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Utilities across US exposed to Blackjewel's abrupt coal mine shutdowns

Owners of several coal-fired power generators may need to adjust their coal supply plans after Blackjewel LLC shut down operations at its two Powder River Basin mines on July 1, the day it filed for bankruptcy court protection.

Blackjewel owns metallurgical and thermal coal mines and operates in the eastern and western U.S., mining about 38.8 million tons of coal in 2018. Two of the company's mines in the Powder River Basin, Eagle Butte and Belle Ayr, accounted for 35.5 million tons of coal produced in 2018, according to the company's bankruptcy court filings. An S&P Global Market Intelligence analysis of federal fuel contract data shows Eagle Butte and Belle Ayr, respectively, supplied coal to eight and 25 power plants across the U.S. through the first four months of 2019.

Customers of Blackjewel's Powder River Basin mines stretch across the U.S., from Portland General Electric Co. and IDACORP Inc.'s Boardman plant in Oregon to the Scherer power plant in Georgia owned by multiple parties including Oglethorpe Power Corp. and Southern Co.

"Oglethorpe is aware of the Blackjewel mine development," Oglethorpe media relations manager Terri Statham said. "We do not expect an impact to our operations as a result of this filing."

The company, which saw its second attempt at a bankruptcy financing package rejected July 3, has warned that it is on "the precipice of conversion" from a Chapter 11 reorganization to a Chapter 7 liquidation bankruptcy.

"If these debtors convert to Chapter 7, the mines will be abandoned, equipment will be stolen or destroyed and the value of the debtors' assets will be devastated. As should be clear following the events of the hearing on July 1, these debtors are out of options," the company said in a July 2 filing.

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The amount of coal supplied to each power plant varies significantly, and coal plants generally keep stockpiles of coal on site that would help mitigate any potential long-term supply disruptions. Many plants depend on coal of a certain specification for their plants and may also be constrained by transportation or other logistical issues, but power plants supplied by the two mines may need to explore alternatives if the workers are not brought back to Blackjewel's operations, particularly in the Powder River Basin.

"We have spoken with Blackjewel and are monitoring the situation. We have developed a contingency plan to address the shut down of Blackjewel's Powder River Basin mines," said Melissa McHenry, managing director of external communications for American Electric Power Co. Inc. "We believe there are alternative supplies to replace this coal, if necessary."

Evergy Inc. buys coal from Blackjewel's Powder River Basin mines for multiple plants it operates. The company's Jeffrey Energy Center bought about 1.8 million tons of coal from Eagle Butte in the first four months of 2019, according to federal fuel contract data. The data does not show any other supplier of coal to the plant in 2019.

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Alliant Energy Corp. purchased coal from Blackjewel's two Powder River Basin for multiple coal plants in its fleet. Spokesperson Scott Reigstad said the company is monitoring the "evolving situation" with Blackjewel's bankruptcy.

"Given this occurred just a few days ago, we're still evaluating how we would proceed if the closures become a longer-term situation," Reigstad said. "However, Alliant Energy is not concerned in terms of obtaining coal since we do have numerous other coal supply alternatives available to us."

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Eagle Butte and Belle Ayr produced about 9.2 million tons of coal in the first quarter alone, about 13.1% of the coal mined out of the Powder River Basin. Producers in the region have been struggling with competition from natural gas and renewable energy.

Pure-play Powder River Basin producer Cloud Peak Energy Inc. is in the middle of a bankruptcy reorganization, and the two largest producers in the basin, Peabody Energy Corp. and Arch Coal Inc., are working to complete a joint venture of their assets in the region to improve costs so they can better compete against other fuels on the tail of each of those companies own emergence from recent bankruptcy court restructurings.