Wyoming Operations We control approximately 760.3 million tons of coal reserves in the Powder River Basin, the largest and fastest growing U.S. coal-producing region. Our subsidiaries, Foundation Coal West, Inc. and Foundation Wyoming Land Company, own and manage two sub-bituminous, low sulfur, non-union surface mines that sold 49.2 million tons of coal in 2008, or 71% of our total production volume. The two mines employ approximately 620 salaried and hourly employees. Our Powder River Basin mines have produced over one billion tons of coal since 1972. Belle Ayr Mine The Belle Ayr mine, located approximately 18 miles southeast of Gillette, Wyoming, extracts coal from the Wyodak-Anderson Seam, which averages 75 feet thick, using the truck-and-shovel mining method. Belle Ayr shipped 28.8 million tons of coal in 2008. The mine sells 100% of raw coal mined and no washing is necessary. Belle Ayr has approximately 255.6 million tons of reserves. Based on 2008 production levels, the reserves at Belle Ayr will sustain projected production for approximately 9 years if market conditions warrant. We plan to apply to lease several hundred million tons of surface mineable, unleased federal coal that adjoins Belle Ayr’s property under the LBA process. If we prevail in the bidding process and obtain these leases, we will be able to extend the life of the mine. Belle Ayr has the advantage of shipping its coal on both of the major western railroads, the BNSF Railway and the Union Pacific Railroad. Eagle Butte Mine The Eagle Butte mine, located approximately eight miles north of Gillette, Wyoming, extracts coal from the Roland and Smith Seams, which total 100 feet thick, using the truck-and-shovel mining method. Eagle Butte shipped 20.4 million tons of coal in 2008. The mine sells 100% of the raw coal mined and no washing is necessary. On February 20, 2008, our affiliate successfully bid on a new federal coal lease adjacent to the western boundary of the Eagle Butte mine, containing approximately 224.0 million tons of proven and probable reserves. The lease became effective on May 1, 2008. Eagle Butte has approximately 504.7 million tons of reserves. Based on 2008 production levels, the reserves at Eagle Butte will sustain production levels for approximately 25 years if market conditions warrant. Coal from Eagle Butte is shipped on the BNSF Railway to power plants located throughout the West, Midwest and the South. The mine also ships a small portion by truck. Pennsylvania Operations We control approximately 730.5 million tons of contiguous reserves in Northern Appalachia. Approximately 161.5 million tons are assigned to active mines and 81.8 million tons are assigned to other permitted mines for future development. Approximately 487.2 million tons are unassigned. Our Pennsylvania affiliates’ mines are located in the southwestern part of the state, approximately 60 miles south of Pittsburgh. Both mines operate in the Pittsburgh No. 8 Seam, the dominant coal-producing seam in the region, which is six to eight feet thick on these properties. The Pennsylvania operations consist of the Cumberland and the Emerald mining complexes, which collectively shipped 14.4 million tons in 2008, primarily using longwall mining systems supported by continuous mining methods. The mines sell high Btu, medium sulfur coal primarily to eastern utilities. The two mines employ approximately 1,420 salaried and hourly employees. The hourly work force at each mine is represented by the United Mine Workers of America (“UMWA”). Cumberland Mine The Cumberland mining complex, located approximately 12 miles south of Waynesburg, Pennsylvania, was established in 1977. Cumberland shipped 7.4 million tons of coal in 2008. As of December 31, 2008, 13 Cumberland had assigned reserves of 100.6 million tons. All of the coal at Cumberland is processed through a preparation plant before being loaded onto Cumberland’s owned and operated railroad for transportation to the Monongahela River dock site. At the dock site, coal is then loaded into barges for transportation to river-served utilities or to other docks for subsequent rail shipment to non-river-served utilities. The mine can also ship a portion of its production via truck. Emerald Mine The Emerald mining complex, located approximately two miles south of Waynesburg, Pennsylvania, was established in 1977. As of December 31, 2008, Emerald had assigned reserves of approximately 60.9 million tons. Emerald shipped 7.0 million tons of coal in 2008 which included 0.8 million tons of purchased and resold coal. Emerald has the ability to store clean coal and blend variable sulfur products to meet customer requirements. All of Emerald’s coal is processed through a preparation plant before being loaded into unit trains operated by the Norfolk Southern Railway or CSX Transportation. The mine also has the option to ship a portion of its coal by truck. West Virginia Operations Our subsidiaries operate four mining facilities located in West Virginia in the Central Appalachia region: Kingston, Laurel Creek, Rockspring and Pioneer. The Kingston, Laurel Creek and Rockspring facilities are all underground mining complexes that use room-and-pillar mining technology to develop and extract coal. The Pioneer mines operate two surface mines utilizing truck/loader systems to extract coal from multiple seams. Our West Virginia operations have approximately 87.6 million tons of reserves that are assigned to current or planned future operations and approximately 144.4 million tons of reserves that are unassigned and are being held for future development. Except for the two surface mines, all of the raw coal is processed through preparation plants before transportation to market. Production from the mines is typically low sulfur, high Btu coal. In 2008, our West Virginia affiliates’ mines collectively shipped 6.9 million tons of coal which included 0.4 million tons of purchased and resold coal. These mines ship coal by rail, primarily via either the Norfolk Southern Railway or CSX Transportation, or by barge on the Kanawha and Big Sandy Rivers. These operations serve a diversified customer base, including regional and national customers. We also own and operate the Rivereagle loading facility on the Big Sandy River in Boyd County, Kentucky. As of December 31, 2008, our West Virginia operations had approximately 1,000 non-union salaried and hourly employees. In November 2003, a UMWA election was held at the Rockspring mining facility, the outcome of which is pending. If the UMWA was properly elected, approximately 305 employees at the Rockspring facility would become represented by UMWA members. See ITEM 1A. RISK FACTORS for additional disclosure related to this matter. Kingston Mines The Kingston complex consists of two mines, Kingston #1 and Kingston #2, located in Fayette County and Raleigh County, respectively. Kingston #1 mines the Glen Alum Seam and Kingston #2 mines the Douglas Seam. In 2008, the Kingston complex shipped 1.1 million tons and as of December 31, 2008 had approximately 10.4 million tons of reserves of which approximately 7.2 million tons are assigned and approximately 3.2 million tons are unassigned and are being held for future development. Kingston sells coal primarily into the metallurgical market for domestic steel plants. The coal is trucked to the Kanawha River for shipment by barge or to CSX Transportation or the Norfolk Southern Railway loadouts for shipment by rail. Laurel Creek Mines The Laurel Creek mining complex consists of three underground mines, as well as surface reserves. The #1 and #8 mines operate in the Coalburg Seam and the #6 mine operates in the Cedar Grove seam. The preparation 14 plant is located in Logan and Mingo Counties. In 2008, the mines shipped 1.0 million tons and as of December 31, 2008 had approximately 23.7 million tons of assigned reserves (both underground and surface) and approximately 9.6 million tons of unassigned reserves. The coal is shipped by truck primarily to our Rivereagle dock, other third-party docks or our rail siding on CSX Transportation. On January 30, 2009, an affiliate of the Company idled the Laurel Creek mining complex. The decision to idle the Laurel Creek mining complex was due to certain business conditions. The Company expects to record approximately $2.1 million in employee severance and medical continuance costs in accordance with SFAS No. 146. The Laurel Creek mining complex is included in the Company’s Central Appalachia segment. See Note 21 to the Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K. Rockspring Mine Rockspring Development, Inc. operates a large multiple section mining complex in Wayne County called Camp Creek that produces coal from the Coalburg Seam. The complex shipped 2.9 million tons of coal in 2008. Assigned and unassigned coal reserves totaled approximately 38.0 million tons and 22.7 million tons, respectively. Rockspring has a mine site rail loadout served by Norfolk Southern Railway. The coal is transported primarily to southeastern utilities. The mine can also ship a portion of its production by truck. Pioneer Mines Pioneer Fuel Corporation operates two surface mines: Paynter Branch, which is located in Wyoming County, and Pax surface mine, which is located in Raleigh County. These mines utilize front-end loaders with trucks to mine multiple seams. The Pioneer mines shipped 1.5 million tons of steam and metallurgical coal in 2008. As of December 31, 2008, the mines had assigned reserves of approximately 18.8 million tons with an additional 13.4 million tons of unassigned reserves. Based on 2008 production rates, we expect that the Pax mine has sufficient reserves to last approximately 11 years. The Paynter Branch mine will complete mining activities on the permitted area in 2009. Coal from Paynter Branch is shipped by truck to our on-site rail loading facility on the Norfolk Southern Railway and then on to domestic utilities and exported to metallurgical coal customers. Coal from Pax is shipped to customers primarily via rail, with coal being trucked from the mine to our on-site train loading facility served by CSX Transportation/R.J. Corman Railroad. Pax coal may also be trucked to the Kanawha River for shipment by barge. Illinois Operations Wabash Mine The Wabash mine, a room-and-pillar operation, located in Wabash County, Illinois was placed on long-term idle status on April 4, 2007 due to a combination of factors, including aged underground infrastructure, softening market conditions, escalating labor and operating costs and higher value uses for capital. Remaining reserves at the property total 26.1 million tons in the Illinois No. 5 seam. The mine and related facilities are fully permitted. Idle facilities include a preparation plant and rail loading facility on the Norfolk Southern Railway. If market conditions warrant, the mine could be re-opened with less capital investment than would be required to develop a new underground mine.
Employees As of December 31, 2008, we and our subsidiaries had approximately 3,300 employees. As of December 31, 2008, pursuant to two distinct collective bargaining agreements that expire in 2011, the UMWA represented approximately 34% of our affiliates’ employees, who produced approximately 19% of our coal sales volume during the fiscal year ended December 31, 2008. Relations with organized labor are important to our success, and we believe our relations with our employees are satisfactory.
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