Coal Baron’s Next Step: Not Just Mining, But Also Power Plants

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By Stephen Lee

Oct. 21 — Self-declared environmentalist Tom Clarke has been buying up coal mine permits with the aim of running them in environmentally responsible ways. Now he’s thinking bigger.

Clarke’s company, ERP Compliant Fuels, owns 135 mining permits. His new plan is to own the entire supply chain, starting with coal extraction and extending through thermal-coal-fired electricity generation and metallurgical-coal-based steel production—and to offset all of it with carbon credits that cancel out greenhouse gas emissions.

“You’ll see integration next year,” Clarke, who made his fortune with the nursing home company Kissito Healthcare, told Bloomberg BNA. “This is a year where I want us to make a major impact in integrated steel mill carbon emissions. And if I can buy a power station, or two, or 30, that would be great.”

Clarke said ERP Compliant Fuels will bid on the coal-fired Merrimack Station in Bow, N.H. The plant is being sold by Eversource Energy, but no date for an auction has been set.

Owning the Carbon Supply Chain

By exerting more control over the way coal is dug up and burned, Clarke says he can ensure that it is done responsibly. His goal is to offset the coal he mines by planting trees.

“Reforestation’s the only low-cost, globally deployable option that we have to reduce carbon” from burning coal, Clarke said.

In fiscal 2016, ERP offset 10 percent of the 5.9 million metric tons of carbon dioxide its coal emitted, according to a company document. But Clarke says he is committed to increasing that number dramatically, and is aiming for his power plants to offset 100 percent of their emissions.

Theo Spencer, a senior policy advocate at the Natural Resources Defense Council, cast doubt on the tree-planting idea, not least because, by Clarke’s own admission, 90 percent of his carbon emissions aren’t being compensated for.

“Yes, planting trees can have mitigation benefits, but it’s no substitution for transitioning towards cleaner sources of fuel than coal,” Spencer told Bloomberg BNA. “I think his intent is admirable, and these are real places with real people and real jobs. I’m just not sure, from an environmental perspective, that this all pencils out yet.”

No More New Permits, Clarke Says

Clarke has no plans to expand his coal mining empire beyond the 665,000 acres of land to which he owns the permits.

“I don’t know of anybody who’s filing new permits,” Clarke said. “We’re not seeking to open new mines. People accuse us of working with George Soros to end coal mining, but coal mining’s on its way out on its own.”

He further said his involvement in coal is a net positive for the environment, especially when compared to the alternative: someone without an environmental agenda mining and selling the product.

“The strategy is unorthodox, but we figure somebody’s going to mine it, so it might as well be us,” Clarke said.

Questions About Claims

Many observers have questioned Clarke’s claims, however.

“You have to look at which mines he’s buying, and whether, in those auction proceedings, there were any other coal miners willing to buy those particular assets,” Hayden Baker, an attorney at Sullivan & Worcester LLP, told Bloomberg BNA. “And if the answer to that is no, or they weren’t willing to buy it to mine coal from those assets, then it begs the question of whether that coal was really going to stay in the ground.”

Clarke responded that 75 percent of the 12 million tons of coal ERP will produce next year will be metallurgical coal, which, because it commands greater prices than the power-generating thermal coal, is far more likely to be dug up.

The only thermal coal Clarke’s business mines comes from its Federal Mining Complex outside Morgantown, W.Va., he said. “The market’s only going to buy so much thermal coal,” he said.

A look at the three major coal purchases Clarke has made—involving Patriot Coal Corp., in August 2015, Cliffs Natural Resources Inc. in December 2015 and Walter Resources in February 2016—reveals a mixed picture.

The Walter purchase drew 26 signed non-disclosure agreements from bidders, ultimately yielding four bids. On the other hand, the two Cliffs mines Clarke bought appear to have been up for sale for close to an entire year, and in the Patriot deal, no other bidder offered “greater economic value” to the debtors’ estate than Clarke.

‘If I Fail, They Fail.’

Joe Lovett, executive director of Appalachian Mountain Advocates, said he believes Clarke to be sincere when he talks about protecting the environment. But he also raised questions about Clarke’s ability to pay for the reclamation work he inherited when he took over the mines.

“What he got for the Patriot mines, for instance—he got the bad mines, all of the liabilities,” Lovett told Bloomberg BNA. “Blackhawk [the company that emerged from Patriot’s bankruptcy] took all the good assets, the money-making assets. Tom doesn’t have any way to make any money, and he has a lot of mines that he has to reclaim. And in the long term it will fail.”

Clarke said he understood the skepticism, but noted that his cleanup plans are backed by $200 million in surety bonds, provided by 11 partners.

“If I fail, they fail—to the tune of $200 million,” he said. “So they want me to succeed.”

To contact the reporter on this story: Stephen Lee in Washington, D.C. at stephenlee@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

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