We Live and Breath Safety

    Coal Leader: We are with Pete Lilly, who is Chief Operating Officer – Coal of CONSOL Energy. Pete we appreciate you talking to readers of Coal Leader. Tell us please how you got involved in the coal industry.

Pete Lilly: Thank you Bill. It’s always a pleasure to visit with you with your background and experience; you bring a unique perspective to our industry. I got involved in the coal industry after I finished my time in the service. It was a time when we had the oil embargos and crises back in the early and mid 70’s and coal was starting to become a hot ticket item again. I made the decision to try to get into the business and the fact that I had grown up in southern West Virginia gave me some credibility at least from a cultural standpoint. That’s really what drove it: the fact that coal was a pretty hot topic in the 70’s. 

Coal Leader: Could you tell us about your present responsibilities within CONSOL and about the management team that you have reporting to you?

Pete Lilly: When Brett Harvey brought me in, he made a decision to consolidate the operations and sales and marketing groups within CONSOL into more of a business unit responsibility. I am responsible for the coal business, for everything to do with the safe, cost effective production and the sales and distribution of all the coal that CONSOL produces which is the majority of CONSOL’s business. I have since redefined things somewhat. I’ve tried to keep layers of management to a minimum and maximize the number of direct reports so I now have the CONSOL marketing and transportation, sales and transportation, and distribution networks reporting through two people directly to me and the operations reporting through four vice presidents with regional responsibilities. There is a fifth person who is vice president of operations support, supporting all those. The purpose is to facilitate communications across groups.

 
Coal Leader: Turning to the coal supply situation, I think you might agree that one of the biggest problems the industry has faced in the past has been an oversupply, which has put a great downward pressure on the prices, but the situation may be changing. Would you like to comment on that?

Pete Lilly: Oh yes. I think we are seeing a new period evolve here. For years and years the coal industry oversupplied its customers probably 28 out of the last 30 years and it has to do with a lack of consolidation and lack of discipline to hold supply off the market during times when the demand is light. In the west, clearly, the infrastructure and when I say infrastructure I am talking about the combination of the railroad’s capacity and the ability of the mines to process, load, handle trains and get it out properly. That capacity is clearly strained. It will take considerably more capital by the mines and the railroads to overcome that capacity constraint. In the east, I think it is a different story. I think the Central Appalachia reserves are really supply constrained now for another reason of basically degradation of reserves and depletion of reserves. In Northern Appalachia, again it’s a different story. It’s been an issue over the years, a number of the mines have now depleted. Fortunately, CONSOL is in a very strong position reserve wise. We are probably the only company on a widespread basis that has the ability to sustain existing mines for a decade or more, a couple of decades typically, and we have the reserve base to develop some new greenfield projects once the market justifies it. 

Coal Leader: What are some of the other major problems that CONSOL Energy faces today?

Pete Lilly: I think if I were characterizing it, I would say it is a problem that our customers have that rolls back on us, and that is a regulatory uncertainty. We believe that President Bush’s Clear Skies Initiative should be, for the most part, supported and implemented quickly, because there is an array of regulations and rules that create uncertainty for our electric utilities customers. They don’t know whether the rules are going to change, so they have been slow to invest in scrubbers and other clean coal burning technologies. I think we still have some grandfather plants that have high emissions rates of SO2 and we’ve got to get that cleaned up. I think the Clear Skies Initiative is the way to do it and in so doing, it would create regulatory certainty. The utilities would know what the laws are and what they will be ten years from now and therefore they’d feel comfortable about making large capital investments. 

Coal Leader: You wouldn’t want to complete an interview without a discussion of providing greater safety and health. Tell us the role of safety and health within CONSOL Energy?

Pete Lilly: We live and breath safety and health. I have meetings with my staff on a weekly basis and make an effort to visit all the mines as frequently as I can. I will tell you that safety is our prime consideration and that we continually work to reinforce both insuring a safe work environment for people and eliminating unsafe acts by our people and the two go hand in hand. The safe environment is created by adhering to standards of workmanship, housekeeping and the state and federal agencies are focused on helping us create that safe work environment. I will say I am quite pleased to see that through the first four months of this calendar year, CONSOL’s safety performance is the best that it has ever been. So we must work hard to ensure that we not only sustain that performance so far this year but improve upon it.

Coal Leader: A final comment please on the coal industry generally. How do you see the future of coal?

Pete Lilly: Well I am excited about it. Of course I am the eternal optimist but I believe that when you look at the whole context of the need for energy, our economy will continue to grow and the demand for electricity will grow. Only two of the last 50 years have we seen the demand for electricity not grow year on year. Unfortunately one of those was ’01, but I will say that the demand for electricity will grow in concert with the economy. Coal provides half of the electricity generated in this country and we really just don’t have any other viable alternative. There just aren’t going to be any more nuclear plants built in the next couple of decades and those plants that exist are running at full capacity. We don’t have enough natural gas. We have major issues on refilling storage for this coming winter for home heating uses. So the combination of those things says that we have got to utilize our coal. We’ve got to utilize it in a clean, environmentally sensitive manner and I believe that President Bush’s Clear Skies Initiative will pave the way for us as a country to be able to do that.

Coal Leader: Thank you very much indeed for taking the time to talk to readers of Coal Leader.

Pete Lilly: Thank you. 

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