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King Coal wants to grow

By Emery Cowan Herald staff writer

The King Coal II mine's looming metal conveyor belts, silos and stacker towers are visible only briefly from the dirt road that winds through the desert hills and fertile pastures of Hay Gulch.

Located south of Hesperus, the mine has kept a low profile in the county despite having carved out a unique and lucrative niche for itself as a subsidiary of a multimillion-dollar international cement manufacturer based out of Chihuahua, Mexico.

The mine, a small operation relative to most, provides almost all the coal used to fire cement kilns in the company's plants across the United States and Mexico. As the construction industry, a major cement consumer, continues a slow but steady postrecession recovery, it has created a growing demand for the mine's coal.

So as coal operations in places such as Wyoming's Powder River Basin have seen production decline because of cheap natural-gas prices, the King Coal II mine has increased its current production by about 40 percent since 2010 and has plans to expand by almost 1,000 acres. Its current lease covers 2,300 acres.

But among the steps it must complete before it can carve into a new section of coal is a lengthy review process for a land-use permit through the county. And the Bureau of Land Management is just beginning the environmental assessment process required for GCC Energy, owner of the mine, to modify its minerals lease.

Homeowners who live near the mine and have dealt with coal trucks rumbling by their houses for years also have made their concerns part of the equation. They are worried about well water quality, underground vibrations and constant truck traffic.

For a company that long had a subtle presence in the county, it is headed for an extended period in the spotlight.

Getting into the cement business

“This is the best coal on this side of the Mississippi River,” said Trent Peterson, shining his headlamp on the fist-sized ebony chunks at his feet.

Peterson is vice president of GCC Energy. The company is a wholly owned subsidiary of Grupos Cementos de Chihuahua, or GCC, a company that began in 1941 and is publicly traded on the Mexican stock exchange. The company's 2011 revenue totaled $5.4 million, according to current conversion rates.

The Hesperus area is no stranger to coal mining. The practice hit a peak in the late 1800s and early 1900s, and remains of small non-mechanized family-owned mines dot the landscape around Hay Gulch.

The first King Coal mine was started in 1938 and closed in 2009. King Coal II, located about two miles west, was built in 2007. The mine's surface facilities cover about 22 acres, and its underground operations affect more than 295 acres.

The coal in the area is very low in sulfur, mercury, chlorine and alkalis, making it ideal for the cement-firing process, Peterson said. The coal ash also contains many of the minerals used to make cement.

GCC wasn't looking to acquire a coal mine when Peterson approached company executives in 2004. Aided by a tight coal market, he finally convinced the company of the benefits of securing its own energy source. GCC bought the King Coal mines in 2005.

GCC Energy was able to buffer itself when the recession decimated the construction industry, and now that infrastructure construction begins to revive, the company is seeing steady growth that it expects to continue, Peterson said.

The company employs just more than 100 people, 37 percent of whom live in La Plata County. Its annual payroll is $8 million, but Peterson declined to release revenue figures.

About 35 percent of the company's coal is used in GCC's cement plants, and about 65 percent is sold to other cement manufacturers. A small portion of GCC Energy's coal also powers the Durango & Silverton Narrow Gauge Railroad.

The company extracts about 700,000 tons of coal from beneath the ground annually, and expects that to increase to 800,000 to 900,000 tons during the next several years.

The proposed expansion, which will cover 960 acres, will allow the company to operate at that increased level of production for about 25 years, Peterson said.

Environmental concerns

As a result of its increased production, more trucks will be commuting back and forth along Hay Gulch Road, which connects to Colorado Highway 140 south of Hesperus.

The number of trucks driving the dirt road each day is expected to increase from 70 or 80 to 110 per day, said Victoria Schmitt, planning engineer with the county's planning department.

The increased truck traffic, and the havoc it wreaks on the dirt road, especially during wet weather, is one of several complaints residents have voiced about the mine's operations.

“They tear it up something serious,” resident J.T. Coyne said.

Coyne lives 7,500 feet from the mine's entrance and said he can feel vibrations at his house from what he thinks is mining machinery hitting the bedrock.

“I am continuously straightening photos and art on the wall,” he said.

Coyne also has seen his water quality degrade since the mine started operations.

GCC mines coal that is about 320 feet underground, and Coyne's well extends 650 feet. He suspects the water used in the mining process seeps down into the aquifer that he taps with his water well. The water he stores in a cistern near his house has turned from clear to “totally black” since the mine started, Coyne said. He changes his water filter four times as often now.

Travis Luz, another nearby homeowner, echoed Coynes' concerns.

Many of the homeowners in the nearby Vista de Oro subdivision have concerns about the mine, he said.

“Our efforts to make this either have really tight constraints or make it go away aren't going to cease,” he said. “There is a plethora of unhappy property owners.”

But the county can't do much to stop GCC Energy's operations, Schmitt said.

“They have the right to mine,” she said. “We're there to make sure the impacts are mitigated.”

This is the county's first review of the mine since it was built because the county initially thought it didn't have jurisdiction over the mine, which is located on land owned by the Colorado State Board of Land Commissioners. The county since has realized it does have jurisdiction to issue or deny the company a land-use permit. The increase in truck traffic associated with GCC Energy's growing production triggered a county review of the mine's surface operations.

But the county's authority to address the mine's impacts only goes so far, said Courtney Roseberry, the county planner in charge of GCC Energy's permit request. The county is tasked with analyzing and proposing mitigation measures surrounding the mine's water needs and supply, sewer infrastructure, road access, drainage and impacts on the surrounding property.

The Colorado Division of Reclamation Mining and Safety and the federal Office of Surface Mining Reclamation and Enforcement have jurisdiction over every other aspect of the mine's surface and underground operations.

Those state and federal regulatory agencies are working with GCC Energy to develop a vibration and water well study to address residents' concerns.

With so many moving pieces, the project is more than a month away from going before the county planning commission or the board of county commissioners, Roseberry said.

“(The project) isn't going anywhere soon,” she said.

ecowan@durangoherald.com

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