Entergy Arkansas nailing down new rail contract for coal

Entergy Arkansas has an existing long-term railroad contract that will provide up to about 85% of its coal transport requirements for 2012, while a request for proposals for its open rail transportation position was issued in 2011 and a definitive agreement is expected by mid 2012, said parent Entergy Corp. in its Feb. 28 annual Form 10-K report.

Entergy Arkansas has committed to four one- to three-year contracts that will supply about 90% of the total coal supply needs in 2012. These contracts are staggered in term so that not all contracts have to be renewed the same year. The remaining 10% of coal requirements will be satisfied by contracts with a term of less than one year. Based on greater Powder River Basin (PRB) coal deliveries and the high cost of “foreign” coal, no alternative coal consumption is expected at Entergy Arkansas during 2012, the Form 10-K said.

Entergy Gulf States Louisiana has executed three one- to three-year contracts that will supply about 90% of Nelson Unit 6 coal needs in 2012. Additional PRB coal will be purchased through contracts with a term of less than one year to provide the other 10%. For the same reasons as for Entergy Arkansas’s plants, no alternative coal consumption is expected at Nelson Unit 6 during 2012. Coal will be transported to Nelson via a new transportation agreement beginning Jan. 1 that will provide 90%-100% of rail transport requirements for 2012.

For the year 2011, coal transportation delivery to Entergy Arkansas-operated coal units met coal demand at the plants and it is expected that delivery times experienced in 2010 and 2011 will continue through 2012. In the fourth quarter of 2011, Entergy Gulf States Louisiana experienced significant delivery shortfalls as the result of flood-related disruptions on the BNSF Railway. Coal inventory levels recovered by year end and improved transportation times are expected under the new transportation agreement beginning in 2012. Both Entergy Arkansas and Entergy Gulf States Louisiana control a sufficient number of railcars to satisfy the rail transportation requirement.

The operator of the co-owned Big Cajun II Unit 3, Louisiana Generating LLC, has advised Entergy Gulf States Louisiana and Entergy Texas that it has adequate rail car and barge capacity to meet the volumes of low-sulfur PRB coal requested for 2012. Entergy Gulf States Louisiana’s and Entergy Texas’s coal nomination requests to Big Cajun II Unit 3 are made on an annual basis.

White Bluff scrubbers still an open issue

In September 2010, the owner of a minority interest in Entergy’s White Bluff and Independence coal facilities, both located in Arkansas, received a request from the U.S. Environmental Protection Agency for several categories of information concerning capital and maintenance projects at the facilities in order to determine compliance with the Clean Air Act’s New Source Review requirements.

The EPA request for information does not allege that either facility violated the law. In February 2011, Entergy received a similar request from the EPA and has responded to it. In August 2011, Entergy’s Nelson facility, located in Louisiana, received a similar request for information from the EPA. Entergy said it responded to this request.

In June 2005, the EPA issued final Best Available Retrofit Technology (BART) regulations under its regional haze rules that could potentially result in a requirement to install SO2 and NOx controls on certain of Entergy’s coal and oil units. The rule leaves certain BART determinations to the states. The Arkansas Department of Environmental Quality (ADEQ) prepared a State Implementation Plan (SIP) for Arkansas facilities to implement its obligations under the Clean Air Visibility Rule. The ADEQ determined that Entergy Arkansas’s White Bluff power plant affects a Class I Area’s visibility and will be subject to the EPA’s presumptive BART limits, which likely would require the installation of scrubbers and low-NOx burners.

Under then-current state regulations, the White Bluff scrubbers would have had to be operational by October 2013. Entergy Arkansas filed a petition in December 2009 with the Arkansas Pollution Control and Ecology Commission requesting a variance from this deadline, however, because the EPA has expressed concerns about Arkansas’s regional haze SIP and questioned the appropriateness of issuing an air permit prior to that approval.

The Entergy Arkansas petition requested that, consistent with federal law, the compliance deadline be changed to as expeditiously as practicable, but in no event later than five years after EPA approval of the Arkansas Regional Haze SIP. The Arkansas Pollution Control and Ecology Commission approved the variance in March 2010. In October 2011, the EPA released a proposed rule addressing the Arkansas Regional Haze SIP. In the proposal, the EPA disapproves a large portion of the Arkansas regional haze SIP, including the emission limits for NOx and SO2 at White Bluff.

The EPA did not issue a Federal Implementation Plan for regional haze requirements because Arkansas has indicated it wishes to correct its SIP and resubmit it. Due to an extension in the comment period for the proposed rule, EPA has yet to issue a final rule. It is expected that after the EPA’s proposed rule becomes final, there will be a two-year timeframe in which the EPA must either approve a SIP issued by Arkansas or issue a Federal Implementation Plan, Entergy noted.

White Bluff is 57% owned by Entergy Arkansas. Independence is owned 16% by Entergy Arkansas, 25% by Entergy Mississippi and 7% by Entergy Power.

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.