Comeback kid

A BUZZ has surrounded the Illinois coal industry as researchers make significant inroads into clean coal technology, giving the once-shunned high-sulfur Illinois coal a new glow.
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Galatia mine. Courtesy Illinois State Geological Survey

Angie Tomlinson

The state’s high-sulfur coal has once more become an attractive and lucrative investment for coal companies and coal-to-liquids hopefuls which have been quick to recognise the potential. And prospects is one area Illinois isn’t lacking in, with the largest reported bituminous coal resource of any state in the United States with a 250-year supply.

A review of the past 18 months shows many of the major US coal companies investing in reserves in the state and cementing plans to develop new mines.

In February, American Clean Coal Fuels secured a mining lease near Oakland to develop a mine to supply its proposed coal-to-diesel plant. The plant will be able to convert 4.3 million tons of coal into 385 million gallons of synthetic diesel fuel annually. American Clean Coal Fuels envisages 600 new full-time jobs to be created from the project, including 200 at the mine. The plant is expected to be ramped up in 2012, with coal extraction at the mine beginning prior to that.

Also in February, the fortunes of American Coal’s Galatia mine and its workers turned around after the company announced it would recall 337 miners as the operation expanded to three longwall sections, opening up the New Future section to replace the old Millennium Portal.

Early this year, Massey Energy completed a deal to acquire an Illinois Basin reserve property near the Green River, with company chief Don Blankenship commenting: “This acquisition will allow us to participate in the anticipated market growth of the Illinois Basin.”

Coal giant Peabody Energy has also been active in the area of late. In December, it signed a 10-year coal supply agreement with Tennessee Valley Authority (the nation’s largest public power provider) to supply 6Mt per annum of Illinois Basin coal from existing and future mines. Coal sales under the first five years of the agreement are expected to be in excess of $1 billion.

Master limited partnership Natural Resource Partners last year shored up its position in the region, in August closing a $35 million deal to purchase 144Mt of coal reserves.

In three separate transactions, NRP purchased reserves from Williamson Development, an affiliate of Cline Resource and Development.

Other major player Arch Coal also expanded its interests in the Illinois Basin, attaining a one-third interest in Knight Hawk Coal.

On the flipside, Foundation Coal announced in April that it would close its Wabash mine in Illinois. The operation sustained losses of more than $26 million in 2006 and entered into 2007 at a loss as well. It cited “extensive aged infrastructure, geologic challenges, and soft market conditions” as cause for the financial issues.

While coal companies have been active on a reserve and mine development level, local and international clean fuel companies have also been active in the region, either expressing interest or inking supply deals with coal companies.

In March, Rentech and Peabody Energy settled an initial coal supply contract for Rentech Energy Midwest’s ultra-clean fuels conversion project in East Dubuque, Illinois.

Coal from Peabody’s Gateway Mine near Coulterville, Illinois will supply the REMC project. Peabody will provide up to approximately 7.2Mt of Illinois coal beginning in 2009 or early 2010, through to December 2017.

Rentech and Peabody are also cooperating in the co-development of up to two potential clean fuels projects to be located on Peabody reserves. The projects would convert coal into ultra-clean transportation fuels.

Illinois has also been vocal in its bid to secure the $1 billion FutureGen facility. It has formed the FutureGen for Illinois Task Force to coordinate the state’s efforts.

The FutureGen Alliance will announce its final selection from the four remaining sites in September 2007.

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