The Hobet Mining LLC unit of Patriot Coal (NYSE: PCX) told a federal court May 9 that it has spent $9.44m so far and is making progress on a court-ordered installation of an innovative water treatment system at a mining operation in southern West Virginia.
Under an October 2010 court order in a lawsuit filed by the Ohio Valley Environmental Coalition, Hobet Mining is on a mandated schedule to install technology to reduce selenium and other toxics in water runoff from a mine site. It has to file monthly reports with the U.S. District Court for the Southern District of West Virginia on its progress. The ABMet treatment plant is to be located in Berry Branch, a local stream.
The 90% design for the ABMet plant was completed April 30, Hobet noted. Breakdown of the backstack material at the freshwater bypass pond continued during April. The NPDES permit modification for the ABMet system was completed and the company is awaiting issuance of this permit. The main control building design was completed and sent out for bid during the month of April. GE completed the design of the reactor vessels in April. At this time, all projects are on schedule.
Task orders in the amount of $29.65m are currently authorized for this project, with total expended money to date being $9.44m. Among the upcoming work is that an Article 3 incidental boundary permit revision will be developed and submitted to the West Virginia Department of Environmental Protection after the design of the backwash pond is complete. Fabrication of the ABMet reactors will continue in May with the first delivery scheduled for late June. The backstack reclamation by Hobet will continue in the area of Ponds A-C. Powerline construction from the plant site to Pond 1 is scheduled to begin in May. Under the court-mandated schedule, projection completion is due by May 1, 2013.
This project is catching a lot of attention in the coal business because it is one of the first major tests of new technology to treat mine water runoff, with various other producers in the region – and as far away as western Canada – facing a similar need to clean up water due to unrelenting legal pressure from environmental groups.
Patriot Coal noted in its May 9 Form 10-Q filing that Hobet and its Apogee Coal unit in southern West Virginia are both under court order to clean up water runoff. At first, Hobet was going to use a fluidized-bed reactor (FBR) system.
“In December 2011, the Special Master appointed by the U.S. District Court to oversee the Hobet Surface Mine No. 22 project approved Hobet’s request to substitute ABMet selenium treatment technology for the FBR technology at this outfall,” the Form 10-Q added. “The U.S. District Court subsequently confirmed this substitution. We continue to design and seek permits for the Hobet ABMet facility and anticipate beginning construction on the facility in the second quarter of 2012. The estimated total expenditures for completing the ABMet water treatment facility are approximately $25 million which is significantly less than the estimated $40 million to build the Hobet FBR facility. As of March 31, 2012, we have spent approximately $2.5 million on the Hobet ABMet water treatment facility. In December 2011, we decreased the portion of the selenium water treatment liability related to Hobet Surface Mine No. 22 by $25.6 million ($15.3 million related to installation costs and $10.3 million related to operating costs) due to the change in the technology approved by the Special Master.”
Patriot’s Form 10-Q added that neither the FBR nor the ABMet technology has been proven effective on a full-scale commercial basis at coal mining operations.