Westmoreland Coal (NasdaqGM: WLB) has delivered its first shipment of coal via a new rail wye built at Westmoreland Resources Inc.’s Absaloka strip mine located at Hardin, Montana.
The new connection to the main rail line allows trains to ship coal to the West, providing increased market opportunities for Absaloka’s coal, which is coal leased from The Crow Tribe. The railroad serving this region is the BNSF Railway. The increased market opportunities could result in both increased coal royalties for tribe, as well as more mine employment opportunities. Westmoreland’s investment in the expansion of the rail line has already resulted in several new accounts including a test burn and spot sales to a new utility plant customer.
“Our team has worked very hard in concert with The Crow Tribe and the BNSF to make the completion of the western connection a reality,” noted Robert King, Westmoreland President and CEO. “The new rail line opens up Westmoreland’s sales opportunities to the West, allowing us to capitalize on our geographically-advantaged position in the North Powder River Basin.”
U.S. Energy Information Administration data shows coal deliveries out of Absaloka in the first four months of this year to the Sherburne County (Minnesota), Big Stone (South Dakota) and J.C. Weadock (Michigan) power plants.
Notable is that a routing to the West for the Absaloka coal would put it in more direct competition with Arch Coal‘s (NYSE: ACI) planned Otter Creek mine in the Montana PRB, since the planned rail line for the Otter Creek coal has a new route that tends to favor the western customer base (including the Pacific Coast export market). An old routing for that Tongue River rail line would have taken that coal more to the East, nearer Absaloka.
U.S. Mine Safety and Health Administration data shows that Absaloka produced 1.5 million tons in the first half of this year, 2.7 million tons in 2012 and 5.6 million tons in 2011. Production has been down lately largely because Sherburne County Unit 3 has been off-line since late 2011 due to an equipment problem, with that 884-MW unit due back up in September.
Westmoreland Coal’s operations include sub-bituminous coal mining in the Powder River Basin in Montana and Wyoming, and lignite mining in Montana, North Dakota and Texas. Its power operations include ownership of the two-unit ROVA coal-fired power plant in North Carolina.