Usibelli inks new pact for military coal

Posted: Wednesday, July 31, 2002

FAIRBANKS (AP) -- The Department of Defense will buy more than $100 million worth of coal from Usibelli Coal Mine during the next five years.

The coal will supply Fort Wainwright, Eielson Air Force Base and Clear Air Force Station with power and heat, said Master Sgt. Angel Newman of the Alaska Command in Anchorage.

Bill Brophy, vice president of customer relations for Usibelli, said the contract is a continuation of a long-standing relationship with the military.

''There's not really a significant change to the volume of the coal,'' he said. As a result, the contract will not do much to make up for the recent loss of Usibelli's sales to South Korea, Brophy said.

The good news, he said, is that the military chose to sign a five-year contract with the mine. It also considered one- and three-year contracts, he said.

The military will pay Usibelli $108 million for 2.17 million tons of sub-bituminous coal delivered through May 31, 2007. That puts the average per-ton price at almost $50, a few dollars per ton higher than previous five-year contracts, according to Defense Department documents on the Internet.

The coal will be mined near Healy and shipped north on the Alaska Railroad. The transportation cost is included in the price.

The military's appetite for coal may have shrunk with the new contract. According to the documents, the military signed separate five-year contracts for each base in 1997. The five-year total for the three bases -- 2.3 million tons -- was slightly higher than the current merged contract.

Brophy said the slight reduction could be partly due to a small drop in coal consumption at Clear, which recently installed a more efficient radar.

The price for delivered coal will increase slightly. However, the figures do not indicate, and Brophy declined to clarify, whether the increase is due to a higher price for coal or rail transport.

The average price per ton delivered under the contract announced Monday is $49.77.

The average per-ton price for coal delivered at Eielson over the past five years was $46.50. The price at Wainwright, which uses slightly more coal and is 20 miles closer to the mine, was $45.82. The price at Clear, which burns about half as much as each of the big bases and is only 35 miles north of Healy, was $40.20.

The coal prices before delivery are similar to those paid by the University of Alaska Fairbanks, which also burns coal to power its campus. UAF spokeswoman Debra Damron said the university is in its second year of a 10-year contract with Usibelli.

In Alaska, only military installations north of the Alaska Range use coal as their primary heat and power source, Newman said.

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