Burning ambition could ignite coal project

The stars may be in alignment at long last for a huge coal project that has been languishing for decades just 50 miles from Anchorage. Developer Bob Stiles has renewed confidence that a mine will be built to exploit the Beluga-Chuitna coal fields, as he said in a presentation to the Alaska Miners Association convention in Anchorage Nov. 4. (See related story on cover of Nov. 20 Petroleum News.)

The deposit on the west side of Cook Inlet, 10 miles from the Native village of Tyonek, contains an estimated 1 billion tons of sub-bituminous coal reserves, 700 million tons of which is proven. The owners of the property, Texas businessmen Richard Bass and Herbert Hunt, established a company called PacRim Coal earlier this year to develop the mine, contracting with Stiles to manage the project, including the marketing effort.

Stiles recently signed a Memorandum of Understanding with Alaska's Department of Natural Resources for the large mine project team to coordinate all the state permits.

The permitting process has been made more complicated by the outcome of a 1987 suit brought by Anchorage law firm Trustees for Alaska against DNR, which was resolved in 1992.

"As a result of the Trustees' suit and the Supreme Court ruling, we have to permit all of the parts of the project, not only under all of the typical sorts of permits that you have to get, plus we have the permitting under ASCMCRA (the Alaska Surface Coal Mining Control and Reclamation Act)," Stiles told the convention.

"We're working closely with DNR to figure out what that means."

Road, port, other facilities must be included

The Alaska Supreme Court upheld the argument of Trustees for Alaska that DNR's permit for surface mining and reclamation, originally issued to Diamond Shamrock-Chuitna Coal joint venture, should have encompassed off-site facilities: namely the planned 11-mile access road and adjacent conveyor from the mine site to a port, port facilities, a solid waste disposal facility, gravel pits and a housing facility with an air strip and access road.

"Coal development's unique among the resource development in Alaska, in that in addition to all of the typical NPDES permits, Corps permits, coastal reviews, on and on and on, we also have a regulatory machine just for us … That's unique to coal development anywhere, by the way," Stiles said. "The other thing that is unique in coal development as compared to other resources is that it's market-driven. Coal's not a pure commodity. You can't pick up the Wall Street Journal every morning and see what your product's worth and say, oh, OK, well, we've got an economically viable deal."

Construction could begin in 2007

Nevertheless, Stiles believes the permitting and economics are doable and that a mine will be developed within the next few years. "All things going well, as they rarely do, we anticipate starting construction in the second to third quarter of 2007 and the first coal goes in the boat fourth quarter of 2009 to first quarter of 2010," he said. "We're talking about maybe 300 to 350 jobs and 150 to 175 people on site at any given time." The mine would operate 24 hours a day, with two 12-hour shifts.

The first person to obtain prospecting permits for the property in the late 1960s was another Texan, Starkey Wilson, who went into partnership with Bass and Hunt. "It's a wonderful resource to develop with beneficial uses," Wilson told Mining News. "It would be a tragedy if it's not developed. I believe very much in it."

In 1990 more litigation came, this time from the Mental Health Trust, a case that dragged on until 1995.

This shut down the marketing effort, Stiles told the convention.

"It put a cloud on what your future royalties might be, and the last thing you want to be doing is sitting in front of a potential customer in a foreign country and saying, well, we've got this little problem that we've got to work with here, and then you try and explain what the damn problem is, and meantime there's the guys from Australia, Indonesia, South Africa … and the guy sitting across the table from you says, well, you better solve that problem, because I've got other guys waiting, they want to sell me coal today," Stiles said.

Some 500 holes drilled

Over the years about 500 holes had been drilled in the 20,000-acre area. By 1995 the technology for analyzing the deposit and planning a mine had improved, and a detailed geologic model of Chuitna was developed for the first time. The current plan is to produce 10-12 million tons of coal per year, and possibly up to 15 million tons, according to Stiles. "We'll have storage for about a million tons and hope to God we've never got a million tons in the yard," he added.

Last year the property became embroiled in yet another controversy, this time over Gov. Frank Murkowski's efforts to market the coal to Taiwan, using the unproven KFx technology to remove moisture from it. Alaska's then attorney general, Gregg Renkes, resigned after it was discovered that he owned shares in Denver-based KFx.

"We do not believe that upgrading of the coal is an essential or necessarily a desirable element of the initial development of the Chuitna Coal Project," Stiles told Mining News. "We are aware of the ongoing discussions between the state and Taiwan as they are related to coal … Should a viable project employing coal as a fuel or feedstock result from the discussions between the state and Taiwan, we would be more than pleased to sell them coal."

There is no difference between the quality of the Chuitna coal and the quality of the coal produced by Usibelli, Alaska's only coal mine, Stiles said. "Theirs is high-moisture, ours has been described as wet," he told the convention, provoking much laughter. "Well, that's an incorrect description, wet. As for marketing, we go into business, we knock Usibelli out? Wrong. Us going into business is good for Usibelli as well as us. Alaska is not looked at as a coal-producing region. What those customers in the export markets are looking for are coal-producing regions. So by us going into production and shipping coal, it actually helps Usibelli."