Patriot to shut Bluegrass complex in western Kentucky

Patriot Coal (OTC: PCXCQ), which has been in bankruptcy protection since July 9, said Nov. 1 that the Bluegrass Mine Complex will be closed by the end of 2012.

The complex currently employs about 89 people and includes the Patriot surface mine, which is expected to produce about 1.2 million tons of thermal coal in 2012, and the Grand Eagle Prep Plant, both located near Henderson, Ky. Reclamation work will continue as the site is restored to meet regulatory requirements, Patriot noted. The company added no details on why the shutdown is taking place.

Duke Energy Kentucky, a unit of Duke Energy (NYSE: DUK), said in a Sept. 12 report it filed with the Kentucky Public Service Commission in a fuel review case that it has a contract for this coal for the East Bend power plant. The contract is with Patriot Coal Sales, with coal from the Bluegrass complex. The contract was executed in November 2010, expires Dec. 31, 2012, calls for 325,000 tons in 2012, with a current price of $45/ton.

U.S. Energy Information Administration data shows that another customer for the Patriot surface mine earlier this year was the Ghent power plant of Kentucky Utilities. EIA data also shows the R D Green plant of Big Rivers Electric taking coal from the now-shut Freedom deep mine, also part of the Bluegrass complex.

A Sept. 11 Big Rivers Electric filing with the Kentucky PSC on Sept. 11 shows that a contract with Patriot Coal Sales for coal out of the Freedom mine called for 1 million tons in 2011, only 108,000 tons this year, and is due to expire at the end of this year. There is another contract for coal out of the Freedom, Grand Eagle and Highland mines that calls for 964,000 tons this year and expires at the end of 2015.

A Sept. 12 Louisville Gas and Electric filing at the Kentucky PSC, which also covers fuel buying of sister utility KU, shows a contract for coal out of the Freedom and Patriot mines expired at the end of 2011. Two other contracts for coal out of Patriot, Freedom and Highland both expired at the end of 2011. Another KU contract for Patriot, Freedom and Highland coal is due to expire at the end of 2013 and calls for 1.25 million tons per year in each of 2012 and 2013.

Said Patriot’s Feb. 23 annual Form 10-K report about the impacted operation: “The Bluegrass mining complex is located in western Kentucky and is sourced by two company-operated mines, Freedom, an underground mine, and Patriot, a surface mine. Coal at Freedom is produced utilizing continuous mining methods, while coal at Patriot is produced utilizing the truck-and-shovel/loader mining method. All coal is sold on the thermal market and is transported via truck or via barge loaded on the Green River. Coal is produced from the Kentucky No. 9 seam. The employees at the Bluegrass mining complex are not represented by a union.”

Patriot said in April that it planned to idle the Freedom deep mine due to weak markets for this coal. The U.S. Mine Safety and Health Administration database shows Freedom as “nonproducing,” with no output in the third quarter of this year, 504,708 tons produced in the first half of this year and 1.2 million tons in all of 2011. MSHA data shows that the to-be-shut Patriot surface mine produced 791,522 tons in the first nine months of this year and 1.2 million tons in all of 2011.

Patriot’s Feb. 23 Form 10-K shows that as of the end of 2011, the Bluegrass complex had 64 million tons of assigned proven and probable reserves, with 4 million tons of that surface-minable and 60 million tons deep-minable.

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.