The fight over the proposed buyout of a huge, Maryland-based coal mining company is interesting for its own sake. Wall Street egos, including a hedge-fund manager and would-be buyer of the Pittsburgh Steelers, are battling over control of the country's fourth-biggest coal producer.
But the contest for Linthicum Heights-based Foundation Coal, which comes to a vote Friday, sheds light beyond Wall Street and the job of extracting soft black rocks from the Appalachian ground.
It's no less than a referendum on the future of energy, the environment and the American economy. One side is bullish on China and Brazil, and seems to fear that this country is in for a long, slow slog. The other is so confident that the United States will recover, and that coal is the fuel of the future, that it's willing to pay Foundation shareholders a very handsome price.
If the United States is "the Saudi Arabia of coal," as is often said, then Foundation could be Chevron, or Shell. With 1.7 billion tons of coal in its seams, the company could power Maryland's coal-burning electricity generators for more than a century. The question is whether anybody in Maryland or anywhere else will want the stuff.
Progress is catching up with coal. It spews too much junk into the air, although thanks to environmental rules, it's not as dirty as it used to be. Coal makes more greenhouse gas than other energy sources. If Congress attaches a price to carbon dioxide emissions through taxes or a cap-and-trade program, coal might not be the bargain it seems now.
The more immediate issue is when the U.S. economy will recover enough to need more coal at any price.
Electricity generation, the main use for coal, has plunged as factories and offices have gone dark. Coal consumption in the first quarter hit its lowest point since 2002, says the Energy Information Administration. Coal stockpiles have reached their highest level in more than two decades. A ton of the stuff costs less than a third of what it did a year ago.
Don't worry, says Alpha Natural Resources, a rival of Foundation's based in Abingdon, Va. It wants to buy Foundation for about $1.5 billion, an offer that has helped double Foundation's stock price since March.
Because of the kind of coal it sells, more than half of Alpha's orders last year went to Brazil and other international destinations. By absorbing Foundation, whose business is mostly domestic, Alpha becomes much more dependent on U.S. economic growth.
Alpha boss Michael Quillen trumpeted the "diversity across geographies" that the deal gives his company. (He said that in a news release. Observing the usual "quiet period" before a merger vote, neither Alpha nor any of the other primary parties returned my calls.)
Geographical diversity is not what Alpha's biggest shareholder, Duquesne Capital, wants. Not if it includes the United States.
Duquesne thinks the deal "is against the long-term interests" of Alpha shareholders and sees "no upsides that can mitigate the loss of value."
Billionaire Duquesne boss Stanley Druckenmiller learned his chops from famed currency trader George Soros and now runs his own Pittsburgh-based hedge fund. Last year, Druckenmiller flirted with buying an interest in the Steelers. Holding about 8 percent of Alpha's shares as well as investors' respect, he's making Friday's vote tough for Alpha's management.
He wants Alpha to stick with its strength of selling coal used in steelmaking - coking coal - to emerging economies as well as U.S. customers. Steel coal commands higher prices than regular coal, and customers such as Brazil, Russia and China are rapidly adding steel plants as well as coal-burning generators.
In the United States, by contrast, the economy is punk, environmental regulations will hurt coal's viability and newly available fields of natural gas will provide an economical competitor, Duquesne and Druckenmiller argue.
So there are two visions. In Alpha's, the United States quickly recovers from its crash, penalties for carbon pollution are small or nonexistent, coal remains the generation king and this country probably keeps increasing CO2 emissions.
"Coal has been the backbone of the U.S. power grid for 90 years," says Paul Forward, who follows Foundation and Alpha for Stifel Nicolaus in Baltimore. "We have an installed fleet of coal power plants that will take a very long time to replace under any scenarios in a shift toward lower-carbon types of power generation."
Under Druckenmiller's bet, the American economy struggles for a long time, and environmental rules and energy conservation render generator coal increasingly uncompetitive. Meanwhile Brazil, India and China speed ahead.
Some blend of the two outcomes seems most likely. Coal-fired electricity will be around a long time, but it looks as if environment taxes will make it more expensive. Tepid U.S. growth will probably keep a lid on coal prices for years.
But I'm not the one who's voting.
Foundation and Alpha would become the third-biggest U.S. coal producer if they marry, an energy giant with $4 billion in annual sales, mines in Pennsylvania, West Virginia, Kentucky and Wyoming, and a big stake in the American economy.
On Friday, their shareholders will decide whether that kind of business makes sense anymore.