Nov 5 - McClatchy-Tribune Regional News - Ken Ward Jr. The Charleston Gazette, W.Va.


Despite complaints from industry lobbyists and coalfield politicians about an impending permit crisis, most major Appalachian coal producers are telling their shareholders that increased federal environmental reviews are not likely to disrupt production or cause layoffs anytime soon.

Most of the region's largest publicly traded coal companies say they have permits in place that will allow them to continue operating, filling orders and employing workers through at least early 2011.

And two major producers -- Massey Energy and CONSOL Energy -- told industry analysts that they have more than adequate permits in place and could benefit if their competitors see new permits held up by the Obama administration.

"Relative to other companies we feel very good and we think that at least in the short term that we would benefit from the permitting process being frustrated, but we're certainly not in favor," Massey President Don Blankenship said during a conference call last week with industry analysts.

The Obama administration has announced plans to take "unprecedented steps" to reduce the environmental impacts from mountaintop removal coal mining. Among other actions, the U.S. Environmental Protection Agency is taking a much closer look at 79 pending Clean Water Act permits that the federal Army Corps of Engineers proposed to issue for mining operations.

Senate President Earl Ray Tomblin, D-Logan, has warned EPA that the permit issues need to be resolved "not in a matter of weeks, but days." And Senate Majority Leader Truman Chafin, D-Mingo, told a statewide MetroNews radio audience this week that, "We're going to see layoffs like you've never seen before real soon."

But in reporting quarterly financial results over the last two weeks, none of Appalachia's major coal producers have outlined significant impending layoffs because of EPA's permit reviews.

One company, International Coal Group, previously announced during a U.S. Army Corps of Engineers public hearing on mountaintop removal that a "de facto moratorium" on mining permits in Appalachia had caused it to shut down some equipment and lay off workers.

Roger Nicholson, ICG's vice president and general counsel, said later that a total of 48 workers lost their jobs at two ICG mines in Kentucky because of permit delays.

"The practical effect of delay in issuance of permits is that a mine is often forced to change its mining sequence when permits for logical extensions of an operation are delayed," Nicholson said. "This raises costs and can render an operation uneconomical and, of course, permitted coal reserves can be exhausted, which can lead to closures and layoffs without the issuance of new permits for additional areas."

But in a conference call with industry analysts last week, ICG President Ben Hatfield said current EPA permit reviews are not "anything that's likely to cause us to have to literally shutter production" over the next two years.

Hatfield said ICG's mines are set up so the company can haul waste rock and dirt a little further and "maintain current production." Hatfield also said that most of ICG's planned production growth is through new underground mining operations.

Patriot Coal has been worried about a new permit to continue operations at its Hobet 21 mountaintop removal complex along the Boone-Lincoln County line, where more than 300 United Mine Workers members staff one of the few remaining unionized strip mines in West Virginia.

State regulators have said Patriot Coal and EPA reached a deal on that permit. Last week, Patriot CEO Richard Whiting told industry analysts a final permit hasn't been approved yet, but said the two sides are "making progress" on the issue.

As for other permitting delays, Whiting said, "Anything else we have in our lineup becomes more of an issue [when] you get to mid-2011."

Whiting also told analysts that his company already has new permits in hand for additional mining in the area where it earlier this year closed its Samples Mine because of market conditions.

CONSOL Energy President Brett Harvey told analysts two weeks ago that EPA is reviewing at least one permit for a surface mine it purchased two years ago from Amvest Corp. CONSOL also has five other pending permits in the pipeline, Harvey said. But none of them are in the company's mining plans for 2010.

Harvey called mountaintop removal a "very poignant issue" for the Central Appalachian coalfields and said it is "critical to get permits there."

"We have low exposure to Central App, but we think it will affect Central App in a big way that could translate back into an advantage for Northern App because we have very big mines that are well capitalized and have 20 to 25 year lives," Harvey said. "We would rather see everybody get permits and be competitive, but if there is a positive for us, it does push value back to Northern App if Central App continues to struggle based on permitting."

Blankenship said Massey has 100 million tons of steam coal for generating electricity already permitted and "lots of opportunities to get permits in manners or in ways that comply with these laws, but we always worry about what EPA and others will do next, as far as frustrating that process."

But Blankenship added that Massey's permits and production estimates "are very safe" through 2010.

"In [2011], if we had an issue with permitting on a surface mine, we would go to more deep mines ... and keep ourselves in a position to make those volumes or more irregardless of which way the permitting issue evolves," Blankenship said. "But certainly if we get a lot of pressure from the permitting side that continues on into [2011] we will begin to get restricted to some extent and we'll probably see a little bit higher cost on surface mining because of the placement of the material and perhaps move a little bit more to deep mining."

Reach Ken Ward Jr. at kward@wvgazette.com or 304-348-1702.

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