BLM to hold Aug. 21 auction on Cloud Peak Energy coal reserve

The U.S. Bureau of Land Management has set an Aug. 21 lease auction for a coal reserve that a unit of Cloud Peak Energy (NYSE: CLD) wants to add to the adjacent Cordero surface mine in the Wyoming Powder River Basin.

This is called the Maysdorf II North Coal Tract, located in Campbell County, Wyo. This coal lease sale is being held in response to a lease by application (LBA) filed by Cordero Mining LLC, BLM said in a notice to be published in the July 12 Federal Register. The coal resource to be offered consists of all reserves recoverable by surface mining methods in a 1,338.37-acre area.

U.S. Mine Safety and Health Administration data shows that the Cordero mine of Cordero Mining produced 9.2 million tons in the first quarter of this year, and 39.2 million tons in 2012.

The tract is adjacent to a federal lease to the east controlled by the Cordero Rojo (also known simply as Cordero) mine, to a federal lease to the north controlled by the Belle Ayr mine of Alpha Natural Resources (NYSE: ANR), and to the Maysdorf II South Coal Tract to the southeast, which is awaiting a future lease sale. The LBA is adjacent to additional unleased federal coal to the west across State Highway 59. A qualified surface owner restricts leasing on the Maysdorf II North Tract toward the south. The proximity to Belle Ayr raises the possibility of a competing lease bid from Alpha.

Most of the acreage offered has been determined to be minable except for the State Highway 59 right-of-way and 100 foot buffer along the western boundary of the LBA. Acreage south of the LBA has been removed from the application due to the lack of qualified surface owner consent; however, the economic analysis of the bonus value for the LBA coal along this southern boundary includes a reasonable cost to acquire an overstrip agreement toward the end of mine life in order to mine the last of the LBA coal.

Most of the surface estate of the tract is owned by Alpha Coal West Inc., with a small portion in the southeast corner owned by Caballo Rojo Inc.

The LBA tract contains surface mineable coal reserves in the Wyodak Coal Zone currently being recovered in the adjacent, existing mines. Several beds are merged on the LBA tract into a single mineable seam. The average total coal thickness is about 69 feet and the range of overburden thickness is approximately 266 to 397 feet. The tract contains an estimated 148,565,000 tons of mineable coal. This estimate of mineable reserves includes the main seam but does not include any tonnage from localized seams or splits containing less than 5 feet of coal. The total mineable stripping ratio of the coal in bank cubic yards per ton is approximately 4.5:1.

The Maysdorf II North LBA coal is ranked as subbituminous C. The overall average quality on an as-received basis is 8,602 Btu/lb containing approximately 0.24% sulfur. These quality averages place the coal reserves near the middle of the range of coal quality currently being mined in the Wyoming portion of the PRB.

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.