The image of coal miners working underground far beneath the mountains of Kentucky and West Virginia often comes to mind when thinking about U.S. coal production.

But more than 40% of coal produced in the country comes from just 16 mines in a coal producing region known as the Powder River Basin (PRB), primarily in northeast Wyoming and southeast Montana. Four companies collectively own more than half of those PRB mines, which produced 87% of the Basin’s coal in 2018.

Dragline in action at a PRB coal mine. Source: Wyoming Coal Association And rather than send miners deep underground, PRB coal is close enough to the surface to allow for strip mining to take place using draglines, shovels and dump trucks to fill trainloads of coal cars.

In a reflection of the declining use of coal for electric power generation, two of the companies that operate in the PRB — Cloud Peak and Blackjewel — filed for bankruptcy protection earlier in 2019. The two other companies, Peabody and Arch Coal, are proposing a joint venture that would involve some PRB mines.

In mid-August, Navajo Transitional Energy Co. won a bid to buy most of Cloud Peak Energy’s assets, including the company’s Spring Creek, Cordero Rojo and Antelope mines as well as a reclamation project.

Navajo agreed to make a $15.7 million cash payment at closing, a $40 million second lien promissory note and a 5-year term royalty on future tons produced. It also agreed to take on tax liabilities and federal and state coal royalty payments, all reclamation obligations and up to $20 million in accounts payable. The deal could close as early as October, pending bankruptcy court approval.

Low sulfur content

The Energy Department's Energy Information Administration (EIA) said that most of the coal produced in the PRB supports electric power generation. Starting in the 1990s, many coal-fired power plants switched to subbituminous coal from the PRB. The coal's relatively low sulfur content helped those plants meet tightening Clean Air Act emission standards for sulfur dioxide, which caused acid rain that contaminated many waterways in the eastern U.S. By 2003, EIA said that the PRB yielded more coal than the Appalachian coal basins in the eastern United States.

Both U.S. total coal production and PRB coal production peaked in 2008 and have since declined. PRB coal production reached a high of 496 million short tons (MMst) in 2008 and fell to 314 MMst in 2016 but has since increased slightly to 324 MMst in 2018.

PRB coal often is transported hundreds of miles by train to electric power plants.Coal use in the U.S. electric power sector has fallen as overall electricity demand has remained relatively flat and other fuels — particularly natural gas and renewables — have gained market share. Coal’s share of the U.S. electricity generation mix was 48% in 2008 and has since fallen to 28% in 2018. EIA said it expects coal’s share of power generation to be 24% in both 2019 and 2020. It also forecast that coal production in the Western region, which includes PRB coal as well as coal production in the Rocky Mountains, will decline by 12% in 2019.

Export markets

Declines in domestic coal consumption had been partially offset by rising demand for coal in export markets. Although most U.S. coal exports are bituminous coal (used for steelmaking), the U.S. has exported growing volumes of subbituminous coal from PRB mines to Asian countries for coal-fired power plants. The U.S. exported 7.7 MMst of subbituminous coal in 2018, accounting for 7% of total U.S. coal exports and 2% of total PRB coal production, EIA said.

Coal mines in the PRB are using about two-thirds of their productive capacity. (Productive capacity refers to the amount of coal that mines could produce each year with their existing equipment.) EIA said that PRB coal productive capacity peaked in 2010 at 575 MMst and has since declined to 476 MMst in 2018.

Price stability

Prices for PRB coal have shown little volatility in the past decade. In 2008, the average annual selling price for PRB coal with a heating value of 8,800 British thermal units per pound was $13.31 per short ton, compared with $12.31 per short ton in 2018. Transportation rates to deliver coal from PRB mines to power plants, mostly by railroad, now account for nearly two-thirds of the total delivered cost of the coal, compared with 56% in 2008.

Due to its relatively stable price and low sulfur content, PRB coal is one of the last coals to be displaced as natural gas prices give that fuel a competitive edge for power generation. Appalachian coals tend to be displaced first and PRB coals last, even though Wyoming-produced coal often must travel hundreds of miles by train to reach its destination.

The low-rank quality of PRB coal means that it is dusty and a risk to spontaneously combust, which presents occasional problems during transit. Once at the power plant, special care must be taken to keep coal dust under control. Without those precautions, coal dust explosions can occur, causing substantial damage as well as injuries and, sometimes, death.