Blaschak, Keystone and other producers expand operations
By Lee Buchsbaum, Associate Editor & Photographer
Pockmarks from century old timbers stretch out along the sloping highwall at Blaschak Coal’s Primrose anthracite mine near Mahanoy City in northeastern Pennsylvania. Classified by the state as “re-mining” jobs, virtually all of the dozens of active mines located throughout the storied eight-county anthracite coalfields are day-lighting old galleries and tunnels to harvest the ancient coal pillars left behind by 19th century miners. But even as they uncover the past, today’s anthracite producers are experiencing something not seen in a long time: resurging demand.
Though today mainly used for sugar beet refining, industrial processing, and individual and institutional heating, historically anthracite’s 90% and better carbon content was a favorite of domestic steel producers. With current international coke markets tight, anthracite producers are drawing attention from Chinese and other foreign steelmakers. In increasing numbers, they are travelling to America’s oldest coalfields in search of whatever might still be available. As new production rises, anthracite miners are lining up capital as they push through new permits and take immediate steps to keep the fickle market’s attention.
Anthracite: Where America’s Coal Industry Began
Traveling through the 150-year old mining towns in anthracite country is truly a window into the origins of America’s mining industry. By some estimates more than 20 billion tons of anthracite was mined out of those eight counties since mining began though billons of tons remain.
According to Pennsylvania’s Department of Environmental Protection (DEP), 2010 surface production was 3,027,215 tons, up 255,917 tons (9%) from 2009’s total of 2,771,298 tons. This was accompanied by a 20% increase in total employees (472 in 2010 vs. 393 in 2009). Last year (2010) was the first time surface production was more than 3 million tons since 1987 and 50% higher than the 1,645,575 tons mined in 2001—the industry’s lowest production figure since records for surface mining were kept beginning in 1934. (Conversely, underground production has fallen to less than 200,000 tons annually).
“Large-scale” development of the anthracite fields began in the early 19th century during the War of 1812. Initially, anthracite was used for home heating and iron production—allowing America to become energy independent of Great Britain and to create a domestic defense industry. After the Civil War broke out, anthracite was used by northern steelmakers for cannonballs and other armaments. In 1917, during World War I, production peaked at more than 100 million tons as Bethlehem Steel, U.S. Steel and other companies ramped up industrial output and weapons manufacturing to transform America into the “arsenal of Democracy.”
However, as other metallurgical coals, such as Pittsburgh No. 8, started being used to make coke, anthracite production went into a long steep decline. Home, industrial and institutional heating consumers buoyed the industry after WWII, but anthracite never broke into the large-scale electrical generation markets. Shut out from the growth enjoyed by bituminous and subbituminous miners, only once since 1969 has anthracite production been greater than 10 million tons. Current production statistics often confuse the re-mining of vast piles of historic coal waste, regionally known as “culm banks” with newly mined coal. Culm, averaging less than 7,000 Btu, is transported to specially built electrical co-generation plants that ring the anthracite fields.
A New Beginning
Though DEP figures confuse raw coal production with clean coal, it’s clear the mining of virgin and brownfield areas are picking up as more permits are being filed and more equipment orders are placed. “The markets today are definitely the strongest they have been in the last 15 years. Producers are selling every pound of coal they can mine,” said Duane C. Feagley, executive director of the Pennsylvania Anthracite Council.
After bottoming out in 2001, the industry started seeing a turnaround in 2003 and 2004. “The price of fuel was going up, rapidly. Many who use heating oil in Pennsylvania couldn’t afford to pay anymore, so folks began installing coal stoves in their homes to subsidize heating. Those little coal stoves saved them a couple of thousand dollars a year,” said Bobby Burns, president and owner, Keystone Anthracite.
But a bigger change occurred in 2010 as international purchasers started approaching producers. That sustained demand has led Blaschak Coal, Keystone and others to start increasing production. “We’re working on getting onto new properties. Demand is not slowing down. We’ve been hiring and we plan on hiring more as we expand and get onto new sites. There’s so much anthracite that’s left here,” said Burns.
Because of the immense amount of mining in the region, it once boasted perhaps the densest rail network in the nation. Despite the near collapse of the industry, the anthracite fields still have a viable core infrastructure. “We’ve done a good job keeping the rail we have, but we’re going to need more. The main carriers, Norfolk Southern or regional lines like Reading & Northern, do get backed up, but there’s enough capacity to move existing volumes of coal. But we’re going to have to put more money into it as new sites are developed,” said Burns.
International Purchasers Find Anthracite
One of the misconceptions about anthracite is that it has all been mined. “The old miners were good, but they were primitive in their methods. It was all done by hand back then. Miners were only able to take a fractional amount of the coal deposits because they had to leave a lot of pillars in place,” said Daniel Blaschak, vice president, Blaschak Coal, the second largest anthracite producer in the region. Though the hard anthracite veins often average between 60- to 80-ft thick—sometimes swelling to 100-ft thick—19th and early 20th century underground miners frequently only recovered 45%-50% of the coal in the areas they accessed.
Geologic stresses also kept miners from going still deeper into the lower coal seams. With the coal essentially forming long, narrow but deep basins, mining was concentrated along the pitches and outcrops. Where miners could work depended on the rock structure they were in and whether the roof would hold. There were no roofbolts until the mid-20th century. This was a world dominated by wood timbers, steam, mules, sweat and prayers. “The end result is that they only accessed a fraction of, depending on which figures you look at, the billions and billions that are still here,” said Blaschak.
Since anthracite is almost pure carbon, it burns virtually without smoke. Its low sulfur content lends it to being an excellent heating source. A century ago locally produced anthracite heated nearly everything within a 600 square mile area of Pennsylvania. Anthracite is still used for water filtration. “From Boston to Portland, Los Angeles to Miami and everywhere in-between, each major municipality has water systems filtered with beds made of anthracite,” said Blaschak.
But anthracite is also ideally suited as a coke replacement “because we are 85%-90% pure carbon in our natural state. A coke product may be 95%-98%. Raw, we’re already within 10% of the carbon content of processed coke. With a high carbon content, prime anthracite only has about 0.4% sulfur and our volatiles are somewhere between the 4% to 6% by weight range,” said Blaschak.
In the late 1980s, China began exporting metallurgical and anthracite coals, grabbing a large percentage of the coking market throughout the following decade. But as its own economy took off, China switched gears and began importing coking coals from around the world. Back in eastern Pennsylvania, China’s retreat was a welcome sign that pricing support for met coal would return. For anthracite producers, higher prices meant they could afford to go after more expensive deposits. “Pricing has now come almost full circle. When we were at $40/ton to $50/ton, we were only able to go so deep. But when you’re getting toward the $200/ton market, now all of the sudden we are able to access those steeper and deeper reserves,” said Blaschak.
However, as the industry struggled in the 1980s and 1990s, one of its biggest problems became its inability to produce coal at consistent volumes. “The unreliability of supply was devastating to big users. Production of anthracite got down to about 1 million tons. At 1 million tons we’re not a world player. And even today when we’re producing between 2 and 3 million tons, there are still concerns about the viability or the long term ability of this industry to supply anthracite at the kind of tonnages that these large consumers really want,” said Blaschak.
At current and forecast prices, there are probably billions of tons now economically available. The real issues are locating the best reserves, determining how to develop them, and how to re-build an industry capable of having “the kind of reliability that your customers are necessarily requiring to encourage them to switch to anthracite. For the last three years, we’ve seen the beginnings of a shift as elements of the global steel industry have come here seeking Pennsylvania anthracite. During this time, export orders have been assembled and put together. Relationships are growing each year as all of these parties are seeking long-term commitments to supply anthracite to these industries. This is where the renaissance of this industry begins to take shape,” said Greg Driscoll, chairman and CEO, Blaschak Coal.
Anthracite producers are now regularly filling export orders. Though volumes may be small by some standards, for this industry, it’s a huge sea change. “We’re starting to see orders for 100,000 to 200,000 tons per year [tpy]. While other producers could fill those easily, for us it may take several companies working together to generate those volumes. We have our own 90,000-ton order for which we are the sole supplier this year and into the first quarter of next year,” said Blaschak. Much of this coal is being shipped to Kinder Morgan’s Fairless Hills export coal facility located northeast of Philadelphia.
Re-mining, Reclamation & Retrieving the Culm
Because of the sheer volume of “pre-law” deep and surface mining from the 19th and 20th centuries, the anthracite industry’s environmental legacy is great. Out of all the mining states in the country, Pennsylvania (combining both bituminous and anthracite fields) has the largest reclamation responsibility. Since 1985, millions of tons of accumulated anthracite waste or “culm” has been burned by a relatively new fleet of co-generation plants located throughout the anthracite coalfields. Ranging between 45 and 100 megawatts, not only have these plants generated a tremendous amount of electricity and jobs, but they have created a near closed loop for the anthracite industry. The calorific value for culm ranges from 3,500 to 7,500 Btus/lb. Though much lower in calorific value than the local anthracite still being produced, culm is cheap and abundant. The accumulated culm is also an environmental problem because the rain leaches through and creates an acidic discharge.
All anthracite mining permits granted currently are actually classified as “re-mining reclamation permits.” There are virtually no new permits issued by the DEP that are not for re-mining in this region. What does that mean? “Because this area is the headwaters for the Lehigh and other rivers, our older mine complexes have provided a natural gathering point for vast amounts of rainwater,” said Blaschak. The water penetrates down through the mines. They in turn discharge polluted water back into the greater watershed. “The only way to correct this problem is to perform surgery by surface mining and daylighting the old tunnels and works. Once we do this, we put the surface contours back and remediate the erosion and sedimentation by getting the water to once again flow over the earth through reconstituted stream channels. With higher prices and the use of more modern machinery than were used in the past, we’re able to go deeper than before. By conducting re-mining in the area, we effectively save the Abandoned Mine Land (AML) fund and the taxpayer $15,000 to $20,000 per acre just through the efforts we are now undertaking,” said Blaschak.
Blaschak Coal and most other re-miners return to the same pitches that were mined in the past, this time going after the vast amounts of pillars and the once harder to retrieve in-between blocks of coal. “They had to leave them there for support. Some of the old works are also filled with waste because in those days they’d throw all the little pieces away,” said Blaschak. But now, through larger scale surface mining, the whole of the deposit can be mined.
Using old U.S. Geological Survey (USGS) and old company maps, Blashack and other companies return to old mines and seek out coal blocks that, for whatever reasons, have had little or no disturbance. “These maps are staples in our work because as we go looking for the next job and the next reserve, they show how much of this area was before anybody touched it. When you find something that’s promising, you go in and do some exploratory drilling to confirm that economically harvestable coal blocks remain,” said Blaschak.
Scattered throughout Blaschak’s holdings and throughout the anthracite fields, an observer will come across the carcasses of old draglines abandoned to the elements since jobs ended in the early 1940s and 1950s. Producers back then would only go across the surface digging 100 ft down or so until they encountered one of many bottom rock layers. When costs rose, these producers would just move on. Today, Blaschak and others are returning to those former pits and go another 200 ft down from where others left off. “The deeper you go the more chance you have of attacking some of the small but rich coal basins that remain. Sometimes these basins contain beds more than 90 ft thick,” said Blaschak.
Using a variety of newer medium-sized draglines and hydraulic shovels, surface operations will dig down 400-ft through folded strata and coal seams. “Because of how deep we’ll go, a relatively large 300-400 acre surface mine will have a life of between 25-30 years,” said Blaschak.
Blaschak’s Coal Operations
Last featured by Coal Age in 1957, Blaschak Coal Co. is a third generation producer. But in the last few years, the company has transitioned from a family-owned firm to a more corporate producer. “Decades ago, my father and two of his brothers started this company,” said Dan Blaschak. However, the relatively informal familial corporate model has proven unable to attract the level of investment needed to propel the company through the 21st century. “Most family organizations do not survive through the third generation. Dan and his brother Tony and their cousins are all asking themselves who wants to take over the reins of this company. What they realized was that there would be greater expansion opportunities available through a more formal corporate structure. In April 2009, Milestone Partners of Radnor, Pa., acquired control of Blaschak and today own about 90% of the company,” said Driscoll, a veteran of the coking and petroleum industries who was drawn to Blaschak because of its ability to take advantage of growing markets.
Blaschak Coal has three active mine sites—all surface—the Primrose, Centralia and Lattimer mines. The company also has one site in reclamation, Burring, that’s located west of Centralia. Each of these sites holds between 1.5 and 2 million tons of clean coal reserves. Blaschak currently employs about 140 full time employees. Today, the company has two production shifts working roughly 5.5 days per week.
The Centralia mine is the producer’s easternmost operation and is just west of the infamous town of Centralia. As many readers will recall, much of the population of the town has been relocated over the years due to a long-burning uncontrolled underground mine fire. As late as September, steam and smoke were still venting from the underground seams. Blaschak, however, has been mining from a small surface tract for about 10 years. In the past two years and throughout 2011, Blaschak’s run of mine production has averaged 190,000 tpy. Raw coal from Centralia is trucked to the company’s preparation plant, located near St. Nicholas, Pa., where it is washed and sized. The Centralia mine uses a 185 Demag excavator and a Cat 375 as the main digging tools. These are supported by Cat loaders, dozers and 1900-ton 777 haul trucks.
The Lattimer operation employs two Manitowoc 4600 draglines, each equipped with 7-yd3 buckets and a Cat 5130 excavator. These are, in turn, supported primarily by Cat front-end loaders, dozers and 777 haul trucks. The Lattimer mine is the company’s newest operation. It acquired mining rights there in 2010 and expects to produce 175,000 tons of run of mine coal in 2011. “With the addition of our Lattimer operation, the company has demonstrated its intention to be responsive to the renewed global demand for anthracite. The management team here, and our investors are committed to continue to grow reserves and production in response to the growing global need for high quality carbon,” said Driscoll.
Blaschak’s Primrose mine is located just north of Mahanoy City, where the company is headquarterd. Blaschak has been active at this mine since 2007. Run of mine production there has averaged 175,000 tpy. At Primrose, Blaschak employs a Marion 7450 dragline with a 14-yd3 bucket supported by a 185 Demag shovel with a 17-yd3 bucket and a Cat 375 excavator. Other support equipment at Primrose include Cat loaders, dozers and 777 haul trucks.
Raw coal from Centralia and Primrose is trucked on-road to the St. Nicholas prep plant. Blaschak also trucks in purchased raw coal to St. Nicholas from several outside sources. The Lattimer mine’s production is delivered off-road to Blaschak’s on-site prep plant there. Sales are all FOB mine site and go out by truck and rail from St. Nicholas and truck only from Lattimer. Coal is sized and sorted at the two preparation plant locations. Blaschak produces the traditional anthracite sizes (stove, nut, pea, buckwheat, rice, barley, No. 4 and No. 5). It also produces to customer size specifications as required.
Combined, raw coal production in 2009 and 2010 averaged 360,000 tons. “We are currently on pace in 2011 to produce over 560,000 tons. In 2012, we expect to produce more than 600,000 tons,” said Driscoll.
At the Primrose mine, Blaschak’s final coal cut recovery is done with the Marion 7450 dragline. By sending the bucket down another 140 ft into the pit, it can mine lower measures without additional benching. “It may be small when compared to other draglines, but its 14-yd3 bucket is essential to the company not because it’s our earth mover, but because it’s our coal mover. The smaller bucket gives us the ability to keep the coal as clean as possible since we can position it in the coal seams,” said Driscoll.
Small Operators Struggle to Get Permits
Similar to Blaschak and other regional producers, Keystone Coal is a relatively small, closely held producer. The company was started by Burn’s father who had worked in anthracite most of his life. “My father has been in the business since the 1970s. He started Keystone in 1994. He eventually sold one of his companies to Girard Estate, a larger regional coal reserve holder. Over time, they built a good-sized prep plant that he managed for them. In 2006, the owners wanted out, and we signed a long-term lease agreement with them. Two years later, I bought my father out,” said Burns.
Today, Keystone operates the Continental mine, one of the largest in the region. “Using a fleet of Manitowoc draglines and a mixed bag of Marion and Cat shovels and trucks, we produce more than 400,000 tpy clean from that one mine. Overall, we have a total of 50 employees who produce a little more than 700,000 tpy,” said Burns.
One of the industry’s biggest challenges, however, is expanding to fill the new markets. “We can’t expand because we can’t get the permits. Despite the fact that we have the highest paying jobs in the area by far, the state is moving very slowly,” said Burns.
One of the other challenges producers face is reclamation bonding. With credit markets tight, the region’s small-scale operators are often forced to put up letters of assets. Another issue is getting the financing to purchase new trucks, shovels and other mining machines. “It can be tough to get credit for equipment. We placed an order for new Cat 777s and new shovels. I’ve got a site ready to go. We’re just waiting on a permit to proceed,” said Burns.
With a growing group of producers and a beckoning market, the question now is whether the political climate will allow these companies to compete worldwide.