Utah coal mine seeks to expand its operations. Critics question why feds would allow it.

(Al Hartmann | Tribune file photo) A full coal truck pulls into the Savage Energy Terminal in Wellington where coal mined in Emery and Carbon counties, such as Lila Canyon, is transferred to rail. Despite drastic declines in demand for coal, Lila Canyon's owner, UtahAmerican Energy, is seeking to expand its federal leases around the mine by 5,500 acres. UtahAmerican Energy's corporate parent is trying reorganized under bankruptcy protection.

Its corporate parent might be in bankruptcy protection fighting off impatient creditors, but a Utah coal producer is seeking to expand its federal lease holdings by 5,500 acres around an Emery County mine.

The Bureau of Land Management last week released an environmental review of the first of two proposed leases sought by UtahAmerican Energy that would extend the life of the Lila Canyon Mine, whose current reserves under lease are expected to run out in 2026 at current production levels. Up to 9.1 million tons of high-quality coal can be extracted from the 1,273 acres on the eastern periphery of its existing leasehold in the Book Cliffs south of Sunnyside, extending operations there for three years.

The BLM, meanwhile, continues to study UtahAmerican’s application to lease the 4,232-acre Williams Draw tract immediately south of the mine.

Environmental activists are dismayed that the BLM is processing these coal-lease applications when U.S. utilities have turned their backs on coal as a fuel source, and the agency is under orders from Congress to plan for newly designated wilderness and conservation areas in Emery County.

“At a time when coal and oil prices are through the floor, why is this the priority for this administration?” asked Steve Bloch, legal director for the Southern Utah Wilderness Alliance. “It’s a doubling down on a fossil fuel that time has passed by. The administration needs to focus its energy on figuring out how to transition away from this dirtiest of fossil fuels.”

UtahAmerican’s parent is Ohio-based Murray Energy Corp., the nation’s largest coal company founded by coal magnate Bob Murray. The firm filed for Chapter 11 bankruptcy in October in the face of a long-standing drop in demand predating the coronavirus crisis. According to news reports, Murray Energy is preparing to cede control of its assets to its lenders and could face liquidation. Murray has asked the bankruptcy court to let it walk away from health care obligations of up to $6 million a month, according to the Pittsburgh Post-Gazette.

Given the financial peril UtahAmerican’s owner faces, observers posed, why would it consider investing millions expanding the footprint of the Lila Canyon mine?

“Making matters worse is that BLM is doing this work at the behest of bankrupt coal baron Bob Murray and at a time when some of the nation’s largest existing mines have idled because of a lack a demand," Bloch said. "The market has shown that the world simply doesn’t need another coal mine.”

The world actually does want Utah coal, according to Brian Somers, president of the Utah Mining Association, who contends it’s not fair to peg Utah’s coal industry in the same category as the troubled Appalachian mines.

“Utah has some of the most efficient coal mines in the country—all of which are still operating despite the current crisis—and the greatest coal on earth,” said Somers, riffing on the Beehive State’s famous slogan about snow. "Utah coal operators are seeking to expand for the simple reasons that Utahns rely on coal to generate 66% of their inexpensive and reliable electricity, and because Utah coal commands a premium in international export markets where demand continues to grow.”

According the U.S. Mine Safety and Health Administration, Lila Canyon has ratcheted up its production, hitting 3.7 million tons in 2019, much of it burned in Emery County’s Hunter and Huntington power plants. If the mine produces from the proposed lease areas, some and possibly all of that coal could get shipped by rail to a coastal terminal for export, according to the environmental review released last week and open for public comment through May 25.

As of this year, the mine employed 238 workers, representing 2% of Carbon and Emery counties’ total employment. It also supported indirect employment of 547 jobs.

The environmental review indicates UtahAmerican would develop its expanded leases with five long-wall panels that would grind away at two seams located 2,500 to 3,000 deep in the Blackhawk Formation. The company is more interested in the upper seam, which has an average thickness of 12.4 feet, while the lower seam is too thin to economically mine in places.

These deposits are considered “moderately gassy,” meaning that extraction will release potentially explosive methane than must be vented or flared to make it safe to mine. But the coal quality is considered excellent because it packs a lot of energy, about 11,600 British thermal units per pound, and is comprised of just 11% ash and less than 1% sulfur.

The environmental review indicates that production would ramp up over a few years to full operations, producing 4.5 million tons a year. That level of production would generate 268 truck trips a day, shuttling the coal 32 miles to the Savage Energy Terminal in Wellington. Combusting all that coal will release 11.7 tons of carbon dioxide and other greenhouse gases into the atmosphere.

Based on the average price of Utah coal ($35 a ton in 2017), coal mined from the lease extensions would sell for $321 million and generate in $25.7 million in royalties and $1.29 million in total state tax revenue.

Also in play are two state trust land sections, totaling 1,280 acres, connecting Williams Draw and the mine’s current lease footprint. In 2018, the Utah School and Institutional Trust Lands Administration issued UtahAmerican a lease for these lands, which would be added to Lila Canyon’s project area.

Under land exchanges in Emery County authorized in the Dingell Act, which cleared Congress with near unanimous support last year, the two federal coal tracts Murray seeks to lease would be among the lands traded to SITLA in exchange for its holdings in the newly designated Turtle Canyon Wilderness. In that case, the royalties from this coal, if it ever gets mined, would go to the state’s endowment supporting public education instead of the federal treasury.

Last year, Utah officials signed off on UtahAmerican’s request for a royalty rate reduction, citing “the geologic and engineering challenges encountered in mining the remaining panels in these leases.” Publicly available documents don’t specify the new royalty, but the BLM commonly approves rate reductions from the standard 8% to 5%.