In April, Hallador entered into a storage agreement with one customer to store 250,000 tons for a minimum of one year and a maximum of two years. A similar storage deal was reached with the second customer in June. Carlisle’s major customers include Indianapolis Power & Light, Duke Energy, Hoosier Energy and Jacksonville Electric Authority in Florida.

Hallador said it is continuing to sell Carlisle’s coal as contracted to these customers. “The risks and rewards of ownership will pass from us to them as coal is placed in segregated storage,” Hallador said. “We will be paid a nominal fee in addition to our contracted price at the time the coal is placed in storage.”

As of June 30, Hallador said, it had stored 73,000 tons for the first customer and “nil” for the second. Hallador said it had realized about $3 million in revenue from this “bill and hold” arrangement.

For the first half of 2012, Hallador said it was about 42,000 tons behind on shipments to customers. The company expected to make up the shortfall during the second half of the year. The dollar amount of the shortfall, about $2.3 million, “is high due to over shipping on low-priced contracts and under shipping on high-priced contracts,” it said.

Carlisle is expected to produce just under 3 million tons in 2012 after turning out 3.2 million tons in 2011. The mine produced 1.48 million tons in the first six months of this year.

In the short term, Hallador added the market for steam coal in the United States faces a number of challenges, including an unusually mild winter of 2011-2012 that reduced the demand for electricity and caused a rapid buildup in coal inventories, as well as low natural gas prices and more stringent federal Environmental Protection Agency rules.

Earlier this year, Hallador filed a permit request in Illinois for the new Bulldog underground mine in Vermilion County. An official with the Illinois Office of Mines and Minerals confirmed receipt of the application but could not predict when the agency will issue a final decision.

Hallador said it has leased approximately 19,500 acres in Vermilion County near the village of Allerton. Based on reserve estimates, the company currently controls 32.3 million tons of recoverable coal reserves, including 16.3 million tons proven and 16 million tons probable. A “considerable amount” of the leased acreage has yet to undergo exploratory drilling. As a result, Hallador said it expects its controlled reserves to grow as it continues drilling through the remainder of this year.

Hallador hopes to receive a final permit for Bulldog in the first half of 2013. Production could commence in 2014. At peak output, Bulldog could produce as much as 3 million tons of high-sulfur coal annually.