Call to Order and Roll Call
The 4th meeting of the Interim Joint Committee on Natural Resources and Environment was held on Thursday, September 1, 2011, at 10:00 AM, in the Jackson Room at Buckhorn Lake State Park in Buckhorn, Kentucky. Senator Brandon Smith, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Brandon Smith, Co-Chair; Representative Jim Gooch Jr., Co-Chair; Senators Ernie Harris, Ray S. Jones II, and Robin L. Webb; Representatives Hubert Collins, Tim Couch, Keith Hall, Marie Rader, John Short, Fitz Steele, and Jim Stewart III.
Legislative Guests: Representatives John Will Stacy and Teddy Edmonds.
Guests: Bill Bissett, Kentucky Coal Association; Allen Dupree, Alpha Natural Resources; Charles Snavely, Arch Coal.
LRC Staff: Tanya Monsanto, Stefan Kasacavage, and Kelly Blevins.
Update on recent mergers in the
coal industry and what that activity means for
Kentucky’s coal markets
Mr. Bill Bissett, President of the Kentucky Coal Association, explained that mergers are taking place because companies are battling the federal government and must have more and better resources.
Mr. Allen Dupree, Alpha Natural Resources, explained that since its merger with Massey on June 1, Alpha Natural Resources now employs 14,000 from Wyoming to Virginia. Two thousand of the 14,000 employees reside in Kentucky. Alpha Natural Resources contributes $191 million in wages paid in Kentucky. There was anxiety in acquiring Massey due to the number of accidents that company had sustained; therefore, Alpha Natural Resources has created greater transparency to foster safety. The new employee safety training focuses on accidents caused by at risk behaviors. At-risk behaviors are those which are a function of the employee, not the equipment, and Alpha Natural Resources has provided 40 sessions of safety training for 1,400 employees.
In response to a question that Mine Safety and Health Administration (MSHA) has no accountability and its inspectors are citing for no reason, Mr. Dupree agreed that only after a major accident does MSHA becomes overtly active in enforcement. Mr. Dupree continued that there is no accountability. Rather there is a culture to write as many violations as possible.
In response to remarks expressing concern that Kentucky and other states have waited for the federal government to do the right thing without a reaction, Mr. Dupree agreed that there are cases in the courts that will result in MSHA needing to explain its behavior.
Mr. Charles Snavely testified that Arch Coal has seven complexes in Kentucky that employ 1,700 in Eastern Kentucky. Two of those operations are underground in Knott County. Mr. Snavely noted that it takes sizable company to deal with regulatory scrutiny. That is why the nation is witnessing coal company mergers right now. Also, coal consumption internationally is high. Internationally, the world is powered by coal. Coal-fired plants are being built in China, India, and Europe. Instead of burning coal, the United States is becoming an exporting country. The best quality metallurgical coal is located in Appalachian area of the United States. Arch Coal is positioning itself to become an exporter.
In response to a question about whether Arch coal is positioning itself to export coal into Eastern European countries, Mr. Snavely responded that Kentucky coal will be transported down the Ohio River where it will be blended with Illinois coal. Mr. Snavely explained that other countries are secure with their energy supply. China’s response to energy security is to diversify its energy sources. The United States on the other hand is fighting to promote more environmental security with new Environmental Protection Agency (EPA) initiatives daily. This is resulting in increased electricity prices. Mr. Snavely explained that states with greater environmental regulations have the highest rates. In terms of environmental justice, the increased environmental regulation affects the nation’s poor much more than mining activities affect the poor.
In response to concerns with over transportation issues such as waterways, locks, and dams and whether Kentucky’s infrastructure can handle the doubling of exports, Mr. Snavely responded that railways can handle the demand but the river ports cannot handle the increased demand for coal.
In response to a question about foreign investors looking for companies in Kentucky, Mr. Dupree noted that Alpha Natural Resources has an office in India where there is demand for metallurgical coal. Mr. Snavely noted that Australia, Indonesia, and South Africa are large producers of metallurgical coal as well. When the buyers of metallurgical coal lose one of those big three suppliers the United States moves in to displace them. In response to a question about whether India is looking at investment in the United States, Mr. Snavely replied that Arch Coal has received interest in its coal reserves.
In response to a question about countries finding coal supplies in Kentucky, Mr. Bissett, executive director of the Kentucky Coal Association, stated that an Indian company has made inquiries to the Kentucky Coal Association about where to purchase coal. Mr. Bissett furthered that the interest in Kentucky coal by other countries underlies the fact that there is no question whether Kentucky will mine coal, but there is a question about whether it will be burned in the United States.
In response to a question about where Kentucky coal goes, Mr. Snavely explained that coal mined in Kentucky is often exported to southeastern states for steam power markets. In response to a question about the cost of Kentucky steam power quality coal, Mr. Snavely noted that the coal is being sold at $200 per ton.
In response to a remark about the federal government wanting to stop the use of coal by making permitting more difficult, Mr. Snavely responded that it is true. Federal regulation is the biggest threat to the industry, but it is not the only threat the coal industry is facing. A new generation of employees, water quality issues, and environmental permitting also negatively affect the industry. The United States Army Corps of Engineers and the National Point Source Discharge Permit (NPDES) issued under the Clean Water Act present more problems. These new environmental requirements force industry to produce surface water runoff cleaner than drinking water, and the new conductivity regulations that affect only the Appalachian area are targeted to kill the industry.
All materials from the meeting are on file with the LRC Library. There being no further business the meeting adjourned at approximately 11:45 am.