Usibelli thrives on coal exports in 2009

Increased interest in Alaska coal from buyers in Asia and Chile boosted exports from the Usibelli Coal Mine to record levels in 2009.

According to Steve Denton, vice president for business development for Usibelli Coal Mine Inc., exports jumped 54 percent to 803,572 metric tons last year, or roughly twice the mine's five-year average. The previous peak for exports totaled 723,000 metric tons in 1990.

Denton told Mining News Dec. 18 that tightening markets in the Pacific Rim explained the bump.

"The demand in the Pacific basin is starting to stress the supply available in other areas, and so many of the coal consumers are starting to look around for other sources of supply," he said.

Denton also said several think tanks recently mentioned Alaska as a potential long-term source of coal.

A more diverse group of buyers also strengthened Usibelli's position in 2009. Of the family-run mine's total 2009 exports, 467,000 metric tons, or nearly 60 percent, was shipped to a buyer in Chile. The remaining 337,000 tons went to buyers in Asia.

While exports to both regions represent strong growth, the boost in sales to Asia was the larger of the two. In 2007, when Usibelli took over operation of the railroad terminal and loading facility in Seward, the company had no exports to Asia.

"We just were not competitive at that time with Korea," Denton said.

A large drop in the cost of shipping following the 2008 Summer Olympics in Beijing also gave Usibelli an edge. Because the cost of shipping fell faster than coal prices, the price of Alaska coal delivered to Asia dropped faster than the price of coal from other regions.

"That differential created a window of opportunity for us when we ended up booking a lot of sales," Denton said.

Running near full capacity

The increase in exports has led Usibelli to hire new workers and pushed the mine to near capacity. According to Denton, Usibelli has hired a handful of additional workers at the loading facility in Seward and about 20 workers at the mine in Healy, including truck drivers, mechanics, and heavy equipment operators.

"It's had a pretty significant impact on us all the way down the line," he said. "We're running pretty much everything in the system at close to full capacity."

The record exports also helped the Alaska Railroad Corp., which hauls Usibelli coal to Seward and owns the loading terminal, which is operated by Aurora Energy Services, a Usibelli affiliate.

Revenue from tourism, shipments of petroleum products refined in North Pole, and the hauling of gravel all dropped in 2009, according to Steve Silverstein, the railroad's vice president for business development.

"Overall, 2009 was a down year in general, but export coal was one of the bright spots," Silverstein said. "The extra revenue helped us. Certainly, it made it a little bit less painful than it otherwise might have been."

Falling revenues have forced the railroad to lay off about 200 workers in the past few years.

At Usibelli, more coal production has reduced the effective lifespan of permitted reserves. The mine will most likely submit a new permit application in the first half of 2010 to boost its accessible reserves, Denton said. "The amount we have permitted right now is kind of at the low end of what we'd like to have relative to our production," he explained.

A solid outlook for exports

Denton said Usibelli is in good shape for 2010, with almost as many sales already booked as in 2009. "We think we'll maybe exceed 2009," he said.

Denton added that Usibelli is selling all the coal it can produce with the given level of demand and isn't looking hard for new customers. But he said the company continues to send inquiries, and would entertain expanding its capacity if it could secure a long-term contract with a buyer.

Denton also stressed the importance of the mine's in-state customers, which include Golden Valley Electric Association, the University of Alaska Fairbanks, and Interior military bases. Unlike exports, which are highly variable and unpredictable, in-state sales are relatively stable.

"Were we not buoyed by a stable domestic business, we would not be in the export business," Denton said.

Groups file suit to stop alleged coal pollution

Trustees for Alaska, a public interest law firm, Jan. 6 said it filed a lawsuit against the railroad and Aurora Energy Services on behalf of the Sierra Club Alaska Chapter and Alaska Community Action on Toxics.

The environmental groups allege that the railroad and Aurora are violating the Clean Water Act due to unpermitted discharges of coal into Resurrection Bay.

The environmental groups said a lack of adequate pollution controls at the coal-loading facility has resulted in ongoing dumping of coal debris into the bay.

They also said uncontrolled blowing coal dust is damaging water quality in the bay. At the end of October, the conservation groups gave the railroad and Aurora a 60-day notice of intent to file suit if the coal transporters failed to obtain a permit for the operation under the Clean Water Act, Section 402. They vowed to take measures to limit discharges of coal from the facility.

However, Sierra Club Alaska and Trustees for Alaska representatives said at the time that they could not provide specific measures or benchmarks that would prevent them from proceeding with the lawsuit.