Bob Murray has hopes for a Republican president.Ross Mantle
The founder of America's largest underground coal mining company was infuriated, but not surprised, by last December's UN climate change summit. "The errant President, Barack Obama, is attempting to commit the United States to draconian carbon dioxide emissions requirements when the rest of the world is not going to make any commitments," declares Bob Murray, 76-year-old CEO of Murray Energy Corp.
The U.S. coal industry has been in Obama's crosshairs since he took office in 2009, vowing to shift to a green-energy economy. Since then, the toll of coal-fired units (of which power plants are comprised) that have closed, fixed dates for closing or converted to cleaner-burning natural gas has grown to more than 400. In the same period, the share of U.S. electricity generated from coal has declined from about one-half to one-third. The Dow Jones U.S. Coal Index has fallen by more than 97 per cent from its peak in 2008.
But Big Coal and its Republican allies are still counterpunching hard. In 2010, obdurate Senate minority leader Mitch McConnell, from coal-rich Kentucky, killed a proposed emissions cap-and-trade plan by persuading several nervous Democrats to abandon Obama.
Since then, the Republicans have won control of both houses of Congress, and Obama has tried to bypass them via the Environmental Protection Agency. But producers and coal-dependent states have fired back with dozens of lawsuits. Murray has filed six. "Twenty-seven states have joined this old man and submitted briefs in my lawsuits," Murray says. "And they have traction."
Last June, the U.S. Supreme Court ruled in favour of a suit filed by Michigan, saying that emissions standards introduced by the EPA in 2012 didn't conform to the federal Clean Air Act. Murray filed a supporting brief, but he didn't celebrate much. "I won nothing," he says. "The courts are so slow, and Obama had compressed the time frame for states to comply, so 411 coal-fired units had already closed."
The biggest threat to the industry now isn't Obama; it's gas. Fracking and horizontal drilling have driven U.S. gas prices down by about 80 per cent since 2008. But power from coal is still cheap. "I can produce power for 4 cents a kilowatt hour," Murray says. Wind or solar cost about 22 cents. But gas is now as cheap or cheaper than coal.
Even Murray concedes that U.S. coal production will continue to decline. "This cycle is largely permanent," he says. He won't say he's aiming to be the last man standing –"those words are derogatory to my competitors." But he has the lowest costs of any major underground producer, and "I do think we're in the best position to compete in domestic and world markets."
Murray is a study in tenacity in every respect. "My father was paralyzed from the neck down in a mining accident when I was 9," he says. "My mother had cancer." He started in the mines at age 17, and won a mining engineering scholarship from North American Coal Corp. He stayed with the company 31 years, rising to CEO. But in 1987, Murray was fired after a boardroom dispute. The following year, he borrowed $66-million and founded Murray Energy with one mine (all currency in U.S. dollars). The Ohio-based firm now has 13 U.S. mines that employ about 7,000 workers, as well as two mines in Colombia. Along the way, he has broken his neck three times and had four strokes.
Murray credits the company's growth to a strategy he has pursued since the 1980s. At the time, many big producers had shifted to open-pit deposits of low-sulphur coal in Wyoming and Montana to cope with new limits on sulphur dioxide emissions. But the coal contained about 20 per cent water, and didn't burn efficiently.
Murray's strategy was to take out a map and draw circles around sources of high-heat coal, which contains more sulphur but burns more efficiently, and around power plants that had scrubbers to limit emissions. He located lots of so-called long-wall underground deposits in northern Appalachia and Illinois. The high heat and scrubbing don't make coal clean, Murray says, "but they make it much cleaner." He then expanded the circles to ellipses to find nearby water or truck transportation routes, which are less regulated than rail and much cheaper.
Murray also developed and builds his own highly efficient mining machinery to extract long-wall deposits. The company now produces about 85 million tonnes of coal a year, making it No. 3 in the U.S. Murray isn't getting much help from financial markets, however. He has $1.7-billion worth of bonds outstanding. Last September, Moody's downgraded the company's rating from B2 (junk) to B3 (junkier). "That's bad, but it's not us," Murray says. "I've got EBITDA. I've met my targets. It's the outlook on the industry."
So what could turn things around? "A Republican president." Donald Trump is on board: "Obama's war on coal is killing American jobs, making us more energy dependent on our enemies & creating a great business disadvantage," he tweeted last June. The other major Republican presidential candidates are also on side.
After 59 years in the coal business, Bob Murray still believes he has a future in it.