Vectren is spending about $175 million to develop the Oaktown complex, located at the eastern outskirts of the small community of Oaktown in Knox County, about 50 miles north of Evansville. Traveling north on U.S. 41 at night, bright lights at the Oaktown No. 1 mine, in production since early this year, illuminate the surrounding farm fields. The estimated 100 million tons of Oaktown reserves, as of June 30, 2010, are within 50 miles of eight coal-fired power plants and sit immediately adjacent to the CSX mainline railroad to easily serve neighboring facilities.

The Oaktown mines are at least a year behind schedule. Initially, both mines were expected to be in production by 2011. Because of the prolonged economic downturn and falling coal prices from record levels in 2008, Oaktown No. 2 is now targeted for operation in 2012.

In a Securities and Exchange Commission filing in August, the company said Vectren Fuels “may continue to adjust this timing as it evaluates the impacts of current market conditions.” Speculation surfaced during the past year that Vectren was considering selling the Oaktown complex and, perhaps, its other operating coal mine—Prosperity, also a deep mine, in Pike County, Ind. Vectren insists it has no such plans. The Oaktown mines were designed to help cushion the blow from the closing earlier this year of Vectren’s only surface operation, Cypress Creek, in Warrick County, Ind. Cypress Creek was retired when its economically mineable reserves played out. Once in full production, the Oaktown mines will employ 400 and be capable of cranking out about 5 million tons of coal per year.

Coal mining contributed about $1.7 million to Vectren’s second-quarter earnings, more than double the $700,000 a year earlier. Through the first half of 2010, coal mining earned $5.6 million for the company, up from $3.4 million in the comparable period of 2009.

Vectren’s coal production totaled 800,000 tons in the three months ended June 30, a decline of 100,000 from the second quarter of last year. Coal sales, though, rose to 900,000 tons, from 800,000 tons a year ago. With electricity demand starting to recover, especially as a result of the hot summer weather, Vectren said it has fielded more inquiries from customers wanting to buy coal.