Coal mine and generator to have $35 million payroll

LIVELY GROVE, Ill. -- Grocer David Waller has seen coal mines come and go over the 60 years his family has owned Waller's Market in this southwest Illinois village.

News that St. Louis-based Peabody Energy plans to dig a new mine near this village and build a 1,500-megawatt generator on top of it means one thing to this remote corner of Washington County, Waller said Monday.

"It means a lot of people around here looking for work will find some," he said.

On Monday, Peabody executives formally announced the $2 billion Prairie State Energy Campus in western Washington County on the steps of Nashville's old brick courthouse, flanked by a high school band and black-and-white Peabody banners.

They said the project, planned for a site 50 miles southeast of St. Louis, will put to work 1,500 people during construction, which should begin in about one year, and as many as 500 people once the facility is open in 2006 or 2007.

The so-called "mine-mouth" generator will have a $35 million annual payroll and pump some $40 million to $60 million into the regional economy, Peabody officials said.

It will be "almost identical" to the Thoroughbred Energy project the company wants to build in western Kentucky, said Jacob Williams, Peabody's vice president of generation development.

Peabody is still trying to get state permits for that complex, Williams said.

Mine-mouth power plants are thought to be particularly efficient because the coal that fires the electricity is mined on site, omitting the cost of transporting it.

Tax breaks

The Prairie State project is the first to come along after the state passed $3.5 billion in tax breaks, loan guarantees and other incentives in June aimed at boosting the market for Illinois coal, which is more expensive to burn that the cleaner variety mined in the West.

Legislators were heartened by President Bush's support of the fossil fuel in his energy plan released last spring, and driven to action by soaring natural gas prices that made coal relatively cheap.

Peabody officials said details of the project's financing are still being worked out.

But the break on sales tax on the equipment and materials needed for the $2 billion construction project should save the company tens of millions of dollars alone.

Peabody will eventually form a joint venture with a company experienced in power generation to run the generator at Prairie State, Williams said.

The company will sell to the usual collection of utilities that buy power now, as well as the scores of potential customers that will result from the deregulation of the state's power market in 2005, when corporations and other entities can start buying their power directly from generators, he said.

Peabody officials touted the plan as a return to an area it retreated from in October 1999, when, like scores of other coal companies, it left hundreds of local miners out of work when it shuttered its last Illinois mine.

But with the country's rising energy demands and new technology to make coal cleaner to burn, a new day has begun for coal, said Fred Palmer, Peabody's executive vice president for legal and external affairs.

"Coal is back," said Palmer. "It's back in the Illinois basin and it's back across America."