Coal: Win-Win for Utility, Customers, Miner -- Not a Bakken Story

I generally don't post stories about coal, and even less so when the stories have to do with out-of-state suppliers and utilities. But this one is interesting enough, that I've included it as an exception. There are several lessons from this story, but I won't go into them. I will simply link the story and a couple of highlights, leaving it up to the reader to look for the lessons. I think it's a great story.

Link here, from the Billings Gazette.

Peabody Energy, which operates several mines in the Powder River Basin in Wyoming, has inked a six-year deal to provide coal to several electrical power plants in Missouri — a deal the buyer says was driven by a need to meet stricter federal environmental regulations.

The basin’s low-sulfur coal will allow Ameren Missouri to defer purchase of costly clean air filtration equipment, which would be paid for by higher rates — an estimated 15 to 20 percent hike by 2017 — charged to customers.

The company said the deal with Peabody is the “backbone” to its strategy to comply with new stringent federal regulations that require lower sulfur dioxide emissions.

Data points:

• A six-year contract for 91 million tons of coal
• Contract is between the largest Powder River Basin producer and the largest Powder River Basin customer
• The contract represents a growing market for low-sulfur Powder River Basin coal
• Ameren Missouri provides electricity for 1.2 million customers in central and eastern Missouri
• St Louis-based Peabody owns three coal mines in Wyoming's section of the Powder River Basin: Rawhide, Caballo, and North Antelope/Rochelle
• The mines produced 140 million tons of coal last year
• The total amount of coal from the entire Powder River Basin produced last year was 428 million tons

The story did not say which railroad, if any, will be transporting the coal, but Warren Buffett purchased Burlington Northern Santa Fe railroad in 2010.