When asked to cut costs, Coteau goes above and beyond for Basin Electric

For years, Coteau has been devising innovative ways to mine lignite coal at a lower cost per ton, and has seen buy-in from its employees in all areas of the company.

Relationships are important, especially in the cooperative world. It was the relationship of farmers banding together to form cooperatives that brought electricity to rural areas across the country. In the late 1950s and early 1960s, it was small co-ops in the Missouri River Basin that got together to solve the problem of a lack of electricity generation, which was not allowing them to meet their members’ growing needs. The solution to this problem was the formation of what is now Basin Electric, and it is the relationships that have formed over the past 61 years that make this cooperative strong today. 

In addition to the relationships with its members, Basin Electric also thrives because of teamwork with other companies. When these bonds are strong, employees of these companies will go above and beyond what’s expected of them to find ways to achieve the goals they both share. Such is the case with Basin Electric subsidiary, Dakota Coal Company, and The Coteau Properties Company. 

Dakota Coal provides financing for the Freedom Mine north of Beulah, North Dakota, and is responsible for marketing lignite from the Freedom Mine, which is owned and operated by The Coteau Properties Company, a subsidiary of the North American Coal Corporation. 

For years, Coteau has been devising innovative ways to mine lignite coal at a lower cost per ton, and has seen buy-in from its employees in all areas of the company. “The teamwork between Dakota Coal, Coteau, and Basin Electric is remarkable,” says Dean Bray, Dakota Coal manager. “We don’t think of each other as being different companies, we see ourselves as being on the same team because we all have the same goals.”

Kent Neustel, vice president at Coteau says employees are paying attention to things that could be done more efficiently, because they know what saving money means to the member at the end of the line. “Those people are our neighbors, our families, and our friends, so we have a personal interest in doing whatever we can to cut costs,” Neustel says.

The latest cost savings Coteau has implemented is changing the way it uncovers the lignite coal. Traditionally, truck-shovels were used to move a portion of the overburden, the material or dirt overlaying the coal. By utilizing draglines in a different digging mode, the truck-shovel material can be moved with the draglines at a substantial savings. “This mode is not new technology, just a different way of doing things,” Neustel says. “There is some risk involved, in that the total tons the mine can uncover is limited and coal quality will need extra attention to ensure the plants receive the proper blend, but we are committed to making it work.”

The amount of coal that will be uncovered meets the projections needed to supply enough lignite for Antelope Valley Station, Leland Olds Station, and Dakota Gasification Company’s Great Plains Synfuels Plant for the next 10 years. This change will save between $14-15 million this year alone.

When one tire can cost as much as $30,000, it’s easy to understand that tires are a big expense at the mine. In an effort to reduce the number of tires that need to be replaced, Coteau installed a tire sensor system, which checks the temperature and pressure in the truck tires. The system saved eight tires in 2018, resulting in a savings of approximately $175,000. 

Thanks to increased savings and efficiencies, in 2018 Coteau saw the lowest employee numbers since 2009, and the lowest overtime numbers since 2012 – the third lowest on record. These numbers were achieved through attrition, retirements, and a lower number of temporary employees. 

Relationships with vendors that have been developed over the years have also helped Coteau significantly reduce its costs. When Coteau began taking bids for a routine shovel outage, instead of submitting a bid for exactly what was described, one vendor approached Coteau saying that if the outage dates could be moved by just a few weeks, it could do the work for significantly less money, so Coteau did move the dates. 

Another vendor had some parts in its warehouse that none of its other customers used, but knew that Coteau did, so it sold those parts to Coteau at 2007 prices. That same vendor found a buyer for some used parts that were removed during the outage. 

Between changing the dates, buying the lower-priced parts, and selling its used parts, the total cost of the outage was reduced by $1.2 million from what was budgeted. 

Bray says Coteau employees have been working for years on ways to reduce the amount of coal fines, the residual component of crushed coal, which can cause problems in the gasifiers at the Great Plains Synfuels Plant. One of its longtime contractors recently suggested a different way of blasting at the mine to help minimize fines, and Bray says since implementing this suggestion, Coteau has seen a record reduction in the amount of fines sent to Dakota Gas.

Dakota Coal and Coteau have been working hard to lower the cost of coal through these and other means. Because of the knowledge and innovation of its employees and the relationships between the companies, vendors, contractors, and many others, these savings can now be passed on to the members at the end of the line – the people they all work to serve.

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