Interior's Misstatement On Montana Coal Mine Leads To Small 'Market Sensation'
We're getting perspective now on last week's news that the U.S. Interior Department said it had approved a major coal mine expansion in Montana. It caused the stock of the mining company involved to temporarily spike.
Six days later, Interior rescinded its statement, saying no expansion was approved, and the original approval statement was the result of “internal miscommunication.”
Matthew Preston is the research director for North American coal markets for a global research and consulting firm called Wood Mackenzie.
Here's his take on Interior telling the Associated Press that it had approved Westmoreland Coal's proposal to expand it's Rosebud Mine outside Colstrip by 10.5 square miles, potentially adding 19 years of life to the mine.
"It did cause something of a sensation in the market for a small period, brief, of time, and relatively small scale, but it was something that you can't just pass over lightly."
Westmoreland's stock, which lost 93 percent of its value last year, rose by as much as 49 percent on news that Interior had greenlighted the company to mine an additional 60 million tons of coal at Rosebud. That didn't sound exactly rational to Preston, given that the sole customer for the Rosebud mine's coal is the Colstrip power plant.
"I'm not sure what the market was thinking, because it's been pretty clear that the life of the Colstrip plant is limited. You know, a third of the plant is going to go away in 2022, and perhaps the whole plant by 2028, so adding another 60 million tons to the reserves they have wouldn't seem to make much difference. But, the market was somehow interested in that. You know, it's a market, so sentiment happened to turn, and people took that announcement to heart, I guess."
The Colstrip plant's life is being limited by at least one of the west coast utilities that buys its electricity. Seattle-based Puget Sound Energy has made it clear that it plans to source its energy in the future from sources with less impact on climate change.
Some supporters of coal based energy are optimistic that the Trump administration will turn the industry's fortunes around, and that that could mean an extended life for the Colstip power plant and the mines that support it. Wood Mackenzie's Preston doesn't share that belief.
"Yeah, no, I don't think so. I don't think anything that the Trump administration is doing right now would change the minds of the folks that are owners of the Colstrip plant. Everybody can change their minds, but the owners of the plant seem set on moving some other direction than coal."
Still, the Interior Department's statement that the Rosebud mine expansion was OK'd did have an impact on Westmoreland's stock price, meaning investors potentially made or lost money based on the statement and its retraction six days later.
"And it's certainly unfortunate, from the point of view of the folks that may have made the decision to invest or not invest because of that. I don't know that there's any regulations that would come down on specific individuals within the Interior [Department]," Preston says. "I don't think there's any — this is my opinion — I wouldn't expect there to be any ulterior motive to this announcement and then retracting it, I think it was as they state, a miscommunication within the office."
The Interior Department and Westmoreland Coal declined interview requests from Montana Public Radio and Yellowstone Public Radio.