Arch Coal works to sell Lost Prairie production to power customers

Arch Coal (NYSE:ACI) is currently in discussion with several unnamed possible steam coal customers for its planned Lost Prairie room-and-pillar mine in Illinois, said a company official at a March 21 hearing on one of the project’s water permits.

The Illinois Environmental Protection Agency has lately been taking public comment on two water permits, holding back-to-back hearings on draft versions of those permits on March 21 in Pinckneyville. The hearing transcript for the National Pollutant Discharge Elimination System (NPDES) permit was posted to the agency’s website on April 3.

The mine project, being pursued by Arch’s Prairie Coal Co. LLC, would discharge treated wastewater into an unnamed tributary of Wolf Creek. A mine permit for the project was issued last year by the Illinois Office of Mines and Minerals.

James Kliche, a mining engineer at Arch Coal, gave an opening statement at the hearing that described the project and Arch’s past as a good neighbor when it had operated now-shut coal mining operations in this same area. Arch Coal presently owns a 49% equity interest in Illinois producer Knight Hawk Coal and owns and operates the Viper deep mine in central Illinois, Kliche noted. Arch got Viper in a June 2011 buy of International Coal Group.

“We see market opportunities continue to develop for this coal as more power plants install scrubbers,” Kliche told hearing attenders. “Total coal production from the Illinois Basin area is presently near 115 million tons a year. Arch Coal is a proven leader in the coal industry. We are the second largest coal producer in the United States. We have a dominant production position in all three major low-sulfur basins in the United States. We have a significant exposure to domestic and foreign metallurgical markets. Our diversified reserve portfolio is about 5.7 billion tons of coal, of which over 700 million tons are in Illinois. Our production represents about 16% of the U.S. coal supply.”

Arch Coal has been a strong miner safety program and environmental compliance record, Kliche noted.

“We are currently discussing coal supply contracts with several utilities, which would enable the initiation of construction of the mine,” Kliche added. “The future Lost Prairie mine would infuse Perry County with new jobs and spur economic development. The mine is to be developed once coal commitments are secured in the next one to three years. Mine construction costs will be about $250 [million] to $300 million. Annual coal production will be about three and a half million tons a year. Ultimate mine employment would be 240 to 260 people, with the majority recruited locally from the vicinity in Perry County. Payroll and benefits are anticipated to be about $25 [million] to $30 million a year.”

The relatively short hearing featured some positive comments about the project from area residents who liked the idea of new jobs for the community. The usual environmental group opposition to any coal mining project in Illinois was voiced this time by Brian Perbix, who represented the Prairie Rivers Network, as well as the Illinois Sierra Club, which was unable to send a representative to the hearing. Prairie Rivers Network is the state affiliate of the National Wildlife Federation.

Perbix said that the Illinois EPA should refrain from approving this NPDES permit until concerns are met. This project will result in additional pollutant loading to an unnamed tributary of Wolf Creek, he said. Data collected by the applicant indicates that sulfate levels, for example, in Wolf Creek are currently averaging around 235 milligrams per liter, and the permit calls for 1,674 milligrams per liter. Similarly, chloride concentrations in the creek are currently around 13 milligrams per liter on average, and the permit would allow a discharge of up to 500 milligrams per liter, Perbix said.

In particular, Perbix said there is concern about the leachate collection system. The liquid coming out of the bottom of the planned prep plant’s rejects pond will be bled off slowly into Sediment Pond No. 1. In the application materials the network saw, the agency did not fully identify and quantify the proposed pollutant load coming from beneath the slurry impoundment, Perbix said.

Illinois EPA officials generally responded to the Perbix complaints that the draft permit is up to state standards in all areas.

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.