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Alpha Natural Resources Report 2014

In 2010, nearly every national government agreed to “prevent dangerous anthropogenic interference with the climate system,” and to do so, “the increase in global temperature should be below two degrees Celsius.”
To achieve a 66 percent probability of limiting the global temperature rise to 2° C, the Intergovernmental Panel on Climate Change estimates that approximately 987 gigatons of CO2 can be emitted through 2100.  The International Energy Agency (IEA), estimates total proven reserves of coal, oil, and natural gas represent approximately 2,860 gigatons in potential CO2 emissions.
The IEA states, “No more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if the world is to achieve the 2° C goal, unless carbon capture and storage (CCS) technology is widely deployed” and, “almost two-thirds of these carbon reserves are related to coal.”
Goldman Sachs states “most thermal coal growth projects will struggle to earn a positive return for their owners,” finding that “even when carbon prices are low or non-existent, the downside risks of future regulation can offset the cost advantage of thermal coal relative to alternative energy sources.”
HSBC indicates that declining coal demand after 2020 could reduce the current discounted cashflow valuation of coal producers by 44%.
The World Bank and European Investment Bank have recently placed restrictions on the financing of coal projects.
In its 2012 10K, Alpha recognizes that numerous “Climate change initiatives could significantly reduce the demand for coal and reduce the value of our coal and gas assets,” and “[there] are expected to be numerous GHG emissions initiatives that could reduce the demand for coal” (emphasis added). 
However, Alpha does not provide information on how it is planning to mitigate risks resulting from these expected initiatives, which is particularly important to shareholders given the company’s reliance on thermal coal sales for the majority of its revenue.
Given the growing public concern over climate change, shareowners request Alpha prepare a report by October 2014, omitting proprietary information and prepared at reasonable cost, on the company’s goals and plans to address global concerns regarding fossil fuels and their contribution to climate change, including analysis of long and short term financial and operational risks to the company.
Supporting Statement:
We recommend the report include discussion of:
  • Risks and opportunities associated with various low-carbon scenarios, including reducing carbon emissions by 80 percent by 2050, as well as a scenario in which global coal demand declines due to evolving policy, technology, or consumer responses to address climate change;
  • Assumptions regarding deployment of CCS;
  • How the company’s capital allocation strategy accounts for the risks and opportunities in these potential scenarios;
  • Plans to manage these risks, such as reducing the carbon intensity of its assets, diversifying its business by investing in lower-carbon energy sources, or returning capital to shareholders;
  • The Board of Directors’ role in overseeing capital allocation and climate risk reduction strategies