County Elk Creek mine taking operation to Delta

“We don’t see viable reserves in this area any longer”

A small piece of Gunnison County’s landscape and a bigger share of its revenue stream are going to see big changes in the coming years, as Oxbow’s Elk Creek Mine, one of three major coal producers in the North Fork Valley, finishes work in its existing leases and moves down the road into Delta County.

Coal mining operations contribute more than $2 million in property and severance taxes each year to Gunnison County.
At the same time, natural gas production is picking up pace and is set to replace coal as the county’s most profitable export.
On May 6, Oxbow Carbon applied for an exploratory drilling permit from the Bureau of Land Management for an area of Oak Mesa, north of Hotchkiss and entirely inside Delta County. Randy Litwiller, vice president of Oxbow Mining, says it’s a first step to finding a new place for Elk Creek’s 360 miners to go when the current operation is closed, likely no later than 2017.
Moving the operation to Oak Mesa is also another chance for Oxbow to tap the USGS-estimated 750 million tons of recoverable coal in that northwestern knob of Gunnison County known as the North Fork Valley, where a century-old mining tradition lives alongside organic farmers, wineries and an established ranching community.
Still, the company is pushing to get two lease extensions at Elk Creek. One would be small, at about 150 acres, and would extend the life of the mine only six months. The other is a physical extension of the coal lease known as the East Tract that covers 786 acres and would add several years to the life of the mine.
But environmental groups are pushing back against the company’s efforts to do any more mining in the North Fork, and environmental advocates Wildearth Guardians and Earth Justice have appealed the federal decisions that would give the miners a green light to expand. If both efforts to stop the leasing were successful, the coal seams could dry up in the next few years.
After recounting the struggles his company has had in getting its operations permitted, Litwiller says, “We don’t see viable reserves in this area any longer.” But just down Highway 133 near Hotchkiss, things are looking a lot better.
He says that in looking for a place to relocate the operation the company saw coal from Anthracite Creek to Crested Butte, but settled on the location in Delta County “that showed the most promise.”
“That place has been dotted with old small mom and pop type mines for the last 100 years,” Litwiller says, adding that the company will mine there for at least 20 more years. “There’s no secrets to [the coal in that area], but it’s remote enough that it hasn’t been targeted until now.”
And operations aren’t going to slow down at the Elk Creek Mine while the paperwork is filed for the mine on Oak Mesa. Litwiller says, “The permitting process, if it goes on unencumbered, will take every bit of the life of [the Elk Creek] mine to accomplish.”
The Elk Creek Mine produces between five million and six million tons of coal a year, worth as much as $74 million on the market today, that provides more than $18 million in taxes to the federal government (half of which comes back to the state) and hundreds of thousands of dollars in severance taxes to the county. Gunnison County finance director Linda Nienhueser says last year the county took in $428,093.61 in all its severance tax, which is funneled through the state.
The county’s share of the money goes into the general fund of the budget to pay for most things related to the government’s administration. The county also received $1.9 million in property taxes in 2010, Litwiller says of the mine located in Somerset.
“All pieces play a part. If natural gas picks up and the coal mine decreases production, it could balance out,” Nienhueser says. “But coal is obviously a major tax payer in the county.”