Bowie Resource Partners LLC said in a brief June 5 statement that it has closed a transaction with PacifiCorp to supply the coal requirements for PacifiCorp’s Huntington Power Plant in Utah through 2029 and to acquire approximately 50 million tons of undeveloped, high-heat, low-sulfur coal reserves in Utah from an affiliate of PacifiCorp.
“We are excited about this unique 15-year partnership with our largest customer,” said Bowie Executive Chairman John Siegel.
Bowie is one of the nation’s largest Western Bituminous coal producers with four underground mines in Utah and Colorado. Earlier this decade it bought its three Utah mines (Sufco, Skyline and Dugout Canyon) from Arch Coal (NYSE: ACI).
In a related move, the Idaho Public Utilities Commission announced June 2 that it is approving an application by PacifiCorp d/b/a Rocky Mountain Power to set aside expenses related to the utility’s decision to close the Deer Creek longwall mine in Utah for possible later recovery from customers. Deer Creek, located near Huntington, Utah, is operated by Energy West Mining, a wholly-owned subsidiary of PacifiCorp. The utility is seeking authority from the six states where it has customers to: incur costs for closing the mine; withdraw from a contract it has with the United Mine Workers of America Pension Trust, which will incur a withdrawal liability; sell the assets it has in the mine; and enter into agreements with Kentucky-based Bowie to provide replacement coal for the Huntington and Hunter plants in Utah, which have been taking coal from Deer Creek.
PacifiCorp is targeting closure of the Deer Creek mine for 2015, pending regulatory approval. The U.S. Mine Safety and Health Administration database classifies the mine as “nonproducing,” with no production in the first quarter of this year, and 2.1 million tons of output in all of 2014, with 499,755 tons of that production in the fourth quarter of 2014, its last quarter of operation.
Bowie trucks coal to the Huntington plant from its mines in Utah’s Carbon and Sevier counties. The new contract by PacifiCorp with Bowie extends for 15 years and provides a reliable coal supply (at 2.8 million tons per year) with steady prices.
The Deer Creek mine, purchased in 1977, had at one point produced an average 3.5 million tons of coal annually. The mine has been the primary source of coal for the Huntington Power Plant in east-central Utah, which annually consumes about 2.9 million tons. It has also supplied some coal to the Hunter Power Plant. Notable is that PacifiCorp’s other coal plant in Utah, the small Carbon facility, was shut earlier this year for clean-air reasons.
That 50 million tons of coal reserves that Bowie mentioned in its June 5 statement is the Cottonwood tract, which is isolated from any operating mine in Utah, but is next to PacifiCorp’s long-shut Trail Mountain deep mine, which Bowie is also getting in this deal.