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Issue link: https://coal.epubxp.com/i/105148
southern coal continued tract is serviced from our new mid-vol operation at Bishop, which is now the crown jewel of the met operations. We have additional met contracts, but the rest of the met production is currently sold on a spot basis." The AEP Decision Like all utilities that operate coal-fired power plants, AEP is under a lot of pressure these days (See May 2012, Coal Age, p. 34). The difference of course is that AEP would be the largest. When asked about the transaction, Justice explained that AEP has adopted a philosophy that differs from other utilities. "Most of the other utilities are diverting all of their attention to natural gas," Justice said. AEP is also pursuing gas, but it has not turned its back on coal. It's trying to keep coal as part of a diversified fuel mix. And if the economy improves, as everyone hopes it will, they will need to generate power from coal." Southern Coal has worked with AEP for a long time. "We have a great relationship. Both parties have worked together to craft a deal that makes economic sense for both sides," Justice said. "They knew how many jobs were at stake and we are very appreciative for what they have done. There are more than 1,000 families that will benefit directly by this decision and many more indirectly." Should gas prices surge, coal as part of a diversified fuel portfolio serves as a hedge for the utility. AEP understands that coal operators can't simply bring production online at the drop of hat after being idled for months or years. Southern Coal also has existing supply agreements with Virginia Power, Carolina Power & Light and traders on the Big Sandy River. "If demand grows, we would need more equipment to expand production beyond 9 million tons," Justice said. A Diversified Portfolio Southern Coal produces 4.5 million tpy of met coal: 500,000 tpy of low vol met coal (Tams), 2 million tpy of mid-vol from the new Bishop and Alabama operations, and 2 million tpy of high vol with 1.5 million coming from Virginia and 500,000 tpy coming from the new Beechcreek surface mine in Phelps, Ky. On the met side of the business, in addition to the Tams and A&G; operations, Southern Coal acquired Sigmon Coal Co. and Lambert Coal Co. in Virginia, which have been rebranded as Virginia Fuel Corp. These operations were contiguous with A&G.; "With this acquisition, we doubled our reserve base in Virginia," Justice said. "We have not expanded our production in total. We reduced surface mine production and increased underground production. In Virginia, we are still producing 2.5 million tpy." Once met prices declined, the company reversed its decision to redirect all of its Virginia tons into the met. Today, the Virginia operations are positioned as 1.5 million tpy met and 1 million tpy steam with the bulk of that production going to AEP. The decision to increase underground production in Virginia was based on quality. "The move from surface to under- ground was a met-driven decision," Justice said. "Most of the surface mineable reserves are high-vol B. Most of the underground reserves are either high-vol A or high-vol A minus—very good met reserves." The company's new Beechcreek mine operates two Komatsu WA900 spreads with Komatsu 475 dozers and Cat 777 trucks. Beechcreek was purchased in July 2010. It was a small permit and Southern Coal added pieces to it. "In a deal with Berwind Land Co. we obtained permits from Lexington Coal Holding," Justice said. "We have grown that to a 12-million ton reserve base with 5 million tons permitted and the remainder is in the process of being permitted. The ratio is 22:1. Beechcreek is a direct ship operation with an NS rail line nearby. The seams being mined are the Alma (three splits), Cedar Grove and Pond Creek (or No. 2 Gas). The surface mines work two 10-hour shifts seven days per week. The underground mines still work two 9-hour shifts six days per week. The surface mines have three crews and the underground mines have two crews. At the surface mines, the A crew works five days, B crew works five nights, and the C crew works two days and two nights. "We have been able to increase our run-time hours by about 28% and that is helping our fixed costs," Justice said. "And, the men like it. They still get a good amount of overtime and a decent amount of time off, but the simple truth is most people are just happy to be working." The Crown Jewel A McLanahan filter press will dewater the tailings at the new Bishop prep plant. 32 www.coalage.com Permitting for the Bishop operation began in 2010. It has 300 million tons of reserves with 6 million tons of surface mineable reserves permitted and 5 million tons of underground mineable reserves permitted. "It's a 24, 25 vol [midvol] coal," Justice said. "We have submitted several surface and underground permits. When approved, they will add 60 million tons to the permitted base." The property sits right on the border of Tazewell County, Va., and McDowell County, W.Va. Southern Coal acquired it from CONSOL Energy eight years ago. In 2013, Bishop will produce 900,000 tons from the surface mining operations and 300,000 tons from the underground mining operations. The underground mine will cut coal from two sections. One section started production in December. January 2013