Anyone thirsty for a hopeful story of unfettered profitability, even in the face of incredibly daunting challenges, may wish to take a fresh look at Appalachian coal miner Massey Energy (NYSE:MEE).

Though all available evidence suggested that Massey Energy would count among the most heavily impaired miners within a horrific decline in domestic coal demand, Massey defied the odds by gaining market share, increasing coal shipments to utilities, and beating analyst estimates by a cool 50% spread. During the first half of 2009 -- while coal burn at southeastern utilities decreased 19%, and overall consumption of central Appalachian coal plummeted by 25% -- Massey bucked the trend with an 8% increase in shipments to utilities.

Sales of metallurgical coal faced the truly insurmountable obstacles of reduced export demand and a domestic steel industry operating below 50% of capacity, so it's no surprise that Massey sold 40% less coking coal during the second quarter than it had a year earlier. Early signs of stabilization from steelmakers Nucor (NYSE:NUE) and AK Steel (NYSE:AKS), however, combined with aggressive production cuts from fellow met coal leaders like Cliffs Natural Resources (NYSE:CLF) and Alpha Natural Resources (NYSE:ANR) have begun to approach a balance between supply and stabilizing demand.

Massey reported second-quarter earnings of $20.2 million, comparing favorably to Arch Coal's (NYSE:ACI) $15.1 million loss. Still, even after adjusting for the $245 million hit from lawsuits which impacted the prior-year period, Massey's current net profit represents a hefty 78% decline year over year. (I never said the lemonade had been sweetened!) Operating margin contracted 34% from $15.94 per ton to $10.48, due principally to the weaker price environment for met coal.

If you're thinking this lemonade is ready to drink, please consider the full range of complex factors impacting my outlook for Appalachian coal miners. Increased scrutiny of traditional mountaintop removal practices under the new EPA administration, the implications of Cap & Trade, fierce competition in the export market for met coal from producers far closer to the steelmaking hotspots, and stagnant short-term demand of both types of coal top this Fool's list of ade-souring agents.

After this laudable performance from Massey in the face of whipping headwinds, I won't dismiss the miner's fortitude, but CONSOL Energy (NYSE:CNX) remains my sole coal pick among the Appalachian miners.

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