Colowyo cuts employment by 10 percent

RBC I Even though the official announcement came last week that Colowyo Coal Company was reducing its employment level by about 10 percent, the plan has been in the works for months.
“We let employees know about the numbers back in August, so it wasn’t a huge surprise what we did last week, rolling out the voluntary separation plan,” said Mark Roberts, director of commercial planning and business development for Colowyo.
Company officials hope to reduce employment levels for the northwest Colorado mine, which has been in operation since 1977, to the 270 to 280 range by the second quarter of next year.
“That would involve 30 some (employees), to get down to that 10 percent,” Roberts said.
The company hopes to achieve the reduced employment levels through “a combination of attrition and voluntary separations,” according to the news release.
“The focus is on the voluntary separation during this time,” Roberts said. “The voluntary separation is open to all the employees in the production department, whether they’ve been there three months or 30 years. The structure … we’ve worked out a plan that we think is fair, and we’ve shared that plan with them. So, we’re hoping we’ll get the numbers of volunteers we need to make it work.
“We have a target number we’re trying to hit with the voluntary separation,” Roberts added. “If we don’t, there will be involuntary reduction through layoffs.”
Anticipated lower production levels are the reason for the employment reduction.
The company’s expected coal sales for 2010 are about 2.5 million tons.
“We produced fewer tons in 2009 than we did in 2008, and we’ll produce fewer tons in 2010 than we did this year,” Roberts said.
Colowyo’s annual sales from 1994 to 2008 ranged from 4.5 million tons to 6.4 million tons. Coal production for the first nine months of this year was around 2.7 million tons.
“We need to open a new reserve area, and to do that takes significant dollars, and we can’t do that without a long-term contract, and we don’t have that right now,” Roberts said. “So we can’t spend the money. We can’t justify opening this new reserve. We need a long-term commitment from somebody.”
The national move toward so-called green energy — considered environmentally friendly — is having an impact on Colowyo.
“Some customers have a concern about making that long-term commitment when they don’t know how long coal will be sold, or how economical it will be to use it,” Roberts said. “There’s a general concern about any coal, whether it’s clean or not. There’s a concern about (carbon dioxide emissions) that has an impact regardless of how clean the coal is. It’s a significant uncertainty for people in the coal industry, both buyers and sellers.”
However, Roberts added, “If you think about it, roughly 70 percent of electric energy in Colorado comes from coal and half in the U.S. comes from coal, but people don’t understand that. Right now, they’re just concerned about greenhouse gases and climate change. Those are the key issues there.”
In last week’s news release, the company said, “Colowyo has large, high-quality coal resources, but it does not currently have adequate customer commitments to make the significant investments needed to convert such resources to reserves and to access these resources.”
“They (new coal areas) are there, but it’s expensive to go get it,” Roberts said.
The spokesman said Colowyo’s current long-term commitments will take the company through 2017.
“Right now, our contracts take us through 2017,” Roberts said. “That’s about how much reserves — coal in the ground — we have left to make those commitments, without looking at brand-new mining. That’s the reason we’re planning to stay open, to serve that contract need. So, what we’re looking at is through 2017. From our viewpoint, we would need that long-term underpinning contract to move forward.
“We’re continuing discussions in that regard, but nothing is imminent,” Roberts added.