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NEW YORK (Reuters) - Two years ago, Peabody Energy Corp opened a new coal mine in Sullivan County, Indiana. The mine,called Bear Run, is now the largest surface mine in the easternUnited States and a symbol of the revival of one of America'shistorical coal fields. As coal mining slows in Appalachia, Midwestern fields are drawingnew coal investors as more efficient anti-pollution technology atcoal-fired power plants has made Illinois Basin coal competitiveagain. "It's probably the fastest growing region because now utilitieshave scrubbers, they can burn that nasty coal," said William Burns,a coal industry analyst with Johnson Rice in New Orleans. Coal entrepreneur Chris Cline is betting on an Illinois Basin boomwith a planned $300 million initial public offering (IPO) for hisForesight Energy and producers like Peabody and Alliance Coal areramping up operations or opening new mines. Peabody, the largest U.S. coal producer, opened another new mine,Wild Boar, in Indiana last year and is expanding its Gateway minein southern Illinois, in a region where Peabody traces its rootsback to its first mine in 1895. The Bear Run mine alone employs 460miners and produces 6 million tons of coal a year. Production in the Illinois Basin, which covers parts of Illinois,Indiana and western Kentucky, shrank by more than one-third in thelast two decades on environmental concerns over the high-sulphurcontent of its coal. The game changer was the advance of anti-pollution scrubbertechnology that allows burning high-sulphur coal with fewerpollutant emissions, analyst Burns said. Also, stricter emissions regulations requiring scrubbers mean powerplants can no longer get by burning lower-sulphur Appalachian coal. Scrubbers using limestone or lime can remove as much as 97 percentof sulphur dioxide (SO2) emissions at a coal-fired electricityplant. Most utilities have now installed scrubbers following the2005 Clean Air Interstate Rule that required further reduction inSO2 emissions in the eastern United States. Burns noted that the Illinois Basin was the region most affected bythe Clean Air Act and subsequent amendments that set federalcontrols on air pollution. The resurgence of the Illinois Basin contrasts with the central andnorthern Appalachian region of West Virginia, Virginia, easternKentucky and Pennsylvania, where many of its mines are played outor increasingly difficult and expensive to work. "Now most plants have installed scrubbers and there are veryfavorable conditions for mining there," said analyst Lucas Pipes,of Brean Murray Carret & Co. "There are still virgin seams thathave never been mined and costs are extremely low." Illinois Basin coal is cheaper to mine because the coal seams arecloser to the surface, and the region is well-positioned to shipcoal to Gulf ports for growing U.S. exports, Svec said. "The Illinois Basin has good growth potential from a variety ofperspectives," said Peabody spokesman Vic Svec. "It is a backfillagainst the continuing decline of central Appalachia." LOWER COSTS, EASIER TO MINE The Illinois Basin, one of America's four major coal basins besidesnorthern Appalachia, central Appalachia and the Powder River Basinof Wyoming, has been mined since the 1800s. In the 1970s, it was producing about 140 million tons per year,according to U.S. Energy Department data. But it fell below 100million tons per year after 1990, following implementation of CleanAir Act amendments. In 2011, Illinois Basin output rose to about 116 million tons. By contrast, Appalachia's total production has fallen from a highof 488 million tons in 1990 to about 336 million last year. Overall, the U.S. coal industry is in a slump, with prices forthermal coal, used for power generation, plummeting as demand fromutilities has fallen off. Coal producers, mostly operating in Appalachia, have suffered aspower plants increase the use of natural gas, which is athistorically low prices, and switch off many older coal-fired powerplants. The relatively mild U.S. winter has also led utilities to burn lesscoal, forcing producers to shut mines to manage supply. The lower prices, combined with the higher costs of mining inincreasingly more difficult Appalachian coal seams, are squeezingmargins and forcing producers to scramble to find lower-costalternatives. "They have discovered that Illinois Basin coal is a suitablereplacement of high-cost Appalachian coal," said John Hanou, whoseHanou Energy Consulting LLC just carried out a survey on theregion's prospects for the next 10 years. Adding to the attraction of Illinois Basin coal is that costs areabout 40 percent to 50 percent lower than in Appalachia because thecoal seams are close to the surface. Mark Levin, an analyst with BB&T Capital Markets, said somecompanies operating there had mining costs of $20-$30 per ton,compared with as much as $70 per ton in Appalachia. In its IPO filing, Foresight said its average costs last year were$19.85 per ton. Hanou predicts Illinois Basin production could rise to 136 milliontons in 2012, with the addition of two Foresight mines. Daniel Scott, an analyst with Dahlman Rose & Co, believesproduction can increase by 50 percent in the next few years. Peabody produced 28.1 million tons in the Illinois Basin last yearand expects to boost mining as it forecasts U.S. coal exports willincrease by more than 75 percent to 250 million tons in the nextfive years. Alliance Coal, a subsidiary of Alliance Resource Partners LP, wasthe No. 2 producer in the Basin last year with 27.7 million tons. Cline's Foresight mined 10.4 million tons last year but with twomines -- Sugar Camp and Hillsboro -- opening this year, it couldrise to 25 million by 2013, Hanou said. Thomson Reuters 2012 All rights reserved SUBSCRIBE to Mineweb.com's free daily newsletter now. We are high quality suppliers, our products such as Wire Guide Nozzle , China Coil Winding Magnetic Damper for oversee buyer. To know more, please visits Electronic Wire Tensioner.
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