Rockport plant’s coal take to tumble in 2015 due to EPA rule

The giant, 2,600-MW Rockport coal plant of Indiana Michigan Power is projected to dip to 5.5 million tons of coal need in 2015, down from 7.4 million tons in 2013 and 7 million tons in 2014.

Charles West, Manager, Fuel Procurement, in the Fuel, Emissions and Logistics Department for American Electric Power Service Corp. (AEPSC), a subsidiary of American Electric Power (NYSE: AEP), was one of the company officials that prepared testimony that was filed Sept. 28 at the Michigan Public Service Commission. This filing was in an annual Power Supply Cost Recovery (PSCR) case.

I&M has two coal generating stations that are both projected to be in operation in 2013; Rockport and Tanners Creek.

  • Rockport, located in Spencer County, Ind., consists of two 1,300-MW units. SO2 emissions at Rockport are limited by the New Source Performance Standard to no more than 1.2 lbs SO2/MMBtu. The coal supply is a blend of Powder River Basin (PRB) coal from Wyoming and various eastern sources.
  • Tanners Creek is located in Dearborn County, Ind., and consists of four coal units with a total nominal capacity of 995 MW. Units 1-3 (TC 1-3) are limited to SO2 emissions of 1.2 lbs SO2/MMBtu and Unit 4 (TC-4) has been modified to a 1.2% sulfur standard on an annual basis. As a result of the different air emission standards, as well as different boiler designs, the coal supplies for TC 1-3 and TC-4 vary in order to meet differing coal quality requirements. The fuel requirements of TC 1-3 will be met from bituminous sources located in Colorado and/or from eastern bituminous sources, West noted. TC-4, similar to Rockport, can use a blend of subbituminous and bituminous coals.

A table in West’s testimony shows Rockport’s coal take at a projected 7.4 million tons in 2014, then 7 million tons in 2014, only 5.5 million tons in 2015, rebounding to 9 million tons in 2016 and falling to 8.5 million tons in 2017, the end of the five-year forecast period.

The projections for Tanners Creek Units 1-3 are 279,000 tons in 2013, only 13 tons in 2014, and then no tons during the rest of the period due to retirement of those units in 2015.

The projection for Tanners Creek Unit 4 is 1.1 million tons in 2013, 1.3 million tons in 2014, 1.3 million tons in 2015, 1.5 million tons in 2016 and 1.4 million tons in 2017.

West showed contract tonnages that Indiana Michigan has from unnamed suppliers for 2013. One supplier would ship 1.9 million tons of Western coal under a contract due to expire at the end of 2014, another Western contract due to expire at the end of 2016 calls for 5.2 million tons, another Western contract covers 125,000 tons under a term due to expire at the end of 2013, and a fourth contract covers 165,000 tons of Eastern coal and expires at the end of 2014.

In addition to these long-term contracts, coal may also be purchased to fulfill any additional needs through both long-term and spot agreements with various suppliers.

  • I&M expects to receive about 7.4 million tons in 2013 at Rockport at a projected weighted average delivered cost of 214.03 cents/MMBtu (exclusive of affiliated transportation costs).
  • For 2013, TC 1-3 is projected to receive approximately 279,000 tons of coal at a weighted average delivered cost 253.80 cents/MMBtu (exclusive of affiliate transportation costs).
  • I&M expects to receive around 1.1 million tons of coal at TC4 in 2013 at a weighted average delivered cost of 202.82 cents/MMBtu (exclusive of affiliate transportation costs).
  • The anticipated overall cost of coal delivered to I&M plants in 2013 is 214.20 cents/MMBTU or $39.65 per ton (exclusive of affiliate transportation costs).

West cites depressed coal generation around the U.S.

“The unstable economy continues to provide challenges for predicting coal consumption and has had a significant impact on coal procurement,” West wrote. “However, weather, natural gas prices, and environmental impositions have had the largest impact on the demand for, and cost of, coal for I&M. A very mild winter at the end of 2011 and early in 2012 resulted in a decline in total electricity generation across the United States. This reduction in demand, along with the notable decrease in natural gas prices, led to a significant decrease in coal consumption across the U.S. In fact,  coal consumption in the first quarter 2012 was the lowest since the second quarter 1988 (EIA Quarterly Coal Report: January–March 2012).”

West noted that the U.S. Environmental Protection Agency’s Cross-State Air Pollution Rule (CSAPR) and Mercury and Air Toxics Standards (MATS) are having an impact on the planning for the coal units. On Aug. 21, after the preparation of the forecast used in this filing, a federal appeals court vacated CSAPR and put back in place all the Clean Air Interstate Rule (CAIR). “At this time, we do not anticipate this new ruling will have a significant impact on I&M’s generation plans beyond 2014, but I&M will continue to monitor the evolving regulatory and legal environment,” West added.

Beginning in 2015, MATS will introduce new constraints. The expected impact of MATS includes the fact that in 2015 Rockport will experience decreased burn while efforts are made to install environmental controls, West added.

“Despite these conditions, there is less risk in the projection of I&M’s delivered coal prices in 2013 as much of the prices are currently locked in under long-term contracts,” West wrote. “Based on current market projections, I&M may expect to pay between $12/ton and $15/ton for PRB coal and between $50/ton and $70/ton for bituminous coal in 2013.”

AEPSC has been in negotiation with western railroad suppliers for rail services from the PRB to the Cook Coal Terminal in Metropolis, Ill., West reported. This coal is used at both Rockport and Tanners Creek. Since the previous contract with the Union Pacific will expire at the end of 2012, AEPSC negotiated and, just prior to filing, executed a new agreement with the UP effective 2013. “While the increase was inevitable, I&M aggressively negotiated with the two potential carriers to secure a competitive rate, along with favorable terms and conditions, that will ensure continued reliable service,” West added.

Other Sept. 28 testimony was from Jon MacLean, Manager-Resource Planning in the Resource Planning Section of the Corporate Planning & Budgeting Department of AEPSC.

I&M’s generation sources for the 2013 forecast period include the coal-fired Tanners Creek and Rockport (I&M’s share) plants, the Cook Nuclear Plant, small hydroelectric plants located on the St. Joseph River in Michigan and Indiana and wind energy purchases, he noted.

MacLean said that at this time, the capacity plan for I&M includes the purchase of three additional 100 MW (nominal/nameplate rating) blocks of wind energy by 2015, including the Wildcat Wind REPA that will begin operation in late 2012. No new capacity additions are under construction, or have been approved for construction, for I&M. Wind is generally considered an energy resource, not a capacity resource, due to the intermittent nature of wind. Nevertheless, wind resources receive an initial 13% capacity credit from PJM. For AEP pool purposes, in 2013, wind resources receive capacity “values” based on their annual capacity factors, MacLean wrote.

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.