Leading by Example: CONSOL’s Industry-Wide Success

Whether diversifying their traditional coal portfolio with natural gas drilling, implementing the Absolute ZERO onsite safety initiative or maintaining high levels of productivity while doing their due diligence to protect the environment, CONSOL Energy is leading the region’s energy industry by example.

CONSOL Energy is one of the highest producing coal and natural gas companies in the State of West Virginia, and while CEO Brett Harvey, a fourth generation coal miner, is not from the Mountain State, he certainly understands the importance of what West Virginia and the Appalachian Region contribute to the nation’s energy industry. As the CEO of one of only a few energy companies that has successfully diversified to produce both coal and natural gas, Harvey has a unique perspective to share with readers both within West Virginia and beyond.

WVE: Tell us how you got involved in the energy industry.

BH: My family has a long history in the coal mining business. I am the fourth generation that chose to work in the mines and am compelled to work in this business because I admire the pride and strong work ethic of the people it employs. I firmly believe the work we do is critically important to the United States and to global growth.

WVE: As one of the largest producers of coal and natural gas in West Virginia, what is the greatest challenge you see facing the Appalachian Region? 

BH: Our license to operate is paramount, and we must continue to approach safety and compliance as core values in all we do. West Virginia’s vast coal reserves and new natural gas discoveries represent a once-in-a-generation opportunity to help meet growing world energy demand. In order to be able to participate in this unique opportunity, industry must continue to prioritize safety and environmental compliance above all else. If we do, the residents of West Virginia and the entire region will reap the benefits for generations to come.

WVE: What contributed to the efforts to extend the reach of CONSOL in the energy industry into natural gas production? 

BH: We saw an opportunity to extend our expertise in coal bed methane extraction to unconventional gas development through our acquisition of Dominion Resources’ natural gas assets. The Marcellus formation shares the same footprint as our coal reserves, so this was a natural fit and organic opportunity to diversify our company with two fuels on the balance sheet that will represent two-thirds of global energy consumption for decades to come.

WVE: What do you see as the biggest challenge facing the natural gas industry? 

BH: New markets for natural gas and the infrastructure to deliver product are challenges we must address. Currently, the market for natural gas is largely electricity generation. If we are to truly capitalize on the shale opportunity, we must expand the field and spawn new opportunities in transportation, manufacturing, medicine and beyond. The possibilities are boundless if we approach public policy in a way that facilitates growth and job creation associated with natural gas development.

WVE: What do you see as the biggest challenge facing the coal industry? 

BH: A number of factors have converged on the coal industry in recent years: tepid economic growth at home and abroad, low natural gas prices combined with an abundant supply due to technological innovation in unconventional drilling techniques and an irrational regulatory agenda directed at both the permitting process as well as electricity generation. Despite this challenging environment, coal is expected to surpass oil as the world’s dominant energy source by 2017. This is a testament to coal’s place as a continued driver of economic progress across the globe.

WVE: What type of R&D is CONSOL working on in preparation for the future of the energy industry? 

BH: Similar to our operational focus on our core values of safety, compliance and continuous improvement, our research and development efforts are focused on advancing these core values to make us a safer and more efficient producer of natural resources. In fact, CONSOL Energy’s R&D facility is the largest privately funded facility in the industry—something we are very proud of and allows us to continue to be an innovator in our field.

WVE: How does having an export terminal affect production for CONSOL?

BH: Having a wholly-owned marine terminal in Baltimore—the only East Coast terminal serviced by two rail lines—represents a competitive advantage for CONSOL Energy. The geographic proximity of our terminal to our coal mines allows us to dynamically participate in the growth of world coal markets. In 2012, the terminal shipped 12.7 million tons of coal to Asia, Europe and South America.

WVE: What are you doing to ensure CONSOL will continue to be a leader in coal and natural gas for years to come? 

BH: In 2012, we began to take a hard look at our energy portfolio and began to divest non-core, non-revenue producing assets. We have also begun a process to monetize some assets, such as Midstream, that we are currently operating but that supplement our core businesses. Our goal when evaluating asset sales is to enter into transactions that can narrow the gap between our share price and the value of all of our assets. We are also growing production in both coal and gas. We expect to add 5 million tons of coal per year with the opening of BMX Mine next year, and gas production continues to grow at 8-15 percent per year. There is also new potential in oil and liquids through our natural gas operations. We will come out of the recession as a bigger, stronger, more diverse company prepared to capitalize on opportunities when the economy turns.

WVE: What is your favorite part of being involved in energy production? 

BH: Fossil fuels are a vital resource that have allowed this country to become a global industrial leader and to support a quality of life that represents a standard many other countries are trying to achieve. And we continue to depend on these energy sources to power our modern daily life. It’s rewarding to know we play a part in driving the quality of life that all Americans have come to expect.

WVE: You have held many leadership positions in the energy industry. What do you think the biggest changes have been over the years?

BH: The coal industry has reinvented itself over and over again. American innovation pushes continuous improvement, and it happens across every facet of our lives. If you think about music 50 years ago, we have been through vinyl, eight-track, cassette, compact disc and digital mediums, and who knows where we’re going. Energy production is the same way—how we’re mining it, getting it to market and certainly how we’re converting it to generate electricity. For example, a coal-fired power plant brought online today is 90 percent cleaner than the one it replaces.

Since I started my career 33 years ago, coal generation for electricity has nearly tripled while emissions have been reduced by half. Technology is working and will continue to make progress. Again, that’s just the product of our best and brightest pushing new and better ways to deliver the energy we need.

WVE: What’s the biggest challenge you’ve faced in your career in the energy industry?

BH: The biggest challenge in my career has been finding effective ways to improve the safety culture of CONSOL Energy. Every great journey starts with a first step. Five years ago, we developed the Absolute ZERO program based on a simple philosophy: Absolute ZERO is not just a goal; it’s a value. And it is not just a value; it is our top value. From our world-class training program to incentives and awards that include time off and bonuses for performance, our employees are impacted personally by the initiative and have responded positively. We have also stressed contractor safety as being as important to us as the safety of our company employees. We mean it, and we reinforce it every day. We are also spending time to develop best practices for both our coal and gas operations and eyeing safety improvements for the equipment we use every day.

Effective communication is the key to success on all those fronts. After 33 years in the mining business, I can see we are getting the message through, and we are seeing the positive effects. In 2012, CONSOL Energy had its best safety year on record with an overall (coal and gas) incident rate of 1.30. Notably, our coal division saw safety exceptions drop 11 percent to 1.67 and the gas division worked another year without incurring a lost time incident.

WVE: What is the biggest misconception you see regarding the industry, whether it’s overall or it focuses on coal or natural gas? 

BH: From an energy producer’s viewpoint, one of the most frustrating things is that the opposition would have you believe we are in a crisis when it comes to air and water quality. The reality is we are the envy of the world and coal is a necessary cornerstone in leading a resurgent American manufacturing sector with affordable, reliable energy now and in the future. While the world continues to use our coal to modernize their societies and strengthen their competitive posture, we diminish our competitiveness in the world by abandoning it. Without a cohesive energy policy, American families continue to struggle, and the American economy lags behind in the global marketplace.

WVE: What can West Virginia do to create a friendlier place for the energy industry to do business? 

BH: I commend Governor Tomblin and other leaders in West Virginia who are taking a common sense approach to the state’s regulatory framework. They support energy production and job creation in a responsible manner. For example, the recently passed shale regulation bill is a model for other states to follow as it provides the predictability and certainty needed for the energy business, which is capital intensive, to operate and commit to future expansion.

WVE: In your opinion, what must the state do to prepare for the future of energy?

BH: As I mentioned earlier, technology drives innovation in the energy business, and to support these new technologies, the entire industry must invest in the transition to a younger work force. At CONSOL Energy, we are hiring approximately 500 new employees per year, and the jobs we are filling require technical skills that didn’t necessarily exist 25 years ago. We must also tap local talent and encourage work force development efforts that prepare the next generation for careers in energy.

WVE: What is the key to the nation embracing this new age of natural gas and what must they do to compete with the surrounding states? 

BH: The shale gas revolution has the potential to alter the energy landscape around the world, and, in doing so, reshuffle the deck in terms of foreign policy as well. Energy security is within our reach if we embrace the opportunity and public policies that encourage—not inhibit—responsible resource extraction.

WVE: What do you think the energy industry will look like in 10 years?

BH: That is hard to predict. Five years ago, the industry was growing at a rapid pace. The health of our domestic and global economies will largely dictate the evolution of the energy industry. World demand will increase by more than 50 percent in the next two decades while domestic demand is expected to increase by 20 percent in the same timeframe. The energy industry has always had ups and downs, but CONSOL Energy is well positioned to provide the gas and coal the world will require in the coming years.