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Wyoming Coal Sale Canceled by U.S. on Bid at 15-Year Low

The U.S. government rejected the sale of coal in Wyoming after an auction drew the lowest top bid in 15 years, as the outlook for the power-plant fuel weakens because of cheap natural gas and new rules coming out this week.

The Bureau of Land Management turned down the bid of $35 million, or 21 cents a ton, by Kiewit Mining Group Inc., based in Omaha, Nebraska, for the 167 million tons of Powder River Basin coal, the agency said today in a statement. The rejection follows a BLM sale in August that attracted no bidders.

The company’s offer was less than one-fifth what mining companies paid for similar deposits last year, and the lowest amount per ton since 1998. It didn’t meet the government’s estimate of fair value, the bureau said in a statement.

“The bottom has just dropped out of the market,” Mark Northam, director of the University of Wyoming School of Energy Resources, said by telephone. “This represents a high degree of uncertainty about whether coal will stay robust in the future.”

Pending rules from the Environmental Protection Agency will depress the use of coal for power generation, Northam said. The agency is set to issue its proposal for emission controls on new power stations this week, and follow that up with rules constraining carbon-dioxide emissions from existing plants in 2014. Coal produces twice the carbon dioxide as natural gas when burned to make power.

Source: bloomberg