It's been a tough few years on the coal industry as cheaper, cleaner natural gas has replaced the dirty fuel in domestic electricity generation. Perhaps then, it is unsurprising that the coal industry spent more than $17 million lobbying the federal government last year. Today we'll take a look at how much coal companies are spending, what they're fighting for (or against), and why investors should care.
Dollars for bills
For the full-year 2012, the coal lobby had these big spenders to thank:
- Peabody Energy (NYSE: BTU ) – $5.5 million
- CONSOL Energy (NYSE: CNX ) – $3.9 million
- Alpha Natural Resources (NYSE: ANR ) – $2.6 million
- Arch Coal (NYSE: ACI ) – $1.8 million
- Patriot Coal (NASDAQOTH: PCXCQ ) – $1.1 million
Compared to the lobbying dollars its fossil fuel cousin big oil is spending, these numbers aren't that high. Given that the industry is in dire straits – Patriot Coal has already gone bankrupt – one would almost expect the numbers to be higher. But perhaps without these lobbying efforts, things would be far worse for coal. The coal lobby has risen steadily after a big uptick between 2004 and 2005, so let's see what issues are garnering the most cash these days.
Where does the money go?
A quick jaunt through the Senate's Lobbying Disclosure Act database reveals exactly what the companies above deem important enough to spend their money on. As investors, you should probably know what they are, so here are three entries from each of the companies listed above, per their first-quarter disclosures.
- "HConRes8, Expressing the opposition of Congress to Federal efforts to establish a carbon tax on fuels for electricity and transportation."
- "H.R. 1569, Amending the Internal Revenue Code of 1986 to terminate certain energy tax subsidies and lower the corporate income tax rate."
- "SConRes 4, A concurrent resolution expressing the sense of Congress that a carbon tax is not in the economic interest of the United States."
- "H.R. 4342, Waterways Are Vital for the Economy, Energy, Efficiency and Environment Act of 2012, All Titles"
- "H.R. 2273, Coal Residuals Reuse and Management Act, All Titles"
- "H.R., 6172, To Prohibit EPA from imposing NSPS until CCS is technologically and economically feasible, All Titles"
Alpha Natural Resources:
- "Legislation directed at amending current safety standards, regulation and oversight at domestic coal production and processing facilities."
- "Legislative language within pending appropriations bills or continuing resolutions that promote or dissuade investments in coal-fired plants or other coal-related infrastructure domestically or overseas..."
- "Legislation to amend current environmental laws to increase federal regulation over the permitting, production, or combustion of domestic coal resources and post-mining reclamation activities, including interpretations of Clean Water Act (CWA) jurisdictional scope..."
- "Legislative efforts to expand the Mercury Export Ban Act"
- "Promoting Coal Exports"
- "President's FY2014 Budget"
- "Respond to Member and staff inquiries about Chapter 11 reorganization"
- "Educate Members and staff regarding Patriot Coal's Chapter 11 reorganization proceedings"
You'll notice that there is no standard for language or disclosure; some companies eloquently record their actions, while others favor brevity. Regardless, these filings are chock-full of information for investors.
The industry spent about $2.8 million on lobbying in the first quarter; if that trend continues, it could result in a significant pullback compared to years past. However, it makes sense to wait for second-quarter data before even guessing at that call.
More importantly, spending a few minutes perusing the LDA forms of your investments every quarter can do two beneficial things for investors. It fills you in on exactly how much money your company is spending on lobbying, something that public companies rarely ever include in SEC filings. Second, it lets you know what issues management deems important enough to spend millions of dollars on. Money talks, and if the LDA forms don't match up with what management has been preaching, you know there is a problem.
The coal industry in the United States has been in a state of flux since the arrival of a cheaper alternative for energy production: natural gas. Exports are becoming a much bigger part of the domestic coal landscape, and Peabody Energy has deals in place to get its cheaper coal from the Powder River and Illinois basins to India, China, and the EU. For investors looking to capitalize on a rebound in the U.S. coal market, The Motley Fool has authored a special new premium report detailing exactly why Peabody Energy is perhaps most worthy of your consideration. Don't miss out on this invaluable resource – simply click here now to claim your copy today.