PacRim owners shelve Chuitna coal mine plans

PacRim Coal’s plan for a 12.5 million-tons per year export coal mine has been put on hold, very likely ending work to develop the mine that has spanned decades.

PacRim, an affiliate of Dallas-based Hunt Oil Co., has withdrawn from a lengthy quest for regulatory approvals for its Chuitna Coal Project, a spokesman said.

The project is in the Beluga coalfields on the west side of Cook Inlet, 50 miles west of Anchorage.

“Following several months of internal review and discussions, the partners in PacRim Coal, LP have decided to suspend pursuit of its permitting efforts to invest in other projects,” company vice president Joe Lucas said in a statement.

Lucas said the company isn’t yet ready to say the project is dead, but “will be clarifying its intentions with the relevant agencies,” including the landowner, the State of Alaska’s Mental Health Trust Land Office.

State officials were notified March 31 of the decision to withdraw from preparations of a state surface mining permit, said Russ Kirkhan, chief coal regulator in the state Department of Natural Resources. The decision by the owners, the Hunt family, was made the March 21, the state was told.

The action came as a surprise as PacRim had been working on its state application as recently as two weeks ago, Kirkhan said.

PacRim had been working on a draft environmental impact statement, or EIS, with the U.S. Army Corps of Engineers as lead agency. The Corps had put the EIS work on hold last November to allow the company to complete its application for the state surface mine permit, a Corps spokeswoman said.

A complication for PacRim has been an extended permitting process and regulatory uncertainties caused by impacts of a surface mine development on local salmon streams. This also stirred opposition from environmental groups and residents of Tyonek, a nearby Alaska Native village.

About 300 million tons of subbituminous coal reserves had been confirmed by PacRim’s drilling in a 5,000-acre area, but the region, known as the Beluga coal deposit, is estimated to potentially hold several billions tons of coal.

While the coal is low-rank it has very low sulfur content, which makes it attractive as a blend stock to enable coal-fired power plants to meet air emissions standards.

Usibelli Coal Mine Inc. now mines similar low-rank coal at its mine at Healy, and has exported coal to power plants in Asia and to Chile for use as blend-stock, although most of Usibelli’s production is sold to power plants in Interior Alaska. It has shipped only one export load in the last two years and the Alaska Railroad has shut down its coal terminal at Seward.

PacRim wouldn’t say what motivated its decision but the continued outlook for a soft Pacific steam coal market and the political drag created by environmental opposition were no doubt contributing factors. The company has worked on the project since the 1970s and at one time, in 1990, it was fully permitted and ready to build.

A slump in Pacific coal markets caused the Hunts to put a pause on construction, and when markets recovered and planning resumed, most of the permitting and environmental work had to be redone.

State-owned lands in the area are held by the state Mental Health Trust Authority. An estimated $300 million in coal production royalties the project would have produced would have gone to the authority, which funds state programs for mental health and the disabled.

Alaskans expressed disappointment in PacRim’s decision.

“The Chuitna Coal Project would have provided many economic benefits to Alaskans, including an estimated construction cost of $750 million dollars, employing up to 500 workers over the two-year construction phase,” said Marleanna Hall, director of the Resource Development Council of Alaska.

“It would have employed 350 people in production with an annual payroll of $35 million dollars. These are good, family-wage paying jobs.”

The project has seen about $150 million spent on it with around $50 million of that in the last decade.

“It’s unfortunate to have this investment no longer coming to Alaska,” Hall said.

Local environmental groups took the opposite position.

“This was a bad deal all around for Alaskans. It would have set a horrible precedent for mining through salmon streams,” said Bob Shavelson, director of Cook Inletkeeper, a local environmental watchdog, a reference to PacRim’s plan to temporarily divert, but then restore, several miles of a salmon-bearing stream.

Tribal leaders at Tyonek voiced similar feelings.

“Our waters are safe now! We can fish our river without any worries of harmful effects to our fish as well as the wildlife that surround the waters of our river,” said Arthur Standifer, Tribal president of the Native Village of Tyonek.

Not everyone in Tyonek village shared that view. Leo Barlow, CEO of Tyonek Native Corp., the community-owned development corporation, said, “PacRim was a great company to work with. They have spent a lot of money and many years in planning, and had developed some pretty innovative strategies, such as moving coal in containers in ways that would eliminate dust and pollution. They hired our shareholders and consulted with us frequently.”

In recent years, two companies have explored other ways of commercializing the Beluga. Cook Inlet Region Inc., the Anchorage-based Alaska Native regional corporation for Southcentral, owns extensive coal lands in the area and has done test drilling and planning for underground coal gasification, a process that would manufacture a coal synthesis gas through a combustion in deeply-buried coal seams. The gas could then be used in power generation or other uses.

Australia-based Linc Energy, an independent, also conducted test drilling. Neither entity developed a project, however.

Tim Bradner is co-publisher of Alaska Legislative Digest and a contributor to the Journal of Commerce. He can be reached at [email protected].

04/05/2017 - 1:14pm