CHARLESTON, W.Va. -- Confirming growing industry speculation about such a deal, CONSOL Energy announced Monday that it is selling its five large underground coal mines in northern West Virginia to Murray Energy.The $3.5 billion transaction frees CONSOL to focus more on its increasing interest in the region's growing natural gas market, and roughly doubles the size of Ohio-based Murray's workforce and annual coal production.In separate statements, Murray Energy and CONSOL said they had entered into a purchase agreement that includes CONSOL's McElroy, Shoemaker, Blacksville, Loveridge and Robinson Run mining complexes.The mines, using advanced longwall machines, are located in Marion, Marshall and Monongalia counties, and employ about 2,800 hourly workers who are represented by the United Mine Workers union. They are five of the top six underground mines in West Virginia, with nearly 30 million tons of combined production in 2012, according to federal data.The deal also includes coal reserves, related river transportation and dock facilities and other assets."No company has developed a better legacy with its employees, with its customers, with the financial markets, with the regulatory agencies, or with the public in general, over many decades than has CONSOL and Consolidation Coal," said Robert E. Murray, president and CEO of Murray Energy. "Murray Energy intends to preserve this well-earned legacy."In a separate statement, CONSOL said that Murray would pay $850 million in cash at closing and make future payments of nearly $184 million in value resulting from the retention of royalties on certain reserves, water treatment payments, and tolling fees at CONSOL's Baltimore Terminal.CONSOL said that Murray would also acquire $2.4 billion of CONSOL balance sheet liabilities, including $2.1 billion for retirement benefits.CONSOL described the deal as a "major shift" that divests it of significant coal assets and allows it to focus more on natural gas production.
"CONSOL needs to change with the marketplace and that's why we're doing what we're doing," CONSOL CEO Brett Harvey told reporters in a conference call. "It's a major pivot toward value for our shareholders."The deal increases Murray's number of direct employees from 3,300 to 7,100, the company said. Annual production would increase from 30.1 million tons to 58.6 million tons, Murray said."The combined companies will allow Murray Energy to better serve our customers with reliable and low cost coal supplies at accurate qualities," Murray said. "This is truly a momentous time for the combined employees of Murray Energy Corporation, and for our company."Already, Murray Energy operated six longwall mining systems, with major operations in Ohio, Illinois, Kentucky and Utah, and was ranked as the largest privately held coal producer in the country."With our expertise, we will be able to efficiently operate the acquired Consolidation Coal mines and provide their employees with an opportunity for long term employment," said Robert Moore, Murray Energy's executive vice president.
Murray Energy declined to comment beyond its prepared statement.
Prior to the CONSOL deal, most of Murray Energy's mines were non-union operations. The Powhatan No. 6 Mine, operated by Murray's Ohio Valley Coal Co., is unionized.Hourly workers at the mines Murray is purchasing from CONSOL have long been UMW members and are currently working under a UMW contract that runs through the end of 2016, said union spokesman Phil Smith."This changes nothing for our members with respect to the terms and conditions of their employment," said UMW President Cecil Roberts. "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."Murray Energy owned the Crandall Canyon Mine in Utah, where a series of collapses in August 2007 killed six miners and three rescue workers.Last year, Murray Energy's Genwal Resources Inc., which operated Crandall Canyon, pleaded guilty in U.S. District Court in Salt Lake City to two criminal violations of mandatory health and safety standards under the Federal Mine Safety and Health Act. Murray Energy has said the deaths were the result of a "tragic seismic event," and that the violations were not the cause of the collapse.In Monday's statement, CEO Robert E. Murray said that his company "operates safe coal mines" with a "particular emphasis on fire protection."
"This will help assure the protection of our new employees," Murray said.After campaigning last year for Republican presidential nominee Mitt Romney, Murray continues to be an outspoken critic of the Obama administration's coal policies, and says that "there is no connection between mankind's activities or power plant emissions and so-called global warming.""Mr. Obama's actions are a human issue to me, as I know the names of many of the Americans whose jobs and family livelihoods are being destroyed as he appeases his radical environmentalist, unionist, elitist, Hollywood character, and other constituents," Murray said during a speech at the Bluefield Coal Show last month, according to a copy of his prepared remarks.The mines being sold represent roughly half of CONSOL's annual production, but CONSOL is keeping its Bailey and Enlow Fork mines in Pennsylvania and its soon-to-be-opened BMX Mine, also in western Pennsylvania. Also, CONSOL will retain its Buchanan Mine in southwestern Virginia, and the Miller Creek Mining Complex in Mingo County.CONSOL said, "Myriad external factors have converged to dictate a no-growth domestic environment for coal, rendering [the mines it is selling] no longer within the scope of our current strategic direction.""The employees at these mines are among the safest and productive miners anywhere in the world," CONSOL's Harvey said in a memo to those workers. "The mines we are selling are highly productive, well-capitalized, well-contracted, and contain long-lived, high BTU reserves, but they are fully matured assets that are better suited for a seasoned coal operator looking to strengthen their reserve position in the domestic coal market."Reach Ken Ward Jr. at email@example.com or 304-348-1702.