Arch Coal’s Dugout Canyon mine readies for coal seam switch

The Dugout Canyon longwall mine in Utah of Arch Coal (NYSE: ACI) will be transitioning from the Rock Canyon to the Gilson coal seam in the middle of the 2011-2016 period, according to an updated mine map that Arch’s Canyon Fuel Co. LLC unit recently filed with Utah regulators.

The map shows mine plans for the 2011-2016 period, and early in that period there is mining in the western area of the mine in the Rock Canyon seam, then a move east into the Gilson seam. The map shows a total of 12 longwall panels in the Gilson seam, with the eleventh and twelfth panels unusually short as they are squeezed into a southeast corner of the mine. Note that longwall panels are distinct because they are rectangles that in this case generally run west-to-east, while room-and-pillar mining areas are discernible because of a tight checkerboard-like layout.

Said Arch’s Feb. 29 annual Form 10-K report: “Dugout Canyon mine is an underground mining complex located on approximately 18,600 acres in Carbon County, Utah. The Dugout Canyon mining complex has extracted steam coal from the Rock Canyon and Gilson seams. We control a significant portion of the coal reserves through federal and state leases. The Dugout Canyon mining complex had approximately 15.0 million tons of proven and probable reserves at December 31, 2011. The coal seam currently being mined could sustain current production levels until approximately 2014, at which point we will need to transition to another coal seam to continue mining.”

Arch Coal announced in November 2011 that it would be scaling back production at Dugout Canyon in response to continuing weakness in coal demand in the region. In keeping with this market-driven decision, Canyon Fuel eliminated a total of 114 jobs at the mine, and planned to suspend longwall operations at the end of the current panel, planned for the first half of 2012.

Paul Lang, executive vice president of operations, said in the November 2011 announcement: “Although we are reducing production at Dugout Canyon at this time, we believe there may be additional opportunities for Utah coal in the future – both here at home and in the global marketplace. The next potential longwall panel at Dugout Canyon has been developed and any decision on future production will be based on what market conditions allow.”

Mine has been a major supplier to PacifiCorp

The Dugout Canyon complex consists of a longwall, two continuous miner sections and a truck loadout facility. Coal is shipped to customers via the Union Pacific railroad or by highway trucks. A portion of the coal is washed at a 400-ton-per-hour preparation plant. The loadout facility can load approximately 20,000 tons of coal per day into highway trucks. Coal shipped by rail is loaded through a third-party facility capable of loading an 11,000-ton train in less than three hours.

The U.S. Mine Safety and Health Administration currently counts Dugout Canyon as “active,” with production of 516,052 tons in the first quarter of this year and 2.4 million tons in all of 2011. The mine produced nearly 2.5 million tons in 2010 and 3.3 million tons in 2009. Its peak production during the 2000-2011 period was 4.6 million tons in 2005.

Arch Coal’s three Utah longwall mines – Sufco, Skyline and Dugout Canyon – are major suppliers to PacifiCorp and other power generation customers.

PacifiCorp fuels official Cindy Crane said in recent testimony filed at the Utah Public Service Commission that in December 2010, the company executed a coal supply agreement with a Robert Murray company, UtahAmerican Energy, for coal from the West Ridge mine in Utah for 2011 through 2014. The West Ridge mine’s high ash fusion temperature mitigates the low ash fusion characteristics of Arch’s Sufco coal that causes boiler slagging at the Hunter power plant and its high sulfur content improves precipitator performance at the Carbon power plant. The contract established 500,000 tons as the annual contract minimum in 2011 and 1 million tons as the contract minimum for 2012 through 2014.

Arch’s Dugout Canyon mine is the only other active longwall operation in Utah that produces high ash fusion temperature coal, Crane noted. Arch previously supplied the company with over 1 million tons of Dugout Canyon coal annually under the long-ago Electric Lake settlement and as substitute coal under the company’s long-term agreement with Sufco. Arch’s contractual requirement to supply Dugout Canyon coal as a substitute for Sufco coal expired in December 2010, Crane wrote.

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.