Colowyo Coal to cut production
Company’s decision has ramifications in several tax funds
December 21, 2009
Although opinions differ about how Colowyo Coal Co.'s announcement it will cut 10 percent of its staff might affect Moffat County, the mine south of Craig is intertwined with several aspects of the local, state and federal economies.
Along with its personnel cuts, Colowyo plans to roughly halve its coal production for the foreseeable future.
Mine officials said Colowyo sold between 4.5 million to 6.4 million tons from 1994 to 2008 but will sell about 2.5 million tons in 2010 after selling roughly 2.7 million tons in the first nine months this year.
Production amounts factor into several different taxes. Most notable for Colorado and Moffat County are federal mineral lease dollars and severance tax revenue, which fund K-12 public education, Colorado Department of Local Affairs energy impact grants and water conservation groups, among other things.
The mine also pays taxes for black lung excise tax for the black lung disability trust fund and federal reclamation taxes, as well as a 12.5 percent royalty on all coal sold.
All of these will be reduced as the mine produces less coal, said Mark Roberts, Colowyo director of commercial planning and business development.
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Tinneal Gerber, Moffat County budget analyst, said revenues such as federal mineral leases and royalties won't affect the county or Moffat County School District budgets much since the Colowyo mine has begun moving its operations to Rio Blanco County.
"In a sense, because their production was moving into Rio Blanco County anyways, we have that figured into our numbers already," she said.
Gerber added county officials budgeted for a significant decrease in revenue from coal production in 2010, and then for zero production in 2011 because of both the company's plans to mine less coal and move to Rio Blanco County.
"On mineral leases and severance taxes, we've gone very minimal on what we project because we knew those were going to be down," she said.
Colowyo's decision also affects the state's energy impact grant fund, which Moffat County has depended on in the last several years for new equipment, road maintenance and other large-scale or expensive projects.
It is largely because the state doesn't have enough money for energy impact grants that county officials cut nearly all capital expenses from the 2010 budget.
The mine's position "definitely is another small hit to that fund, for sure," Gerber said.
Roberts said Colowyo's situation is entirely predicated on economics and not other factors.
The mine sells coal in long-term purchasing contracts for around 10 years each, he said. In today's economy, a 10-year commitment is a tough sell for some buyers.
Colowyo has enough contracts to sell about 2.5 million tons a year through 2017, Roberts said.
But the company will produce as much coal as it can sell, he added, and has enough deposits to mine for another 50 to 100 years.
"It's a pretty simple equation, although getting there is not that easy," Roberts said. "If the coal can be sold, it will be mined."