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Consol’s Coal: Behind the Scenes in Providing Electricity

Sat January 29, 2000 - West Edition
Fruma Klass

Most people think the major sources of America’s energy are oil, gas, or nuclear plants. People even mention water, solar, wind, and other renewable resources. Not so, according to J. Brett Harvey, CEO of Consol Energy, one of the largest coal mining operations in the eastern United States.

Tom Hoffman, vice president for Investors and Public Relations at Consol Energy, succinctly summed up the coal situation, “No coal, no dot-com.”

The power plants that generate electricity run on coal, the coal Consol Energy has been mining since 1860 — before the Civil War. Consol still operates 24 coal mines — two surface mines and 22 deep-underground — in six states and Canada.

“We’re the Rodney Dangerfield of American industry,” Hoffman said. “We don’t get the respect we deserve. We are a fundamental building block in this country. Our fundamental contribution is not the direct jobs we provide; that’s just part of the economic story. But we’re tremendous consumers, too — timber, limestone, gravel, lime, fittings, conveyor belts, the machinery to create and operate these mines, mines unseen by the average American. We have mines as big as a city in infrastructure. That’s the real economic effect: how much new wealth is created. Yet our stock price doesn’t go up.

“That’s because of public perceptions,” Hoffman continued. “This is an industry that is definitely underappreciated. Even though we constantly produce more with fewer people, the public thinks coal is an old technology, now superceded. That’s why the market price of coal has been quietly dropping for years. But Consol is still No. 1 in profits. Number Four in amount produced, but No. 1 in profits.”

The reason for the difference is mostly because of the kind of coal Consol mines. Its eastern-United States sources produce higher-energy coal, worth $20 to 27 a ton, while coal from western sources is worth only $3 to $5 a ton. (The dividing line between “western” and “eastern” coal sources is in Illinois.)

Coal from the eastern United States is highly desirable abroad, too. “Our coal is anthracite, hard coal, much less polluting than bituminous, soft coal,” Hoffman explained. “Coal from, say, Wyoming, is sub-bituminous. It may be low in sulfur, but it’s certainly high in transport costs. What they mine in Europe is really soft coal — it’s lignite, almost peat. So we ship to Europe, the Middle East (especially Israel), and the Pacific Rim. Japanese industry uses our coal to make coke for steel.” In the United States, Consol ships by rail and also over water, in its own five diesel-powered riverboats and 300 barges.

In fact, Consol uses a great deal of equipment for mining, as well as shipping. In its two remaining surface mines, one in Ohio and one in Canada, Consol uses electrically powered power shovels, diesel-electric trucks, and bottom-dump trucks, up to 72 metric tons (80 tons). Its 22 deep-underground mines use specialty equipment, like scrapers — trucks that scrape up non-coal rock and take it to disposal sites after its separation from coal in a special processing plant. Some trucks run on tracks instead of tires. Since diesel is not legal in some states, Consol’s longwall mining shears and “scoops,” low-profile — less than 1.83 or 2.44 meters (6 or 8 ft.) high — rubber-tired units with scoops on the front, are electrically powered. This equipment is specially designed for Consol and made by Joy Manufacturing (an American company), DTB (a German company), and others.

Consol had several options to keep its No. 1 position in the profits list: (1) it could increase the production of coal from its existing mines. Most of them have a large reserve base, expandable at low cost; (2) it could open new “greenfield” sites — new mines in undeveloped areas. With longwall mining for deep mines, any possible environmental damage is taken care of immediately; or (3) it could simply acquire other companies. Of the country’s estimated 2,000 coal-mining companies, 25 percent have changed hands in the last five years.

Consol regularly closes mines that become unproductive, most recently its Keystone and Helvetia sites in central Pennsylvania. These old, high-cost, depleted mines had their coal close to the surface — 91.4 meters (300 ft.) down. The new mines are some 1219.2 to 1524 meters (4,000 to 5,000 ft.) down. One of the new mines, Enlow Fork in southwestern Pennsylvania (opened in 1990), is the largest underground mine in the Western Hemisphere. Maybe in the world, Hoffman said, “but we don’t know what’s in China.”

And Consol is at the forefront of technological advance: bigger machinery, fewer people, more and more robotics. It’s all automated. There are no more picks and shovels, and the company’s safety record is excellent, according to Hoffman. The number of mines has been shrinking dramatically, but their average size, in terms of production, has grown. Consol is simply producing more and more coal with fewer and fewer people. In 1973, with 56 coal mines and 22,000 employees, Consol produced 55 million tons of coal. In 1998, with 24 coal mines and 8,000 employees, it produced 78 million tons of coal. A single big mine went from 1,000 employees producing 1 to 1.5 million tons in 1973 to 400 employees producing 6 to 10 million tons in 1999. Hoffman said. “Keep going this way,” he said, “and we’ll have one single man pushing one single button.”

The customer base has shrunk too, since coal isn’t used much for home heating any more. But that’s all right, according to Hoffman. “Our principal customers are power plants. They burn coal to generate electricity,” he said. “In this country, only about 11 percent of the power is generated from renewable resources, and only one-half of 1 percent is solar and wind. Another 10 per cent is gas and oil, and nuclear is about 25 per cent. But since Three Mile Island, people are nervous about nuclear plants, and the nuclear accident in Russia, in Chernobyl, hasn’t made them less nervous. Coal is the most reliable as well as the most abundant energy resource in the United States — and it’s certainly the cheapest.” It will be clean, too, Hoffman said. Within 10 years, he said, coal-fired generating plants will all have been fitted/retrofitted with pollution-control devices.

Consol has been producing coal for 140 years, and as we move into the new millennium it looks like the company will keep right on producing coal, for a long, long time to come. Coal will continue to be the fuel of choice for generating electricity, and electricity consumption is rising 2 to 3 percent a year. Consol’s coal reserves have been estimated elsewhere as 70 years’ worth but, as Hoffman put it, “We have reserves of 200 to 250 years.”

Hoffman summed it all up, “And the world needs coal. It’s coal that provides the energy to make the power that runs the modern world. No coal, no dot-com. Fortunately, there’s plenty of coal.”

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