Constellation eyes coal options at three for-sale plants

To comply with Maryland Healthy Air Act (HAA) requirements, Constellation Energy Group (NYSE:CEG) is planning to burn domestic and/or imported compliance coals (1.2 lb/mmbtu SO2 or less) at the H.A. Wagner plant, said Constellation in its Feb. 29 annual Form 10-K report.

The company’s C.P. Crane plant, also in Maryland, was converted in June 2010 to burn up to 100% low-sulfur sub-bituminous coal. In March 2010, Constellation completed installation of flue gas desulfurization (FGD) equipment on both Brandon Shores coal units. With the FGD installation, Brandon Shores is able to burn higher sulfur coals (up to 6 lbs/MMbtu  or about 3.5% sulfur). The blend of coals actually procured for Brandon Shores will be optimized to achieve the lowest delivered cost while complying with HAA limitations.

Constellation’s primary coal-burning facilities have the following requirements: Brandon Shores Units 1-2, 2.45 million tons per year; C.P. Crane Units 1-2, 650,000 tons per year; and H.A. Wagner Units 2-3, 600,000 tons per year. The C.P. Crane tonnage figure is based on low-Btu sub-bituminous coal.

These plants, particularly H.A. Wagner, were very lightly used in 2011. The plants, total generating capacity figures, fuel(s) and capacity factor percentages in 2011 were: H.A. Wagner, 976 MW, coal/oil/gas, 18%: Brandon Shores, 1,273 MW, coal, 52.6%; and C.P. Crane, 399 MW, oil/coal, 27.8%.

In connection with its pending merger with Exelon (NYSE:EXC), Constellation has committed to sell three coal plants – Brandon Shores, C.P. Crane and H.A. Wagner – within six months of the completion of the merger. These are the only coal plants that the Form 10-K said that Constellation has committed to sell.

Constellation receives coal deliveries to these three Maryland plants by rail and barge. Over the past few years, it has expanded coal sources through a variety of methods, including restructuring of rail and terminal contracts, increasing the range of coals it can consume, and finding potential other coal supply sources including limited shipments from international sources. While it primarily uses coal produced from mines located in Central and Northern Appalachia, it is using sub-bituminous coal from the western U.S. at C.P. Crane and has the ability to switch to using imported coal at Brandon Shores and H.A. Wagner.

Constellation also owns undivided minority interests in the coal-fired Keystone and Conemaugh plants in western Pennsylvania, each of which has a total of 1,711 MW of capacity. These ownership interests are 20.99% in Keystone and 10.56% in Conemaugh. All of the Conemaugh and Keystone plants’ annual coal requirements are purchased from regional suppliers on the open market. FGD equipment was installed on both of the Keystone units in 2009 and has been installed on both Conemaugh units since the mid 1990s. The FGD SO2 restrictions on coal are 6 lbs/MMbtu (or approximately 3.7% sulfur) for the Keystone plant and about 4.9 lbs/mmbtu (or 3% sulfur) for the Conemaugh plant.

The annual coal requirements for the ACE, Jasmin, and Poso plants, which are located in California, are supplied under contracts with mining operators. These plants are restricted to coal with sulfur content less than 4%, Constellation noted. Constellation owns 31.1% of the 102-MW ACE plant, 50% of the 35-MW Jasmin plant, and 50% of the 35-MW Poso plant.

The primary fuel source for the Panther Creek and Colver generating facilities in Pennsylvania is waste coal. These facilities meet their annual requirements through existing reserves of mined and processed waste coal and through supply agreements with various terms. Constellation owns 50% of Panther Creek, which has 80 MW of capacity in total, and 25% of Colver, which has total capacity of 102 MW. Constellation also owns 50% of the 51-MW Sunnyside plant in Utah, which is also fired by nearby waste coal supplies.

The Maryland Healthy Air Act, in effect for several years now, has pretty well shielded the three Maryland coal plants from new U.S. Environmental Protection Agency rules, which are roughly equal to or less stringent than HAA restrictions on SO2, NOx and mercury. However, if EPA’s Cross-State Air Pollution Rule (CSAPR), which is currently held up in an appeals court, is implemented, it could affect the market prices of SO2 and NOx emission allowances, which could in turn affect Constellation’s financial results, the Form 10-K pointed out.

To comply with various new regulations, Constellation said it will install additional air emission control equipment at its coal-fired facilities in Maryland and at the co-owned coal facilities in Pennsylvania. The company said its expected spending in this area will be about $15m in 2012, $30m in 2013, $35m in 2014 and $5m for 2015-2016. “Our estimates are subject to significant uncertainties including the timing of any additional federal and/or state regulations or legislation, the implementation timetables for such regulation or legislation, plant divestitures, and the specific amount of emissions reductions that will be required at our facilities,” the Form 10-K cautioned.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.