Decade of the 50's
1954
Paul Quarnberg was elected to the Board of Directors to replace Harold Norman who resigned in 1954. Harold Norman was elected Treasurer! Assistant Secretary.
The year 1954 may be recorded as one of the most historic years for the Company. That was the year that the Company and Homestake Mining Company consummated the year-long negotiations that provided for the acquisition of the Kirk power plant and the Wyodak power plant and an option to purchase the Wyodak Coal Mining equipment and lease the coal reserves.
Following is a verbatim memorandum released by the Company on July 19, 1954:
BLACK HILLS POWER AND LIGHT COMPANY
Rapid City, South Dakota
July 19, 1954
(The following material was prepared for your use in making public the scope of the Homestake-Black Hills agreements to security holders, financial services and others.)
At meetings of the Boards of Directors of Homestake Mining Company held July 16 and of Black Hills Power and Light Company held on July 19, 1954, approval was given to the respective officers of the two corporations to execute a series of agreements which have been the subject of negotiations over a number of months.
In brief the scope of these agreements is as follows:
- Black Hills acquires the 11,500 kW steam turbine generating power station of Homestake, located near Lead, South Dakota, and the 5,000 kW steam generating station of Homestake's subsidiary, Wyodak Coal Company, located at Wyodak's coal mine in Wyoming, for a purchase price of about $915,000.
- Homestake enters into a ten-year agreement to purchase from Black Hills Power for its mining operations in excess of that generated in its three hydro-electric plants and Wyodak enters into a ten-year agreement to purchase power for its coal mining operations. Had these contracts been in effect during the 12 months ended May 31. 1954, Black Hills would have sold Homestake and Wyodak 38,500,000 kWh for about $370,000.
- Black Hills receives, by assignment, contracts under which Wyodak has been furnishing the power requirements of the city of Gillette, Wyoming, and of the Tri-County Rural Electric Association. These requirements amounted to about 11,245,000 kWh in the 12 months ended May 31, 1954 with revenues of $136,000.
Black Hills enters into a ten-year contract to purchase from Wyodak the fuel requirements of the Osage, Wyodak, and Kirk power plants at a sliding scale of prices from $1.15 down to $0.90 per ton depending upon the quantity used. Based on current fuel requirements the average per ton cost would be $1.08 which compares with a price of $1.26 per ton for coal which has been furnished heretofore to the Osage plant of Black Hills.
- Black Hills is granted an option exercisable in two years to purchase on its own behalf or by a subsidiary or an affiliate the coal mining equipment and operations of Wyodak Coal Company at a price of about $562,000 if exercised at August 31, 1954, the option price reducing by $4,550 per month thereafter.
- Black Hills exercises the option to buy the coal mine, it enters into a coal lease arrangement whereby Wyodak is paid 20 cents per ton royalty for about 15 per cent of the recoverable coal owned by Wyodak and 15 cents per ton for the remainder.
The power rates, coal prices and lease royalties are subject to appropriate escalation adjustments.
Homestake will accept a substantial portion of the respective purchase prices in two year secured and 10 year unsecured serial notes bearing interest at 4 percent. Hence at the moment no financing by Black Hills is involved, other than a nominal bank loan.
The officers and directors of Black Hills believe that the consummation of these agreements will be of great benefit to the company and its operations, for the following reasons:
- Black Hills will acquire two strategically located power plants which can be enlarged to meet load growth in South Dakota and Wyoming. The Wyodak site is of value particularly because coal is delivered from the coal tipple to the power plant by conveyors and without any charges for transportation of coal.
- Black Hills obtains the largest industrial power load in its South Dakota service area with prospective growth and two wholesale customers in Wyoming, one of which is expanding its business very rapidly.
- Based upon present fuel requirements, the sliding scale of coal prices produces an immediate reduction of 18 cents per ton at the 0 sage power plant.
- If the option on the Wyodak mine is exercised, Black Hills is assured of a potential fuel supply of about 20 million tons at a production cost currently below the lowest price block in the new coal contract.
The Wyodak power plant was a 5,000 kW coal burning steam plant, consisting of 500, 1,000, 1,500, and 2,000 kW generators with boilers. The plant furnished power for the mining of coal and supplied the power requirements of the city of Gillette and the Tri-State REA. Since very little power was used for mining during the plant's peak generating period, the plant operated at a high load factor. The plant was purchased by the Company from Homestake on October 16, 1954. A 47 kV transmission line was immediately constructed between the plant and the Osage plant to tie it in with the interconnected transmission system of the Company. Because coal could be delivered directly from the tipple to the hoppers of the power plant, the site would probably be used as a location for future generating capacity.
The last unit of the Kirk power plant, located near Lead was installed in 1935. It had name plate capacity of 11,500 kW. It had been supplying power to Homestake because the hydro- plants in Spearfish Canyon (used by Homestake in its gold mining operations since 1925) could not provide all of Homestakes requirements. Immediately following the purchase of the plant, work started on the installation of a new substation and other facilities required to connect it to the integrated transmission system of the Company.
The magnitude of this transaction has exceeded all expectations. Homestake Mining Company and the city of Gillette became the two largest customers of the Company.
In April of 1954 the Bureau of Reclamation began serving about half of the Rushmore G & T cooperatives REA loads in South Dakota, loads previously served by the Company. It was expected that by April or May of 1955, the balance of the Rushmore load would be taken by the Bureau. In July of 1954 the Bureau assumed approximately half of the Air Base load, and the South Dakota State Cement Plant became vulnerable to takeover.
A three story addition to the General Office building was started in 1954 along with new office buildings in Newcastle, Spearfish, and Newell.
Changes in the engineering department took place the same year. Robert G. Asheim was promoted from Manager of the distribution department to System Manager of Engineering and Operations to replace Robert Protheroe. Henry Oestreich, former line superintendent, became Manager of Transmission and Line Construction and Lloyd Adel was promoted to Construction Engineer. Former Meter Superintendent Lyle McNulty became Chief Engineer and Harry Babbitt was promoted to Manager of Production. A new employee, Kelley Hale, was hired to assist McNulty. Mack West, another new employee, replaced McNulty as Meter Superintendent.