A millionaire environmentalist is buying into coal with a twist he believes can turn the beleaguered black fossil fuel at least partially green.
Tom Clarke, who made a fortune in health care, recently announced a plan to buy bankrupt St. Louis-based Patriot Coal for $400 million, following a major investment in coal by the billionaire liberal activist George Soros. But Clarke said he is not simply bargain-shopping in an industry wounded by federal policies and the emergence of American oil and gas. He said he is looking to transform the industry, and intends to sell his coal at a 10 percent premium -- which he will then spend on planting trees.
"My No. 1 priority is not to stop burning coal because that's not going to happen for 30 to 50 years," Clarke told the St. Louis Post-Dispatch. "We really see this as an opportunity -- not to expand coal, it's going to shrink anyway. But let's make sure we can at least keep people employed in Central Appalachia with this offset.”
Clarke, who founded Kissito Healthcare, which operates nursing homes in Virginia and nine acute hospitals in Africa, submitted to a bankruptcy court his plan to buy Patriot Coal through his company ERP Compliant Fuels, in partnership with his nonprofit Virginia Conservation Legacy Fund. Analysts who have watched Big Coal be brought to its knees by new regulations from the Obama administration's Environmental Protection Agency are divided over Clarke's scheme.
“There is no way around it. The cost will show up in people’s bills.”
“I thought this was really innovative,” said Sterling Burnett, a research fellow at the Chicago-based Heartland Institute. “If he wants to buy up these coal mines and coal companies and package coal to power plants with trees to suck up carbon emissions, and this helps save the coal companies, then he has made a real positive contribution.”
Patriot, which was formed in 2007 as a spinoff from industry giant Peabody Energy, controls approximately 1.4 billion tons of coal reserves in the U.S. Once traded publicly on the New York Stock Exchange, its shares lost nearly 75 percent of their value during President Obama's first term, when he aggressively went after coal-fired power plants. It emerged from bankruptcy court as a privately-held company, with many of its assets sold to Blackhawk mining.
Critics of the EPA policies say they have put thousands of people out of work and driven up energy prices, all for dubious environmental benefits. Coal remains a plentiful source of energy that even environmentalists like Clarke and Soros cannot ignore, said Daniel Kish, senior vice president of policy at the Institute for Energy Research in Washington, D.C.
“I cannot tell you the number of crazy things happening in the energy market because of EPA regulations,” Kish said. “People are being made to do really unnatural things that don’t make economic sense.”
Clarke, who did not return requests for comment, called the yet-untested deal a “landmark achievement” that allows his company to keep the coal mines operating, increase employment in the Appalachians, and reforest thousands of acres of land. He plans to use “reforestation carbon credits” to sweeten the deal for his customers, coal-fired power plants who could be subject to a proposed EPA mandate of reducing carbon emissions by 32 percent by the year 2030.
Clarke's plan may save jobs, but it will mean substantially higher electricity prices, Kish said.
“There is no way around it,” Kish said. “The cost will show up in people’s bills.”
Burnett conceded that Clarke's plan would impact energy costs, and may not even be approved by the EPA. But he said it could be worthwhile if it helps save an industry -- and keeps thousands working.
“Will this be a way by where coal-fired power plants can reduce their emissions and still use coal?” Burnett asked. “If this plan works, then it is a good thing for coal country. It will keep mines open, it will keep power plants open, and yes, it will raise the cost of energy. But quite frankly, the cost of energy will go up substantially anyway. This keeps the grid reliable at a modest increase in prices.”
Clarke's team would acquire Patriot's assets, including the Federal Mining Complex in northern West Virginia, Corridor G Mining Complex in southern West Virginia and other mining permits for purposes of land reclamation and water quality improvement. In return, ERP and its non-profit affiliate Virginia Conservation Legacy Fund would assume $400 million in liabilities, which include employee compensation, obligations to a state black lung fund and other company debt.
John Sparr, a mining engineer and geologist, said merely planting trees is no guarantee that the CO2 from burning coal will be absorbed.
“On paper, it is simple to calculate the amount of CO2 emissions a ton of coal will produce and then to calculate the number of trees it takes to consume the CO2,” Sparr said. “The problem with that theory is that you have to "train" the CO2 molecules to go to those trees . . . maybe we only burn coal when the wind is blowing in that direction?
"And, oh yes, the trees," he said. "Are these mature, 40-foot oak trees they are planting, or more likely 16-inch pine seedlings? Do they realize how long it will take to get a mature forest capable of consuming the CO2?”
Soros, who has demonized fossil fuels for years through his think tanks and political contributions, recently snapped up 1 million shares of Peabody and half a million shares of Arch Coal, giving him significant stakes in what’s left of the U.S. coal industry. His company purchased 553,200 shares of Arch Coal for $188,000 and made an investment of $2,254,000 into Peabody Energy for 1,029,400 shares.
The trades would have cost Soros a lot more six years ago, when Peabody, which trades under the symbol BTU, was at about $90 a share, but shares have now fallen to around $1, in large part, critics say, because of Obama’s pronouncement in 2008 that energy investors can build coal-fired power plants, but his administration will shut them down.
The 85-year-old hedge fund manager is the 19th wealthiest person in the U.S. with a net worth of $24.2 billion.