Production from the largest active Powder River Basin coal mines totaled 106.88 million tons in the third quarter, according to an SNL Energy analysis of U.S. Mine Safety and Health Administration data, down from the year-ago quarter on rail issues and production cuts at lower-Btu mines.
The yearlong rail service issues may be starting to abate. The third-quarter production total represented a 7.3% increase compared to the second-quarter total of 99.63 million tons. Executives at Cloud Peak Energy Inc., which saw a year-over-year production increase 
at its Antelope mine in the third quarter, said they noticed improvement in rail service during the third quarter and into October.
However, lower production totals compared to the previous year despite higher demand in 2014 suggest that the rail issues are far from resolved. Nine of the 16 PRB mines reported lower production in the third quarter than the year-ago quarter, including five of the six highest-producing mines. Production from the mines in the 12 months ended in the third quarter totaled 408.65 million tons, down 1.1% from the 413.39 million tons produced in the year-ago period.
Rail service seems to vary by mine. Cloud Peak President and CEO Colin Marshall said Oct. 29 that rail service picked up in the last month or two and that the coal producer is running at a higher rate than it has previously during 2014.
However, Alpha Natural Resources Inc. President Paul Vining said the rail issues will last “well into next year,” adding that performance was poor in the third quarter. And Arch Coal Inc. executives said Oct. 28 that October rail performance was “below our expectation,” similar to July.
“We would expect, hopefully, over the balance of this quarter to see some improvements and to see another step-up in volume,” Arch President and CEO John Eaves said. “Certainly, these improvements have not been as quickly as we would have liked to see. But we are seeing those gradual improvements and would expect to see that as we move into 2015. We’re reading everything that everybody else says about the delayed improvements in the railroad.”
The other major trend in the PRB is the move away from 8,400 Btu/lb coal due to market weakness and the spread compared to 8,800 Btu/lb coal. According to SNL Energy over-the-counter market survey data, 2015 PRB 8,400 Btu/lb coal was priced at $10.30/ton as of Oct. 31. The 2015 8,800 Btu/lb coal product was priced at $12.31/ton.
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