The company said that the decision is also due to weak coal market and uncertainty in the permitting process.
In 2010, Arch Coal secured lease rights to about 8,300 acres in the Otter Creek area following which has engaged state regulators through the permitting process to obtain the approval to mine.
The process, however, was prolonged and further fall in coal markets has prompted the company to suspend the permitting effort.
Arch Coal said in a statement: "The Powder River Basin remains an important coal supply region for domestic and international power generators.
"However, given current conditions, Arch can no longer devote the time, capital and resources required to develop a coal mine on the Otter Creek reserve block."
The firm now plans focus on operating safe, responsible and low-cost mines while complying with prudent capital allocation strategy and preserving liquidity.
In January 2016, Arch Coal filed voluntary petitions for reorganization in the US Bankruptcy Court for the Eastern District of Missouri.
An agreement has also been signed by the company with a majority of its lenders under its $1.9bn first lien financing facility to restructure its debt.
Image: Arch Coal secured lease rights to about 8,300 acres in the Otter Creek area for coal mining. Photo: courtesy of dan/ FreeDigitalPhotos.net.
