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Sagging exports hit Usibelli coal production for fifth year in a row

With international customers shunning Alaska coal for cheaper sources, Usibelli, the state's sole working coal mine, faces more layoffs and a possible sixth straight year of declining production, mine officials said.

When exports peaked in 2011, the Alaska Railroad, among others, predicted a rosy future for Usibelli coal. That was before Chile, once Usibelli's biggest foreign customer, opened a new coal mine of its own; before longtime customer South Korea started taxing coal imports; before global coal supply increases and the rise of natural gas as a rival fuel drove prices down; and before a stronger dollar made U.S. coal pricier relative to coal from other countries.

Usibelli's three foreign customers have historically been Chile, South Korea and Japan. But the mine anticipates no shipments this year to either Chile or South Korea, said Lorali Simon, the mine's vice president of external affairs.

"We expect to continue to see softening in the export market, but we're still looking for opportunities," she said.

In 2011, Usibelli exported close to 1.2 million tons of coal, but that number had fallen 57 percent by 2014 to 513,000 tons.

The drop in exports has cut into freight revenues for the Alaska Railroad. The railroad transports coal from the mine, near Denali National Park and Preserve, to Seward for loading onto ships bound for markets abroad.

"We have a significant amount of assets tied up in coal freight service," Alaska Railroad CEO Bill O'Leary told a World Trade Center of Alaska audience in July.

As exports have fallen, so too has production. In 2014, Usibelli produced 1.5 million tons of coal, down from 2.2 million tons in 2010. A new coal-fired power plant in Healy, the seventh in the state, will only somewhat offset further export declines expected for this year, Simon said.

Workforce reductions, which have occurred over a three-year period, will likely continue, Simon said. Employment stood at 143 in 2012 following the mine's banner export year, but had fallen 15 percent by 2014, according to data from the federal Mine Safety and Health Administration.

Despite the production slowdown, Denali Borough Mayor Clay Walker described the economy of the nearby town of Healy, home to many of Usibelli's employees, as "very strong."

"The economy in the local area hasn't been palpably affected by a production decline," Walker said. "You can tell there's no growth as far as mining jobs, but we've had some growth with tourism coming back and our second power plant coming online."

At the end of the line in Seward, the most noticeable changes have occurred at the electric utility, which counts the coal loading facility as one of its biggest customers, said Ron Long, assistant city manager.

The multiday process of moving the coal onto ships using a huge motorized conveyor belt uses quite a bit of power, Long said.

"The big demand periods are when there's a ship in to load, so the less often they do that, the less units we sell," he said. "It's not going to drive up rates for someone else, but it does force us to be carefully looking at our long-term needs."

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