By Lee Buchsbaum

Surrounded by some of the biggest names in the business, independent producer Sunrise Coal LLC’s Carlisle underground mine in Carlisle, Ind., began development in March 2006. Initially conceived as a mid-sized 1.5 million ton per year (tpy) producer, Sunrise first hit coal 350 feet below ground that December and began bottom development the following January. Commercial coal production followed quickly thereafter with the first tons being shipped on February 5, 2007. By the end of July, the mine had sent its customers more than 400,000 tons of 11,500 Btu, 5.5-lbSO2MMBtu, Indiana No. 5 coal. A second continuous miner (CM) unit coming on line that summer enabled output to reach an annualized production rate of 1.3 million tpy. But demand was steady and increasing so in the winter of 2008, Sunrise expanded to a third unit of production, ramping up to a 2.2 million tpy production rate. 

With today’s recession getting deeper and mines throttling back and shutting down throughout America’s coalfields, it’s sometimes hard to remember just how spectacular 2008’s market was. In Indiana it kept building and kept Sunrise thriving.  As customers continued to call, in February 2009, Carlisle brought a fourth CM unit on line, ramping up production to a 3 million tpy rate. Today, despite a slight decline in coal production nationwide, there’s no slowing down here. This room-and-pillar operation continues to take delivery of new equipment, hire new miners, innovate and expand. At the end of what has been a very tough first half of 2009, Carlisle plans on picking up the pace to 3.3 million tpy in 2010 and stay there through 2011—unless several of the new customers knocking on their doors looking for ultra-low chlorine blending coal cause more CM units to be deployed.

Indiana’s Steady Market
Year in and year out, Indiana produces roughly 35 million tons, with 2008 production being more than 36 million. Indiana’s average consumption is generally more than 60 million tpy, with fully half that amount supplied by local mines. “All but 3 or 4 million of what’s produced in the state, stays in the state,” said Brent Bilsland, president, Sunrise Coal. While Peabody Energy and its Black Beauty subsidiary dominates in-state coal output, less than a half dozen Indiana producers sell to Indiana’s four main electrical utilities. Sunrise reports that they have three main customers, Indianapolis Power & Light, which is owned by AES, Hoosier Energy (which is only 13 miles from the mine), and Duke Energy. “Though we have shipped our product as far away as the Santee Cooper plant in South Carolina last summer, almost 90% of our coal stays local and we’re pretty much sold out for the next five years at current production levels,” said Bilsland.

Insulating the coal market from big swings, contracts are generally signed for longer periods of time, making for a more stable pricing environment. “We don’t see a large run up in prices and we ordinarily don’t see a big run down either,” said Bilsland. Though Sunrise does believe that pricing will change over time as an increasing amount of longwalled coal comes out of Illinois, fundamentally, Illinois Basin mining economics are superior to that of Northern and Central Appalachia. With scrubbers on line or coming on line all up and down the Ohio River Valley and around the nation, Illinois Basin coal will begin to increase its market share. 

Regionally, with Peabody having 55% of the market share in Indiana, it has generally worked to Sunrise’s advantage to be smaller. “Utilities understand that the market needs to have some smaller operators in the mix otherwise their options would be limited to just one or two huge producers. When coal prices boomed, some of our competitors didn’t deliver on all their contracts. Instead they made additional sales, maybe bought and re-sold some coal, and re-priced what they had. We honored our standing contracts and shipped every ton we were contracted to ship. Several of our customers have said that we are among the most reliable, best performers and they want us to remain in the mix,” said Bilsland.  

But not all Illinois Basin coal is interchangeable. One quality that is unique about Indiana’s shallower coal, and in particular, the Carlisle mine’s deposit, is that its chlorine levels are very low. The Carlisle mine’s coal averages 0.06% chlorine. As eastern production declines, blending higher chlorinated Illinois coal with Indiana coal will become a selling point. With so much new production coming out of Illinois, some operators and customers have been surprised by the Illinois coal’s high chlorine levels—around 0.2% or higher. As a result, Sunrise is starting to have Illinois producers “contact us about purchasing our coal to blend down their high chlorine levels,” said Bilsland. This new blending market may lead to a variety of strategies, opportunities and even greater production demand in the future.

Carlisle’s Mining Plan and Methods
Sunrise Coal’s Carlisle operation is mining at an average depth of 350 ft with all production coming from the 5- to 6-ft thick Indiana No. 5 seam. Carlisle’s coal quality averages 11,500 Btu/lb, with less than 10% ash content, 13.5% moisture, 5.5- to 6-lb/SO2MMBtu coal, 0.06%-0.07% ultra-low chlorine, and a high fusion temperature, above 2,150° H=W reducing atmosphere.

The mine follows a basic room-and-pillar design using a synchronized continuous miner section with no retreat mining. Plans are for 18 ft entries for Sunrise’s mains, and 60 ft x 60 ft pillars with 20 ft entries in the rooms. Sunrise attempts to tailor its entry design around the geology of it’s the coal deposit. “Our reserve has some hills that we have to design around. Additionally, now our design also has to accommodate for the timing of all four units,” said Bilsland. Not all CM units, of course, can be mining in panels as some units have to be constantly developing mains so they have new places to cut when the panels mine out. 

Sunrise Coal has 270 employees companywide. The mine runs two production shifts and one maintenance shift daily, with roughly 14 people per production unit shift. The mine has four production units. Carlisle currently has six Joy 14CM15 “wet head” miners (with two more Joy 14CM15s on order), 16 battery cars of which seven are Joy/Stammler BH18 AC cars  (with nine more on order), eight Bucyrus roof bolters, and 10 Bucyrus battery scoops.

The Carlisle mine has a dual-use slope for the main coal conveyor, and the moving of supplies and personnel without a hoist. There are two 8 ft diameter shafts at the base of the slope for the southern two units and two 10 ft diameter shafts 3 miles north for the northern units mine ventilation. The slope is 18 ft wide with concrete and steel arch construction. The mine employs a push-pull ventilation system with a fan pushing on the intake airshaft and another fan pulling air on the return airshaft.

In the last few years, to accommodate their expansion from two to four units and the subsequent increase in production, Carlisle upgraded their slope belts and raw coal handling facilities from 48 inches to 72 inches. “Higher coal prices drove this decision. We are not currently planning on any additional upgrades, but we were not planning on it last summer either, high coal prices make you reconsider everything,” said Bilsland.

The Carlisle mine has two Daniels-designed 450 tph raw feed heavy media wash plants. While they are sister plants, one of them was built for the short-lived Howesville mine and later moved and reassembled at Carlisle. The second wash plant was built onsite to meet the needs of the mine’s recent expansion.

Carlisle also has a double tracked 100-car, dual-switched rail loop coming off of the CSX Chicago-to-Nashville mainline, however, the mine is dual served by both the Indiana Railroad and CSX. While most of their coal is shipped by rail, some is shipped by truck as well. The facility’s state-of-the-art load out is capable of loading either trucks or rail cars.

Sunrise currently leases about 43.5 million recoverable tons and there is the potential to secure additional reserves. Measured at 3 million tpy, Carlisle has approximately 19 years of additional mine life. Though Carlisle has a large block of coal under its control, the reserves butt up against some of Peabody Energy/Black Beauty, Vectren, and James River Coal’s reserves and holdings. 

At the end of 2008, Sunrise’s Carlisle mine had a sales backlog of 15.3 million tons of coal going through 2013. At that time, those commitments represented approximately 88%, 90%, and 84% of Sunrise’s estimated production for 2009, 2010, and 2011, respectively, and represent about one-third of its total recoverable reserves.

Haulage: Diesel vs. Battery
“We tried using diesels initially, but battery technology has really come around in the last five years and the operational advantages gained offset their higher initial costs,” said Jay Toney, executive vice president, operations and planning, Sunrise Coal. “We’ve been using Joy haulers since we put in the Riola mine. Those were Joy AH 100 cars back then. We averaged 3,000 tons per shift versus 2,100 per shift beforehand. The cars we are buying now from Joy are improvements over those designs. Joy takes care of their product. If you have a problem, they come out and fix it. It’s the people behind the product.”

“It took me a long time to learn how to make money from more expensive machines,” said Ron Laswell, Sunrise Coal founder and long time Indiana coal veteran. “But at the end of the day, there’s no better battery cars built than Joy’s. At $0.10 to $0.15 per ton, it does cost more to haul with battery. But even if it’s costing you more per ton, you can haul more coal. Increased volume and lowered labor costs make up for those higher front-end costs. Those extra tons really help with profit margins.”

A Lean Approach Gives Greater Flexibility
Perhaps because of the small size of the company, they have a flexibility that allows for the opportunity to experiment with new ideas and technologies. “Our lack of hierarchy and overhead gives us an efficient management style. We can make a decision in a half hour that might take our competitors weeks. Our speed of decision making gives us an operational advantage over those much larger competitors,” said Bilsland. 

An example of this flexibility is Sunrise’s new Matec Plate Press that the mine recently acquired to reduce the moisture content of their fine coal slurry to around 30%. First seen by Sunrise at the September 2008 MINExpo in Las Vegas, the company was intrigued and decided to purchase one to blend their slurry cake with their coarse gob and compact the two products into one coarse gob mound. “If the process works, we believe we can eliminate the need for slurry ponds and reduce our cost for handling gob,” said Bilsland.

Under the leadership of Ron and Steve Laswell, the operational core of what is today Sunrise Coal, one of the talents that the company has developed is tremendous self-sufficiency. Sunrise built their own slopes, their own railroad grade, and helped with some of the tracklaying. “Underground, we do all our own development. Above ground, we built our electrical sub-station, brought our water line in, moved the top and sub-soil, assembled our wash plants, rail loadout, and surface conveyors,” said Bilsland. Because of this experience, Sunrise believes they are adept at developing underground coal mines. “By being able to develop these in house from techniques we’ve learned from the Laswell brothers, we think we could reduce the costs necessary to build a mine by a third, which leads to a greater return for our investors,” said Bilsland.

Constructing a Winner: the Laswells, Hallador and the Yorktown Connection
Ron and Steve Laswell, who founded Sunrise, have been mining in Indiana since the early 1970s. Though they started with strip mines, the Laswells eventually transitioned into underground mining. After developing the Redbird, Coal Inc, Buck Creek, Riola, Howesville, and other operations, Carlisle is Ron’s eighth underground coal mine.

In 2001, Ron started leasing the Carlisle Reserve and in 2002, he and Steve formed Sunrise Coal, LLC in preparation for opening and operating a commercial coal mine. “The brothers, in particular Ron, have brought a wealth of both surface and underground mining experience to Sunrise. Ron’s ideas about mining have been incorporated into our daily operations and they have helped make Sunrise the successful mine that it is today,” said Bilsland.

“My theory on Ron and Steve was when they got started, they had to figure out how to build things themselves because they couldn’t afford to hire outside contractors. Now they’ve become self-sufficient and taught others, including all of us, their lessons. Jay Toney and Wayne Laswell, Ron’s son, started with them and learned a great deal from Ron and Steve. Those lessons are the bedrock of this organization,” said Bilsland.

By late 2004, Hank and Brent Bilsland, father and son, had also joined Sunrise as investors. The Laswell brothers and Hank Bilsland already had a history of working together. Previously, the Laswell brothers and Bilsland family were three of the four principle owners in Catlin Coal, Inc., which developed the Riola mine in Catlin, Ill. The Riola mine was sold in 2000 to Black Beauty Coal Co. along with the leases and permits to the Vermillion Grove mine.

Another of Sunrise Coal’s early partners was Denver-based Hallador Petroleum.  Hallador, a petroleum company turned energy developer, was instrumental in financing the short-lived Howesville mine. Attracted by coal’s market fundamentals, Hallador entered the industry determined to invest in developing Illinois Basin rich reserves. “After several years in the energy industry, we have learned that coal is easy to find but very expensive to produce. On the other hand, oil and gas is hard to find but relatively easy to produce. Given the options, we have invested more in developing Indiana’s well known high quality reserves,” said Vic Stabio, CEO and president, Hallador Petroleum Co. 

By the time the Howesville mine was shutdown, Hallador had become a 60% owner of the company.  “As we shifted equipment over to the new Carlisle mine, we got our contracts in place and were off and running. In 2006, coal prices moved up steadily through summer. The original plan was to mine 1.5- to 1.6-million tpy, but with the new contracts we were able to sign, we expanded production. The higher price of coal at year’s end accelerated our decision to go ahead and expand,” said Stabio.

In 2006, Hallador helped provide the financing needed to further develop the Carlisle mine. Hallador’s principle owner, Yorktown Partners, a private equity firm located in New York with ties to Armstrong Coal in western Kentucky, helped secure that financing. Sunrise was Yorktown’s first venture in the coal industry. Through a series of transactions which began in 2006 and ended in July 2008, Hallador now owns an 80% interest in Sunrise Coal, LLC.

Attract and Retain, Sunrise’s Focus on Employee Safety
Like many mines during the recent boom, Carlisle has been aggressively working to attract and retain staff, operate safely and train new hires. The cornerstone of their safety program is their strong training program. Mine training takes place on-site in the mine’s training facility. Sunrise has eight MSHA-certified instructors on staff. Throughout the year, instructors offer annual retraining to all underground and surface employees, initial surface and underground training, inexperienced miner training, first-aid training, drug and alcohol awareness training for managers, and several other mandatory training courses.    

Given the long history of the Laswells in the Indiana coalfields, it’s not surprising that much of their workforce came to the mine to learn from some of the best. “Jay [Toney] and Wayne Laswell have been working with Ron since they were 19. The guys who started with Ron 20 years ago, many are still here,” said Bilsland. Sunrise also has attracted many of the former employees of Peabody’s Vermillion Grove operation which shut down recently. To an extent, throughout Indiana, Black Beauty is reducing their head count underground. “Good people like to work with good people, a quality workforce builds from there,” said Bisland.

“What we manage here is people,” said Toney. “Roughly one-third of our total production costs are labor related and that’s one of the few factors that we can influence. We know that by treating them properly and helping them to work together as a team, we can increase our collective output. If you can’t do that then labor can become half your cost per ton if, and when your people don’t work together, other issues like safety can become an even greater concern. We focus on people and safety everyday here for those reasons.” 

Despite their success, and in the face of a tough market, Sunrise refuses to slow down. Though they’ve been under construction since May 2005, the company continues to look at new projects. “While we are looking forward to a little break here, every day we explore our options, we have some coring and drilling projects under way. If the market is right, we’ll develop something. While our specialty is developing and working underground, we are looking at some surface opportunities that are emerging,” said Bilsland. And following a number of inquiries, the chlorine blending market also beckons.  

Back in Denver, Stabio also hints that the company is looking to expand. “We are trying to find some other reserves, we’re looking at a number of mostly Indiana-based opportunities, especially if we can find something near our existing Carlise mine. We still have a little excess capacity in our wash plant and load out,” he said.

Buchsbaum is a Denver-based freelance writer and photographer specializing in industrial subjects. He can be reached through his Web site at www.lmbphotography or by phone at 303-746-8172.