Gulf Power lays out coal procurement planning

Gulf Power plans to use a mix of Illinois Basin, Colorado and other coals at the Crist, Lansing Smith, Scholz and Daniel power plants over the next few years, said a Gulf Power coal procurement plan filed Aug. 1 at the Florida Public Service Commission as part of an annual fuel cost review case.

The coal procurement risk management plan is heavily redacted, but information worthy of note survived the redacter’s hand.

Gulf Power operates three coal-fueled plants with a combined normal full-load gross rating of 1,469 MW and with annual coal consumption projected at more than 3 million tons. Gulf uses railcars and barges to transport coal to its plants. In 2011, coal represented 67% of Gulf’s generation sources. Gulf also co-owns 50% of Daniel.

Here is a breakdown of information and plans by plant.

  • Crist – In 2013, Crist will be served for coal delivery by Marquette Transportation Co. LLC. Crist is forecasted to burn between 1.1 million and 1.7 million tons of coal per year. In recent years, the scrubber-equipped Crist plant has undertaken a plan to blend Illinois Basin coal with other low-sulfur bituminous coals such as Colombian, Central Appalachian and Colorado coals in order to take advantage of an increased Btu content and decreased sulfur content of the blended product. This practice of blending Illinois Basin coal with lower sulfur coals is scheduled to continue.
  • Smith – In 2013, Smith will also be served by Marquette Transportation. Smith is forecasted to burn between 481,000 and 512,000 tons of coal a year and must comply with a state SO2 emission limit of 2.1 lbs SO2/MMBtu. Smith can burn a variety of coals, including Illinois Basin and imported coals such as Colombian, Australian and Venezuelan. Domestic sources such as Colorado, Utah and Central Appalachian coals also have been burned in the past.
  • Scholz – The old, little-used Scholz plant is served by CSX Transportation rail. Scholz is projected to burn 16,000 tons of coal in 2013 and must comply with a state SO2 emission limit of 6.17 lbs SO2/MMBtu. Scholz has burned Central Appalachian coals. Because Scholz is considered a peaking plant, its fuel supply will be based on limited-term, firm commitments and/or spot purchases depending on burn projections. Contract commitment terms will be two years or less. If commitments are made for more than 50% of projected burn requirements, the contract will match the maximum annual tonnage purchased to the plant burn requirements.
  • Daniel – Daniel, which is 50-50 owned by Gulf Power and fellow Southern Co. (NYSE: SO) subsidiary Mississippi Power, is served by the Mississippi Export Railroad (MSE) which is about 40 miles in length and runs between Moss Point and Evanston, Miss. The MSE is served by two Class 1 railroads: the Canadian National connecting at Evanston and CSX connecting at Moss Point. Daniel must use “compliance” coal with a maximum of 1.2 lbs SO2/MMBtu (0.6 lbs sulfur/MMBtu). Daniel can burn imported coal in addition to coal from Colorado and Central Appalachia. PRB coal is also burned at various ratios depending on the season.

Gulf Power maintains diverse blending facilities

Both Crist and Smith’s portfolio currently includes coals from supply regions such as the Central Appalachian region and the western bituminous regions of Colorado and Utah. These coals are being delivered by rail to the Alabama State Docks (ASD) in Mobile, Ala. In 2009, the ASD upgraded the rail unloading facility at the Bulk Terminal to allow for an increase in volume of rail coal at this facility. Shipments can also be delivered to various ports along the Mississippi River and transloaded into barges for ultimate delivery to Crist and Smith.

Illinois Basin coal and lower sulfur coals such as Central Appalachian and/or Colorado coals must be blended before delivery to Crist. This is currently accomplished by railing both coals to the ASD and blending them for transloading into barges. This blending process could be performed at other off-site locations as economics permit.

Western bituminous coals can either be railed directly to ASD and transloaded into barges or railed to the Mississippi River and transloaded into barges for ultimate delivery to Crist and Smith. Currently, no transportation infrastructure improvements will be necessary for the movement of these coals to Gulf’s plants.

An important element of the coal diversification philosophy for Daniel is that Daniel can share most coal supplies with Mississippi Power’s Watson plant should operational, supply or transportation problems occur at either plant. Gulf said it will also continue its policy of testing various import as well as domestic coals.

“Traditionally, Daniel has used sources such as PRB and Colorado low-sulfur coals,” the company said. “Since 2000-2001, market conditions – including production problems, lack of availability of supply in some domestic regions and environmental awareness – have emphasized the need to diversify with import coals. These other coal sources, transportation arrangements and plant quality limitations will be actively evaluated because of reliability and availability issues in the domestic market and in the existing Colombian market.”

The filing added: “The strategic objective is to include import, Colorado, and PRB sources in future coal commitments for Daniel. Colorado and/or PRB coal will continue to make up a significant portion of Daniel’s committed volumes, provided that economics warrant and that Union Pacific and BNSF railroad transportation capacity is available. As part of this objective, Gulf will explore expanding its plant quality parameters through the continuation of an active test burn program. In addition to receiving import coal through the ASD, Daniel also has the ability to take imported rail coal through the Convent Marine Terminal in Convent, La. This is a proven facility that Daniel has used in the past. Because it is an inland-river facility capable of unloading Panamax-sized vessels, it provides additional security during hurricane season. Both Illinois Basin and Central Appalachian coals can be railed directly to Daniel, although some infrastructure improvements would be necessary. At this time, it is uncertain if the plant will need some time to acquire additional plant equipment necessary for burning Illinois Basin coals. The procurement group will need to be cognizant of the environmental controls placed on the units and ensure that the coals purchased will meet the environmental requirements.”

Under a heading for Crist and Smith, the company filing said: “A rail contract with Norfolk Southern is being negotiated to provide for the rail transportation of Central Appalachian coal from Alpha Coal Sales to the Alabama State Docks through Dec. 31, 2014.” Under that same heading was: “A barge contract is being negotiated with a commercial barge carrier for the barge transportation of 360,000 tons of Central Appalachian coal from Argus Energy loaded on the Big Sandy River for delivery to Mobile for final delivery to Smith in 2013.”

Alpha Coal Sales is a unit of Alpha Natural Resources (NYSE: ANR). Argus Energy is an eastern Kentucky and southern West Virginia coal producer that is controlled by coal operator Jim Booth.

Under a heading for Daniel, the company said: “BNSF agreement BNSF-12677 provides for rail transportation of PRB coal to Memphis, TN where BNSF interchanges with CN to deliver the PRB coal to Daniel. The BNSF agreement expires Dec. 31, 2014. No action is needed on this agreement in 2013.”

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.