Reconsidering the Power to Move Mountains

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Move over, Tanya Harding. Step aside, O.J.! Here's a court case that could actually have an impact on mountains, miners, consumers, and Fools.

A 2007 court ruling regarding the environmentally destructive process of mountaintop removal by Appalachian coal miners is currently being appealed by Massey Energy (NYSE: MEE) and the West Virginia Coal Association. In this archetypal legal battle between environmentalists and industry interests, the stakes appear as high as a mountain peak for both sides.

Consideration for new surface mining permits in Appalachia have been frozen since last year's ruling, and coal industry analysts are warning that consumers will pay a high price in the form of higher electricity rates, power shortages, and brownouts if the decision is upheld in this appeal. On the other hand, environmental groups point to the wholesale destruction of streams, forests, wildlife habitat, and the contamination of drinking water supplies among the prices already paid in the region for this type of coal mining.

According to the U.S. District Court in Virginia, the Army Corps of Engineers did not adequately consider the environmental ramifications of surface mining when it approved permits for mines of Massey subsidiaries. Given the importance of Appalachian coal in the context of severe tightness in the global coal supply, the pending decision could impact coal prices worldwide.

To gauge which miners have the most at stake with this appeal, consider that surface mining accounts for 60% of production for International Coal Group (NYSE: ICO), 47% for Massey, 44% for Alpha Natural Resources (NYSE: ANR), and 36% for Patriot Coal (NYSE: PCX).

CONSOL Energy (NYSE: CNX), conversely, obtains 96% of its production through underground mining. If the prior ruling is upheld, Fools can expect CONSOL to benefit from climbing prices for coveted Appalachian coal. If the price impacts indeed reverberate throughout the industry, then miners with operations in other regions will stand to gain. Peabody Energy (NYSE: BTU) derives substantial production from Australian mining operations, while Teck Cominco (NYSE: TCK) recently consolidated its ownership of the prolific Elk Valley Coal project in Canada.

Whatever the result of this appeal, I think it's safe to say we won't have heard the last of this epic impasse between the coal mining industry and environmentalists.

Further Foolishness:

• How I know coal will heat up again.
• An acquisition bid is pending for Alpha.
• Massey has been mired in legal battles.