<PAGE>

                                                                   EXHIBIT 10.72


                                 GRANT AGREEMENT

                           PERFORMANCE UNITS AGREEMENT

         THIS AGREEMENT, dated as of August 1, 2004 ("Grant Date") is made by
and between PEABODY ENERGY CORPORATION, a Delaware corporation (the "Company"),
and the undersigned employee of the Company or a Subsidiary (as defined below)
or Affiliate (as defined below) of the Company ("Grantee").

         WHEREAS, the Company wishes to afford the Grantee the opportunity to
participate in future increases in Company value;

         WHEREAS, the Company wishes to carry out the Plan (as hereinafter
defined), the terms of which are hereby incorporated by reference and made a
part of this Agreement; and

         WHEREAS, the Committee (as hereinafter defined), appointed to
administer the Plan, has determined that it would be to the advantage and best
interest of the Company and its stockholders to grant the Performance Units
provided for herein to the Grantee as an incentive for increased efforts during
his term of office with the Company or its Subsidiaries or Affiliates, and has
advised the Company thereof and instructed the undersigned officers to issue
said Performance Units;

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties, hereto do hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         Whenever the following terms are used in this Agreement, they shall
have the meaning specified in the Plan or below unless the context clearly
indicates to the contrary.

Section 1.1 - "Affiliate", as applied to any Person, shall mean any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract or otherwise.

Section 1.2 - "Board of Directors" or "Board" shall mean the Board of Directors
of the Company.

Section 1.3 - "Cause" shall mean (i) any material and uncorrected breach by
Grantee of the terms of his employment agreement with the Company, if any,
including, but not limited to, engaging in action in violation of any
restrictive covenants therein, (ii) any willful fraud or

<PAGE>


dishonesty of Grantee involving the property or business of the Company, (iii) a
deliberate or willful refusal or failure of Grantee to comply with any major
corporate policy of the Company which is communicated to Grantee in writing or
(iv) Grantee's conviction of, or plea of nolo contendere to, any felony if such
conviction shall result in his imprisonment; provided that with respect to
clauses (i), (ii) or (iii) above, Grantee shall have 10 days following written
notice of the conduct which is the basis for the potential termination for Cause
within which to cure such conduct in order to prevent termination for Cause by
the Company.

Section 1.4 - "Change of Control" shall mean:

         (a) any Person (other than a Person holding securities representing 10%
or more of the combined voting power of the Company's outstanding securities as
of May 22, 2001, the Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or any company owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company), becomes the beneficial
owner, directly or indirectly, of securities of the Company, representing 50% or
more of the combined voting power of the Company's then-outstanding securities;
or

         (b) during any period of twenty-four consecutive months (not including
any period prior to May 22, 2001), individuals, who at the beginning of such
period constitute the Board (the "Incumbent Board"), cease for any reason to
constitute at least a majority of the Board; provided, however, that the
Incumbent Board shall be deemed to include any new director, whose election by
the Board or nomination for election by the Company's shareholders was approved
by a vote of at least three-fourths ( 3/4) of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved; provided further that the
Incumbent Board shall be deemed to exclude (A) any director nominated by a
Person who has entered into an agreement with the Company to effect a
transaction described in Section 1.4(a), (c) or (d) and (B) any director
nominated by any Person (including the Company) who publicly announces an
intention to take or to consider taking actions (including, but not limited to,
an actual or threatened proxy contest) which if consummated would constitute a
Change in Control); or

         (c) the consummation of any merger, consolidation, plan of arrangement,
reorganization or similar transaction or series of transactions in which the
Company is involved; provided, however, that a Change of Control shall not
include any transaction or series of transactions as a result of which the
shareholders of the Company immediately prior thereto continue to own, in
substantially the same proportions as their ownership immediately prior to such
transaction(s), more than 50% of the combined voting power of the securities of
the Company or such surviving entity (or the parent, if any) outstanding
immediately after such transaction(s) (either by remaining outstanding or by
being converted into voting securities of the surviving entity); or

         (d) the shareholders of the Company approve a plan of complete
liquidation of the Company or the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a liquidation of the
Company into a wholly owned subsidiary.


                                       2
<PAGE>


For purposes of this Section 1.5, "Person" (including a "group"), has the
meaning as such term is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (or any successor section thereto).

Section 1.5 - "Committee" shall mean the Compensation Committee of the Company,
duly appointed by the Board as the Administrator under Section 2 of the Plan.

Section 1.6 - "Common Stock" shall mean the common stock of the Company, par
value $0.01.

Section 1.7 - "Disability" shall mean Grantee's absence from the full-time
performance of Grantee's duties pursuant to a reasonable determination made in
accordance with the Company's disability plan that Grantee is disabled as a
result of incapacity due to physical or mental illness that lasts, or is
reasonably expected to last, for at least six months.

Section 1.8 - "FMV per Share" shall mean the average of the closing prices of
the shares of Common Stock for the 28 calendar days immediately preceding the
Determination Date (as defined below), or, with respect to the Grant Date, the
average of the closing prices of the shares of Common Stock for the 28 calendar
days immediately following the Grant Date; notwithstanding the foregoing, in the
event of a Change of Control, "FMV per Share" shall mean the per share value of
equity based on amounts paid in the Change of Control.

Section 1.9 - "Good Reason" shall mean (i) a reduction by the Company in
Grantee's Base Salary, (ii) a material reduction in the aggregate program of
employee benefits and perquisites to which Grantee is entitled (other than a
reduction which affects all executives), (iii) relocation by more than 50 miles
from Grantee's workplace, (iv) any material diminution or material adverse
change in Grantee's duties, responsibilities or reporting relationships, which
causes Grantee to fall below the level of the executive team, or (v) a material
decline in Grantee's Bonus opportunity.

Section 1.10 - "Incentive Amount" shall mean the dollar amount payable to
Grantee hereunder with respect to the Performance Units, if any, as calculated
in Article IV.

Section 1.11 - "Performance Units" shall mean the units granted on a performance
basis under this Agreement. The value of each Performance Unit shall be equal to
the FMV per Share as of the Grant Date or the relevant Determination Date (as
defined below).

Section 1.12 - "Person" shall mean an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.

Section 1.13 - "Plan" shall mean the Peabody Energy Corporation Long-Term Equity
Incentive Plan, as from time to time amended.

Section 1.14 - Pronouns - The masculine pronoun shall include the feminine and
neuter, and the singular the plural, where the context so indicates.

Section 1.15 - "Recapitalization Event" shall mean a recapitalization,
reorganization, stock dividend or other special corporate restructuring which
results in an extraordinary distribution to


                                       3
<PAGE>


the stockholders of cash and/or securities through the use of leveraging or
otherwise but which does not result in a Change of Control.

Section 1.16 - "Retirement" shall mean normal retirement at or after age 55 with
at least ten (10) years of service with the Company.

Section 1.17 - "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations, or group of
commonly controlled corporations, other than the last corporation in the
unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.

Section 1.18 - "Termination of Employment" shall mean a termination of the
Grantee's employment with the Company (regardless of the reason therefor).

                                   ARTICLE II

                           GRANT OF PERFORMANCE UNITS

Section 2.1 - Grant of Performance Units. For good and valuable consideration,
the Company shall grant to the Grantee such number of Performance Units as set
forth on the signature page hereof (based on such FMV per Share as of the Grant
Date as set forth on the signature page hereof) upon the terms and conditions
set forth in this Agreement.

Section 2.2 - No Obligation of Employment. Nothing in this Agreement or in the
Plan shall confer upon the Grantee any right to continue in the employ of the
Company or any Subsidiary or Affiliate or shall interfere with or restrict in
any way the rights of the Company and its Subsidiaries or Affiliates, which are
hereby expressly reserved, to terminate the employment of the Grantee at any
time for any reason whatsoever, with or without Cause.

Section 2.3 - Adjustments in Performance Units. In the event that shares of
Common Stock are, from time to time, changed into or exchanged for a different
number or kind of shares of the Company or other securities of the Company by
reason of a merger, consolidation, recapitalization event, reclassification,
stock split, stock dividend, combination of shares, or otherwise, the Committee
shall make an appropriate and equitable adjustment in the number and kind of
Performance Units, or other consideration payable hereunder, and the applicable
FMV per Share. Any such adjustment made by the Committee shall be final and
binding upon the Grantee, the Company and all other interested persons.

                                   ARTICLE III

                          VESTING OF PERFORMANCE UNITS

Section 3.1 - Performance Units. Unless otherwise provided in this Article III,
the Performance Units shall vest on the 15th of each calendar month, in equal
monthly increments, over the period beginning on the Grant Date and ending on
December 31, 2006 (the "Performance Cycle").


                                       4
<PAGE>


Section 3.2 - Effect of Certain Events. Notwithstanding Section 3.1, during the
Performance Cycle, upon the earliest of: (1) a Termination of Employment on
account of death, Disability or Retirement before the close of business on
December 31, 2005, (2) a Termination of Employment by the Company without Cause,
or by the Grantee for Good Reason, (3) a Change of Control, or (4) a
Recapitalization Event, (i) the Performance Units shall not continue to vest,
(ii) any and all Performance Units which remain unvested shall terminate
immediately, and (iii) the Grantee shall be entitled to the Incentive Amount
calculated pursuant to Section 4.1 hereof with respect to vested Performance
Units. Notwithstanding Section 3.1, during the Performance Cycle, upon the
earlier of: (1) a Termination of Employment by the Company for Cause, and (2) a
Termination of Employment by the Grantee without Good Reason, (i) all
Performance Units shall terminate, and (ii) the Grantee shall not be entitled to
any Incentive Amount hereunder (unless such Incentive Amount previously became
due hereunder). In the event of a Termination of Employment on or after the
close of business on December 31, 2005, as a result of Retirement during the
Performance Cycle prior to the occurrence of any other event mentioned in this
Section 3.2, the Performance Units shall continue to vest in accordance with the
provisions of this Article III, and such Retirement shall not trigger an
accelerated payment of the Incentive Amount under Article IV hereof.

                                   ARTICLE IV

                           PAYMENT OF INCENTIVE AMOUNT

Section 4.1 - Determination of Incentive Amount. The Incentive Amount payable to
the Grantee hereunder shall be determined on the earliest to occur of the
following events (the "Determination Date"): (i) December 31, 2006; (ii) a
Termination of Employment on account of death, Disability or Retirement before
the close of business on December 31, 2005, (iii) a Termination of Employment by
the Company without Cause, or by the Grantee for Good Reason, (iv) a Change of
Control, or (v) a Recapitalization Event. Except as set forth in the immediately
following sentence, any subsequent occurrence of an event described in Article
III hereof shall not constitute a Determination Date, and no additional payment
shall be made to the Grantee hereunder. Notwithstanding anything herein to the
contrary, a Termination of Employment on or after the close of business on
December 31, 2005, as a result of Retirement during the Performance Cycle shall
not constitute a Determination Date for purposes hereof and no payment of an
Incentive Amount shall be made under this Article IV solely as a result of such
Retirement. The Incentive Amount shall be equal to the sum of:

(A) Fifty percent (50%) times the number of Performance Units that are vested as
of the Determination Date pursuant to Article III hereof, multiplied by the FMV
per Share as of the Determination Date, and further multiplied by the percentage
specified in Exhibit A hereto with respect to the achievement of such applicable
EBITDA ROIC targets as set forth in Exhibit A hereto; plus

(B) Fifty percent (50%) times number of Performance Units that are vested as of
the Determination Date pursuant to Article III hereof, multiplied by the FMV per
Share as of the Determination Date, and further multiplied, in the event the
Determination Date is December 31, 2006, by the applicable percentage based on
the matrix below (the "Applicable Percentage"):


                                       5
<PAGE>


                              Applicable Percentage

<Table>
<Caption>
TS R PERCEN 75%ILE - S&P TILE



<S>        <C>     <C>      <C>     <C>      <C>      <C>      <C>      <C>     <C>      <C>
75%ile     80%     100%     100%    100%     100%     100%     100%     100%    100%     100%
                                                                                         ------
70%ile     72%     100%     100%    100%     100%     100%     100%     100%    100%     100%

65%ile     64%      94%     100%    100%     100%     100%     100%     100%    100%     100%

60%ile     56%      86%      96%    100%     100%     100%     100%     100%    100%     100%

55%ile     48%      78%      88%     98%     100%     100%     100%     100%    100%     100%

50%ile     40%      70%      80%     90%     100%     100%     100%     100%    100%     100%
                                             -------
45%ile     33%      63%      73%     83%      93%     100%     100%     100%    100%     100%

40%ile     27%      57%      67%     77%      87%     100%     100%     100%    100%     100%

35%ile     20%      50%      60%     70%      80%     100%     100%     100%    100%     100%
                    ------
30%ile      0%      30%      40%     50%      60%      84%      96%     100%    100%     100%
           =====================================================================================
           35%ile   40%ile   45%ile  50%ile   55%ile   65%ile   70%ile   75%ile  80%ile  100%ile
           =====================================================================================
                                        TSR PERCENTILE - INDUSTRY
</Table>


where:

"TSR Percentile - Industry" represents the Company's average total shareholder
return (based on the average of the closing prices of the shares of Common Stock
for the 4 weeks immediately preceding the Determination Date) expressed as a
percentage of an industry peer group index (weighted at 60% of the total award
opportunity hereunder), which peer group shall include such companies as shall
be selected by the Committee in its sole discretion from time to time; and

"TSR Percentile - S&P" represents the Company's average total shareholder return
(based on the closing price of the shares of Common Stock on the Determination
Date) expressed as a percentage of the Standard & Poor 400 Mid Cap Index
(weighted at 40% of the total award opportunity hereunder).

Notwithstanding the foregoing, in the event the Company's average total
shareholder return as of the applicable Determination Date (based on the average
of the closing prices of the shares of Common Stock for the 4 weeks immediately
preceding the Determination Date) is negative, (i) no Incentive Amount shall be
paid hereunder if the TSR Percentile - Industry (as defined above) is less than
fifty percent (50%) as of that same date, and (ii) the Applicable Percentage
shall not exceed seventy-five percent (75%) if the TSR Percentile - Industry (as
defined above) equals or exceeds fifty percent (50%) as of that same date.

Section 4.2 - Form and Time of Payment. The Incentive Amount shall be paid to
the Grantee in a lump sum in cash as soon as practicable after the Determination
Date; provided, however,


                                       6
<PAGE>


that the Committee, in its sole discretion, may decide to pay the Incentive
Amount in Common Stock based on the FMV per Share as of the applicable
Determination Date.

Section 4.3 - Conditions to Issuance of Stock Certificates. In the event the
Committee decides to pay the Incentive Amount in Common Stock under Section 4.2,
the shares of Common Stock deliverable upon payment of the Incentive Amount may
be either previously authorized but unissued shares or issued shares which have
then been reacquired by the Company. Such shares shall be fully paid and
nonassessable. The Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock deliverable hereunder
prior to fulfillment of all of the following conditions:

                  (a) The obtaining of approval or other clearance from any
         state or federal governmental agency which the Committee shall, in its
         absolute discretion, determine to be necessary or advisable; and

                  (b) The lapse of such reasonable period of time following the
         Determination Date as the Committee may from time to time establish for
         reasons of administrative convenience.

Section 4.4 - Rights as Stockholder. The Grantee shall not be, nor have any of
the rights or privileges of, a stockholder of the Company in respect of any
shares of Common Stock deliverable hereunder unless and until certificates
representing such shares shall have been issued by the Company to the Grantee.

                                   ARTICLE V

                                  MISCELLANEOUS

Section 5.1 - Administration. The Committee shall have the power to interpret
the Plan and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret or revoke any such rules. All actions taken and all interpretations
and determinations made by the Committee shall be final and binding upon the
Grantee, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Performance
Units. In its absolute discretion, the Board of Directors may at any time and
from time to time exercise any and all rights and duties of the Committee under
the Plan and this Agreement.

Section 5.2 - Performance Units Not Transferable. Neither the Performance Units
nor any interest or right therein or part thereof shall be liable for the debts,
contracts or engagements of the Grantee or his successors in interest or shall
be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; provided,
however, that this Section 5.2 shall not prevent transfers by will or by the
applicable laws of descent and distribution.


                                       7
<PAGE>


Section 5.3 - Withholding. No later than the date as of which an amount payable
hereunder first becomes includible in the Grantee's gross income for tax
purposes, the Grantee shall pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, any applicable withholding
taxes.

Section 5.4 - Notices. Any notice to be given under the terms of this Agreement
to the Company shall be addressed to the Company in care of its Secretary, and
any notice to be given to the Grantee shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this Section
5.4, either party may hereafter designate a different address for notices to be
given to him. Any notice which is required to be given to the Grantee shall, if
the Grantee is then deceased, be given to the Grantee's personal representative
if such representative has previously informed the Company of his status and
address by written notice under this Section 5.4. Any notice hereunder shall be
delivered personally, faxed, or mailed by certified mail, return receipt
requested, or delivered by overnight courier service.

Section 5.5 - Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Agreement.

Section 5.6 - Applicability of Plan. The Performance Units and the shares of
Common Stock issued to the Grantee, if any, shall be subject to all of the terms
and provisions of the Plan, to the extent applicable to the Performance Units
and such shares. In the event of any conflict between this Agreement and the
Plan, the terms of the Plan shall control.

Section 5.7 - Amendment. This Agreement may be amended only by a writing
executed by the parties hereto which specifically states that it is amending
this Agreement.

Section 5.8 - Dispute Resolution. Any dispute or controversy arising under or in
connection with this Agreement shall be resolved by arbitration. Arbitrators
shall be selected, and arbitration shall be conducted, in accordance with the
rules of the American Arbitration Association. The Company shall pay any legal
fees in connection with such arbitration in the event that the Grantee prevails
on a material element of his claim or defense.

Section 5.9 - Governing Law. The laws of the State of Delaware shall govern the
interpretation, validity and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflicts of
laws.


                                       8
<PAGE>


         IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.

                                  PEABODY ENERGY CORPORATION

                                  /s/ ROBERT B. KARN, III
                                  ----------------------------------
                                  ROBERT B. KARN, III

                                  Compensation Committee Chairman & Director




/s/ IRL F. ENGELHARDT             Aggregate number of Performance Units: 46,861
-------------------------         FMV per Share as of Grant Date: $53.35
IRL F. ENGELHARDT

Chairman & CEO


Date: November 22, 2004



                                       9
<PAGE>


                                    EXHIBIT A

                               EBITDA ROIC TARGETS

For purposes of calculating the portion of the Incentive Amount described in
Section 4.1(A), the following percentage rates shall apply:

<Table>
<Caption>
                                        ENTRY            TARGET
                                        -----            ------
<S>                                     <C>               <C>
EBITDA ROIC TARGETS                     16.9%             18.8%
PERCENT OF AWARD EARNED                   60%              100%
</Table>

For purposes of the chart above:

(1) EBITDA shall mean income from continuing operations before deducting early
debt extinguishment costs, net interest expense, income taxes, minority
interests, asset retirement obligation expense and depreciation, depletion and
amortization; and

(2) ROIC shall mean EBITDA divided by Average Total Capital, where Average Total
Capital is determined based on 13-month average debt, plus 13-month average
equity, plus 13-month average accounts receivable securitization less 13-month
average cash. The 13-month period referred to in the immediately preceding
sentence shall be the period of 13 consecutive calendar months ending with the
calendar month immediately preceding the relevant Determination Date, as
described in Section 4.1.





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