Foreign Demand Offsets U.S. Environmental Issues

WHEELING – Federal regulations may make it hard for coal mined in Marshall County to be burned in the United States, but spiking energy demands in Asian cities such as Beijing and New Delhi should keep the market strong, according to a local financial professional.

“Foreign markets for coal are increasing because of the expansion of power plants, especially in China and India where there are plans to build even more plants,” said Thomas Morrison, associate vice president of Wheeling-based financial firm Hazlett, Burt & Watson.

Robert E. Murray, chairman, president and CEO of Murray Energy, announced Monday that he would spend $3.5 billion to acquire five Consol Energy mines, including McElroy and Shoemaker in Marshall County.

For the past few years, Murray has accused President Barack Obama and congressional Democrats of waging a “war on coal,” which he said is making it difficult to burn the mineral in the U.S.

“U.S. coal usage faces an uncertain future because of federal steps to limit emissions from U.S. plants,” Morrison acknowledged Monday.

Although new U.S. Environmental Protection Agency rules will make it more difficult to general coal-fired electricity in America, the ability to sell coal to be burned in Asia can provide a new market.

“The new EPA regulations do make it tough here, but I don’t think coal is going anywhere anytime soon,” said Mike Caputo, vice president for United Mine Workers of America District 31, which covers northern West Virginia and Ohio. “We need to make clean-coal technology usable in a commercial manner.”

Bill Raney, president of the West Virginia Coal Association, said he expects a “seamless transition” of the mines from Consol to Murray. He believes most of the coal mined in the Mountain State now is burned domestically, but knows this could always change.

“Murray Energy is a well-known operator and a highly respected company,” Raney added.

Even prior to the Monday announcement, Consol has been shifting its growth focus from coal to gas to comply with environmental regulation trends over the past two years.

“Consol has been expanding into natural gas production for years. This sale will allow them to raise cash for natural gas exploration,” said Morrison. “The long-term outlook for Consol will still be affected by the price of coal along with natural gas, with higher prices of course being better for them.”

Publicly traded Consol is listed under the symbol “CNX” on the New York Stock Exchange. On Monday, the stock opened with a value of $36.96 per share. It climbed to a high of $38.75 per share, before settling at $37.95 at the close of Monday trading.

Morrison added that once the transaction officially closes, those who hold Consol shares will see their annual dividend payments slashed from 50 cents to 25 cents.