• Don Blankenship


Public coal company stock prices are very depressed today when compared to what they have been at times over the past decade. Most of the conversations among coal miners and coal executives' center around the question of when will the coal prices return.

Another topic is how bad and unfair Obama's war on coal is. Another is the loss in coal's market share of electricity generation. Another is the big impact new discoveries of natural gas have had on coal's future.

All of these coal issues make good conversation. Sometimes they even make good comedy when politicians ranging from Rahall to McConnell exclaim how hard they will fight Obama’s war on coal. These politicians remind me of WWE wrestlers that pretend to hate and fight each other with a vengeance until the spotlight is off and then they sit around and talk about how gullible the fans/voters are to believe that they really dislike each other. McConnell and Rahall say they have been fighting for coal for three decades as its percent of US electricity has declined from 52 to 39 percent. Not very good fighters are they?

But politicians can't be expected to be good fighters for coal when the coal companies won't fight for themselves. Coal executives, coal boards, coal users, coal haulers (railroads), coal vendors’ et al have not fought at all, so you can hardly call Obama's attacks on coal a war. It's more like what I call it in an essay I did a awhile back. It's a surrender of coal. The industry only shoots back when they have taken another casualty and then only briefly. They never go on the offensive. The key element of their strategy is to be politically correct. Their thought being that if they have access to Obama and his friends, that they can use their gifts of persuasion to change Obama's mind about coal. My view of that has always been - Fat Chance.

It is not practical to believe that you can allow the American public to go on believing that the use of coal will destroy the planet and yet expect that a politician will be pro coal. After all he depends on that same public to get re-elected. It is also not practical to do what so many coal people do, which is to sit and wait for someone else to fight for them. I used to routinely push for funding of a national campaign to correct people's misunderstanding of global warming and the real life impacts the attacks on coal are having on their daily lives. The most common response I used to get at WV Coal Association meetings, National Coal meetings, and other coal organization meetings was that you could not win that battle. But they are wrong. It is a winnable battle. Why?Because the truth is on coal's side.

The EPA regulations recently issued for greenhouse gases gave the industry yet another opportunity to get the American public’s attention with the truth regarding the insanity of America trying to regulate the earth's temperature. But yet again the industry comments suggest that America can in fact control the earth's temperature and that it’s simply a debate over how. Truly its business suicide when Arch Coal says for example - "We strongly encourage the Administration to reconsider its regulatory approach and to focus instead on robust investment in advanced technologies including carbon capture, utilization, and storage. That is the rational way forward for addressing climate concerns."

In other words Arch isn't really concerned about working Americans electric bills or American industrial competitiveness but rather only about their industry and their company and their job. Save coal is the slogan they seem to have versus save America. They want to be politically correct and save themselves while the rest of America's workers drown in a "reg-cession" and helplessly watch their quality of life swept away in a current of nonsensical, "Greeniac", anti-American regulations. The coal industry and Arch should wake up and join with Jim Inhofe to call manmade global warming what it is - a hoax. They should explain that even if manmade global warming is occurring

transferring American jobs to so-called developing countries does not decrease carbon emissions, it instead increases them along with true pollutants like particulates, sulfur, arsenic, mercury and more.

As bad as the coal companies logic is, the coal union (UMWA) is worse as it seems to always support anti-coal politicians. Cecil Roberts himself told me ten years ago that the coal industry cannot stop the passage of global warming legislation. He is right if he continues to support anti-coal presidential candidates that appoint Supreme Court justices that think human breathing is a polluting activity.

Perhaps the most remarkable thing to me is that coal companies and coal organizations will give money to (for example) politicians like Harry Reid or Nick Rahall. Once during a National Coal Association meeting I was being pressured to give money to their PAC (political action committee). I refused and my response to them was to ask for an explanation as to why I should since they were giving money to Harry Reid. After a somewhat heated exchange some individual from Nevada spoke up and said he had requested the contribution because Harry had helped him get a permit. Think about it. Harry and his friends make it impossible to get hundreds of mining and utility permits, but because Harry then helps get one permit for one company the Coal Association gives Harry money. This is not politically correct. It is political suicidal.

Despite all of this verbiage about the war on coal, political correctness, today's coal prices, global warming, natural gas, et al the thing which gets too little attention is the runaway cost of mining and transporting coal. Much of what the coal industry talks about or better said whines about will never be fixed if they don't change their strategy. Even if they do change their ways it will take a long time to see the effect of the change. In the meantime more companies will go bankrupt. The companies that will survive to live and prosper another day will be the ones that position themselves to win and that attack their costs with a vengeance.

Positioning a company to win means identifying the company's high opportunity mines i.e. the ones that if improved can make a margin even in today's market. Thick coal, low royalty rates, coal quality, distance to the processing plant, freight cost to customer, minability and other factors help to identify the mines that can win. Afterward there has to be a good dose of reality as to wage rates, benefits, perquisites, et al. Vendors have to then be asked to come to the party of cost reduction as just cutting their price is not enough. They have to cut their costs too so that they can sustain the lower price for the coal company for an extended time.

The reason costs have to be the focus is that its costs that management can and is expected to do something about on a daily basis. Also, if the coal management teams will look at the current day price they will see that it isn't as much different from what they projected it to be a few years ago as is the cost. In fact (believe it or not) prices today aren't that bad on a historical basis.

The coal companies need to start with a blank sheet of paper as they begin to do their 2015 budgets. They need to quantify the challenges they have to control cost and announce their intentions to address them well in advance of the New Year. This gives everyone a chance to adjust their personal budgets and to add new ideas for managing things better and whining less about things they can do little about in the short term.

Now before anyone says this letter suggests someone put profits before safety let me comment about that. First Massey executives nor I ever put profits before safety. Anyone that says otherwise is lying or uninformed. Good safety programs are critical to achieving low costs anyway so no good businessman would ever cut safety spending if it might decrease safety. On the other hand, I also never allowed Massey mines to operate less healthy or less safe so that I could be viewed as politically correct by bureaucrats. Many in the mining industry are doing just that and not only is it endangering miners it is increasing costs. The industry should not have politically correct mine practices but unfortunately, it does today. Coal companies should demand that their ventilation systems be the best achievable plans and that the scrubbers run. It's that simple. Safety cannot be allowed to be a political issue.

Today you can buy Arch Coal bonds that yield 13.6%. This perhaps says more clearly than anything I have written here that the coal companies need to quickly address their costs. If they have to re-finance their debt at these interest rates the "Fat Chance" the industries political correctness strategy has might instead become the "Fat Lady" singing. But for the record I own a lot of Arch stock because I like their "position to win" or should we say “survive.”

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