Dolet Hills Shut Down Good For Some DeSoto Mineral Owners

SWEPCO, Cleco eye 2021 retirement of Dolet Hills coal plant in Louisiana

Cleco Power LLC and Southwestern Electric Power Co. could shut down the 642.5-MW Dolet Hills lignite-fired coal plant in Louisiana before the end of 2021, or about five years ahead of a previous plan, the utilities wrote in recent federal filings.

In a May 6 Form 10-Q filing with the U.S. Securities and Exchange Commission, American Electric Power Co. Inc. subsidiary Southwestern Electric Power, or SWEPCO, indicated management has "revised the useful life of the Dolet Hills Power Station to September 2021 based on the remaining estimated fuel supply available for continued seasonal operation."

SWEPCO owns about a 40% stake in the De Soto County, La., coal plant and previously agreed to retire the power plant by the end of 2026 as part of a settlement agreement approved by the Arkansas Public Service Commission. SWEPCO reached the agreement with the Sierra Club and other intervenors in its electric rate case.

Cleco Power owns a 50% interest in Dolet Hills and operates the plant, which was brought online in April 1986, according to S&P Global Market Intelligence data. Cleco Power is a subsidiary of Cleco Partners LP and Cleco Corporate Holdings LLC.

In a Form 10-Q filed May 12, Cleco Power wrote that in April, the utility "announced its intent to seek regulatory approval to retire the Dolet Hills Power Station at the end of 2021, subject to recovery mechanisms."

"Cleco Power intends to seek regulatory approval to retire the Dolet Hills Power Station in Mansfield and the nearby mine that supplies the plant with coal," Cleco spokesperson Jennifer Cahill wrote in a May 13 email. "The closing dates for the power station and mine will be subject to discussions with stakeholders, including the Louisiana Public Service Commission and regional transmission organizations."

SWEPCO subsidiary Dolet Hills Lignite Co., or DHLC, "provides 100% of the fuel supply" to the power plant.

"In March 2020, it was determined that DHLC would not proceed developing additional mining areas for future lignite extraction and management notified a substantial portion of its workforce that employment will permanently end in June 2020," SWEPCO wrote. "Based on these actions, management has revised the estimated useful life of many of DHLC's assets to June 2020 to coincide with the date at which extraction is expected to be discontinued."

SWEPCO said its share of the net investment in the Dolet Hills Power Station is $151 million, which the utility expects to recover through its base rates.

Cleco Power, meanwhile, said it "has the ability to secure alternative fuel sources and expects to have sufficient lignite fuel available to continue seasonal operations of the Dolet Hills Power Station through at least the 2020 and 2021 seasonal operations periods."

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Permalink Reply by Skip Peel - Mineral Consultant on August 25, 2021 at 3:46

Good to see you post, TD,P.  Yep, this is your backyard and you were around during the early HA days. Thanks for the background.   I would think that a delayed release of the land (surface) based on a couple of years of stabilization would be a reasonable requirement but do you think that period of reclamation would in any way keep laterals from being drilled two miles below the surface?  I could see a prohibition for surface use such as well pads, roads, pipeline rights-of-way, etc. but with the ability of operators to drill 10,000 to 15,000' laterals, surface use on reclaimed lands would appear to allow HA development for much of the mined and not yet reclaimed lands.  What do you think of the rock under the mine?

Permalink Reply by Two Dogs, Pirate on August 26, 2021 at 3:39

I thought at the time that the time allotted for reclamation was a bit much. Back then most everything was 640 acre units which would probably been a problem but now with these long laterals it would be a much easier task. I would think that the rock would be pretty good in that area. When Petrohawk pulled out and went to Texas I went South and worked mainly Wilcox formation in Beauregard, Allen and Calcasieu Parishes then TMS in Rapides Parish so I stopped following the Haynesville Shale. The Dolet Hills area is real pretty but you got to take to the back roads to see it, I-49 doesn't do it justice. Shutting the coal mine down will cost a lot of people their jobs up in that area.

Permalink Reply by Skip Peel - Mineral Consultant on August 26, 2021 at 4:16

I have heard that the reclaimed lands look good.  Lots of jobs will go away, such is history.  The question is, what new jobs will replace them?  For that particular area, the resurgence in the timber industry may mean more jobs.

Permalink Reply by Jed Clampett on September 14, 2021 at 4:46
We own a large block of acreage in the Dolet Hills mine predominantly in one section.
 
signed Lignite lease mid 1970's
we sold surface rights in mid 1990's
received advanced royalty payments from mid 1970's thru 2000 on lignite
started mining lignite 2000 to 2006.
no mining or payments since then.
reclamation of the surface land in our section is not complete.
 
    R.S. 31:161 seems to say that the prescription clock will not run again until - - -
    1. reclamation operations on the land burdened by the servitude are complete, 
 2. the land burdened by the servitude is deleted from the mining plan, and
     3. there is no longer in effect a permit for lignite or other form of coal mining and reclamation as to any land included in the mining plan whichever is sooner. 
      It does not seem any of these three items have concluded yet.

Below is where I get confused:
 
An O&G operator arranged for release from bond of 50 acres or so for a pad to drill a well in 2011.The well was completed 2013 and produced gas. It was a 1 HZ mile well entirely in our section.
we never received royalty payments from the gas well.
 
seems to me the prescription period for our oil and gas has not prescribed.
It seems to me we should have got paid for the gas well????
We never signed an O&G lease with anybody.
Were am I wrong?
Permalink Reply by Skip Peel - Mineral Consultant on September 14, 2021 at 4:56

No, I don't think you are wrong if you reserved your minerals when you sold the surface in the 1990s.  To put it simply:  Prescription of a mineral servitude is interrupted when the land is incorporated into the mine plan and commences to run again for the full ten year period once the land is released from the mine plan.  The mine plan is updated periodically to reflect the changing boundary.  Your mineral servitude would have suspended prescription on the date you sold the surface.  I suspect that you are owed royalty but the mineral code only allows for a recovery of the most recent three years from the date demand is made.  Of course there should be additional wells to come so it is worth the time and expense to get this straightened out now.

Disclaimer:  I'm unfamiliar with the term "released from bond" and do not know the section-township-range location of the mineral interest.  Suggest you seek the advice of an O&G attorney/firm that is experienced with mineral servitudes and interruption of prescription.

Permalink Reply by Two Dogs, Pirate on September 15, 2021 at 9:41

See my previous posts above. The title is screwed up way back in time that real estate abstractors probably wouldn't find. Good Louisiana landmen would find these problems before they would pay the big bucks that were being thrown around back in the Haynesville hayday. If you go back in time when the log jam was still clogging the Red River you will find maps that depict a bayou running along the West side of I-49 that labeled the bayou as a branch of the Red River. This bayou goes into a cypress swamp just North of the Evelyn exit of I-49. The State of Louisiana may own a lot of the minerals in this area. The landmen taking the leases for the lignite mine were probably not oil and gas landmen and didn't go back far enough to see these problems or may have been told by the power companies to only run title for X number of years.

Permalink Reply by Skip Peel - Mineral Consultant on September 15, 2021 at 9:48

I agree, TD,P.  Going back to patent is likely out of question for many tracts however I think thirty years of adverse possession will render the majority of titles marketable.  I'm all for getting rid of coal especially lignite and replacing it with natural gas.  Closing the mine then is a win-win proposition in my opinion.  I feel sure the land/mineral owners and the Haynesville operators would agree.

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