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Brief Biographical / Historical Sketch

History

The Consolidation Coal Company (Maryland)

The Consolidation Coal Company was incorporated in Maryland on March 8, 1860, for the purpose of effecting a merger of a number of coal operators mining the Georges Creek basin in Allegany County, Maryland. Because of the Civil War, during which Confederate armies frequently blocked the region’s only outlet to market, the company was not actually organized until April 19, 1864. Starting life as the dominant operator in this small but significant coal field, “Consol” rose to become the nation’s top producer of bituminous coal.

The Georges Creek or Cumberland Coal Field, occupying part of the triangle of western Maryland, contained a high-quality, low-volatile bituminous steam coal which was also, thanks to the Potomac River, the coal of this type most accessible to Eastern markets. Coal had been mined in the region beginning in the 1700s, and the first coal company, the Maryland Mining Company, had been incorporated in 1828. However, large-scale development could not occur until the mid-1840s, after the Baltimore and Ohio Railroad reached Cumberland and provided reliable transportation. This also coincided with the development of ocean steam navigation and a rapid growth in the number of railroad locomotives and stationary steam engines. Cumberland coal was ideal for ship bunkering, and much of the output was shipped to New York Harbor. Naturally, New York capitalists and manufacturers played a leading role in developing the field. Lewis Howell’s Maryland and New York Iron and Coal Company rolled the first solid U.S. railroad rail at its Mount Savage mill in 1844. The Consolidation Coal merger was put together by New Yorkers such as William H. Aspinwall, Erastus Corning, the Delanos and Roosevelts, and the Boston financier John Murray Forbes, who already had substantial investments in the region.

Upon its formation, the Consolidation Coal Company acquired the properties of the Ocean Steam Coal Company, the Frostburg Coal Company, and the Mount Savage Iron Company totaling about 11,000 acres. The last named company brought with it control of the Cumberland and Pennsylvania Railroad, which connected the mines to the Baltimore & Ohio and later the Pennsylvania and Western Maryland railroads. In 1870, Consol absorbed the Cumberland Coal and Iron Company of 1840, the next largest operator in the field, and gained an additional 7,000 acres. Further purchases from the Delano interests gave it over 80 percent of the entire Cumberland Field.

Soon after its hated rival, the Pennsylvania Railroad, gained access to the Cumberland Coal Field, the Baltimore and Ohio Railroad began purchasing large blocks of Consolidation Coal stock to protect its traffic base in 1875, eventually gaining a 52 percent interest. A B&O slate of directors was elected in February 1877, with Charles F. Mayer of Baltimore as president, and the company offices were moved from New York to Baltimore.

Until the turn of the century, Consolidation Coal’s mining operations were confined to the small soft coal region of western Maryland. The company purchased the 12,000 acre Millholland coal tract near Morgantown, W.Va. in 1902 and acquired controlling interests in the Fairmont Coal Company of West Virginia and the Somerset Coal Company of Pennsylvania the following year. These acquisitions boosted Consolidation’s annual production more than six-fold in only three years. The company purchased the 25,000 acre Stony Creek tract in Somerset County, Pa., in 1904. The Fairmont Coal Company purchase included a joint interest in the North Western Fuel Company, which owned and operated docks and coal distribution facilities in Wisconsin and Minnesota.

In 1906, the Interstate Commerce Commission held a formal investigation of rail ownership of coal companies, which resulted in the passage of the Hepburn Act and its “Commodities Clause,” which prohibited railroads from dealing in the commodities they hauled. In anticipation of the new regulations, the Baltimore and Ohio Railroad sold its entire holdings of Consolidation stock to a Baltimore syndicate headed by Consol president Clarence W. Watson, J. H. Wheelwright and H. Crawford on April 26, 1906. At the time of the B&O’s divestiture, the aggregate annual output of Consolidation’s mines totaled more than 10 million tons and the company controlled more than 200,000 acres. The John D. Rockefeller interests began purchasing Consol securities in 1915, eventually securing a controlling interest. The company’s offices were returned to New York City in May 1921.

After the B&O divestiture, Consol began expanding into the Southern Appalachian coal fields, which were just being opened by railroads on a large scale. The mines in this region yielded a low volatile coal that provided an ideal fuel source for stationary steam engines, ships, and locomotives. Of equal importance, operators in the remote mountains had been able to resist unionization and thus achieve lower operating costs, while all of Consol’s previous holdings had been in the so-called “Central Competitive Field” to the north, which had been unionized in the 1890s. Consolidation Coal purchased 30,000 acres in the Millers Creek Field of Eastern Kentucky in 1909 and 100,000 acres in the Elkhorn Field the next year. In February 1922, Consol secured a long term lease and option on the Carter Coal Company, whose 37,000 acres straddled the borders of Virginia, West Virginia and Kentucky. In 1925, Consol became the nation’s largest producer of bituminous coal, excluding the captive mines of the steel companies.

During the Great Depression, Consolidation Coal experienced serious financial difficulties and was forced into receivership on June 2, 1932. The Rockefellers liquidated their holdings at a loss, and the Carter Coal Company was returned to the Carter heirs in 1933. Consol was reorganized and reincorporated in Delaware as the Consolidation Coal Company, Inc. on November 1, 1935, and was able to retain its position as one of the nation’s top coal producers. Eventually, stock control passed into the hands of the M.A. Hanna Company group of Cleveland, dealers in coal and iron ore. Although production reached record levels during the Second World War, management feared a recurrence of the collapse that had followed World War I. It also faced the prospect of increased competition from oil and natural gas and the loss of traditional markets such as home heating and locomotive fuel. As a result Consol opened negotiations with another large producer, the Pittsburgh Coal Company, which was the dominant operator in the Pittsburgh District.

The Pittsburgh Coal Company

The Pittsburgh Coal Company was a product of the great industrial merger movement of the late 1890s. In 1899, two large mergers were effected in the Pittsburgh District.

The Monongahela River Consolidated Coal and Coke Company was incorporated in Pennsylvania on October 1, 1899 to merge the properties of over 90 small firms operating mines along the Monongahela River south of Pittsburgh. Some of these operations dated to the early 1800s, and all of them shipped coal down the Ohio-Mississippi River system by barge from close to the mine mouth, or later by the railroads built along the river banks. The combination controlled 40,000 acres of coal land, 100 steam towboats, 4,000 barges, and facilities for handling coal at Cincinnati, Louisville, Vicksburg, Memphis, Baton Rouge and New Orleans.

The Pittsburgh Coal Company was incorporated in New Jersey as a holding company on September 1, 1899 and acquired the properties of over 80 operators located in the areas back from the river on both sides of the Monongahela south of Pittsburgh. The combination was engineered by some of the most prominent Pittsburgh industrialists, including Andrew W. Mellon, Henry W. Oliver, and Henry Clay Frick. It controlled over 80,000 acres and six collector railroads, the longest of which was the Montour Railroad. Most of its output was shipped by rail, with a large share being transferred to ships on the Great Lakes for distribution throughout the industrial Midwest. The company owned coal docks and yards at Chicago, Cleveland, Duluth, West Superior, Sault Ste. Marie, Ashtabula, Fairport and Thornburg. Subsequently, the company expanded in southwestern Pennsylvania and the Hocking Valley of Ohio through the lease of the Shaw Coal Company in 1901 and the purchase of the Midland Coal Company in 1903. Most of the properties were vested in a separate Pittsburgh Coal Company, an operating company incorporated in Pennsylvania.

Unlike the Consolidation Coal Company, which had grown by gradual accretion, the Pittsburgh Coal Company had been created in a single stroke. As with many mergers of the period, its capitalization probably contained a high percentage of “water” in anticipation of profits from future growth. Unfortunately, the years after the merger saw explosive growth in the coal fields of Southern Appalachia instead. Although farther from major consuming centers, they enjoyed several advantages. The coal itself was superior, low-volatile with higher BTU content and altogether cleaner than the high-volatile coals of Ohio and the Pittsburgh District. As already noted, the southern mines were also non-union. With the inroads of Southern Appalachian coal, the Pittsburgh Coal Company continuously lost ground in the crucial Lake and western markets from 1900 to 1915. The company’s capitalization proved unwieldy in the unsettled economic conditions following the Panic of 1907. A reorganization plan was devised under which a new Pittsburgh Coal Company was incorporated in Pennsylvania on January 12, 1916 by merging the old Pittsburgh Coal Company of Pennsylvania and the Monongahela River Consolidated Coal and Coke Company. The old holding company was then liquidated and the stock of the new operating company distributed to its stockholders. Dissension between the common and preferred stockholders delayed consummation of the plan until July 16, 1917.

The Pittsburgh Coal Company, which had all its operations in the Central Competitive Field, had a much more difficult time than Consolidation in breaking the 1923 Jacksonville Agreement with the United Mine Workers in 1925-1927 and reverting to non-union status. The three-year struggle ended the company’s ability to pay dividends. Pittsburgh Coal survived the Depression without receivership but with ever-increasing arrearages on its preferred stock. By the end of World War II, its managers were just as eager as those at Consol to attempt greater economies through merger. The Pittsburgh Coal Company and the Consolidation Coal Company merged on November 23, 1945, with exchange ratios of 65 to 35 percent. Pittsburgh Coal Company, the surviving partner, changed its name to the Pittsburgh Consolidation Coal Company.

The Pittsburgh Consolidation Coal Company

After the merger, the M.A. Hanna Company interests of Cleveland became the dominant factor in Pitt-Consol’s affairs. Hanna had transferred its pre-merger Consol stock to its subsidiary Bessemer Coal & Coke Corporation in 1943. This led to a restructuring whereby Pitt-Consol acquired Hanna’s share of the North Western-Hanna Fuel Company in April 1946 and the Hanna coal properties in eastern Ohio on June 16, 1946 These included large reserves of strippable coal that accounted for about 20 percent of the state’s production. Pitt-Consol later acquired Hanna’s holdings of coal land in Harrison, Belmont and Jefferson Counties, Ohio, on December 30, 1949. It purchased the New York Central Railroad’s 51 percent interest in the Jefferson Coal Company, giving it full control, in 1952 and merged it into the Hanna Coal Company Division.

Pitt-Consol sold its last major railroads, the Montour Railroad and the Youngstown & Southern Railway to the Pennsylvania Railroad and the Pittsburgh & Lake Erie Railroad on December 31, 1946. The Northwestern Coal Railway had been sold to the Great Northern system, and the Cumberland & Pennsylvania Railroad had been sold to the Western Maryland Railway in May 1944.

In addition, a new Research and Development Division was created to fund projects aimed at developing more efficient production methods, new outlets for coal consumption, coal-based synthetic fuels and chemical byproducts. A new coal gasification plant opened at Library, Pa., in November 1948, and the company began the manufacture of a smokeless fuel briquette under the trademark “Disco” at Imperial, Pa., in 1949. An experimental coal slurry pipeline was built in Ohio in 1952.

During the 1950s and early 1960s, Pitt-Consol made many changes in its coal holdings, selling high-cost or less desirable properties, diversifying its reserves across many different coal fields, rationalizing property lines to permit large mechanized underground or strip mines and forming joint ventures with steel companies to secure guaranteed customers. Pitt-Consol acquired the Jamison Coal and Coke Company in 1954 and the Pocahontas Fuel Company, Incorporated, a large producer of low-volatile Southern Appalachian coal, in 1956. In the latter year, it sold its Elkhorn Field properties to the Bethlehem Steel Corporation. As Pittsburgh District operations became less central, the corporate name was changed back to Consolidation Coal Company in April 1958.

The Consolidation Coal Company, CONOCO and CONSOL Energy, Inc.:

Consol continued to expand into the early 1960s. On April 30, 1962, it absorbed the Truax-Traer Coal Company of Illinois. Truax-Traer also mined lignite in North Dakota, a low-grade but low-sulfur coal that was taking a greater share of the power generation market as environmental laws placed greater restrictions on high-sulfur coal from the Central Competitive Field. The following year Consol acquired the Crozer Coal and Land Company and the Page Coal and Coke Company, owners of additional reserves of low-volatile, low-sulfur steam coal in southern West Virginia.

In 1966, just two years after the company marked its centennial, Consolidation Coal was acquired by the Continental Oil Company (Conoco). This was part of a general trend whereby U.S. oil companies extended their reach by acquiring coal reserves and large coal producers. In turn, Conoco was acquired by E.I. du Pont de Nemours & Company in 1981. This purchase was motivated by DuPont’s desire to obtain better control of chemical feedstocks in an era of high oil prices. Consolidation Coal was not a major factor in the Conoco acquisition and did not really fit into DuPont’s strategy, especially after coal and oil prices declined. As a result, it was quickly sold off when DuPont was restructured a decade later. In 1991, a new holding company CONSOL Engery, Inc. was incorporated as a joint venture of DuPont Energy Company and the German energy conglomerate Rheinisch-Westfalisches Elektrizitatswerk A.G., through its wholly owned subsidiaries Rheinbraun A.G. and Rheinbraun U.S.A. GmbH. Consolidation Coal Company became a wholly-owned subsidiary of CONSOL Energy, Inc. DuPont eventually sold most of its half interest, so that by 1998, Rheinbraun affiliates owned 94% of CONSOL Energy stock, while DuPont Energy retained only 6%. CONSOL Energy purchased the entire stock of the Rochester & Pittsburgh Coal Company on September 22, 1998. CONSOL Energy stock began trading on the New York Stock Exchange under the symbol “CNX” in 1999, with an initial public offering of more than 20 million shares.

CONSOL Energy produced more than 74 million tons of coal in 1999, accounting for approximately 7% of domestic production. The company currently operates 22 mining complexes, primarily east of the Mississippi River.