Westmoreland Coal (NasdaqGM:WLB), through its Westmoreland Resources subsidiary, has entered into a long-term coal supply agreement with TransAlta Centralia Generation LLC to supply coal from the Absaloka mine to a power plant in Washington state.
The agreement provides for up to 2 million tons per year to 2024, and up to 1.2 million tons in 2025. The term of the agreement is through 2025, which is when the plant is due to shut under a clean-air mandate from the state of Washington. That kind of contract length is rare these days in the coal-fired power industry, where term deals are more in the three-to-five-year range.
The coal will be transported via the recently constructed western wye railroad trackage, which enables western movements of coal from the Absaloka mine in the Montana end of the Power River Basin. The mine, located on Crow Tribe property, ships coal on the BNSF Railway.
“We are very pleased to announce that we have entered into this agreement with TransAlta to supply the Centralia Plant and look forward to a long and beneficial relationship,” said Robert King, President and Chief Executive Officer. “This contract provides the Absaloka Mine with a long-term relationship that expands our production going forward and generates value for both the company and The Crow Tribe.”
TransAlta Corp.’s coal-fired, 1,340-MW Centralia Thermal plant in Washington state has shown weak results lately due to factors like low power prices and relatively cheap natural gas in the Pacific Northwest.
TransAlta, in its Oct. 31 earnings statement for the third quarter, noted that Washington state’s TransAlta Energy Bill and a Memorandum of Agreement, which was signed in December 2011, provides a framework for the orderly transition from coal-fired energy produced at Centralia Thermal and the shutdown of the units, one in 2020 and the other in 2025. The company has worked out a long-term power agreement to provide electricity from the plant to Puget Sound Energy from December 2014 until the facility is fully retired in 2025.
U.S. Energy Information Administration data shows that the coal suppliers to the Centralia plant earlier this year were the Spring Creek mine in the Montana PRB of Cloud Peak Energy and the Rawhide mine in the Wyoming PRB of Peabody Energy.
Westmoreland Coal is the oldest independent coal company in the U.S. Its coal operations include sub-bituminous coal mining in the Powder River Basin in Montana and Wyoming, and lignite mining operations in Montana, North Dakota and Texas.