Westmoreland Coal contract at Lewis & Clark expires this year

Virtually all of the fuel requirements of the Coyote, Heskett and Lewis & Clark stations are met with coal supplied by units of Westmoreland Coal (NasdaqGM:WLB) under contracts that expire in May 2016, April 2016 and December 2012, respectively, said MDU Resources (NYSE:MDU) in its Feb. 24 annual Form 10-K report.

MDU Resources is the parent of Montana-Dakota Utilities, which, through its electric and natural gas distribution segments, generates, transmits and distributes electricity and distributes natural gas in Montana, North Dakota, South Dakota and Wyoming.

The Coyote agreement with Westmoreland provides for the purchase of coal to supply the coal requirements of the plant or 30,000 tons per week, whichever may be the greater quantity. The Lewis & Clark and existing Heskett coal supply agreements provide for the purchase of coal necessary to supply the requirements of these stations. Montana-Dakota estimates the Heskett and Lewis & Clark coal requirement to be in the range of 450,000 to 550,000 tons and 250,000 to 350,000 tons per contract year, respectively.

Montana-Dakota has a coal supply agreement, which meets the majority of the Big Stone plant’s fuel requirements, for the purchase of 1.5 million tons of coal in 2012 with Peabody COALSALES LLC, the Form 10-K noted. U.S. Energy Information Administration data shows coal deliveries in December 2011 to Big Stone, which is located in South Dakota, from Peabody Energy‘s (NYSE:BTU) Rawhide mine in the Wyoming end of the Powder River Basin.

Montana-Dakota also has a coal supply agreement with Wyodak Resources Development that provides for the purchase of coal necessary to supply the coal requirements of Wygen III through June 1, 2060. Montana-Dakota estimates the maximum annual coal consumption of the facility to be 585,000 tons. Wygen III is a minemouth facility located at the Wyodak mine in the Wyoming PRB.

The average cost of coal purchased, including freight, at Montana-Dakota’s electric generating stations (including Big Stone, Coyote and Wygen III) was $1.62/MMBtu ($23.38/ton) in 2011, up from $1.55/mmBtu ($22.60/ton) in 2010 and $1.52/MMBtu ($22.05/ton)in 2009.

The Westmoreland website shows that Dakota Westmoreland’s Beulah mine in North Dakota supplies the fuel requirements for the adjacent, 427-MW Coyote plant. Dakota Westmoreland also owns and controls a four-mile rail spur that connects the mine and plant to the BNSF Railway’s Stanton line, which it uses to supply the two-unit, 75-MW Heskett plant, located 74 miles away. The Beulah mine produces around 2.9 million tons of lignite annually.

Westmoreland Savage‘s Savage mine is located on the Montana-North Dakota border and has a full-requirements contract with the 57-MW Lewis & Clark plant, the Westmoreland website said. The mine also has a longstanding annual supply relationship with a sugar beet refinery near Sidney, Mont. Savage produces approximately 350,000 tons of lignite annually.

Montana-Dakota plans emissions spend at Big Stone

Montana-Dakota incurred $3.6m of environmental capital expenditures in 2011. Capital expenditures are estimated to be $15.3m, $47.8m and $90m in 2012, 2013 and 2014, respectively, to maintain environmental compliance as new emission controls are required, including the installation of a Best Available Retrofit Technology (BART) air quality control system at Big Stone. Additional expenditures for this BART project are expected during 2015 and 2016 of about $40m. Projects for 2012 through 2014 will also include SO2, NOx and mercury and non-mercury metals control equipment installation at various electric generating stations.

The South Dakota Board of Minerals and Environment has approved rules implementing the South Dakota Regional Haze Program that upon approval by the U.S. Environmental Protection Agency will require the Big Stone plant to install and operate a BART air quality control system to reduce emissions of particulate matter, SO2 and NOx as early as practicable, but not later than five years after EPA’s approval of the state program. The state program was submitted to EPA in January 2011.

Montana-Dakota’s share of the cost of this air quality control system is estimated at $125m. In May 2011, Montana-Dakota filed for an advance determination of prudence with the North Dakota Public Service Commission requesting advance determination that the air quality control system is reasonable and prudent. That application will be up for discussion at the commission’s March 26 work session.

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.