A renegotiated contract with the Hayden Station electrical power plant ensures that Seneca Coal Co. employees have relatively solid job security until 2011.
After a soft year in the coal mining industry and recent layoffs of more than two dozen miners at Routt County's Twentymile Coal Co., many mine employees and public officials were nervous about the future of the employer in the Hayden community. Average coal prices have been falling since 1986, when coal sold for $29.52 per ton. Now, Colorado coal is about $12 per ton.
Beth Sutton, spokeswoman for Peabody Group which owns the mine, said the company has no intentions of laying off any of its employees.
"The problem is, there are no definite answers. I can't tell you what's going to happen two or three or 10 years from now, just like in any business. But in the midst of tough conditions, we've been able to stand the test of time," she said. "We continually review our mining plans and do what's best for our employees and our customer. We have a talented group of miners. We're very proud of our operations at Seneca."
Seneca is the sole provider of steam coal for Hayden Station. The surface mine produces 1.7 million tons of low-sulfur coal annually for the plant and has enough surface coal to continue servicing the plant through its contract expiration date in 2011. After that date, the mine will likely be depleted of its surface reserves.
"After 2011, like any operator, we'll continue to evaluate our reserves," Sutton said. "We're not going to speculate about something that will occur a decade from now and it doesn't make sense to speculate about what will happen after that time.
"We have significant underground reserves," Sutton said. "We've been evaluating those and that is an option, but it's only an option and one of many options."
Seneca General Manager Brad Brown said the possibility of tapping into underground coal veins is a viable one.
"We've got 60 million tons of underground reserves in one block," Brown said. "To go underground would be a whole different operation. We may have to add staff, but we would try to use our existing staff and maybe supplement it a little. I hate to speculate, though. It's just one of many options."
The possibility of becoming a coal broker is another option for the company. A coal broker buys coal at below market value from other coal mining companies and then resells it at a higher price.
"We're not brokering coal at this time," Sutton said. "We're concentrating on our existing reserves."
Sutton would not comment as to whether coal brokering was a new part of Seneca's contract with Hayden Station, but said it was not ruled out as a future option for the company. Peabody, Seneca and Hayden Station officials all refused to comment on details of the contract.
Seneca employs about 90 people and has an annual payroll of more than $4.5 million. The company estimates it injects $11 million into the Northwest Colorado economy in wages, benefits, taxes and royalties each year.
Brown said the renegotiation of the Hayden Station contract bodes well for the mine and the mining staff.
"It was a really old contract, originally written in the late '60s," Brown said. "We worked on it for about three years and have just recently got the nuts and bolts of the whole thing worked out. The bottom line is, it's a good contract for both the mine and the Hayden Station. It was an arduous thing to get completed but we're pleased and we see a lot of opportunity for Seneca mine in the future. I plan to be here indefinitely. I really like it here."
Hayden Station Director Frank Roitsch said he also was pleased with the outcome of the contract renegotiations. He said quality was his main focus beyond 2011 not how the mine operates.
"The contract renegotiation actually gave us a decrease in pricing," Roitsch said. "In all of our facilities we require coal of a certain quality. As long as they meet that quality we're happy and not concerned with how they mine."
Despite the difficult year in the coal mining industry, Seneca has had a good year, Brown said. The facts remain the same: the company will deplete its surface reserves in the next 10 years.
"No, there are not a lot of surface reserves, but all the options are out there and the good news is we have more options under our new contract," he said. "It's a very tough industry and it's really frustrating. Northwest Colorado has some of the most productive mines in the country and we can't sell all the coal that we mine. Seneca is somewhat different because our coal is dedicated to one company. We have a no-frills operation and produce the best quality coal for the least cost. I don't see us going anywhere. We're looking forward."
Seneca Coal Co. is part of St. Louis-based Peabody Group, the world's largest private-sector coal producer and marketer. Peabody operates 27 coal mines in the United States and Australia, serving more than 150 coal customers in 17 countries. (Bryna Larsen is a reporter with the Steamboat Pilot/Today.)