A s the federal coal program faces major reforms, uncertain times have befallen the King Coal II mine near Hesperus.
Between a pending county land-use permit and a recent federal order pausing its expansion, quandary clouds operations at King II, which is nearing the end of a 10-year lease agreement with the Bureau of Land Management.
Last month, U.S. Interior Secretary Sally Jewell announced a moratorium on new coal-mining leases on public lands pending a three-year review of leasing criteria, which has big implications for the future of coal management.
Surface mines pay 12.5 percent in royalties, while underground operations like King II pay 8 percent. It’s a low rate compared with those imposed on other extractive resource industries, but that, and more, could change as a result of the federal review.
“It could be they go through a programmatic environmental review and say it’s permanent, or raise royalty rates to recover carbon costs,” said Jeremy Nichols, climate and energy program director at WildEarth Guardians and staunch opponent of coal extraction. “That could make public coal mining totally unprofitable.”
Previously approved leases can continue, but the BLM listed pending projects across the U.S. potentially subject to the pause – including King II’s lease modification proposal.
But BLM officials say they cannot speculate about the impact the review will have on pending leases until the analysis is complete.
“We’re still sorting it out, but what this says to me is (the King II) lease modification wouldn’t be approved until the programmatic environmental impact statement is finalized,” said Beverly Winston, a BLM spokesperson with the Washington bureau.
Mining in Hay Gulch began more than 75 years ago with King Coal I, which was under local ownership until it was purchased by Mexico-based cement producer Grupo Cementos de Chihuahua. In 2007, the multi-million dollar company was issued a 10-year mining plan to open King Coal II, which now employs 120 and produces just under 1 million tons of coal each year.
The state permits the mine to produce a maximum 1.3 million tons annually. King II produced a total of 970,790 tons in 2014 and 815,544 tons in 2015 – a shortfall attributed to customers taking advantage of depressed natural gas pricing and substituting coal. Most GCC coal goes to the company’s cement plants or other cement manufacturers. About 200 kilograms of coal produces 1 ton of cement.
King II’s original lease is coming to a close next year unless a lease modification is approved, which would extend the life of the mine another 10 years.
Amendments to the Mineral Leasing Act of 1920 require a competitive bidding process for public lands available for coal leasing. There are two exceptions: if company operations predate the Federal Coal Leasing Amendments Act of 1976, or if a business wants to expand by 960 acres or less.
Four years ago, King II requested a lease modification to add 952 acres, just under the regulatory threshold, and that request is still unresolved. GCC is also nearing a deadline this month to submit a long-overdue application for a county land-use permit, which will allow the company to continue operating.
Last fall, the county planning commission granted a continuance until Feb. 25 to submit a permit application. If approved, GCC could be required to cover costs like improvements to County Road 120 in southwest La Plata County, which bears the brunt of company trucks making trips to and from the mine.
GCC Energy Vice President Trent Peterson noted that it’s unclear whether continued operations at King II will mean job losses and reconfiguration. He also couldn’t answer questions about the sustainability of continuing operations given the possible outcomes of the lease modification and the land-use permit, but said the company plans to seek an exemption from the federal rule.
Erin McCann, spokesperson for Sen. Michael Bennet, said the senator’s office is working with mine officials, and King II may qualify for an emergency coal lease during the moratorium due to insufficient reserves. This requires a separate review from the three-year environmental assessment. If approved, the lease would be exempt from the moratorium, but still King II could hit a wall with only about 5.2 million left in reserves.
Coal is far from depletion, but it’s arguably the most retrograde of extractive fuel industries, challenging the clean-energy mindset advancing at the federal level, and struggling as a result.
A wave of bankruptcies have swept the industry, with Arch Coal in Wyoming – the nation’s second largest coal company – filing Chapter 11 just before the moratorium announcement.
Last year, data from the DRMS illustrated the industry’s slump in Colorado, where coal production reached a 20-year low, with the biggest insinuations for the Western Slope.
Milo Gonzalez, a production foreman who started working at King II in April 2013, said the moratorium has shaken job security for the miners and the operation as a whole.
“You want to plan ahead, build your future, and we’re planning but we don’t know where we’re going,” he said. “You plan ahead to make necessary moves to ensure security: getting new equipment, building new facilities – this slows everything down.”
But Gonzalez said he recognizes the broader implications for coal.
“This is stuff I can’t control,” he said. “Coal isn’t the most popular thing out there right now.”
That doesn’t sit right with local economic leaders, who see the moratorium as a direct threat to jobs and the $400,000 in property taxes King II paid last year.
Roger Zalneraitis, executive director of the La Plata County Economic Development Alliance, said jobs and the tax base are his two concerns, and the lack of clarity from the BLM is unfair to the county and mine employees.
“The worst thing for companies is uncertainty,” he said. “It eats at you. You’ve got a cloud and a federal agency that won’t give us an answer.”
But in this situation, environmental groups see an opportunity for reform but also a call for assiduous planning.
“I think the imperative is big in La Plata County; decision-makers should say it’s time to plan,” Nichols said. “You can’t just say, ‘Let’s keep the coal in the ground’ – we have to take care of the community. If there’s ever a moment when we should be up to the challenge of diversifying, now is that time.”