Murray believes his St. Clairsville, Ohio-based company is well-positioned to survive the coming upheaval.
Since Murray Energy joined forces with Foresight in a move that surprised many coal industry observers, Robert D. Moore, executive vice president and COO of Murray Energy, has taken on added duties as CEO of Foresight and become a member of Foresight’s board of directors, succeeding Michael Beyer. Gary Broadbent, Murray Energy assistant general counsel and spokesman, now pulls double duty as the spokesman for Foresight as well.
Murray, who founded his company more than three decades ago and still serves as its chairman, president and CEO, talked about his rationale for the Foresight transaction and some of his marketing strategies during a May 21 presentation to the North American Coalbed Methane Forum in Canonsburg, Pennsylvania.
With electric utilities, the primary customers for the typically high-sulfur steam coal produced and sold by Murray Energy and Foresight, faced with complying with an ever-increasing raft of federal Environmental Protection Agency rules, have installed, or are in the process of installing, scrubbers to reduce sulfur dioxide and mercury emissions.
To Murray, this means the low-sulfur Powder River Basin will start to lose market share to higher-sulfur steam coal in the Illinois Basin (ILB) and Northern Appalachia as utilities switch back to the “high-heating value, nearby bituminous coals for which their boilers were originally designed.”
Foresight and Murray Energy, he noted, just happen to produce much of their coal in the ILB, for instance, at lower-cost longwall mines.
Indeed, just one day after Murray’s speech, Murray Energy announced the layoff of more than 1,800 employees — nearly a fourth of its total workforce — at nine locations in Central Appalachia, Northern Appalachia, as well as the ILB, to adjust output to a continuing decline in demand. Cuts came at all five West Virginia underground steam coal mines Murray Energy purchased from CONSOL Energy in late 2013, including the Monongalia County mine, which recently resumed operations, but will do so with fewer employees.
Despite the massive job losses, however, Broadbent said Murray Energy’s 2015 production is only expected to decrease by 3 to 4 million tons. The company previously forecast production of 65 to 66 million tons this year.
Murray told the forum participants the Foresight acquisition conforms to an original “concentric ellipse” strategy he designed for Murray Energy back in the 1980s. At the time, Murray drew concentric circles out from every U.S. power plant he thought was a candidate for installation of scrubbers to lower emissions of SO2, nitrogen oxide, mercury and particulates to comply with the Clean Air Act.
“When I could find water and truck transportation for the coal, thus avoiding inefficient, high-cost railroads, my concentric circles became concentric ellipses, and I could reach out further to find high heating value coal reserves,” he said. “I also focused on coal reserves that are amenable to the use of the longwall mining method, which, as you know, is up to 10 times more productive than continuous mining.”
Both the CONSOL and Foresight deals, he noted, “fit within this concentric ellipse strategy of the 1980s.”
In addition, Murray said the acquisitions provide “the best possible transloading and transportation infrastructure in our country to the global export coal markets. We have dual railroad access from Northern Appalachia to America’s most underutilized ports on the East Coast, and particularly Baltimore, and to the Gulf Coast from the Illinois Basin. We now have four railroads, the large Sitran Terminal on the Ohio River, and a throughput agreement at a port south of New Orleans, as well as many other transloading facilities, to serve our mines and the international coal marketplace.”
While the industry is beset by many challenges and will look different going forward, Murray asserted he is “obviously not giving up.”
“Nor should you,” he advised. “We have the law, science, economics, cold, hard energy facts and the Constitution on our side. Our cause is right. It is right for our industry, communities and America.”
