Pittsburgh, Pennsylvania - May 3, 2008

J. Brett Harvey

President and Chief Executive Officer

CONSOL Energy Inc.

 

 

Thank you very much, Dean Miciak. 

President Dougherty, Father McCool - representing the Holy Spirit Fathers, ladies and gentlemen, and the graduates of the Class of 2008.

The University, from which you graduate, and which, today, has graciously added my name to its family of scholars, is one of tradition and of great accomplishment. It is committed to excellence in education; to a profound concern for moral and spiritual values; and to service to the Church, the community, the nation, and the world.

It is also a University whose threads are woven into the fabric of Pittsburgh’s history. The Spiritans – the priests and brothers of the Congregation of the Holy Spirit – came here to serve the immigrants who worked in a city that was dubbed “hell with the lid taken off.” Along the way, the Spiritans founded a university that was molded in the same fiery crucibles that molded Pittsburgh. 

Duquesne has grown with the City of Pittsburgh; shared much of Pittsburgh’s heritage; and will help create much of Pittsburgh’s future. Not bad for an institution that got it’s start in rented rooms, above a bakery, 130 years ago.

 

Commencement speakers always wonder what is expected of them. When former New York Governor Mario Cuomo was invited to give the commence address at St. Johns University – another distinguished Catholic University --, he asked the University’s  President, Father Flynn, how he should approach the speech.

Father Flynn told the governor that commencement speakers should think of themselves as “the body”. The body at an old-fashioned Irish wake. He said, “They need you in order to have the party, but nobody expects you to say very much!”

Well, I will try to follow Father Flynn’s advice today.

 

You leave here to depart on the great journey. For some of you, it is the maiden voyage. For others, this was a temporary stop in a journey already underway. Either way, it falls upon me today to provide some thoughts for the journey. My lessons from the journey of life.

I grew up in a U.S. Steel mining town in southern Utah. My Dad was the Superintendent of the U.S. Steel mine. In a mining town, the Superintendent’s house is usually the big one on the top of the hill. So, relatively speaking, I had it pretty good. 

After high school, I spent two years as a missionary on the Navajo reservation. It was from the Navajo that I learned one of my first lessons.

The lesson was: “It is not what you have that defines who you are, but how you live with what you have.” 

Even back in the early sixties, the U.S. was a consumer economy. Even in small mining towns in southern Utah, people had stuff. Cars, radios, some TV’s, grocery stories, and so on.

 But on the Navajo reservation, there wasn’t much stuff. And the stuff they had was usually handmade, maybe jewelry or a saddle, stuff that was gathered from the earth, like corn or a horse, as well as some things passed from one generation to the next. The Navajo were poor by American standards. But they taught me about the importance of family and tribe. About respect for those older than me. About tradition and heritage. Though their material positions were meager, the Navajo led lives of great dignity. 

 

I am a fourth generation coal miner. My great grandfather came from Wales to work in the anthracite mines of eastern Pennsylvania. He worked with the U.S. Bureau of Mines and went west to teach and help organize the first mine rescue teams in the west. My Father was Superintendent of the Columbia Mine in Utah, so it did seem logical for me to become a mining engineer, which I did in 1978 when I graduated from the University of Utah. 

Armed with my mining DNA and my mining engineering degree, I prepared to set the world on its ear. 

One of my first jobs was foreman of a production crew at an underground coal mine. Just like today, there was always competition among the shifts to get the most production each day and I thought my crew wasn’t holding up their end of the bargain. So I was riding them pretty hard, telling them how to do their jobs. In fact, there wasn’t a job being done by that crew that I didn’t know how to do or do better.

Now, most of these guys were quite a bit older than I was, and had more experience. But as I said, I had my degree.

Well, one day, they apparently had enough of me. When I came down to check on them, they were gone! I had no idea at first where they were, but I had no crew! When I went back out of the mine, there they all were, sitting in the bathhouse. I tried to tell them that they needed to get back to work, that our shift needed to get its coal out. 

That’s when one old fellow told me -- they agreed about getting the coal out of the ground -- but since I knew so much about it, they figured I could just do it myself.

And thus I learned Lesson #2: “It is not about me. It is about us.”

From those rough miners, I learned that my assignment was important – but so was theirs. They were willing to respect me for the job I had to do, but in return, they expected respect for what they did.

Business life is about working with others. Being a manager is about working with others and getting the best from them. I am the CEO. My job is important. But I cannot run CONSOL Energy by myself. I have 8000 people whose assignments are important. What most people want is to be noticed for what they do and to feel that what they do is important.

It is not about me. It is about us. 

 

I learned Lesson #3 in 1999, when we were doing what’s called a “road show” of financial centers in preparation to taking CONSOL Energy public. It was our Initial Public Offering, or IPO.  

For nearly four weeks, we traveled non-stop from city to city, meeting with money managers, mutual funds, and pension asset managers. We did breakfast meetings, lunches, dinners, and individual meetings in between. Sometimes we didn’t know where we were, but we were being ushered about in a private plan and in stretch limos, so we felt pretty important.

Interestingly, we were on the same road show schedule as the World Wrestling Federation and Martha Stewart, both of whom were taking their companies public. Martha even joked in a TV interview that whenever she visited a fund manager, she was followed minutes later by wrestlers or coal miners. So there I was with the Diva of Decorating and the CEO of Smackdown. 

But I learned Lesson #3 from a crusty money manager in New York.  

Keep in mind – 1999 was the dot.com era. Owning assets like coal mines and gas wells was no where near as sexy as the ability to create something from nothing and double an investor’s money overnight. 

Anyway, this crusty guy lets me get about five minutes into our pitch and he interrupts me.

“What’s the organic growth rate in this industry?” he asks. I told him about five percent a year. 

Now remember -- the coal and gas business, combined, account for two-thirds of the fuel we use to generate electricity in this country, so five percent turns out to be a lot of coal and gas! 

“Five percent!? That’s a big yawn,” he said. He closed his book and walked out. Not even a “thanks for coming in fellas.” Just walked out.

That’s when I knew what Lesson #3 was: “Just because you’re doing it, doesn’t mean it’s the center of the universe.”

                                   

Lesson #4 is likely something you learned during your time at Duquesne: “Hold yourself to a high ethical and moral standard and you will sleep better at night.” 

A few years ago, CONSOL conducted a private placement sale of stock owned by a large majority shareholder who wanted out. Right in the middle of the stock offering, our outside auditing firm received an anonymous letter, alleging malfeasance by corporate officials. While we were under no obligation to disclose this letter, we, nevertheless, halted the sale of the stock, sent the letter to the SEC and notified the public of the letter and its general contents. 

After months of investigation, the letter was shown to be baseless and without merit. We resumed and completed the sale, and, in the process, got very positive reviews from Wall Street for the forthright manner in which we handled the matter. 

To this day, CONSOL Energy enjoys a reputation among investors as a company with excellent disclosure practices. In business, doing the right thing is always the right thing to do. I slept well at night back then and sleep well at night now, knowing that we are running the company with high ethical standards. The same standards taught here at Duquesne.

 

My final lesson is this: “Don’t spend your time looking for the next big job. Do the job you have to the best of your ability, and the next big job will find you.” 

Ambition, drive, the desire to get ahead – these are all characteristics that you expect most people to have, and they can lead to great things. I expect people who work for me to have these characteristics.

But if a person is motivated solely by the desire to get a promotion, my experience has been that they usually do not succeed. They fall short, because they are not giving their best effort to the job at hand.

Do your job well and you WILL get you noticed. But more importantly, you will have the inner satisfaction that comes only from knowing that you did your best.

 

There are several other lessons I could mention, but I think will leave you with this final thought.

The world seems to be entering a perilous time.  War, terrorism on a world-wide scale; potential global climate change, and shortages of food and energy, appear to be the sets that occupy the stage onto which you are about to step.

I am focused on producing energy. 

There are those, including many in ecclesiastic circles, who say that we use too much energy. That our stewardship requires that we use less. Or even that the world should stop using fossil fuels because of their impact on climate.

But the world uses more than 450 quadrillion Btu’s of energy annually. By 2030, that number will increase by 55 percent. The sheer size of the demand is staggering. The world uses 40,000 gallons of oil per second. The world consumes more than five billion tons of coal per year and more than nine trillion cubic feet of natural gas per year.

And remember that there are more than 1.5 billion people in the world who do not have electricity. Give them a few light bulbs or an electric cooking plate, as surely we must, and demand for energy will rise.

There are billions of poor people in the world who move from place to place by walking, riding an animal, or pedaling a bicycle. But India plans to build a $2000 car. If we give these poor people a cheap car, as surely we should, millions will drive for the first time, consuming more energy.

I offer as axiomatic that improving people’s health and economic well-being requires the increased use of energy. With billions of people in the world struggling to rise above subsistence living, we must recognize that there exists a compelling case for finding and using more, not less energy. 

Like it or not, more than 80% of the world’s energy comes from the fossil fuels, oil, gas and coal. We depend on a carbon-based system of energy that has been built over nearly two centuries. Like a large ship at sea, the world will not be able to turn its energy ship very quickly. For the foreseeable future, the world is tied to fossil fuel consumption.

That said, we should and will develop a diverse portfolio of energy sources, including alternative renewable energy. The problem is that these sources of energy start from such a low base of contribution that even Herculean efforts to increase production still leave them, in 20 years, with about the same share of the market as they have today because their rate of growth only keeps pace with the overall growth in demand for energy.

For example, wind power has shown a capacity for expansion. It is estimated that wind generation capacity in the U.S. has grown six fold over the past seven years. But that amounts to only about 0.7% of total U.S. electricity generation. 

Put into a bottle all the wind energy generated in the U.S. last year, make it New York City’s sole source of electricity, and it is enough to run the city for only six months.

The inconvenient truth about the world’s energy system is that fossil fuels, including coal, will be what run it, both here in the United States and around the world, for decades to come. You and I must find the ways to use them with a smaller carbon footprint.

The solution will come, as it has for many problems we have faced, with the development and the deployment of new technologies -- technologies that will capture the CO2 before it is released into the atmosphere.

I know not everyone agrees with me. Perhaps some of you are among them. After all, I am not the center of the universe.

But I suspect everyone will agree that the challenges facing our country and the world in the coming decades -- from war, to providing basic needs for food and energy -- are as serious as we have seen in some time.

That’s where you come in. Uncertainty sometimes creates the greatest opportunities. Fear creates adrenaline and adrenaline creates value. You all are blessed with keen minds, you are armed with knowledge, and you are imbued with the spirit of service of this great University. You have the tools that are necessary to make the world a better place, to make people’s lives better – even if it is but one person at a time. All that remains is for you to begin the journey.

Thank you very much, and congratulations.