The life cycle of coal continues to be of great concern to many of our stakeholders. We began a survey in 2009 to evaluate the environmental, safety and health performance of our coal suppliers and conducted our second survey in 2010.

The survey focuses largely on compliance issues but also includes performance indicators on biodiversity, conservation, recycling, water quality, air emissions and land reclamation. For the second year, some of the survey questions were based on indicators from Global Reporting Initiative’s (GRI) Mining and Metals Sector Supplement in order to be consistent with our GRI reporting. We adjusted the 2010 survey based on stakeholder feedback and the need to reframe some of the questions from 2009 to ensure relevance and accuracy of the data. Once again, we hired a coal mining consultant to assist with the survey.

We followed up with several suppliers who outperformed their peers and/or industry averages in the 2009 survey to learn more about best practices that could be shared across the industry. For example, several suppliers conduct rigorous internal audits of their environmental and safety programs and have systems to track violations and violations per inspection, along with strong programs of corrective action.

The next step will be to meet with suppliers who did not perform as well according to the survey to learn what is driving their results, share what we have learned from the outperforming companies and share our own performance experience. This will be an ongoing process, based on each year’s survey results.

We met with a diverse set of stakeholders to talk about the preliminary results. They voiced the need to improve the sustainability of the entire coal process—from mining to land reclamation to energy production. There was also strong agreement that, regardless of its future in America, the global market for coal is on the rise.

AEP buys coal from several coal producing regions of the country. One of them is the Central Appalachian (CAPP) region. The coal mined in this region is often among the more expensive coals we buy and they are needed to meet environmental and operational requirements. Our use of CAPP coal has declined significantly during the past five years. In 2006, approximately 40 percent of AEP’s coal purchases came from this region, which is where significant mountain removal mining (MTR) is conducted, to about 20 percent in 2009.

It is difficult to quantify exactly how many tons produced from MTR sites are purchased by AEP. Often coal is gathered from many locations to one centralized location and then shipped to the market from that location. In an attempt to quantify this value, AEP has reviewed the mines, coal washing plants and loading facilities in the Central Appalachian region from whom we receive coal to try to identify the sources that contain MTR coal. Based on all the available information we have collected, we estimate the percentage of MTR coal we purchase is approximately 7 percent

Again in 2010, MTR was part of the stakeholder discussion. While some stakeholders believe that MTR is a “wedge issue” leading to further regulatory action regarding surface mining or coal mining in general, one stakeholder said that AEP’s purchases of MTR coal, however small, were corrupting its dialogue with environmental groups on more important issues.

There is an opposite view from other stakeholders who say that mountaintop mining results in flat, reclaimed land that has led to economic development and commerce in these areas. Read more about one stakeholder’s perspective in the Stakeholder Engagement section.

The 2010 coal supplier survey was well-received.  Because it was widely agreed that the coal industry would be judged in terms of its worst performers, many stakeholders believe that focusing on negative outliers and nonresponders would be an important step going forward. Many of the stakeholders want AEP to start considering survey results in their procurement decisions. However, many understand that government (both the EPA and the Mine Safety Health Administration) has taken a more active role in protecting the safety and health of miners and the environment. 

One follow up to the stakeholder meeting was agreement to explore the possibility of developing voluntary standards to improve ecosystem services and conservation outcomes on reclaimed mining land. The effort is being led by the Appalachian Wildlife Foundation with participation from several coal suppliers, electric utilities and land owners. AEP serves on the Mine Land Stewardship Initiatives Steering Committee for this group. We will report on this initiative as it evolves.

We plan to continue to conduct this survey annually and we are making suppliers aware of its importance to AEP. We are exploring the possibility of teaming up with our peers to make this an industrywide survey, an idea which was well-received by coal suppliers who are concerned about duplication efforts as other utilities consider implementing their own reviews.

The information we gathered provides valuable insight into the performance of our suppliers and how it aligns with AEP’s values and expectations. At the completion of the 2010 survey (based on 2009 performance), we will have collected four years of data from our suppliers. Some stakeholders want us to use this information to influence our coal buying decisions. In light of the current federal and state regulatory environment, it is unlikely we will pursue this right now. However, we will continue to share what we learn with our suppliers to help drive performance improvement in that industry. Read a summary of preliminary results of the 2010 survey. The final report will be posted later this year, once complete.