Peabody Energy announced Wednesday morning it has entered into long-term coal supply agreements for more than 90 million tons of coal, which will allow development of the Bear Run Mine, south of Dugger.
Bear Run Mine will have an expected capacity of approximately 8 million tons of coal annually. The mine will initially supply two major Midwestern electricity generators under long-term contracts with terms of up to 17 years, which together are expected to generate nearly $6 billion in revenues.
"We're ramping up very quickly with operations expected to begin as quickly as the second half of this year then next year we'll begin to producing 2 to 3 million tons and will increase production there after," said Peabody spokesperson Beth Sutton. "The Bear Run will be Peabody's largest surface mine in (the) eastern United States and it's ramping to serve some of the largest contracts in our history."
Company officials say the demand for coal is growing.
"Long-term coal demand continues to grow. We are the largest producer and reserve holder in the Illinois Basin, which is one of the fastest-growing coal regions. We are pleased to be partnering with our customers to meet their energy needs and develop a major new coal mine," said Peabody Chairman and Chief Executive Officer Gregory H. Boyce. "Peabody's history as a reliable supplier of affordable fuel, combined with our leading production and reserve position and financial strength, provided us the opportunity to secure some of the largest coal supply agreements in Peabody's history and develop this world-class operation to serve growing customer needs."
Approximately $350 to $400 million in capital will be invested over several years to bring the mine to its 8 million ton per year capacity. Bear Run will employ approximately 350 skilled workers and would annually contribute approximately $140 million in regional economic benefits, Sutton said in a prepared news release.
"Coal is the key to American energy independence and to the affordable power in which Indiana's future prosperity depends. This is great job news in the near and long term," said Gov. Mitch Daniels.
Peabody Energy is the world's largest private-sector coal company, with 2008 sales of 256 million tons and $6.6 billion in revenues. Its coal products fuel 10 percent of all U.S. electricity generation and 2 percent of worldwide electricity.
This is announcement is good news to Indiana Railroad Company which announced last October that it was building a five-mile spur rail line south of Dugger to serve the new surface mine.
Indiana Rail Road spokesman Chris Rund told the Greene County Daily World that the new mine will be located south of Dugger -- south of the rail's east-west main line.
"The extension would connect with our main track near Dugger (just east of town). There have been a number of rail lines owned by both mining companies and railroads that have served coal mines in this area for many years. Tracks have been rebuilt, abandoned and/or relocated through the years as mining activity relocated and changed," Rund said. "The extension will cross Highway 159 and then run parallel to the road. Length of the extension is approximately 5.2 miles."
Indiana Rail Road Company estimated the cost of the spur at between $9 million and $12 million.