First-quarter Powder River Basin coal production declined 11.7% year over year as coal-fired power plants continue to retire and the U.S. transitions to other power sources such as natural gas, wind and solar.

The United States' largest coal-producing region, which straddles the border between Montana and Wyoming, mined 55.3 million tons of coal in the first quarter of 2021, down from 62.6 million tons in the year-ago period, according to an S&P Global Market Intelligence analysis of federal data. Total production from the region in the 12 months ended March 31 fell 22.2% year over year.

A separate Market Intelligence analysis published May 5 noted that coal prices in the region have held steady in the past three quarters to compete with natural gas power generation. While coal demand is declining, producers have also begun to address excess capacity, which should support higher prices over the next few years, the analysis stated. Market Intelligence forecast Powder River Basin coal production will increase 10 million tons to 246 million tons in 2021, but power plant retirements will continue to erode Powder River Basin coal demand thereafter.

Sustainability think tank Sightline Institute published a recent analysis of the basin, concluding that customers of every Powder River Basin mine consumed less coal in 2020 than the average burn seen in the last three years.

"The basin's remaining coal mines face an array of challenging circumstances," Sightline energy analyst Dan Cohn wrote in the report. "Largely for financial reasons, utility companies and electricity markets alike now largely prioritize natural gas, wind, and solar over coal, leading to the retirement of many coal plants, an end to new coal plant construction, and a dramatic decline in coal burn."

The nation's largest mine, Peabody Energy Corp.'s North Antelope Rochelle operation, reported 15.1 million tons of coal production in the first quarter, down from 17.5 million tons in the year-ago quarter. While production has been declining at many of the company's U.S. operations, President and CEO Glenn Kellow expressed some optimism on an April 29 earnings call about what he described as an "extremely strong U.S. thermal business."

"We have what we regard as the lowest cost and best-positioned assets in the best basin in the [Powder River Basin]," Kellow said.

Peabody's other two mines in the Powder River Basin also decreased production over the 12 months ended March 31, with output at Caballo dropping by 13.1% and production at Rawhide down by 8.0% year over year. The company reported a first-quarter attributable net loss of $80.1 million in the first quarter, narrowing year over year from a loss of $129.7 million.

Arch Resources Inc. reduced 12-month coal production volumes from Black Thunder by 30.8% compared to the prior year. The company is increasingly focusing on its metallurgical coal assets in the eastern U.S. as it continues to operate the second largest coal mine in the country.

Arch is winding down operations of the Coal Creek mine and expects to discontinue production there by the end of 2021. Arch President and CEO Paul Lang said the company is "going to take care of Coal Creek, and we're going to move on to Black Thunder," during an April 22 earnings call. The company has also expressed interest in selling the mine if a buyer presents a compelling offer.

"We'll continue to run these things for cash and look for a possible buyer of the assets," Lang said. "I think it's true that as we carry on this parallel path, particularly as we drop the liability and bonding, the universe of buyers will expand."

The third-largest producer in the region is the Navajo Nation's Navajo Transitional Energy Co. LLC. The company acquired its Powder River Basin mines through the bankruptcy of Cloud Peak Energy Inc. in 2019. Production across the three mines totaled 38.3 million tons in the 12-month period ended March 31, declining year over year from 48.5 million tons.

Eagle Specialty Materials LLC, another Powder River Basin producer that entered the market with assets bought during another company's bankruptcy reorganization, increased production over the 12 months ended March 31. The company produced 23.5 million tons of coal at its Belle Ayr and Eagle Butte mines in the 12 months ended March 31, up from 19.2 million tons a year earlier.

The largest percentage decline in production during the 12 months that ended March 31 was recorded at Peter Kiewit Son's Inc.'s Buckskin mine, dropping 45.0% year over year.