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Pennsylvania exempts coal from COVID-19 order, allowing mines to stay open


Essential Energy Insights - February 2021


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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021

Pennsylvania exempts coal from COVID-19 order, allowing mines to stay open

Pennsylvania Gov. Tom Wolf clarified that coal mines are exempted from a March 20 order to shut down non-life sustaining businesses in the state.

The March 19 order would have impacted coal mines that cumulatively produced 6.5% of the coal mined in the United States last year. The directive, intended to slow down the spread of COVID-19, included exemptions for natural gas companies but not coal mines. The state produced about 45.5 million tons of coal in 2019 and employed an average of 4,295 people in the fourth quarter of 2019, S&P Global Market Intelligence data shows.

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The correction to the governor's original order is consistent with mining classification under federal laws designating the sector as a critical industry, said Rachel Gleason, executive director of the Pennsylvania Coal Alliance. The group applauded the decision to allow the mines to remain open.

"During these difficult times, Pennsylvania's coal industry will continue to do their part to support manufacturing and keep the lights on for all of Pennsylvania's electricity consumers," Gleason said in a statement. "The PA Coal Alliance and its members are taking the necessary steps to ensure the safety and well-being of their employees. We encourage all Pennsylvanians to do the same by taking the actions needed to keep their family members and neighbors safe."

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Coal was not listed as exempt in the governor's original shutdown order. B. Riley FBR analyst Lucas Pipes wrote in a March 20 note that the industry was seeking clarification and hoping to remain open. Pipes noted that the order could have had a significant impact on Consol Energy Inc. and Contura Energy Inc.'s 2020 earnings.

"If we assume that all Pennsylvania coal mines close for the next three months, this would equate to roughly 12 million tons of lost supply. Most of this supply is thermal coal," Pipes wrote. "Inventories in Northern Appalachia were estimated to be 24 million tons at the end of February, so a forced shutdown could lead to a normalization of what are currently highly elevated inventory levels."

The largest producer in the region is Consol, which mined 27.3 million tons of coal from its three-mine Pennsylvania coal complex in 2019, according to an analysis of U.S. Mine Safety and Health Administration data.

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While the company is developing a metallurgical coal project in Pennsylvania, the mines in Pennsylvania are its only active operations. Though it has since recovered slightly, Consol's stock price fell to as much as 24.4% lower than its opening price of $7.38 per share on March 20. The company did not respond to a request for comment on the order.

Contura has just one mine in the state, but it produced 6.6 million tons of coal in 2019.

Other top owners of coal mines in the state by coal production include Rosebud Mining Co., Robindale Energy Services Inc. and Quintana Capital Group GP Ltd. Quintana controls Corsa Coal Corp., which said in a March 20 news release released several hours before the governor added coal mines to the list of exempt companies that it was planning to adhere to the directive to close its operations in the state. Substantially all of the company's operations are located in Pennsylvania.

"The limited notice to Pennsylvania businesses regarding the effectiveness of the order and the order's current indefinite duration have provided further uncertainty and hardship to Corsa, its employees and their families, as well as our other stakeholders, during this already trying time," said Corsa CEO Peter Merritts. "Over the coming days, we hope to obtain more clarity regarding the order and its impact on Corsa, and whether those impacts can be mitigated while still, first and foremost, maintaining the health and safety of our employees, their families and the communities in which we operate."