Cloud Peak Energy looks to explore Wyoming coal reserve

The U.S. Bureau of Land Management (BLM) said in a June 1 Federal Register notice that it is looking for parties willing to share exploration expenses – and exploration results – with Cordero Mining LLC on 3,748 acres of federal coal reserves next to the Cordero Rojo mine in Campbell County, Wyo.

These invitations are required under federal rules, and they are usually not taken up by an outside party. But, coal leasing has gotten a lot more competitive in recent years in the Wyoming end of the Powder River Basin and it has become fairly common for exploration programs to get shared by an operator of a nearby mine that might be interested in leasing a reserve at a competitive BLM auction. The BLM leasing system, by the way, is known as “lease by application,” or LBA for short.

Cordero Mining is a unit of Cloud Peak Energy (NYSE: CLD). “The Cordero Rojo mine is located approximately 25 miles south of Gillette, Wyoming,” said Cloud Peak’s Feb. 17 Form 10-K statement. “The mine extracts thermal coal from the Wyodak Seam, which ranges from approximately 55 to 70 feet in thickness. We have nominated as an LBA a large coal tract adjacent to our existing operation, which we now believe the BLM will schedule for lease sometime in late 2012 or in 2013. The BLM ultimately determines if the tract will be leased, and if so, the final boundaries of, and the coal tonnage for, this tract. Significant areas of unleased coal are potentially available for nomination by us or other mining operations or persons adjacent to our current operations.”

The BLM database shows that the pending LBA for Cordero Rojo is for the 4,654-acre, 434-million-ton Maysdorf II coal tract. The lease application was filed in August 2006 and this tract cleared the environmental review process in 2009.

The Form 10-K gives these basic as-received specs for the Cordero Rojo coal: 8,399 Btu/lb, 5.33% ash, 0.31% sulfur and 0.74 lbs/mmBtu of SO2. The mine sold 39.5 million tons of coal in 2011.

Cordero Rojo is in a group of mid-Btu mines just south of Gillette, with the three high-Btu mines (Antelope, North Antelope Rochelle and Black Thunder) further to the south. The Belle Ayr mine of Alpha Natural Resources (NYSE: BTU) is contiguous to the Cordero Rojo mine on the north side, and Arch Coal’s (NYSE: ACI) Coal Creek mine is nearby on the southeast side, but not contiguous and with the UP/BNSF Joint Line rails running between. So if there is any competition for Cordero Rojo reserves, it would likely come from Alpha only.

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.