Twentymile Coal Co. in West Routt County announced plans this week to increase coal production by 40 percent.
Peabody Energy, Twentymile's parent company, announced its plans to boost production during the next three years from a record 8.7 million tons of coal last year to 12 million tons annually by 2008. The move comes as the coal market in the United States is emerging from two decades of oversupply.
"We are experiencing record demand for this high-Btu coal, and recent rail upgrades near Denver allow us to target increasing volumes," Peabody's Charles Burggraf said. He is the group executive of Colorado operations for the company.
In the process of ramping up production, Peabody will invest $60 million in a new, more efficient longwall underground mining system, company spokeswoman Beth Sutton said.
John T. Boyd Co., a Pittsburgh-based consulting firm, predicts the current strong prices for coal will hold. The firm recently published a 15-year forecast for the coal industry that predicts that current prices are not a short-term spike but an "inevitable response to long-term shift in the supply and demand for coal in the U.S."
Scott Ford of the Small Business Resource Center at Colorado Mountain College in Steamboat Springs said the increased production at the mine, in addition to securing jobs that pay more than $60,000 a year, would generate new business for suppliers. The mine appears certain to pay more severance taxes, which are the source of Energy and Mineral Impact Assistance grants returned to local communities.
"Overall, this is very good news for the entire Yampa Valley," Ford said. "It looks like the economic pond is about to get bigger as a result of the growth in this primary industry. As it grows, the local economy will grow."
Sutton said Peabody estimates that it pumps $90 million annually into the area economy.
Moffat County Commissioner Saed Tayyara said Thursday that increased energy development, including the Twentymile expansion, is important for Northwest Colorado's economy.
"We welcome the growth," Tayyara said.
Peabody said it would hire 80 new workers at Twentymile this year, in addition to 400 existing employees, to meet the demand for coal. Sutton said the new hires would allow the mine to operate additional shifts in order to meet production goals.
The announcement that Twentymile will expand production comes about six months after Peabody announced it was shutting down production at another Northwest Colorado mine, Seneca Coal Company near Hayden, by the end of this year.
At the time, Sutton said that the coal that could be economically mined at Seneca's surfacemining operations had been depleted. She also anticipated that some or all of the 100 employees would remain on the job in 2006 as reclamation efforts at Seneca go forward. However, on Wednesday, she was unable to be specific about how much employment would continue at the mine next year or how Seneca employees might be affected by the new hiring process at Twentymile.
"Twentymile and Seneca are two unique operations," Sutton said. "If an employee of Peabody wants to apply for a Peabody affiliate in Colorado or another state, it's the individual's decision."
Sutton said the company alerted employees at Seneca about the impending end of production more than a year in advance to allow them time to plan their transition.
Potentially, the elimination of 100 jobs at Seneca, offset by the addition of 80 jobs at Twentymile, could result in a net reduction in Peabody's workforce here of 20 jobs.
Peabody owned Seneca before buying Twentymile in 2004.
The company announced plans to purchase Twentymile Mine in January 2004 from Ruhrkohle AG (commonly referred to as RAG), along with the German company's 25 percent interest in northern Venezuela's Paso Diablo surface mine.
Twentymile Mine was acquired by RAG from Denver-based Cyprus Amax after the former owner announced in 1998 it intended to sell off its $1 billion coal division to focus on hard-rock mining.