2 utilities end buys of central appalachia coal - Beckley, Bluefield & Lewisburg News, Weather, Sports

2 utilities end buys of central appalachia coal

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The Tennessee Valley Authority has ended its purchase of coal from Central Appalachia, and Atlanta-based Southern Co. is about to do the same.

Both utilities say they no longer need to buy Central Appalachia (CAPP) coal and can instead burn cheaper, dirtier coal from the Illinois Basin and still meet Clean Air Act requirements.

It was the Clean Air Act amendments of 1990 that helped squeeze Illinois Basin coal out of the market in favor of CAPP coal, but advancements in scrubber and pollution control technology are helping Illinois Basin coal regain some of its lost market share.

The Central Appalachia region includes southern West Virginia and eastern Kentucky.

TVA spokesman Scott Brooks said the utility is changing its coal sourcing "mostly because of price."

Southern Co. officials announced last month they will virtually end their purchases of CAPP coal by 2016, sourcing their coal instead from the Illinois Basin, which consists of Illinois, Indiana and western Kentucky.

Southern Co. is the holding company for electric utilities that serve most of Georgia and Alabama and southern Mississippi and the Florida panhandle.

As current contracts expire, Southern is going back to the market and buying the most cost-effective coal available, and that's Illinois Basin coal, said Robert Hardman, director of coal services.

In the 1970s and 1980s, Southern Co. utilities burned a large amount of Illinois Basin coal, but the company shifted to CAPP when the Clean Air Act Amendments took effect. But in the past decade, Southern Co. has spent nearly $9 billion in scrubbers and environmental control technologies, so it can now go back to Illinois Basin coal, Hardman said.

An analysis of Southern Co. coal purchases by SNL Financial shows that its largest single supplier is the Hobet 21 surface mine in West Virginia. Several mines in eastern Kentucky also are large suppliers.

The Hobet mine is owned by Patriot Coal.

The ash content of Illinois Basin and CAPP coals are similar, Hardman said. Scrubbing Illinois Basin coal produces more residue than scrubbing CAPP coal, but the residue can be used to produce gypsum, which is used by wallboard makers and some agricultural operations.

"Because we're burning Illinois Basin coal, we're creating more gypsum, and we're selling more gypsum into the market," Hardman said.

But from Southern Co.'s perspective, coal is not the only option. The company also has gas-fired power plants, nuclear plants in operation and one under construction, he said.

Hardman said he could not speak for other utilities, but he figures utilities close to the CAPP region will continue to burn coal from there because of transportation costs.

"Each utility is going to have to decide their own economies to determine what makes sense," he said.