Exclusive: Interview with CNX CEO Nick DeIuliis – Part 1

Last week MDN editor Jim Willis had the privilege and honor of a (remote) sitdown interview with Nick DeIuliis, the CEO of CNX Resources, one of the major producers in the Marcellus/Utica. Nick is a fascinating guy. In many ways, he is MDN’s hero. He recently published a book titled Precipice: The Left’s Campaign to Destroy America. If you want to know Nick’s philosophy, his worldview, and what makes him tick, read the book. Jim’s interview with Nick covered many issues and took a full hour. Today’s post is the first of a multi-part series from our extended interview. Along the way, you will learn some new things about Nick and CNX, including information about some exciting technologies CNX is working on/patenting that could change the future of the natural gas industry. And no, that’s not hyperbole.

For this first installment, we begin with background and a bit of history. Nick DeIuliis came from humble roots, from a working-class family. CNX came from humble roots too–from the coal industry. How did Nick rise to become the CEO of a major shale energy company? Understanding DeIuliis and understanding the history and transformation of CNX is important for understanding the future–where CNX and the M-U industry are heading.

Note: The following is a lightly-edited (but faithful to the original) transcript of our conversation with Nick.

MDN: How did a working-class kid rise to become the CEO of a major shale company in the United States?

Nick DeIuliis: Jim, I could tell you that it was all part of a grand plan, but that would be pretty far from the truth. I did grow up in Pittsburgh, I’ve lived here my entire life. To your point, my family roots and history were pretty typical of people in this region. I had grandparents or great-grandparents who had emigrated from Europe, from Italy in my situation. And they worked in the steel mills and the coal mines and the railroads, and they lived in neighborhoods where basically everybody’s father did that. It was similar across a bunch of different ethnicities, which is what you found in places like Pittsburgh and throughout Appalachia. This was a fairly common experience or upbringing.

When I was a kid, coming into the ’70s and early ’80s, you saw this devastation that occurred for lack of a better term, it’s probably the most applicable term, when it came to manufacturing and energy across this region and the City of Pittsburgh and western Pennsylvania. And I saw firsthand from a ground zero perspective what happens when something like that occurs to the middle class and how it can just devastate families and communities and everything in between.

For decades there was no clear answer to how the region or the city itself would recover from that. Those were sort of my formative years–growing up and exiting high school, and taking a shot at college, but not really knowing what the college experience was like because nobody in my direct family had ever gone that route. But I gave college a go and came out with an engineering degree. I wanted to stay in the region. I desperately wanted to stay in the Pittsburgh area because everything I knew was tied to it and I loved it.

One day I saw an ad for a chemical engineer at a place called Consolidation Coal Company, which was a prior version of CNX Resources today after many iterations. I was fortunate enough to get an offer in 1990 and started my career there in the research area. My job was to assess how different fuels would behave in different boilers and power plants across the United States. So, I wasn’t necessarily looking at mining or extracting natural gas, things like that. I was more on the demand side, and I came to appreciate through that effort a lot about the power industry, supply-demand fundamentals, policy implications, environmental considerations, and these things were very front and center to my job through the years.

I ended up going back at night to get an MBA, and I ultimately got a law degree, all while I was at working at the company. Then I got into more of the corporate and strategic planning side of the company.

I ended up IPOing and running what was at that time CNX Gas in 2005, right when the shale revolution was taking off. It was a standalone company but controlled by CONSOL Energy as a major shareholder. CONSOL brought it back in [under the corporate umbrella] because we saw natural gas being our future.

I’ve done a bunch of different things at the company through the last, I guess, now 32 years running.

But the one thing (for me) has always been the focus and the love of regions like western Pennsylvania. And to me, it’s a very simple story for the region and for the company and for the industry–it’s the same story for all three, which has a great history, a great legacy built on manufacturing and energy and a middle-class work ethic.

And then the region went through a really disruptive time. And then, once the shale revolution came around, it basically resurrected the ability for the region and the industries and the middle class to revive itself. That is where we are at today.

MDN: So you spent your career pretty much with CONSOL, right? First CONSOL, and now CNX?

DeIuliis: That’s right. And yeah, from basically, what? A 21-year-old. But my entire working adult life has been spent in the company doing many different things. You see the career paths that are available to individuals, whether they’re from the region or beyond the region in industries like ours. Whether it’s manufacturing or energy, or anything in between, you can take an individual out of a high school and whether they want to go to college initially or not, you don’t start with a job, you basically start with a career or profession that can pay family-sustaining wages. It leads to all other types of avenues. I didn’t plan on getting an MBA or going to law school when I got out of college initially. But I did, and it just develops different career paths or branches of its own to where I landed and where I’m at now. It wasn’t the intention or the plan. But I knew at the same time that these types of Industries coupled with these types of regions or basins, can lead to that type of optionality.

MDN: With CONSOL, coal is its background, and I’m sure you’ve worked in that area to some degree, at least over the years. Is coal on the way out? Is coal dead?

DeIuliis: I think a lot of things have been very interesting to watch as they have unfolded, and many of those were changes, disruptions, innovations that basically came from the private sector, free enterprise, American ingenuity. You know the doers that are out there, so to speak. And I think what you’re seeing with a coal and natural gas dynamic over the past 20 years or so is really emblematic of that. It reflects a lot of those things.

So CONSOL to CNX is an interesting example of that, because one of the things that the company did back in the day when it was predominantly or exclusively a coal company, was that it was really good at pioneering the technology and processes to efficiently and safely liberate methane from coal seams before they would go through and mine those coal seams, to improve the safety and reduce the hazard risk tied to mining. The company became so good in pioneering those techniques for degasification that at some point in probably the mid- or late-80s, the company came up with the thought, “Well, instead of venting this methane to the atmosphere, why don’t we collect it? And if necessary, we’ll process it to get it to pipeline quality specs and then sell it into a pipeline system.”

Now we go from one saleable byproduct of coal mining to two–coal and natural gas. That coalbed methane effort was the genesis of the natural gas business. CONSOL Energy, back in the day, became CNX Resources today.

You take those types of disruptive technologies and then you add on top of that horizontal drilling with the shale revolution, advanced completion techniques with the shale revolution, and all of a sudden, you saw the private sector and the free market get involved. So it’s something that everybody knew was there. It wasn’t a surprise that the shale deposits held the amount of methane that they did, but there was never a view that you could extract it in an efficient enough or economically viable enough manner to make a return. But technology and innovation unlocked that.

And what you saw was that once different sectors of the economy became convinced that this was a replicable opportunity, not just in one basin but across different basins, and not just for a [single] year’s drilling program but for multiple years, with respect to inventory depth and cost structure, well then what did you see? You saw the private space and capital markets funding pipeline infrastructure. You saw the power generation grid start to transform from largely a coal-based grid to a natural gas-based grid. You saw the supply-demand fundamentals start to shift and then again the private sector, the capital markets adjusting alongside it.

So when demand for natural gas started to grow the activity set, the supply of natural gas started to grow with it to balance. You saw everything working in concert the way you would want to see them work–in concert, consistent with how the United States became the economic envy of the world through the years.

Lo and behold, while that was occurring, what happened to things like SO2 and NOx, and mercury, and particulates, and CO2 emissions? They drop precipitously. The example I always like to use is the state of Pennsylvania, my home state. If it were a standalone developed nation of its own, it would be the only country in the world that would have already met its Paris Climate Accord targets, and it did that by the private sector and by the domestic energy industry innovating and creating and bringing to bear disruptive technologies that basically displaced the utilization of coal with the utilization of natural gas, and that drastically reduced the CO2 footprint for Pennsylvania and the economy.

Now, what happens to coal, to your question, moving forward? I think that really comes down to a question of what’s going on in the developing world. And right now, unfortunately there are almost two billion people on the planet who do not have access to reliable, affordable electricity and energy. And I’m not sure specifically, I haven’t studied closely enough in recent years, I’m not sure specifically what that means for coal demand, but I would suspect that there would be regions of the world where the demand for coal is growing, even though in the developed world–the United States, Europe, etc.–not so much. And obviously, [demand here] has been declining, largely because of being supplanted by natural gas.

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Stay tuned for tomorrow’s post, which delves into CNX’s assets, operations, and a technology CNX is developing that may blow your mind, like it did for us.