CONSOL to Sell River Fleet
Washington PA Observer Reporter
28 October 2013
CANONSBURG – Consol Energy Inc. said Monday it is selling its
Consolidation Coal Co. subsidiary, which contains all five of its
longwall coal mines in West Virginia, to a subsidiary of Murray
Energy Corp. for $3.5 billion.
The CCC mines being sold are McElroy Mine, Shoemaker Mine,
Robinson Run Mine, Loveridge Mine, and Blacksville No. 2 Mine.
According to Consol, 3,722 hourly and salaried employees will be
involved in the transaction.
A news release from the United Mine Workers of America stated
there are about 2,800 active hourly workers represented by the
union at the five operations.
Stating that the announcement of Monday’s transaction was “no
great surprise,” UMWA International President Cecil E. Roberts
said contracts would remain intact after the transition.
“This changes nothing for our members with respect to the terms
and conditions of their employment,” Roberts said. “Our collective
bargaining agreement does not go away with this transaction, and
our members remain covered by its provisions. There will be no
changes in pay, benefits, insurance, schedules, working
conditions, safety provisions, grievance procedures or any other
language in the contract.”
Roberts added pension and retiree health care liabilities for the
five West Virginia mines, as well as those from the currently
closed Mine 84 in Washington County are also being transferred.
Southpointe-based Consol said in a press release that
collectively, the mines produced 28.5 million tons of thermal coal
in 2012. The acquisition will give Murray Energy approximately 1.1
billion tons of Pittsburgh No. 8 seam reserves.
Consol said it is also including its river and dock operations in
the sale. In 2012, the fleet of 21 towboats and 600 barges
transported 19.3 million tons of coal and other commodities along
the upper Ohio River system.
Consol said it is retaining coal assets that align with its
long-term strategic objectives. The company is keeping its
Pennsylvania operations, which include the Bailey, Enlow Fork, and
soon-to-be-completed BMX mines in Washington and Greene counties.
The low-cost mines, with five longwalls and with estimated
production of nearly 24 million tons in 2014, produce a high-BTU
Pittsburgh-seam coal that is lower in sulfur than many Northern
Appalachian coals. It can be sold domestically or abroad, as
either thermal coal or high-volume coking coal.
Consol said the sale enhances its ability to grow its gas
production, enabling it to extend its gas growth production
targets beyond 2014. The 2014 gas production guidance range is
between 210 and 225 billion cubic feet, of which approximately 7
to 8 percent are expected to be liquids or condensates.
For 2015 and 2016, the company expects 30 percent annual gas
During a conference call Monday morning, Consol Energy President
Nick DeIuliis said the company projects spending $14 billion over
the next decade on its West Virginia Marcellus Shale natural gas
assets. It also expects to spend $8 billion in the next 10 years
on its Pennsylvania natural gas assets and another $2.5 billion on
its coal operations here, he added.
“While this transaction furthers Consol’s exploration and
production growth strategy,” said J. Brett Harvey, Consol’s
chairman and chief executive officer, “the sale of these five
mines – assets that have long contributed to America’s economic
strength and our company’s legacy – was a very difficult decision
for our team. The employees at these mines are among the safest
and most productive miners anywhere in the world. In the end, we
concluded that the time had come to sell these mature assets to
ownership whose strategic direction is more aligned with those
According to Consol, Murray Energy will pay $850 million in cash
at the closing, with future payments expected to total nearly $184
million in value resulting from the retention of a royalty on
select reserves, certain water treatment payments, and tolling
fees at Consol’s Baltimore Terminal.
Based in St. Clairsville, Ohio, Murray Energy is the largest
privately owned coal company in America, which according to the
company’s website, produces about 30 million tons of bituminous
coal annually. The company, which has 3,300 employees in six
states, operates eight underground and surface mining operations,
plus 40 subsidiary and support companies.
Murray Energy owned the Crandall Canyon mine in Utah when it
collapsed in 2007 and killed nine people, including three
rescuers. Six miners remain permanently entombed. But Murray told
the Associated Press Monday that his company “operates safe coal
mines, with a particular emphasis on fire protection.”
“This will help assure the protection of the health and safety of
our new employees,” he said.
Murray has deep ties to West Virginia. In 2009, he gave West
Virginia University $1 million for research into mining methods
and use of fossil fuels. Though he graduated from Ohio State,
Murray sent three sons to WVU to earn degrees in mining
engineering and geology and is considered a longtime friend and
supporter of the school.
Murray Energy said the transaction will nearly double its coal
production from 30.1 million tons to 58.6 million tons per year,
and nearly triple its coal reserves from 859 million tons to
almost 2.4 billion tons. The work force will more than double,
from 3,300 to 7,100 employees.
Consol said it is also significantly de-levering its balance sheet
through the disposition, with Murray acquiring $2.4 billion of
Consol balance sheet liabilities. This includes a $2.1 billion
acquisition of other postretirement benefit plans. Other acquired
liabilities include $105 million of workers compensation, $61
million of coal workers’ pneumoconiosis, $13 million of long-term
disability and $149 million of environmental.
Additionally, Murray Energy is acquiring Consol’s United Mine
Workers of America 1974 pension trust obligations. Consol Energy,
under contract with the UMWA, currently services the obligation
through a $5.50 per hour contribution, or approximately $33
million per year.
Consol said it expects to record approximately $1.3 billion of
pre-tax gain on its fourth quarter 2013 financial statements.
The company is retaining its flagship Buchanan Mine in
southwestern Virginia. The longwall coal mine produces a premium
coking coal for the steel industry, producing between 4 million
and 5 million tons per year.
The Miller Creek Mining Complex in southern West Virginia is also
being retained, which is expected to produce about 2 million tons
in 2014. After the transaction closes, Consol will continue to
have 3.1 billion tons of reported reserves, including enough to
support new mines in Northern Appalachia and the Illinois Basin.
With the retained mines and the 100 percent-owned Baltimore
Terminal, Consol said it will continue to participate in the
growth of the world’s thermal and metallurgical coal markets.