High demand for coal leads to planning new import terminals

Washington (Platts)--24Oct2005

With high oil and natural gas prices feeding the demand for coal, much of
which will be imported as demand outstrips production, many companies have new
coal import terminals or expansions on the drawing board.

Plans by Drummond Coal to import up to 20 million tonnes (metric tons) of coal
into the eastern and southern US have led Kinder Morgan Energy Partners to
announce expansions at two docks. Drummond plans to expand its Mina Pribbenow
mine in Colombia from 23 million tonnes/year to 43 million tonnes/year and has
signed contracts to ensure terminal capacity.

KMEP spokesman Rick Rainey told Platts Coal Trader last week that expansion
plans are in the works for the company's Shipyard River terminal in
Charleston, S.C., and its Pier IX terminal in Newport News, Va. to handle the
Drummond tonnage.

"Drummond signed an agreement for 30 years to guarantee throughput" at Pier
IX, Rainey said. Pier IX on the James River is currently an export terminal,
but Rainey said it will be expanded to accept 9 million tons/year of import
coal by the first quarter of 2008.

It currently has storage capacity of 1.4 million tons and processes 12 million
tons of export coal. It has one dock with 50-foot draft able to handle
cape-size vessels and is served by CSX Railway. It also has blending
facilities.

The Shipyard River Terminal can store 300,000 tons with annual capacity of 3.5
million tons of bulk products, mainly coal, petroleum coke and cement. It is
served by CSX and Norfolk Southern railroads.

Rainey said planned improvements will increase throughput 30%. "Specifically,
the expansion will enhance KMEP's ability to handle the increasing supplies of
imported coal used to meet the growing demand for electricity in the
Southeast."

It will probably be expanded in two phases. The first will add 4.5 million
tons/year with new ship unloading and rail loading systems. The second will
add two receival jetties to direct coal into either of two coal yards, so coal
can be loaded from both at the same time.

McDuffie growing 

In Mobile, Ala., the Alabama Port Authority's McDuffie Coal Terminal's berth 1
export facility is being converted into an export-import facility, spokeswoman
Judith Adams told Platts Coal Trader Friday. She said work is already under
way and a crane has already been procured for the expansion, which is set to
open in the third quarter of 2006.

Southern Company already imports about 10 million tons/year of Drummond coal
into the port for its power plants in Alabama, Mississippi, Georgia and the
Florida Panhandle, Adams said. The expansion will bring throughput to between
20 million-22 million tons from its current 16 million-ton capacity.

"We are in discussions about what we can do to further increase our capacity.
Coal is the fossil fuel of choice right now for the utility market," Adams
said, noting that Jim Walter Resources, Southern and smaller buyers use
McDuffie to import coal. "The coal market has exploded for both imports and
exports here."

She said the port also exports Alabama metallurgical coal to China and Europe
for steel production. "We see a growing trend and expect that that market will
continue to grow." 

Also last week, Fort Myers, Fla.-based Keystone Coal Mining Co. said it will
build a coal import terminal in Jacksonville, Fla.

The company, which mines in West Virginia and Venezuela, has a 61-acre site
under contract and plans to build a facility that would handle 5 million-6
million tons/year of cargo including coal for southeast utilities. The site is
served by NS. It is targeted to open by the end of 2006 or early 2007.

Others plan new terminals 

In recent months, several other companies have discussed plans for coal import
terminals, including:

Mirant Mid-Atlantic LLC received permission in September from the Maryland
Public Service Commission to build a coal barge unloading facility at its
Morgantown generating station along the Potomac River in Newberg, Charles
County, Md.

The terminal is designed to off-load 5 million tons of coal/year, about the
annual coal consumption of Morgantown and Atlanta-based Mirant's Chalk Point
generating stations. Chalk Point is about 25 miles northeast of Morgantown. It
has two 364-MW coal units. Morgantown has two 626-MW coal units. Both plants
burn northern Appalachian coal.

Mirant spokesman Dave Thompson told Platts Coal Trader that the company is
looking for the opportunity to buy imported coal.

"The coal barge unloader will allow Mirant to diversify its coal supply base
by accessing the Central Appalachian Region [central and southern West
Virginia, southern Virginia and Kentucky] and offshore coal supply from
Colombia and Venezuela," the company said. "Central Appalachian coal will be
transported by rail to the Tidewater Piers in Virginia by either CSX
Transportation or Norfolk Southern, loaded into barges and shipped to
Morgantown. Offshore coal will be off-loaded from ocean-going vessels at a
deepwater port [Tidewater Virginia or Baltimore] and then transferred to
barges for shipment to Morgantown."

The plants currently receive their coal by CSX rail. Mirant hopes to have the
unloading facility, including the 550-foot pier and 860-foot conveyor,
completed by 2007.

Dominion Resources Inc., which owns Dominion Energy, is considering the
construction of an import coal pier at its Chesapeake Energy Center power
plant on the Southern Branch of the Elizabeth River in Chesapeake, Va. The
four units burn 4,500 tons of coal/day to produce 760 MW.

Dominion's plant currently uses domestic coal brought in by rail, but the
company is considering bringing in foreign coal by barge to lower costs,
Dominion said. To meet new clean-air regulations, the company is studying the
cost-effectiveness of using cleaner South American coal in addition to
installing equipment to reduce emissions at the plant.

Dominion said it has just begun to meet with federal, state and city officials
about the Chesapeake terminal and has no construction schedule yet. 

Spokesman David Botkins told Platts Coal Trader Friday that Dominion is still
reviewing the plan and has not decided whether to proceed. 

MMC Energy North America LLC and Carolina Marine Terminal Inc. intend to
jointly develop an expansion of a bulk coal-handling terminal on the Cape Fear
River in Wilmington, N.C.

The bulk coal terminal will have facilities to handle other raw materials from
barges, ships, rail cars and trucks. It will support coal generation assets
controlled by MMC and its affiliates as well as other utilities and
independent power producers, the companies said. 

Phase 1 of the project is permitted, and CMT has signed a service contract
with Progress Energy Carolinas to transload and manage the coal stockpile at
its Sutton plant in Wilmington. At the existing terminal, 63 acres that CMT
controls are permitted to store coal and other bulk raw materials. The
terminal, which is served by CSX, will handle coal from Colombia and Venezuela
as well as other sources.

Alpha Natural Resources Inc. said in July that its Alpha Terminal Co.
subsidiary and its partners are considering a $20 million-$25 million
investment in the construction of a new coal import facility at DTA's Newport
News, Va., export terminal. 

Engineering is expected to be completed shortly, and construction could begin
later this year, with a targeted in-service date of early 2007.

Alpha Terminal is the largest partner in DTA, holding a 32.5% interest. Other
partners include subsidiaries of Peabody Energy (30%), Dominion Energy (20%)
and Arch Coal (17.5%). 

Alpha owns a 24.5% interest in a Venezuelan coal mine that is expected to
begin operation in 2007.

-- Mark E. Heckathorn, mark_heckathorn@platts.com

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