United States: EIA's Winter Outlook + Sheridan's New Coal Mine

Last Updated: October 15 2016
Article by Melissa J. Lyon
Most Read Contributor in United States, November 2016

Two things are on my mind today: (1) winter is coming – I am so ready for some snow, hot cider and a refreshing chill to the air (it is supposed to be in the 80s all weekend in Denver, but I am still ready to unpack my sweaters and snow shoes!), and (2) Wyoming is moving forward with opening a new coal mine near Sheridan, Wyoming.

On the concept of winter being just around the bend, the U.S. Energy Information Administration ("EIA") released its Short-Term Energy and Winter Fuels Outlook ("EIA Outlook"). The full report of the EIA Outlook can be found here.

What is EIA's winter forecast?

In general, the EIA's Outlook is promising for the energy industry in the upcoming winter months. "EIA projects average U.S. household expenditures for natural gas, heating oil, electricity, and propane will increase this winter (October 1 through March 31) compared with last winter."

Winter is coming – and it is predicted to be a cold one.

The Old Farmer's Almanac, even though controversial as to its accuracy, is predicting "temperatures in much of the nation to be much colder than last winter, but still above normal." The National Oceanic and Atmospheric Administration ("NOAA") is also projecting the same, reportedly forecasting temperatures colder than last year, which was 15% warmer than the 10-year average nationally.

What else is the EIA predicting?

  • Crude Oil

The EIA Outlook provides that U.S. crude oil production averaged 9.4 million barrels per day in 2015 and is forecasted to decrease to 8.7 million barrels per day in 2016 and 8.6 million barrels per day in 2017.

Brent crude oil prices are forecasted to average $43 per barrel in 2016 and $51 per barrel in 2017.

As I write this article, the price of oil is sliding slightly, but the consensus is that the price is not so bad right now. Bloomberg Energy is reporting that WTI Crude is currently $50.34 per barrel and Brent Crude is $52.00 per barrel.

  • Natural Gas

The EIA Outlook predicts that natural gas production will increase 3.7 billion cubic feet per day (Bcf/d) in 2017.

This is consistent with other reports that are predicting an increase in natural gas production. For example, Bloomberg released a story yesterday entitled, "Oil Rebound's Dirty Little Secret Threatens U.S. Gas Bulls," which discusses an increase in drilling for oil in the Permian will also "unleash" the production of more natural gas.

  • Coal

Coal exports have declined 32% in the first 7 months of 2016 and are expected to decline an additional 5% in 2017, according to the EIA Outlook.

This brings me to the second thing on my mind...Wyoming is opening a new coal mine.

The Brook Mine

High Country News ("HCN") put out an article yesterday, written by Paige Blankenbeuhler, entitled, "Defying Trends, Wyoming Approves a New Coal Mine: Why a small operation is forging forward despite broader industry contraction." HCN's article discusses that Lexington, Kentucky-based Ramaco is going forward with opening the Brook Mine, just north of Sheridan, Wyoming, and that the Wyoming Environmental Quality Council reportedly approved the coal mine proposal.

The vote by the Wyoming Environmental Quality Council to allow the Brook Mine to move forward was reported to be unanimous.

  • More on the Brook Mine...

Despite that coal is on the decline nationwide, there are several distinctions about the Brook Mine's operations could help it survive the coal industry's contraction.

What are the things about the Brook Mine that make it different??

  1. It's on private land. Ramaco reportedly owns the mineral rights to the coal. This is a major difference when compared to other coal mines – this means that no federal royalties will be due to the federal government.
  2. It's going to be a high-wall mine. According to the HCN article, "[u]nlike most mines in the Powder River Basin, which are open-pit surface mines, the Brook Mine would be a 'high-wall mine,' which are less expensive to operate than open-pit or underground mines that require drilling into deep contours with more expensive and complicated machinery." More on the high-wall mining technique can be found in this Brook Mine Overview power-point presentation prepared by Ramaco in May of 2014 and publically available online through www.ramacollc.com.
  3. Little guy. The proposed mine is "starting off small" and Ramaco is reportedly only planning to produce about 8 million tons of coal per year from the location.

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