Published: August 17, 2016 |

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The slide in Montana coal production continues, with more than 7 million fewer tons mined through the first half of the year compared to 2015.

Through June, mines in Montana lost roughly two months’ worth of production when compared to coal mined in the first six months of last year. The disparity was worst in the last two months.

The main reason for the decline is natural gas, said Bud Clinch, of the Montana Coal Council, particularly in Midwest power plants where both natural gas and coal are burned. Once used as a spot fuel to generate electricity during peak demand, gas is now used more often because of its affordability, Clinch said.

Coal accounted for more than 40 percent of the nation’s electricity production less than 8 years ago, but now accounts for just 29 percent and has been surpassed by natural gas in use by power plants, according to the U.S. Energy Information Administration. The nation’s ability to generate power using coal has declined 15 percent since 2011.

Natural gas has been cheaper than coal for 17 straight months, according to EIA. The trend has cut into demand for Montana coal, of which the spot price has fallen to $8.50 a ton, four times less than the national average, as mines attempt to remain competitive, according to the EIA.

“It really is a distance to market ratio,” Clinch said, explaining Powder River Basin rock-bottom prices. “You see this disproportionate rate to transportation, which is three times the cost of coal.”

In the first half of the year, Montana saw more than 66 coal mining jobs lost and the bankruptcy of Arch Coal, which abandoned plans to develop a mine at Otter Creek, a project in which Arch had already invested $159 million and paid Montana an $86 million bonus for state-owned minerals involved in the deal.

A $1.4 billion coal deal signed by the Crow Tribe with Cloud Peak Energy in 2013 has also languished, and declining royalties from another Crow mine has resulted in tribal government layoffs.

State coal taxes are taking a hit because production is down. The 2016 fiscal year, which wrapped up in June, was $7.3 million lower in coal tax collections than the previous year, according to Montana’s Department of Revenue. Losses started accelerating in January. On average, a train load of Montana coal produces $30,800 in federal and state taxes, according to the Coal Council.

Montana coal severance taxes, which amounted to $54 million during the latest fiscal year, are split between the state coal trust and several government programs directly funded with coal money. Montana libraries receive roughly $500,000 a year in coal taxes and will cut spending on online research databases to cover losses.

The state coal trust is worth roughly $1 billion. Its interest pays for infrastructure and economic development programs.

While sizable, coal revenue is a small percentage of the $1.75 billion in in state taxes collected last year.

Source: (August 14, 2016) The Associated Press

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