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PETROLEUM DIRECTORY: Usibelli Coal Mine enters the 21st century With plenty of reserves and stable production costs coal competes effectively with other energy sources Alan Bailey Petroleum Directory Contributing Writer
Amid the ups and downs of the oil and gas business it’s easy to forget the relative stability and reliability of the earliest form of industrial energy — coal. In Alaska, for example, Usibelli Coal Mine Inc. has unerringly turned out a flow of “black gold” from the Healy area for more than 60 years, providing energy for Alaska and generating a valuable export commodity for the state.
Emil Usibelli, an Italian immigrant, founded Usibelli Coal Mine in 1943, although mining operations in the Healy area actually started several decades earlier.
“(Usibelli Coal Mine) was started with a 10,000 ton, one-year contract to supply coal to Ladd Airfield during World War II,” Steve Denton, Usibelli Coal Mine’s vice president for business development, told Petroleum News.
Emil Usibelli created great skepticism among local miners by operating a surface mine rather than following the conventional strategy of underground mining.
“They thought this upstart didn’t really know how to mine coal,” Denton said.
However, Usibelli’s revolutionary approach paid off and his business expanded steadily. Underground mining in the Healy area finally ceased in 1962 and in 1971 Usibelli Coal Mine bought out its last remaining competitor in the area.
The Usibelli family still owns the company and Joe Usibelli Jr., Emil Usibelli’s grandson, is now company president. Energy for Alaska Ever since its first contract with Ladd Airfield, Usibelli Coal Mine has supplied energy for heat and electricity in Alaska, especially in the Alaska Interior. The company supplies coal for cogeneration plants at Clear Air Force Station, Fort Wainwright, Eielson Air Force Base, the University of Alaska Fairbanks and for Aurora Energy in Fairbanks.
“We serve one mine-mouth powerplant ... and that’s the Golden Valley plant here in Healy,” Denton said.
Most of the plants are cogenerators, supplying both electricity and hot water or steam for heating neighborhood buildings. This arrangement maximizes the energy usage from the coal and provides environmental benefits in Alaska’s frigid winters.
“In places like Fairbanks where you have air quality problems ... in the winter time, by centralizing your fuel burning in a central powerplant ... you’ve got much better control over the combustion and control over the pollutants ... you also dramatically reduce ice fog,” Denton said. Cost stability With question marks over the future of gas supplies in the Cook Inlet, Denton thinks that coal can help stabilize the future cost of electricity in the Alaska Railbelt. Whereas high and unpredictable exploration costs tend to heavily influence the cost of natural gas, coal exists in vast quantities and its production cost tends to be very stable, Denton said.
“The cost of finding coal is relatively low and most of your costs associated with producing coal are operating costs,” Denton said.
Given this economic background, Usibelli Coal Mine has proposed the development of another mine-mouth powerplant called the Emma Creek Energy Project.
“We’ve produced a conceptual design of a power plant that would be located near our (new) Jumbo Dome deposit ...,” Denton said. “That would be a new mine that would produce somewhere in the neighborhood of about 1.5 million tons (of coal) per year to feed a 200 megawatt powerplant.”
Usibelli Coal Mine also owns leases covering the majority of the Wishbone Hill coal deposits near Sutton. These high-rank coal deposits could feed electricity generation in the Matanuska and Susitna valleys. A good coal to export The low sulfur content of the coal from around Healy makes this environmentally friendly fuel especially appealing for use in powerplants.
“The sulfur content of the coal that we ship is typically 0.2 percent or lower,” Denton said. “So we have some of the lowest sulfur coal in the world.”
Also in recent years there’s been an upsurge in demand for the type of low-rank coal that the mine in Healy produces. The high quantity of volatiles in this type of coal renders the fuel easy to burn in powerplants, while low mining costs offset an energy content somewhat below that of higher-rank bituminous coals.
With exports to South Korea starting in 1985 Usibelli Coal Mine began an international trade in low-rank coal.
“They were blending our coal with coals from other countries and burning in a furnace that was designed for that purpose,” Denton said. “At that point in time we were the only low-rank coal exporter in the world.”
When Indonesia entered the low-rank coal market in the early 1990s the market expanded. However, a glut of coal depressed prices and in 2002 Indonesia outbid Usibelli Coal Mine for the South Korea contract.
Since then, with China starting to import coal, world coal prices have rebounded. Usibelli Coal Mine is exporting to South Korea again and the company says that it can now compete on price with other Pacific Rim producers.
“The Pacific Rim coal price has more than doubled ... from what it was a year ago,” Denton said. “That has created a very keen interest on the part of coal purchasers around the world to look for new sources of supply.”
So Usibelli Coal Mine is actively pursuing export opportunities around the Pacific Rim and is even looking at export possibilities to South America. Responsible development Although Usibelli Coal Mine has expanded its operations over the years the company has also achieved an exemplary reputation for its environmental programs. In fact the company pioneered a land reclamation program several years before the federal government started to regulate surface mine reclamation.
“The fundamental goals of that (environmental) program are protecting the water, so as not to pollute the surface and ground water, and to return the land to a condition comparable to its condition prior to mining,” Denton said.
To protect the water in the area around the mine, all discharged water passes through certified settling ponds. Laboratory technicians regularly test water samples from the ponds and surrounding countryside, to ensure that no contamination is occurring.
The company reclaims land by continuously swapping overburden from actively mined strips back into previously mined strips.
“The first step is to salvage the topsoil from the new areas you’re going to mine and spread it on the areas that you’ve already backfilled,” Denton said. “... then we’ll typically put grass on that and, if needed, we’ll plant trees and plants that we’ve raised from seeds gathered in the Healy area ... we plant somewhere in the neighborhood of 20,000 to 30,000 trees and shrubs every year.”
Local school children gather alder, spruce and willow cones for growing new trees, while college students help with planting trees and carrying out other reclamation activities.
The company’s community involvement extends well beyond these remediation activities. Each year the company awards fellowship grants to the University of Alaska Fairbanks, gives scholarships to university students and, through the Usibelli Foundation, awards grants to worthy causes. So what of the future? With international trade in coal starting to boom Denton feels excited about his company’s potential to expand into the burgeoning coal market. Usibelli Coal Mine’s current production of 1.2 million to 1.3 million tons of coal per year sits well below the company’s potential production rate.
“We feel that we’ve got the capacity for somewhere in the neighborhood of about 3 million tons per year, with minimal additions to existing equipment,” Denton said.
And with Alaska’s need for stable energy supplies coupled with rising international energy usage, that extra capacity may prove invaluable.
Editor’s note: Alan Bailey owns Badger Productions in Anchorage, Alaska.
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