Trapper to begin coal exploration activity
November 5, 2011
Trapper Mine entered into an agreement Tuesday with the Museum of Northwest Colorado to conduct coal exploration activities on 167 acres of land shared by both parties.
The parcel, known as Tract 100, runs adjacent to the east side of Trapper's current permit area near Knez Divide Road.
Trapper owns the surface estate and equally shares the coal interest with the Museum of Northwest Colorado.
Dan Davidson, director of the Museum of Northwest Colorado, said the museum received its share of the coal as a donation approximately five years ago and never expected Trapper would want to explore the area.
"I never thought Trapper would go that direction," Davidson said. "I checked into that when the tract was donated to us five or six years ago, and at the time they had just had a slide and they didn't have the equipment to mine the area because it goes deeper than where they are now.
"The circumstances appear to have changed now that Trapper has upgraded its technology."
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In a surprise twist, Davidson said Tract 100 was leased in February to B.L. Taylor Ltd., an oil and natural gas production company with offices in Oklahoma City, Okla.
The museum has a 22-percent interest in those minerals as well.
"It's interesting things have worked out this way," Davidson said. "This is the first time the museum has entered into agreements for two different types of exploration on one piece of land that I am aware of."
Davidson said the lease with B.L. Taylor is for three years and its coal exploration agreement with Trapper runs through 2013.
Davidson believes there may be potential to have two companies trying to conduct different types of production on the same tract at the same time.
Stephen Hinkemeyer, production and engineering manager at Trapper, agrees the separate contracts could make for a unique working environment in the future.
"Three years ago, none of the oil and gas minerals were leased, but nowadays most everything is leased," Hinkemeyer said. "We're going to have to sort our way through all of that if we decide there's coal out there we want to go surface mine."
If Tract 100 is deemed commercially profitable for coal, oil and natural gas, Hinkemeyer expects Trapper will have to coordinate with B.L. Taylor on drilling locations and timetables.
"We're a long ways off from that in looking at this reserve, but ultimately those are some of the questions we're going to have to ask ourselves if we decide to move ahead," Hinkemeyer said.
However, Hinkemeyer said no one has approached Trapper about a surface use agreement and he doubts there would be any future issues considering technological advancements in oil and natural gas drilling.
"I thought that was interesting when Dan told me about the (B.L. Taylor) lease because we have owned the surface for a while now and no one has contacted us yet about a surface use agreement," Hinkemeyer said. "But with today's horizontal drilling technology, you could drill a hole a mile away and get to the oil and gas underneath that tract and we wouldn't ever know it."
But, Hinkemeyer said discussions about what may need to be coordinated with B.L Taylor in the future are premature because no one knows exactly how much coal is in Tract 100.
"We know there's coal there and we think it could be more than 30 million tons in that tract," Hinkemeyer said. "But, we don't have any great expectations that there's hundreds of millions of tons there."
Thirty million tons may sound like a worthwhile endeavor, but Hinkemeyer said a major obstacle stands in the way of mining Tract 100 — power lines.
"There are two 345 kVA twin power lines running right through the middle of that tract," Hinkemeyer said. "It is un-mineable with those power lines there."
To get to the coal, Hinkemeyer said the power lines would have to be rerouted at a cost of $2 million to $3 million per mile.
"We're looking at a cost of $5 to $6 million dollars to move those lines, so there would have to be a lot of good coal there to justify that expense," Hinkemeyer said. "I don't know if we would ever mine this reserve just because of those power lines, but you have to know what's there before you make a decision."
Davidson said he isn't concerned whether Tract 100 will be mined in the future, but is happy to see Trapper Mine doing what it can to remain a fixture in the community.
"I'm just glad to see Trapper Mine is looking toward the future," he said.
Hinkemeyer said Trapper is exploring additional acreage as well and is doing so to meet the needs of neighboring Craig Station.
Craig Station currently has a contract to purchase all of the coal mined at Trapper through 2020.
But, Hinkemeyer said its exploration activities have nothing to do with a potential coal shortage at the existing mine.
"We have more coal than what our contract through 2020 would entail," Hinkemeyer said. "That power plant is probably not going anywhere, so they are doing their due diligence looking for future reserves that are available right now to power the station in the future."
In addition to exploring Tract 100, which is scheduled to have two coal cores drilled this month, Hinkemeyer said Trapper is exploring approximately 9,000 acres of federal coal managed by the Bureau of Land Management.
Hinkemeyer said Trapper has surface use agreements with the BLM to drill 40 coal cores at the conclusion of hunting season and could potentially drill up to 60 more in 2013 depending on initial testing results.
Hinkemeyer said Trapper plans to drill the cores at depths of 250 to 400 feet and that none of the coal acquired will be sold.
Hinkemeyer said the coal will be analyzed for its BTU potential and to measure moisture, sulfur and mercury contents, among others.
"There's a whole host of tests we're going to have done," Hinkemeyer said. "We'll know right away where the coal and the rock seams are, but we also need to know the quality."