling approximately 315 million tons of sub-bituminous PRB coal with an estimated heat content of 9,350 Btu/lb and an average sulfur content of 0.47%. Based on initial feasibility studies, the mine has the potential to reach 15 million tons per year when at full production, they said.
The U.S. Office of Surface Mining database shows Youngs Creek Mining as 50-50 owned since early 2007 by Consol of Wyoming LLC and Chevron NPRB LLC, with no recent changes in ownership.
“This application has been on hold since the initial presentation to the Land Board at the August 10, 2009, meeting,” said a report on the project filed for the Montana Land Board meeting of May 21 by the state Department of Natural Resources and Conservation. “At that time, the Board requested additional information on relocation of the railroad which is attached. Additionally, the Department proposes to stipulate in the easement document that the applicant must secure all permits and approvals associated with mining operations and operation of the rail spur as may be required by law in both Montana and Wyoming. Further, applicant must adhere to all terms and conditions of said permits. If a default of any term or condition occurs, applicant will be in non-compliance and must cure the violation or face revocation of the easement.”
The DNRC director recommended approval of this easement request as follows: a 40-year limited term easement; review of compensation on a 10-year cycle until the easement is up for renewal, at which point compensation methods will be reassessed; and an initial easement cost of $63,820.
“This proposed easement is for a rail spur line that would connect the Youngs Creek coal mine in Wyoming to the existing Burlington Northern Santa Fe Railway (BNSF) Decker spur line,” said the report. “The coal mine lies approximately one mile from the Montana state line and lies east of the Tongue River. The rail line will transport coal from the Youngs Creek mine to the BNSF Decker spur in Montana, which heads south to Wyoming and then loops back in to Montana, connecting to the main BNSF line heading to east and west markets. A 40-year limited term easement is recommended due to the life expectancy of the mine. It is possible that additional coal deposits may be expanded, possibly into Montana, which would extend the life of the mine. Should this occur, the easement would need to be renewed, at which point a new valuation for compensation to the Common School trust would occur.”
Alternate routes were reviewed in detail. Given the construction constraints regarding track curvature and alignment with the existing BNSF Decker spur, limited possibilities exist.
The existing Decker mine, 50-50 owned by Australia’s Ambre Energy Ltd. and Cloud Peak Energy (NYSE: CLD), is on the Decker spur line. Cloud Peak has said in the past that Decker may be getting close to the end of its life, though there have been prior extensions of that life.
New PRB mines are rarely developed, making the Youngs Creek project particularly notable. Other new new PRB mines on the drawing board are: Peabody Energy‘s (NYSE: BTU) School Creek mine, located near its existing North Antelope Rochelle mine in the Wyoming PRB; and Arch Coal‘s (NYSE: ACI) Otter Creek mine in Montana, which can only be developed if the long-planned and long-delayed Tongue River Railroad is finally built. The Tongue River Railroad, which is now part owned by Arch Coal, recently told the U.S. Surface Transportation Board it wants a quick approval of a truncated version of the project so it can get this line built for transport of the coal out of Arch’s planned Otter Creek mine.