Alliance subsidiary Penn Ridge Coal entered into the coal lease and coal sales agreement with Allegheny Energy to develop Allegheny's Buffalo Coal Reserve.
Alliance chief Joseph W. Craft III said the deal strengthened the company’s presence in the Northern Appalachian coal markets and increased its exposure to high-sulfur coal.
"When combined with our Tunnel Ridge reserves, Alliance now controls an estimated 125 million tonnes of coal in the Pittsburgh No. 8 seam,” Craft said.
“As Allegheny and other power generators complete their planned and announced installations of new environmental controls over the next 5 years, Alliance is well positioned to help meet this anticipated growth in demand for high-sulfur coal.”
Alliance said it believed production from its Penn Ridge and Tunnel Ridge mines would be needed to satisfy high-sulphur coal demand and it was prepared to develop both mines once the necessary permits and sales commitments were secured.
The 19,800-acre Buffalo Coal Reserve lease is estimated to include about 55Mt of high BTU, "scrubber quality" coal in the Pittsburgh No. 8 seam.
The development process for the mine will begin immediately.
In conjunction with the Buffalo Coal Reserve lease, Penn Ridge also entered into a 10-year, 20Mt coal sales agreement with affiliates of Allegheny. The Buffalo mine will supply Allegheny's power plants with up to two million tonnes per year.
The Buffalo Coal Reserve area neighbours Alliance’s Tunnel Ridge reserve area in Washington County, Pennsylvania and Ohio County, West Virginia. The Tunnel Ridge reserve is estimated to include about 70Mt of coal in the Pittsburgh No. 8 seam.
Alliance has filed permits to develop the Tunnel Ridge mine and is currently in discussions to secure coal sales agreements. Initial production from the mine is also anticipated for 2009-10.
