The U.S. Bureau of Land Management office in Utah held a June 17 competitive coal lease sale by sealed bid for the Flat Canyon Coal Tract—a 2,692-acre area in Sanpete County that is estimated to contain approximately 42 million tons of recoverable coal and is adjacent to the Skyline deep mine, which contains other federal coal leases.
The BLM said it received one bid, from Canyon Fuel Co. LLC, the operator of the Skyline mine, for $17.2 million or $6,388.92 per acre. However, this result is considered preliminary and will not be confirmed until the BLM sale panel determines if the bid meets or exceeds the estimated fair market value for the coal resource in the Flat Canyon tract; the BLM will not accept any bid that is less than estimated fair market value. A date has not been set for the sale panel meeting.
If the BLM sale panel determines that a high bid meets or exceeds fair market value, the BLM does not issue the lease until the U.S. Department of Justice has conducted an anti-trust review of the bidder’s coal holdings. When a coal lease is issued, an annual rental payment of $3 per acre is required, along with a royalty payment of 12.5% of the value of coal produced by strip or auger mining methods and 8% of the value of coal produced by underground mining methods. The Flat Canyon Coal Tract will be mined using underground methods.
Skyline is one of the three Utah mines that Arch Coal (NYSE: ACI) sold earlier this decade to Bowie Resource Partners.
The coal beds contained in the Flat Canyon tract are under an average of 1,700 feet cover from the surface. The coal in the Flat Canyon tract has two economical coal beds; the Lower O’Conner B and the Flat Canyon beds. The minable portions of these coal beds are approximately 6 to 14 feet in thickness. The tract contains approximately 42 million tons of recoverable high-volatile B bituminous coal. The coal quality is based on an “as received basis” as follows: 12,400 Btu/lb, 5.8% moisture, 7.1% ash, 42.8% volatile matter, 43.8% fixed carbon and 0.5% sulfur.
U.S. Mine Safety and Health Administration data shows that the Skyline mine produced 1.2 million tons in the first quarter of this year, 4.2 million tons in all of 2014 and 3.1 million tons in all of 2013.