Providing coverage of Alaska and Northwest Canada's mineral industry
April 2012

Vol. 17, No. 18 Week of April 29, 2012

Mining News: Jumbo Dome offers reliable coal supply

Healy deposit could meet increasing demand from Usibelli domestic and foreign customers; Wishbone Hill offers growth potential

Shane Lasley

Mining News

Usibelli Coal Mine Inc.’s Healy operation, Alaska’s longest lived mine, produced a record 2.2 million short tons of coal in 2011. This marks the fifth straight year of production growth for Usibelli, a trend the family-owned company foresees continuing in 2012.

“We expect to mine a slightly higher tonnage in 2012, approximately 2.4 million short tons,” Usibelli Vice President Customer Relations Bill Brophy told Mining News.

Six Interior Alaska power plants consumed some 1 million tons of the coal Usibelli mined last year to generate around 136 megawatts of power. The balance of the 2011 production was shipped from Usibelli’s mines near Healy to Pacific Rim customers seeking the ultra-low sulfur, high-energy carbon.

“Currently, Chile and South Korea are the primary UCM customers on the Pacific Rim,” Brophy explained.

The 2.4 million tons expected to be produced this year will be excavated at the Two Bull Ridge mine site; by 2013 the company hopes to be mining at Jumbo Dome, a new area of focus at Usibelli’s Healy operation.

Wishbone Hill, a smaller, bituminous coal deposit that the company hopes to establish as a mine near Palmer in Southcentral Alaska, could further increase the scope of the family-owned Alaska business.

Jumbo Dome approved

Situated some seven miles (11 kilometers) northeast of it current operation at Two Bull Ridge, the 83 million tons of coal reserves at Jumbo Dome are anticipated to provide Usibelli customers both domestic and international with coal for the next 30 years and potentially provide fuel to a large mouth-of-mine power plant envisioned by the company.

Permits approved by Alaska Department of Natural Resources, Division of Mining, Land and Water in February allow Usibelli to excavate up to 3 million tons per year from the new deposit.

Though enough coal remains at Two Bull Ridge to last another decade, Usibelli plans to start mining at Jumbo Dome in the coming months to ensure access to a reliable source of coal for the coming decades.

“We mined in the Poker Flats Mine for 25 years and transitioned to Two Bull Ridge during 2003. The current operations in Two Bull Ridge will continue for another 10 years or more, depending on demand from our customers. As one might expect, we must plan for the future, and in mining operations we must plan well in advance and maintain a steady flow of product to our customers. This requires us to overlap between mine sites,” Brophy explained.

Jumbo Dome is also less than three miles (five kilometers), from the Alaska Railbelt electrical grid transmission intertie line.

Usibelli is hoping to take advantage of this fortuitous location with a mouth-of-mine power plant, known as the Emma Creek Energy Project.

According to a plan presented to the State of Alaska, the proposed 200-megawatt Emma Creek power plant would be built just north of the Jumbo Dome site. If built, the facility would burn some 1.5 million tons of coal per year from the adjacent mine and provide Alaska’s railbelt customers with an additional 1.6 million megawatt-hours per year of relatively inexpensive coal-fired electricity.

New carbon dioxide limits proposed by EPA for new fossil fuel-fired power plants could derail the Emma Creek project while it is still in the conceptual stage. See “EPA, EA target coal-fired electricity,” page 4.

HCCP timeline undetermined

While the Emma Creek project is still in the conceptual stage, the Healy Clean Coal Power Plant is a facility that is fully built and sitting idle at the mouth of Usibelli’s Healy mine. This lower emissions facility has the potential to provide 50 megawatts of power to the Alaska railbelt electrical grid, and offers the best possibility for near-term expansion in Usibelli’s domestic market.

HCCP was designed and constructed to burn low-grade coal mined by Usibelli. By burning the coal in stages and adding limestone to the feed the plant was designed to reduce nitrogen and sulfur oxide emissions. The clean coal facility was completed in 1997 and testing ran through 1999, but it has sat idle during the past 12 years.

GVEA, an electric cooperative serving some 100,000 residents of Interior Alaska, agreed to purchase the plant from the Alaska Industrial Development and Export Authority at the end of 2009 and began work on renewing the permits to bring the plant online. The Alaska Department of Environmental Conservation re-issued air permit for the facility in February and the U.S. Environmental Protection Agency is in the process of reviewing the permit.

“Today we have a valid permit that is issued by the state,” GVEA President and CEO Brian Newton told an audience March 21 at the 23rd Biennial Fairbanks Alaska Mining Conference.

The permit, though, needs the endorsement of the EPA – a process with a timeline that is not well defined.

“We don’t know whether it is 60 days, 90 days – some have said EPA can take as long as they like,” Newton said.

The carbon dioxide standards proposed by EPA are not expected to apply to the already existing HCCP.

Usibelli said it has maintained a long-term commitment to clean coal technology and is ready to provide coal to the facility whenever HCCP is returned to service.

“UCM is capable of providing fuel to HCCP at any time, including tomorrow morning!” Brophy told Mining News in an email. “An additional 50 MW of coal-fired energy will be a tremendous cost savings to the Railbelt.”

According to Newton, the monthly electric bill of the average Golden Valley residential customer has more than doubled from US$84 in 2005 to US$170 in 2012.

The utility executive blames the sharp increase on rising oil prices.

He said oil costs Golden Valley nearly quadruple and natural gas more than double that of coal to produce a megawatt of electricity. In 2011, 36 percent of the Interior Alaska utility’s power came from oil, 32 percent from gas and 28 percent from coal.

Wishbone Hill awaits permit

Wishbone Hill is a historical coal mining area with a past that dates back to the early 20th Century. It is located some 10 miles northeast of Palmer, Alaska, near the community of Sutton.

Usibelli External Affairs Manager Lorali Simon told a crowd at the AMA conference in Fairbanks that while Wishbone Hill is a relatively small deposit, its value lies in the quality and location of the coal.

“It is the only bituminous coal source on the road system,” she said.

J-Power, a Tokyo-based company that operates 67 power plants with a total output capacity of about 17,000 megawatts of electricity, is interested in buying bituminous coal from Wishbone Hill.

“They are currently a customer of our Healy coal; they would like to supplement purchase with output from Wishbone Hill,” Simon said.

In 2010 Usibelli initiated a feasibility study on mining about 6 million tons of coal at Wishbone Hill at a rate of about 500,000 tons per year.

The feasibility study included loading the JP Azure, a super-Panamax ship, with Usibelli coal at Port MacKenzie, the proposed site for shipping Wishbone Hill coal to market. Too large to transit the Panama Canal, this massive ship traversed the Cook Inlet and a small amount of coal was successfully loaded on the vessel while docked at the Matanuska-Susitna Borough-owned port.

Simon said Usibelli, which is in the midst of a long process of obtaining a minor air quality permit from Alaska DEC, has not made a final decision on whether to advance a mine at Wishbone Hill.

If Alaska-based Usibelli decides to develop the Southcentral Alaska project, some 500,000 tons a year of the cleaner-burning coal will likely be shipped to Japan via Port MacKenzie, which is on the west side of upper Cook Inlet directly across from Anchorage.

Once tracks are laid along the 36 mile stretch between Port MacKenzie and Alaska’s current railway, Usibelli will have an alternative location to load Healy coal onto ships in route to its Pacific Rim customers.

“We are interested in the rail-line going to Port MacKenzie – not just for the opportunity to possibly use that for Wishbone Hill but as a supplemental port for our Healy coal,” Simon said. “We would love to increase our exports as a company by using MacKenzie as a supplemental port.”

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