Bear Run Coal Mine, USA

Peabody Energy (Peabody) announced in March 2009 that it will undertake development of the Bear Run Coal Mine in Sullivan County, Indiana. Peabody will invest up to $400m in the development of the mine that will supply coal to two Midwestern electricity generators. The supply contract for the two electricity generators will last for 17 years.

Bear Run is projected to be the biggest surface mine in the eastern US. Operations are expected to start in 2010. Peabody is developing the mine to meet its long-term supply commitments for 90mt of coal. The mine is expected to employ 350 workers for digging coal from the ground and at the plants to generate electricity.

Duke Energy will build a $2bn coal gasification power plant for Peabody. Duke Energy specialises in providing gas and electricity services in Ohio, Indiana and Kentucky regions. The power plant will be located near Edwardsport, which is about 10 miles from the new mine.

Geology and reserves

The Bear Run coal mine is estimated to have a reserve of 200mt. Half of the reserves will be supplied to the Midwestern electricity generators.

The mine is part of the Illinois Basin, a region rich in coal. The region is spread across Illinois, southwestern Indiana and northwestern Kentucky. Indiana was the tenth biggest generator of electricity in 2007, 94% of which was derived from coal.

Production

The plant is expected to start operations from 2010 with an initial production of up to 3mt. Production will later be increased to 8mt of coal per year. This will constitute a 25% increase in Peabody's sales from Illinois basin compared to that in 2008. The Bear Run mine development is expected to yield $6bn in revenues for Peabody, which generates 10% of all electricity in the US and 2% worldwide.

Transport

Peabody has signed a contract with Indiana Rail Road Company (INRD) to build a 5.2 mile industrial spur. The spur will deviate from the main line located near Dugger and pass over the Indiana Highway 159. It will then turn southward running parallel to the highway and reach the load-out trucks at the mine.

The spur will link the load-out to the east-west line. It will exclusively serve the Bear Run coal mine and use half-mile of the earlier right-of-way, which served Dugger. Peabody will own 3.26 miles of the right of way.

INRD will invest $17m to construct the spur, which is expected to be completed by 2010. The company will invest an additional $5m during the next two years to improve infrastructure to accommodate increased traffic volumes. The Bear Run coal mine is expected to increase INRD's coal transportation volume by 30%.

INRD filed a petition with the federal Surface Transportation Board (STB) in October 2008 for the spur. On 14 April 2009, STB issued an order clearing the way for construction of the railroad. Negotiations for land acquisition, clearing and grubbing of the section of the right-of-way is in progress.

During the construction of the spur, Peabody will transport coal via trucks. The truck haul distance is 34 miles, which the trucks will cover to reach the Farmerburg mine preparation plant and the rail load-out.

The route of the trains can be towards east to Indianapolis where they will be connected to Indiana Southern Railroad. Alternatively, the route can be to the west to the Hoosier Energy Rural Electric Co-op's Merom station and Ameren's Newton station.

Environment

Environmentalists view the developments in the Illinois Basin including the Peabody Bear Run coal mine with skepticism. Surface mines tend to exhaust dust and pollutants into the air. The mines also discharge metals and toxic matter into waterways posing health risks to residents in the area.

Environmentalists also predict that the setting up of the coal-fired plant will increase carbon dioxide emissions. The Illinois Basin already contains the largest cluster of coal-fired power plants. The plants are located near the Ohio river and are expected to pollute the river with increased carbon dioxide emissions once other coal companies also start mining activities in the region.